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,

2023

2022

2023

2022

Net income as reported

16,205

18,763

18,228

21,165

23,821

53,196

Horizon Bancorp, Inc. Reports Third Quarter 2023 Results