Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results

Rhea-AI Summary

Horizon Bancorp reported record financial results for Q4 2020, earning $21.9 million or $0.50 per diluted share, compared to $20.3 million in Q3 2020 and $18.5 million in Q4 2019. The bank's net interest income increased to $43.6 million, and total loans rose to $3.88 billion. Horizon maintained strong asset quality with non-performing loans at 0.69%. Despite increased non-interest expenses of $36.5 million, the company sees liquidity and capital strength as opportunities for growth in 2021, with a tangible book value per share rise to $11.78.

Positive

• Record net income of $21.9 million for Q4 2020, up from $18.5 million in Q4 2019.
• Increased tangible book value per share to $11.78, highest in company history.
• Strong liquidity position with approximately $1.6 billion in cash and investments.

Negative

• Net interest margin fell to 3.34% from 3.58% YOY.
• Increased non-interest expenses to $36.5 million, a rise of 18.9% from Q4 2019.

MICHIGAN CITY, Ind., Jan. 27, 2021 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) -- Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three and twelve months ending December 31, 2020.

“Horizon closed 2020 with record quarterly top– and bottom–line results, supported by continued strength in mortgage lending and other fee–generating businesses, the benefits of our work to deleverage and optimize returns on total earning assets, and favorable deferral trends and credit quality metrics,” Chairman and CEO Craig M. Dwight said. “Entering the new year with strong liquidity, capital, and reserves, we see clear opportunities to enhance the bank’s operating efficiency, deepen in–market retail and commercial customer relationships, and help to strengthen our resilient Indiana and Michigan communities in 2021.”

Fourth Quarter 2020 Highlights

• Earned record net income of $21.9 million, or $0.50 diluted earnings per share, compared to $20.3 million, or $0.46 diluted earnings per share, for the third quarter of 2020 and $18.5 million, or $0.41 diluted earnings per share, for the fourth quarter of 2019.
   
• Grew pre–tax, pre–provision net income to a record $26.9 million for the quarter, compared to $26.7 million for the third quarter of 2020 and $22.8 million for the fourth quarter of 2019. This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense. (See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income” table below.)
   
• Grew net interest income to a record $43.6 million for the quarter, compared to $43.4 million for the third quarter of 2020 and $41.5 million for the fourth quarter of 2019. Adjusted net interest income for the quarter was $45.0 million compared to $41.9 million for the third quarter of 2020. (See the “Non–GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” tables below.)
   
• Reported return on average assets (“ROAA”) of 1.49% and return on average common equity (“ROACE”) of 12.79% in the quarter, as well as adjusted ROAA of 1.56% and adjusted ROACE of 13.33%, excluding the impact of gains on sale of investment securities and prepayment penalties on borrowings, net of tax. (See the “Non–GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” tables below.)
   
• Grew mortgage–related non–interest income by 8.5% from the linked quarter and 138.6% from the prior year period, with gain on mortgage loan sales of $7.8 million and net mortgage servicing income of $327,000. The bank originated $186.1 million in mortgage loans during the quarter, down 10.1% from the third quarter of 2020 and up 63.3% from the fourth quarter of 2019.
   
• Total non–interest income, excluding securities gains, grew to a record $17.1 million, up 9.6% from the linked quarter and 43.5% from the prior year period, supported by increases in mortgage–related gains and servicing income, banking and fiduciary fees.
   
• Reported net interest margin (“NIM”) of 3.34% and adjusted NIM of 3.44%, with reported NIM declining by 5 basis points and adjusted NIM increasing by 17 basis points from the third quarter of 2020. (See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this non–GAAP calculation). An estimated 18 basis points attributed to PPP lending improved the margin, offset by an estimated 10 and 7 basis point compression, respectively, attributed to the subordinated notes and excess liquidity held during the quarter, for both NIM and adjusted NIM.
   
• Increased the allowance for credit losses (“ACL”) by 1.3% during the quarter and 222.8% year–to–date to $57.0 million at period end, representing 1.47% of total loans, reflecting January 2020 implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in the allocation for the Company’s identified stressed portfolios. ACL at period end also represented 1.55% of loans excluding $208.9 million in Federal Paycheck Protection Program (“PPP”) loans, and 212.7% of non–performing loans.
   
• COVID–19 deferral levels improved to 3.5% of total loans at period end, compared to 4.1% on September 30, 2020 and 14.3% on June 30, 2020 and the bank experienced no material specific loan losses attributed to COVID–19 closures in 2020.
   
• Maintained solid asset quality metrics, including non–performing and delinquent loans representing 0.69% and 0.19% of total loans, respectively, at December 31, 2020, while net charge–offs were 0.01% of average loans for the period.
   
• The efficiency ratio for the period was 57.54% compared to 55.59% for the third quarter of 2020. The adjusted efficiency ratio was 56.48% compared to 56.64% for the third quarter of 2020. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” tables below.)
   
• Horizon’s tangible book value per share increased from $10.63 at December 31, 2019 to $11.78 at December 31, 2020, which includes the accounting adjustment for CECL as of January 1, 2020. This represents the highest tangible book value per share in the Company’s history. (See the “Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share” tables below.)
   
• Maintained strong liquidity position including approximately $1.6 billion in cash and investment securities, which is approximately 26.3% of total assets, and approximately $1.0 billion in unused availability on lines of credit, at December 31, 2020.
   
• Horizon has reported over thirty years of uninterrupted dividends and as of year–end had in excess of $127 million in cash at the holding company, which provides us with considerable future optionality to build shareholder value.

Summary

		For the Three Months Ended
		December 31,				September 30,				December 31,
Net Interest Income and Net Interest Margin		2020				2020				2019
Net interest income		$	43,622			$	43,397			$	41,519
Net interest margin		3.34		%		3.39		%		3.58		%
Adjusted net interest margin		3.44		%		3.27		%		3.49		%

		For the Three Months Ended
		December 31,			September 30,			December 31,
Asset Yields and Funding Costs		2020			2020			2019
Interest earning assets		4.05	%		3.90	%		4.57	%
Interest bearing liabilities		0.94	%		0.67	%		1.24	%

The yield on interest earning assets for the fourth quarter of 2020 was impacted by PPP loans and higher liquidity levels. Horizon estimates PPP loans increased the yield by 15 basis points and higher liquidity levels compressed the yield by 8 basis points. Horizon estimates PPP loans decreased the yield on interest earning assets by 6 basis point for the third quarter of 2020. The funding costs on interest bearing liabilities increased by an estimated 37 basis points for the fourth quarter of 2020 as a result of prepayment penalties on borrowings.

		For the Three Months Ended
Non–interest Income and		December 31,				September 30,				December 31,
Mortgage Banking Income		2020				2020				2019
Total non–interest income		$	19,733			$	16,700			$	11,934
Gain on sale of mortgage loans		7,815				8,813				3,119
Mortgage servicing income net of impairment		327				(1,308		)		294

		For the Three Months Ended
		December 31,				September 30,				December 31,
Non–interest Expense		2020				2020				2019
Total non–interest expense		$	36,453			$	33,407			$	30,432
Annualized non–interest expense to average assets		2.47		%		2.30		%		2.32		%

		For the Three Months Ended
		December 31,			September 30,			December 31,
Credit Quality		2020			2020			2019
Allowance for credit losses to total loans		1.47	%		1.39	%		0.49	%
Non–performing loans to total loans		0.69			0.72			0.58
Percent of net charge–offs to average loans outstanding for the period		0.01			0.02			0.02

						CECL Adoption
Allowance for		December 31,								January 1,				Net Reserve Build																December 31,
Credit Losses		2019				Impact				2020				1Q20				2Q20				3Q20				4Q20				2020
Commercial		$	11,996			$	13,618			$	25,614			$	6,936			$	6,597			$	648			$	2,415			$	42,210
Retail Mortgage		923				4,048				4,971				683				178				(368		)		(844		)		4,620
Warehouse		1,077				—				1,077				(22		)		135				60				17				1,267
Consumer		3,671				4,911				8,582				599				(260		)		889				(880		)		8,930
Allowance for Credit Losses (“ACL”)		$	17,667			$	22,577			$	40,244			$	8,196			$	6,650			$	1,229			$	708			$	57,027
ACL / Total Loans		0.49		%						1.10		%																		1.47		%
Acquired Loan Discount (“ALD”)		$	20,228			$	(2,786	)		$	17,442			$	(1,436	)		$	(1,532	)		$	(1,541	)		$	(1,439	)		$	11,494

Horizon’s asset quality metrics continued to remain favorable through the fourth quarter, with low levels of delinquency and other real estate owned and a decrease in non–performing loans. Horizon’s reserve build reflects adoption of CECL on January 1, 2020 and the increase in the Company’s quarterly allocations to cover potential future loan losses related to economic factors and the nature and characteristics of its loan portfolios, primarily related to the impact on non–essential businesses caused by COVID–19 closures and the slow pace of reopening and economic recovery. Through December 31, 2020, Horizon has not recorded any material specific loan losses attributed to COVID–19 closures. Lower losses are attributable to Horizon working with its customers to provide payment modifications to help assist our customers as they manage through the economic slowdown due to the pandemic and the location of a high percentage of our retail and restaurant loans have benefited from the influx of Chicago residents into our markets. In addition, during the quarter Horizon made good progress on lowering its non–performing assets as a result of payoffs received on two non–performing credits.

During the fourth quarter, $2.0 million of the ACL related to the January 1, 2020, transfer of acquired loan discounts to the ACL was used in the payoff on two non–performing credits and a portion included with the $2.5 million of acquisition related income recognized during the quarter.

Income Statement Highlights

Net income for the fourth quarter of 2020 was $21.9 million, or $0.50 diluted earnings per share, compared to $20.3 million, or $0.46, for the linked quarter and $18.5 million, or $0.41, for the prior year period.

Adjusted net income for the fourth quarter of 2020 was $22.8 million, or $0.52 diluted earnings per share, compared to $19.4 million, or $0.45, for the linked quarter and $18.5 million, or $0.41, for the prior year period. Adjusted net income, which is not calculated according to generally accepted accounting principles (“GAAP”), is a measure that Horizon uses to provide a greater understanding of operating profitability.

The increase in net income for the fourth quarter of 2020 when compared to the third quarter of 2020 reflects an increase in non–interest income of $3.0 million, an increase of $225,000 in net interest income and a decrease in income tax expense of $2.4 million, offset by an increase in non–interest expense of $3.0 million and an increase in credit loss expense of $990,000.

Interest income includes the recognition of PPP loan processing fees totaling $4.6 million in the fourth quarter of 2020, compared to $2.2 million in the linked quarter. On December 31, 2020, the Company had $4.0 million in deferred PPP loan processing fees outstanding and $208.9 million in PPP loans outstanding. PPP deferred fees and loans outstanding at September 30, 2020 were $8.0 million and $310.8 million, respectively. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness.

Fourth quarter 2020 income from the gain on sale of mortgage loans, totaled $7.8 million in the fourth quarter of 2020, down from $8.8 million in the linked quarter and up from $3.1 million in the prior year period.

Non–interest expense of $36.5 million in the fourth quarter of 2020 reflected a $1.2 million increase in salaries and employee benefits expense from the linked quarter. The increase in salaries and employee benefits expense reflected higher performance–based compensation accruals due to the record 2020 net interest income, non–interest income revenues and other key performance metrics. The increase in other losses included mostly one–time items including losses on liquidation of bank owned real estate held from previous branch closings.

The increase in net income for the fourth quarter of 2020 when compared to the prior year period reflects an increase in net interest income of $2.1 million, an increase in non–interest income of $7.8 million and a decrease in income tax expense of $2.0 million, offset by an increase in non–interest expense of $5.8 million and an increase in credit loss expense of $2.7 million.

Net income for the year ended December 31, 2020 was $68.5 million, or $1.55 diluted earnings per share, compared to $66.5 million, or $1.53 diluted earnings per share, for the year ended December 31, 2019. Adjusted net income for the year ended December 31, 2020 was $67.8 million, or $1.53 diluted earnings per share, compared to $70.7 million, or $1.63 diluted earnings per share for the year ended December 31, 2019. The increase in net income for the year ended December 31, 2020 when compared to the prior year reflects an increase in net interest income of $10.1 million, an increase in non–interest income of $16.6 million and a decrease in income tax expense of $3.4 million, offset by an increase in the provision for credit loss expense of $18.8 million and an increase in non–interest expense of $9.4 million.

Non–GAAP Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Net income as reported		$	21,893			$	20,312			$	14,639			$	11,655			$	18,543			$	68,499			$	66,538
Merger expenses		—				—				—				—				—				—				5,650
Tax effect		—				—				—				—				—				—				(987		)
Net income excluding merger expenses		21,893				20,312				14,639				11,655				18,543				68,499				71,201
(Gain) / loss on sale of investment securities		(2,622		)		(1,088		)		(248		)		(339		)		(10		)		(4,297		)		75
Tax effect		551				228				52				71				2				902				(16		)
Net income excluding (gain) / loss on sale of investment securities		19,822				19,452				14,443				11,387				18,535				65,104				71,260
Death benefit on bank owned life insurance (“BOLI”)		—				(31		)		—				(233		)		—				(264		)		(580		)
Net income excluding death benefit on BOLI		19,822				19,421				14,443				11,154				18,535				64,840				70,680
Prepayment penalties on borrowings		3,804				—				—				—				—				3,804				—
Tax effect		(799		)		—				—				—				—				(799		)		—
Net income excluding prepayment penalties on borrowings		22,827				19,421				14,443				11,154				18,535				67,845				70,680
Adjusted net income		$	22,827			$	19,421			$	14,443			$	11,154			$	18,535			$	67,845			$	70,680

Non–GAAP Reconciliation of Diluted Earnings per Share
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Diluted earnings per share (“EPS”) as reported		$	0.50			$	0.46			$	0.33			$	0.26			$	0.41			$	1.55			$	1.53
Merger expenses		—				—				—				—				—				—				0.13
Tax effect		—				—				—				—				—				—				(0.02		)
Diluted EPS excluding merger expenses		0.50				0.46				0.33				0.26				0.41				1.55				1.64
(Gain) / loss on sale of investment securities		(0.06		)		(0.02		)		(0.01		)		(0.01		)		—				(0.10		)		—
Tax effect		0.01				0.01				—				—				—				0.02				—
Diluted EPS excluding (gain) / loss on sale of investment securities		0.45				0.45				0.32				0.25				0.41				1.47				1.64
Death benefit on bank owned life insurance (“BOLI”)		—				—				—				(0.01		)		—				(0.01		)		(0.01		)
Diluted EPS excluding death benefit on BOLI		0.45				0.45				0.32				0.24				0.41				1.46				1.63
Prepayment penalties on borrowings		0.09				—				—				—				—				0.09				—
Tax effect		(0.02		)		—				—				—				—				(0.02		)		—
Diluted EPS excluding prepayment penalties on borrowings		0.52				0.45				0.32				0.24				0.41				1.53				1.63
Adjusted diluted EPS		$	0.52			$	0.45			$	0.32			$	0.24			$	0.41			$	1.53			$	1.63

Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Pre–tax income		$	23,860			$	24,638			$	16,632			$	13,239			$	22,463			$	78,369			$	79,841
Credit loss expense		3,042				2,052				7,057				8,600				340				20,751				1,976
Pre–tax, pre–provision income		$	26,902			$	26,690			$	23,689			$	21,839			$	22,803			$	99,120			$	81,817
Pre–tax, pre–provision income		$	26,902			$	26,690			$	23,689			$	21,839			$	22,803			$	99,120			$	81,817
Merger expenses		—				—				—				—				—				—				5,650
(Gain) / loss on sale of investment securities		(2,622		)		(1,088		)		(248		)		(339		)		(10		)		(4,297		)		75
Death benefit on BOLI		—				(31		)		—				(233		)		—				(264		)		(580		)
Prepayment penalties on borrowings		3,804				—				—				—				—				3,804				—
Adjusted pre–tax, pre–provision income		$	28,084			$	25,571			$	23,441			$	21,267			$	22,793			$	98,363			$	86,962

Horizon’s net interest margin decreased to 3.34% for the fourth quarter of 2020 compared to 3.39% for the third quarter of 2020. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 27 basis points, offset by an increase in the yield of interest earning assets of 15 basis points. Interest income from acquisition–related purchase accounting adjustments was $973,000 higher during the fourth quarter of 2020 when compared to the third quarter of 2020.

Horizon’s net interest margin decreased to 3.34% for the fourth quarter of 2020 when compared to 3.58% for the fourth quarter of 2019. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 52 basis points offset by a decrease in the cost of interest bearing liabilities of 30 basis points.

Horizon’s net interest margin decreased to 3.44% for the year ended December 31, 2020 compared to 3.69% for the prior year. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 64 basis points offset by a decrease in the cost of interest bearing liabilities of 48 basis points.

The net interest margin was impacted during the third and fourth quarters of 2020 due to the PPP loans that were originated. Horizon estimates that the PPP loans increased the net interest margin by 18 basis points in the fourth quarter and compressed the margin 4 basis points for the third quarter. This assumes these PPP loans were not included in average interest earning assets or interest income and were primarily funded by the growth in non–interest bearing deposits. The increase to the net interest margin for the twelve months of 2020 using the same assumptions was estimated to be 3 basis points.

The net interest margin was impacted during the third and fourth quarters of 2020 due to higher liquidity levels impacting the mix of interest earning assets. Horizon estimates the higher liquidity levels compressed the net interest margin by 7 basis points for the fourth quarter and 3 basis points for the third quarter. This assumes the higher liquidity level was not included in average interest earning assets or interest income. The compression to the net interest margin for the twelve months of 2020 using the same assumptions was estimated to be 4 basis points.

The net interest margin was also impacted during the third and fourth quarters of 2020 due to the issuance of $60.0 million in subordinated notes in June 2020. Horizon estimates that the subordinated notes compressed the net interest margin by 10 basis points for both the third and fourth quarters. This assumes the subordinated notes were not included in average interest bearing liabilities or interest expense and were primarily offset by a reduction in cash. The compression to the net interest margin for the twelve months of 2020 using the same assumptions was estimated to be 6 basis points.

Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Net interest income as reported		$	43,622			$	43,397			$	42,996			$	40,925			$	41,519			$	170,940			$	160,791
Average interest earning assets		5,365,888				5,251,611				5,112,636				4,746,202				4,748,217				5,120,106				4,470,450
Net interest income as a percentage of average interest earning assets (“Net Interest Margin”)		3.34		%		3.39		%		3.47		%		3.56		%		3.58		%		3.44		%		3.69		%
Net interest income as reported		$	43,622			$	43,397			$	42,996			$	40,925			$	41,519			$	170,940			$	160,791
Acquisition–related purchase accounting adjustments (“PAUs”)		(2,461		)		(1,488		)		(1,553		)		(1,434		)		(1,042		)		(6,936		)		(5,590		)
Prepayment penalties on borrowings		3,804				—				—				—				—				3,804				—
Adjusted net interest income		$	44,965			$	41,909			$	41,443			$	39,491			$	40,477			$	167,808			$	155,201
Adjusted net interest margin		3.44		%		3.27		%		3.35		%		3.44		%		3.49		%		3.38		%		3.57		%

Net interest margin, excluding acquisition–related purchase accounting adjustments and prepayment penalties on borrowings (“adjusted net interest margin”), was 3.44% for the fourth quarter of 2020 compared to 3.27% for the prior quarter and 3.49% for the fourth quarter of 2019. Interest income from acquisition–related purchase accounting adjustments was $2.5 million, $1.5 million and $1.0 million for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Adjusted net interest margin was 3.38% for the year ended December 31, 2020 compared to 3.57% for the prior year. Interest income from acquisition–related purchase accounting adjustments was $6.9 million and $5.6 million for the years ended December 31, 2020 and 2019.

Lending Activity

Total loans were $3.88 billion, or $3.67 billion excluding PPP lending, on December 31, 2020. Total loans were $4.04 billion, or $3.73 billion excluding PPP lending, on September 30, 2020 and $3.64 billion on December 31, 2019. During the year ended December 31, 2020, commercial loans increased $145.6 million, mortgage warehouse loans increased $245.3 million, and loans held for sale increased $9.4 million, offset by a decrease in residential mortgage loans of $146.4 million and a decrease in consumer loans of $14.0 million.

Loan Growth by Type, Excluding Acquired Loans
(Dollars in Thousands, Unaudited)
		December 31,				December 31,				Amount				Percent
		2020				2019				Change				Change
Commercial		$	2,192,271			$	2,046,651			$	145,620			7.1%
Residential mortgage		624,286				770,717				(146,431		)		(19.0)%
Consumer		655,200				669,180				(13,980		)		(2.1)%
Subtotal		3,471,757				3,486,548				(14,791		)		(0.4)%
Loans held for sale		13,538				4,088				9,450				231.2%
Mortgage warehouse		395,626				150,293				245,333				163.2%
Total loans		$	3,880,921			$	3,640,929			$	239,992			6.6%

Residential mortgage lending activity for the three months ended December 31, 2020 generated $7.8 million in income from the gain on sale of mortgage loans, a decrease of $1.0 million from the third quarter of 2020's record level and an increase of $4.7 million from the fourth quarter of 2019. Total origination volume for the fourth quarter of 2020, including loans placed into the portfolio, totaled $186.1 million, representing a decrease of 10.1% from third quarter 2020 levels, and an increase of 63.3% from the fourth quarter of 2019. As a percentage of total originations, 58% of fourth quarter 2020 volume was related to refinances and 42% was for new purchases. Total origination volume of loans sold to the secondary market totaled $157.7 million, representing a decrease of 5.2% from the third quarter of 2020 and an increase of 88.8% from the fourth quarter of 2019.

Expense Management

		Three Months Ended
		December 31,				September 30,				Amount				Percent
Non–interest Expense		2020				2020				Change				Change
Salaries and employee benefits		$	20,030			$	18,832			$	1,198			6.4%
Net occupancy expenses		3,262				3,107				155				5.0%
Data processing		2,126				2,237				(111		)		(5.0)%
Professional fees		691				688				3				0.4%
Outside services and consultants		2,083				1,561				522				33.4%
Loan expense		2,961				2,876				85				3.0%
FDIC insurance expense		900				570				330				57.9%
Other losses		735				114				621				544.7%
Other expense		3,665				3,422				243				7.1%
Total non–interest expense		$	36,453			$	33,407			$	3,046			9.1%
Annualized non–interest expense to average assets		2.47		%		2.30		%

Total non–interest expense was $3.0 million higher in the fourth quarter of 2020 when compared to the third quarter of 2020. Increased salaries and employee benefits reflected higher performance–based compensation accruals following improved financial performance in the second half of this year. Higher FDIC insurance expense reflected significant growth in deposits through the end of the fourth quarter of 2020. Outside services and consultants, other losses and other expenses were partially offset by a decrease in data processing.

		Three Months Ended
		December 31,				December 31,				Amount				Percent
Non–interest Expense		2020				2019				Change				Change
Salaries and employee benefits		$	20,030			$	16,841			$	3,189			18.9%
Net occupancy expenses		3,262				3,106				156				5.0%
Data processing		2,126				2,235				(109		)		(4.9)%
Professional fees		691				520				171				32.9%
Outside services and consultants		2,083				1,415				668				47.2%
Loan expense		2,961				2,438				523				21.5%
FDIC insurance expense		900				—				900				—%
Other losses		735				377				358				95.0%
Other expense		3,665				3,718				(53		)		(1.4)%
Total non–interest expense		$	36,453			$	30,650			$	5,803			18.9%
Annualized non–interest expense to average assets		2.47		%		2.32		%

Total non–interest expense was $5.8 million higher in the fourth quarter of 2020 when compared to the fourth quarter of 2019. Increases in salaries and employee benefits, FDIC insurance expense, outside services and consultants, loan expense and other losses were offset in part by decreases in data processing and other expense.

		Twelve Months Ended
		December 31,												December 31,
		2020												2019												Adjusted
Non–interest Expense		Actual				Merger Expenses				Adjusted				Actual				Merger Expenses				Adjusted				Amount Change				Percent Change
Salaries and employee benefits		$	71,082			$	—			$	71,082			$	65,206			$	(484	)		$	64,722			$	6,360			9.8%
Net occupancy expenses		12,811				—				12,811				12,157				(75		)		12,082				729				6.0%
Data processing		9,200				—				9,200				8,480				(360		)		8,120				1,080				13.3%
Professional fees		2,433				—				2,433				1,946				(392		)		1,554				879				56.6%
Outside services and consultants		7,318				—				7,318				8,152				(2,466		)		5,686				1,632				28.7%
Loan expense		10,628				—				10,628				8,633				(2		)		8,631				1,997				23.1%
FDIC insurance expense		1,855				—				1,855				252				—				252				1,603				636.1%
Other losses		1,162				—				1,162				740				(71		)		669				493				73.7%
Other expense		14,952				—				14,952				16,466				(1,800		)		14,666				286				2.0%
Total non–interest expense		$	131,441			$	—			$	131,441			$	122,032			$	(5,650	)		$	116,382			$	15,059			12.9%
Annualized non–interest expense to average assets		2.34		%						2.34		%		2.47		%						2.36		%

Total non–interest expense was $9.4 million higher for the year ended December 31, 2020 when compared to the prior year. Increases in salaries and employee benefits, loan expenses, data processing, FDIC insurance expense and net occupancy expenses were offset in part by decreases in outside services and consultants expense and other expense.

Annualized non–interest expense as a percent of average assets were 2.47%, 2.30% and 2.32% for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Annualized non–interest expense as a percent of average assets were 2.34% and 2.47% for the years ended December 31, 2020 and 2019, respectively. Annualized non–interest expense, excluding merger expenses, as a percent of average assets were 2.34% and 2.36% for the years ended December 31, 2020 and 2019, respectively.

Income tax expense totaled $2.0 million for the fourth quarter of 2020, a decrease of $2.4 million when compared to the third quarter of 2020 and a decrease of $2.0 million when compared to the fourth quarter of 2019. The decrease in income tax expense in the fourth quarter of 2020 compared to the third quarter of 2020 and the fourth quarter of 2019 was primarily due to the ability to recognize solar tax credits from completed projects the Company has invested in along with an increase in tax exempt municipal investments.

Income tax expense totaled $9.9 million for the year ended December 31, 2020, a decrease of $3.4 million when compared to the same prior year period. The decrease in income tax expense was primarily due to the solar tax credits, an increase in tax exempt municipal investments and lower taxable income.

Capital

The capital resources of the Company and Horizon Bank (the “Bank”) exceeded regulatory capital ratios for “well capitalized” banks at December 31, 2020. Stockholders’ equity totaled $692.2 million at December 31, 2020 and the ratio of average stockholders’ equity to average assets was 11.82% for the year ended December 31, 2020.

Capital levels benefited from the Company’s previously disclosed public offering of subordinated notes raising $60.0 million in June 2020. Horizon’s fortress balance sheet at December 31, 2020 maintained adequate regulatory capital ratios when stress testing for highly adverse scenarios.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of December 31, 2020.

		Actual							Required for Capital Adequacy Purposes							Required for Capital Adequacy Purposes with Capital Buffer							Well Capitalized Under Prompt Corrective Action Provisions
		Amount				Ratio			Amount				Ratio			Amount				Ratio			Amount				Ratio
Total capital (to risk–weighted assets)
Consolidated		$	650,206			14.92	%		$	348,617			8.00	%		$	457,560			10.50	%		N/A				N/A
Bank		532,315				12.21	%		348,810				8.00	%		457,813				10.50	%		$	436,013			10.00	%
Tier 1 capital (to risk–weighted assets)
Consolidated		606,395				13.92	%		261,462				6.00	%		370,404				8.50	%		N/A				N/A
Bank		492,221				11.29	%		261,606				6.00	%		370,609				8.50	%		348,808				8.00	%
Common equity tier 1 capital (to risk–weighted assets)
Consolidated		491,281				11.27	%		196,096				4.50	%		305,038				7.00	%		N/A				N/A
Bank		492,221				11.29	%		196,205				4.50	%		305,207				7.00	%		283,407				6.50	%
Tier 1 capital (to average assets)
Consolidated		606,395				10.66	%		227,453				4.00	%		227,453				4.00	%		N/A				N/A
Bank		492,221				8.71	%		226,158				4.00	%		226,158				4.00	%		282,697				5.00	%

“The strength and resilience of Horizon’s business is demonstrated by the Company’s strong operating fundamentals, ability to consistently generate retained earnings and growth in tangible book value per share and the Company’s healthy capital position overall,” said Mr. Dwight. “Accordingly, we will continue to be opportunistic with share repurchases under our current buyback authorization, and we remain committed to maintaining our current quarterly cash dividend.”

Liquidity

The Bank maintains a stable base of core deposits provided by long–standing 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 repayment, investment security sales and maturities, 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”). At December 31, 2020, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.04 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank had approximately $632.4 million of unpledged investment securities at December 31, 2020.

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, net interest margin, total loans and loan growth, the allowance for credit losses, tangible stockholders’ equity, tangible book value per share, efficiency ratio, the return on average assets, the return on average equity and pre–tax, pre–provision income. 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 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 figures identified herein and their most comparable GAAP measures.

Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
(Dollars in Thousands, Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Total stockholders’ equity		$	692,216			$	670,293			$	652,206			$	630,842			$	656,023
Less: Intangible assets		175,140				175,107				176,020				176,961				177,917
Total tangible stockholders’ equity		$	517,076			$	495,186			$	476,186			$	453,881			$	478,106
Common shares outstanding		43,880,562				43,874,353				43,821,878				43,763,623				44,975,771
Book value per common share		$	15.78			$	15.28			$	14.88			$	14.41			$	14.59
Tangible book value per common share		$	11.78			$	11.29			$	10.87			$	10.37			$	10.63

Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Non–interest expense as reported		$	36,453			$	33,407			$	30,432			$	31,149			$	30,650			$	131,441			$	122,032
Net interest income as reported		43,622				43,397				42,996				40,925				41,519				170,940				160,791
Non–interest income as reported		$	19,733			$	16,700			$	11,125			$	12,063			$	11,934			$	59,621			$	43,058
Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”)		57.54		%		55.59		%		56.23		%		58.79		%		57.34		%		57.01		%		59.86		%
Non–interest expense as reported		$	36,453			$	33,407			$	30,432			$	31,149			$	30,650			$	131,441			$	122,032
Merger expenses		—				—				—				—				—				—				(5,650		)
Non–interest expense excluding merger expenses		36,453				33,407				30,432				31,149				30,650				131,441				116,382
Net interest income as reported		43,622				43,397				42,996				40,925				41,519				170,940				160,791
Prepayment penalties on borrowings		3,804				—				—				—				—				3,804				—
Net interest income excluding prepayment penalties on borrowings		47,426				43,397				42,996				40,925				41,519				174,744				160,791
Non–interest income as reported		19,733				16,700				11,125				12,063				11,934				59,621				43,058
(Gain) / loss on sale of investment securities		(2,622		)		(1,088		)		(248		)		(339		)		(10		)		(4,297		)		75
Death benefit on BOLI		—				(31		)		—				(233		)		—				(264		)		(580		)
Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI		$	17,111			$	15,581			$	10,877			$	11,491			$	11,924			$	55,060			$	42,553
Adjusted efficiency ratio		56.48		%		56.64		%		56.49		%		59.43		%		57.35		%		57.20		%		57.23		%

Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Average assets		$	5,864,086			$	5,768,691			$	5,620,695			$	5,257,332			$	5,250,574			$	5,628,783			$	4,933,058
Return on average assets (“ROAA”) as reported		1.49		%		1.40		%		1.05		%		0.89		%		1.40		%		1.22		%		1.35		%
Merger expenses		—				—				—				—				—				—				0.11
Tax effect		—				—				—				—				—				—				(0.02		)
ROAA excluding merger expenses		1.49				1.40				1.05				0.89				1.40				1.22				1.44
(Gain) / loss on sale of investment securities		(0.18		)		(0.08		)		(0.02		)		(0.03		)		—				(0.08		)		—
Tax effect		0.04				0.02				—				0.01				—				0.02				—
ROAA excluding (gain) / loss on sale of investment securities		1.35				1.34				1.03				0.87				1.40				1.16				1.44
Death benefit on BOLI		—				—				—				(0.02		)		—				—				(0.01		)
ROAA excluding death benefit on BOLI		1.35				1.34				1.03				0.85				1.40				1.16				1.43
Prepayment penalties on borrowings		0.26				—				—				—				—				0.07				—
Tax effect		(0.05		)		—				—				—				—				(0.01		)		—
ROAA excluding prepayment penalties on borrowings		1.56		%		1.34		%		1.03		%		0.85		%		1.40		%		1.22		%		1.43		%
Adjusted ROAA		1.56		%		1.34		%		1.03		%		0.85		%		1.40		%		1.22		%		1.43		%

Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2020				2020				2020				2020				2019				2020				2019
Average common equity		$	680,857			$	668,797			$	649,490			$	667,588			$	653,071			$	665,466			$	605,719
Return on average common equity (“ROACE”) as reported		12.79		%		12.08		%		9.07		%		7.02		%		11.26		%		10.29		%		10.98		%
Merger expenses		—				—				—				—				—				—				0.93
Tax effect		—				—				—				—				—				—				(0.16		)
ROACE excluding merger expenses		12.79				12.08				9.07				7.02				11.26				10.29				11.75
(Gain) / loss on sale of investment securities		(1.53		)		(0.65		)		(0.15		)		(0.20		)		(0.01		)		(0.65		)		0.01
Tax effect		0.32				0.14				0.03				0.04				—				0.14				—
ROACE excluding (gain) / loss on sale of investment securities		11.58				11.57				8.95				6.86				11.25				9.78				11.76
Death benefit on BOLI		—				(0.02		)		—				(0.14		)		—				(0.04		)		(0.10		)
ROACE excluding death benefit on BOLI		11.58				11.55				8.95				6.72				11.25				9.74				11.66
Prepayment penalties on borrowings		2.22				—				—				—				—				0.57				—
Tax effect		(0.47		)		—				—				—				—				(0.12		)		—
ROACE excluding prepayment penalties on borrowings		13.33		%		11.55		%		8.95		%		6.72		%		11.25		%		10.19		%		11.66		%
Adjusted ROACE		13.33		%		11.55		%		8.95		%		6.72		%		11.25		%		10.19		%		11.66		%

Conference Call

As previously announced, Horizon will host a conference call to review its fourth quarter financial results and operating performance.

Participants may access the live conference call on January 28, 2021 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 877–317–6789 from the United States, 866–450–4696 from Canada or 412–317–6789 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 February 4, 2021. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 412–317–0088 from other international locations, and entering the access code 10150632.

About Horizon Bancorp, Inc.

Horizon Bancorp, Inc. is an independent, commercial bank holding company serving northern and central Indiana, and southern and central Michigan through its commercial banking subsidiary, Horizon Bank. Horizon may be reached online at www.horizonbank.com. Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC.

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. 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 risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in Horizon’s Annual Report on Form 10–K and its quarterly reports on Form 10–Q. Further, statements about the effects of the COVID–19 pandemic on our business, operations, financial performance, and prospects may constitute forward–looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward–looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. 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)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Balance sheet:
Total assets		$	5,886,614			$	5,790,143			$	5,739,262			$	5,351,325			$	5,246,829
Investment securities		1,302,701				1,195,613				1,126,075				1,099,943				1,042,675
Commercial loans		2,192,271				2,321,608				2,312,715				2,050,402				2,046,651
Mortgage warehouse loans		395,626				374,653				300,386				223,519				150,293
Residential mortgage loans		624,286				675,220				704,410				757,529				770,717
Consumer loans		655,200				658,884				660,871				675,849				669,180
Earning assets		5,206,645				5,262,054				5,143,978				4,835,934				4,706,051
Non–interest bearing deposit accounts		1,053,242				1,016,646				981,868				709,978				709,760
Interest bearing transaction accounts		2,802,673				2,600,691				2,510,854				2,264,576				2,245,631
Time deposits		675,218				718,952				814,877				907,717				975,611
Borrowings		475,000				587,473				583,073				704,613				549,741
Subordinated notes		58,603				58,566				58,824				—				—
Junior subordinated debentures issued to capital trusts		56,548				56,491				56,437				56,374				56,311
Total stockholders’ equity		692,216				670,293				652,206				630,842				656,023

Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Income statement:
Net interest income		$	43,622			$	43,397			$	42,996			$	40,925			$	41,519
Credit loss expense		3,042				2,052				7,057				8,600				340
Non–interest income		19,733				16,700				11,125				12,063				11,934
Non–interest expense		36,453				33,407				30,432				31,149				30,650
Income tax expense		1,967				4,326				1,993				1,584				3,920
Net income		$	21,893			$	20,312			$	14,639			$	11,655			$	18,543
Per share data:
Basic earnings per share		$	0.50			$	0.46			$	0.33			$	0.26			$	0.41
Diluted earnings per share		0.50				0.46				0.33				0.26				0.41
Cash dividends declared per common share		0.12				0.12				0.12				0.12				0.12
Book value per common share		15.78				15.28				14.88				14.41				14.59
Tangible book value per common share		11.78				11.29				10.87				10.37				10.63
Market value – high		15.86				11.48				12.44				18.79				19.42
Market value – low		$	10.16			$	9.05			$	8.40			$	7.97			$	16.60
Weighted average shares outstanding – Basis		43,862,435				43,862,435				43,781,249				44,658,512				44,971,676
Weighted average shares outstanding – Diluted		43,903,881				43,903,881				43,802,794				44,756,716				45,103,065
Key ratios:
Return on average assets		1.49		%		1.40		%		1.05		%		0.89		%		1.40		%
Return on average common stockholders’ equity		12.79				12.08				9.07				7.02				11.26
Net interest margin		3.34				3.39				3.47				3.56				3.58
Allowance for credit losses to total loans		1.47				1.39				1.38				1.30				0.49
Average equity to average assets		11.61				11.59				11.56				12.70				12.44
Bank only capital ratios:
Tier 1 capital to average assets		8.71				8.57				8.48				9.43				9.49
Tier 1 capital to risk weighted assets		11.29				10.67				10.49				11.83				12.20
Total capital to risk weighted assets		12.21				11.56				11.74				12.67				12.65

Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
		Twelve Months Ended
		December 31,				December 31,
		2020				2019
Income statement:
Net interest income		$	170,940			$	160,791
Credit loss expense		20,751				1,976
Non–interest income		59,621				43,058
Non–interest expense		131,441				122,032
Income tax expense		9,870				13,303
Net income		$	68,499			$	66,538
Per share data:
Basic earnings per share		$	1.56			$	1.53
Diluted earnings per share		1.55				1.53
Cash dividends declared per common share		0.48				0.46
Book value per common share		15.78				14.59
Tangible book value per common share		11.78				10.63
Market value – high		18.79				19.42
Market value – low		$	7.97			$	15.50
Weighted average shares outstanding – Basis		44,044,737				43,493,316
Weighted average shares outstanding – Diluted		44,123,208				43,598,373
Key ratios:
Return on average assets		1.22		%		1.35		%
Return on average common stockholders’ equity		10.29				10.98
Net interest margin		3.44				3.69
Allowance for credit losses to total loans		1.47				0.49
Average equity to average assets		11.82				12.28
Bank only capital ratios:
Tier 1 capital to average assets		8.71				9.49
Tier 1 capital to risk weighted assets		11.29				12.20
Total capital to risk weighted assets		12.21				12.65

Financial Highlights
(Dollars in Thousands Except Ratios, Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Loan data:
Substandard loans		$	98,874			$	88,286			$	61,385			$	61,322			$	58,670
30 to 89 days delinquent		6,938				5,513				4,029				12,017				7,729
Non–performing loans:
90 days and greater delinquent – accruing interest		262				331				123				246				146
Trouble debt restructures – accruing interest		1,793				1,825				2,039				2,115				3,354
Trouble debt restructures – non–accrual		2,610				2,704				3,443				3,360				2,006
Non–accrual loans		22,142				24,454				22,451				18,281				15,679
Total non–performing loans		$	26,807			$	29,314			$	28,056			$	24,002			$	21,185
Non–performing loans to total loans		0.69		%		0.72		%		0.70		%		0.65		%		0.58		%

Allocation of the Allowance for Credit Losses
(Dollars in Thousands, Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Commercial		$	42,210			$	39,795			$	39,147			$	32,550			$	11,996
Residential mortgage		4,620				5,464				5,832				5,654				923
Mortgage warehouse		1,267				1,250				1,190				1,055				1,077
Consumer		8,930				9,810				8,921				9,181				3,671
Total		$	57,027			$	56,319			$	55,090			$	48,440			$	17,667

Net Charge–offs (Recoveries)
(Dollars in Thousands Except Ratios, Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Commercial		$	23			$	488			$	6			$	(20	)		$	146
Residential mortgage		(10		)		136				24				17				40
Mortgage warehouse		—				—				—				—				—
Consumer		216				199				377				407				443
Total		$	229			$	823			$	407			$	404			$	629
Percent of net charge–offs (recoveries) to average loans outstanding for the period		0.01		%		0.02		%		0.01		%		0.01		%		0.02		%

Total Non–performing Loans
(Dollars in Thousands Except Ratios, Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Commercial		$	14,348			$	16,169			$	14,238			$	9,579			$	7,347
Residential mortgage		7,994				9,209				9,945				10,411				9,884
Mortgage warehouse		—				—				—				—				—
Consumer		4,465				3,936				3,873				4,012				3,954
Total		$	26,807			$	29,314			$	28,056			$	24,002			$	21,185
Non–performing loans to total loans		0.69		%		0.72		%		0.70		%		0.65		%		0.58		%

Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Commercial		$	1,908			$	2,191			$	2,374			$	2,464			$	3,698
Residential mortgage		—				70				249				336				28
Mortgage warehouse		—				—				—				—				—
Consumer		—				80				20				13				—
Total		$	1,908			$	2,341			$	2,643			$	2,813			$	3,726

Average Balance Sheets
(Dollars in Thousands, Unaudited)
		Three Months Ended											Three Months Ended
		December 31, 2020											December 31, 2019
		Average Balance				Interest				Average Rate			Average Balance				Interest				Average Rate
Assets
Interest earning assets
Federal funds sold		$	112,139			$	29			0.10	%		$	40,657			$	172			1.68	%
Interest earning deposits		28,507				52				0.73	%		12,665				58				1.82	%
Investment securities – taxable		408,412				1,489				1.45	%		491,160				2,824				2.28	%
Investment securities – non–taxable (1)		866,182				4,919				2.86	%		545,832				3,575				3.26	%
Loans receivable (2) (3)		3,950,648				46,745				4.72	%		3,657,903				46,769				5.10	%
Total interest earning assets		5,365,888				53,234				4.05	%		4,748,217				53,398				4.57	%
Non–interest earning assets
Cash and due from banks		79,753											75,248
Allowance for credit losses		(56,657		)									(17,916		)
Other assets		475,102											445,025
Total average assets		$	5,864,086										$	5,250,574
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits		$	3,450,824			$	2,718			0.31	%		$	3,255,725			$	8,767			1.07	%
Borrowings		511,306				5,456				4.25	%		484,729				2,281				1.87	%
Subordinated notes		58,581				871				5.91	%		—				—				—	%
Junior subordinated debentures issued to capital trusts		56,512				567				3.99	%		54,489				831				6.05	%
Total interest bearing liabilities		4,077,223				9,612				0.94	%		3,794,943				11,879				1.24	%
Non–interest bearing liabilities
Demand deposits		1,037,232											747,513
Accrued interest payable and other liabilities		68,774											55,047
Stockholders’ equity		680,857											653,071
Total average liabilities and stockholders’ equity		$	5,864,086										$	5,250,574
Net interest income / spread						$	43,622			3.11	%						$	41,519			3.33	%
Net interest income as a percent of average interest earning assets (1)										3.34	%										3.58	%
(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.

Average Balance Sheets
(Dollars in Thousands, Unaudited)
		Twelve Months Ended											Twelve Months Ended
		December 31, 2020											December 31, 2019
		Average Balance				Interest				Average Rate			Average Balance				Interest				Average Rate
Assets
Interest earning assets
Federal funds sold		$	61,408			$	154			0.25	%		$	21,301			$	511			2.40	%
Interest earning deposits		25,943				268				1.03	%		19,601				342				1.74	%
Investment securities – taxable		459,551				8,071				1.76	%		474,833				11,753				2.48	%
Investment securities – non–taxable (1)		706,092				17,213				3.09	%		454,066				12,095				3.34	%
Loans receivable (2) (3)		3,867,112				179,672				4.66	%		3,500,649				183,631				5.27	%
Total interest earning assets		5,120,106				205,378				4.11	%		4,470,450				208,332				4.75	%
Non–interest earning assets
Cash and due from banks		84,065											62,920
Allowance for credit losses		(46,329		)									(18,019		)
Other assets		470,941											417,707
Total average assets		$	5,628,783										$	4,933,058
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits		$	3,327,917			$	18,556			0.56	%		$	3,007,937			$	33,690			1.12	%
Borrowings		559,953				11,430				2.04	%		468,159				10,672				2.28	%
Subordinated notes		30,610				1,824				5.96	%		—				—				—	%
Junior subordinated debentures issued to capital trusts		56,427				2,628				4.66	%		50,134				3,179				6.34	%
Total interest bearing liabilities		3,974,907				34,438				0.87	%		3,526,230				47,541				1.35	%
Non–interest bearing liabilities
Demand deposits		919,449											757,389
Accrued interest payable and other liabilities		68,961											43,720
Stockholders’ equity		665,466											605,719
Total average liabilities and stockholders’ equity		$	5,628,783										$	4,933,058
Net interest income / spread						$	170,940			3.24	%						$	160,791			3.40	%
Net interest income as a percent of average interest earning assets (1)										3.44	%										3.69	%
(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)
		December 31, 2020				December 31, 2019
		(Unaudited)
Assets
Cash and due from banks		$	249,711			$	98,831
Interest earning time deposits		8,965				8,455
Investment securities, available for sale		1,134,025				834,776
Investment securities, held to maturity (fair value $179,990 and $215,147)		168,676				207,899
Loans held for sale		13,538				4,088
Loans, net of allowance for credit losses of $57,027 and $17,667		3,810,356				3,619,174
Premises and equipment, net		92,416				92,209
Federal Home Loan Bank stock		23,023				22,447
Goodwill		151,238				151,238
Other intangible assets		23,902				26,679
Interest receivable		21,396				18,828
Cash value of life insurance		96,751				95,577
Other assets		92,617				66,628
Total assets		$	5,886,614			$	5,246,829
Liabilities
Deposits
Non–interest bearing		$	1,053,242			$	709,760
Interest bearing		3,477,891				3,221,242
Total deposits		4,531,133				3,931,002
Borrowings		475,000				549,741
Subordinated notes		58,603				—
Junior subordinated debentures issued to capital trusts		56,548				56,311
Interest payable		2,712				3,062
Other liabilities		70,402				50,690
Total liabilities		5,194,398				4,590,806
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   Issued 43,905,631 and 45,000,840 shares,   Outstanding 43,880,562 and 44,975,771 shares		—				—
Additional paid–in capital		362,945				379,853
Retained earnings		301,419				269,738
Accumulated other comprehensive income		27,852				6,432
Total stockholders’ equity		692,216				656,023
Total liabilities and stockholders’ equity		$	5,886,614			$	5,246,829

Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Interest income
Loans receivable		$	46,745			$	44,051			$	43,918			$	44,958			$	46,769
Investment securities – taxable		1,570				1,704				2,321				2,898				3,054
Investment securities – non–taxable		4,919				4,391				4,105				3,798				3,575
Total interest income		53,234				50,146				50,344				51,654				53,398
Interest expense
Deposits		2,718				3,616				4,506				7,716				8,767
Borrowed funds		5,456				1,662				2,074				2,238				2,281
Subordinated notes		871				895				58				—				—
Junior subordinated debentures issued to capital trusts		567				576				710				775				831
Total interest expense		9,612				6,749				7,348				10,729				11,879
Net interest income		43,622				43,397				42,996				40,925				41,519
Credit loss expense		3,042				2,052				7,057				8,600				340
Net interest income after credit loss expense		40,580				41,345				35,939				32,325				41,179
Non–interest Income
Service charges on deposit accounts		2,360				2,154				1,888				2,446				2,766
Wire transfer fees		301				298				230				171				179
Interchange fees		2,645				2,438				2,327				1,896				1,996
Fiduciary activities		2,747				2,105				1,765				2,528				2,594
Gains / (losses) on sale of investment securities		2,622				1,088				248				339				10
Gain on sale of mortgage loans		7,815				8,813				6,620				3,473				3,119
Mortgage servicing income net of impairment		327				(1,308		)		(2,760		)		25				294
Increase in cash value of bank owned life insurance		566				566				557				554				566
Death benefit on bank owned life insurance		—				31				—				233				—
Other income		350				515				250				398				410
Total non–interest income		19,733				16,700				11,125				12,063				11,934
Non–interest expense
Salaries and employee benefits		20,030				18,832				15,629				16,591				16,841
Net occupancy expenses		3,262				3,107				3,190				3,252				3,106
Data processing		2,126				2,237				2,432				2,405				2,235
Professional fees		691				688				518				536				520
Outside services and consultants		2,083				1,561				1,759				1,915				1,415
Loan expense		2,961				2,876				2,692				2,099				2,438
FDIC insurance expense		900				570				235				150				—
Other losses		735				114				193				120				377
Other expenses		3,665				3,422				3,784				4,081				3,718
Total non–interest expense		36,453				33,407				30,432				31,149				30,650
Income before income taxes		23,860				24,638				16,632				13,239				22,463
Income tax expense		1,967				4,326				1,993				1,584				3,920
Net income		$	21,893			$	20,312			$	14,639			$	11,655			$	18,543
Basic earnings per share		$	0.50			$	0.46			$	0.33			$	0.26			$	0.41
Diluted earnings per share		0.50				0.46				0.33				0.26				0.41

Condensed Consolidated Statements of Income
(Dollars in Thousands, Expect Per Share Data, Unaudited)
		Twelve Months Ended
		December 31,
		2020				2019
Interest income
Loans receivable		$	179,672			$	183,631
Investment securities – taxable		8,493				12,606
Investment securities – non–taxable		17,213				12,095
Total interest income		205,378				208,332
Interest expense
Deposits		18,556				33,690
Borrowed funds		11,430				10,672
Subordinated notes		1,824				—
Junior subordinated debentures issued to capital trusts		2,628				3,179
Total interest expense		34,438				47,541
Net interest income		170,940				160,791
Credit loss expense		20,751				1,976
Net interest income after credit loss expense		150,189				158,815
Non–interest income
Service charges on deposit accounts		8,848				9,959
Wire transfer fees		1,000				653
Interchange fees		9,306				7,655
Fiduciary activities		9,145				8,580
Gains / (losses) on sale of investment securities		4,297				(75		)
Gain on sale of mortgage loans		26,721				9,208
Mortgage servicing income net of impairment		(3,716		)		1,914
Increase in cash value of bank owned life insurance		2,243				2,190
Death benefit on bank owned life insurance		264				580
Other income		1,513				2,394
Total non–interest income		59,621				43,058
Non-interest expense
Salaries and employee benefits		71,082				65,206
Net occupancy expenses		12,811				12,157
Data processing		9,200				8,480
Professional fees		2,433				1,946
Outside services and consultants		7,318				8,152
Loan expense		10,628				8,633
FDIC insurance expense		1,855				252
Other losses		1,162				740
Other expense		14,952				16,466
Total non–interest expense		131,441				122,032
Income before income taxes		78,369				79,841
Income tax expense		9,870				13,303
Net income		$	68,499			$	66,538
Basic earnings per share		$	1.56			$	1.53
Diluted earnings per share		$	1.55			$	1.53

Contact:	Mark E. Secor
	Chief Financial Officer
Phone:	(219) 873-2611
Fax:	(219) 874-9280

FAQ

What were Horizon Bancorp's earnings for Q4 2020?

Horizon Bancorp reported a net income of $21.9 million, or $0.50 diluted earnings per share for Q4 2020.

How did Horizon Bancorp's net interest income perform in Q4 2020?

The bank's net interest income increased to $43.6 million in Q4 2020.

What is the stock symbol for Horizon Bancorp?

The stock symbol for Horizon Bancorp is HBNC.

What was the tangible book value per share for Horizon Bancorp at the end of 2020?

The tangible book value per share increased to $11.78 at the end of 2020.

How did Horizon Bancorp's non-interest expenses change in Q4 2020?

Non-interest expenses rose to $36.5 million, an increase of 18.9% compared to Q4 2019.