Horizon Bancorp, Inc. Reports First Quarter 2023 Results
04/26/2023 - 04:35 PM
MICHIGAN CITY, Ind., April 26, 2023 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three months ended March 31, 2023.
“Horizon Bank is proud to announce reaching a significant new milestone of our 150th anniversary of continuous banking operations. We have planned celebrations to honor this occasion throughout the year and, as we like to say, we are 150 years strong!” Chairman and Chief Executive Officer Craig M. Dwight said.
“Our enduring relationships with in–market clients and our advisors' focus on serving local businesses, consumers and communities are reflected in Horizon's stable deposits, growing loans and low credit costs in the first quarter,” Mr. Dwight continued. “Our organization's long–standing 150 year commitment to operational excellence and effective technology implementation was also evident in Horizon's first quarter results, including meaningful non–interest expense reductions and earnings per share of $0.42 . Given our strong depositor relationships and lending opportunities in attractive Midwest markets, ample sources of liquidity, active balance sheet management, and talented advisors, we believe Horizon is very well positioned for continued success for 2023 and beyond."
First Quarter 2023 Highlights
Deposits totaled $5.70 billion at period end, declining $155.8 million during the quarter, primarily due to a $122.2 million reduction in balances by municipal and other public depositors that have otherwise largely maintained their banking relationship with Horizon. Consumer and commercial deposits totaled $4.28 billion at period end, declining just $33.6 million during the quarter. 75% of total deposits at period end were FDIC insured, collateralized, or third–party insured, and the average tenure of all deposit accounts with Horizon exceeded 10 years.The average deposit account balance at period end was less than $25,000 for consumer and commercial depositors and less than $195,000 for all accounts including those of large public depositors. Horizon's loan–to–deposit ratio was 74.5% at period end, as total loans increased by an annualized rate of 8.3% year–to–date and a rate of 2.1% quarter over quarter, fueled by growth in commercial, consumer and residential balances. Asset quality remained solid with total loan delinquency at 0.33% of total loans and net charge–offs to average loans of 0.01% during the quarter. Non–interest expense of $34.5 million in the first quarter declined 3.3% from the linked quarter and 2.1% from the prior year period. Non–interest expense in the first quarter represented 1.79% of average assets on an annualized basis, improving from 1.84% , in the linked quarter and 1.95% in the prior year period. Net income totaled $18.2 million , compared to $21.2 million in the fourth quarter of 2022 and $23.6 million in the prior year period. Diluted earnings per share (“EPS”) of $0.42 compared to $0.48 for the fourth quarter of 2022 and $0.54 for the first quarter of 2022. Deposit betas increased to 51% on total interest bearing deposits in the first quarter compared to a 32% deposit beta during the previous quarter. During the first quarter of 2023, unrealized losses on available for sale investments declined to $121.5 million compared to unrealized losses of $140.1 million at December 31, 2022. As a result our tangible capital ratio increased from 6.56% at December 31, 2022 to 6.87% at March 31, 2023. Horizon's book value per share and tangible book value per share increased to $16.11 and $12.17 compared to $15.55 and $11.59 in the linked quarter and $15.55 and $11.54 in the first quarter of 2022. The Bank’s capital position was still robust with leverage and risk based capital ratios of 8.86% and 13.15% , respectively. Horizon's annualized dividend yield was 5.79% as of March 31, 2023. On January 17, 2023, Horizon's Board of Directors approved the appointment of Thomas M. Prame to serve as the Chief Executive Officer of both Horizon and Horizon Bank (the “Bank”), effective June 1, 2023. Craig M. Dwight will retain the title of Chief Executive Officer until June 1, 2023 and retire as an employee from Horizon and the Bank effective July 3, 2023. Mr. Dwight will continue as the Chairman of the Board of Directors of both Horizon and the Bank. Summary
For the Three Months Ended March 31, December 31, March 31, Net Interest Income and Net Interest Margin 2023 2022 2022 Net interest income $ 45,237 $ 48,782 $ 46,831 Net interest margin 2.67 % 2.85 % 2.90 % Adjusted net interest margin 2.65 % 2.83 % 2.85 %
For the Three Months Ended March 31, December 31, March 31, Asset Yields and Funding Costs 2023 2022 2022 Interest earning assets 4.17 % 3.88 % 3.13 % Interest bearing liabilities 1.85 % 1.29 % 0.30 %
For the Three Months Ended Non-interest Income and March 31, December 31, March 31, Mortgage Banking Income 2023 2022 2022 Total non–interest income $ 9,620 $ 10,674 $ 14,155 Gain on sale of mortgage loans 785 1,196 2,027 Mortgage servicing income net of impairment 713 637 3,489
For the Three Months Ended March 31, December 31, March 31, Non-interest Expense 2023 2022 2022 Total non–interest expense $ 34,524 $ 35,711 $ 35,270 Annualized non–interest expense to average assets 1.79 % 1.84 % 1.95 %
For the Three Months Ended March 31, December 31, March 31, Credit Quality 2023 2022 2022 Allowance for credit losses to total loans 1.17 % 1.21 % 1.41 % Non–performing loans to total loans 0.47 % 0.52 % 0.54 % Percent of net charge–offs to average loans outstanding for the period 0.01 % 0.01 % 0.00 %
March 31, Net Reserve December 31, Allowance for Credit Losses 2023 1Q23 2022 Commercial $ 31,156 $ (1,289 ) $ 32,445 Retail Mortgage 4,447 (1,130 ) 5,577 Warehouse 798 (222 ) 1,020 Consumer 13,125 1,703 11,422 Allowance for Credit Losses (“ACL”) $ 49,526 $ (938 ) $ 50,464 ACL / Total Loans 1.17 % 1.21 % Acquired Loan Discount (“ALD”) $ 6,158 $ (121 ) $ 6,279
“Horizon's first quarter profitability metrics included net income of $18.2 million , return on average assets of 0.94% and return on average tangible equity of 14.18% , which were impacted by the effects of industry wide competition for deposits and the rising interest rate environment,” Mr. Dwight said. “Looking ahead, we believe Horizon will continue to benefit from new loan originations replacing lower–yielding payoffs and paydowns, our liquidity position and prudent deposit pricing, continued expense management discipline, relatively low credit costs, and active management of our investment portfolio.”
Income Statement Highlights
Net income for the first quarter of 2023 was $18.2 million , or $0.42 diluted earnings per share, compared to $21.2 million , or $0.48 , for the linked quarter and $23.6 million , or $0.54 , for the prior year period.
The change in net income for the first quarter of 2023 when compared to the fourth quarter of 2022 reflects a decrease in non–interest expense of $1.2 million and lower income tax expense of $786,000 , offset by a decrease in net interest income of $3.5 million , lower non–interest income of $1.1 million , which included a $500,000 loss on the sale of approximately $64.0 million of investment securities, and an increase in credit loss expense of $311,000. $34.5 million in the first quarter of 2023 reflected a $1.3 million decrease in salaries and employee benefits, a $268,000 decrease in outside services and consultants, a $215,000 decrease in data processing expense and a $163,000 decrease in loan expense, offset by a $369,000 increase in other expense from the linked quarter.
Net income for the first quarter of 2023 compared to the same prior year period reflects a decrease in non–interest income of $4.5 million , a decrease in net interest income of $1.6 million , and an increase in credit loss expense of $1.6 million . These results are offset by a decrease in income tax expense of $1.7 million and a decrease in non–interest expense of $746,000.
Net Interest Margin
Horizon’s net interest margin was 2.67% for the first quarter of 2023 compared to 2.85% for the fourth quarter of 2022. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 56 basis points, offset by an increase in the yield on interest earning assets of 29 basis points. Additionally, interest income from acquisition–related purchase accounting adjustments was $64,000 lower during the first quarter of 2023 when compared to the fourth quarter of 2022.
Net interest margin was 2.67% for the first quarter of 2023 compared to 2.90% for the first quarter of 2022. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 155 basis points, offset by an increase in the yield on interest earning assets of 104 basis points. Additionally, interest income from acquisition–related purchase accounting adjustments was $549,000 lower during the first quarter of 2023 when compared to the first quarter of 2022.
Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.65% for the first quarter of 2023, compared to 2.83% for the linked quarter and 2.85% for the first quarter of 2022. Interest income from acquisition–related purchase accounting adjustments was $367,000 , $431,000 and $916,000 for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively. (See the “Non–GAAP Reconciliation of Net Interest Margin” table below).
Lending Activity
Total loan balances and loans held for sale increased to $4.25 billion on March 31, 2023 compared to $4.16 billion on December 31, 2022. During the three months ended March 31, 2023, commercial loans increased $38.0 million , consumer loans increased $58.3 million , and residential mortgage loans increased $9.2 million , offset by decreases in mortgage warehouse loans of $16.6 million and loans held for sale of $3.4 million .
Loan Growth by Type (Dollars in Thousands, Unaudited) March 31, December 31, QTD QTD Annualized 2023 2022 $ Change % Change % Change Commercial $ 2,505,459 $ 2,467,422 $ 38,037 1.5 % 6.3 % Residential mortgage 662,459 653,292 9,167 1.4 % 5.7 % Consumer 1,026,076 967,755 58,321 6.0 % 24.4 % Subtotal 4,193,994 4,088,469 105,525 2.6 % 10.5 % Loans held for sale 2,409 5,807 (3,398 ) (58.5 )% (237.3 )% Mortgage warehouse 52,957 69,529 (16,572 ) (23.8 )% (96.7 )% Total loans and loans held for sale $ 4,249,360 $ 4,163,805 $ 85,555 2.1 % 8.3 %
Deposit Activity
Total deposit balances of $5.70 billion on March 31, 2023 declined 2.66% compared to $5.86 billion on December 31, 2022.
Deposit Growth by Type (Dollars in Thousands, Unaudited) March 31, December 31, QTD QTD Annualized 2023 2022 $ Change % Change % Change Non–interest bearing $ 1,231,845 $ 1,277,768 $ (45,923 ) (3.6 )% (14.6 )% Interest bearing 3,402,525 3,582,891 (180,366 ) (5.0 )% (20.4 )% Time deposits 1,067,575 997,115 70,460 7.1 % 28.7 % Total deposits $ 5,701,945 $ 5,857,774 $ (155,829 ) (2.7 )% (10.8 )%
Expense Management
Three Months Ended March 31, December 31, QTD QTD 2023 2022 $ Change % Change Non–interest Expense Salaries and employee benefits $ 18,712 $ 19,978 $ (1,266 ) (6.3 )% Net occupancy expenses 3,563 3,279 284 8.7 % Data processing 2,669 2,884 (215 ) (7.5 )% Professional fees 533 694 (161 ) (23.2 )% Outside services and consultants 2,717 2,985 (268 ) (9.0 )% Loan expense 1,118 1,281 (163 ) (12.7 )% FDIC insurance expense 540 388 152 39.2 % Core deposit intangible amortization 903 925 (22 ) (2.4 )% Other losses 221 118 103 87.3 % Other expense 3,548 3,179 369 11.6 % Total non–interest expense $ 34,524 $ 35,711 $ (1,187 ) (3.4 )% Annualized non–interest expense to average assets 1.79 % 1.84 %
Total non–interest expense was $1.2 million lower in the first quarter of 2023 when compared to the fourth quarter of 2022. The decrease in expenses was primarily due to a decrease in salaries and employee benefits of $1.3 million from lower salary and incentive compensation expense, a decrease in outside services and consultants expense of $268,000 and a decrease in data processing expense of $215,000 , offset by an increase in other expense of $369,000 and net occupancy expenses of $284,000.
Three Months Ended March 31, March 31, QTD QTD 2023 2022 $ Change % Change Non–interest Expense Salaries and employee benefits $ 18,712 $ 19,735 $ (1,023 ) (5.2 )% Net occupancy expenses 3,563 3,561 2 0.1 % Data processing 2,669 2,537 132 5.2 % Professional fees 533 314 219 69.7 % Outside services and consultants 2,717 2,525 192 7.6 % Loan expense 1,118 1,205 (87 ) (7.2 )% FDIC insurance expense 540 725 (185 ) (25.5 )% Core deposit intangible amortization 903 926 (23 ) (2.5 )% Other losses 221 168 53 31.5 % Other expense 3,548 3,574 (26 ) (0.7 )% Total non–interest expense $ 34,524 $ 35,270 $ (746 ) (2.1 )% Annualized non–interest expense to average assets 1.79 % 1.95 %
Total non–interest expense was $746,000 lower in the first quarter of 2023 when compared to the first quarter of 2022 primarily due to an decrease in salaries and incentive compensation expense of $1.0 million and a decrease in FDIC insurance expense of $185,000 , offset by an increase in professional fees of $219,000 and outside services and consultants expense of $192,000.
Annualized non–interest expense as a percent of average assets was 1.79% , 1.84% and 1.95% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
Income tax expense totaled $1.9 million for the first quarter of 2023, a decrease of $786,000 when compared to the fourth quarter of 2022 and a decrease of $1.7 million when compared to the first quarter of 2022.
Capital
The capital resources of the Company and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2023. Stockholders’ equity totaled $702.6 million at March 31, 2023 and the ratio of average stockholders’ equity to average assets was 8.86% for the three months ended March 31, 2023.
Tangible book value, which excludes intangible assets from total equity, per common share (“TBVPS”) increased $0.58 during the three months ended March 31, 2023 to $12.17 .
The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of March 31, 2023.
Actual Required for Capital Adequacy Purposes Required for Capital Adequacy Purposes with Capital Buffer Well Capitalized Under Prompt Corrective Action Provisions $ Ratio $ Ratio $ Ratio $ Ratio Total capital (to risk–weighted assets) Consolidated $ 791,701 13.97 % $ 453,270 8.00 % $ 594,917 10.50 % N/A N/A Bank 736,730 13.15 % 448,323 8.00 % 588,425 10.50 % $ 560,404 10.00 % Tier 1 capital (to risk–weighted assets) Consolidated 742,175 13.10 % 339,952 6.00 % 481,599 8.50 % N/A N/A Bank 687,204 12.26 % 336,243 6.00 % 476,344 8.50 % 448,323 8.00 % Common equity tier 1 capital (to risk–weighted assets) Consolidated 621,647 10.97 % 254,964 4.50 % 396,611 7.00 % N/A N/A Bank 687,241 12.26 % 252,182 4.50 % 392,283 7.00 % 364,263 6.50 % Tier 1 capital (to average assets) Consolidated 742,175 10.06 % 295,058 4.00 % 295,058 4.00 % N/A N/A Bank 687,204 8.86 % 310,127 4.00 % 310,127 4.00 % 387,658 5.00 %
Liquidity
The Bank maintains a stable base of core deposits provided by long–standing and new relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayments, investment security cash flows, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the “FHLB”). On March 31, 2023, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.65 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Bank. The Bank had approximately $666.3 million of unpledged investment securities on March 31, 2023.
Forward Looking Statements
This press release may contain forward–looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon Bancorp, Inc. and its affiliates (collectively, “Horizon”). For these statements, Horizon claims the protection of the safe harbor for forward–looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission (the “SEC”). Forward–looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward–looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.
Although management believes that the expectations reflected in such forward–looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: current financial conditions within the banking industry, including the effects of recent failures of other financial institutions, liquidity levels, and responses by the Federal Reserve, Department of the Treasury, and the Federal Deposit Insurance Corporation to address these issues; changes in the level and volatility of interest rates, changes in spreads on earning assets and changes in interest bearing liabilities; increased interest rate sensitivity; the ability of Horizon to remediate its material weaknesses in its internal control over financial reporting; continuing increases in inflation; loss of key Horizon personnel; increases in disintermediation; potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms take a greater market share of the payment systems; estimates of fair value of certain of Horizon’s assets and liabilities; changes in prepayment speeds, loan originations, credit losses, market values, collateral securing loans and other assets; changes in sources of liquidity; continuing risks and uncertainties relating to the COVID–19 pandemic and government responses thereto; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; material changes outside the U.S. or in overseas relations, including changes in U.S. trade relations related to imposition of tariffs, Brexit, and the phase out of the London Interbank Offered Rate (“LIBOR”); the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward–looking statements are discussed in Horizon’s reports (such as the Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, and Current Reports on Form 8–K) filed with the SEC and available at the SEC’s website (www.sec.gov). Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.
Financial Highlights (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Balance sheet: Total assets $ 7,897,995 $ 7,872,518 $ 7,718,695 $ 7,640,936 $ 7,420,328 Interest earning deposits & federal funds sold 30,221 12,233 7,302 5,646 20,827 Interest earning time deposits 3,098 2,812 2,814 3,799 4,046 Investment securities 2,958,978 3,020,306 3,017,191 3,093,792 3,118,641 Commercial loans 2,505,459 2,467,422 2,403,743 2,363,991 2,259,327 Mortgage warehouse loans 52,957 69,529 73,690 116,488 105,118 Residential mortgage loans 662,459 653,292 634,901 608,582 593,372 Consumer loans 1,026,076 967,755 919,198 866,819 768,854 Total loans 4,246,951 4,157,998 4,031,532 3,955,880 3,726,671 Earning assets 7,273,921 7,225,833 7,087,368 7,088,737 6,898,208 Non–interest bearing deposit accounts 1,231,845 1,277,768 1,315,155 1,328,213 1,325,570 Interest bearing transaction accounts 3,402,525 3,582,891 3,736,798 3,760,890 3,782,644 Time deposits 1,067,575 997,115 778,885 756,482 743,283 Total deposits 5,701,945 5,857,774 5,830,838 5,845,585 5,851,497 Borrowings 1,311,927 1,142,949 1,048,091 959,222 728,664 Subordinated notes 58,933 58,896 58,860 58,823 58,786 Junior subordinated debentures issued to capital trusts 57,087 57,027 56,966 56,907 56,850 Total stockholders’ equity 702,559 677,375 644,993 657,865 677,450
Financial Highlights (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Income statement: Net interest income $ 45,237 $ 48,782 $ 53,395 $ 53,008 $ 48,171 Credit loss expense (recovery) 242 (69 ) (601 ) 240 (1,386 ) Non–interest income 9,620 10,674 10,188 12,434 14,155 Non–interest expense 34,524 35,711 38,350 36,368 36,610 Income tax expense 1,863 2,649 2,013 3,975 3,539 Net income $ 18,228 $ 21,165 $ 23,821 $ 24,859 $ 23,563 Per share data: Basic earnings per share $ 0.42 $ 0.49 $ 0.55 $ 0.57 $ 0.54 Diluted earnings per share 0.42 0.48 0.55 0.57 0.54 Cash dividends declared per common share 0.16 0.16 0.16 0.16 0.15 Book value per common share 16.11 15.55 14.80 15.10 15.55 Tangible book value per common share 12.17 11.59 10.82 11.11 11.54 Market value – high 16.32 20.00 20.59 19.21 23.54 Market value – low $ 10.31 $ 14.51 $ 16.74 $ 16.72 $ 18.67 Weighted average shares outstanding – Basis 43,583,554 43,574,151 43,573,370 43,572,796 43,554,713 Weighted average shares outstanding – Diluted 43,744,721 43,667,953 43,703,793 43,684,691 43,734,556 Key ratios: Return on average assets 0.94 % 1.09 % 1.24 % 1.33 % 1.31 % Return on average common stockholders’ equity 10.66 12.72 13.89 14.72 13.34 Net interest margin 2.67 2.85 3.04 3.13 2.90 Allowance for credit losses to total loans 1.17 1.21 1.27 1.32 1.41 Average equity to average assets 8.86 8.55 8.91 9.06 9.79 Efficiency ratio 62.93 60.06 59.33 54.91 57.83 Annualized non–interest expense to average assets 1.74 1.84 1.91 1.90 1.95 Bank only capital ratios: Tier 1 capital to average assets 8.86 8.89 8.84 8.85 8.83 Tier 1 capital to risk weighted assets 12.26 12.72 12.74 12.87 13.23 Total capital to risk weighted assets 13.15 13.59 13.65 13.83 14.25
Financial Highlights (Dollars in Thousands Except Ratios, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Loan data: Substandard loans $ 49,804 $ 56,194 $ 57,932 $ 59,377 $ 57,928 30 to 89 days delinquent 13,971 10,709 6,970 6,739 6,358 Non–performing loans: 90 days and greater delinquent – accruing interest 137 92 193 210 107 Trouble debt restructures – accruing interest — 2,570 2,529 2,535 2,372 Trouble debt restructures – non–accrual — 1,548 1,665 1,345 1,501 Non–accrual loans 19,660 17,630 14,771 16,116 16,133 Total non–performing loans $ 19,797 $ 21,840 $ 19,158 $ 20,206 $ 20,113 Non–performing loans to total loans 0.47 % 0.52 % 0.47 % 0.51 % 0.54 %
Allocation of the Allowance for Credit Losses (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Commercial $ 31,156 $ 32,445 $ 33,806 $ 34,802 $ 37,789 Residential mortgage 4,447 5,577 5,137 4,422 4,351 Mortgage warehouse 798 1,020 1,024 1,067 1,055 Consumer 13,125 11,422 11,402 12,059 9,313 Total $ 49,526 $ 50,464 $ 51,369 $ 52,350 $ 52,508
Net Charge–offs (Recoveries) (Dollars in Thousands Except Ratios, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Commercial $ 104 $ (94 ) $ 51 $ (75 ) $ 38 Residential mortgage (6 ) (8 ) (75 ) 40 (10 ) Mortgage warehouse — — — — — Consumer 281 387 162 319 108 Total $ 379 $ 285 $ 138 $ 284 $ 136 Percent of net charge–offs (recoveries) to average loans outstanding for the period 0.01 % 0.01 % 0.00 % 0.01 % 0.00 %
Total Non–performing Loans (Dollars in Thousands Except Ratios, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Commercial $ 8,523 $ 9,330 $ 7,199 $ 8,008 $ 7,844 Residential mortgage 6,926 8,123 8,047 8,469 8,584 Mortgage warehouse — — — — — Consumer 4,348 4,387 3,912 3,729 3,685 Total $ 19,797 $ 21,840 $ 19,158 $ 20,206 $ 20,113 Non–performing loans to total loans 0.47 % 0.52 % 0.47 % 0.51 % 0.54 %
Other Real Estate Owned and Repossessed Assets (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Commercial $ 1,567 $ 1,881 $ 3,206 $ 1,414 $ 2,245 Residential mortgage 203 107 22 — 170 Mortgage warehouse — — — — — Consumer 78 152 14 58 5 Total $ 1,848 $ 2,140 $ 3,242 $ 1,472 $ 2,420
Average Balance Sheets (Dollars in Thousands, Unaudited) Three Months Ended Three Months Ended March 31, 2023 March 31, 2022 Average Balance Interest Average Rate Average Balance Interest Average Rate Assets Interest earning assets Federal funds sold $ 7,767 $ 83 4.33 % $ 237,605 $ 91 0.16 % Interest earning deposits 8,780 70 3.23 % 20,673 24 0.47 % Investment securities – taxable 1,727,369 8,725 2.05 % 1,646,525 7,391 1.82 % Investment securities – non–taxable (1) 1,314,129 7,556 2.95 % 1,279,082 6,697 2.69 % Loans receivable (2) (3) 4,143,221 55,364 5.44 % 3,630,871 36,539 4.10 % Total interest earning assets 7,201,266 71,798 4.17 % 6,814,756 50,742 3.13 % Non–interest earning assets Cash and due from banks 103,563 104,676 Allowance for credit losses (50,337 ) (54,307 ) Other assets 576,614 454,550 Total average assets $ 7,831,106 $ 7,319,675 Liabilities and Stockholders’ Equity Interest bearing liabilities Interest bearing deposits $ 4,502,199 $ 14,819 1.33 % $ 4,478,621 $ 1,496 0.14 % Borrowings 1,053,317 9,268 3.57 % 503,846 1,043 0.84 % Repurchase agreements 138,749 503 1.47 % 139,742 37 0.11 % Subordinated notes 58,910 880 6.06 % 58,763 880 6.07 % Junior subordinated debentures issued to capital trusts 57,048 1,091 7.76 % 56,807 455 3.25 % Total interest bearing liabilities 5,810,223 26,561 1.85 % 5,237,779 3,911 0.30 % Non–interest bearing liabilities Demand deposits 1,255,697 1,322,781 Accrued interest payable and other liabilities 71,714 42,774 Stockholders’ equity 693,472 716,341 Total average liabilities and stockholders’ equity $ 7,831,106 $ 7,319,675 Net interest income / spread $ 45,237 2.32 % $ 46,831 2.83 % Net interest income as a percent of average interest earning assets (1) 2.67 % 2.90 % (1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.
Condensed Consolidated Balance Sheets (Dollars in Thousands) March 31, 2023 December 31, 2022 (Unaudited) Assets Cash and due from banks $ 134,722 $ 123,505 Interest earning time deposits 3,098 2,812 Investment securities, available for sale 943,441 997,558 Investment securities, held to maturity (fair value $1,709,392 and $1,681,309) 2,015,537 2,022,748 Loans held for sale 2,409 5,807 Loans, net of allowance for credit losses of $49,526 and $50,464 4,197,425 4,107,534 Premises and equipment, net 91,814 92,677 Federal Home Loan Bank stock 32,264 26,677 Goodwill 155,211 155,211 Other intangible assets 16,336 17,239 Interest receivable 36,428 35,294 Cash value of life insurance 147,156 146,175 Other assets 122,154 139,281 Total assets $ 7,897,995 $ 7,872,518 Liabilities Deposits Non–interest bearing $ 1,231,845 $ 1,277,768 Interest bearing 4,470,100 4,580,006 Total deposits 5,701,945 5,857,774 Borrowings 1,311,927 1,142,949 Subordinated notes 58,933 58,896 Junior subordinated debentures issued to capital trusts 57,087 57,027 Interest payable 5,922 5,380 Other liabilities 59,622 73,117 Total liabilities 7,195,436 7,195,143 Commitments and contingent liabilities Stockholders’ equity Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares — — Common stock, no par value, Authorized 99,000,000 shares — — Additional paid–in capital 354,035 354,188 Retained earnings 440,556 429,385 Accumulated other comprehensive income (loss) (92,032 ) (106,198 ) Total stockholders’ equity 702,559 677,375 Total liabilities and stockholders’ equity $ 7,897,995 $ 7,872,518
Condensed Consolidated Statements of Income (Dollars in Thousands Except Per Share Data, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Interest income Loans receivable $ 55,364 $ 50,859 $ 45,517 $ 40,585 $ 36,539 Investment securities – taxable 8,725 8,702 8,436 8,673 7,391 Investment securities – non–taxable 7,556 7,543 7,478 7,307 6,697 Other 153 83 65 43 115 Total interest income 71,798 67,187 61,496 56,608 50,742 Interest expense Deposits 14,819 10,520 4,116 1,677 1,496 Borrowed funds 9,771 6,040 3,895 1,450 1,080 Subordinated notes 880 881 880 881 880 Junior subordinated debentures issued capital trusts 1,091 964 744 556 455 Total interest expense 26,561 18,405 9,635 4,564 3,911 Net interest income 45,237 48,782 51,861 52,044 46,831 Credit loss expense (recovery) 242 (69 ) (601 ) 240 (1,386 ) Net interest income after credit loss expense 44,995 48,851 52,462 51,804 48,217 Non–interest Income Service charges on deposit accounts 3,028 2,947 3,023 2,833 2,795 Wire transfer fees 109 118 148 170 159 Interchange fees 2,867 2,951 3,089 3,582 2,780 Fiduciary activities 1,275 1,270 1,203 1,405 1,503 Losses on sale of investment securities (500 ) — — — — Gain on sale of mortgage loans 785 1,196 1,441 2,501 2,027 Mortgage servicing income net of impairment 713 637 355 319 3,489 Increase in cash value of bank owned life insurance 981 751 814 519 510 Death benefit on bank owned life insurance — — — 644 — Other income 362 804 115 461 892 Total non–interest income 9,620 10,674 10,188 12,434 14,155 Non–interest expense Salaries and employee benefits 18,712 19,978 20,613 19,957 19,735 Net occupancy expenses 3,563 3,279 3,293 3,190 3,561 Data processing 2,669 2,884 2,539 2,607 2,537 Professional fees 533 694 552 283 314 Outside services and consultants 2,717 2,985 2,855 2,485 2,525 Loan expense 1,118 1,281 1,392 1,533 1,205 FDIC insurance expense 540 388 670 775 725 Core deposit intangible amortization 903 925 926 925 926 Other losses 221 118 398 362 168 Other expenses 3,548 3,179 3,578 3,287 3,574 Total non–interest expense 34,524 35,711 36,816 35,404 35,270 Income before income taxes 20,091 23,814 25,834 28,834 27,102 Income tax expense 1,863 2,649 2,013 3,975 3,539 Net income $ 18,228 $ 21,165 $ 23,821 $ 24,859 $ 23,563 Basic earnings per share $ 0.42 $ 0.49 $ 0.55 $ 0.57 $ 0.54 Diluted earnings per share 0.42 0.48 0.55 0.57 0.54
Use of Non–GAAP Financial Measures
Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non–GAAP financial measures relating to net income, diluted earnings per share, pre–tax, pre–provision net income, net interest margin, tangible stockholders’ equity and tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and return on average tangible equity. In each case, we have identified special circumstances that we consider to be non–recurring and have excluded them. We believe that this shows the impact of such events as acquisition–related purchase accounting adjustments, among others we have identified in our reconciliations. Horizon believes these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP information identified herein and its most comparable GAAP measures.
Non–GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Net income as reported $ 18,228 $ 21,165 $ 23,821 $ 24,859 $ 23,563 (Gain) / loss on sale of investment securities 500 — — — — Tax effect (105 ) — — — — Net income excluding (gain) / loss on sale of investment securities 18,623 21,165 23,821 24,859 23,563 Death benefit on bank owned life insurance (“BOLI”) — — — (644 ) — Net income excluding death benefit on BOLI 18,623 21,165 23,821 24,215 23,563 Adjusted net income $ 18,623 $ 21,165 $ 23,821 $ 24,215 $ 23,563
Non–GAAP Reconciliation of Diluted Earnings per Share (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Diluted earnings per share (“EPS”) as reported $ 0.42 $ 0.48 $ 0.55 $ 0.57 $ 0.54 (Gain) / loss on sale of investment securities 0.01 — — — — Tax effect — — — — — Diluted EPS excluding (gain) / loss on sale of investment securities 0.43 0.48 0.55 0.57 0.54 Death benefit on bank owned life insurance (“BOLI”) — — — (0.01 ) — Adjusted diluted EPS $ 0.43 $ 0.48 $ 0.55 $ 0.56 $ 0.54
Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Pre–tax income $ 20,091 $ 23,814 $ 25,834 $ 28,834 $ 27,102 Credit loss expense (recovery) 242 (69 ) (601 ) 240 (1,386 ) Pre–tax, pre–provision net income $ 20,333 $ 23,745 $ 25,233 $ 29,074 $ 25,716 Pre–tax, pre–provision net income $ 20,333 $ 23,745 $ 25,233 $ 29,074 $ 25,716 (Gain) / loss on sale of investment securities 500 — — — — Death benefit on BOLI — — — (644 ) — Adjusted pre–tax, pre–provision net income $ 20,833 $ 23,745 $ 25,233 $ 28,430 $ 25,716
Non–GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Net interest income as reported $ 45,237 $ 48,782 $ 51,861 $ 52,044 $ 46,831 Average interest earning assets 7,201,266 7,091,980 7,056,208 6,943,633 6,814,756 Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) 2.67 % 2.85 % 3.04 % 3.13 % 2.90 % Net interest income as reported $ 45,237 $ 48,782 $ 51,861 $ 52,044 $ 46,831 Acquisition–related purchase accounting adjustments (“PAUs”) (367 ) (431 ) (906 ) (1,223 ) (916 ) Adjusted net interest income $ 44,870 $ 48,351 $ 50,955 $ 50,821 $ 45,915 Adjusted net interest margin 2.65 % 2.83 % 2.99 % 3.06 % 2.85 %
Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Total stockholders’ equity $ 702,559 $ 677,375 $ 644,993 $ 657,865 $ 677,450 Less: Intangible assets 171,547 172,450 173,375 173,662 174,588 Total tangible stockholders’ equity $ 531,012 $ 504,925 $ 471,618 $ 484,203 $ 502,862 Common shares outstanding 43,621,422 43,574,151 43,574,151 43,572,796 43,572,796 Book value per common share $ 16.11 $ 15.55 $ 14.80 $ 15.10 $ 15.55 Tangible book value per common share $ 12.17 $ 11.59 $ 10.82 $ 11.11 $ 11.54
Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Non–interest expense as reported $ 34,524 $ 35,711 $ 36,816 $ 35,404 $ 35,270 Net interest income as reported 45,237 48,782 51,861 52,044 46,831 Non–interest income as reported $ 9,620 $ 10,674 $ 10,188 $ 12,434 $ 14,155 Non–interest expense / (Net interest income + Non–interest income) 62.93 % 60.06 % 59.33 % 54.91 % 57.83 % Non–interest expense as reported $ 34,524 $ 35,711 $ 36,816 $ 35,404 $ 35,270 Net interest income as reported 45,237 48,782 51,861 52,044 46,831 Non–interest income as reported 9,620 10,674 10,188 12,434 14,155 (Gain) / loss on sale of investment securities 500 — — — — Death benefit on BOLI — — — (644 ) — Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI $ 10,120 $ 10,674 $ 10,188 $ 11,790 $ 14,155 Adjusted efficiency ratio 62.37 % 60.06 % 59.33 % 55.46 % 57.83 %
Non–GAAP Reconciliation of Return on Average Assets (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Average assets $ 7,831,106 $ 7,718,366 $ 7,635,102 $ 7,476,238 $ 7,319,675 Return on average assets (“ROAA”) as reported 0.94 % 1.09 % 1.24 % 1.33 % 1.31 % (Gain) / loss on sale of investment securities 0.03 — — — — Tax effect (0.01 ) — — — — ROAA excluding (gain) / loss on sale of investment securities 0.96 1.09 1.24 1.33 1.31 Death benefit on BOLI — — — (0.03 ) — ROAA excluding death benefit on BOLI 0.96 1.09 1.24 1.30 1.31 Adjusted ROAA 0.96 % 1.09 % 1.24 % 1.30 % 1.31 %
Non–GAAP Reconciliation of Return on Average Common Equity (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Average common equity $ 693,472 $ 660,188 $ 680,376 $ 677,299 $ 716,341 Return on average common equity (“ROACE”) as reported 10.66 % 12.72 % 13.89 % 14.72 % 13.34 % (Gain) / loss on sale of investment securities 0.29 — — — — Tax effect (0.06 ) — — — — ROACE excluding (gain) / loss on sale of investment securities 10.89 12.72 13.89 14.72 13.34 Death benefit on BOLI — — — (0.38 ) — ROACE excluding death benefit on BOLI 10.89 12.72 13.89 14.34 13.34 Adjusted ROACE 10.89 % 12.72 % 13.89 % 14.34 % 13.34 %
Non–GAAP Reconciliation of Return on Average Tangible Equity (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Average common equity $ 693,472 $ 660,188 $ 680,376 $ 677,299 $ 716,341 Less: Average intangible assets 172,139 173,050 173,546 175,321 176,356 Average tangible equity $ 521,333 $ 487,138 $ 506,830 $ 501,978 $ 539,985 Return on average tangible equity (“ROATE”) as reported 14.18 % 17.24 % 18.65 % 19.86 % 17.70 % (Gain) / loss on sale of investment securities 0.39 — — — — Tax effect (0.08 ) — — — — ROATE excluding (gain) / loss on sale of investment securities 14.49 17.24 18.65 19.86 17.70 Death benefit on BOLI — — — (0.51 ) — ROATE excluding death benefit on BOLI 14.49 17.24 18.65 19.35 17.70 Adjusted ROATE 14.49 % 17.24 % 18.65 % 19.35 % 17.70 %
Earnings Conference Call
As previously announced, Horizon will host a conference call to review its first quarter financial results and operating performance.
Participants may access the live conference call on April 27, 2023 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833–974–2379 from the United States, 866–450–4696 from Canada or 1–412–317–5772 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.
A telephone replay of the call will be available approximately one hour after the end of the conference through May 4, 2023. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 1–412–317–0088 from other international locations, and entering the access code 6349380.
About Horizon Bancorp, Inc.
Celebrating 150 years, Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion –asset commercial bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon Bank’s retail offerings include prime residential, indirect auto, and other secured consumer lending to in–market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in–market business banking and treasury management services, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana’s Michigan City, is available at horizonbank.com and investor.horizonbank.com.
Contact: Mark E. Secor Chief Financial Officer Phone: (219) 873–2611 Fax: (219) 874–9280 Date: April 26, 2023
