MICHIGAN CITY, Ind., Oct. 25, 2023 (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 and nine months ended September 30, 2023.
"Horizon's third quarter performance demonstrated our diversified lending platform's ability to produce solid growth while successfully continuing to shift our loan mix to higher yielding assets. This strategy paired with the strength of our credit culture will continue to add value over time," President and Chief Executive Officer Thomas M. Prame said. "Horizon's core deposit funding base remained stable and our business units provided another promising quarter of non–interest income results. Recognizing the near term headwinds facing the banking industry, Horizon remains dedicated to disciplined expense management and prudently deploying resources into new revenue opportunities that can quickly realize positive momentum."
Third Quarter 2023 Highlights
- Net income was $16.2 million or $0.37 per diluted share. This compared to $18.8 million or $0.43 in the second quarter of 2023, which included an after–tax benefit of approximately $1.1 million, or $0.02 per share on a non–recurring swap termination fee.
- Loans totaled $4.36 billion at period end, increasing by 8.2% annualized during the quarter and 6.4% annualized since December 31, 2022. Commercial loan growth totaled $83.0 million, increasing by 13.1% annualized during the quarter and 6.6% annualized since December 31, 2022.
- Deposits remained resilient, totaling $5.7 billion at period end, compared to $5.7 billion on June 30, 2023. Brokered deposits and wholesale borrowing levels were consistent with second quarter balances.
- Net interest income was $42.1 million. This compared to $46.2 million in the linked quarter, which benefited from the aforementioned non–recurring swap termination fee by $1.5 million.
- Non–interest income expanded to $11.8 million from $11.0 million in the linked quarter, primarily due to higher mortgage–related revenue.
- Well–managed non–interest expense was $36.2 million, or 1.81% of average assets annualized. Results slightly improved from the second quarter, even with an additional $460,000 in FDIC insurance expense.
- Maintained sound asset quality, with 30 to 89 days delinquent loans representing 0.30% of total loans and non–performing loans representing 0.45% of total loans at period end, as well as net charge–offs representing 0.02% of average loans during the quarter.
- Horizon's dividend performance included a 5.99% yield as of September 30, 2023, with cash maintained at the holding company level representing approximately eight quarters of dividend payments and fixed costs.
Summary
| For the Three Months Ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| Net Interest Income and Net Interest Margin | 2023 | 2023 | 2022 | |||||||||
| Net interest income | $ | 42,090 | $ | 46,160 | $ | 51,861 | ||||||
| Net interest margin | 2.41 | % | 2.69 | % | 3.04 | % | ||||||
| Adjusted net interest margin | 2.38 | % | 2.57 | % | 2.99 | % | ||||||
| For the Three Months Ended | |||||||||
| September 30, | June 30, | September 30, | |||||||
| Asset Yields and Funding Costs | 2023 | 2023 | 2022 | ||||||
| Interest earning assets | 4.48 | % | 4.39 | % | 3.58 | % | |||
| Interest bearing liabilities | 2.52 | % | 2.10 | % | 0.69 | % | |||
| For the Three Months Ended | |||||||||
| Non-interest Income and | September 30, | June 30, | September 30, | ||||||
| Mortgage Banking Income | 2023 | 2023 | 2022 | ||||||
| Total non–interest income | $ | 11,830 | $ | 10,997 | $ | 10,188 | |||
| Gain on sale of mortgage loans | 1,582 | 1,005 | 1,441 | ||||||
| Mortgage servicing income net of impairment | 631 | 640 | 355 | ||||||
| For the Three Months Ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| Non-interest Expense | 2023 | 2023 | 2022 | |||||||||
| Total non–interest expense | $ | 36,168 | $ | 36,262 | $ | 36,816 | ||||||
| Annualized non–interest expense to average assets | 1.81 | % | 1.86 | % | 1.91 | % | ||||||
| For the Three Months Ended | |||||||||
| September 30, | June 30, | September 30, | |||||||
| Credit Quality | 2023 | 2023 | 2022 | ||||||
| Allowance for credit losses to total loans | 1.14 | % | 1.17 | % | 1.27 | % | |||
| Non–performing loans to total loans | 0.45 | % | 0.52 | % | 0.47 | % | |||
| Percent of net charge–offs to average loans outstanding for the period | 0.02 | % | 0.01 | % | 0.00 | % | |||
| September 30, | Net Reserve | December 31, | ||||||||||||||||||
| Allowance for Credit Losses | 2023 | 3Q23 | 2Q23 | 1Q23 | 2022 | |||||||||||||||
| Commercial | $ | 29,472 | $ | (882 | ) | $ | (802 | ) | $ | (1,289 | ) | $ | 32,445 | |||||||
| Retail Mortgage | 2,794 | (854 | ) | (799 | ) | (1,130 | ) | 5,577 | ||||||||||||
| Warehouse | 714 | (179 | ) | 95 | (222 | ) | 1,020 | |||||||||||||
| Consumer | 16,719 | 1,638 | 1,956 | 1,703 | 11,422 | |||||||||||||||
| Allowance for Credit Losses ("ACL") | $ | 49,699 | $ | (277 | ) | $ | 450 | $ | (938 | ) | $ | 50,464 | ||||||||
| ACL / Total Loans | 1.14 | % | 1.21 | % | ||||||||||||||||
| Acquired Loan Discount ("ALD") | $ | 5,148 | $ | (371 | ) | $ | (639 | ) | $ | (121 | ) | $ | 6,279 | |||||||
"Our historical conservative credit culture remains a strength of Horizon as displayed by our third quarter asset quality metrics," Mr. Prame added. "We believe our focus on lending to well–qualified borrowers, the teams' proactive and proven approach to loss mitigation, and our focus on building a diverse portfolio will further position us well to traverse a fluid economic outlook."
Income Statement Highlights
Net income for the third quarter of 2023 was $16.2 million, or $0.37 diluted earnings per share, compared to $18.8 million, or $0.43, for the linked quarter and $23.8 million, or $0.55, for the prior year period. The change in net income for the third quarter of 2023 when compared to the linked quarter, reflects growth in non–interest income of $833,000 and decreases in credit loss expense of $417,000, income tax expense of $168,000 and non–interest expense of $94,000, offset by a decrease in net interest income of $4.1 million.
Net interest income was $42.1 million in the third quarter of 2023, compared to $46.2 million in the linked quarter which benefited from a swap termination fee of $1.5 million.
Total non–interest income of $11.8 million was $833,000 higher in the third quarter of 2023 when compared to the second quarter of 2023, primarily due to a $615,000 increase in other income and a $577,000 increase in gain on sale of mortgage loans, offset by a decrease of $398,000 in interchange fees.
Total non–interest expense was $94,000 lower in the third quarter of 2023 when compared to the second quarter of 2023, primarily due to a $277,000 decrease in loan expense, a $199,000 decrease in outside services and consultants and a $119,000 decrease in other expense, offset by an increase $460,000 increase in FDIC insurance expense from the linked quarter.
Horizon's effective tax rate was 7.3% for the third quarter of 2023, with income tax expense of $1.3 million decreasing $168,000 when compared to the second quarter of 2023.
Net Interest Margin
Horizon's net interest margin ("NIM") was 2.41% for the third quarter of 2023. This compared to 2.69% for the second quarter of 2023, when NIM benefited by approximately 0.08% from a non–recurring swap termination fee.
Net interest margin, excluding the aforementioned swap termination fee in the linked quarter and acquisition–related purchase accounting adjustments ("adjusted net interest margin"), was 2.38% for the third quarter of 2023, compared to 2.57% 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 $4.36 billion on September 30, 2023 compared to $4.27 billion on June 30, 2023. During the three months ended September 30, 2023, commercial loans increased $83.0 million, consumer loans increased $25.6 million and residential mortgage loans increased $648,000, offset by a decrease in mortgage warehouse loans of $16.4 million and loans held for sale of $4.1 million.
Lending activity in the third quarter was led by strong results of our relationship banking model in commercial lending. Mortgage banking activities aligned with client demand in a continuing rising interest rate environment, while the lift in consumer balances was primarily in home equity loans, which offset a decrease in indirect auto lending. These results reflect the continued strategic shift of the organization to focus on higher yielding assets.
| Loan Growth by Type | ||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||
| September 30, | June 30, | QTD | QTD | Annualized | ||||||||||||
| 2023 | 2023 | $ Change | % Change | % Change | ||||||||||||
| Commercial | $ | 2,589,244 | $ | 2,506,279 | $ | 82,965 | 3.3 | % | 13.1 | % | ||||||
| Residential mortgage | 675,399 | 674,751 | 648 | 0.1 | % | 0.4 | % | |||||||||
| Mortgage warehouse | 65,923 | 82,345 | (16,422 | ) | (19.9 | )% | (79.1 | )% | ||||||||
| Consumer | 1,028,436 | 1,002,885 | 25,551 | 2.5 | % | 10.1 | % | |||||||||
| Total loans | 4,359,002 | 4,266,260 | 92,742 | 2.6 | % | 8.6 | % | |||||||||
| Loans held for sale | 2,828 | 6,933 | (4,105 | ) | (59.2 | )% | (234.9 | )% | ||||||||
| Total loans and loans held for sale | $ | 4,361,830 | $ | 4,273,193 | $ | 88,637 | 2.5 | % | 8.2 | % | ||||||
Deposit Activity
Total deposit balances of $5.70 billion on September 30, 2023 decreased 0.16% compared to $5.71 billion on June 30, 2023.
The deposit mix at the end of the third quarter of 2023 represented the demand for clients to earn more interest on their excess funds and consumers spending excess liquidity. The Bank's tenured and granular core deposit relationships remain steadfast, reflecting the value of Horizon's relationship banking model and local community engagement.
| Deposit Growth by Type | |||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||
| September 30, | June 30, | QTD | QTD | Annualized | |||||||||||
| 2023 | 2023 | $ Change | % Change | % Change | |||||||||||
| Non–interest bearing | $ | 1,126,703 | $ | 1,170,055 | $ | (43,352 | ) | (3.7 | )% | (15.0 | )% | ||||
| Interest bearing | 3,322,788 | 3,289,474 | 33,314 | 1.0 | % | 4.1 | % | ||||||||
| Time deposits | 1,250,606 | 1,249,803 | 803 | 0.1 | % | 0.3 | % | ||||||||
| Total deposits | $ | 5,700,097 | $ | 5,709,332 | $ | (9,235 | ) | (0.2 | )% | (0.7 | )% | ||||
Capital
The capital resources of the Company and the Bank continued to exceed regulatory capital ratios for "well capitalized" banks at September 30, 2023. Stockholders' equity totaled $693.4 million at September 30, 2023 and the ratio of average stockholders' equity to average assets was 8.99% for the nine months ended September 30, 2023.
Tangible book value, which excludes intangible assets from total equity, per common share ("TBVPS") was $12.00, decreasing $0.34 during the third quarter of 2023, as meaningfully higher interest rates led to unrealized net losses on securities available for sale ("AFS") of $2.83 per common share, reducing accumulated other comprehensive income ("AOCI") by $25.5 million in the three months ending September 30, 2023. TBVPS increased by $0.41 during the first nine months of the year. Tangible common equity was changed modestly to 6.72% of tangible assets as of September 30, 2023, a decrease of 19 basis points during the quarter but still elevated by 16 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 September 30, 2023.
| Actual | Required for Capital Adequacy Purposes | Required for Capital Adequacy Purposes with Capital Buffer | Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||||||||||||
| $ | Ratio | $ | Ratio | $ | Ratio | $ | Ratio | |||||||||||||||||
| Total capital (to risk–weighted assets) | ||||||||||||||||||||||||
| Consolidated | $ | 812,586 | 14.55 | % | $ | 446,920 | 8.00 | % | $ | 586,582 | 10.50 | % | N/A | N/A | ||||||||||
| Bank | 741,748 | 13.28 | % | 446,733 | 8.00 | % | 586,337 | 10.50 | % | $ | 558,416 | 10.00 | % | |||||||||||
| Tier 1 capital (to risk–weighted assets) | ||||||||||||||||||||||||
| Consolidated | 762,887 | 13.66 | % | 335,190 | 6.00 | % | 474,852 | 8.50 | % | N/A | N/A | |||||||||||||
| Bank | 692,049 | 12.39 | % | 335,050 | 6.00 | % | 474,654 | 8.50 | % | 446,733 | 8.00 | % | ||||||||||||
| Common equity tier 1 capital (to risk–weighted assets) | ||||||||||||||||||||||||
| Consolidated | 646,716 | 11.58 | % | 251,392 | 4.50 | % | 391,055 | 7.00 | % | N/A | N/A | |||||||||||||
| Bank | 692,049 | 12.39 | % | 251,287 | 4.50 | % | 390,891 | 7.00 | % | 362,971 | 6.50 | % | ||||||||||||
| Tier 1 capital (to average assets) | ||||||||||||||||||||||||
| Consolidated | 762,887 | 9.98 | % | 305,700 | 4.00 | % | 305,700 | 4.00 | % | N/A | N/A | |||||||||||||
| Bank | 692,049 | 8.94 | % | 309,532 | 4.00 | % | 309,532 | 4.00 | % | 386,915 | 5.00 | % | ||||||||||||
Liquidity
The Bank maintains a stable base of core deposits provided by long–standing and new relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayments, investment security cash flows, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the "FHLB"). On September 30, 2023, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.64 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Bank. The Bank had approximately $622.9 million of unpledged investment securities on September 30, 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 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 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) | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| Balance sheet: | |||||||||||||||
| Total assets | $ | 7,959,434 | $ | 7,963,353 | $ | 7,897,995 | $ | 7,872,518 | $ | 7,718,695 | |||||
| Interest earning deposits & federal funds sold | 76,293 | 119,637 | 30,221 | 12,233 | 7,302 | ||||||||||
| Interest earning time deposits | 2,207 | 2,452 | 3,098 | 2,812 | 2,814 | ||||||||||
| Investment securities | 2,831,651 | 2,889,309 | 2,958,978 | 3,020,306 | 3,017,191 | ||||||||||
| Commercial loans | 2,589,244 | 2,506,279 | 2,505,459 | 2,467,422 | 2,403,743 | ||||||||||
| Mortgage warehouse loans | 65,923 | 82,345 | 52,957 | 69,529 | 73,690 | ||||||||||
| Residential mortgage loans | 675,399 | 674,751 | 662,459 | 653,292 | 634,901 | ||||||||||
| Consumer loans | 1,028,436 | 1,002,885 | 1,026,076 | 967,755 | 919,198 | ||||||||||
| Total loans | 4,359,002 | 4,266,260 | 4,246,951 | 4,157,998 | 4,031,532 | ||||||||||
| Earning assets | 7,306,490 | 7,319,100 | 7,273,921 | 7,225,833 | 7,087,368 | ||||||||||
| Non–interest bearing deposit accounts | 1,126,703 | 1,170,055 | 1,231,845 | 1,277,768 | 1,315,155 | ||||||||||
| Interest bearing transaction accounts | 3,322,788 | 3,289,474 | 3,402,525 | 3,582,891 | 3,736,798 | ||||||||||
| Time deposits | 1,250,606 | 1,249,803 | 1,067,575 | 997,115 | 778,885 | ||||||||||
| Total deposits | 5,700,097 | 5,709,332 | 5,701,945 | 5,857,774 | 5,830,838 | ||||||||||
| Borrowings | 1,356,510 | 1,352,039 | 1,311,927 | 1,142,949 | 1,048,091 | ||||||||||
| Subordinated notes | 59,007 | 58,970 | 58,933 | 58,896 | 58,860 | ||||||||||
| Junior subordinated debentures issued to capital trusts | 57,201 | 57,143 | 57,087 | 57,027 | 56,966 | ||||||||||
| Total stockholders' equity | 693,369 | 709,243 | 702,559 | 677,375 | 644,993 | ||||||||||
| Financial Highlights | ||||||||||||||||||||
| (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||||
| Income statement: | ||||||||||||||||||||
| Net interest income | $ | 42,090 | $ | 46,160 | $ | 45,237 | $ | 48,782 | $ | 51,861 | ||||||||||
| Credit loss expense (recovery) | 263 | 680 | 242 | (69 | ) | (601 | ) | |||||||||||||
| Non–interest income | 11,830 | 10,997 | 9,620 | 10,674 | 10,188 | |||||||||||||||
| Non–interest expense | 36,168 | 36,262 | 34,524 | 35,711 | 36,816 | |||||||||||||||
| Income tax expense | 1,284 | 1,452 | 1,863 | 2,649 | 2,013 | |||||||||||||||
| Net income | $ | 16,205 | $ | 18,763 | $ | 18,228 | $ | 21,165 | $ | 23,821 | ||||||||||
| Per share data: | ||||||||||||||||||||
| Basic earnings per share | $ | 0.37 | $ | 0.43 | $ | 0.42 | $ | 0.49 | $ | 0.55 | ||||||||||
| Diluted earnings per share | 0.37 | 0.43 | 0.42 | 0.48 | 0.55 | |||||||||||||||
| Cash dividends declared per common share | 0.16 | 0.16 | 0.16 | 0.16 | 0.16 | |||||||||||||||
| Book value per common share | 15.89 | 16.25 | 16.11 | 15.55 | 14.80 | |||||||||||||||
| Tangible book value per common share | 12.00 | 12.34 | 12.17 | 11.59 | 10.82 | |||||||||||||||
| Market value – high | 12.68 | 11.10 | 16.32 | 20.00 | 20.59 | |||||||||||||||
| Market value – low | $ | 9.90 | $ | 7.75 | $ | 10.31 | $ | 14.51 | $ | 16.74 | ||||||||||
| Weighted average shares outstanding – Basis | 43,646,609 | 43,639,987 | 43,583,554 | 43,574,151 | 43,573,370 | |||||||||||||||
| Weighted average shares outstanding – Diluted | 43,796,069 | 43,742,588 | 43,744,721 | 43,667,953 | 43,703,793 | |||||||||||||||
| Key ratios: | ||||||||||||||||||||
| Return on average assets | 0.81 | % | 0.96 | % | 0.94 | % | 1.09 | % | 1.24 | % | ||||||||||
| Return on average common stockholders' equity | 8.99 | 10.59 | 10.66 | 12.72 | 13.89 | |||||||||||||||
| Net interest margin | 2.41 | 2.69 | 2.67 | 2.85 | 3.04 | |||||||||||||||
| Allowance for credit losses to total loans | 1.14 | 1.17 | 1.17 | 1.21 | 1.27 | |||||||||||||||
| Average equity to average assets | 9.03 | 9.07 | 8.86 | 8.55 | 8.91 | |||||||||||||||
| Efficiency ratio | 67.08 | 63.44 | 62.93 | 60.06 | 59.33 | |||||||||||||||
| Annualized non–interest expense to average assets | 1.81 | 1.86 | 1.79 | 1.84 | 1.91 | |||||||||||||||
| Bank only capital ratios: | ||||||||||||||||||||
| Tier 1 capital to average assets | 8.94 | 8.72 | 8.86 | 8.89 | 8.84 | |||||||||||||||
| Tier 1 capital to risk weighted assets | 12.39 | 12.12 | 12.65 | 12.72 | 12.74 | |||||||||||||||
| Total capital to risk weighted assets | 13.28 | 13.03 | 13.56 | 13.59 | 13.65 | |||||||||||||||
| Financial Highlights | ||||||||
| (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Income statement: | ||||||||
| Net interest income | $ | 133,487 | $ | 150,736 | ||||
| Credit loss expense (recovery) | 1,185 | (1,747 | ) | |||||
| Non–interest income | 32,447 | 36,777 | ||||||
| Non–interest expense | 106,954 | 107,490 | ||||||
| Income tax expense | 4,599 | 9,527 | ||||||
| Net income | $ | 53,196 | $ | 72,243 | ||||
| Per share data: | ||||||||
| Basic earnings per share | $ | 1.22 | $ | 1.66 | ||||
| Diluted earnings per share | 1.21 | 1.65 | ||||||
| Cash dividends declared per common share | 0.32 | 0.47 | ||||||
| Book value per common share | 16.25 | 14.80 | ||||||
| Tangible book value per common share | 12.34 | 10.82 | ||||||
| Market value – high | 16.32 | 23.45 | ||||||
| Market value – low | $ | 7.75 | $ | 16.72 | ||||
| Weighted average shares outstanding – Basis | 43,611,926 | 43,567,028 | ||||||
| Weighted average shares outstanding – Diluted | 43,757,321 | 43,699,035 | ||||||
| Key ratios: | ||||||||
| Return on average assets | 0.90 | % | 1.29 | % | ||||
| Return on average common stockholders' equity | 10.06 | 13.97 | ||||||
| Net interest margin | 2.59 | 3.02 | ||||||
| Allowance for credit losses to total loans | 1.14 | 1.27 | ||||||
| Average equity to average assets | 8.99 | 9.25 | ||||||
| Efficiency ratio | 64.46 | 57.32 | ||||||
| Annualized non–interest expense to average assets | 1.82 | 1.92 | ||||||
| Bank only capital ratios: | ||||||||
| Tier 1 capital to average assets | 8.94 | 8.84 | ||||||
| Tier 1 capital to risk weighted assets | 12.39 | 12.74 | ||||||
| Total capital to risk weighted assets | 13.28 | 13.65 | ||||||
| Financial Highlights | ||||||||||||||||||||
| (Dollars in Thousands Except Ratios, Unaudited) | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||||
| Loan data: | ||||||||||||||||||||
| Substandard loans | $ | 47,624 | $ | 41,484 | $ | 49,804 | $ | 56,194 | $ | 57,932 | ||||||||||
| 30 to 89 days delinquent | 13,089 | 10,913 | 13,971 | 10,709 | 6,970 | |||||||||||||||
| Non–performing loans: | ||||||||||||||||||||
| 90 days and greater delinquent – accruing interest | 392 | 1,313 | 137 | 92 | 193 | |||||||||||||||
| Trouble debt restructures – accruing interest | — | — | — | 2,570 | 2,529 | |||||||||||||||
| Trouble debt restructures – non–accrual | — | — | — | 1,548 | 1,665 | |||||||||||||||
| Non–accrual loans | 19,056 | 20,796 | 19,660 | 17,630 | 14,771 | |||||||||||||||
| Total non–performing loans | $ | 19,448 | $ | 22,109 | $ | 19,797 | $ | 21,840 | $ | 19,158 | ||||||||||
| Non–performing loans to total loans | 0.45 | % | 0.52 | % | 0.47 | % | 0.52 | % | 0.47 | % | ||||||||||
| Allocation of the Allowance for Credit Losses | |||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| Commercial | $ | 29,472 | $ | 30,354 | $ | 31,156 | $ | 32,445 | $ | 33,806 | |||||
| Residential mortgage | 2,794 | 3,648 | 4,447 | 5,577 | 5,137 | ||||||||||
| Mortgage warehouse | 714 | 893 | 798 | 1,020 | 1,024 | ||||||||||
| Consumer | 16,719 | 15,081 | 13,125 | 11,422 | 11,402 | ||||||||||
| Total | $ | 49,699 | $ | 49,976 | $ | 49,526 | $ | 50,464 | $ | 51,369 | |||||
| Net Charge–offs (Recoveries) | ||||||||||||||||||||
| (Dollars in Thousands Except Ratios, Unaudited) | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||||
| Commercial | $ | 142 | $ | 101 | $ | 104 | $ | (94 | ) | $ | 51 | |||||||||
| Residential mortgage | (39 | ) | (10 | ) | (6 | ) | (8 | ) | (75 | ) | ||||||||||
| Mortgage warehouse | — | — | — | — | — | |||||||||||||||
| Consumer | 619 | 183 | 281 | 387 | 162 | |||||||||||||||
| Total | $ | 722 | $ | 274 | $ | 379 | $ | 285 | $ | 138 | ||||||||||
| Percent of net charge–offs (recoveries) to average loans outstanding for the period | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.00 | % | ||||||||||
| Total Non–performing Loans | ||||||||||||||||||||
| (Dollars in Thousands Except Ratios, Unaudited) | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||||
| Commercial | $ | 6,969 | $ | 8,275 | $ | 8,523 | $ | 9,330 | $ | 7,199 | ||||||||||
| Residential mortgage | 7,777 | 8,168 | 6,926 | 8,123 | 8,047 | |||||||||||||||
| Mortgage warehouse | — | — | — | — | — | |||||||||||||||
| Consumer | 4,702 | 5,666 | 4,348 | 4,387 | 3,912 | |||||||||||||||
| Total | $ | 19,448 | $ | 22,109 | $ | 19,797 | $ | 21,840 | $ | 19,158 | ||||||||||
| Non–performing loans to total loans | 0.45 | % | 0.52 | % | 0.47 | % | 0.52 | % | 0.47 | % | ||||||||||
| Other Real Estate Owned and Repossessed Assets | |||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| Commercial | $ | 1,287 | $ | 1,567 | $ | 1,567 | $ | 1,881 | $ | 3,206 | |||||
| Residential mortgage | 32 | 107 | 203 | 107 | 22 | ||||||||||
| Mortgage warehouse | — | — | — | — | — | ||||||||||
| Consumer | 72 | 7 | 78 | 152 | 14 | ||||||||||
| Total | $ | 1,391 | $ | 1,681 | $ | 1,848 | $ | 2,140 | $ | 3,242 | |||||
| Average Balance Sheets | ||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | |||||||||||||||
| Assets | ||||||||||||||||||||
| Interest earning assets | ||||||||||||||||||||
| Federal funds sold | $ | 92,305 | $ | 1,247 | 5.36 | % | $ | 4,201 | $ | 24 | 2.27 | % | ||||||||
| Interest earning deposits | 8,018 | 85 | 4.21 | % | 9,994 | 41 | 1.63 | % | ||||||||||||
| Investment securities – taxable | 1,684,590 | 8,788 | 2.07 | % | 1,728,197 | 8,436 | 1.94 | % | ||||||||||||
| Investment securities – non–taxable (1) | 1,220,998 | 7,002 | 2.88 | % | 1,384,249 | 7,478 | 2.71 | % | ||||||||||||
| Loans receivable (2) (3) | 4,280,700 | 63,003 | 5.86 | % | 3,929,567 | 45,517 | 4.61 | % | ||||||||||||
| Total interest earning assets | 7,286,611 | 80,125 | 4.48 | % | 7,056,208 | 61,496 | 3.58 | % | ||||||||||||
| Non–interest earning assets | ||||||||||||||||||||
| Cash and due from banks | 100,331 | 99,221 | ||||||||||||||||||
| Allowance for credit losses | (49,705 | ) | (52,303 | ) | ||||||||||||||||
| Other assets | 587,514 | 531,976 | ||||||||||||||||||
| Total average assets | $ | 7,924,751 | $ | 7,635,102 | ||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||
| Interest bearing liabilities | ||||||||||||||||||||
| Interest bearing deposits | $ | 4,538,698 | $ | 24,704 | 2.16 | % | $ | 4,478,741 | $ | 4,116 | 0.36 | % | ||||||||
| Borrowings | 1,180,452 | 10,399 | 3.50 | % | 813,873 | 3,756 | 1.83 | % | ||||||||||||
| Repurchase agreements | 136,784 | 825 | 2.39 | % | 141,283 | 139 | 0.39 | % | ||||||||||||
| Subordinated notes | 58,983 | 880 | 5.92 | % | 58,836 | 880 | 5.93 | % | ||||||||||||
| Junior subordinated debentures issued to capital trusts | 57,166 | 1,227 | 8.52 | % | 56,928 | 744 | 5.19 | % | ||||||||||||
| Total interest bearing liabilities | 5,972,083 | 38,035 | 2.52 | % | 5,549,661 | 9,635 | 0.69 | % | ||||||||||||
| Non–interest bearing liabilities | ||||||||||||||||||||
| Demand deposits | 1,159,241 | 1,351,857 | ||||||||||||||||||
| Accrued interest payable and other liabilities | 77,942 | 53,208 | ||||||||||||||||||
| Stockholders' equity | 715,485 | 680,376 | ||||||||||||||||||
| Total average liabilities and stockholders' equity | $ | 7,924,751 | $ | 7,635,102 | ||||||||||||||||
| Net interest income / spread | $ | 42,090 | 1.96 | % | $ | 51,861 | 2.89 | % | ||||||||||||
| Net interest income as a percent of average interest earning assets (1) | 2.41 | % | 3.04 | % | ||||||||||||||||
| (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) | ||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | |||||||||||||||
| Assets | ||||||||||||||||||||
| Interest earning assets | ||||||||||||||||||||
| Federal funds sold | $ | 43,976 | $ | 1,706 | 5.19 | % | $ | 82,667 | $ | 131 | 0.21 | % | ||||||||
| Interest earning deposits | 8,597 | 254 | 3.95 | % | 15,404 | 93 | 0.81 | % | ||||||||||||
| Investment securities – taxable | 1,706,083 | 26,253 | 2.06 | % | 1,715,478 | 24,499 | 1.91 | % | ||||||||||||
| Investment securities – non–taxable (1) | 1,258,345 | 21,617 | 2.91 | % | 1,346,173 | 21,482 | 2.70 | % | ||||||||||||
| Loans receivable (2) (3) | 4,216,817 | 178,961 | 5.70 | % | 3,779,921 | 122,641 | 4.36 | % | ||||||||||||
| Total interest earning assets | 7,233,818 | 228,791 | 4.35 | % | 6,939,643 | 168,846 | 3.37 | % | ||||||||||||
| Non–interest earning assets | ||||||||||||||||||||
| Cash and due from banks | 102,264 | 100,067 | ||||||||||||||||||
| Allowance for credit losses | (49,839 | ) | (53,038 | ) | ||||||||||||||||
| Other assets | 579,203 | 486,862 | ||||||||||||||||||
| Total average assets | $ | 7,865,446 | $ | 7,473,534 | ||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||
| Interest bearing liabilities | ||||||||||||||||||||
| Interest bearing deposits | $ | 4,494,821 | $ | 58,481 | 1.74 | % | $ | 4,499,441 | $ | 7,289 | 0.22 | % | ||||||||
| Borrowings | 1,137,289 | 28,702 | 3.37 | % | 644,803 | 6,209 | 1.29 | % | ||||||||||||
| Repurchase agreements | 138,706 | 2,011 | 1.94 | % | 140,837 | 216 | 0.21 | % | ||||||||||||
| Subordinated notes | 58,947 | 2,641 | 5.99 | % | 58,800 | 2,641 | 6.01 | % | ||||||||||||
| Junior subordinated debentures issued to capital trusts | 57,108 | 3,469 | 8.12 | % | 56,869 | 1,755 | 4.13 | % | ||||||||||||
| Total interest bearing liabilities | 5,886,871 | 95,304 | 2.16 | % | 5,400,750 | 18,110 | 0.45 | % | ||||||||||||
| Non–interest bearing liabilities | ||||||||||||||||||||
| Demand deposits | 1,200,133 | 1,336,912 | ||||||||||||||||||
| Accrued interest payable and other liabilities | 71,280 | 44,343 | ||||||||||||||||||
| Stockholders' equity | 707,162 | 691,529 | ||||||||||||||||||
| Total average liabilities and stockholders' equity | $ | 7,865,446 | $ | 7,473,534 | ||||||||||||||||
| Net interest income / spread | $ | 133,487 | 2.19 | % | $ | 150,736 | 2.92 | % | ||||||||||||
| Net interest income as a percent of average interest earning assets (1) | 2.59 | % | 3.02 | % | ||||||||||||||||
| (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) | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash and due from banks | $ | 175,137 | $ | 123,505 | ||||
| Interest earning time deposits | 2,207 | 2,812 | ||||||
| Investment securities, available for sale | 865,168 | 997,558 | ||||||
| Investment securities, held to maturity (fair value $1,556,845 and $1,681,309) | 1,966,483 | 2,022,748 | ||||||
| Loans held for sale | 2,828 | 5,807 | ||||||
| Loans, net of allowance for credit losses of $49,699 and $50,464 | 4,309,303 | 4,107,534 | ||||||
| Premises and equipment, net | 94,716 | 92,677 | ||||||
| Federal Home Loan Bank stock | 34,509 | 26,677 | ||||||
| Goodwill | 155,211 | 155,211 | ||||||
| Other intangible assets | 14,530 | 17,239 | ||||||
| Interest receivable | 37,850 | 35,294 | ||||||
| Cash value of life insurance | 149,212 | 146,175 | ||||||
| Other assets | 152,280 | 139,281 | ||||||
| Total assets | $ | 7,959,434 | $ | 7,872,518 | ||||
| Liabilities | ||||||||
| Deposits | ||||||||
| Non–interest bearing | $ | 1,126,703 | $ | 1,277,768 | ||||
| Interest bearing | 4,573,394 | 4,580,006 | ||||||
| Total deposits | 5,700,097 | 5,857,774 | ||||||
| Borrowings | 1,356,510 | 1,142,949 | ||||||
| Subordinated notes | 59,007 | 58,896 | ||||||
| Junior subordinated debentures issued to capital trusts | 57,201 | 57,027 | ||||||
| Interest payable | 16,281 | 5,380 | ||||||
| Other liabilities | 76,969 | 73,117 | ||||||
| Total liabilities | 7,266,065 | 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 44,116,739 and 43,937,889 shares | — | — | ||||||
| Additional paid–in capital | 355,478 | 354,188 | ||||||
| Retained earnings | 461,325 | 429,385 | ||||||
| Accumulated other comprehensive income (loss) | (123,434 | ) | (106,198 | ) | ||||
| Total stockholders' equity | 693,369 | 677,375 | ||||||
| Total liabilities and stockholders' equity | $ | 7,959,434 | $ | 7,872,518 | ||||
| Condensed Consolidated Statements of Income | ||||||||||||||||||
| (Dollars in Thousands Except Per Share Data, Unaudited) | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||
| Interest income | ||||||||||||||||||
| Loans receivable | $ | 63,003 | $ | 60,594 | $ | 55,364 | $ | 50,859 | $ | 45,517 | ||||||||
| Investment securities – taxable | 8,788 | 8,740 | 8,725 | 8,702 | 8,436 | |||||||||||||
| Investment securities – non–taxable | 7,002 | 7,059 | 7,556 | 7,543 | 7,478 | |||||||||||||
| Other | 1,332 | 475 | 153 | 83 | 65 | |||||||||||||
| Total interest income | 80,125 | 76,868 | 71,798 | 67,187 | 61,496 | |||||||||||||
| Interest expense | ||||||||||||||||||
| Deposits | 24,704 | 18,958 | 14,819 | 10,520 | 4,116 | |||||||||||||
| Borrowed funds | 11,224 | 9,718 | 9,771 | 6,040 | 3,895 | |||||||||||||
| Subordinated notes | 880 | 881 | 880 | 881 | 880 | |||||||||||||
| Junior subordinated debentures issued capital trusts | 1,227 | 1,151 | 1,091 | 964 | 744 | |||||||||||||
| Total interest expense | 38,035 | 30,708 | 26,561 | 18,405 | 9,635 | |||||||||||||
| Net interest income | 42,090 | 46,160 | 45,237 | 48,782 | 51,861 | |||||||||||||
| Credit loss expense (recovery) | 263 | 680 | 242 | (69 | ) | (601 | ) | |||||||||||
| Net interest income after credit loss expense | 41,827 | 45,480 | 44,995 | 48,851 | 52,462 | |||||||||||||
| Non–interest Income | ||||||||||||||||||
| Service charges on deposit accounts | 3,086 | 3,021 | 3,028 | 2,947 | 3,023 | |||||||||||||
| Wire transfer fees | 120 | 116 | 109 | 118 | 148 | |||||||||||||
| Interchange fees | 3,186 | 3,584 | 2,867 | 2,951 | 3,089 | |||||||||||||
| Fiduciary activities | 1,206 | 1,247 | 1,275 | 1,270 | 1,203 | |||||||||||||
| Gain (loss) on sale of investment securities | — | 20 | (500 | ) | — | — | ||||||||||||
| Gain on sale of mortgage loans | 1,582 | 1,005 | 785 | 1,196 | 1,441 | |||||||||||||
| Mortgage servicing income net of impairment | 631 | 640 | 713 | 637 | 355 | |||||||||||||
| Increase in cash value of bank owned life insurance | 1,055 | 1,015 | 981 | 751 | 814 | |||||||||||||
| Other income | 964 | 349 | 362 | 804 | 115 | |||||||||||||
| Total non–interest income | 11,830 | 10,997 | 9,620 | 10,674 | 10,188 | |||||||||||||
| Non–interest expense | ||||||||||||||||||
| Salaries and employee benefits | 20,058 | 20,162 | 18,712 | 19,978 | 20,613 | |||||||||||||
| Net occupancy expenses | 3,283 | 3,249 | 3,563 | 3,279 | 3,293 | |||||||||||||
| Data processing | 2,999 | 3,016 | 2,669 | 2,884 | 2,539 | |||||||||||||
| Professional fees | 707 | 633 | 533 | 694 | 552 | |||||||||||||
| Outside services and consultants | 2,316 | 2,515 | 2,717 | 2,985 | 2,855 | |||||||||||||
| Loan expense | 1,120 | 1,397 | 1,118 | 1,281 | 1,392 | |||||||||||||
| FDIC insurance expense | 1,300 | 840 | 540 | 388 | 670 | |||||||||||||
| Core deposit intangible amortization | 903 | 903 | 903 | 925 | 926 | |||||||||||||
| Other losses | 188 | 134 | 221 | 118 | 398 | |||||||||||||
| Other expenses | 3,294 | 3,413 | 3,548 | 3,179 | 3,578 | |||||||||||||
| Total non–interest expense | 36,168 | 36,262 | 34,524 | 35,711 | 36,816 | |||||||||||||
| Income before income taxes | 17,489 | 20,215 | 20,091 | 23,814 | 25,834 | |||||||||||||
| Income tax expense | 1,284 | 1,452 | 1,863 | 2,649 | 2,013 | |||||||||||||
| Net income | $ | 16,205 | $ | 18,763 | $ | 18,228 | $ | 21,165 | $ | 23,821 | ||||||||
| Basic earnings per share | $ | 0.37 | $ | 0.43 | $ | 0.42 | $ | 0.49 | $ | 0.55 | ||||||||
| Diluted earnings per share | 0.37 | 0.43 | 0.42 | 0.48 | 0.55 | |||||||||||||
| Condensed Consolidated Statements of Income | ||||||||
| (Dollars in Thousands Except Per Share Data, Unaudited) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Interest income | ||||||||
| Loans receivable | $ | 178,961 | $ | 122,641 | ||||
| Investment securities – taxable | 26,253 | 24,500 | ||||||
| Investment securities – non–taxable | 21,617 | 21,482 | ||||||
| Other | 1,960 | 223 | ||||||
| Total interest income | 228,791 | 168,846 | ||||||
| Interest expense | ||||||||
| Deposits | 58,481 | 7,289 | ||||||
| Borrowed funds | 30,713 | 6,425 | ||||||
| Subordinated notes | 2,641 | 2,641 | ||||||
| Junior subordinated debentures issued capital trusts | 3,469 | 1,755 | ||||||
| Total interest expense | 95,304 | 18,110 | ||||||
| Net interest income | 133,487 | 150,736 | ||||||
| Credit loss expense (recovery) | 1,185 | (1,747 | ) | |||||
| Net interest income after credit loss expense | 132,302 | 152,483 | ||||||
| Non–interest Income | ||||||||
| Service charges on deposit accounts | 9,135 | 8,651 | ||||||
| Wire transfer fees | 345 | 477 | ||||||
| Interchange fees | 9,637 | 9,451 | ||||||
| Fiduciary activities | 3,728 | 4,111 | ||||||
| Gain (loss) on sale of investment securities | (480 | ) | — | |||||
| Gain on sale of mortgage loans | 3,372 | 5,969 | ||||||
| Mortgage servicing income net of impairment | 1,984 | 4,163 | ||||||
| Increase in cash value of bank owned life insurance | 3,051 | 1,843 | ||||||
| Death benefit on bank owned life insurance | — | 644 | ||||||
| Other income | 1,675 | 1,468 | ||||||
| Total non–interest income | 32,447 | 36,777 | ||||||
| Non–interest expense | ||||||||
| Salaries and employee benefits | 58,932 | 60,305 | ||||||
| Net occupancy expenses | 10,095 | 10,044 | ||||||
| Data processing | 8,684 | 7,683 | ||||||
| Professional fees | 1,873 | 1,149 | ||||||
| Outside services and consultants | 7,548 | 7,865 | ||||||
| Loan expense | 3,635 | 4,130 | ||||||
| FDIC insurance expense | 2,680 | 2,170 | ||||||
| Core deposit intangible amortization | 2,709 | 2,777 | ||||||
| Other losses | 543 | 928 | ||||||
| Other expenses | 10,255 | 10,439 | ||||||
| Total non–interest expense | 106,954 | 107,490 | ||||||
| Income before income taxes | 57,795 | 81,770 | ||||||
| Income tax expense | 4,599 | 9,527 | ||||||
| Net income | $ | 53,196 | $ | 72,243 | ||||
| Basic earnings per share | $ | 1.22 | $ | 1.66 | ||||
| Diluted earnings per share | 1.21 | 1.65 | ||||||
Use of Non–GAAP Financial Measures
Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non–GAAP financial measures relating to net income, diluted earnings per share, pre–tax, pre–provision net income, net interest margin, tangible stockholders' equity and tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and return on average tangible equity. In each case, we have identified special circumstances that we consider to be non–recurring and have excluded them. We believe that this shows the impact of such events as acquisition–related purchase accounting adjustments and swap termination fees, among others we have identified in our reconciliations. Horizon believes these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP information identified herein and its most comparable GAAP measures.
| Non–GAAP Reconciliation of Net Income | |||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | |||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Net income as reported | $ | 16,205 | $ | 18,763 | $ | 18,228 | $ | 21,165 | $ | 23,821 | $ | 53,196 | $ | 72,243 | |||||||||||
| Swap termination fee | — | (1,453 | ) | — | — | — | (1,453 | ) | — | ||||||||||||||||
| Tax effect | — | 305 | — | — | — | 305 | — | ||||||||||||||||||
| Net income excluding swap termination fee | 16,205 | 17,615 | 18,228 | 21,165 | 23,821 | 52,048 | 72,243 | ||||||||||||||||||
| (Gain) / loss on sale of investment securities | — | (20 | ) | 500 | — | — | 480 | — | |||||||||||||||||
| Tax effect | — | 4 | (105 | ) | — | — | (101 | ) | — | ||||||||||||||||
| Net income excluding (gain) / loss on sale of investment securities | 16,205 | 17,599 | 18,623 | 21,165 | 23,821 | 52,427 | 72,243 | ||||||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | — | — | — | — | — | — | (644 | ) | |||||||||||||||||
| Net income excluding death benefit on BOLI | 16,205 | 17,599 | 18,623 | 21,165 | 23,821 | 52,427 | 71,599 | ||||||||||||||||||
| Adjusted net income | $ | 16,205 | $ | 17,599 | $ | 18,623 | $ | 21,165 | $ | 23,821 | $ | 52,427 | $ | 71,599 | |||||||||||
| Non–GAAP Reconciliation of Diluted Earnings per Share | ||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||
| Diluted earnings per share ("EPS") as reported | $ | 0.37 | $ | 0.43 | $ | 0.42 | $ | 0.48 | $ | 0.55 | $ | 1.21 | $ | 1.65 | ||||||||||
| Swap termination fee | — | (0.03 | ) | — | — | — | (0.03 | ) | — | |||||||||||||||
| Tax effect | — | 0.01 | — | — | — | 0.01 | — | |||||||||||||||||
| Diluted EPS excluding swap termination fee | 0.37 | 0.41 | 0.42 | 0.48 | 0.55 | 1.19 | 1.65 | |||||||||||||||||
| (Gain) / loss on sale of investment securities | — | — | 0.01 | — | — | 0.01 | — | |||||||||||||||||
| Tax effect | — | — | — | — | — | — | — | |||||||||||||||||
| Diluted EPS excluding (gain) / loss on sale of investment securities | 0.37 | 0.41 | 0.43 | 0.48 | 0.55 | 1.20 | 1.65 | |||||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | — | — | — | — | — | — | (0.01 | ) | ||||||||||||||||
| Diluted EPS excluding death benefit on BOLI | 0.37 | 0.41 | 0.43 | 0.48 | 0.55 | 1.20 | 1.64 | |||||||||||||||||
| Adjusted diluted EPS | $ | 0.37 | $ | 0.41 | $ | 0.43 | $ | 0.48 | $ | 0.55 | $ | 1.20 | $ | 1.64 | ||||||||||
| Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income | ||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Pre–tax income | $ | 17,489 | $ | 20,215 | $ | 20,091 | $ | 23,814 | $ | 25,834 | $ | 57,795 | $ | 81,770 | ||||||||||||
| Credit loss expense (recovery) | 263 | 680 | 242 | (69 | ) | (601 | ) | 1,185 | (1,747 | ) | ||||||||||||||||
| Pre–tax, pre–provision net income | $ | 17,752 | $ | 20,895 | $ | 20,333 | $ | 23,745 | $ | 25,233 | $ | 58,980 | $ | 80,023 | ||||||||||||
| Pre–tax, pre–provision net income | $ | 17,752 | $ | 20,895 | $ | 20,333 | $ | 23,745 | $ | 25,233 | $ | 58,980 | $ | 80,023 | ||||||||||||
| Swap termination fee | — | (1,453 | ) | — | — | — | (1,453 | ) | — | |||||||||||||||||
| (Gain) / loss on sale of investment securities | — | (20 | ) | 500 | — | — | 480 | — | ||||||||||||||||||
| Death benefit on BOLI | — | — | — | — | — | — | (644 | ) | ||||||||||||||||||
| Adjusted pre–tax, pre–provision net income | $ | 17,752 | $ | 19,422 | $ | 20,833 | $ | 23,745 | $ | 25,233 | $ | 58,007 | $ | 79,379 | ||||||||||||
| Non–GAAP Reconciliation of Net Interest Margin | ||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Net interest income as reported | $ | 42,090 | $ | 46,160 | $ | 45,237 | $ | 48,782 | $ | 51,861 | $ | 133,487 | $ | 150,736 | ||||||||||||||
| Average interest earning assets | 7,286,611 | 7,212,640 | 7,201,266 | 7,091,980 | 7,056,208 | 7,233,818 | 6,939,643 | |||||||||||||||||||||
| Net interest income as a percentage of average interest earning assets ("Net Interest Margin") | 2.41 | % | 2.69 | % | 2.67 | % | 2.85 | % | 3.04 | % | 2.59 | % | 3.02 | % | ||||||||||||||
| Net interest income as reported | $ | 42,090 | $ | 46,160 | $ | 45,237 | $ | 48,782 | $ | 51,861 | $ | 133,487 | $ | 150,736 | ||||||||||||||
| Acquisition–related purchase accounting adjustments ("PAUs") | (435 | ) | (651 | ) | (367 | ) | (431 | ) | (906 | ) | (1,453 | ) | (3,045 | ) | ||||||||||||||
| Swap termination fee | — | (1,453 | ) | — | — | — | (1,453 | ) | — | |||||||||||||||||||
| Adjusted net interest income | $ | 41,655 | $ | 44,056 | $ | 44,870 | $ | 48,351 | $ | 50,955 | $ | 130,581 | $ | 147,691 | ||||||||||||||
| Adjusted net interest margin | 2.38 | % | 2.57 | % | 2.65 | % | 2.83 | % | 2.99 | % | 2.53 | % | 2.96 | % | ||||||||||||||
| Non–GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share | |||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| Total stockholders' equity | $ | 693,369 | $ | 709,243 | $ | 702,559 | $ | 677,375 | $ | 644,993 | |||||
| Less: Intangible assets | 169,741 | 170,644 | 171,547 | 172,450 | 173,375 | ||||||||||
| Total tangible stockholders' equity | $ | 523,628 | $ | 538,599 | $ | 531,012 | $ | 504,925 | $ | 471,618 | |||||
| Common shares outstanding | 43,648,501 | 43,645,216 | 43,621,422 | 43,574,151 | 43,574,151 | ||||||||||
| Book value per common share | $ | 15.89 | $ | 16.25 | $ | 16.11 | $ | 15.55 | $ | 14.80 | |||||
| Tangible book value per common share | $ | 12.00 | $ | 12.34 | $ | 12.17 | $ | 11.59 | $ | 10.82 | |||||
| Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio | ||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Non–interest expense as reported | $ | 36,168 | $ | 36,262 | $ | 34,524 | $ | 35,711 | $ | 36,816 | $ | 106,954 | $ | 107,490 | ||||||||||||||
| Net interest income as reported | 42,090 | 46,160 | 45,237 | 48,782 | 51,861 | 133,487 | 150,736 | |||||||||||||||||||||
| Non–interest income as reported | $ | 11,830 | $ | 10,997 | $ | 9,620 | $ | 10,674 | $ | 10,188 | $ | 32,447 | $ | 36,777 | ||||||||||||||
| Non–interest expense / (Net interest income + Non–interest income) ("Efficiency Ratio") | 67.08 | % | 63.44 | % | 62.93 | % | 60.06 | % | 59.33 | % | 64.46 | % | 57.32 | % | ||||||||||||||
| Non–interest expense as reported | $ | 36,168 | $ | 36,262 | $ | 34,524 | $ | 35,711 | $ | 36,816 | $ | 106,954 | $ | 107,490 | ||||||||||||||
| Net interest income as reported | 42,090 | 46,160 | 45,237 | 48,782 | 51,861 | 133,487 | 150,736 | |||||||||||||||||||||
| Swap termination fee | — | (1,453 | ) | — | — | — | (1,453 | ) | — | |||||||||||||||||||
| Net interest income excluding swap termination fee | 42,090 | 44,707 | 45,237 | 48,782 | 51,861 | 132,034 | 150,736 | |||||||||||||||||||||
| Non–interest income as reported | 11,830 | 10,997 | 9,620 | 10,674 | 10,188 | 32,447 | 36,777 | |||||||||||||||||||||
| (Gain) / loss on sale of investment securities | — | (20 | ) | 500 | — | — | 480 | — | ||||||||||||||||||||
| Death benefit on BOLI | — | — | — | — | — | — | (644 | ) | ||||||||||||||||||||
| Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI | $ | 11,830 | $ | 10,977 | $ | 10,120 | $ | 10,674 | $ | 10,188 | $ | 32,927 | $ | 36,133 | ||||||||||||||
| Adjusted efficiency ratio | 67.08 | % | 65.12 | % | 62.37 | % | 60.06 | % | 59.33 | % | 64.84 | % | 57.52 | % | ||||||||||||||
| Non–GAAP Reconciliation of Return on Average Assets | ||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Average assets | $ | 7,924,751 | $ | 7,840,026 | $ | 7,831,106 | $ | 7,718,366 | $ | 7,635,102 | $ | 7,865,446 | $ | 7,473,534 | ||||||||||||||
| Return on average assets ("ROAA") as reported | 0.81 | % | 0.96 | % | 0.94 | % | 1.09 | % | 1.24 | % | 0.90 | % | 1.29 | % | ||||||||||||||
| Swap termination fee | — | (0.07 | ) | — | — | — | (0.02 | ) | — | |||||||||||||||||||
| Tax effect | — | 0.02 | — | — | — | 0.01 | — | |||||||||||||||||||||
| ROAA excluding swap termination fee | 0.81 | 0.91 | 0.94 | 1.09 | 1.24 | 0.89 | 1.29 | |||||||||||||||||||||
| (Gain) / loss on sale of investment securities | — | — | 0.03 | — | — | 0.01 | — | |||||||||||||||||||||
| Tax effect | — | — | (0.01 | ) | — | — | — | — | ||||||||||||||||||||
| ROAA excluding (gain) / loss on sale of investment securities | 0.81 | 0.91 | 0.96 | 1.09 | 1.24 | 0.90 | 1.29 | |||||||||||||||||||||
| Death benefit on BOLI | — | — | — | — | — | — | (0.01 | ) | ||||||||||||||||||||
| ROAA excluding death benefit on BOLI | 0.81 | 0.91 | 0.96 | 1.09 | 1.24 | 0.90 | 1.28 | |||||||||||||||||||||
| Adjusted ROAA | 0.81 | % | 0.91 | % | 0.96 | % | 1.09 | % | 1.24 | % | 0.90 | % | 1.28 | % | ||||||||||||||
| Non–GAAP Reconciliation of Return on Average Common Equity | ||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Average common equity | $ | 715,485 | $ | 710,953 | $ | 693,472 | $ | 660,188 | $ | 680,376 | $ | 707,162 | $ | 691,529 | ||||||||||||||
| Return on average common equity ("ROACE") as reported | 8.99 | % | 10.59 | % | 10.66 | % | 12.72 | % | 13.89 | % | 10.06 | % | 13.97 | % | ||||||||||||||
| Swap termination fee | — | (0.82 | ) | — | — | — | (0.27 | ) | — | |||||||||||||||||||
| Tax effect | — | 0.17 | — | — | — | 0.06 | — | |||||||||||||||||||||
| ROACE excluding swap termination fee | 8.99 | 9.94 | 10.66 | 12.72 | 13.89 | 9.85 | 13.97 | |||||||||||||||||||||
| (Gain) / loss on sale of investment securities | — | (0.01 | ) | 0.29 | — | — | 0.09 | — | ||||||||||||||||||||
| Tax effect | — | — | (0.06 | ) | — | — | (0.02 | ) | — | |||||||||||||||||||
| ROACE excluding (gain) / loss on sale of investment securities | 8.99 | 9.93 | 10.89 | 12.72 | 13.89 | 9.92 | 13.97 | |||||||||||||||||||||
| Death benefit on BOLI | — | — | — | — | — | — | (0.12 | ) | ||||||||||||||||||||
| ROACE excluding death benefit on BOLI | 8.99 | 9.93 | 10.89 | 12.72 | 13.89 | 9.92 | 13.85 | |||||||||||||||||||||
| Adjusted ROACE | 8.99 | % | 9.93 | % | 10.89 | % | 12.72 | % | 13.89 | % | 9.92 | % | 13.85 | % | ||||||||||||||
| Non–GAAP Reconciliation of Return on Average Tangible Equity | ||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Average common equity | $ | 715,485 | $ | 710,953 | $ | 693,472 | $ | 660,188 | $ | 680,376 | $ | 707,162 | $ | 691,529 | ||||||||||||||
| Less: Average intangible assets | 170,301 | 171,177 | 172,139 | 173,050 | 173,546 | 171,199 | 174,323 | |||||||||||||||||||||
| Average tangible equity | $ | 545,184 | $ | 539,776 | $ | 521,333 | $ | 487,138 | $ | 506,830 | $ | 535,963 | $ | 517,206 | ||||||||||||||
| Return on average tangible equity ("ROATE") as reported | 11.79 | % | 13.94 | % | 14.18 | % | 17.24 | % | 18.65 | % | 13.27 | % | 18.68 | % | ||||||||||||||
| Swap termination fee | — | (1.08 | ) | — | — | — | (0.36 | ) | — | |||||||||||||||||||
| Tax effect | — | 0.23 | — | — | — | 0.08 | — | |||||||||||||||||||||
| ROATE excluding swap termination fee | 11.79 | 13.09 | 14.18 | 17.24 | 18.65 | 12.99 | 18.68 | |||||||||||||||||||||
| (Gain) / loss on sale of investment securities | — | (0.01 | ) | 0.39 | — | — | 0.12 | — | ||||||||||||||||||||
| Tax effect | — | — | (0.08 | ) | — | — | (0.03 | ) | — | |||||||||||||||||||
| ROATE excluding (gain) / loss on sale of investment securities | 11.79 | 13.08 | 14.49 | 17.24 | 18.65 | 13.08 | 18.68 | |||||||||||||||||||||
| Death benefit on BOLI | — | — | — | — | — | — | (0.17 | ) | ||||||||||||||||||||
| ROATE excluding death benefit on BOLI | 11.79 | 13.08 | 14.49 | 17.24 | 18.65 | 13.08 | 18.51 | |||||||||||||||||||||
| Adjusted ROATE | 11.79 | % | 13.08 | % | 14.49 | % | 17.24 | % | 18.65 | % | 13.08 | % | 18.51 | % | ||||||||||||||
Earnings Conference Call
As previously announced, Horizon will host a conference call to review its third quarter financial results and operating performance.
Participants may access the live conference call on October 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 November 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 7722200.
About Horizon Bancorp, Inc.
Celebrating 150 years, Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $8.0 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 Bank's retail offerings include prime residential, indirect auto, and other 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: | October 25, 2023 |
