Horizon Bancorp, Inc. Reports Solid First Quarter 2024 Results Including EPS of $0.32, Net Interest Margin Expansion, Loan Growth and Well-Managed Operating Expenses

Rhea-AI Summary

Horizon Bancorp, Inc. reported solid first quarter 2024 results, with net income of $14.0 million and EPS of $0.32. The company saw net interest margin expansion, loan growth, and well-managed operating expenses. President and CEO, Thomas M. Prame, highlighted the positive impact of margin and net interest income expansion, strategic leveraging of liquidity, and strong deposit portfolio performance.

Positive

• Net income for the first quarter of 2024 was $14.0 million, or $0.32 per diluted share.
• The company experienced a significant improvement from a net loss of $25.2 million in the linked fourth quarter of 2023.
• Margin and net interest income expanded for the second consecutive quarter, driven by higher yielding loan portfolios.
• Strategic leveraging of excess liquidity into commercial, equipment finance, residential, and consumer loans contributed to positive results.
• The deposit portfolio showed resilience in terms of balances and costs.
• The company maintained a disciplined approach to expenses and positive credit metrics through active portfolio management and conservative lending practices.
• The organization remains confident in its ability to improve net interest margin and financial performance despite the current economic outlook.
• Positive momentum was observed across diversified operating segments, with consistent growth in relationship banking platforms in local markets.
• President and CEO Thomas M. Prame expressed optimism for the future based on the solid start to the year.

Negative

• None.

Insights

Financial Analyst

Horizon Bancorp's report of $14.0 million net income for Q1 2024, a stark rebound from a net loss of $25.2 million in Q4 2023, signals a turnaround in financial health. A noteworthy aspect is the earnings per share (EPS) of $0.32, which is a critical metric for shareholders as it represents profitability on a per-share basis. The growth in loan portfolios and disciplined cost management could signify a strategic pivot towards optimizing earnings. The bank's ability to grow its net interest margin, despite a challenging rate environment, reflects a robust interest income strategy. For investors, these numbers suggest improved operational efficiency and a potential for sustained growth. However, this should be balanced against the macroeconomic risks, including the potential for rate hikes that can affect loan growth and the interest rate spread.

Credit Analyst

From a credit perspective, the positive credit metrics mentioned are indicative of effective risk management. A conservative lending approach may contribute to lower delinquency rates and charge-offs, which in turn can lead to a healthier balance sheet and reduced provisions for loan losses. Investors should appreciate the bank's active portfolio management, which likely involves prudent loan origination and monitoring policies. However, it's important to monitor how the 'higher rates for longer' economic outlook impacts Horizon's cost of funds and its ability to maintain competitive loan and deposit rates without compressing the net interest margin.

Market Analyst

Horizon Bancorp's reference to strategic leveraging of excess liquidity into higher-yielding loans is a testament to its adaptive market strategy. Expansion in commercial, equipment finance, residential and consumer loan portfolios can diversify revenue streams, which is typically favourable in the eyes of investors looking for reduced risk exposure. Furthermore, the bank's focus on relationship banking suggests a commitment to customer retention and organic growth within its local markets. While these strategies seem promising, it remains important for investors to consider the broader banking sector's performance and regional economic trends that may influence Horizon's market position.

MICHIGAN CITY, Ind., April 24, 2024 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”), the parent company of Horizon Bank (the “Bank”), announced its unaudited financial results for the three months ended March 31, 2024.

Net income for the first quarter of 2024 was $14.0 million, or $0.32 per diluted share compared to a net loss of $25.2 million, or $0.58, in the linked fourth quarter of 2023. During the fourth quarter of 2023, the Company recognized a net loss on the sale of securities of $31.6 million and the tax effect of the surrender of bank owned life insurance of $8.6 million.

“We are very pleased with our positive first quarter results which included a second consecutive quarter of margin and net interest income expansion. Throughout the quarter, we began to strategically leverage our excess liquidity into higher yielding commercial, equipment finance, residential and consumer loan portfolios. These activities were complimented by the resiliency of our deposit portfolio both in terms of balances and cost,” President and Chief Executive Officer Thomas M. Prame said. “Horizon's first quarter earnings not only reflect continued improvement in our margin, but highlights our disciplined approach to expenses and positive credit metrics through our active portfolio management and conservative lending approach. Even with the current economic outlook of higher rates for longer, we feel confident in our ability to continue to improve our net interest margin and the financial performance of the organization moving forward. We are encouraged by the positive momentum across our diversified operating model and we are experiencing consistent growth in our relationship banking platforms in our local markets. The team had a solid start to the year, and we feel optimistic about our trajectory as we move into the second quarter.”

First Quarter 2024 Highlights

• Net interest margin increased to 2.50% compared to 2.43% in the linked quarter. Net interest income was $43.3 million compared to $42.3 million in the linked quarter. The net interest margin for the month ended March 31, 2024 was 2.53%.
  
  
• Commercial loans grew 11.2% annualized in the quarter, including $22.8 million in new equipment finance production and a $52.0 million increase in other commercial loans.
  
  
• Total loans were $4.62 billion at period end, increasing by 18.2% annualized during the quarter. Balances included the strategic deployment of excess liquidity into higher yielding and excellent credit quality residential mortgages of $94.7 million and consumer loans with credit protection of $59.1 million.
  
  
• Cash totaled $271.1 million at period end, providing significant flexibility to drive future net interest margin growth through deployment into higher yielding assets throughout 2024.
  
  
• Excellent asset quality with net charge-offs representing only 0.01% of average loans, as well as delinquent and non-performing loans representing 0.33% and 0.41%, respectively, at period end. The Company's first quarter credit loss expense of $805,000 was primarily attributable to loan growth and replacement of net charge-offs.
  
  
• Stable deposit base with continued pricing discipline. Deposits totaled $5.58 billion at quarter end, compared to $5.66 billion on December 31, 2023. Modest outflows were primarily attributed to public fund certificates of deposits.
  
  
• Solid fee income results, even with backdrop of lower BOLI income and mortgage seasonality. Expenses were well-managed in the quarter and at the lower end of guidance.
  

Summary

		For the Three Months Ended
		March 31,				December 31,				March 31,
Net Interest Income and Net Interest Margin			2024				2023				2023
Net interest income		$	43,288			$	42,257			$	45,237
Net interest margin			2.50	%			2.43	%			2.67	%
Adjusted net interest margin			2.50	%			2.42	%			2.65	%

		For the Three Months Ended
		March 31,			December 31,			March 31,
Asset Yields and Funding Costs		2024			2023			2023
Interest earning assets		4.82	%		4.69	%		4.17	%
Interest bearing liabilities		2.84	%		2.74	%		1.85	%

		For the Three Months Ended
Non-interest Income and		March 31,			December 31,				March 31,
Mortgage Banking Income		2024				2023			2023
Total non–interest income		$	9,929		$	(20,449	)		$	9,620
Gain on sale of mortgage loans			626			951				785
Mortgage servicing income net of impairment			439			724				713

		For the Three Months Ended
		March 31,				December 31,				March 31,
Non-interest Expense			2024				2023				2023
Total non–interest expense		$	37,107			$	39,330			$	34,524
Annualized non–interest expense to average assets			1.90	%			1.98	%			1.79	%

		For the Three Months Ended
		March 31,			December 31,			March 31,
Credit Quality		2024			2023			2023
Allowance for credit losses to total loans		1.09	%		1.13	%		1.17	%
Non–performing loans to total loans		0.41	%		0.46	%		0.47	%
Percent of net charge–offs to average loans outstanding for the period		0.01	%		0.02	%		0.01	%

		March 31,				Net Reserve				December 31,
Allowance for Credit Losses			2024			1Q24					2023
Commercial		$	30,514			$	778			$	29,736
Retail Mortgage			2,655				152				2,503
Warehouse			659				178				481
Consumer			16,559				(750	)			17,309
Allowance for Credit Losses (“ACL”)		$	50,387			$	358			$	50,029
ACL / Total Loans			1.09	%							1.13	%
Acquired Loan Discount (“ALD”)		$	4,660			$	(130	)		$	4,790

Income Statement Highlights

Net income for the first quarter of 2024 was $14.0 million, or $0.32 diluted earnings per share. The Company reported a net loss of $25.2 million, or $0.58, for the linked quarter and net income of $18.2 million, or $0.42, for the prior year period. The linked quarter net loss was due primarily to a $31.6 million net loss on the sale of securities resulting from the balance sheet restructuring which occurred in December 2023, income tax expense from the early surrender of bank owned life insurance, extraordinary non-interest expenses associated with staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. The change in net income for the first quarter of 2024 when compared to the linked quarter, also reflects growth in net-interest income of $1.0 million and decreases in credit loss expense of $469,000, income tax expense of $5.1 million and non-interest expense of $2.2 million.

Net interest income was $43.3 million in the first quarter of 2024, compared to $42.3 million in the linked quarter.

Total non–interest income was $9.9 million in the first quarter of 2024, compared to negative $20.4 million in the linked quarter when the Company recorded a $31.6 million pre-tax loss on the sale of investment securities associated with the balance sheet restructuring which occurred in December 2023.

Total non–interest expense was $2.2 million lower in the first quarter of 2024 when compared to the linked quarter, primarily due to decreases of $1.6 million in salaries and employee benefits, $626,000 in loan expense, $492,000 in other losses, and $478,000 in data processing, partially offset by increases of $965,000 in outside services and consultants, $286,000 in net occupancy expenses, and $120,000 in FDIC insurance expense.

Horizon's effective tax rate was 8.6% for the first quarter of 2024, with income tax expense of $1.3 million which is $5.1 million lower than the linked quarter when the Company recorded income tax associated with the surrender of bank owned life insurance.

Net Interest Margin

Horizon’s net interest margin (“NIM”) was 2.50% for the first quarter of 2024, compared to 2.43% for the fourth quarter of 2023.

Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.50% for the first quarter of 2024, compared to 2.42% for the linked quarter. (See the “Non–GAAP Reconciliation of Net Interest Margin” table below).

Lending Activity

Total loan balances and loans held for sale increased to $4.62 billion on March 31, 2024 compared to $4.42 billion on December 31, 2023. Balances at the end of the first quarter of 2024 included deployment of surplus liquidity into $59.1 million in consumer loans with credit protections and $94.7 million in residential mortgages. During the three months ended March 31, 2024, commercial loans grew organically by $74.8 million, including $22.8 million in equipment finance production. During the first quarter of 2024, consumer loans increased $13.3 million, residential mortgage loans increased $100.9 million, and mortgage warehouse loans increased $11.5 million, offset by a decrease in loans held for sale of $496,000.

Loan Growth by Type
(Dollars in Thousands, Unaudited)
		March 31,			December 31,			QTD				QTD			Annualized
		2024			2023			$ Change				% Change			% Change
Commercial		$	2,749,766		$	2,674,960		$	74,806			2.8	%		11.2	%
Residential mortgage			782,070			681,136			100,934			14.8	%		59.6	%
Mortgage warehouse			56,549			45,078			11,471			25.4	%		102.3	%
Consumer			1,029,790			1,016,456			13,334			1.3	%		5.3	%
Total loans			4,618,175			4,417,630			200,545			4.3	%		18.3	%
Loans held for sale			922			1,418			(496	)		(35.0	)%		(140.7	)%
Total loans and loans held for sale		$	4,619,097		$	4,419,048		$	200,049			4.3	%		18.2	%

Deposit Activity

Total deposit balances of $5.58 billion on March 31, 2024 decreased 1.50% compared to $5.66 billion on December 31, 2023.

The deposit mix at the end of the first quarter of 2024 represented the demand for clients to earn more interest on their excess funds and seasonal fluctuation of commercial balances for taxes and distributions. The Bank's tenured and granular core deposit relationships remain steadfast, reflecting the value of Horizon's relationship banking model and local community engagement.

Deposit Growth by Type
(Dollars in Thousands, Unaudited)
	March 31,			December 31,			QTD				QTD			Annualized
	2024			2023			$ Change				% Change			% Change
Non–interest bearing	$	1,093,076		$	1,116,005		$	(22,929	)		(2.1	)%		(8.3	)%
Interest bearing		3,350,673			3,369,149			(18,476	)		(0.5	)%		(2.2	)%
Time deposits		1,136,121			1,179,739			(43,618	)		(3.7	)%		(14.9	)%
Total deposits	$	5,579,870		$	5,664,893		$	(85,023	)		(1.5	)%		(6.0	)%

Capital

The capital resources of the Company and the Bank continued to exceed regulatory capital ratios for “well capitalized” banks at March 31, 2024. Stockholders’ equity totaled $721.3 million at March 31, 2024, and the ratio of average stockholders’ equity to average assets was 9.25% for the three months ended March 31, 2024.

Tangible book value, which excludes intangible assets from total equity, per common share (“TBVPS”) was $12.65, increasing $0.05 during the first quarter of 2024. Tangible common equity increased to 7.20% of tangible assets as of March 31, 2024, an increase of 11 basis points during the quarter.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of March 31, 2024.

		Actual						Required for Capital Adequacy Purposes						Required for Capital Adequacy Purposes with Capital Buffer						Well Capitalized Under Prompt Corrective Action Provisions
		$			Ratio			$			Ratio			$			Ratio			$			Ratio
Total capital (to risk–weighted assets)
Consolidated		$	793,832		13.82	%		$	459,403		8.00	%		$	602,967		10.50	%		N/A			N/A
Bank			721,280		12.59	%			458,163		8.00	%			601,338		10.50	%		$	572,703		10.00	%
Tier 1 capital (to risk–weighted assets)
Consolidated			742,695		12.93	%			344,553		6.00	%			488,116		8.50	%		N/A			N/A
Bank			670,143		11.70	%			343,622		6.00	%			486,798		8.50	%			458,163		8.00	%
Common equity tier 1 capital (to risk–weighted assets)
Consolidated			625,965		10.90	%			258,414		4.50	%			401,978		7.00	%		N/A			N/A
Bank			670,143		11.70	%			257,716		4.50	%			400,892		7.00	%			372,257		6.50	%
Tier 1 capital (to average assets)
Consolidated			742,695		9.68	%			306,779		4.00	%			306,779		4.00	%		N/A			N/A
Bank			670,143		8.63	%			310,602		4.00	%			310,602		4.00	%			388,253		5.00	%

Liquidity

The Bank maintains a stable base of core deposits provided by long–standing and new relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayments, investment security cash flows, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the “FHLB”). On March 31, 2024, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.56 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Bank. The Bank had approximately $581.1 million of unpledged investment securities on March 31, 2024.

Forward Looking Statements

This press release may contain forward–looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon Bancorp, Inc. and its affiliates (collectively, “Horizon”). For these statements, Horizon claims the protection of the safe harbor for forward–looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission (the “SEC”). Forward–looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward–looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.

Although management believes that the expectations reflected in such forward–looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: current financial conditions within the banking industry, including the effects of recent failures of other financial institutions, liquidity levels, and responses by the Federal Reserve, Department of the Treasury, and the Federal Deposit Insurance Corporation to address these issues; changes in the level and volatility of interest rates, changes in spreads on earning assets and changes in interest bearing liabilities; increased interest rate sensitivity; the ability of Horizon to remediate its material weaknesses in its internal control over financial reporting; continuing increases in inflation; loss of key Horizon personnel; increases in disintermediation; potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms take a greater market share of the payment systems; estimates of fair value of certain of Horizon’s assets and liabilities; changes in prepayment speeds, loan originations, credit losses, market values, collateral securing loans and other assets; changes in sources of liquidity; economic conditions and their impact on Horizon and its customers, including local and global economic recovery from the pandemic; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict and the Israel and Hamas conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward–looking statements are discussed in Horizon’s reports (such as the Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, and Current Reports on Form 8–K) filed with the SEC and available at the SEC’s website (www.sec.gov). Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Financial Highlights
(Dollars in Thousands, Unaudited)
		March 31,			December 31,			September 30,			June 30,			March 31,
		2024			2023			2023			2023			2023
Balance sheet:
Total assets		$	7,855,707		$	7,931,195		$	7,959,434		$	7,963,353		$	7,897,995
Interest earning deposits & federal funds sold			170,882			413,744			76,293			119,637			30,221
Interest earning time deposits			1,715			2,205			2,207			2,452			3,098
Investment securities			2,461,044			2,492,889			2,831,651			2,889,309			2,958,978
Commercial loans			2,749,766			2,674,960			2,589,244			2,506,279			2,505,459
Mortgage warehouse loans			56,549			45,078			65,923			82,345			52,957
Residential mortgage loans			782,070			681,136			675,399			674,751			662,459
Consumer loans			1,029,790			1,016,456			1,028,436			1,002,885			1,026,076
Total loans			4,618,175			4,417,630			4,359,002			4,266,260			4,246,951
Earning assets			7,306,564			7,362,395			7,306,490			7,319,100			7,273,921
Non–interest bearing deposit accounts			1,093,076			1,116,005			1,126,703			1,170,055			1,231,845
Interest bearing transaction accounts			3,350,673			3,369,149			3,322,788			3,289,474			3,402,525
Time deposits			1,136,121			1,179,739			1,250,606			1,249,803			1,067,575
Total deposits			5,579,870			5,664,893			5,700,097			5,709,332			5,701,945
Borrowings			1,359,121			1,353,050			1,356,510			1,352,039			1,311,927
Subordinated notes			55,634			55,543			59,007			58,970			58,933
Junior subordinated debentures issued to capital trusts			57,315			57,258			57,201			57,143			57,087
Total stockholders’ equity			721,250			718,812			693,369			709,243			702,559

Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Income statement:
Net interest income		$	43,288			$	42,257			$	42,090			$	46,160			$	45,237
Credit loss expense (recovery)			805				1,274				263				680				242
Non–interest income			9,929				(20,449	)			11,830				10,997				9,620
Non–interest expense			37,107				39,330				36,168				36,262				34,524
Income tax expense			1,314				6,419				1,284				1,452				1,863
Net income		$	13,991			$	(25,215	)		$	16,205			$	18,763			$	18,228
Per share data:
Basic earnings per share		$	0.32			$	(0.58	)		$	0.37			$	0.43			$	0.42
Diluted earnings per share			0.32				(0.58	)			0.37				0.43				0.42
Cash dividends declared per common share			0.16				0.16				0.16				0.16				0.16
Book value per common share			16.49				16.47				15.89				16.25				16.11
Tangible book value per common share			12.65				12.60				12.00				12.34				12.17
Market value – high			14.44				14.65				12.68				11.10				16.32
Market value – low		$	11.75			$	9.33			$	9.90			$	7.75			$	10.31
Weighted average shares outstanding – Basis			43,663,610				43,649,585				43,646,609				43,639,987				43,583,554
Weighted average shares outstanding – Diluted			43,874,036				43,649,585				43,796,069				43,742,588				43,744,721
Key ratios:
Return on average assets			0.72	%		(1.27)        %					0.81	%			0.96	%			0.94	%
Return on average common stockholders’ equity			7.76				(14.23	)			8.99				10.59				10.66
Net interest margin			2.50				2.43				2.41				2.69				2.67
Allowance for credit losses to total loans			1.09				1.13				1.14				1.17				1.17
Average equity to average assets			9.25				8.92				9.03				9.07				8.86
Efficiency ratio			69.73				180.35				67.08				63.44				62.93
Annualized non–interest expense to average assets			1.90				1.98				1.81				1.86				1.79
Bank only capital ratios:
Tier 1 capital to average assets			8.63				8.41				8.77				8.72				8.86
Tier 1 capital to risk weighted assets			11.70				11.96				12.22				12.12				12.65
Total capital to risk weighted assets			12.59				12.87				13.11				13.03				13.56

Financial Highlights
(Dollars in Thousands Except Ratios, Unaudited)
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Loan data:
Substandard loans		$	43,672			$	49,526			$	47,563			$	41,484			$	49,804
30 to 89 days delinquent			15,272				16,595				13,089				10,913				13,971
Non–performing loans:
90 days and greater delinquent – accruing interest			108				559				392				1,313				137
Non–accrual loans			19,053				19,710				19,056				20,796				19,660
Total non–performing loans		$	19,161			$	20,269			$	19,448			$	22,109			$	19,797
Non–performing loans to total loans			0.41	%			0.46	%			0.45	%			0.52	%			0.47	%

Allocation of the Allowance for Credit Losses
(Dollars in Thousands, Unaudited)
		March 31,			December 31,			September 30,			June 30,			March 31,
		2024			2023			2023			2023			2023
Commercial		$	30,514		$	29,736		$	29,472		$	30,354		$	31,156
Residential mortgage			2,655			2,503			2,794			3,648			4,447
Mortgage warehouse			659			481			714			893			798
Consumer			16,559			17,309			16,719			15,081			13,125
Total		$	50,387		$	50,029		$	49,699		$	49,976		$	49,526

Net Charge–offs (Recoveries)
(Dollars in Thousands Except Ratios, Unaudited)
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Commercial		$	(57	)		$	233			$	142			$	101			$	104
Residential mortgage			(5	)			21				(39	)			(10	)			(6	)
Mortgage warehouse			—				—				—				—				—
Consumer			488				531				619				183				281
Total		$	426			$	785			$	722			$	274			$	379
Percent of net charge–offs (recoveries) to average loans outstanding for the period			0.01	%			0.02	%			0.02	%			0.01	%			0.01	%

Total Non–performing Loans
(Dollars in Thousands Except Ratios, Unaudited)
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Commercial		$	5,493			$	7,362			$	6,969			$	8,275			$	8,523
Residential mortgage			8,725				8,058				7,777				8,168				6,926
Mortgage warehouse			—				—				—				—				—
Consumer			4,943				4,849				4,702				5,666				4,348
Total		$	19,161			$	20,269			$	19,448			$	22,109			$	19,797
Non–performing loans to total loans			0.41	%			0.46	%			0.45	%			0.52	%			0.47	%

Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
		March 31,			December 31,			September 30,			June 30,			March 31,
		2024			2023			2023			2023			2023
Commercial		$	1,124		$	1,124		$	1,287		$	1,567		$	1,567
Residential mortgage			—			182			32			107			203
Mortgage warehouse			—			—			—			—			—
Consumer			50			205			72			7			78
Total		$	1,174		$	1,511		$	1,391		$	1,681		$	1,848

Average Balance Sheets
(Dollars in Thousands, Unaudited)
		Three Months Ended										Three Months Ended
		March 31, 2024										March 31, 2023
		Average Balance				Interest			Average Rate			Average Balance				Interest			Average Rate
Assets
Interest earning assets
Federal funds sold		$	322,058			$	4,387		5.48	%		$	7,767			$	83		4.33	%
Interest earning deposits			9,025				110		4.90	%			8,780				70		3.23	%
Investment securities – taxable			1,364,195				7,362		2.17	%			1,727,369				8,725		2.05	%
Investment securities – non–taxable (1)			1,149,957				6,451		2.86	%			1,314,129				7,556		2.95	%
Loans receivable (2) (3)			4,448,324				66,954		6.09	%			4,143,221				55,364		5.44	%
Total interest earning assets			7,293,559				85,264		4.82	%			7,201,266				71,798		4.17	%
Non–interest earning assets
Cash and due from banks			105,795										103,563
Allowance for credit losses			(49,960	)									(50,337	)
Other assets			486,652										576,614
Total average assets		$	7,836,046									$	7,831,106
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits		$	4,500,148			$	27,990		2.50	%		$	4,502,199			$	14,819		1.33	%
Borrowings			1,200,728				10,904		3.65	%			1,053,317				9,268		3.57	%
Repurchase agreements			138,052				1,026		2.99	%			138,749				503		1.47	%
Subordinated notes			55,558				831		6.02	%			58,910				880		6.06	%
Junior subordinated debentures issued to capital trusts			57,279				1,225		8.60	%			57,048				1,091		7.76	%
Total interest bearing liabilities			5,951,765				41,976		2.84	%			5,810,223				26,561		1.85	%
Non–interest bearing liabilities
Demand deposits			1,077,183										1,255,697
Accrued interest payable and other liabilities			82,015										71,714
Stockholders’ equity			725,083										693,472
Total average liabilities and stockholders’ equity		$	7,836,046									$	7,831,106
Net interest income / spread						$	43,288		1.98	%						$	45,237		2.32	%
Net interest income as a percent of average interest earning assets (1)									2.50	%									2.67	%
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.

Condensed Consolidated Balance Sheets
(Dollars in Thousands)
		March 31, 2024				December 31, 2023
		(Unaudited)
Assets
Cash and due from banks		$	271,088			$	526,515
Interest earning time deposits			1,715				2,205
Investment securities, available for sale			535,319				547,251
Investment securities, held to maturity (fair value $1,627,853 and $1,668,758)			1,925,725				1,945,638
Loans held for sale			922				1,418
Loans, net of allowance for credit losses of $50,387 and $50,029			4,567,788				4,367,601
Premises and equipment, net			94,303				94,583
Federal Home Loan Bank stock			53,826				34,509
Goodwill			155,211				155,211
Other intangible assets			12,754				13,626
Interest receivable			40,008				38,710
Cash value of life insurance			36,455				36,157
Other assets			160,593				177,061
Total assets		$	7,855,707			$	7,940,485
Liabilities
Deposits
Non–interest bearing		$	1,093,076			$	1,116,005
Interest bearing			4,486,794				4,548,888
Total deposits			5,579,870				5,664,893
Borrowings			1,359,121				1,353,050
Subordinated notes			55,634				55,543
Junior subordinated debentures issued to capital trusts			57,315				57,258
Interest payable			7,853				22,249
Other liabilities			74,664				68,680
Total liabilities			7,134,457				7,221,673
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 and outstanding 44,115,840 and 44,106,174 shares			—				—
Additional paid–in capital			356,599				356,400
Retained earnings			435,927				429,021
Accumulated other comprehensive income (loss)			(71,276	)			(66,609	)
Total stockholders’ equity			721,250				718,812
Total liabilities and stockholders’ equity		$	7,855,707			$	7,940,485

Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
		Three Months Ended
		March 31,			December 31,				September 30,			June 30,			March 31,
		2024				2023			2023			2023				2023
Interest income
Loans receivable		$	66,954		$	65,583			$	63,003		$	60,594		$	55,364
Investment securities – taxable			7,362			8,157				8,788			8,740			8,725
Investment securities – non–taxable			6,451			6,767				7,002			7,059			7,556
Other			4,497			3,007				1,332			475			153
Total interest income			85,264			83,514				80,125			76,868			71,798
Interest expense
Deposits			27,990			27,376				24,704			18,958			14,819
Borrowed funds			11,930			11,765				11,224			9,718			9,771
Subordinated notes			831			870				880			881			880
Junior subordinated debentures issued capital trusts			1,225			1,246				1,227			1,151			1,091
Total interest expense			41,976			41,257				38,035			30,708			26,561
Net interest income			43,288			42,257				42,090			46,160			45,237
Credit loss expense (recovery)			805			1,274				263			680			242
Net interest income after credit loss expense			42,483			40,983				41,827			45,480			44,995
Non–interest Income
Service charges on deposit accounts			3,214			3,092				3,086			3,021			3,028
Wire transfer fees			101			103				120			116			109
Interchange fees			3,109			3,224				3,186			3,584			2,867
Fiduciary activities			1,315			1,352				1,206			1,247			1,275
Gain (loss) on sale of investment securities			—			(31,572	)			—			20			(500	)
Gain on sale of mortgage loans			626			951				1,582			1,005			785
Mortgage servicing income net of impairment			439			724				631			640			713
Increase in cash value of bank owned life insurance			298			658				1,055			1,015			981
Other income			827			1,019				964			349			362
Total non–interest income			9,929			(20,449	)			11,830			10,997			9,620
Non–interest expense
Salaries and employee benefits			20,268			21,877				20,058			20,162			18,712
Net occupancy expenses			3,546			3,260				3,283			3,249			3,563
Data processing			2,464			2,942				2,999			3,016			2,669
Professional fees			607			772				707			633			533
Outside services and consultants			3,359			2,394				2,316			2,515			2,717
Loan expense			719			1,345				1,120			1,397			1,118
FDIC insurance expense			1,320			1,200				1,300			840			540
Core deposit intangible amortization			872			903				903			903			903
Other losses			16			508				188			134			221
Other expenses			3,936			4,129				3,294			3,413			3,548
Total non–interest expense			37,107			39,330				36,168			36,262			34,524
Income before income taxes			15,305			(18,796	)			17,489			20,215			20,091
Income tax expense			1,314			6,419				1,284			1,452			1,863
Net income		$	13,991		$	(25,215	)		$	16,205		$	18,763		$	18,228
Basic earnings per share		$	0.32		$	(0.58	)		$	0.37		$	0.43		$	0.42
Diluted earnings per share			0.32			(0.58	)			0.37			0.43			0.42

Use of Non–GAAP Financial Measures

Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non–GAAP financial measures relating to net income, diluted earnings per share, pre–tax, pre–provision net income, net interest margin, tangible stockholders’ equity and tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and return on average tangible equity. In each case, we have identified special circumstances that we consider to be non–recurring and have excluded them. We believe that this shows the impact of such events as acquisition–related purchase accounting adjustments and swap termination fees, among others we have identified in our reconciliations. Horizon believes these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP information identified herein and its most comparable GAAP measures.

Non–GAAP Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,			December 31,				September 30,			June 30,				March 31,
		2024				2023			2023				2023				2023
Net income as reported		$	13,991		$	(25,215	)		$	16,205		$	18,763			$	18,228
Swap termination fee			—			—				—			(1,453	)			—
Tax effect			—			—				—			305				—
Net income excluding swap termination fee			13,991			(25,215	)			16,205			17,615				18,228
(Gain) / loss on sale of investment securities			—			31,572				—			(20	)			500
Tax effect			—			(6,630	)			—			4				(105	)
Tax valuation reserve			—			5,201				—			—				—
Net income excluding (gain) / loss on sale of investment securities			13,991			4,928				16,205			17,599				18,623
Extraordinary expenses			—			705				—			—				—
Tax effect			—			(148	)			—			—				—
Net income excluding extraordinary expenses			13,991			5,485				16,205			17,599				18,623
BOLI tax expense and excise tax			—			8,597				—			—				—
Net income excluding BOLI tax expense and excise tax			13,991			14,082				16,205			17,599				18,623
Adjusted net income		$	13,991		$	14,082			$	16,205		$	17,599			$	18,623

Non–GAAP Reconciliation of Diluted Earnings per Share
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,			December 31,				September 30,			June 30,				March 31,
		2024				2023			2023				2023			2023
Diluted earnings per share (“EPS”) as reported		$	0.32		$	(0.58	)		$	0.37		$	0.43			$	0.42
Swap termination fee			—			—				—			(0.03	)			—
Tax effect			—			—				—			0.01				—
Diluted EPS excluding swap termination fee			0.32			(0.58	)			0.37			0.41				0.42
(Gain) / loss on sale of investment securities			—			0.72				—			—				0.01
Tax effect			—			(0.15	)			—			—				—
Tax valuation reserve			—			0.12				—			—				—
Diluted EPS excluding (gain) / loss on sale of investment securities			0.32			0.11				0.37			0.41				0.43
Extraordinary expenses			—			0.02				—			—				—
Tax effect			—			—				—			—				—
Diluted EPS excluding extraordinary expenses			0.32			0.13				0.37			0.41				0.43
BOLI tax expense and excise tax			—			0.20				—			—				—
Diluted EPS excluding BOLI tax expense and excise tax			0.32			0.33				0.37			0.41				0.43
Adjusted diluted EPS		$	0.32		$	0.33			$	0.37		$	0.41			$	0.43

Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,			December 31,				September 30,			June 30,				March 31,
		2024				2023			2023				2023			2023
Pre–tax income		$	15,305		$	(18,796	)		$	17,489		$	20,215			$	20,091
Credit loss expense (recovery)			805			1,274				263			680				242
Pre–tax, pre–provision net income		$	16,110		$	(17,522	)		$	17,752		$	20,895			$	20,333
Pre–tax, pre–provision net income		$	16,110		$	(17,522	)		$	17,752		$	20,895			$	20,333
Swap termination fee			—			—				—			(1,453	)			—
(Gain) / loss on sale of investment securities			—			31,572				—			(20	)			500
Extraordinary expenses			—			705				—			—				—
Adjusted pre–tax, pre–provision net income		$	16,110		$	14,755			$	17,752		$	19,422			$	20,833

Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Net interest income as reported		$	43,288			$	42,257			$	42,090			$	46,160			$	45,237
Average interest earning assets			7,293,559				7,239,034				7,286,611				7,212,640				7,201,266
Net interest income as a percentage of average interest earning assets (“Net Interest Margin”)			2.50	%			2.43	%			2.41	%			2.69	%			2.67	%
Net interest income as reported		$	43,288			$	42,257			$	42,090			$	46,160			$	45,237
Acquisition–related purchase accounting adjustments (“PAUs”)			(13	)			(175	)			(435	)			(651	)			(367	)
Swap termination fee			—				—				—				(1,453	)			—
Adjusted net interest income		$	43,275			$	42,082			$	41,655			$	44,056			$	44,870
Adjusted net interest margin			2.50	%			2.42	%			2.38	%			2.57	%			2.65	%

Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
(Dollars in Thousands, Unaudited)
		March 31,			December 31,			September 30,			June 30,			March 31,
		2024			2023			2023			2023			2023
Total stockholders’ equity		$	721,250		$	718,812		$	693,369		$	709,243		$	702,559
Less: Intangible assets			167,965			168,837			169,741			170,644			171,547
Total tangible stockholders’ equity		$	553,285		$	549,975		$	523,628		$	538,599		$	531,012
Common shares outstanding			43,726,380			43,652,063			43,648,501			43,645,216			43,621,422
Book value per common share		$	16.49		$	16.47		$	15.89		$	16.25		$	16.11
Tangible book value per common share		$	12.65		$	12.60		$	12.00		$	12.34		$	12.17

Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Non–interest expense as reported		$	37,107			$	39,330			$	36,168			$	36,262			$	34,524
Net interest income as reported			43,288				42,257				42,090				46,160				45,237
Non–interest income as reported		$	9,929			$	(20,449	)		$	11,830			$	10,997			$	9,620
Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”)			69.73	%			180.35	%			67.08	%			63.44	%			62.93	%
Non–interest expense as reported		$	37,107			$	39,330			$	36,168			$	36,262			$	34,524
Extraordinary expenses			—				(705	)			—				—				—
Non–interest expense excluding extraordinary expenses			37,107				38,625				36,168				36,262				34,524
Net interest income as reported			43,288				42,257				42,090				46,160				45,237
Swap termination fee			—				—				—				(1,453	)			—
Net interest income excluding swap termination fee			43,288				42,257				42,090				44,707				45,237
Non–interest income as reported			9,929				(20,449	)			11,830				10,997				9,620
(Gain) / loss on sale of investment securities			—				31,572				—				(20	)			500
Non–interest income excluding (gain) / loss on sale of investment securities		$	9,929			$	11,123			$	11,830			$	10,977			$	10,120
Adjusted efficiency ratio			69.73	%			72.36	%			67.08	%			65.12	%			62.37	%

Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Average assets		$	7,836,046			$	7,880,816			$	7,924,751			$	7,840,026			$	7,831,106
Return on average assets (“ROAA”) as reported			0.72	%		(1.27)%					0.81	%			0.96	%			0.94	%
Swap termination fee			—				—				—				(0.07	)			—
Tax effect			—				—				—				0.02				—
ROAA excluding swap termination fee			0.72				(1.27	)			0.81				0.91				0.94
(Gain) / loss on sale of investment securities			—				1.59				—				—				0.03
Tax effect			—				(0.33	)			—				—				(0.01	)
Tax valuation reserve			—				0.26				—				—				—
ROAA excluding (gain) / loss on sale of investment securities			0.72				0.25				0.81				0.91				0.96
Extraordinary expenses			—				0.04				—				—				—
Tax effect			—				(0.01	)			—				—				—
ROAA excluding extraordinary expenses			0.72				0.28				0.81				0.91				0.96
BOLI tax expense and excise tax			—				0.43				—				—				—
ROAA excluding BOLI tax expense and excise tax			0.72				0.71				0.81				0.91				0.96
Adjusted ROAA			0.72	%			0.71	%			0.81	%			0.91	%			0.96	%

Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Average common equity		$	725,083			$	702,793			$	715,485			$	710,953			$	693,472
Return on average common equity (“ROACE”) as reported			7.76	%		(14.23)%					8.99	%			10.59	%			10.66	%
Swap termination fee			—				—				—				(0.82	)			—
Tax effect			—				—				—				0.17				—
ROACE excluding swap termination fee			7.76				(14.23	)			8.99				9.94				10.66
(Gain) / loss on sale of investment securities			—				17.82				—				(0.01	)			0.29
Tax effect			—				(3.74	)			—				—				(0.06	)
Tax valuation reserve			—				2.94				—				—				—
ROACE excluding (gain) / loss on sale of investment securities			7.76				2.79				8.99				9.93				10.89
Extraordinary expenses			—				0.40				—				—				—
Tax effect			—				(0.08	)			—				—				—
ROACE excluding extraordinary expenses			7.76				3.11				8.99				9.93				10.89
BOLI tax expense and excise tax			—				4.85				—				—				—
ROACE excluding BOLI tax expense and excise tax			7.76				7.96				8.99				9.93				10.89
Adjusted ROACE			7.76	%			7.96	%			8.99	%			9.93	%			10.89	%

Non–GAAP Reconciliation of Return on Average Tangible Equity
(Dollars in Thousands, Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
			2024				2023				2023				2023				2023
Average common equity		$	725,083			$	702,793			$	715,485			$	710,953			$	693,472
Less: Average intangible assets			168,519				169,401				170,301				171,177				172,139
Average tangible equity		$	556,564			$	533,392			$	545,184			$	539,776			$	521,333
Return on average tangible equity (“ROATE”) as reported			10.11	%		(18.76)        %					11.79	%			13.94	%			14.18	%
Swap termination fee			—				—				—				(1.08	)			—
Tax effect			—				—				—				0.23				—
ROATE excluding swap termination fee			10.11				(18.76	)			11.79				13.09				14.18
(Gain) / loss on sale of investment securities			—				23.48				—				(0.01	)			0.39
Tax effect			—				(4.93	)			—				—				(0.08	)
Tax valuation reserve			—				3.87				—				—				—
ROATE excluding (gain) / loss on sale of investment securities			10.11				3.66				11.79				13.08				14.49
Extraordinary expenses			—				0.52				—				—				—
Tax effect			—				(0.11	)			—				—				—
ROATE excluding extraordinary expenses			10.11				4.07				11.79				13.08				14.49
BOLI tax expense and excise tax			—				6.39				—				—				—
ROATE excluding BOLI tax expense and excise tax			10.11				10.46				11.79				13.08				14.49
Adjusted ROATE			10.11	%			10.46	%			11.79	%			13.08	%			14.49	%

Earnings Conference Call

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

Participants may access the live conference call on April 25, 2024 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833–974–2379 from the United States, 866–450–4696 from Canada or 1–412–317–5772 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.

A telephone replay of the call will be available approximately one hour after the end of the conference through May 3, 2024. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 1–412–317–0088 from other international locations, and entering the access code 4319315.

About Horizon Bancorp, Inc.

Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion–asset commercial bank holding company for Horizon Bank, which serve 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, as well as equipment financing solutions for customers regionally and nationally, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana's Michigan City, is available at horizonbank.com and investor.horizonbank.com.

Contact:	Mark E. Secor
	Chief Financial Officer
Phone:	(219) 873–2611
Fax:	(219) 874–9280
Date:	April 24, 2024

FAQ

What was Horizon Bancorp, Inc.'s net income for the first quarter of 2024?

Horizon Bancorp, Inc.'s net income for the first quarter of 2024 was $14.0 million.

What was the EPS for Horizon Bancorp, Inc. in the first quarter of 2024?

Horizon Bancorp, Inc.'s EPS for the first quarter of 2024 was $0.32.

What caused the significant improvement in Horizon Bancorp, Inc.'s financial results compared to the fourth quarter of 2023?

The improvement was driven by margin and net interest income expansion, strategic leveraging of liquidity into higher yielding loan portfolios, and strong deposit portfolio performance.

How does Horizon Bancorp, Inc. plan to continue improving its financial performance despite the current economic outlook?

Horizon Bancorp, Inc. plans to maintain its disciplined approach to expenses, positive credit metrics, and active portfolio management to improve net interest margin and overall financial performance.

What did President and CEO Thomas M. Prame express regarding the company's performance and outlook for the future?

Thomas M. Prame expressed optimism for the future based on the positive start to the year and solid financial performance of Horizon Bancorp, Inc.