Michigan City, Indiana, January 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.”

•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.

“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.

“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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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..

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.

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 (www.sec.gov).risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in Horizon’s Annual Report on Form 10–K and its quarterly reports on Form 10–Q. Further, statements about the effects of the COVID–19 pandemic on our business, operations, financial performance, and prospects may constitute forward–looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward–looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.