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

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

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.

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.

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.

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.

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.

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.