Horizon Bancorp, Inc. Reports Record Second Quarter 2022 EPS of $0.57

Rhea-AI Summary

Horizon Bancorp (NASDAQ: HBNC) reported record earnings for Q2 2022, with net income reaching $24.9 million, a 5.5% increase from the prior quarter and 12.1% year-over-year. Diluted EPS rose to $0.57. Pre-tax, pre-provision net income surged 13.1% from the preceding quarter to $29.1 million. Total loans grew 6.2% to $3.89 billion, with consumer loans experiencing a 12.6% increase. However, the company recorded a one-time charge of $380,000 for closing seven branch locations.

Positive

• Record net income of $24.9 million, up 5.5% from Q1 2022.
• Diluted EPS increased to $0.57, reflecting strong profitability.
• Pre-tax, pre-provision net income grew to $29.1 million, a 13.1% increase from Q1.
• Total loans reached $3.89 billion, a 6.2% increase, showcasing strong loan growth.

Negative

• One-time charge of approximately $380,000 for branch closures.
• Unrealized losses on securities increased to $122.0 million, impacting the tangible capital ratio.

MICHIGAN CITY, Ind., July 27, 2022 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three– and six–months ending June 30, 2022.

“We are extremely pleased with our performance during the second quarter of fiscal 2022. Record earnings and profitability can be attributed to strong loan growth and the higher interest rate environment which led to a meaningful increase in pre–tax, pre–provision net income,” Chairman and CEO Craig M. Dwight said. “This level of organic growth would not have been possible without the hard work and dedication from our team to meet the evolving needs of our customers. We remain committed to driving organic growth through our investments in commercial and consumer loan production, finding strategic opportunities to deploy capital, and leveraging our asset sensitive balance sheet and strong credit quality to achieve long–term shareholder value.”

Second Quarter 2022 Highlights

• Net income grew to a record $24.9 million, up 5.5% from the linked quarter and 12.1% from the prior year period. Diluted earnings per share (“EPS”) of $0.57 was up from $0.54 for the first quarter of 2022 and $0.50 for the second quarter of 2021.
  
  
• Pre–tax, pre–provision net income grew to $29.1 million, up 13.1% from the linked quarter and 18.9% from the prior year period. 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.) Horizon recorded a provision expense of $240,000 in the quarter compared to a provision release of $1.4 million in the linked quarter, and a provision release of $1.5 million in the prior year period.
  
  
• Reported net interest margin (“NIM”) was 3.19% and adjusted NIM was 3.12%, with reported NIM increasing by 20 basis points and adjusted NIM increasing by 19 basis points from the first quarter of 2022. (See the “Non-GAAP Reconciliation of Net Interest Margin” table below for the definition of this non–GAAP calculation of adjusted NIM.)
  
  
• Total loans, excluding Federal Paycheck Protection Program (“PPP”) loans and sold commercial participation loans, grew by 6.2%, or 25.1% annualized, during the second quarter to $3.89 billion at period end compared to $3.66 billion on March 31, 2022.
  
  
• Commercial loans, excluding PPP loans and sold commercial participation loans, grew by 4.9%, or 19.7% annualized, during the second quarter to a record $2.31 billion from $2.20 billion on March 31, 2022.
  
  
• Consumer loans grew by 12.6%, or 50.5% annualized, during the second quarter to a record $848.7 million at period end.
  
  
• Non–interest expense was $36.4 million in the quarter, or 1.95% of average assets on an annualized basis, compared to $36.6 million, or 2.03%, in the first quarter of 2022 and $33.4 million, or 2.18%, in the second quarter of 2021. Non–interest expense was $73.0 million, or 1.99% of average assets on an annualized basis for the six months ended June 30, 2022 compared to $65.6 million, or 2.19% of average assets on an annualized basis for the six months ended June 30, 2021.
  
  
• The efficiency ratio for the period was 55.57% compared to 58.74% for the first quarter of 2022 and 57.73% for the second quarter of 2021. The adjusted efficiency ratio was 56.13% compared to 58.74% for the first quarter of 2022 and 57.45% for the second quarter of 2021. (See the “Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below.)
  
  
• As part of the Company’s annual branch performance review of Horizon Bank’s (the “Bank”) retail network, Horizon’s Board of Directors approved the permanent closure of seven branch locations in the second half of 2022. A one–time charge of approximately $380,000 was recorded during the second quarter to record these branch locations’ fixed assets at fair value.
  
  
• Asset quality remains favorable as evidenced by non–performing loans at 0.51% of total loans at period end and net charge–offs to average loans represented 0.01% for the second quarter of 2022.
  
  
• The Company was more asset sensitive as of June 30, 2022 compared to the previous quarter end, as deposit BETA’s have lagged rising rates and an increase in adjustable rate assets. Current estimates for parallel rate shocks to the balance sheet, at a 100 basis point shock and 200 basis point shock, increase net interest income by approximately $7.0 million and $12.8 million, respectively.
  
  
• Since March 31, 2022, deposit betas have significantly lagged our modeled betas at a 3% beta on total deposits over the last three months compared to our model using a beta of 35% for total deposits.
  
  
• During the second quarter of 2022, the continued steepening of the yield curve resulted in unrealized losses on available for sale investments of $122.0 million compared to unrealized losses of $73.6 million at March 31, 2022. The impact to the tangible capital ratio was a decrease of 46 basis points from 6.94% at March 31, 2022 to 6.48% at June 30, 2022, a 6.63% decrease.
  
  
• The Bank's capital is still robust with leverage and risk based capital ratios of 9.17% and 14.81%, respectively.
  

Summary

		For the Three Months Ended
		June 30,				March 31,				June 30,
Net Interest Income and Net Interest Margin			2022				2022				2021
Net interest income		$	53,008			$	48,171			$	42,632
Net interest margin			3.19	%			2.99	%			3.14	%
Adjusted net interest margin			3.12	%			2.93	%			3.13	%

Mr. Dwight continued, “Net interest margin continues to expand, illustrating the Company’s highly asset sensitive balance sheet position. Both the expected additional rate increases, and loan volume will continue to positively impact net interest income and NIM through 2022. Pressure on deposit pricing so far has been limited and we believe will remain in line with or better than our competitors. This expectation reflects our confidence in the strength of our commercial and retail relationships.”

		For the Three Months Ended
		June 30,			March 31,			June 30,
Asset Yields and Funding Costs		2022			2022			2021
Interest earning assets		3.46	%		3.22	%		3.48	%
Interest bearing liabilities		0.34	%		0.30	%		0.45	%

		For the Three Months Ended
Non–interest Income and		June 30,				March 31,				June 30,
Mortgage Banking Income		2022				2022				2021
Total non–interest income		$	12,434			$	14,155			$	15,207
Gain on sale of mortgage loans			2,501				2,027				5,612
Mortgage servicing income net of impairment			319				3,489				1,503

		For the Three Months Ended
		June 30,				March 31,				June 30,
Non–interest Expense			2022				2022				2021
Total non–interest expense		$	36,368			$	36,610			$	33,388
Annualized non–interest expense to average assets			1.95	%			2.03	%			2.18	%

		For the Three Months Ended
		June 30,			March 31,			June 30,
Credit Quality		2022			2022			2021
Allowance for credit losses to total loans		1.33	%		1.41	%		1.58	%
Non–performing loans to total loans		0.51	%		0.54	%		0.63	%
Percent of net charge–offs to average loans outstanding for the period		0.01	%		0.00	%		0.00	%

Allowance for		June 30,				Net Reserve								December 31,
Credit Losses			2022			2Q22				1Q22					2021
Commercial		$	34,802			$	(2,987	)		$	(2,986	)		$	40,775
Retail Mortgage			4,422				71				495				3,856
Warehouse			1,067				12				(4	)			1,059
Consumer			12,059				2,746				717				8,596
Allowance for Credit Losses (“ACL”)		$	52,350			$	(158	)		$	(1,778	)		$	54,286
ACL / Total Loans			1.33	%											1.51	%
Acquired Loan Discount (“ALD”)		$	7,206			$	(1,122	)		$	(769	)		$	9,097

“Our results this quarter were positively impacted by the significant progress towards achieving our goal of an annualized non–interest expense to average assets ratio of less than 2.00%. For the period ended June 30, 2022, our annualized non–interest expense to average assets ratio was 1.95%,” Mr. Dwight continued. “We remain disciplined with a focus on expense management which is critical given the economic uncertainty and rise in inflation, however; we are confident in our ability to continue to reduce our annualized target to less than 2.00%.”

Income Statement Highlights

Net income for the second quarter of 2022 was $24.9 million, or $0.57 diluted earnings per share, compared to $23.6 million, or $0.54, for the linked quarter and $22.2 million, or $0.50, for the prior year period. This represents the highest quarterly net income in the Company’s history.

Adjusted net income for the second quarter of 2022 was $24.2 million, or $0.56 diluted earnings per share, compared to $23.6 million, or $0.54, for the linked quarter and $22.2 million, or $0.50, 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. (See the “Non–GAAP Reconciliation of Net Income” table below.)

The increase in net income for the second quarter of 2022 when compared to the first quarter of 2022 reflects an increase in net interest income of $4.8 million and a decrease in non–interest expense of $242,000. These items were offset by an increase in credit loss expense of $1.6 million and a decrease in non–interest income of $1.7 million and an increase in income tax expense of $436,000 for the second quarter of 2022 when compared to the first quarter of 2022.

Interest income includes the recognition of PPP loan interest and net loan processing fees totaling $198,000 in the second quarter of 2022, compared to $457,000 in the linked quarter. On June 30, 2022, the Company had $32,000 in net deferred PPP loan processing fees outstanding and $2.3 million in PPP loans outstanding. PPP loan net deferred fees and loans outstanding at March 31, 2021 were $141,000 and $6.7 million, respectively.

Second quarter 2022 income from the gain on sale of mortgage loans totaled $2.5 million, up from $2.0 million in the linked quarter and down from $5.6 million in the prior year period.

Certain revenue streams that generated higher income in the quarter ended June 30, 2021, were replaced in the most recent quarter with earning assets that had higher income margins and the increasing margin generated higher net interest income. For the quarter ending June 30, 2021, income from PPP lending, gain on sale of mortgage loans and mortgage servicing income net of impairment totaled $9.8 million. For the quarter ending June 30, 2022, the income from those same revenue streams totaled $3.0 million. The ability to replace this income and increase overall net income in the second quarter was attributed to the strategies management implemented to focus on higher earning assets.

Non–interest expense of $36.4 million in the second quarter of 2022 reflected a $371,000 decrease in net occupancy expenses and a $288,000 decrease in other expenses, offset by an increase in salaries and employee benefit expense of $222,000 and an increase in other losses of $194,000 from the linked quarter.

The increase in net income for the second quarter of 2022 when compared to the same prior year period reflects an increase in net interest income of $10.4 million, offset by an increase in credit loss expense of $1.7 million, a decrease in non–interest income of $2.8 million, an increase in non–interest expense of $3.0 million and an increase in income tax expense of $205,000.

Non–GAAP Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Net income as reported		$	24,859			$	23,563			$	21,425			$	23,071			$	22,173			$	48,422			$	42,595
Acquisition expenses			—				—				884				799				242				—				242
Tax effect			—				—				(184	)			(166	)			(51	)			—				(51	)
Net income excluding acquisition expenses			24,859				23,563				22,125				23,704				22,364				48,422				42,786
Credit loss expense acquired loans			—				—				—				2,034				—				—				—
Tax effect			—				—				—				(427	)			—				—				—
Net income excluding credit loss expense acquired loans			24,859				23,563				22,125				25,311				22,364				48,422				42,786
Gain on sale of ESOP trustee accounts			—				—				—				(2,329	)			—				—				—
Tax effect			—				—				—				489				—				—				—
Net income excluding gain on sale of ESOP trustee accounts			24,859				23,563				22,125				23,471				22,364				48,422				42,786
DOL ESOP settlement expenses			—				—				1,900				—				—				—				—
Tax effect			—				—				(315	)			—				—				—				—
Net income excluding DOL ESOP settlement expenses			24,859				23,563				23,710				23,471				22,364				48,422				42,786
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(914	)
Tax effect			—				—				—				—				—				—				192
Net income excluding (gain) / loss on sale of investment securities			24,859				23,563				23,710				23,471				22,364				48,422				42,064
Death benefit on bank owned life insurance (“BOLI”)			(644	)			—				—				(517	)			(266	)			(644	)			(266	)
Net income excluding death benefit on BOLI			24,215				23,563				23,710				22,954				22,098				47,778				41,798
Prepayment penalties on borrowings			—				—				—				—				125				—				125
Tax effect			—				—				—				—				(26	)			—				(26	)
Net income excluding prepayment penalties on borrowings			24,215				23,563				23,710				22,954				22,197				47,778				41,897
Adjusted net income		$	24,215			$	23,563			$	23,710			$	22,954			$	22,197			$	47,778			$	41,897

Non–GAAP Reconciliation of Diluted Earnings per Share
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Diluted earnings per share (“EPS”) as reported		$	0.57			$	0.54			$	0.49			$	0.52			$	0.50			$	1.11			$	0.97
Acquisition expenses			—				—				0.02				0.02				0.01				—				0.01
Tax effect			—				—				—				—				—				—				—
Diluted EPS excluding acquisition expenses			0.57				0.54				0.51				0.54				0.51				1.11				0.98
Credit loss expense acquired loans			—				—				—				0.05				—				—				—
Tax effect			—				—				—				(0.01	)			—				—				—
Diluted EPS excluding credit loss expense acquired loans			0.57				0.54				0.51				0.58				0.51				1.11				0.98
Gain on sale of ESOP trustee accounts			—				—				—				(0.05	)			—				—				—
Tax effect			—				—				—				0.01				—				—				—
Diluted EPS excluding gain on sale of ESOP trustee accounts			0.57				0.54				0.51				0.54				0.51				1.11				0.98
DOL ESOP settlement expenses			—				—				0.04				—				—				—				—
Tax effect			—				—				(0.01	)			—				—				—				—
Diluted EPS excluding DOL ESOP settlement expenses			0.57				0.54				0.54				0.54				0.51				1.11				0.98
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(0.02	)
Tax effect			—				—				—				—				—				—				—
Diluted EPS excluding (gain) / loss on sale of investment securities			0.57				0.54				0.54				0.54				0.51				1.11				0.96
Death benefit on bank owned life insurance (“BOLI”)			(0.01	)			—				—				(0.02	)			(0.01	)			(0.01	)			(0.01	)
Diluted EPS excluding death benefit on BOLI			0.56				0.54				0.54				0.52				0.50				1.10				0.95
Prepayment penalties on borrowings			—				—				—				—				—				—				—
Tax effect			—				—				—				—				—				—				—
Diluted EPS excluding prepayment penalties on borrowings			0.56				0.54				0.54				0.52				0.50				1.10				0.95
Adjusted diluted EPS		$	0.56			$	0.54			$	0.54			$	0.52			$	0.50			$	1.10			$	0.95

Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Pre–tax income		$	28,834			$	27,102			$	25,505			$	27,127			$	25,943			$	55,936			$	49,815
Credit loss expense			240				(1,386	)			(2,071	)			1,112				(1,492	)			(1,146	)			(1,125	)
Pre–tax, pre–provision net income		$	29,074			$	25,716			$	23,434			$	28,239			$	24,451			$	54,790			$	48,690
Pre–tax, pre–provision net income		$	29,074			$	25,716			$	23,434			$	28,239			$	24,451			$	54,790			$	48,690
Acquisition expenses			—				—				884				799				242				—				242
Gain on sale of ESOP trustee accounts			—				—				—				(2,329	)			—				—				—
DOL ESOP settlement expenses			—				—				1,900				—				—				—				—
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(914	)
Death benefit on BOLI			(644	)			—				—				(517	)			(266	)			(644	)			(266	)
Prepayment penalties on borrowings			—				—				—				—				125				—				125
Adjusted pre–tax, pre–provision net income		$	28,430			$	25,716			$	26,218			$	26,192			$	24,552			$	54,146			$	47,752

Pre–tax, pre–provision net income grew to $29.1 million, up 13.1% from the linked quarter and 18.9% from the prior year period. 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. Horizon recorded a provision expense of $240,000 in the quarter and provision release of $1.4 million in the linked quarter, and a provision release of $1.5 million in the prior year period.

Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Net interest income as reported		$	53,008			$	48,171			$	49,976			$	46,544			$	42,632			$	101,179			$	85,170
Average interest earning assets			6,927,310				6,800,549				6,938,258				6,033,088				5,659,384				6,864,280				5,550,116
Net interest income as a percentage of average interest earning assets (“Net Interest Margin”)			3.19	%			2.99	%			2.97	%			3.17	%			3.14	%			3.03	%			3.21	%
Net interest income as reported		$	53,008			$	48,171			$	49,976			$	46,544			$	42,632			$	101,179			$	85,170
Acquisition–related purchase accounting adjustments (“PAUs”)			(1,223	)			(916	)			(1,819	)			(875	)			(230	)			(2,139	)			(1,809	)
Prepayment penalties on borrowings			—				—				—				—				125				—				125
Adjusted net interest income		$	51,785			$	47,255			$	48,157			$	45,669			$	42,527			$	99,040			$	83,361
Adjusted net interest margin			3.12	%			2.93	%			2.86	%			3.12	%			3.13	%			2.97	%			3.15	%

Horizon’s net interest margin increased to 3.19% for the second quarter of 2022 compared to 2.99% for the first quarter of 2022. The increase in net interest margin reflects an increase in the yield on interest earning assets of 24 basis points offset by an increase in the cost of interest bearing liabilities of four basis points. Interest income from acquisition–related purchase accounting adjustments was $307,000 higher during the second quarter of 2022 when compared to the first quarter of 2022.

Horizon’s net interest margin increased to 3.19% for the second quarter of 2022 compared to 3.14% for the second quarter of 2021. The increase in net interest margin reflects a decrease in the cost of interest bearing liabilities of 11 basis points offset by a decrease in the yield on interest earning assets of two basis points.

Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 3.12% for the second quarter of 2021, compared to 2.93% for the linked quarter and 3.13% for the second quarter of 2021. Interest income from acquisition–related purchase accounting adjustments was $1.2 million, $916,000 and $230,000 for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

Lending Activity

Total loan balances were $3.94 billion, or $3.89 billion excluding PPP loans and sold commercial participation loans, on June 30, 2022. Total loans were $3.72 billion, or $3.66 billion excluding PPP loans and sold commercial participation loans, on March 31, 2022. During the three months ended June 30, 2022, commercial loans, excluding PPP loans and sold commercial participation loans, increased $108.0 million, consumer loans increased $94.8 million, mortgage warehouse loans increased $11.4 million, residential mortgage loans increased $15.2 million and sold commercial participation loans increased $1.0 million, offset by decreases in PPP loans of $4.4 million and loans held for sale of $838,000. PPP loan income was $198,000, $457,000 and $2.7 million for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

Loan Growth by Type, Excluding Acquired Loans
(Dollars in Thousands, Unaudited)
		June 30,				March 31,				Amount				QTD		Annualized
		2022				2022				Change				% Change		% Change
Commercial, excluding PPP loans and sold commercial participation loans		$	2,310,605			$	2,202,568			$	108,037			4.9%		19.9%
PPP loans			2,343				6,705				(4,362	)		(65.1)%		(263.8)%
Sold commercial participation loans			51,043				50,054				989			2.0%		8.0%
Residential mortgage			608,582				593,372				15,210			2.6%		10.4%
Consumer			848,749				753,900				94,849			12.6%		51.0%
Subtotal			3,821,322				3,606,599				214,723			6.0%		24.1%
Loans held for sale			2,943				3,781				(838	)		(22.2)%		(89.9)%
Mortgage warehouse			116,488				105,118				11,370			10.8%		43.9%
Total loans		$	3,940,753			$	3,715,498			$	225,255			6.1%		24.6%
Total loans, excluding PPP loans and sold commercial participation loans		$	3,887,367			$	3,658,739			$	228,628			6.2%		25.3%

Residential mortgage lending activity for the three months ended June 30, 2022 generated $2.5 million in income from the gain on sale of mortgage loans, increasing $474,000 from the first quarter of 2022 and decreasing $3.1 million from the second quarter of 2021. Total mortgage origination volume for the second quarter of 2022, including loans placed into the portfolio, totaled $115.1 million, representing a decrease of 3.2% from first quarter 2022 levels, and a decrease of 33.5% from the second quarter of 2021. As a percentage of total mortgage loan originations, 17% of the volume was from refinancings and 83% was from loans for new home purchases during the second quarter of 2022. Total origination volume of mortgage loans sold to the secondary market totaled $67.3 million, representing a decrease of 17.2% from the first quarter of 2022 and a decrease of 40.5% from the second quarter of 2021.

Gain on sale of mortgage loans and mortgage warehousing income was 5.6% of total revenue for the three months ended June 30, 2022, compared to 4.7% for the linked quarter and 12.3% for the three months ended June 30, 2021.

Deposit Activity

Total deposit balances were $5.85 billion on June 30, 2022 compared to $5.85 billion on March 31, 2022, a decrease of $5.9 million.

Deposit Growth by Type, Excluding Acquired Deposits
(Dollars in Thousands, Unaudited)
	June 30,				March 31,				Amount				QTD		Annualized
		2022				2022			Change				% Change		% Change
Non–interest bearing	$	1,328,213			$	1,325,570			$	2,643			0.2%		0.8%
Interest bearing		3,760,890				3,782,644				(21,754	)		(0.6)%		(2.3)%
Time deposits		756,482				743,283				13,199			1.8%		7.2%
Total deposits	$	5,845,585			$	5,851,497			$	(5,912	)		(0.1)%		(0.4)%

Expense Management

		Three Months Ended
		June 30,				March 31,
			2022				2022
Non–interest Expense		Actual				Actual				Amount Change				Percent Change
Salaries and employee benefits		$	19,957			$	19,735			$	222			1.1%
Net occupancy expenses			3,190				3,561				(371	)		(10.4)%
Data processing			2,607				2,537				70			2.8%
Professional fees			283				314				(31	)		(9.9)%
Outside services and consultants			2,485				2,525				(40	)		(1.6)%
Loan expense			2,497				2,545				(48	)		(1.9)%
FDIC insurance expense			775				725				50			6.9%
Other losses			362				168				194			115.5%
Other expense			4,212				4,500				(288	)		(6.4)%
Total non–interest expense		$	36,368			$	36,610			$	(242	)		(0.7)%
Annualized non–interest expense to average assets			1.95	%			2.03	%

Total non–interest expense was $242,000 lower in the second quarter of 2022 when compared to the first quarter of 2022. The decrease was primarily due to a decrease in net occupancy expenses of $371,000 and a decrease in other expense $288,000, offset by an increase in salaries and employee benefits expense of $222,000.

		Three Months Ended
		June 30,												June 30,
		2022												2021												Adjusted
Non–interest Expense		Actual				Acquisition Expenses				Adjusted				Actual				Acquisition Expenses				Adjusted				Amount Change				Percent Change
Salaries and employee benefits		$	19,957			$	—			$	19,957			$	17,730			$	—			$	17,730			$	2,227			12.6%
Net occupancy expenses			3,190				—				3,190				3,084				—				3,084				106			3.4%
Data processing			2,607				—				2,607				2,388				—				2,388				219			9.2%
Professional fees			283				—				283				588				(51	)			537				(254	)		(47.3)%
Outside services and consultants			2,485				—				2,485				2,220				(187	)			2,033				452			22.2%
Loan expense			2,497				—				2,497				3,107				—				3,107				(610	)		(19.6)%
FDIC insurance expense			775				—				775				500				—				500				275			55.0%
Other losses			362				—				362				6				—				6				356			5933.3%
Other expense			4,212				—				4,212				3,765				(4	)			3,761				451			12.0%
Total non–interest expense		$	36,368			$	—			$	36,368			$	33,388			$	(242	)		$	33,146			$	3,222			9.7%
Annualized non–interest expense to average assets			1.95	%							1.95	%			2.18	%							2.16	%

Total non–interest expense was $3.0 million higher in the second quarter of 2022 when compared to the second quarter of 2021. The increases in expenses was primarily due to an increase in salaries and employee benefits of $2.2 million due to additional employees hired as a result of the 2021 branch acquisition, an increase in other expense of $447,000, an increase in other losses of $356,000, an increase in FDIC insurance expense of $275,000 and an increase in outside services and consultants expense of $265,000, offset by a decrease of $610,000 in loan expense and a decrease of $305,000 in professional fees.

Annualized non–interest expense as a percent of average assets was 1.95%, 2.03% and 2.18% for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively. Annualized non–interest expense, excluding acquisition expenses, as a percent of average assets was 1.95%, 2.03% and 2.16% for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below for these non–GAAP calculations.)

		Six Months Ended
		June 30,												June 30,
			2022											2021												Adjusted
Non–interest Expense		Actual				Acquisition Expenses				Adjusted				Actual				Acquisition Expenses				Adjusted				Amount Change				Percent Change
Salaries and employee benefits		$	39,692			$	—			$	39,692			$	34,601			$	—			$	34,601			$	5,091			14.7%
Net occupancy expenses			6,751				—				6,751				6,402				—				6,402				349			5.5%
Data processing			5,144				—				5,144				4,764				—				4,764				380			8.0%
Professional fees			597				—				597				1,132				(51	)			1,081				(484	)		(44.8)%
Outside services and consultants			5,010				—				5,010				3,922				(187	)			3,735				1,275			34.1%
Loan expense			5,042				—				5,042				5,929				—				5,929				(887	)		(15.0)%
FDIC insurance expense			1,500				—				1,500				1,300				—				1,300				200			15.4%
Other losses			530				—				530				289				—				289				241			83.4%
Other expense			8,712				—				8,712				7,221				(4	)			7,217				1,495			20.7%
Total non–interest expense		$	72,978			$	—			$	72,978			$	65,560			$	(242	)		$	65,318			$	7,660			11.7%
Annualized non–interest expense to average assets			1.99	%							1.99	%			2.19	%							2.18	%

Total non–interest expense was $7.4 million higher in the first six months of 2022 when compared to the first six months of 2021. The increases in expenses was primarily due to an increase in salaries and employee benefits of $5.1 million primarily due to additional employees hired as a result of the 2021 branch acquisition, an increase in other expense of $1.5 million, an increase in outside services and consultants expense of $1.1 million, offset by a decrease of $887,000 in loan expense and a decrease of $535,000 in professional fees.

Annualized non–interest expense as a percent of average assets was 1.99% for the first six months of 2022 compared to 2.19% for the first six months of 2021. Annualized non–interest expense, excluding acquisition expenses, as a percent of average assets was 1.99% and 2.18% for the six months ended June 30, 2022 and June 30, 2021, respectively. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below for these non–GAAP calculations.)

Income tax expense totaled $4.0 million for the second quarter of 2022, an increase of $436,000 when compared to the first quarter of 2022 and an increase of $205,000 when compared to the second quarter of 2021.

Income tax expense totaled $7.5 million for the six months ended June 30, 2022, an increase of $294,000 when compared to the six months ended June 30, 2021.

Capital

The capital resources of the Company and the Bank exceeded regulatory capital ratios for “well capitalized” banks at June 30, 2022. Stockholders’ equity totaled $657.9 million at June 30, 2022 and the ratio of average stockholders’ equity to average assets was 9.43% for the six months ended June 30, 2022.

Tangible book value per common share (“TBVPS”) declined $0.43 in the first quarter of 2022 to $11.11 at period end, as unrealized net losses on securities available for sale (“AFS”) of $2.37 per common share reduced other comprehensive income (“OCI”) by $103.4 million in the first six months of this year. Fluctuations in the fair market value of AFS are widely expected to be recorded by banks in the first six months of 2022.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of June 30, 2022.

		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		$	749,948			15.83	%		$	379,022			8.00	%		$	497,467			10.50	%		N/A				N/A
Bank			701,422			14.81	%			378,939			8.00	%			497,358			10.50	%		$	473,674			10.00	%
Tier 1 capital (to risk–weighted assets)
Consolidated			699,552			14.77	%			284,267			6.00	%			402,711			8.50	%		N/A				N/A
Bank			651,026			13.74	%			284,204			6.00	%			402,623			8.50	%			378,939			8.00	%
Common equity tier 1 capital (to risk–weighted assets)
Consolidated			583,199			12.31	%			213,200			4.50	%			331,645			7.00	%		N/A				N/A
Bank			651,026			13.74	%			213,153			4.50	%			331,572			7.00	%			307,888			6.50	%
Tier 1 capital (to average assets)
Consolidated			699,552			9.83	%			284,722			4.00	%			284,722			4.00	%		N/A				N/A
Bank			651,026			9.17	%			284,117			4.00	%			284,117			4.00	%			355,146			5.00	%

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 June 30, 2022, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $917.6 million in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank had approximately $2.2 billion of unpledged investment securities at June 30, 2022.

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, 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 net 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 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 Tangible Stockholders’ Equity and Tangible Book Value per Share
(Dollars in Thousands, Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Total stockholders’ equity		$	657,865			$	677,450			$	723,209			$	708,542			$	710,374
Less: Intangible assets			173,662				174,588				175,513				183,938				172,398
Total tangible stockholders’ equity		$	484,203			$	502,862			$	547,696			$	524,604			$	537,976
Common shares outstanding			43,572,796				43,572,796				43,547,942				43,520,694				43,950,720
Book value per common share		$	15.10			$	15.55			$	16.61			$	16.28			$	16.16
Tangible book value per common share		$	11.11			$	11.54			$	12.58			$	12.05			$	12.24

Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Non–interest expense as reported		$	36,368			$	36,610			$	39,370			$	34,349			$	33,388			$	72,978			$	65,560
Net interest income as reported			53,008				48,171				49,976				46,544				42,632				101,179				85,170
Non–interest income as reported		$	12,434			$	14,155			$	12,828			$	16,044			$	15,207			$	26,589			$	29,080
Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”)			55.57	%			58.74	%			62.69	%			54.88	%			57.73	%			57.12	%			57.38	%
Non–interest expense as reported		$	36,368			$	36,610			$	39,370			$	34,349			$	33,388			$	72,978			$	65,560
Acquisition expenses			—				—				(884	)			(799	)			(242	)			—				(242	)
DOL ESOP settlement expenses			—				—				(1,900	)			—				—				—				—
Non–interest expense excluding acquisition and DOL ESOP settlement expenses			36,368				36,610				36,586				33,550				33,146				72,978				65,318
Net interest income as reported			53,008				48,171				49,976				46,544				42,632				101,179				85,170
Prepayment penalties on borrowings			—				—				—				—				125				—				125
Net interest income excluding prepayment penalties on borrowings			53,008				48,171				49,976				46,544				42,757				101,179				85,295
Non–interest income as reported			12,434				14,155				12,828				16,044				15,207				26,589				29,080
Gain on sale of ESOP trustee accounts			—				—				—				(2,329	)			—				—				—
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(914	)
Death benefit on BOLI			(644	)			—				—				(517	)			(266	)			(644	)			(266	)
Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI		$	11,790			$	14,155			$	12,828			$	13,198			$	14,941			$	25,945			$	27,900
Adjusted efficiency ratio			56.13	%			58.74	%			58.25	%			56.16	%			57.45	%			57.41	%			57.70	%

Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Average assets		$	7,476,238			$	7,319,675			$	7,461,343			$	6,507,673			$	6,142,507			$	7,391,348			$	6,039,897
Return on average assets (“ROAA”) as reported			1.33	%			1.31	%			1.14	%			1.41	%			1.45	%			1.32	%			1.42	%
Acquisition expenses			—				—				0.05				0.05				0.02				—				0.01
Tax effect			—				—				(0.01	)			(0.01	)			—				—				—
ROAA excluding acquisition expenses			1.33				1.31				1.18				1.45				1.47				1.32				1.43
Credit loss expense acquired loans			—				—				—				0.12				—				—				—
Tax effect			—				—				—				(0.03	)			—				—				—
ROAA excluding credit loss expense on acquired loans			1.33				1.31				1.18				1.54				1.47				1.32				1.43
Gain on sale of ESOP trustee accounts			—				—				—				(0.14	)			—				—				—
Tax effect			—				—				—				0.03				—				—				—
ROAA excluding gain on sale of ESOP trustee accounts			1.33				1.31				1.18				1.43				1.47				1.32				1.43
DOL ESOP settlement expenses			—				—				0.10				—				—				—				—
Tax effect			—				—				(0.02	)			—				—				—				—
ROAA excluding DOL ESOP settlement expenses			1.33				1.31				1.26				1.43				1.47				1.32				1.43
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(0.03	)
Tax effect			—				—				—				—				—				—				0.01
ROAA excluding (gain) / loss on sale of investment securities			1.33				1.31				1.26				1.43				1.47				1.32				1.41
Death benefit on BOLI			(0.03	)			—				—				(0.03	)			(0.02	)			(0.02	)			(0.01	)
ROAA excluding death benefit on BOLI			1.30				1.31				1.26				1.40				1.45				1.30				1.40
Prepayment penalties on borrowings			—				—				—				—				0.01				—				—
Tax effect			—				—				—				—				—				—				—
ROAA excluding prepayment penalties on borrowings			1.30				1.31				1.26				1.40				1.46				1.30				1.40
Adjusted ROAA			1.30	%			1.31	%			1.26	%			1.40	%			1.46	%			1.30	%			1.40	%

Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Average common equity		$	677,299			$	716,341			$	719,643			$	724,412			$	706,652			$	697,004			$	702,052
Return on average common equity (“ROACE”) as reported			14.72	%			13.34	%			11.81	%			12.64	%			12.59	%			14.01	%			12.23	%
Acquisition expenses			—				—				0.49				0.44				0.14				—				0.07
Tax effect			—				—				(0.10	)			(0.09	)			(0.03	)			—				(0.01	)
ROACE excluding acquisition expenses			14.72				13.34				12.20				12.99				12.70				14.01				12.29
Credit loss expense acquired loans			—				—				—				1.11				—				—				—
Tax effect			—				—				—				(0.23	)			—				—				—
ROACE excluding credit loss expense acquired loans			14.72				13.34				12.20				13.87				12.70				14.01				12.29
Gain on sale of ESOP trustee accounts			—				—				—				(1.28	)			—				—				—
Tax effect			—				—				—				0.27				—				—				—
ROACE excluding gain on sale of ESOP trustee accounts			14.72				13.34				12.20				12.86				12.70				14.01				12.29
DOL ESOP settlement expenses			—				—				1.05				—				—				—				—
Tax effect			—				—				(0.17	)			—				—				—				—
ROACE excluding DOL ESOP settlement expenses			14.72				13.34				13.08				12.86				12.70				14.01				12.29
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(0.26	)
Tax effect			—				—				—				—				—				—				0.06
ROACE excluding (gain) / loss on sale of investment securities			14.72				13.34				13.08				12.86				12.70				14.01				12.09
Death benefit on BOLI			(0.38	)			—				—				(0.28	)			(0.15	)			(0.19	)			(0.08	)
ROACE excluding death benefit on BOLI			14.34				13.34				13.08				12.58				12.55				13.82				12.01
Prepayment penalties on borrowings			—				—				—				—				0.07				—				0.04
Tax effect			—				—				—				—				(0.01	)			—				(0.01	)
ROACE excluding prepayment penalties on borrowings			14.34	%			13.34	%			13.08	%			12.58	%			12.61	%			13.82	%			12.04	%
Adjusted ROACE			14.34	%			13.34	%			13.08	%			12.58	%			12.61	%			13.82	%			12.04	%

Non–GAAP Reconciliation of Return on Average Tangible Equity
(Dollars in Thousands, Unaudited)
		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
			2022				2022				2021				2021				2021				2022				2021
Average common equity		$	677,299			$	716,341			$	719,643			$	724,412			$	706,652			$	697,004			$	702,052
Less: Average intangible assets			175,321				176,356				179,594				174,920				173,905				175,836				174,343
Average tangible equity		$	501,978			$	539,985			$	540,049			$	549,492			$	532,747			$	521,168			$	527,709
Return on average tangible equity (“ROATE”) as reported			19.86	%			17.70	%			15.74	%			16.66	%			16.69	%			18.74	%			16.28	%
Acquisition expenses			—				—				0.65				0.58				0.18				—				0.09
Tax effect			—				—				(0.14	)			(0.12	)			(0.04	)			—				(0.02	)
ROATE excluding acquisition expenses			19.86				17.70				16.25				17.12				16.83				18.74				16.35
Credit loss expense acquired loans			—				—				—				1.47				—				—				—
Tax effect			—				—				—				(0.31	)			—				—				—
ROATE excluding credit loss expense acquired loans			19.86				17.70				16.25				18.28				16.83				18.74				16.35
Gain on sale of ESOP trustee accounts			—				—				—				(1.68	)			—				—				—
Tax effect			—				—				—				0.35				—				—				—
ROATE excluding gain on sale of ESOP trustee accounts			19.86				17.70				16.25				16.95				16.83				18.74				16.35
DOL ESOP settlement expenses			—				—				1.40				—				—				—				—
Tax effect			—				—				(0.23	)			—				—				—				—
ROATE excluding DOL ESOP settlement expenses			19.86				17.70				17.42				16.95				16.83				18.74				16.35
(Gain) / loss on sale of investment securities			—				—				—				—				—				—				(0.35	)
Tax effect			—				—				—				—				—				—				0.07
ROATE excluding (gain) / loss on sale of investment securities			19.86				17.70				17.42				16.95				16.83				18.74				16.07
Death benefit on BOLI			(0.51	)			—				—				(0.37	)			(0.20	)			(0.25	)			(0.10	)
ROATE excluding death benefit on BOLI			19.35				17.70				17.42				16.58				16.63				18.49				15.97
Prepayment penalties on borrowings			—				—				—				—				0.09				—				0.05
Tax effect			—				—				—				—				(0.02	)			—				(0.01	)
ROATE excluding prepayment penalties on borrowings			19.35	%			17.70	%			17.42	%			16.58	%			16.70	%			18.49	%			16.01	%
Adjusted ROATE			19.35	%			17.70	%			17.42	%			16.58	%			16.70	%			18.49	%			16.01	%

Earnings Conference Call

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

Participants may access the live conference call on July 28, 2022 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 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 August 4, 2022. 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 7261627.

About Horizon Bancorp, Inc.

Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.6 billion–asset 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’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.

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)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Balance sheet:
Total assets		$	7,640,936			$	7,420,328			$	7,374,903			$	7,534,240			$	6,109,227
Interest earning deposits & federal funds sold			5,646				20,827				502,364				872,540				209,304
Interest earning time deposits			3,799				4,046				4,782				5,767				6,994
Investment securities			3,093,792				3,118,641				2,713,255				2,438,874				1,844,470
Commercial loans			2,363,991				2,259,327				2,213,945				2,173,200				2,104,627
Mortgage warehouse loans			116,488				105,118				109,031				169,909				205,311
Residential mortgage loans			608,582				593,372				594,382				603,540				559,437
Consumer loans			848,749				753,900				727,259				713,432				650,144
Total loans			3,937,810				3,711,717				3,644,617				3,660,081				3,519,519
Earning assets			7,070,667				6,883,254				6,865,051				7,006,513				5,610,538
Non–interest bearing deposit accounts			1,328,213				1,325,570				1,360,338				1,324,757				1,102,950
Interest bearing transaction accounts			3,760,890				3,782,644				3,711,767				3,875,882				3,105,328
Time deposits			756,482				743,283				730,886				779,260				573,348
Total deposits			5,845,585				5,851,497				5,802,991				5,979,899				4,781,626
Borrowings			959,222				728,664				712,739				670,753				439,094
Subordinated notes			58,823				58,786				58,750				58,713				58,676
Junior subordinated debentures issued to capital trusts			56,907				56,850				56,785				56,722				56,662
Total stockholders’ equity			657,865				677,450				723,209				708,542				710,374

Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
		Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Income statement:
Net interest income		$	53,008			$	48,171			$	49,976			$	46,544			$	42,632
Credit loss expense (recovery)			240				(1,386	)			(2,071	)			1,112				(1,492	)
Non–interest income			12,434				14,155				12,828				16,044				15,207
Non–interest expense			36,368				36,610				39,370				34,349				33,388
Income tax expense			3,975				3,539				4,080				4,056				3,770
Net income		$	24,859			$	23,563			$	21,425			$	23,071			$	22,173
Per share data:
Basic earnings per share		$	0.57			$	0.54			$	0.49			$	0.53			$	0.50
Diluted earnings per share			0.57				0.54				0.49				0.52				0.50
Cash dividends declared per common share			0.16				0.15				0.15				0.15				0.13
Book value per common share			15.10				15.55				16.61				16.28				16.16
Tangible book value per common share			11.11				11.54				12.58				12.05				12.24
Market value – high			19.21				23.45				21.14				18.47				19.13
Market value – low		$	16.72			$	18.67			$	18.01			$	15.83			$	16.98
Weighted average shares outstanding – Basis			43,572,796				43,554,713				43,534,298				43,810,729				43,950,501
Weighted average shares outstanding – Diluted			43,684,691				43,734,556				43,733,416				43,958,870				44,111,103
Key ratios:
Return on average assets			1.33	%			1.31	%			1.14	%			1.41	%			1.45	%
Return on average common stockholders’ equity			14.72				13.34				11.81				12.64				12.59
Net interest margin			3.19				2.99				2.97				3.17				3.14
Allowance for credit losses to total loans			1.33				1.41				1.51				1.55				1.58
Average equity to average assets			9.06				9.79				9.64				11.13				11.50
Efficiency ratio			55.57				58.74				62.69				54.88				57.73
Annualized non–interest expense to average assets			1.95				2.03				2.09				2.09				2.18
Bank only capital ratios:
Tier 1 capital to average assets			9.17				8.83				8.50				8.38				8.79
Tier 1 capital to risk weighted assets			13.74				13.23				13.69				11.86				12.80
Total capital to risk weighted assets			14.81				14.25				14.72				12.97				14.09

Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
		Six Months Ended
		June 30,				June 30,
			2022				2021
Income statement:
Net interest income		$	101,179			$	85,170
Credit loss expense (recovery)			(1,146	)			(1,125	)
Non–interest income			26,589				29,080
Non–interest expense			72,978				65,560
Income tax expense			7,514				7,220
Net income		$	48,422			$	42,595
Per share data:
Basic earnings per share		$	1.11			$	0.97
Diluted earnings per share			1.11				0.97
Cash dividends declared per common share			0.31				0.26
Book value per common share			15.10				16.16
Tangible book value per common share			11.11				12.24
Market value – high			23.45				19.94
Market value – low		$	16.72			$	16.98
Weighted average shares outstanding – Basis			43,563,804				43,935,111
Weighted average shares outstanding – Diluted			43,711,822				44,092,577
Key ratios:
Return on average assets			1.32	%			1.42	%
Return on average common stockholders’ equity			14.01				12.23
Net interest margin			3.03				3.21
Allowance for credit losses to total loans			1.33				1.58
Average equity to average assets			9.43				11.62
Efficiency ratio			57.12				57.38
Annualized non–interest expense to average assets			1.99				2.19
Bank only capital ratios:
Tier 1 capital to average assets			9.17				8.79
Tier 1 capital to risk weighted assets			13.74				12.80
Total capital to risk weighted assets			14.81				14.09

Financial Highlights
(Dollars in Thousands Except Ratios, Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Loan data:
Substandard loans		$	59,377			$	57,928			$	56,968			$	91,317			$	82,488
30 to 89 days delinquent			6,739				6,358				8,536				3,997				3,336
Non–performing loans:
90 days and greater delinquent – accruing interest			210				107				145				200				—
Trouble debt restructures – accruing interest			2,535				2,372				2,391				2,433				1,853
Trouble debt restructures – non–accrual			1,345				1,501				1,521				1,604				2,294
Non–accrual loans			16,116				16,133				14,962				25,137				18,175
Total non–performing loans		$	20,206			$	20,113			$	19,019			$	29,374			$	22,322
Non–performing loans to total loans			0.51	%			0.54	%			0.53	%			0.80	%			0.63	%

Allocation of the Allowance for Credit Losses
(Dollars in Thousands, Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Commercial		$	34,802			$	37,789			$	40,775			$	43,121			$	41,766
Residential mortgage			4,422				4,351				3,856				3,737				4,108
Mortgage warehouse			1,067				1,055				1,059				1,054				1,155
Consumer			12,059				9,313				8,596				8,867				8,620
Total		$	52,350			$	52,508			$	54,286			$	56,779			$	55,649

Net Charge–offs (Recoveries)
(Dollars in Thousands Except Ratios, Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Commercial		$	(75	)		$	38			$	926			$	(25	)		$	40
Residential mortgage			40				(10	)			126				(29	)			(23	)
Mortgage warehouse			—				—				—				—				—
Consumer			319				108				360				36				22
Total		$	284			$	136			$	1,412			$	(18	)		$	39
Percent of net charge–offs (recoveries) to average loans outstanding for the period			0.01	%			0.00	%			0.04	%			0.00	%			0.00	%

Total Non–performing Loans
(Dollars in Thousands Except Ratios, Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Commercial		$	8,008			$	7,844			$	7,509			$	16,121			$	10,345
Residential mortgage			8,469				8,584				8,005				8,641				7,841
Mortgage warehouse			—				—				—				—				—
Consumer			3,729				3,685				3,505				4,612				4,136
Total		$	20,206			$	20,113			$	19,019			$	29,374			$	22,322
Non–performing loans to total loans			0.51	%			0.54	%			0.53	%			0.80	%			0.63	%

Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Commercial		$	1,414			$	2,245			$	2,861			$	2,861			$	1,400
Residential mortgage			—				170				695				117				37
Mortgage warehouse			—				—				—				—				—
Consumer			58				5				5				29				46
Total		$	1,472			$	2,420			$	3,561			$	3,007			$	1,483

Average Balance Sheets
(Dollars in Thousands, Unaudited)
		Three Months Ended											Three Months Ended
		June 30, 2022											June 30, 2021
		Average Balance				Interest				Average Rate			Average Balance				Interest				Average Rate
Assets
Interest earning assets
Federal funds sold		$	7,083			$	17			0.96	%		$	359,184			$	98			0.11	%
Interest earning deposits			15,661				26			0.67	%			29,584				44			0.60	%
Investment securities – taxable			1,770,816				8,673			1.96	%			645,139				2,386			1.48	%
Investment securities – non–taxable (1)			1,374,032				7,307			2.70	%			1,054,703				5,656			2.72	%
Loans receivable (2) (3)			3,759,718				41,549			4.45	%			3,570,774				39,236			4.43	%
Total interest earning assets			6,927,310				57,572			3.46	%			5,659,384				47,420			3.48	%
Non–interest earning assets
Cash and due from banks			98,040											84,469
Allowance for credit losses			(52,525	)										(57,196	)
Other assets			503,413											455,850
Total average assets		$	7,476,238										$	6,142,507
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits		$	4,540,959			$	1,677			0.15	%		$	3,680,796			$	2,053			0.22	%
Borrowings			613,282				1,409			0.92	%			334,804				1,256			1.50	%
Repurchase agreements			141,470				41			0.12	%			119,052				40			0.13	%
Subordinated notes			58,800				881			6.01	%			58,653				881			6.02	%
Junior subordinated debentures issued to capital trusts			56,870				556			3.92	%			56,627				558			3.95	%
Total interest bearing liabilities			5,411,381				4,564			0.34	%			4,249,932				4,788			0.45	%
Non–interest bearing liabilities
Demand deposits			1,335,779											1,139,068
Accrued interest payable and other liabilities			51,779											46,855
Stockholders’ equity			677,299											706,652
Total average liabilities and stockholders’ equity		$	7,476,238										$	6,142,507
Net interest income / spread						$	53,008			3.12	%						$	42,632			3.03	%
Net interest income as a percent of average interest earning assets (1)										3.19	%										3.14	%
(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)
		Six Months Ended											Six Months Ended
		June 30, 2022											June 30, 2021
		Average Balance				Interest				Average Rate			Average Balance				Interest				Average Rate
Assets
Interest earning assets
Federal funds sold		$	121,707			$	108			0.18	%		$	313,467			$	164			0.11	%
Interest earning deposits			18,154				50			0.56	%			27,567				90			0.66	%
Investment securities – taxable			1,709,014				16,064			1.90	%			528,250				3,822			1.46	%
Investment securities – non–taxable (1)			1,326,819				14,004			2.69	%			1,005,855				10,879			2.76	%
Loans receivable (2) (3)			3,688,586				79,428			4.36	%			3,674,977				80,054			4.41	%
Total interest earning assets			6,864,280				109,654			3.34	%			5,550,116				95,009			3.57	%
Non–interest earning assets
Cash and due from banks			101,340											84,866
Allowance for credit losses			(53,411	)										(57,486	)
Other assets			479,139											462,401
Total average assets		$	7,391,348										$	6,039,897
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits		$	4,509,962			$	3,173			0.14	%		$	3,602,882			$	4,396			0.25	%
Borrowings			558,867				2,453			0.89	%			350,110				2,487			1.43	%
Repurchase agreements			140,610				77			0.11	%			115,392				78			0.14	%
Subordinated notes			58,782				1,761			6.04	%			58,635				1,761			6.06	%
Junior subordinated debentures issued to capital trusts			56,839				1,011			3.59	%			56,599				1,117			3.98	%
Total interest bearing liabilities			5,325,060				8,475			0.32	%			4,183,618				9,839			0.47	%
Non–interest bearing liabilities
Demand deposits			1,329,316											1,101,377
Accrued interest payable and other liabilities			39,968											52,850
Stockholders’ equity			697,004											702,052
Total average liabilities and stockholders’ equity		$	7,391,348										$	6,039,897
Net interest income / spread						$	101,179			3.02	%						$	85,170			3.10	%
Net interest income as a percent of average interest earning assets (1)										3.03	%										3.21	%
(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)
		June 30, 2022				December 31, 2021
		(Unaudited)
Assets
Cash and due from banks		$	108,848			$	593,508
Interest earning time deposits			3,799				4,782
Investment securities, available for sale			1,041,020				1,160,812
Investment securities, held to maturity (fair value $1,754,214 and $1,559,991)			2,052,772				1,552,443
Loans held for sale			2,943				12,579
Loans, net of allowance for credit losses of $52,350 and $54,286			3,885,460				3,590,331
Premises and equipment, net			93,778				93,441
Federal Home Loan Bank stock			26,677				24,440
Goodwill			154,572				154,572
Other intangible assets			19,090				20,941
Interest receivable			28,996				26,137
Cash value of life insurance			94,625				97,150
Other assets			128,356				80,753
Total assets		$	7,640,936			$	7,411,889
Liabilities
Deposits
Non–interest bearing		$	1,328,213			$	1,360,338
Interest bearing			4,517,372				4,442,653
Total deposits			5,845,585				5,802,991
Borrowings			959,222				712,739
Subordinated notes			58,823				58,750
Junior subordinated debentures issued to capital trusts			56,907				56,785
Interest payable			2,402				2,235
Other liabilities			60,132				55,180
Total liabilities			6,983,071				6,688,680
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 43,883,415 and 43,766,931 shares, Outstanding 43,572,796 and 43,547,942 shares			—				—
Additional paid–in capital			352,412				352,122
Retained earnings			398,517				363,742
Accumulated other comprehensive income			(93,064	)			7,345
Total stockholders’ equity			657,865				723,209
Total liabilities and stockholders’ equity		$	7,640,936			$	7,411,889

Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
		Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
			2022				2022				2021				2021				2021
Interest income
Loans receivable		$	41,549			$	37,879			$	41,171			$	40,392			$	39,236
Investment securities – taxable			8,716				7,506				6,491				4,565				2,528
Investment securities – non–taxable			7,307				6,697				6,456				5,911				5,656
Total interest income			57,572				52,082				54,118				50,868				47,420
Interest expense
Deposits			1,677				1,496				1,663				1,808				2,053
Borrowed funds			1,450				1,080				1,061				1,075				1,296
Subordinated notes			881				880				881				880				881
Junior subordinated debentures issued to capital trusts			556				455				537				561				558
Total interest expense			4,564				3,911				4,142				4,324				4,788
Net interest income			53,008				48,171				49,976				46,544				42,632
Credit loss expense (recovery)			240				(1,386	)			(2,071	)			1,112				(1,492	)
Net interest income after credit loss expense (recovery)			52,768				49,557				52,047				45,432				44,124
Non–interest Income
Service charges on deposit accounts			2,833				2,795				2,510				2,291				2,157
Wire transfer fees			170				159				205				210				222
Interchange fees			3,582				2,780				3,082				2,587				2,892
Fiduciary activities			1,405				1,503				1,591				2,124				1,961
Gains / (losses) on sale of investment securities			—				—				—				—				—
Gain on sale of mortgage loans			2,501				2,027				4,167				4,088				5,612
Mortgage servicing income net of impairment			319				3,489				300				336				1,503
Increase in cash value of bank owned life insurance			519				510				547				534				502
Death benefit on bank owned life insurance			644				—				—				517				266
Other income			461				892				426				3,357				92
Total non–interest income			12,434				14,155				12,828				16,044				15,207
Non–interest expense
Salaries and employee benefits			19,957				19,735				20,549				18,901				17,730
Net occupancy expenses			3,190				3,561				3,204				2,935				3,084
Data processing			2,607				2,537				2,672				2,526				2,388
Professional fees			283				314				562				522				588
Outside services and consultants			2,485				2,525				2,197				2,330				2,220
Loan expense			2,497				2,545				2,803				2,645				3,107
FDIC insurance expense			775				725				798				279				500
Other losses			362				168				1,925				69				6
Other expenses			4,212				4,500				4,660				4,142				3,765
Total non–interest expense			36,368				36,610				39,370				34,349				33,388
Income before income taxes			28,834				27,102				25,505				27,127				25,943
Income tax expense			3,975				3,539				4,080				4,056				3,770
Net income		$	24,859			$	23,563			$	21,425			$	23,071			$	22,173
Basic earnings per share		$	0.57			$	0.54			$	0.49			$	0.53			$	0.50
Diluted earnings per share			0.57				0.54				0.49				0.52				0.50

Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
		Six Months Ended
		June 30,				June 30,
			2022				2021
Interest income
Loans receivable		$	79,428			$	80,054
Investment securities – taxable			16,222				4,076
Investment securities – non–taxable			14,004				10,879
Total interest income			109,654				95,009
Interest expense
Deposits			3,173				4,396
Borrowed funds			2,530				2,565
Subordinated notes			1,761				1,761
Junior subordinated debentures issued to capital trusts			1,011				1,117
Total interest expense			8,475				9,839
Net interest income			101,179				85,170
Credit loss expense (recovery)			(1,146	)			(1,125	)
Net interest income after credit loss expense (recovery)			102,325				86,295
Non–interest Income
Service charges on deposit accounts			5,628				4,391
Wire transfer fees			329				477
Interchange fees			6,362				5,232
Fiduciary activities			2,908				3,704
Gains / (losses) on sale of investment securities			—				914
Gain on sale of mortgage loans			4,528				10,908
Mortgage servicing income net of impairment			3,808				1,716
Increase in cash value of bank owned life insurance			1,029				1,013
Death benefit on bank owned life insurance			644				266
Other income			1,353				459
Total non–interest income			26,589				29,080
Non–interest expense
Salaries and employee benefits			39,692				34,601
Net occupancy expenses			6,751				6,402
Data processing			5,144				4,764
Professional fees			597				1,132
Outside services and consultants			5,010				3,922
Loan expense			5,042				5,929
FDIC insurance expense			1,500				1,300
Other losses			530				289
Other expenses			8,712				7,221
Total non–interest expense			72,978				65,560
Income before income taxes			55,936				49,815
Income tax expense			7,514				7,220
Net income		$	48,422			$	42,595
Basic earnings per share		$	1.11			$	0.97
Diluted earnings per share			1.11				0.97

Contact:	Mark E. Secor
	Chief Financial Officer
Phone:	(219) 873-2611
Fax:	(219) 874-9280
Date:	July 27, 2022

FAQ

What are the Q2 2022 financial results for Horizon Bancorp (HBNC)?

Horizon Bancorp reported a net income of $24.9 million for Q2 2022, marking increases of 5.5% from Q1 and 12.1% year-over-year.

How did diluted earnings per share (EPS) change for Horizon Bancorp (HBNC) in Q2 2022?

Diluted earnings per share rose to $0.57 in Q2 2022, compared to $0.54 in Q1 2022.

What was the growth in total loans for Horizon Bancorp (HBNC) in Q2 2022?

Total loans for Horizon Bancorp grew by 6.2% during Q2 2022, reaching $3.89 billion.

Did Horizon Bancorp (HBNC) face any charges in Q2 2022?

Yes, Horizon Bancorp recorded a one-time charge of approximately $380,000 for the permanent closure of seven branch locations.

What impact did unrealized losses have on Horizon Bancorp (HBNC) in Q2 2022?

Horizon Bancorp experienced unrealized losses on available for sale investments of $122 million, affecting its tangible capital ratio.