Horizon Bancorp, Inc. Announces Record Earnings For 2022| MENAFN.COM

Thursday, 02 February 2023 12:11 GMT

Horizon Bancorp, Inc. Announces Record Earnings For 2022


(MENAFN- GlobeNewsWire - Nasdaq)

MICHIGAN CITY, Ind., Jan. 25, 2023 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) - Horizon Bancorp, Inc. (“Horizon” or the“Company”) announced its unaudited financial results for the three and twelve months ended December 31, 2022.

“Horizon closed 2022 with record annual earnings reflecting continued strong growth in commercial and consumer loans through the fourth quarter, solid asset quality metrics and continued disciplined expense management,” Chairman and CEO Craig M. Dwight said.“We have continued to produce consistent and strong returns with ROAA of 1.24% and ROATE of 18.33% for 2022. As we enter 2023, we believe we are well–positioned with talent, technology and solid pipelines to continue to support our loan growth goals for the year, and focus on reinvesting our cash flows into higher yielding assets. Our well diversified balance sheet and low credit risk profile has performed well through previous economic cycles and, given the strong markets we operate in, we expect similar performance throughout the current economic cycle.”

Fourth Quarter and Full Year 2022 Highlights

  • Return on average assets (“ROAA”) was 1.24% for the year ended 2022.
  • Return on average tangible equity was 18.33% for the year ended 2022.
  • Total loans grew 13.4% year–to–date and 12.8% annualized during the fourth quarter.
  • Commercial loans grew to a record $2.42 billion, up 13.4% year–to–date and 10.8% annualized during the fourth quarter.
  • Consumer loans grew to a record $967.8 million, up 30.6% year–to–date and 21.0% annualized during the fourth quarter.
  • Asset quality remained solid with total loan delinquency at 0.26% of total loans, net charge–offs to average loans of 0.01% and non–performing loans to total loans at 0.52%.
  • Total deposits remained strong increasing $26.9 million during the quarter at an average cost of 71 basis points and $54.8 million year–to–date at an average cost of 30 basis points.
  • Fourth quarter net interest income was $48.8 million compared to $51.9 million in the previous quarter. Lower loan fees, less purchase accounting accretion and higher dealer reserve amortization represented $2.2 million of this decrease.
  • An accounting revision was made to amounts reported in previously issued financial statements covering the third quarter of 2022 related to immaterial errors discovered in the fourth quarter of 2022. The errors relate to the inclusion of the dealer reserve amortization expense in loan expense in non–interest expenses for the third quarter of 2022 rather than loan interest income. The previously issued financial statements for the three and nine months dated September 30, 2022 have been revised to correct this error, which resulted in lowering both interest income and non–interest expense by $1.5 million for the quarter and lowering net interest margin by ten basis points from the historical presentation of these amounts (See Exhibit 1 – Revision of Previously Issued Financial Statements for details). All periods presented reflect this adjustment, and there was no impact to net income.
  • Non–interest income increased by 4.8% from $10.2 million to $10.7 million from the third quarter to the fourth quarter of 2022.
  • Non-interest expense was $35.7 million in the quarter, or 1.84% of average assets on an annualized basis, compared to $36.8 million, or 1.91%, in the third quarter of 2022. Year–to–date non–interest expense continued to be well managed at $143.2 million, or 1.90% of average assets.
  • Net income totaled $21.2 million, compared to $23.8 million in the third quarter and $21.4 million in the prior year period. Diluted earnings per share (“EPS”) was $0.48 compared to $0.55 for the third quarter of 2022 and $0.49 for the fourth quarter of 2021.
  • The Bank's capital position continues to be robust with leverage and risk based capital ratios of 9.55% and 13.59%, respectively. The annualized dividend yield was 4.24% as of December 31, 2022.

Summary

For the Three Months Ended
December 31, September 30, December 31,
Net Interest Income and Net Interest Margin 2022 2022 2021
Net interest income $ 48,782 $ 51,861 $ 48,477
Net interest margin 2.85 % 3.04 % 2.87 %
Adjusted net interest margin 2.83 % 2.99 % 2.77 %

“Horizon's net interest income of approximately $48.8 million in the fourth quarter was a reduction from the third quarter due to rapidly rising short term interest rates, some lag in repricing adjustable rate loans and lower fee and non–interest related income. In addition, Horizon's deposit betas increased at a faster pace in the fourth quarter due to the magnitude and velocity of the Federal Reserve Bank's Open Market Committee raising the targeted federal funds rate. We expect funding costs to stabilize in 2023 as the Federal Reserve Bank tempers the velocity of future rate increases,” Mr. Dwight commented.

For the Three Months Ended
December 31, September 30, December 31,
Asset Yields and Funding Costs 2022 2022 2021
Interest earning assets 3.88 % 3.58 % 3.11 %
Interest bearing liabilities 1.29 % 0.69 % 0.31 %


For the Three Months Ended
Non–interest Income and December 31, September 30, December 31,
Mortgage Banking Income 2022 2022 2021
Total non–interest income $ 10,674 $ 10,188 $ 12,828
Gain on sale of mortgage loans 1,196 1,441 4,167
Mortgage servicing income net of impairment 637 355 300


For the Three Months Ended
December 31, September 30, December 31,
Non–interest Expense 2022 2022 2021
Total non–interest expense $ 35,711 $ 36,816 $ 37,871
Annualized non–interest expense to average assets 1.84 % 1.91 % 2.01 %


For the Three Months Ended
December 31, September 30, December 31,
Credit Quality 2022 2022 2021
Allowance for credit losses to total loans 1.21 % 1.27 % 1.48 %
Non–performing loans to total loans 0.52 % 0.47 % 0.52 %
Percent of net charge–offs to average loans outstanding for the period 0.01 % 0.00 % 0.04 %


Allowance for December 31, Net Reserve December 31,
Credit Losses 2022 4Q22 3Q22 2Q22 1Q22 2021
Commercial $ 32,445 $ (1,361 ) $ (996 ) $ (2,987 ) $ (2,986 ) $ 40,775
Retail Mortgage 5,577 440 715 71 495 3,856
Warehouse 1,020 (4 ) (43 ) 12 (4 ) 1,059
Consumer 11,422 20 (657 ) 2,746 717 8,596
Allowance for Credit Losses (“ACL”) $ 50,464 $ (905 ) $ (981 ) $ (158 ) $ (1,778 ) $ 54,286
ACL / Total Loans 1.21 % 1.48 %
Acquired Loan Discount (“ALD”) $ 6,279 $ (308 ) $ (619 ) $ (1,122 ) $ (769 ) $ 9,097

“We continued to report solid asset quality metrics, including low net charge–offs and modest levels of non–performing loans to total loans. Asset quality continued to remain a hallmark of our franchise and a credit to our seasoned loan underwriters”, said Mr. Dwight.

Exhibit 1 – Revision of Previously Issued Financial Statements

We have revised amounts reported in previously issued financial statements for our third quarter 2022 results reflected in this press release related to immaterial errors. Subsequent to the third quarter of 2022, the Company's management determined that the dealer reserve amortization expense was incorrectly included in loan expense in non–interest expenses rather than loan interest income. In addition, the dealer reserve asset was incorrectly included with other assets on the balance sheet rather than included with loans. As a result, loan interest income for the three and nine months ended September 30, 2022 has been revised to include dealer reserve amortization expense, and we have reversed the impact of the inclusion of the dealer reserve amortization expense in loan expense in non–interest expenses for the three and nine months ended September 30, 2022 and for all other prior periods presented. This revision for the third quarter reduced both loan interest income and loan expense by $1.5 million, and lowered the net interest margin by ten basis points from the amounts previously reported in the interim condensed consolidated statements of income for the three and nine months ended September 30, 2022. Our financial statements for the quarter and year ended December 31, 2022 and December 31, 2021 set forth in this press release reflect the inclusion of the dealer reserve amortization expense in loan interest income for those periods.

We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Quarterly Reports on Form 10–Q for the quarterly period ended September 30, 2022.

Three Months Ended
December 31, December 31,
2022 2021
Without
Dealer
Reserve
Change
Dealer
Reserve

Change
Actual Pre
Revision
Revision Post
Revision
Balance Sheet
Loans, net of allowance for credit losses $ 4,089,370 $ 18,164 $ 4,107,534 $ 3,590,331 $ 13,917 $ 3,604,248
Other assets 157,445 (18,164 ) 139,281 80,753 (13,917 ) 66,836
Total assets 7,872,518 - 7,872,518 7,411,889 - 7,411,889
Income Statement
Interest income 69,211 (2,024 ) 67,187 54,118 (1,499 ) 52,619
Net interest income 50,806 (2,024 ) 48,782 49,976 (1,499 ) 48,477
Non–interest expense 37,735 (2,024 ) 35,711 39,370 (1,499 ) 37,871
Net income 21,165 - 21,165 21,425 - 21,425
Average Balance Sheet
Loans 4,019,744 18,912 4,038,656 3,630,896 13,792 3,644,688
Interest earning assets 7,073,068 18,912 7,091,980 6,938,258 13,792 6,952,050
Other assets 599,786 (18,912 ) 580,874 477,352 (13,792 ) 463,560
Total assets $ 7,718,366 $ - $ 7,718,366 $ 7,461,343 $ - $ 7,461,343
Other Financial Information
Average rate on loans 5.22 % (0.20 )% 5.02 % 4.52 % (0.18 )% 4.34 %
Average rate on interest earning assets 4.01 (0.13 ) 3.88 3.20 (0.09 ) 3.11
Net interest spread 2.72 (0.13 ) 2.59 2.89 (0.09 ) 2.80
Net interest margin 2.97 (0.12 ) 2.85 2.97 (0.10 ) 2.87
Efficiency ratio 61.38 (1.32 ) 60.06 62.69 (0.92 ) 61.77
Non–interest expense to average assets 1.94 % (0.10 )% 1.84 % 2.09 % (0.08 )% 2.01 %


Twelve Months Ended
December 31, December 31,
2022 2021
Without
Dealer
Reserve
Change
Dealer
Reserve
Change
Actual Pre
Revision
Revision Post
Revision
Balance Sheet
Loans, net of allowance for credit losses $ 4,089,370 $ 18,164 $ 4,107,534 $ 3,590,331 $ 13,917 $ 3,604,248
Other assets 157,445 (18,164 ) 139,281 80,753 (13,917 ) 66,836
Total assets 7,872,518 - 7,872,518 7,411,889 - 7,411,889
Income Statement
Interest income 241,895 (5,862 ) 236,033 199,995 (5,885 ) 194,110
Net interest income 205,380 (5,862 ) 199,518 181,690 (5,885 ) 175,805
Non–interest expense 149,063 (5,862 ) 143,201 139,279 (5,885 ) 133,394
Net income 93,408 - 93,408 87,091 - 87,091
Average Balance Sheet
Loans 3,828,090 17,047 3,845,137 3,626,033 13,421 3,639,454
Interest earning assets 6,960,360 17,047 6,977,407 6,021,740 13,421 6,035,161
Other assets 526,276 (17,047 ) 509,229 459,316 (13,421 ) 445,895
Total assets $ 7,533,915 $ - $ 7,533,915 $ 6,514,251 $ 6,514,251
Other Financial Information
Average rate on loans 4.70 % (0.17 )% 4.53 % 4.47 % (0.17 )% 4.30 %
Average rate on interest earning assets 3.60 (0.10 ) 3.50 3.43 (0.10 ) 3.33
Net interest spread 2.93 (0.10 ) 2.83 3.03 (0.10 ) 2.93
Net interest margin 3.07 (0.09 ) 2.98 3.13 (0.10 ) 3.03
Efficiency ratio 58.96 (0.98 ) 57.98 58.12 (1.05 ) 57.07
Non–interest expense to average assets 1.98 % (0.08 )% 1.90 % 2.14 % (0.09 )% 2.05 %

Income Statement

Net income for the fourth quarter of 2022 was $21.2 million, or $0.48 diluted earnings per share, compared to $23.8 million, or $0.55, for the linked quarter and $21.4 million, or $0.49, for the prior year period.

The change in net income for the fourth quarter of 2022 when compared to the third quarter of 2022 reflects an increase in non–interest income of $486,000 and a decrease in non–interest expense of $1.1 million, offset by a decrease in net interest income of $3.1 million and an increase in credit loss expense of $532,000.

Non–interest expense of $35.7 million in the fourth quarter of 2022 reflected a $635,000 decrease in salaries and employee benefits, a $400,000 decrease in other expense, a $282,000 decrease in FDIC insurance expense and a $280,000 decrease in other losses, offset by a $345,000 increase in data processing expense and a $142,000 increase in professional fees from the linked quarter.

Net income for the fourth quarter of 2022 when compared to the same prior year period reflects a decrease in non–interest income of $2.2 million and an increase in credit loss expense of $2.0 million, offset by a decrease in non–interest expense of $2.2 million, a decrease in income tax expense of $1.4 million and an increase in net interest income of $305,000.

Net income for the year ended December 31, 2022 was $93.4 million, or $2.14 diluted earnings per share, compared to $87.1 million, or $1.98 diluted earnings per share, for the year ended December 31, 2021. Adjusted net income for the year ended December 31, 2022 was $92.8 million, or $2.13 diluted earnings per share, compared to $88.6 million, or $2.00 diluted earnings per share, for the year ended December 31, 2021. The increase in net income for the year ended December 31, 2022 when compared to the same prior year period reflects an increase in net interest income of $23.7 million and a decrease in income tax expense of $3.2 million, offset by an increase in non–interest expense of $9.8 million, a decrease in non–interest income of $10.5 million and an increase in credit loss expense of $268,000.

Net Interest Margin

Horizon's net interest margin was 2.85% for the fourth quarter of 2022 compared to 3.04% for the third quarter. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 60 basis points, offset by an increase in the yield on interest earning assets of 42 basis points. Additionally, interest income from acquisition–related purchase accounting adjustments was $475,000 lower during the fourth quarter of 2022 when compared to the third quarter of 2022.

Horizon's net interest margin decreased to 2.98% for the year ended December 31, 2022 compared to 3.03% for the same prior year period. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 27 basis points, offset by an increase in the yield on interest earning assets of 28 basis points.

Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.83% for the fourth quarter of 2022, compared to 2.99% for the linked quarter and 2.77% for the fourth quarter of 2021. Interest income from acquisition–related purchase accounting adjustments was $431,000, $906,000 and $1.8 million for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

The adjusted net interest margin was 2.93% for the year ended December 31, 2022 compared to 2.96% for the same prior year period. Interest income from acquisition–related purchase accounting adjustments was $3.5 million and $4.5 million for the year ended December 31, 2022 and 2021, respectively.

Lending Activity

Total loan balances were $4.16 billion, or $4.11 billion excluding PPP loans and sold commercial participation loans, on December 31, 2022 compared to $4.03 billion, or $3.98 billion excluding PPP loans and sold commercial participation loans, on September 30, 2022. During the three months ended December 31, 2022, commercial loans, excluding PPP loans and sold commercial participation loans, increased $63.8 million, consumer loans increased $48.6 million, residential mortgage loans increased $18.4 million, and loans held for sale increased $4.0 million, offset by a decrease in mortgage warehouse loans of $4.2 million.

Loan Growth by Type
(Dollars in Thousands, Unaudited)
December 31, September 30, QTD QTD Annualized
2022 2022 $ Change % Change % Change
Commercial, excluding PPP loans and sold commercial participation loans $ 2,416,249 $ 2,352,446 $ 63,803 2.7% 10.8%
PPP loans 217 315 (98 ) (31.1)% (123.4)%
Sold commercial participation loans 50,956 50,982 (26 ) (0.1)% (0.2)%
Residential mortgage 653,292 634,901 18,391 2.9% 11.5%
Consumer 967,755 919,198 48,557 5.3% 21.0%
Subtotal 4,088,469 3,957,842 130,627 3.3% 13.1%
Loans held for sale 5,807 1,852 3,955 213.6% 847.2%
Mortgage warehouse 69,529 73,690 (4,161 ) (5.6)% (22.4)%
Total loans $ 4,163,805 $ 4,033,384 $ 130,421 3.2% 12.8%
Total loans, excluding PPP loans and sold commercial participation loans $ 4,112,632 $ 3,982,087 $ 130,545 3.3% 13.0%


Loan Growth by Type
(Dollars in Thousands, Unaudited)
December 31, December 31, YTD YTD
2022 2021 $ Change % Change
Commercial, excluding PPP loans and sold commercial participation loans $ 2,416,249 $ 2,131,644 $ 284,605 13.4%
PPP loans 217 25,844 (25,627 ) (99.2)%
Sold commercial participation loans 50,956 56,457 (5,501 ) (9.7)%
Residential mortgage 653,292 594,382 58,910 9.9%
Consumer 967,755 741,176 226,579 30.6%
Subtotal 4,088,469 3,549,503 538,966 15.2%
Loans held for sale 5,807 12,579 (6,772 ) (53.8)%
Mortgage warehouse 69,529 109,031 (39,502 ) (36.2)%
Total loans $ 4,163,805 $ 3,671,113 $ 492,692 13.4%
Total loans, excluding PPP loans and sold commercial participation loans $ 4,112,632 $ 3,588,812 $ 523,820 14.6%

Residential mortgage lending activity for the three months ended December 31, 2022 generated $1.2 million in income from the gain on sale of mortgage loans, decreasing $245,000 from the third quarter of 2022 and decreasing $3.0 million from the fourth quarter of 2021. Total mortgage origination volume for the fourth quarter of 2022, including loans placed into the portfolio, totaled $62.3 million, representing a decrease of 43.8% from third quarter 2022 levels, and a decrease of 58.6% from the fourth quarter of 2021. As a percentage of total mortgage loan originations, 8% of the volume was from refinancing and 92% was from new purchases during the fourth quarter of 2022. Total origination volume of loans sold to the secondary market totaled $23.0 million, compared to $50.2 million in the third quarter.

Gain on sale of mortgage loans and mortgage warehousing income was 3.2% of total revenue for the three months ended December 31, 2022, compared to 3.8% for the linked quarter and 8.8% for the three months ended December 31, 2021.

Deposit Activity

Total deposit balances of $5.86 billion on December 31, 2022 increased 0.5% compared to $5.83 billion on September 30, 2022, or 1.8% annualized.

Deposit Growth by Type
(Dollars in Thousands, Unaudited)
December 31, September 30, QTD QTD Annualized
2022 2022 $ Change % Change % Change
Non–interest bearing $ 1,277,768 $ 1,315,155 $ (37,387 ) (2.8)% (11.3)%
Interest bearing 3,582,891 3,736,798 (153,907 ) (4.1)% (16.3)%
Time deposits 997,115 778,885 218,230 28.0% 111.2%
Total deposits $ 5,857,774 $ 5,830,838 $ 26,936 0.5% 1.8%


Total deposit balances of $5.86 billion on December 31, 2022 increased 0.9% compared to $5.80 billion on December 31, 2021.

Deposit Growth by Type
(Dollars in Thousands, Unaudited)
December 31, December 31, YTD YTD
2022 2021 $ Change % Change
Non–interest bearing $ 1,277,768 $ 1,360,338 $ (82,570 ) (6.1)%
Interest bearing 3,582,891 3,711,767 (128,876 ) (3.5)%
Time deposits 997,115 730,886 266,229 36.4%
Total deposits $ 5,857,774 $ 5,802,991 $ 54,783 0.9%


Expense Management

Non–Interest Expense
(Dollars in Thousands, Unaudited)
Three Months Ended
December 31, September 30, QTD QTD
Non–interest Expense 2022 2022 $ Change % Change
Salaries and employee benefits $ 19,978 $ 20,613 $ (635 ) (3.1)%
Net occupancy expenses 3,279 3,293 (14 ) (0.4)%
Data processing 2,884 2,539 345 13.6%
Professional fees 694 552 142 25.7%
Outside services and consultants 2,985 2,855 130 4.6%
Loan expense 1,281 1,392 (111 ) (8.0)%
FDIC insurance expense 388 670 (282 ) (42.1)%
Other losses 118 398 (280 ) (70.4)%
Other expense 4,104 4,504 (400 ) (8.9)%
Total non–interest expense $ 35,711 $ 36,816 $ (1,105 ) (3.0)%
Annualized non–interest expense to average assets 1.84 % 1.91 %

Total non–interest expense was $1.1 million lower in the fourth quarter of 2022 when compared to the third quarter of 2022. The decrease in expenses was primarily due to a decrease in salaries and employee benefits of $635,000 from lower commissions and health care costs, a decrease in other expense of $400,000, a decrease in FDIC insurance expense of $282,000 and a decrease in other losses of $280,000, offset by an increase in data processing of $345,000 and professional fees of $142,000.

Non–GAAP Reconciliation of Non–Interest Expense
(Dollars in Thousands, Unaudited)
Three Months Ended
December 31, December 31,
2022 2021 Adjusted
Non–interest Expense Actual Acquisition
&
Non–
Recurring
Expenses
Adjusted Actual Acquisition
&
Non–
Recurring
Expenses
Adjusted Amount
Change
Percent
Change
Salaries and employee benefits $ 19,978 $ - $ 19,978 $ 20,549 $ (202 ) $ 20,347 $ (369 ) (1.8)%
Net occupancy expenses 3,279 - 3,279 3,204 - 3,204 75 2.3%
Data processing 2,884 - 2,884 2,672 (1 ) 2,671 213 8.0%
Professional fees 694 - 694 562 (45 ) 517 177 34.2%
Outside services and consultants 2,985 - 2,985 2,197 (162 ) 2,035 950 46.7%
Loan expense 1,281 - 1,281 1,304 (83 ) 1,221 60 4.9%
FDIC insurance expense 388 - 388 798 (6 ) 792 (404 ) (51.0)%
Other losses 118 - 118 1,925 (1,904 ) 21 97 461.9%
Other expense 4,104 - 4,104 4,660 (381 ) 4,279 (175 ) (4.1)%
Total non–interest expense $ 35,711 $ - $ 35,711 $ 37,871 $ (2,784 ) $ 35,087 $ 624 1.8%
Annualized non–interest expense to average assets 1.84 % 1.84 % 2.01 % 1.87 %

Total adjusted non–interest expense was $624,000 higher in the fourth quarter of 2022 when compared to the fourth quarter of 2021. The increase in expenses was primarily due to an increase in outside services and consultants of $950,000 and an increase in data processing of $213,000, offset by a decrease in salaries and employee benefits of $369,000, a decrease in FDIC insurance expense of $404,000 and a decrease in other expense of $175,000.

Non–GAAP Reconciliation of Non–Interest Expense
(Dollars in Thousands, Unaudited)
Twelve Months Ended
December 31, December 31,
2022 2021 Adjusted
Non–interest Expense Actual Acquisition
&
Non–Recurring
Expenses
Adjusted Actual Acquisition
&
Non–Recurring
Expenses
Adjusted Amount
Change
Percent
Change
Salaries and employee benefits $ 80,283 $ - $ 80,283 $ 74,051 $ (227 ) $ 73,824 $ 6,459 8.7%
Net occupancy expenses 13,323 - 13,323 12,541 (13 ) 12,528 795 6.3%
Data processing 10,567 - 10,567 9,962 (18 ) 9,944 623 6.3%
Professional fees 1,843 - 1,843 2,216 (149 ) 2,067 (224 ) (10.8)%
Outside services and consultants 10,850 - 10,850 8,449 (750 ) 7,699 3,151 40.9%
Loan expense 5,411 - 5,411 5,492 (83 ) 5,409 2 -%
FDIC insurance expense 2,558 - 2,558 2,377 (6 ) 2,371 187 7.9%
Other losses 1,046 - 1,046 2,283 (5 ) 2,278 (1,232 ) (54.1)%
Other expense 17,320 - 17,320 16,023 (2,574 ) 13,449 3,871 28.8%
Total non–interest expense $ 143,201 $ - $ 143,201 $ 133,394 $ (3,825 ) $ 129,569 $ 13,632 10.5%
Annualized non–interest expense to average assets 1.90 % 1.90 % 2.05 % 1.99 %


Total adjusted non–interest expense was $13.6 million higher for the year ended December 31, 2022 when compared to the same prior year period. The year–over–increase was due to increases in salaries and employee benefits, outside services and consultants, other expense, net occupancy expenses and data processing, offset by a decrease in other losses.

Annualized non–interest expense as a percent of average assets was 1.84%, 1.91% and 2.01% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively. Annualized non–interest expense, excluding acquisition expenses and non–recurring ESOP settlement expenses, as a percent of average assets was 1.84%, 1.91% and 1.87% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

Annualized non–interest expense as a percent of average assets was 1.90% and 2.05% for the year ended December 31, 2022 and 2021, respectively. Annualized non–interest expense, excluding acquisition expenses and non–recurring ESOP settlement expenses, as a percentage of average assets was 1.90% and 1.99% for the year ended December 31, 2022 and 2021, respectively.

Income tax expense totaled $2.6 million for the fourth quarter of 2022, $2.0 million for the third quarters of 2022 and $4.1 million for the fourth quarter of 2021.

Income tax expense totaled $12.2 million for the year ended December 31, 2022, a decrease of $3.2 million when compared to the year ended December 31, 2021. The decrease in income tax expense was primarily due to an increase income tax credits received during 2022.

Capital

The capital resources of the Company and the Bank exceeded regulatory capital ratios for“well capitalized” banks at December 31, 2022. Stockholders' equity totaled $677.4 million at December 31, 2022 and the ratio of average stockholders' equity to average assets was 9.07% for the twelve months ended December 31, 2022.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of December 31, 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 $ 782,705 14.48 % $ 432,525 8.00 % $ 567,688 10.50 % N/A N/A
Bank 734,578 13.59 % 432,413 8.00 % 567,542 10.50 % $ 540,516 10.00 %
Tier 1 capital (to risk–weighted assets)
Consolidated 736,150 13.62 % 324,393 6.00 % 459,557 8.50 % N/A N/A
Bank 686,069 12.69 % 324,310 6.00 % 459,439 8.50 % 432,413 8.00 %
Common equity tier 1 capital (to risk–weighted assets)
Consolidated 616,231 11.40 % 243,295 4.50 % 378,459 7.00 % N/A N/A
Bank 686,069 12.69 % 243,232 4.50 % 378,361 7.00 % 351,336 6.50 %
Tier 1 capital (to average assets)
Consolidated 736,150 10.23 % 287,867 4.00 % 287,867 4.00 % N/A N/A
Bank 686,069 9.55 % 287,262 4.00 % 287,262 4.00 % 359,077 5.00 %

Tangible book value per common share (“TBVPS”) declined $0.99 during the twelve months ended December 31, 2022 to $11.59, as unrealized net losses on securities available for sale (“AFS”) of $2.71 per common share, reduced accumulated other comprehensive income (“AOCI”) by $118.0 million during the twelve months ended December 31, 2022.

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, while other sources of liquidity for Horizon include earnings, loan repayments, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the“FHLB”). At December 31, 2022, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $438.0 million in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank also had approximately $2.1 billion of unpledged investment securities at December 31, 2022. Total available liquidity was $2.7 billion at December 31, 2022.

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: 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; continuing increases in inflation; loss of key Horizon personnel; increases in disintermediation; potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms take a greater market share of the payment systems; estimates of fair value of certain of Horizon's assets and liabilities; changes in prepayment speeds, loan originations, credit losses, market values, collateral securing loans and other assets; changes in sources of liquidity; continuing risks and uncertainties relating to the COVID–19 pandemic and government responses thereto; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; material changes outside the U.S. or in overseas relations, including changes in U.S. trade relations related to imposition of tariffs, Brexit, and the phase out of the London Interbank Offered Rate (“LIBOR”); the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward–looking statements are discussed in Horizon's reports (such as the Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, and Current Reports on Form 8–K) filed with the SEC and available at the SEC's Internet website ( factors relating to the banking industry and the other factors detailed from time to time in Horizon's reports filed with the Securities and Exchange Commission, including those described in Horizon's Annual Report on Form 10–K and its quarterly reports on Form 10–Q. Further, statements about the effects of the COVID–19 pandemic on our business, operations, financial performance, and prospects may constitute forward–looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward–looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Financial Highlights
(Dollars in Thousands, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Balance sheet:
Total assets $ 7,872,518 $ 7,718,695 $ 7,640,936 $ 7,420,328 $ 7,374,903
Interest earning deposits & federal funds sold 12,233 7,302 5,646 20,827 502,364
Interest earning time deposits 2,812 2,814 3,799 4,046 4,782
Investment securities 3,020,306 3,017,191 3,093,792 3,118,641 2,713,255
Commercial loans 2,467,422 2,403,743 2,363,991 2,259,327 2,213,945
Mortgage warehouse loans 69,529 73,690 116,488 105,118 109,031
Residential mortgage loans 653,292 634,901 608,582 593,372 594,382
Consumer loans 967,755 919,198 866,819 768,854 741,176
Total loans 4,157,998 4,031,532 3,955,880 3,726,671 3,658,534
Earning assets 7,225,833 7,087,368 7,088,737 6,898,208 6,878,968
Non–interest bearing deposit accounts 1,277,768 1,315,155 1,328,213 1,325,570 1,360,338
Interest bearing transaction accounts 3,582,891 3,736,798 3,760,890 3,782,644 3,711,767
Time deposits 997,115 778,885 756,482 743,283 730,886
Total deposits 5,857,774 5,830,838 5,845,585 5,851,497 5,802,991
Borrowings 1,142,949 1,048,091 959,222 728,664 712,739
Subordinated notes 58,896 58,860 58,823 58,786 58,750
Junior subordinated debentures issued to capital trusts 57,027 56,966 56,907 56,850 56,785
Total stockholders' equity 677,375 644,993 657,865 677,450 723,209


Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Income statement:
Net interest income $ 48,782 $ 51,861 $ 52,044 $ 46,831 $ 48,477
Credit loss expense (recovery) (69 ) (601 ) 240 (1,386 ) (2,071 )
Non–interest income 10,674 10,188 12,434 14,155 12,828
Non–interest expense 35,711 36,816 35,404 35,270 37,871
Income tax expense 2,649 2,013 3,975 3,539 4,080
Net income $ 21,165 $ 23,821 $ 24,859 $ 23,563 $ 21,425
Per share data:
Basic earnings per share $ 0.49 $ 0.55 $ 0.57 $ 0.54 $ 0.49
Diluted earnings per share 0.48 0.55 0.57 0.54 0.49
Cash dividends declared per common share 0.16 0.16 0.16 0.15 0.15
Book value per common share 15.55 14.80 15.10 15.55 16.61
Tangible book value per common share 11.59 10.82 11.11 11.54 12.58
Market value – high 20.00 20.59 19.21 23.45 21.14
Market value – low $ 14.51 $ 16.74 $ 16.72 $ 18.67 $ 18.01
Weighted average shares outstanding – Basis 43,574,151 43,573,370 43,572,796 43,554,713 43,534,298
Weighted average shares outstanding – Diluted 43,667,954 43,703,793 43,684,691 43,734,556 43,733,416
Key ratios:
Return on average assets 1.09 % 1.24 % 1.33 % 1.31 % 1.14 %
Return on average common stockholders' equity 12.72 13.89 14.72 13.34 11.81
Net interest margin 2.85 3.04 3.13 2.90 2.87
Allowance for credit losses to total loans 1.21 1.27 1.32 1.41 1.48
Average equity to average assets 8.55 8.91 9.06 9.79 9.64
Efficiency ratio 60.06 59.33 54.91 57.83 61.77
Annualized non–interest expense to average assets 1.84 1.91 1.90 1.95 2.01
Bank only capital ratios:
Tier 1 capital to average assets 9.55 8.84 8.85 8.83 8.50
Tier 1 capital to risk weighted assets 12.69 12.74 12.87 13.23 13.69
Total capital to risk weighted assets 13.59 13.65 13.83 14.25 14.72


Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
Twelve Months Ended
December 31, December 31,
2022 2021
Income statement:
Net interest income $ 199,518 $ 175,805
Credit loss expense (recovery) (1,816 ) (2,084 )
Non–interest income 47,451 57,952
Non–interest expense 143,201 133,394
Income tax expense 12,176 15,356
Net income $ 93,408 $ 87,091
Per share data:
Basic earnings per share $ 2.14 $ 1.99
Diluted earnings per share 2.14 1.98
Cash dividends declared per common share 0.63 0.56
Book value per common share 15.55 16.61
Tangible book value per common share 11.59 12.58
Market value – high 23.45 21.14
Market value – low $ 14.51 $ 15.43
Weighted average shares outstanding – Basis 43,568,823 43,802,733
Weighted average shares outstanding – Diluted 43,699,734 43,955,280
Key ratios:
Return on average assets 1.24 % 1.34 %
Return on average common stockholders' equity 13.66 12.23
Net interest margin 2.98 3.03
Allowance for credit losses to total loans 1.21 1.48
Average equity to average assets 9.07 10.93
Efficiency ratio 57.98 57.07
Annualized non–interest expense to average assets 1.90 2.05
Bank only capital ratios:
Tier 1 capital to average assets 9.55 8.50
Tier 1 capital to risk weighted assets 12.69 13.69
Total capital to risk weighted assets 13.59 14.72


Financial Highlights
(Dollars in Thousands Except Ratios, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Loan data:
Substandard loans $ 56,194 $ 57,932 $ 59,377 $ 57,928 $ 56,968
30 to 89 days delinquent 10,709 6,970 6,739 6,358 8,536
Non–performing loans:
90 days and greater delinquent – accruing interest 92 193 210 107 145
Trouble debt restructures – accruing interest 2,570 2,529 2,535 2,372 2,391
Trouble debt restructures – non–accrual 1,548 1,665 1,345 1,501 1,521
Non–accrual loans 17,630 14,771 16,116 16,133 14,962
Total non–performing loans $ 21,840 $ 19,158 $ 20,206 $ 20,113 $ 19,019
Non–performing loans to total loans 0.52 % 0.47 % 0.51 % 0.54 % 0.52 %


Allocation of the Allowance for Credit Losses
(Dollars in Thousands, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Commercial $ 32,445 $ 33,806 $ 34,802 $ 37,789 $ 40,775
Residential mortgage 5,577 5,137 4,422 4,351 3,856
Mortgage warehouse 1,020 1,024 1,067 1,055 1,059
Consumer 11,422 11,402 12,059 9,313 8,596
Total $ 50,464 $ 51,369 $ 52,350 $ 52,508 $ 54,286


Net Charge–offs (Recoveries)
(Dollars in Thousands Except Ratios, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Commercial $ (94 ) $ 51 $ (75 ) $ 38 $ 926
Residential mortgage (8 ) (75 ) 40 (10 ) 126
Mortgage warehouse - - - - -
Consumer 387 162 319 108 360
Total $ 285 $ 138 $ 284 $ 136 $ 1,412
Percent of net charge–offs (recoveries) to average loans outstanding for the period 0.01 % 0.00 % 0.01 % 0.00 % 0.04 %


Total Non–performing Loans
(Dollars in Thousands Except Ratios, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Commercial $ 9,330 $ 7,199 $ 8,008 $ 7,844 $ 7,509
Residential mortgage 8,123 8,047 8,469 8,584 8,005
Mortgage warehouse - - - - -
Consumer 4,387 3,912 3,729 3,685 3,505
Total $ 21,840 $ 19,158 $ 20,206 $ 20,113 $ 19,019
Non–performing loans to total loans 0.52 % 0.47 % 0.51 % 0.54 % 0.52 %


Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Commercial $ 1,881 $ 3,206 $ 1,414 $ 2,245 $ 2,861
Residential mortgage 107 22 - 170 695
Mortgage warehouse - - - - -
Consumer 152 14 58 5 5
Total $ 2,140 $ 3,242 $ 1,472 $ 2,420 $ 3,561


Average Balance Sheets
(Dollars in Thousands, Unaudited)
Three Months Ended Three Months Ended
December 31, 2022 December 31, 2021
Average
Balance
Interest Average
Rate
Average
Balance
Interest Average
Rate
Assets
Interest earning assets
Federal funds sold $ 4,023 $ 34 3.35 % $ 654,225 $ 251 0.15 %
Interest earning deposits 8,233 48 2.31 % 22,537 32 0.56 %
Investment securities – taxable 1,655,728 8,703 2.09 % 1,405,689 6,208 1.75 %
Investment securities – non–taxable (1) 1,385,340 7,543 2.73 % 1,224,911 6,456 2.65 %
Loans receivable (2) (3) 4,038,656 50,859 5.02 % 3,644,688 39,672 4.34 %
Total interest earning assets 7,091,980 67,187 3.88 % 6,952,050 52,619 3.11 %
Non–interest earning assets
Cash and due from banks 96,835 102,273
Allowance for credit losses (51,323 ) (56,540 )
Other assets 580,874 463,560
Total average assets $ 7,718,366 $ 7,461,343
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing deposits $ 4,555,887 $ 10,520 0.92 % $ 4,543,989 $ 1,663 0.15 %
Borrowings 850,236 5,729 2.67 % 525,638 1,025 0.77 %
Repurchase agreements 141,676 311 0.87 % 137,868 36 0.10 %
Subordinated notes 58,874 881 5.94 % 58,728 881 5.95 %
Junior subordinated debentures issued to capital trusts 56,988 964 6.71 % 56,745 537 3.75 %
Total interest bearing liabilities 5,663,661 18,405 1.29 % 5,322,968 4,142 0.31 %
Non–interest bearing liabilities
Demand deposits 1,321,139 1,366,621
Accrued interest payable and other liabilities 73,378 52,111
Stockholders' equity 660,188 719,643
Total average liabilities and stockholders' equity $ 7,718,366 $ 7,461,343
Net interest income / spread $ 48,782 2.59 % $ 48,477 2.80 %
Net interest income as a percent of average interest earning assets (1) 2.85 % 2.87 %
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.


Average Balance Sheets
(Dollars in Thousands, Unaudited)
Twelve Months Ended Twelve Months Ended
December 31, 2022 December 31, 2021
Average
Balance
Interest Average
Rate
Average
Balance
Interest Average
Rate
Assets
Interest earning assets
Federal funds sold $ 62,211 $ 165 0.27 % $ 398,528 $ 535 0.13 %
Interest earning deposits 13,596 141 1.04 % 25,993 160 0.62 %
Investment securities – taxable 1,700,418 33,202 1.95 % 884,244 14,437 1.63 %
Investment securities – non–taxable (1) 1,356,045 29,025 2.71 % 1,086,942 23,246 2.71 %
Loans receivable (2) (3) 3,845,137 173,500 4.53 % 3,639,454 155,732 4.30 %
Total interest earning assets 6,977,407 236,033 3.50 % 6,035,161 194,110 3.33 %
Non–interest earning assets
Cash and due from banks 99,885 89,993
Allowance for credit losses (52,606 ) (56,798 )
Other assets 509,229 445,895
Total average assets $ 7,533,915 $ 6,514,251
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing deposits $ 4,513,668 $ 17,809 0.39 % $ 3,897,750 $ 7,867 0.20 %
Borrowings 696,584 11,938 1.71 % 425,214 4,546 1.07 %
Repurchase agreements 141,048 527 0.37 % 123,675 155 0.13 %
Subordinated notes 58,819 3,522 5.99 % 58,672 3,522 6.00 %
Junior subordinated debentures issued to capital trusts 56,899 2,719 4.78 % 56,657 2,215 3.91 %
Total interest bearing liabilities 5,467,018 36,515 0.67 % 4,561,968 18,305 0.40 %
Non–interest bearing liabilities
Demand deposits 1,332,937 1,188,275
Accrued interest payable and other liabilities 50,330 51,886
Stockholders' equity 683,630 712,122
Total average liabilities and stockholders' equity $ 7,533,915 $ 6,514,251
Net interest income / spread $ 199,518 2.83 % $ 175,805 2.93 %
Net interest income as a percent of average interest earning assets (1) 2.98 % 3.03 %
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.


Condensed Consolidated Balance Sheets
(Dollars in Thousands)
December 31,
2022
December 31,
2021
(Unaudited)
Assets
Cash and due from banks $ 123,505 $ 593,508
Interest earning time deposits 2,812 4,782
Investment securities, available for sale 997,558 1,160,812
Investment securities, held to maturity (fair value $1,681,309 and $1,559,991) 2,022,748 1,552,443
Loans held for sale 5,807 12,579
Loans, net of allowance for credit losses of $50,464 and $54,286 4,107,534 3,604,248
Premises and equipment, net 92,677 93,441
Federal Home Loan Bank stock 26,677 24,440
Goodwill 155,211 154,572
Other intangible assets 17,239 20,941
Interest receivable 35,294 26,137
Cash value of life insurance 146,175 97,150
Other assets 139,281 66,836
Total assets $ 7,872,518 $ 7,411,889
Liabilities
Deposits
Non–interest bearing $ 1,277,768 $ 1,360,338
Interest bearing 4,580,006 4,442,653
Total deposits 5,857,774 5,802,991
Borrowings 1,142,949 712,739
Subordinated notes 58,896 58,750
Junior subordinated debentures issued to capital trusts 57,027 56,785
Interest payable 5,380 2,235
Other liabilities 73,117 55,180
Total liabilities 7,195,143 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 and Outstanding 43,937,889 and 43,811,421 shares
- -
Additional paid–in capital 354,188 352,122
Retained earnings 429,385 363,742
Accumulated other comprehensive income (106,198 ) 7,345
Total stockholders' equity 677,375 723,209
Total liabilities and stockholders' equity $ 7,872,518 $ 7,411,889


Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Interest income
Loans receivable $ 50,859 $ 45,517 $ 40,585 $ 36,539 $ 39,672
Investment securities – taxable 8,785 8,501 8,716 7,506 6,491
Investment securities – non–taxable 7,543 7,478 7,307 6,697 6,456
Total interest income 67,187 61,496 56,608 50,742 52,619
Interest expense
Deposits 10,520 4,116 1,677 1,496 1,663
Borrowed funds 6,040 3,895 1,450 1,080 1,061
Subordinated notes 881 880 881 880 881
Junior subordinated debentures issued to capital trusts 964 744 556 455 537
Total interest expense 18,405 9,635 4,564 3,911 4,142
Net interest income 48,782 51,861 52,044 46,831 48,477
Credit loss expense (recovery) (69 ) (601 ) 240 (1,386 ) (2,071 )
Net interest income after credit loss expense (recovery) 48,851 52,462 51,804 48,217 50,548
Non–interest Income
Service charges on deposit accounts 2,947 3,023 2,833 2,795 2,510
Wire transfer fees 118 148 170 159 205
Interchange fees 2,951 3,089 3,582 2,780 3,082
Fiduciary activities 1,270 1,203 1,405 1,503 1,591
Gain on sale of mortgage loans 1,196 1,441 2,501 2,027 4,167
Mortgage servicing income net of impairment 637 355 319 3,489 300
Increase in cash value of bank owned life insurance 751 814 519 510 547
Death benefit on bank owned life insurance - - 644 - -
Other income 804 115 461 892 426
Total non–interest income 10,674 10,188 12,434 14,155 12,828
Non–interest expense
Salaries and employee benefits 19,978 20,613 19,957 19,735 20,549
Net occupancy expenses 3,279 3,293 3,190 3,561 3,204
Data processing 2,884 2,539 2,607 2,537 2,672
Professional fees 694 552 283 314 562
Outside services and consultants 2,985 2,855 2,485 2,525 2,197
Loan expense 1,281 1,392 1,533 1,205 1,304
FDIC insurance expense 388 670 775 725 798
Other losses 118 398 362 168 1,925
Other expenses 4,104 4,504 4,212 4,500 4,660
Total non–interest expense 35,711 36,816 35,404 35,270 37,871
Income before income taxes 23,814 25,834 28,834 27,102 25,505
Income tax expense 2,649 2,013 3,975 3,539 4,080
Net income $ 21,165 $ 23,821 $ 24,859 $ 23,563 $ 21,425
Basic earnings per share $ 0.49 $ 0.55 $ 0.57 $ 0.54 $ 0.49
Diluted earnings per share 0.48 0.55 0.57 0.54 0.49


Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
Twelve Months Ended
December 31, December 31,
2022 2021
Interest income
Loans receivable $ 173,500 $ 155,732
Investment securities – taxable 33,508 15,132
Investment securities – non–taxable 29,025 23,246
Total interest income 236,033 194,110
Interest expense
Deposits 17,809 7,867
Borrowed funds 12,465 4,701
Subordinated notes 3,522 3,522
Junior subordinated debentures issued to capital trusts 2,719 2,215
Total interest expense 36,515 18,305
Net interest income 199,518 175,805
Credit loss expense (recovery) (1,816 ) (2,084 )
Net interest income after credit loss expense (recovery) 201,334 177,889
Non–interest Income
Service charges on deposit accounts 11,598 9,192
Wire transfer fees 595 892
Interchange fees 12,402 10,901
Fiduciary activities 5,381 7,419
Gains / (losses) on sale of investment securities - 914
Gain on sale of mortgage loans 7,165 19,163
Mortgage servicing income net of impairment 4,800 2,352
Increase in cash value of bank owned life insurance 2,594 2,094
Death benefit on bank owned life insurance 644 783
Other income 2,272 4,242
Total non–interest income 47,451 57,952
Non–interest expense
Salaries and employee benefits 80,283 74,051
Net occupancy expenses 13,323 12,541
Data processing 10,567 9,962
Professional fees 1,843 2,216
Outside services and consultants 10,850 8,449
Loan expense 5,411 5,492
FDIC insurance expense 2,558 2,377
Other losses 1,046 2,283
Other expenses 17,320 16,023
Total non–interest expense 143,201 133,394
Income before income taxes 105,584 102,447
Income tax expense 12,176 15,356
Net income $ 93,408 $ 87,091
Basic earnings per share $ 2.14 $ 1.99
Diluted earnings per share 2.14 1.98

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

Non–GAAP Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Net income as reported $ 21,165 $ 23,821 $ 24,859 $ 23,563 $ 21,425 $ 93,408 $ 87,091
Acquisition expenses - - - - 884 - 1,925
Tax effect - - - - (184 ) - (401 )
Net income excluding acquisition expenses 21,165 23,821 24,859 23,563 22,125 93,408 88,615
Credit loss expense acquired loans - - - - - - 2,034
Tax effect - - - - - - (427 )
Net income excluding credit loss expense acquired loans 21,165 23,821 24,859 23,563 22,125 93,408 90,222
Gain on sale of ESOP trustee accounts - - - - - - (2,329 )
Tax effect - - - - - - 489
Net income excluding gain on sale of ESOP trustee accounts 21,165 23,821 24,859 23,563 22,125 93,408 88,382
ESOP settlement expenses - - - - 1,900 - 1,900
Tax effect - - - - (315 ) - (315 )
Net income excluding ESOP settlement expenses 21,165 23,821 24,859 23,563 23,710 93,408 89,967
(Gain) / loss on sale of investment securities - - - - - - (914 )
Tax effect - - - - - - 192
Net income excluding (gain) / loss on sale of investment securities 21,165 23,821 24,859 23,563 23,710 93,408 89,245
Death benefit on bank owned life insurance (“BOLI”) - - (644 ) - - (644 ) (783 )
Net income excluding death benefit on BOLI 21,165 23,821 24,215 23,563 23,710 92,764 88,462
Prepayment penalties on borrowings - - - - - - 125
Tax effect - - - - - - (26 )
Net income excluding prepayment penalties on borrowings 21,165 23,821 24,215 23,563 23,710 92,764 88,561
Adjusted net income $ 21,165 $ 23,821 $ 24,215 $ 23,563 $ 23,710 $ 92,764 $ 88,561


Non–GAAP Reconciliation of Diluted Earnings per Share
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Diluted earnings per share (“EPS”) as reported $ 0.48 $ 0.55 $ 0.57 $ 0.54 $ 0.49 $ 2.14 $ 1.98
Acquisition expenses - - - - 0.02 - 0.04
Tax effect - - - - - - -
Diluted EPS excluding acquisition expenses 0.48 0.55 0.57 0.54 0.51 2.14 2.02
Credit loss expense acquired loans - - - - - - 0.05
Tax effect - - - - - - (0.01 )
Diluted EPS excluding credit loss expense acquired loans 0.48 0.55 0.57 0.54 0.51 2.14 2.06
Gain on sale of ESOP trustee accounts - - - - - - (0.05 )
Tax effect - - - - - - 0.01
Diluted EPS excluding gain on sale of ESOP trustee accounts 0.48 0.55 0.57 0.54 0.51 2.14 2.02
ESOP settlement expenses - - - - 0.04 - 0.04
Tax effect - - - - (0.01 ) - (0.01 )
Diluted EPS excluding ESOP settlement expenses 0.48 0.55 0.57 0.54 0.54 2.14 2.05
(Gain) / loss on sale of investment securities - - - - - - (0.02 )
Tax effect - - - - - - -
Diluted EPS excluding (gain) / loss on sale of investment securities 0.48 0.55 0.57 0.54 0.54 2.14 2.03
Death benefit on bank owned life insurance (“BOLI”) - - (0.01 ) - - (0.01 ) (0.03 )
Diluted EPS excluding death benefit on BOLI 0.48 0.55 0.56 0.54 0.54 2.13 2.00
Prepayment penalties on borrowings - - - - - - -
Tax effect - - - - - - -
Diluted EPS excluding prepayment penalties on borrowings 0.48 0.55 0.56 0.54 0.54 2.13 2.00
Adjusted diluted EPS $ 0.48 $ 0.55 $ 0.56 $ 0.54 $ 0.54 $ 2.13 $ 2.00


Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Pre–tax income $ 23,814 $ 25,834 $ 28,834 $ 27,102 $ 25,505 $ 105,584 $ 102,447
Credit loss expense (69 ) (601 ) 240 (1,386 ) (2,071 ) (1,816 ) (2,084 )
Pre–tax, pre–provision income $ 23,745 $ 25,233 $ 29,074 $ 25,716 $ 23,434 $ 103,768 $ 100,363
Pre–tax, pre–provision income $ 23,745 $ 25,233 $ 29,074 $ 25,716 $ 23,434 $ 103,768 $ 100,363
Acquisition expenses - - - - 884 - 1,925
Gain on sale of ESOP trustee accounts - - - - - - (2,329 )
ESOP settlement expenses - - - - 1,900 - 1,900
(Gain) / loss on sale of investment securities - - - - - - (914 )
Death benefit on BOLI - - (644 ) - - (644 ) (783 )
Prepayment penalties on borrowings - - - - - - 125
Adjusted pre–tax, pre–provision income $ 23,745 $ 25,233 $ 28,430 $ 25,716 $ 26,218 $ 103,124 $ 100,162


Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Net interest income as reported $ 48,782 $ 51,861 $ 52,044 $ 46,831 $ 48,477 $ 199,518 $ 175,805
Average interest earning assets 7,091,980 7,056,208 6,943,633 6,814,756 6,952,050 6,977,407 6,035,161
Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) 2.85 % 3.04 % 3.13 % 2.90 % 2.87 % 2.98 % 3.03 %
Net interest income as reported $ 48,782 $ 51,861 $ 52,044 $ 46,831 $ 48,477 $ 199,518 $ 175,805
Acquisition–related purchase accounting adjustments (“PAUs”) (431 ) (906 ) (1,223 ) (916 ) (1,819 ) (3,476 ) (4,503 )
Prepayment penalties on borrowings - - - - - - 125
Adjusted net interest income $ 48,351 $ 50,955 $ 50,821 $ 45,915 $ 46,658 $ 196,042 $ 171,302
Adjusted net interest margin 2.83 % 2.99 % 3.06 % 2.85 % 2.77 % 2.93 % 2.96 %


Non–GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share
(Dollars in Thousands, Unaudited)
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
Total stockholders' equity $ 677,375 $ 644,993 $ 657,865 $ 677,450 $ 723,209
Less: Intangible assets 172,450 173,375 173,662 174,588 175,513
Total tangible stockholders' equity $ 504,925 $ 471,618 $ 484,203 $ 502,862 $ 547,696
Common shares outstanding 43,574,151 43,574,151 43,572,796 43,572,796 43,547,942
Book value per common share $ 15.55 $ 14.80 $ 15.10 $ 15.55 $ 16.61
Tangible book value per common share $ 11.59 $ 10.82 $ 11.11 $ 11.54 $ 12.58


Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Non–interest expense as reported $ 35,711 $ 36,816 $ 35,404 $ 35,270 $ 37,871 $ 143,201 $ 133,394
Net interest income as reported 48,782 51,861 52,044 46,831 48,477 199,518 175,805
Non–interest income as reported $ 10,674 $ 10,188 $ 12,434 $ 14,155 $ 12,828 $ 47,451 $ 57,952
Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”) 60.06 % 59.33 % 54.91 % 57.83 % 61.77 % 57.98 % 57.07 %
Non–interest expense as reported $ 35,711 $ 36,816 $ 35,404 $ 35,270 $ 37,871 $ 143,201 $ 133,394
Acquisition expenses - - - - (884 ) - (1,925 )
ESOP settlement expenses - - - - (1,900 ) - (1,900 )
Non–interest expense excluding acquisition expenses and ESOP settlement expenses 35,711 36,816 35,404 35,270 35,087 143,201 129,569
Net interest income as reported 48,782 51,861 52,044 46,831 48,477 199,518 175,805
Prepayment penalties on borrowings - - - - - - 125
Net interest income excluding prepayment penalties on borrowings 48,782 51,861 52,044 46,831 48,477 199,518 175,930
Non–interest income as reported 10,674 10,188 12,434 14,155 12,828 47,451 57,952
Gain on sale of ESOP trustee accounts - - - - - - (2,329 )
(Gain) / loss on sale of investment securities - - - - - - (914 )
Death benefit on BOLI - - (644 ) - - (644 ) (783 )
Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI $ 10,674 $ 10,188 $ 11,790 $ 14,155 $ 12,828 $ 46,807 $ 53,926
Adjusted efficiency ratio 60.06 % 59.33 % 55.46 % 57.83 % 57.23 % 58.13 % 56.37 %


Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Average assets $ 7,718,366 $ 7,635,102 $ 7,476,238 $ 7,319,675 $ 7,461,343 $ 7,533,915 $ 6,514,251
Return on average assets (“ROAA”) as reported 1.09 % 1.24 % 1.33 % 1.31 % 1.14 % 1.24 % 1.34 %
Acquisition expenses - - - - 0.05 - 0.03
Tax effect - - - - (0.01 ) - (0.01 )
ROAA excluding acquisition expenses 1.09 1.24 1.33 1.31 1.18 1.24 1.36
Credit loss expense acquired loans - - - - - - 0.03
Tax effect - - - - - - (0.01 )
ROAA excluding credit loss expense on acquired loans 1.09 1.24 1.33 1.31 1.18 1.24 1.38
Gain on sale of ESOP trustee accounts - - - - - - (0.04 )
Tax effect - - - - - - 0.01
ROAA excluding gain on sale of ESOP trustee accounts 1.09 1.24 1.33 1.31 1.18 1.24 1.35
ESOP settlement expenses - - - - 0.10 - 0.03
Tax effect - - - - (0.02 ) - -
ROAA excluding ESOP settlement expenses 1.09 1.24 1.33 1.31 1.26 1.24 1.38
(Gain) / loss on sale of investment securities - - - - - - (0.01 )
Tax effect - - - - - - -
ROAA excluding (gain) / loss on sale of investment securities 1.09 1.24 1.33 1.31 1.26 1.24 1.37
Death benefit on BOLI - - (0.03 ) - - (0.01 ) (0.01 )
ROAA excluding death benefit on BOLI 1.09 1.24 1.30 1.31 1.26 1.23 1.36
Prepayment penalties on borrowings - - - - - - -
Tax effect - - - - - - -
ROAA excluding prepayment penalties on borrowings 1.09 1.24 1.30 1.31 1.26 1.23 1.36
Adjusted ROAA 1.09 % 1.24 % 1.30 % 1.31 % 1.26 % 1.23 % 1.36 %


Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Average common equity $ 660,188 $ 680,376 $ 677,299 $ 716,341 $ 719,643 $ 683,630 $ 712,122
Return on average common equity (“ROACE”) as reported 12.72 % 13.89 % 14.72 % 13.34 % 11.81 % 13.66 % 12.23 %
Acquisition expenses - - - - 0.49 - 0.27
Tax effect - - - - (0.10 ) - (0.06 )
ROACE excluding acquisition expenses 12.72 13.89 14.72 13.34 12.20 13.66 12.44
Credit loss expense acquired loans - - - - - - 0.29
Tax effect - - - - - - (0.06 )
ROACE excluding credit loss expense acquired loans 12.72 13.89 14.72 13.34 12.20 13.66 12.67
Gain on sale of ESOP trustee accounts - - - - - - (0.33 )
Tax effect - - - - - - 0.07
ROACE excluding gain on sale of ESOP trustee accounts 12.72 13.89 14.72 13.34 12.20 13.66 12.41
ESOP settlement expenses - - - - 1.05 - 0.27
Tax effect - - - - (0.17 ) - (0.04 )
ROACE excluding ESOP settlement expenses 12.72 13.89 14.72 13.34 13.08 13.66 12.64
(Gain) / loss on sale of investment securities - - - - - - (0.13 )
Tax effect - - - - - - 0.03
ROACE excluding (gain) / loss on sale of investment securities 12.72 13.89 14.72 13.34 13.08 13.66 12.54
Death benefit on BOLI - - (0.38 ) - - (0.09 ) (0.11 )
ROACE excluding death benefit on BOLI 12.72 13.89 14.34 13.34 13.08 13.57 12.43
Prepayment penalties on borrowings - - - - - - 0.02
Tax effect - - - - - - -
ROACE excluding prepayment penalties on borrowings 12.72 % 13.89 % 14.34 % 13.34 % 13.08 % 13.57 % 12.45 %
Adjusted ROACE 12.72 % 13.89 % 14.34 % 13.34 % 13.08 % 13.57 % 12.45 %


Non–GAAP Reconciliation of Return on Average Tangible Equity
(Dollars in Thousands, Unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2022 2022 2022 2022 2021 2022 2021
Average tangible equity $ 660,188 $ 680,376 $ 677,299 $ 716,341 $ 719,643 $ 683,630 $ 712,122
Less: Average intangible assets 173,050 173,546 175,321 176,356 179,594 174,003 175,811
Average tangible equity $ 487,138 $ 506,830 $ 501,978 $ 539,985 $ 540,049 $ 509,627 $ 536,311
Return on average tangible equity (“ROATE”) as reported 17.24 % 18.65 % 19.86 % 17.70 % 15.74 % 18.33 % 16.24 %
Acquisition expenses - - - - 0.65 - 0.36
Tax effect - - - - (0.14 ) - (0.08 )
ROATE excluding acquisition expenses 17.24 18.65 19.86 17.70 16.25 18.33 16.52
Credit loss expense acquired loans - - - - - - 0.38
Tax effect - - - - - - (0.08 )
ROATE excluding credit loss expense acquired loans 17.24 18.65 19.86 17.70 16.25 18.33 16.82
Gain on sale of ESOP trustee accounts - - - - - - (0.43 )
Tax effect - - - - - - 0.10
ROATE excluding gain on sale of ESOP trustee accounts 17.24 18.65 19.86 17.70 16.25 18.33 16.49
ESOP settlement expenses - - - - 1.40 - 0.35
Tax effect - - - - (0.23 ) - (0.06 )
ROATE excluding ESOP settlement expenses 17.24 18.65 19.86 17.70 17.42 18.33 16.78
(Gain) / loss on sale of investment securities - - - - - - (0.17 )
Tax effect - - - - - - 0.04
ROATE excluding (gain) / loss on sale of investment securities 17.24 18.65 19.86 17.70 17.42 18.33 16.65
Death benefit on BOLI - - (0.51 ) - - (0.13 ) (0.15 )
ROATE excluding death benefit on BOLI 17.24 18.65 19.35 17.70 17.42 18.20 16.50
Prepayment penalties on borrowings - - - - - - 0.02
Tax effect - - - - - - (0.01 )
ROATE excluding prepayment penalties on borrowings 17.24 % 18.65 % 19.35 % 17.70 % 17.42 % 18.20 % 16.51 %
Adjusted ROATE 17.24 % 18.65 % 19.35 % 17.70 % 17.42 % 18.20 % 16.51 %


Earnings Conference Call

As previously announced, Horizon will host a conference call to review its fourth quarter and full year 2022 financial results and operating performance.

Participants may access the live conference call on January 26, 2023 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833–974–2379 from the United States, 866–450–4696 from Canada or 1–412–317–5772 from international locations and requesting the“Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.

A telephone replay of the call will be available approximately one hour after the end of the conference through February 2, 2023. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 1–412–317–0088 from other international locations, and entering the access code 9666758.

About Horizon Bancorp, Inc.

Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 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.

Contact: Mark E. Secor
Chief Financial Officer
Phone: (219) 873-2611
Fax: (219) 874-9280
Date: January 25, 2023



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