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Horizon Bancorp, Inc. Announces Fourth Quarter and Full Year 2023 Results, Successfully Executes Balance Sheet Restructuring for Future Earnings Growth
ソース: Nasdaq GlobeNewswire / 24 1 2024 15:05:02 America/Chicago
MICHIGAN CITY, Ind., Jan. 24, 2024 (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, 2023.
“Horizon had a very positive and productive fourth quarter, led by strong loan growth, consistent core deposit balances, stabilized net interest margin and excellent asset quality,” President and Chief Executive Officer Thomas M. Prame said. “Additionally, we closed out the year with a successful restructure of our balance sheet, providing abundant liquidity to deploy into higher yielding assets and drive meaningful earnings growth in future quarters. Over the quarter, the team made significant progress building out our leasing platform, and we expect to see positive impacts from this effort in the second quarter of 2024. The franchise is experiencing positive momentum in its core business models and we are very optimistic about our position as we enter 2024 and our ability to create value for our shareholders and clients.”
Fourth Quarter 2023 Highlights
- Commercial loan growth totaled $85.7 million, increasing by 13.1% annualized during the quarter and 8.4% since December 31, 2022. Total loans were $4.42 billion at period end, increasing by 5.2% annualized during the quarter and 6.1% since December 31, 2022.
- Deposits remained resilient, totaling $5.7 billion at period end, compared to $5.7 billion on September 30, 2023. Brokered deposits and wholesale borrowing levels were consistent with third quarter balances.
- Net interest margin increased to 2.43% compared to 2.41% in the linked quarter. Interest income was $42.3 million compared to $42.1 million in the linked quarter.
- Cash totaled $519.4 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 0.02% of average loans for the quarter, delinquent loans representing 0.38% of total loans at period end and non–performing loans representing 0.44% of total loans at period end, with the increase in provision primarily attributable to loan growth.
- In December, the Company announced a balance sheet repositioning that included the sale of $382.7 million in lower-yielding securities and the surrender of $112.8 million of bank owned life insurance (“BOLI”) policies. For the quarter, the Company recorded a net loss of $25.2 million, or $0.58 per diluted share. Excluding the $38.7 million after-tax impact of the balance sheet repositioning and approximately $705,000 in extraordinary expenses associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities, adjusted net income was $14.1 million, or $0.33 per diluted share, in the quarter. (See the “Non–GAAP Reconciliation of Net Income” table below.) This compared to third quarter 2023 net income of $16.2 million, or $0.37 per diluted share.
- Horizon continues to maintain cash at the holding company level representing approximately eight quarters of dividend payments and fixed costs.
Summary
For the Three Months Ended December 31, September 30, December 31, Net Interest Income and Net Interest Margin 2023 2023 2022 Net interest income $ 42,257 $ 42,090 $ 48,782 Net interest margin 2.43 % 2.41 % 2.85 % Adjusted net interest margin 2.42 % 2.38 % 2.83 % For the Three Months Ended December 31, September 30, December 31, Asset Yields and Funding Costs 2023 2023 2022 Interest earning assets 4.69 % 4.48 % 3.88 % Interest bearing liabilities 2.74 % 2.52 % 1.29 % For the Three Months Ended Non–interest Income and December 31, September 30, December 31, Mortgage Banking Income 2023 2023 2022 Total non–interest income $ (20,449 ) $ 11,830 $ 10,674 Gain on sale of mortgage loans 951 1,582 1,196 Mortgage servicing income net of impairment 724 631 637 For the Three Months Ended December 31, September 30, December 31, Non–interest Expense 2023 2023 2022 Total non–interest expense $ 39,330 $ 36,168 $ 35,711 Annualized non–interest expense to average assets 1.98 % 1.81 % 1.84 % For the Three Months Ended December 31, September 30, December 31, Credit Quality 2023 2023 2022 Allowance for credit losses to total loans 1.13 % 1.14 % 1.21 % Non–performing loans to total loans 0.44 % 0.45 % 0.52 % Percent of net charge–offs to average loans outstanding for the period 0.02 % 0.02 % 0.01 % Allowance for December 31, Net Reserve December 31, Credit Losses 2023 4Q23 3Q23 2Q23 1Q23 2022 Commercial $ 29,736 $ 264 $ (882 ) $ (802 ) $ (1,289 ) $ 32,445 Retail Mortgage 2,503 (291 ) (854 ) (799 ) (1,130 ) 5,577 Warehouse 481 (233 ) (179 ) 95 (222 ) 1,020 Consumer 17,309 590 1,638 1,956 1,703 11,422 Allowance for Credit Losses (“ACL”) $ 50,029 $ 330 $ (277 ) $ 450 $ (938 ) $ 50,464 ACL / Total Loans 1.13 % 1.21 % Acquired Loan Discount (“ALD”) $ 4,790 $ (358 ) $ (371 ) $ (639 ) $ (121 ) $ 6,279 Income Statement Highlights
Net loss for the fourth quarter of 2023 was $25.2 million, or $0.58 diluted earnings per share, compared to net income of $16.2 million, or $0.37, for the linked quarter and $21.2 million, or $0.48, for the prior year period. The results for the fourth quarter of 2023 when compared to the linked quarter reflect a decrease in non–interest income of $32.3 million due primarily to a $31.6 million net loss on the sale of securities, and increases in credit loss expense of $1.0 million, income tax expense of $5.1 million due to the early surrender of bank owned life insurance, and non–interest expense of $3.2 million including $705,000 of extraordinary items.
Net interest income was $42.3 million in the fourth quarter of 2023, increasing $167,000 from $42.1 million in the linked quarter.
Total non–interest income of negative $20.4 million was $32.3 million lower in the fourth quarter of 2023 when compared to the third quarter of 2023, primarily due to a $31.6 million loss on sale of investment securities, a decrease in gain on sale of mortgage loans of $631,000 and a decrease of $397,000 in income from bank owned life insurance.
Total non–interest expense was $3.2 million higher in the fourth quarter of 2023 when compared to the third quarter of 2023, primarily due to a $1.8 million increase in salaries and employee benefits, a $835,000 increase in other expense, a $320,000 increase in other losses and a $225,000 increase in loan expense from the linked quarter. The increase in expenses was substantially due to costs associated with previously disclosed staffing restructuring, recruiting costs, the launch of Horizon Equipment Finance and related variable benefits cost.
Income tax expense was $5.1 million higher in the fourth quarter of 2023 when compared to the third quarter of 2023, primarily attributed to bank owned life insurance tax expense and excise tax of $8.6 million and a tax valuation allowance of $5.2 million recorded during the fourth quarter for the carry forward timing of recognizing capital losses from the previously announced fourth quarter securities sale for tax purposes.
Net Interest Margin
Horizon’s net interest margin (“NIM”) was 2.43% for the fourth quarter of 2023 compared to 2.41% for the third quarter of 2023.
Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.42% for the fourth quarter of 2023, compared to 2.38% 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 $4.42 billion on December 31, 2023 compared to $4.36 billion on September 30, 2023. During the three months ended December 31, 2023, commercial loans increased $85.7 million, and residential mortgage loans increased $5.7 million, offset by a decrease in mortgage warehouse loans of $20.8 million, consumer loans of $12.0 million and loans held for sale of $1.4 million.
Lending activity in the fourth quarter was led by commercial lending growth. Mortgage banking activities aligned with cyclical client demand in a continuing rising interest rate environment, while the decline in consumer balances was aligned with the announced strategy to reduce exposure in the lower yielding indirect auto lending portfolio. These results reflect the continued strategic shift of the organization to focus on higher yielding assets.
Loan Growth by Type (Dollars in Thousands, Unaudited) December 31, September 30, QTD QTD Annualized 2023 2023 $ Change % Change % Change Commercial $ 2,674,960 $ 2,589,244 $ 85,716 3.3 % 13.1 % Residential mortgage 681,136 675,399 5,737 0.8 % 3.4 % Mortgage warehouse 45,078 65,923 (20,845 ) (31.6 )% (125.4 )% Consumer 1,016,456 1,028,436 (11,980 ) (1.2 )% (4.6 )% Total loans 4,417,630 4,359,002 58,628 1.3 % 5.3 % Loans held for sale 1,418 2,828 (1,410 ) (49.9 )% (197.8 )% Total loans and loans held for sale $ 4,419,048 $ 4,361,830 $ 57,218 1.3 % 5.2 % Loan Growth by Type (Dollars in Thousands, Unaudited) December 31, December 31, YTD YTD 2023 2022 $ Change % Change Commercial $ 2,674,960 $ 2,467,422 $ 207,538 8.4 % Residential mortgage 681,136 653,292 27,844 4.3 % Mortgage warehouse 45,078 69,529 (24,451 ) (35.2 )% Consumer 1,016,456 967,755 48,701 5.0 % Total loans 4,417,630 4,157,998 259,632 6.2 % Loans held for sale 1,418 5,807 (4,389 ) (75.6 )% Total loans and loans held for sale $ 4,419,048 $ 4,163,805 $ 255,243 6.1 % Deposit Activity
Total deposit balances of $5.66 billion on December 31, 2023 decreased 0.6% compared to $5.70 billion on September 30, 2023.
The deposit mix at the end of the fourth quarter of 2023 represented the demand for clients to earn more interest on their excess funds and consumers spending excess liquidity. Horizon Bank's (the “Bank”) tenured and granular core deposit relationships remain steadfast, reflecting the value of Horizon's relationship banking model and local community engagement.
Deposit Growth by Type (Dollars in Thousands, Unaudited) December 31, September 30, QTD QTD Annualized 2023 2023 $ Change % Change % Change Non–interest bearing $ 1,116,005 $ 1,126,703 $ (10,698 ) (0.9 )% (3.8 )% Interest bearing 3,369,149 3,322,788 46,361 1.4 % 5.5 % Time deposits 1,179,739 1,250,606 (70,867 ) (5.7 )% (22.5 )% Total deposits $ 5,664,893 $ 5,700,097 $ (35,204 ) (0.6 )% (2.5 )% Total deposit balances of $5.66 billion on December 31, 2023 decreased 3.3% compared to $5.86 billion on December 31, 2022.
Deposit Growth by Type (Dollars in Thousands, Unaudited) December 31, December 31, YTD YTD 2023 2022 $ Change % Change Non–interest bearing $ 1,116,005 $ 1,277,768 $ (161,763 ) (12.7 )% Interest bearing 3,369,149 3,582,891 (213,742 ) (6.0 )% Time deposits 1,179,739 997,115 182,624 18.3 % Total deposits $ 5,664,893 $ 5,857,774 $ (192,881 ) (3.3 )% Capital
The capital resources of the Company and the Bank continued to exceed regulatory capital ratios for “well capitalized” banks at December 31, 2023. Stockholders’ equity totaled $718.8 million at December 31, 2023 and the ratio of average stockholders’ equity to average assets was 8.97% for the twelve months ended December 31, 2023.
Tangible book value, which excludes intangible assets from total equity, per common share (“TBVPS”) was $12.60, increasing $0.60 during the fourth quarter of 2023. The sale of approximately $382.7 million in securities available for sale (“AFS”) in addition to lower long-term interest rates during the fourth quarter of 2023 reduced unrealized net losses on AFS securities and increased accumulated other comprehensive income (“AOCI”) by $56.8 million. TBVPS increased by $1.01 compared to December 31, 2022. Tangible common equity was 7.09% of tangible assets as of December 31, 2023, an increase of 37 basis points during the quarter and 53 basis points since 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, 2023.
Actual Required for Capital Adequacy Purposes Required for Capital Adequacy Purposes with Capital Buffer Well Capitalized
Under Prompt Corrective Action ProvisionsAmount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk–weighted assets) Consolidated $ 783,753 14.36 % $ 436,551 8.00 % $ 572,973 10.50 % N/A N/A Bank 713,767 13.12 % 435,086 8.00 % 571,051 10.50 % $ 543,858 10.00 % Tier 1 capital (to risk–weighted assets) Consolidated 733,724 13.45 % 327,413 6.00 % 463,836 8.50 % N/A N/A Bank 663,738 12.20 % 326,315 6.00 % 462,279 8.50 % 435,086 8.00 % Common equity tier 1 capital (to risk–weighted assets) Consolidated 619,140 11.35 % 245,560 4.50 % 381,982 7.00 % N/A N/A Bank 663,738 12.20 % 244,736 4.50 % 380,701 7.00 % 353,508 6.50 % Tier 1 capital (to average assets) Consolidated 733,724 9.60 % 305,704 4.00 % 305,704 4.00 % N/A N/A Bank 663,738 8.55 % 310,539 4.00 % 310,539 4.00 % 388,174 5.00 % Liquidity
The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan 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 December 31, 2023, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.4 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Bank. The Bank had approximately $601.7 million of unpledged investment securities on December 31, 2023.
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; 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 ongoing conflicts between Russia and Ukraine and Israel and Hamas; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward–looking statements are discussed in Horizon’s reports (such as the Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, and Current Reports on Form 8–K) filed with the SEC and available at the SEC’s website (www.sec.gov). Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.
Financial Highlights (Dollars in Thousands, Unaudited) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Balance sheet: Total assets $ 7,931,195 $ 7,959,434 $ 7,963,353 $ 7,897,995 $ 7,872,518 Interest earning deposits & federal funds sold 413,744 76,293 119,637 30,221 12,233 Interest earning time deposits 2,205 2,207 2,452 3,098 2,812 Investment securities 2,492,889 2,831,651 2,889,309 2,958,978 3,020,306 Commercial loans 2,674,960 2,589,244 2,506,279 2,505,459 2,467,422 Mortgage warehouse loans 45,078 65,923 82,345 52,957 69,529 Residential mortgage loans 681,136 675,399 674,751 662,459 653,292 Consumer loans 1,016,456 1,028,436 1,002,885 1,026,076 967,755 Total loans 4,417,630 4,359,002 4,266,260 4,246,951 4,157,998 Earning assets 7,362,395 7,306,490 7,319,100 7,273,921 7,225,833 Non–interest bearing deposit accounts 1,116,005 1,126,703 1,170,055 1,231,845 1,277,768 Interest bearing transaction accounts 3,369,149 3,322,788 3,289,474 3,402,525 3,582,891 Time deposits 1,179,739 1,250,606 1,249,803 1,067,575 997,115 Total deposits 5,664,893 5,700,097 5,709,332 5,701,945 5,857,774 Borrowings 1,353,050 1,356,510 1,352,039 1,311,927 1,142,949 Subordinated notes 55,543 59,007 58,970 58,933 58,896 Junior subordinated debentures issued to capital trusts 57,258 57,201 57,143 57,087 57,027 Total stockholders’ equity 718,812 693,369 709,243 702,559 677,375 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, 2023 2023 2023 2023 2022 Income statement: Net interest income $ 42,257 $ 42,090 $ 46,160 $ 45,237 $ 48,782 Credit loss expense (recovery) 1,274 263 680 242 (69 ) Non–interest income (20,449 ) 11,830 10,997 9,620 10,674 Non–interest expense 39,330 36,168 36,262 34,524 35,711 Income tax expense 6,419 1,284 1,452 1,863 2,649 Net income $ (25,215 ) $ 16,205 $ 18,763 $ 18,228 $ 21,165 Per share data: Basic earnings per share $ (0.58 ) $ 0.37 $ 0.43 $ 0.42 $ 0.49 Diluted earnings per share (0.58 ) 0.37 0.43 0.42 0.48 Cash dividends declared per common share 0.16 0.16 0.16 0.16 0.16 Book value per common share 16.47 15.89 16.25 16.11 15.55 Tangible book value per common share 12.60 12.00 12.34 12.17 11.59 Market value – high 14.65 12.68 11.10 16.32 20.00 Market value – low $ 9.33 $ 9.90 $ 7.75 $ 10.31 $ 14.51 Weighted average shares outstanding – Basis 43,649,585 43,646,609 43,639,987 43,583,554 43,574,151 Weighted average shares outstanding – Diluted 43,649,585 43,796,069 43,742,588 43,744,721 43,667,953 Key ratios: Return on average assets (1.27 )% 0.81 % 0.96 % 0.94 % 1.09 % Return on average common stockholders’ equity (14.23 ) 8.99 10.59 10.66 12.72 Net interest margin 2.43 2.41 2.69 2.67 2.85 Allowance for credit losses to total loans 1.13 1.14 1.17 1.17 1.21 Average equity to average assets 8.92 9.03 9.07 8.86 8.55 Efficiency ratio 180.35 67.08 63.44 62.93 60.06 Annualized non–interest expense to average assets 1.98 1.81 1.86 1.79 1.84 Bank only capital ratios: Tier 1 capital to average assets 8.55 8.77 8.72 8.86 8.89 Tier 1 capital to risk weighted assets 12.20 12.22 12.12 12.65 12.72 Total capital to risk weighted assets 13.12 13.11 13.03 13.56 13.59 Financial Highlights (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) Twelve Months Ended December 31, December 31, 2023 2022 Income statement: Net interest income $ 175,744 $ 199,518 Credit loss expense (recovery) 2,459 (1,816 ) Non–interest income 11,998 47,451 Non–interest expense 146,284 143,201 Income tax expense 11,018 12,176 Net income $ 27,981 $ 93,408 Per share data: Basic earnings per share $ 0.64 $ 2.14 Diluted earnings per share 0.64 2.14 Cash dividends declared per common share 0.64 0.63 Book value per common share 16.47 15.55 Tangible book value per common share 12.60 11.59 Market value – high 16.32 23.45 Market value – low $ 7.75 $ 14.51 Weighted average shares outstanding – Basis 43,623,614 43,568,823 Weighted average shares outstanding – Diluted 43,837,333 43,699,115 Key ratios: Return on average assets 0.36 % 1.24 % Return on average common stockholders’ equity 3.96 13.66 Net interest margin 2.55 2.98 Allowance for credit losses to total loans 1.13 1.21 Average equity to average assets 8.97 9.07 Efficiency ratio 77.92 57.98 Annualized non–interest expense to average assets 1.86 1.90 Bank only capital ratios: Tier 1 capital to average assets 8.55 8.89 Tier 1 capital to risk weighted assets 12.20 12.72 Total capital to risk weighted assets 13.12 13.59 Financial Highlights (Dollars in Thousands Except Ratios, Unaudited) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Loan data: Substandard loans $ 49,526 $ 47,563 $ 41,484 $ 49,804 $ 56,194 30 to 89 days delinquent 16,595 13,089 10,913 13,971 10,709 Non–performing loans: 90 days and greater delinquent – accruing interest 548 392 1,313 137 92 Trouble debt restructures – accruing interest — — — — 2,570 Trouble debt restructures – non–accrual — — — — 1,548 Non–accrual loans 19,076 19,056 20,796 19,660 17,630 Total non–performing loans $ 19,624 $ 19,448 $ 22,109 $ 19,797 $ 21,840 Non–performing loans to total loans 0.44 % 0.45 % 0.52 % 0.47 % 0.52 % Allocation of the Allowance for Credit Losses (Dollars in Thousands, Unaudited) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Commercial $ 29,736 $ 29,472 $ 30,354 $ 31,156 $ 32,445 Residential mortgage 2,503 2,794 3,648 4,447 5,577 Mortgage warehouse 481 714 893 798 1,020 Consumer 17,309 16,719 15,081 13,125 11,422 Total $ 50,029 $ 49,699 $ 49,976 $ 49,526 $ 50,464 Net Charge–offs (Recoveries) (Dollars in Thousands Except Ratios, Unaudited) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Commercial $ 233 $ 142 $ 101 $ 104 $ (94 ) Residential mortgage 21 (39 ) (10 ) (6 ) (8 ) Mortgage warehouse — — — — — Consumer 531 619 183 281 387 Total $ 785 $ 722 $ 274 $ 379 $ 285 Percent of net charge–offs (recoveries) to average loans outstanding for the period 0.02 % 0.02 % 0.01 % 0.01 % 0.01 % Total Non–performing Loans (Dollars in Thousands Except Ratios, Unaudited) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Commercial $ 6,801 $ 6,969 $ 8,275 $ 8,523 $ 9,330 Residential mortgage 8,063 7,777 8,168 6,926 8,123 Mortgage warehouse — — — — — Consumer 4,761 4,702 5,666 4,348 4,387 Total $ 19,625 $ 19,448 $ 22,109 $ 19,797 $ 21,840 Non–performing loans to total loans 0.44 % 0.45 % 0.52 % 0.47 % 0.52 % Other Real Estate Owned and Repossessed Assets (Dollars in Thousands, Unaudited) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Commercial $ 1,124 $ 1,287 $ 1,567 $ 1,567 $ 1,881 Residential mortgage 182 32 107 203 107 Mortgage warehouse — — — — — Consumer 205 72 7 78 152 Total $ 1,511 $ 1,391 $ 1,681 $ 1,848 $ 2,140 Average Balance Sheets (Dollars in Thousands, Unaudited) Three Months Ended Three Months Ended December 31, 2023 December 31, 2022 Average
BalanceInterest Average
RateAverage
BalanceInterest Average
RateAssets Interest earning assets Federal funds sold $ 194,975 $ 2,736 5.57 % $ 4,023 $ 34 3.35 % Interest earning deposits 26,400 271 4.07 % 8,233 48 2.31 % Investment securities – taxable 1,517,572 8,157 2.13 % 1,655,728 8,703 2.09 % Investment securities – non–taxable (1) 1,172,157 6,767 2.90 % 1,385,340 7,543 2.73 % Loans receivable (2) (3) 4,327,930 65,583 6.04 % 4,038,656 50,859 5.02 % Total interest earning assets 7,239,034 83,514 4.69 % 7,091,980 67,187 3.88 % Non–interest earning assets Cash and due from banks 103,255 96,835 Allowance for credit losses (49,586 ) (51,323 ) Other assets 588,113 580,874 Total average assets $ 7,880,816 $ 7,718,366 Liabilities and Stockholders’ Equity Interest bearing liabilities Interest bearing deposits $ 4,509,268 $ 27,376 2.41 % $ 4,555,887 $ 10,520 0.92 % Borrowings 1,206,462 10,812 3.56 % 850,236 5,729 2.67 % Repurchase agreements 132,524 953 2.85 % 141,676 311 0.87 % Subordinated notes 58,221 870 5.93 % 58,874 881 5.94 % Junior subordinated debentures issued to capital trusts 57,222 1,246 8.64 % 56,988 964 6.71 % Total interest bearing liabilities 5,963,697 41,257 2.74 % 5,663,661 18,405 1.29 % Non–interest bearing liabilities Demand deposits 1,125,164 1,321,139 Accrued interest payable and other liabilities 89,162 73,378 Stockholders’ equity 702,793 660,188 Total average liabilities and stockholders’ equity $ 7,880,816 $ 7,718,366 Net interest income / spread $ 42,257 1.95 % $ 48,782 2.59 % Net interest income as a percent of average interest earning assets (1) 2.43 % 2.85 % (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, 2023 December 31, 2022 Average
BalanceInterest Average
RateAverage
BalanceInterest Average
RateAssets Interest earning assets Federal funds sold $ 82,865 $ 4,442 5.36 % $ 62,211 $ 165 0.27 % Interest earning deposits 12,930 525 4.06 % 13,596 141 1.04 % Investment securities – taxable 1,658,160 34,410 2.08 % 1,700,418 33,202 1.95 % Investment securities – non–taxable (1) 1,236,607 28,384 2.91 % 1,356,045 29,025 2.71 % Loans receivable (2) (3) 4,244,893 244,544 5.79 % 3,845,137 173,500 4.53 % Total interest earning assets 7,235,455 312,305 4.44 % 6,977,407 236,033 3.50 % Non–interest earning assets Cash and due from banks 102,535 99,885 Allowance for credit losses (49,774 ) (52,606 ) Other assets 581,412 509,229 Total average assets $ 7,869,628 $ 7,533,915 Liabilities and Stockholders’ Equity Interest bearing liabilities Interest bearing deposits $ 4,498,588 $ 85,857 1.91 % $ 4,513,668 $ 17,809 0.39 % Borrowings 1,154,714 39,514 3.42 % 696,584 11,938 1.71 % Repurchase agreements 137,153 2,964 2.16 % 141,048 527 0.37 % Subordinated notes 58,764 3,511 5.97 % 58,819 3,522 5.99 % Junior subordinated debentures issued to capital trusts 57,137 4,715 8.25 % 56,899 2,719 4.78 % Total interest bearing liabilities 5,906,356 136,561 2.31 % 5,467,018 36,515 0.67 % Non–interest bearing liabilities Demand deposits 1,181,233 1,332,937 Accrued interest payable and other liabilities 75,765 50,330 Stockholders’ equity 706,274 683,630 Total average liabilities and stockholders’ equity $ 7,869,628 $ 7,533,915 Net interest income / spread $ 175,744 2.13 % $ 199,518 2.83 % Net interest income as a percent of average interest earning assets (1) 2.55 % 2.98 % (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,
2023December 31,
2022(Unaudited) Assets Cash and due from banks $ 519,360 $ 123,505 Interest earning time deposits 2,205 2,812 Investment securities, available for sale 547,251 997,558 Investment securities, held to maturity (fair value $1,668,601 and $1,681,309) 1,945,638 2,022,748 Loans held for sale 1,418 5,807 Loans, net of allowance for credit losses of $50,029 and $50,464 4,367,601 4,107,534 Premises and equipment, net 94,583 92,677 Federal Home Loan Bank stock 34,509 26,677 Goodwill 155,211 155,211 Other intangible assets 13,626 17,239 Interest receivable 38,710 35,294 Cash value of life insurance 36,157 146,175 Other assets 174,926 139,281 Total assets $ 7,931,195 $ 7,872,518 Liabilities Deposits Non–interest bearing $ 1,116,005 $ 1,277,768 Interest bearing 4,548,888 4,580,006 Total deposits 5,664,893 5,857,774 Borrowings 1,353,050 1,142,949 Subordinated notes 55,543 58,896 Junior subordinated debentures issued to capital trusts 57,258 57,027 Interest payable 22,249 5,380 Other liabilities 59,390 73,117 Total liabilities 7,212,383 7,195,143 Commitments and contingent liabilities Stockholders’ equity Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares — — Common stock, no par value, Authorized 99,000,000 shares
Issued and Outstanding 44,106,174 and 43,937,889 shares— — Additional paid–in capital 356,400 354,188 Retained earnings 429,021 429,385 Accumulated other comprehensive income (66,609 ) (106,198 ) Total stockholders’ equity 718,812 677,375 Total liabilities and stockholders’ equity $ 7,931,195 $ 7,872,518 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, 2023 2023 2023 2023 2022 Interest income Loans receivable $ 65,583 $ 63,003 $ 60,594 $ 55,364 $ 50,859 Investment securities – taxable 8,157 8,788 8,740 8,725 8,702 Investment securities – non–taxable 6,767 7,002 7,059 7,556 7,543 Other 3,007 1,332 475 153 83 Total interest income 83,514 80,125 76,868 71,798 67,187 Interest expense Deposits 27,376 24,704 18,958 14,819 10,520 Borrowed funds 11,765 11,224 9,718 9,771 6,040 Subordinated notes 870 880 881 880 881 Junior subordinated debentures issued to capital trusts 1,246 1,227 1,151 1,091 964 Total interest expense 41,257 38,035 30,708 26,561 18,405 Net interest income 42,257 42,090 46,160 45,237 48,782 Credit loss expense (recovery) 1,274 263 680 242 (69 ) Net interest income after credit loss expense (recovery) 40,983 41,827 45,480 44,995 48,851 Non–interest Income Service charges on deposit accounts 3,092 3,086 3,021 3,028 2,947 Wire transfer fees 103 120 116 109 118 Interchange fees 3,224 3,186 3,584 2,867 2,951 Fiduciary activities 1,352 1,206 1,247 1,275 1,270 Gains / (losses) on sale of investment securities (31,572 ) — 20 (500 ) — Gain on sale of mortgage loans 951 1,582 1,005 785 1,196 Mortgage servicing income net of impairment 724 631 640 713 637 Increase in cash value of bank owned life insurance 658 1,055 1,015 981 751 Other income 1,019 964 349 362 804 Total non–interest income (20,449 ) 11,830 10,997 9,620 10,674 Non–interest expense Salaries and employee benefits 21,877 20,058 20,162 18,712 19,978 Net occupancy expenses 3,260 3,283 3,249 3,563 3,279 Data processing 2,942 2,999 3,016 2,669 2,884 Professional fees 772 707 633 533 694 Outside services and consultants 2,394 2,316 2,515 2,717 2,985 Loan expense 1,345 1,120 1,397 1,118 1,281 FDIC insurance expense 1,200 1,300 840 540 388 Core deposit intangible amortization 903 903 903 903 925 Other losses 508 188 134 221 118 Other expenses 4,129 3,294 3,413 3,548 3,179 Total non–interest expense 39,330 36,168 36,262 34,524 35,711 Income before income taxes (18,796 ) 17,489 20,215 20,091 23,814 Income tax expense 6,419 1,284 1,452 1,863 2,649 Net income $ (25,215 ) $ 16,205 $ 18,763 $ 18,228 $ 21,165 Basic earnings per share $ (0.58 ) $ 0.37 $ 0.43 $ 0.42 $ 0.49 Diluted earnings per share (0.58 ) 0.37 0.43 0.42 0.48 Condensed Consolidated Statements of Income (Dollars in Thousands Except Per Share Data, Unaudited) Twelve Months Ended December 31, December 31, 2023 2022 Interest income Loans receivable $ 244,544 $ 173,500 Investment securities – taxable 34,410 33,202 Investment securities – non–taxable 28,384 29,025 Other 4,967 306 Total interest income 312,305 236,033 Interest expense Deposits 85,857 17,809 Borrowed funds 42,478 12,465 Subordinated notes 3,511 3,522 Junior subordinated debentures issued to capital trusts 4,715 2,719 Total interest expense 136,561 36,515 Net interest income 175,744 199,518 Credit loss expense (recovery) 2,459 (1,816 ) Net interest income after credit loss expense (recovery) 173,285 201,334 Non–interest Income Service charges on deposit accounts 12,227 11,598 Wire transfer fees 448 595 Interchange fees 12,861 12,402 Fiduciary activities 5,080 5,381 Gains / (losses) on sale of investment securities (32,052 ) — Gain on sale of mortgage loans 4,323 7,165 Mortgage servicing income net of impairment 2,708 4,800 Increase in cash value of bank owned life insurance 3,709 2,594 Death benefit on bank owned life insurance — 644 Other income 2,694 2,272 Total non–interest income 11,998 47,451 Non–interest expense Salaries and employee benefits 80,809 80,283 Net occupancy expenses 13,355 13,323 Data processing 11,626 10,567 Professional fees 2,645 1,843 Outside services and consultants 9,942 10,850 Loan expense 4,980 5,411 FDIC insurance expense 3,880 2,558 Core deposit intangible amortization 3,612 3,702 Other losses 1,051 1,046 Other expenses 14,384 13,618 Total non–interest expense 146,284 143,201 Income before income taxes 38,999 105,584 Income tax expense 11,018 12,176 Net income $ 27,981 $ 93,408 Basic earnings per share $ 0.64 $ 2.14 Diluted earnings per share 0.64 2.14 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 a balance sheet restructuring that included the sale of certain lower-yielding securities and the surrender of certain bank owned life insurance policies, extraordinary expenses associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities, acquisition–related purchase accounting adjustments and swap termination fees, among others we have identified in our reconciliations. Horizon believes these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP information identified herein and its most comparable GAAP measures.
Non–GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended Twelve Months Ended December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2023 2023 2023 2023 2022 2023 2022 Net income (loss) as reported $ (25,215 ) $ 16,205 $ 18,763 $ 18,228 $ 21,165 $ 27,981 $ 93,408 Swap termination fee — — (1,453 ) — — (1,453 ) — Tax effect — — 305 — — 305 — Net income (loss) excluding swap termination fee (25,215 ) 16,205 17,615 18,228 21,165 26,833 93,408 (Gain) / loss on sale of investment securities 31,572 — (20 ) 500 — 32,052 — Tax effect (6,630 ) — 4 (105 ) — (6,731 ) — Tax valuation reserve 5,201 — — — — 5,201 — Net income (loss) excluding (gain) / loss on sale of investment securities 4,928 16,205 17,599 18,623 21,165 57,355 93,408 Death benefit on bank owned life insurance (“BOLI”) — — — — — — (644 ) Net income (loss) excluding death benefit on BOLI 4,928 16,205 17,599 18,623 21,165 57,355 92,764 Extraordinary expenses (1) 705 — — — — 705 — Tax effect (148 ) — — — — (148 ) — Net income excluding extraordinary expenses 5,485 16,205 17,599 18,623 21,165 57,912 92,764 BOLI tax expense and excise tax 8,597 — — — — 8,597 — Net income excluding BOLI tax expense and excise tax 14,082 16,205 17,599 18,623 21,165 66,509 92,764 Adjusted net income $ 14,082 $ 16,205 $ 17,599 $ 18,623 $ 21,165 66,509 $ 92,764 (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. 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, 2023 2023 2023 2023 2022 2023 2022 Diluted earnings per share (“EPS”) as reported $ (0.58 ) $ 0.37 $ 0.43 $ 0.42 $ 0.48 $ 0.64 $ 2.14 Swap termination fee — — (0.03 ) — — (0.03 ) — Tax effect — — 0.01 — — 0.01 — Diluted EPS excluding swap termination fee (0.58 ) 0.37 0.41 0.42 0.48 0.62 2.14 (Gain) / loss on sale of investment securities 0.72 — — 0.01 — 0.73 — Tax effect (0.15 ) — — — — (0.15 ) — Tax valuation reserve 0.12 — — — — 0.12 — Diluted EPS excluding (gain) / loss on sale of investment securities 0.11 0.37 0.41 0.43 0.48 1.32 2.14 Death benefit on bank owned life insurance (“BOLI”) — — — — — — (0.01 ) Diluted EPS excluding death benefit on BOLI 0.11 0.37 0.41 0.43 0.48 1.32 2.13 Extraordinary expenses(1) 0.02 — — — — 0.02 — Tax effect — — — — — — — Diluted EPS excluding extraordinary expenses 0.13 0.37 0.41 0.43 0.48 1.34 2.13 BOLI tax expense and excise tax 0.20 — — — — 0.20 — Diluted EPS excluding BOLI tax expense and excise tax 0.33 0.37 0.41 0.43 0.48 1.54 2.13 Adjusted diluted EPS $ 0.33 $ 0.37 $ 0.41 $ 0.43 $ 0.48 $ 1.54 $ 2.13 (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. 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, 2023 2023 2023 2023 2022 2023 2022 Pre–tax income (loss) $ (18,796 ) $ 17,489 $ 20,215 $ 20,091 $ 23,814 $ 38,999 $ 105,584 Credit loss expense 1,274 263 680 242 (69 ) 2,459 (1,816 ) Pre–tax, pre–provision income (loss) $ (17,522 ) $ 17,752 $ 20,895 $ 20,333 $ 23,745 $ 41,458 $ 103,768 Pre–tax, pre–provision income (loss) $ (17,522 ) $ 17,752 $ 20,895 $ 20,333 $ 23,745 $ 41,458 $ 103,768 Swap termination fee — — (1,453 ) — — (1,453 ) — (Gain) / loss on sale of investment securities 31,572 — (20 ) 500 — 32,052 — Death benefit on BOLI — — — — — — (644 ) Extraordinary expenses(1) 705 — — — — 705 — Adjusted pre–tax, pre–provision income $ 14,755 $ 17,752 $ 19,422 $ 20,833 $ 23,745 $ 72,762 $ 103,124 (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. 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, 2023 2023 2023 2023 2022 2023 2022 Net interest income as reported $ 42,257 $ 42,090 $ 46,160 $ 45,237 $ 48,782 $ 175,744 $ 199,518 Average interest earning assets 7,239,034 7,286,611 7,212,640 7,201,266 7,091,980 7,235,455 6,977,407 Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) 2.43 % 2.41 % 2.69 % 2.67 % 2.85 % 2.55 % 2.98 % Net interest income as reported $ 42,257 $ 42,090 $ 46,160 $ 45,237 $ 48,782 $ 175,744 $ 199,518 Acquisition–related purchase accounting adjustments (“PAUs”) (175 ) (435 ) (651 ) (367 ) (431 ) (1,628 ) (3,476 ) Swap termination fee — — (1,453 ) — — (1,453 ) — Adjusted net interest income $ 42,082 $ 41,655 $ 44,056 $ 44,870 $ 48,351 $ 172,663 $ 196,042 Adjusted net interest margin 2.42 % 2.38 % 2.57 % 2.65 % 2.83 % 2.51 % 2.93 % 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, 2023 2023 2023 2023 2022 Total stockholders’ equity $ 718,812 $ 693,369 $ 709,243 $ 702,559 $ 677,375 Less: Intangible assets 168,837 169,741 170,644 171,547 172,450 Total tangible stockholders’ equity $ 549,975 $ 523,628 $ 538,599 $ 531,012 $ 504,925 Common shares outstanding 43,652,063 43,648,501 43,645,216 43,621,422 43,574,151 Book value per common share $ 16.47 $ 15.89 $ 16.25 $ 16.11 $ 15.55 Tangible book value per common share $ 12.60 $ 12.00 $ 12.34 $ 12.17 $ 11.59 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, 2023 2023 2023 2023 2022 2023 2022 Non–interest expense as reported $ 39,330 $ 36,168 $ 36,262 $ 34,524 $ 35,711 $ 146,284 $ 143,201 Net interest income as reported 42,257 42,090 46,160 45,237 48,782 175,744 199,518 Non–interest income as reported $ (20,449 ) $ 11,830 $ 10,997 $ 9,620 $ 10,674 $ 11,998 $ 47,451 Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”) 180.35 % 67.08 % 63.44 % 62.93 % 60.06 % 77.92 % 57.98 % Non–interest expense as reported $ 39,330 $ 36,168 $ 36,262 $ 34,524 $ 35,711 $ 146,284 $ 143,201 Extraordinary expenses(1) (705 ) — — — — (705 ) — Non–interest expense excluding extraordinary expenses 38,625 36,168 36,262 34,524 35,711 145,579 143,201 Net interest income as reported 42,257 42,090 46,160 45,237 48,782 175,744 199,518 Swap termination fee — — (1,453 ) — — (1,453 ) — Net interest income excluding swap termination fee 42,257 42,090 44,707 45,237 48,782 174,291 199,518 Non–interest income as reported (20,449 ) 11,830 10,997 9,620 10,674 11,998 47,451 (Gain) / loss on sale of investment securities 31,572 — (20 ) 500 — 32,052 — Death benefit on BOLI — — — — — — (644 ) Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI $ 11,123 $ 11,830 $ 10,977 $ 10,120 $ 10,674 $ 44,050 $ 46,807 Adjusted efficiency ratio 72.36 % 67.08 % 65.12 % 62.37 % 60.06 % 66.68 % 58.13 % (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. 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, 2023 2023 2023 2023 2022 2023 2022 Average assets $ 7,880,816 $ 7,924,751 $ 7,840,026 $ 7,831,106 $ 7,718,366 $ 7,869,628 $ 7,533,915 Return on average assets (“ROAA”) as reported (1.27)% 0.81 % 0.96 % 0.94 % 1.09 % 0.36 % 1.24 % Swap termination fee — — (0.07 ) — — (0.02 ) — Tax effect — — 0.02 — — — — ROAA excluding swap termination fee (1.27 ) 0.81 0.91 0.94 1.09 0.34 1.24 (Gain) / loss on sale of investment securities 1.59 — — 0.03 — 0.41 — Tax effect (0.33 ) — — (0.01 ) — (0.09 ) — Tax valuation reserve 0.26 — — — — 0.07 — ROAA excluding (gain) / loss on sale of investment securities 0.25 0.81 0.91 0.96 1.09 0.73 1.24 Death benefit on BOLI — — — — — — (0.01 ) ROAA excluding death benefit on BOLI 0.25 0.81 0.91 0.96 1.09 0.73 1.23 Extraordinary expenses(1) 0.04 — — — — 0.01 — Tax effect (0.01 ) — — — — — — ROAA excluding extraordinary expenses 0.28 0.81 0.91 0.96 1.09 0.74 1.23 BOLI tax expense and excise tax 0.43 % — % — % — % — % 0.11 % — % ROAA excluding BOLI tax expense and excise tax 0.71 % 0.81 % 0.91 % 0.96 % 1.09 % 0.85 % 1.23 % Adjusted ROAA 0.71 % 0.81 % 0.91 % 0.96 % 1.09 % 0.85 % 1.23 % (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. 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, 2023 2023 2023 2023 2022 2023 2022 Average common equity $ 702,793 $ 715,485 $ 710,953 $ 693,472 $ 660,188 $ 706,274 $ 683,630 Return on average common equity (“ROACE”) as reported (14.23)% 8.99 % 10.59 % 10.66 % 12.72 % 3.96 % 13.66 % Swap termination fee — — (0.82 ) — — (0.21 ) — Tax effect — — 0.17 — — 0.04 — ROACE excluding swap termination fee (14.23 ) 8.99 9.94 10.66 12.72 3.79 13.66 (Gain) / loss on sale of investment securities 17.82 — (0.01 ) 0.29 — 4.54 — Tax effect (3.74 ) — — (0.06 ) — (0.95 ) — Tax valuation reserve 2.94 — — — — 0.74 — ROACE excluding (gain) / loss on sale of investment securities 2.79 8.99 9.93 10.89 12.72 8.12 13.66 Death benefit on BOLI — — — — — — (0.09 ) ROACE excluding death benefit on BOLI 2.79 8.99 9.93 10.89 12.72 8.12 13.57 Extraordinary expenses(1) 0.40 — — — — 0.10 — Tax effect (0.08 ) — — — — (0.02 ) — ROACE excluding extraordinary expenses 3.11 8.99 9.93 10.89 12.72 8.20 13.57 BOLI tax expense and excise tax 4.85 — — — — 1.22 — ROACE excluding BOLI tax expense and excise tax 7.96 8.99 9.93 10.89 12.72 9.42 13.57 Adjusted ROACE 7.96 % 8.99 % 9.93 % 10.89 % 12.72 % 9.42 % 13.57 % (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. 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, 2023 2023 2023 2023 2022 2023 2022 Average tangible equity $ 702,793 $ 715,485 $ 710,953 $ 693,472 $ 660,188 $ 706,274 $ 683,630 Less: Average intangible assets 169,401 170,301 171,177 172,139 173,050 170,745 174,003 Average tangible equity $ 533,392 $ 545,184 $ 539,776 $ 521,333 $ 487,138 $ 535,529 $ 509,627 Return on average tangible equity (“ROATE”) as reported (18.76)% 11.79 % 13.94 % 14.18 % 17.24 % 5.22 % 18.33 % Swap termination fee — — (1.08 ) — — (0.27 ) — Tax effect — — 0.23 — — 0.06 — ROATE excluding swap termination fee (18.76 ) 11.79 13.09 14.18 17.24 5.01 18.33 (Gain) / loss on sale of investment securities 23.48 — (0.01 ) 0.39 — 5.99 — Tax effect (4.93 ) — — (0.08 ) — (1.26 ) — Tax valuation reserve 3.87 — — — — 0.97 — ROATE excluding (gain) / loss on sale of investment securities 3.66 11.79 13.08 14.49 17.24 10.71 18.33 Death benefit on BOLI — — — — — — (0.13 ) ROATE excluding death benefit on BOLI 3.66 11.79 13.08 14.49 17.24 10.71 18.20 Extraordinary expenses(1) 0.52 — — — — 0.13 — Tax effect (0.11 ) — — — — (0.03 ) — ROATE excluding extraordinary expenses 4.07 11.79 13.08 14.49 17.24 10.81 18.20 BOLI tax expense and excise tax 6.39 — — — — 1.61 — ROATE excluding BOLI tax expense and excise tax 10.46 11.79 13.08 14.49 17.24 12.42 18.20 Adjusted ROATE 10.46 % 11.79 % 13.08 % 14.49 % 17.24 % 12.42 % 18.20 % (1) Extraordinary expenses include costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance and the expansion of the Bank's treasury management capabilities. Earnings Conference Call
As previously announced, Horizon will host a conference call to review its fourth quarter and full year 2023 financial results and operating performance.
Participants may access the live conference call on January 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 February 2, 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 5158700.
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, as well as equipment financing solutions for customers regionally and nationally, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana's Michigan City, is available at horizonbank.com and investor.horizonbank.com.
Contact: Mark E. Secor Chief Financial Officer Phone: (219) 873-2611 Fax: (219) 874-9280 
- Commercial loan growth totaled $85.7 million, increasing by 13.1% annualized during the quarter and 8.4% since December 31, 2022. Total loans were $4.42 billion at period end, increasing by 5.2% annualized during the quarter and 6.1% since December 31, 2022.