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Horizon Bancorp, Inc. Announces Record Earnings for 2019

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MICHIGAN CITY, Ind., Jan. 29, 2020 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) today announced its unaudited financial results for the three-month and twelve-month periods ended December 31, 2019. All share data has been adjusted to reflect Horizon’s three-for-two stock split effective June 15, 2018.

SUMMARY:

  • Net income for the year ended December 31, 2019 was $66.5 million, or $1.53 diluted earnings per share, compared to $53.1 million, or $1.38 diluted earnings per share, for the year ended December 31, 2018. This represents the highest annual net income and diluted earnings per share in the Company’s history.

  • Core net income for the year 2019 increased 31.6% to $70.7 million, or $1.63 diluted earnings per share, compared to $53.7 million, or $1.40 diluted earnings per share, for the year 2018. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for the definition of core net income.)

  • Net income for the fourth quarter of 2019 was $18.5 million, or $0.41 diluted earnings per share, compared to $13.1 million, or $0.34 diluted earnings per share, for the fourth quarter of 2018.

  • Core net income for the fourth quarter of 2019 was $18.5 million, or $0.41 diluted earnings per share, compared to $13.8 million, or $0.36 diluted earnings per share, for the fourth quarter of 2018.

  • Return on average assets was 1.35% for the year ended December 31, 2019 compared to 1.31% for the year ended December 31, 2018.

  • Core return on average assets for the year ended December 31, 2019 was 1.43% compared to 1.33% for the year ended December 31, 2018. (See the “Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” table on page 11 for the definition of core return on average assets.)

  • Consumer loans increased at a rate of 21.8%, or $119.7 million, during the year ended December 31, 2019. Excluding acquired loans, consumer loans increased at a rate of 6.3%, or $34.6 million during the year ended December 31, 2019.

  • Net interest income increased $7.7 million, or 22.7%, to $41.5 million for the fourth quarter of 2019 compared to $33.8 million for the fourth quarter of 2018. Net interest income increased $26.2 million, or 19.5%, to $160.8 million for the year ended December 31, 2019 compared to $134.6 million, for the year ended December 31, 2018.

  • Net interest margin was 3.58% for the fourth quarter of 2019 compared to 3.60% for the fourth quarter of 2018. Net interest margin was 3.69% for the year ended December 31, 2019 compared to 3.71% for the year ended December 31, 2018.

  • Core net interest margin was 3.49% for the fourth quarter of 2019 compared to 3.43% for the fourth quarter of 2018. For the year ended December 31, 2019, core net interest margin was 3.57% compared to 3.54% for the year ended December 31, 2018. (See the “Non-GAAP Reconciliation of Net Interest Margin” table on page 5 for the definition of core net interest margin.)

  • Return on average equity was 11.26% for the fourth quarter of 2019 compared to 10.73% for the fourth quarter of 2018. Return on average equity was 10.98% for the year ended December 31, 2019 compared to 11.22% for the year ended December 31, 2018.

  • Core return on average equity for the fourth quarter of 2019 was 11.25% compared to 11.26% for the fourth quarter of 2018. Core return on average equity was 11.66% for the year ended December 31, 2019 compared to 11.34% for the year ended December 31, 2018. (See the “Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” table on page 11 for the description of core return on average assets.)

  • Horizon’s tangible book value per share increased to $10.63 at December 31, 2019 compared to $10.31 and $9.43 at September 30, 2019 and December 31, 2018, respectively. This represents the highest tangible book value per share in the Company’s history. (See the “Non-GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share” table on page 10 for a reconciliation of tangible book value to its most comparable GAAP measure.)

  • On July 16, 2019, Horizon’s Board of Directors authorized a stock repurchase program for up to 2,250,000 shares of Horizon’s issued and outstanding common stock, no par value. As of December 31, 2019, Horizon had repurchased a total of 99,407 shares at an average price per share of $16.04.

Craig Dwight, Chairman and CEO of Horizon, commented: “I am pleased to announce another record year of earnings for Horizon. The 2019 results are attributed to the hard work and dedication of our entire team and their focus on the customer and executing a smooth integration of Salin Bancshares, Inc. and its wholly owned subsidiary Salin Bank and Trust Company ('Salin Bank'). As a result of this acquisition and organic growth, Horizon’s operational leverage and efficiency ratio continued to exhibit improvement, which is evidence that our mass and scale strategy is working.”

Dwight added, “At December 31, 2019, Horizon’s total assets were $5.2 billion, which is an increase of $997.7 million when compared to year-end 2018. In addition to the loans acquired from Salin Bank during the first quarter of 2019, which totaled approximately $568.9 million, Horizon continued to experience loan growth of $153.3 million from our key growth markets in Indiana and Michigan.”

Dwight concluded, “The improvement in Horizon’s core efficiency ratio demonstrates our ability to gain operational leverage through an increase in mass and scale. Horizon’s adjusted efficiency ratio, excluding merger expenses, gain/loss on sale of investment securities and death benefit on bank owned life insurance, decreased to 57.23% for the year ended December 31, 2019 from 60.28% for the same prior year period. Along with an improved adjusted efficiency ratio, Horizon has also experienced a decrease in non-interest expense, excluding merger expenses, as a percentage of average assets from 2.51% for the year ended December 31, 2018 to 2.36% for the year ended December 31, 2019, a 15 basis point improvement. Horizon improved branch efficiencies during 2019 by closing four full-service branches and one loan production office, and consolidating five full-service branches acquired from Salin.”

Income Statement Highlights

Net income for the fourth quarter of 2019 was $18.5 million, or $0.41 diluted earnings per share, compared to $20.5 million, or $0.46 diluted earnings per share, for the third quarter of 2019 and $13.1 million, or $0.34 diluted earnings per share, for the fourth quarter of 2018. Excluding acquisition-related expenses, gain (loss) on sale of investment securities and death benefit on bank owned life insurance (“core net income”), core net income for the fourth quarter of 2019 was $18.5 million, or $0.41 diluted earnings per share, compared to $20.3 million, or $0.45 diluted earnings per share, for the third quarter of 2019 and $13.8 million, or $0.36 diluted earnings per share, for the fourth quarter of 2018.

The decrease in net income and diluted earnings per share from the third quarter of 2019 to the fourth quarter of 2019 reflects a decrease in net interest income of $1.9 million primarily due to $697,000 less in acquisition-related purchase accounting adjustments, $783,000 lower commercial loan fees and the reduction in the net interest margin. Non-interest expense increased $590,000 during the fourth quarter of 2019 as a result of the reversal of previously recorded FDIC insurance expense during the third quarter of $273,000 and an increase in other losses due to write-downs of other real estate owned properties on closed offices or vacant land acquired for future expansion during the fourth quarter totaling $222,000. Offsetting these decreases was an increase in non-interest income of $420,000, in addition to decreases in provision for loan losses of $36,000 and income tax expense of $84,000.

The increase in net income from the fourth quarter of 2018 when compared to the same period of 2019 reflects increases in net interest income of $7.7 million and non-interest income of $3.5 million, in addition to a decrease in provision for loan losses of $188,000, offset by increases in non-interest expense of $4.5 million and income tax expense of $1.4 million due to overall company growth and the Salin acquisition.

Net income for the year ended December 31, 2019 was $66.5 million, or $1.53 diluted earnings per share, compared to $53.1 million, or $1.38 diluted earnings per share, for the year ended December 31, 2018. Core net income for the year ended December 31, 2019 was $70.7 million, or $1.63 diluted earnings per share, compared to $53.7 million, or $1.40 diluted earnings per share, for the year ended December 31, 2018. This represents a 16.4% increase in core diluted earnings per share for the year ended December 31, 2019 compared to the same period in 2018 due to overall company growth, gained efficiencies and the Salin acquisition.

The increase in net income when comparing the year ended December 31, 2019 to the prior year period reflects increases in net interest income of $26.2 million and non-interest income of $8.6 million, in addition to a decrease in provision for loan losses of $930,000, offset by increases in non-interest expense of $19.5 million and income tax expense of $2.9 million.

Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share

(Dollars in Thousands, Except per Share Data, Unaudited)

Three Months Ended

Twelve Months Ended

December 31

September 30

December 31

December 31

December 31

2019

2019

2018

2019

2018

Non-GAAP Reconciliation of Net Income

Net income as reported

$

18,543

$

20,537

$

13,133

$

66,538

$

53,117

Merger expenses

-

-

487

5,650

487

Tax effect

-

-

(102

)

(987

)

(102

)

Net income excluding merger expenses

18,543

20,537

13,518

71,201

53,502

(Gain)/loss on sale of investment securities

(10

)

-

332

75

443

Tax effect

2

-

(70

)

(16

)

(93

)

Net income excluding loss on sale of investment securities

18,535

20,537

13,780

71,260

53,852

Death benefit on bank owned life insurance ("BOLI")

-

(213

)

-

(580

)

(154

)

Net income excluding death benefit on BOLI

18,535

20,324

13,780

70,680

53,698

Core Net Income

$

18,535

$

20,324

$

13,780

$

70,680

$

53,698

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share ("EPS") as reported

$

0.41

$

0.46

$

0.34

$

1.53

$

1.38

Merger expenses

-

-

0.01

0.13

0.01

Tax effect

-

-

-

(0.02

)

-

Diluted EPS excluding merger expenses

0.41

0.46

0.35

1.64

1.39

(Gain)/loss on sale of investment securities

-

-

0.01

-

0.01

Tax effect

-

-

-

-

-

Diluted EPS excluding loss on sale of investment securities

0.41

0.46

0.36

1.64

1.40

Death benefit on BOLI

-

(0.01

)

-

(0.01

)

-

Diluted EPS excluding death benefit on BOLI

0.41

0.45

0.36

1.63

1.40

Core Diluted EPS

$

0.41

$

0.45

$

0.36

$

1.63

$

1.40

Horizon’s net interest margin decreased to 3.58% for the fourth quarter of 2019 when compared to 3.82% for the third quarter of 2019. The decrease in net interest margin reflects a decrease in commercial loan fees of $783,000 and a decrease of $697,000 in acquisition-related purchase accounting adjustments when compared to the third quarter of 2019. The cost of interest-bearing liabilities decreased by 11 basis points as the cost of deposits, borrowings and subordinated debentures all decreased when compared to the third quarter of 2019. Deposit pricing continues to reduce within the markets we serve in alignment with the recent decline in general market short-term interest rates.

Net interest margin decreased to 3.58% for the fourth quarter of 2019 when compared to 3.60% for the fourth quarter of 2018. The decrease in net interest margin was due to a decrease in yield on interest-earning assets, offset by a decrease in the cost of interest-bearing liabilities. Interest income from acquisition-related purchase accounting adjustments was $587,000 lower for the fourth quarter of 2019 when compared to the same prior year period. The rate on interest-bearing liabilities decreased due to lower rates on borrowings and subordinated debentures, partially offset by higher rates on interest-bearing deposits.

Net interest margin decreased to 3.69% for the year ended December 31, 2019 when compared to 3.71% for the year ended December 31, 2018. The lower net interest margin for 2019 reflects an increase in the cost of interest-bearing liabilities of 28 basis points due to an increase in the cost of interest-bearing deposits and borrowings. The increase in the cost of interest-bearing liabilities was offset by an increase in the yield of interest-earning assets.

Net interest margin, excluding acquisition-related purchase accounting adjustments (“core net interest margin”), was 3.49% for the fourth quarter of 2019 compared to 3.67% for the prior quarter and 3.43% for the fourth quarter of 2018. Interest income from acquisition-related purchase accounting adjustments was $1.0 million, $1.7 million and $1.6 million for the three months ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.

Non-GAAP Reconciliation of Net Interest Margin

(Dollars in Thousands, Unaudited)

Three Months Ended

Twelve Months Ended

December 31

September 30

December 31

December 31

December 31

2019

2019

2018

2019

2018

Non-GAAP Reconciliation of Net Interest Margin

Net interest income as reported

$

41,519

$

43,463

$

33,836

$

160,791

$

134,569

Average interest-earning assets

4,748,217

4,623,985

3,808,822

4,470,450

3,697,938

Net interest income as a percentage of average interest-earning assets ("Net Interest Margin")

3.58

%

3.82

%

3.60

%

3.69

%

3.71

%

Acquisition-related purchase accounting adjustments ("PAUs")

$

(1,042

)

$

(1,739

)

$

(1,629

)

$

(5,590

)

$

(6,089

)

Core net interest income

$

40,477

$

41,724

$

32,207

$

155,201

$

128,480

Core net interest margin

3.49

%

3.67

%

3.43

%

3.57

%

3.54

%

Lending Activity

Total loans increased $626.6 million from $3.014 billion as of December 31, 2018 to $3.641 billion as of December 31, 2019. Excluding acquired loans, total loans increased $57.6 million during 2019 as consumer loans increased by $34.6 million and mortgage warehouse loans increased by $76.2 million, offset by a decrease in commercial loans of $27.7 million and residential mortgage loans of $28.4 million.

Loan Growth by Type, Excluding Acquired Loans

(Dollars in Thousands, Unaudited)

December 31

December 31

Amount

Acquired

Amount

Percent

2019

2018

Change

Loans

Change

Change

Commercial

$

2,046,651

$

1,721,590

$

325,061

$

(352,798

)

$

(27,737

)

-1.6

%

Residential mortgage

770,717

668,141

102,576

(131,008

)

(28,432

)

-4.3

%

Consumer

669,180

549,481

119,699

(85,112

)

34,587

6.3

%

Subtotal

3,486,548

2,939,212

547,336

(568,918

)

(21,582

)

-0.7

%

Held for sale loans

4,088

1,038

3,050

-

3,050

293.8

%

Mortgage warehouse loans

150,293

74,120

76,173

-

76,173

102.8

%

Total loans

$

3,640,929

$

3,014,370

$

626,559

$

(568,918

)

$

57,641

1.9

%

During 2019, Horizon Bank (the “Bank”) originated approximately $380.0 million of commercial loans, which is an 11% increase compared to the same period in 2018; however, only 57.9%, or $220.1 million, of these loan originations had been funded as of December 31, 2019. These originations were offset by commercial loan payoffs totaling approximately $315.5 million during 2019, which is a 73.6% increase in payoffs compared to the same period in 2018, as there was an increase in clients moving projects that had reached stabilization into the long-term, fixed rate conduit financing market and properties being sold. During 2018, the Bank originated approximately $337.0 million of commercial loans; however, only 58.2%, or $196.0 million, of these loan originations had been funded as of December 31, 2018. These originations were offset by commercial loan payoffs totaling approximately $181.7 million during 2018.

Residential mortgage lending activity for the three months ended December 31, 2019 generated $3.1 million in income from the gain on sale of mortgage loans, an increase of $417,000 from the third quarter of 2019 and $1.7 million from the fourth quarter of 2018. Total origination volume for the fourth quarter of 2019, including loans placed into portfolio, totaled $114.0 million, representing a decrease of 5.9% from the third quarter of 2019 and an increase of 35.8% from the fourth quarter of 2018. Total origination volume for the fourth quarter of 2019 of loans sold to the secondary market totaled $83.6 million, representing a decrease of 12.1% from the third quarter of 2019 and an increase of 95.5% from the fourth quarter of 2018.

Revenue derived from Horizon’s residential mortgage and warehouse lending activities was 6.4% of Horizon’s total revenue for the year ended December 31, 2019, which is comparable to the same prior year period.

The provision for loan losses totaled $340,000 for the fourth quarter of 2019 compared to $376,000 for the third quarter of 2019 and $528,000 for the fourth quarter of 2018.

The provision for loan losses totaled $2.0 million for the year ended December 31, 2019 compared to $2.9 million for the same period in 2018.

The ratio of the allowance for loan losses to total loans decreased to 0.49% as of December 31, 2019 from 0.59% at December 31, 2018. The decrease in the ratio of the allowance for loan losses to total loans is primarily due to increased loan balances from the Salin acquisition. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.61% as of December 31, 2019 compared to 0.72% as of December 31, 2018. Loan loss reserves plus credit-related loan discounts on acquired loans as a percentage of total loans was 1.04% as of December 31, 2019 compared to 0.98% as of December 31, 2018.

Non-GAAP Allowance for Loan and Lease Loss Detail

As of December 31, 2019

(Dollars in Thousands, Unaudited)

Loan
Balance

Allowance
for Loan
Losses
(ALLL)

Acquired
Loan
Discount

ALLL
+
Acquired
Loan
Discount

Loans, net

ALLL/
Loan Balance

Acquired Loan Discount/
Loan Balance

ALLL +
Acquired Loan Discount/
Loan Balance

Horizon Legacy

$

2,881,650

$

17,534

N/A

$

17,534

$

2,864,116

0.61

%

0.00

%

0.61

%

Heartland

4,863

-

549

549

4,314

0.00

%

11.29

%

11.29

%

Summit

14,309

-

835

835

13,474

0.00

%

5.84

%

5.84

%

Peoples

66,983

-

1,550

1,550

65,433

0.00

%

2.31

%

2.31

%

Kosciusko

28,249

-

417

417

27,832

0.00

%

1.48

%

1.48

%

LaPorte

62,580

-

2,229

2,229

60,351

0.00

%

3.56

%

3.56

%

CNB

3,210

-

78

78

3,132

0.00

%

2.43

%

2.43

%

Lafayette

57,003

-

496

496

56,507

0.00

%

0.87

%

0.87

%

Wolverine

120,654

-

699

699

119,955

0.00

%

0.58

%

0.58

%

Salin

401,428

133

13,375

13,508

387,920

0.03

%

3.33

%

3.36

%

Total

$

3,640,929

$

17,667

$

20,228

$

37,895

$

3,603,034

0.49

%

0.56

%

1.04

%

As of December 31, 2019, non-performing loans totaled $21.2 million, which reflects a three basis point increase in non-performing loans to total loans, or a $6.0 million increase from $15.2 million in non-performing loans as of December 31, 2018. Compared to December 31, 2018, non-performing commercial loans increased by $444,000, non-performing real estate loans increased by $4.9 million and non-performing consumer loans increased by $689,000. Other real estate owned and repossessed assets totaled $3.7 million as of December 31, 2019, which is an increase of $1.7 million from December 31, 2018. The majority of this increase was due to other real estate owned properties acquired in the Salin transaction, including the closed branches, totaling $1.7 million.

Expense Management

Total non-interest expense was $590,000 higher in the fourth quarter of 2019 when compared to the third quarter of 2019. Other losses increased $287,000 primarily due to write-downs of other real estate owned properties during the fourth quarter totaling $222,000. Loan expense and professional fees increased $240,000 and $185,000, respectively, during the fourth quarter of 2019. In addition, the reversal of previously recorded FDIC insurance expense during the third quarter resulted in an increase to total non-interest expense of $273,000 during the fourth quarter. The Bank received assessment credits during the third quarter of 2019 as the FDIC reserve is currently overfunded. Offsetting these increases were decreases in other expense of $221,000 and in other services and consultants of $137,000.

Three Months Ended

December 31

September 30

2019

2019

Adjusted

Non-interest Expense

Actual

Merger Expenses

Adjusted

Actual

Merger Expenses

Adjusted

Amount
Change

Percent
Change

Salaries and employee benefits

$

16,841

$

-

$

16,841

$

16,948

$

-

$

16,948

$

(107

)

-0.6

%

Net occupancy expenses

3,106

-

3,106

3,131

-

3,131

(25

)

-0.8

%

Data processing

2,235

-

2,235

2,140

-

2,140

95

4.4

%

Professional fees

520

-

520

335

-

335

185

55.2

%

Outside services and consultants

1,415

-

1,415

1,552

-

1,552

(137

)

-8.8

%

Loan expense

2,438

-

2,438

2,198

-

2,198

240

10.9

%

FDIC deposit insurance

-

-

-

(273

)

-

(273

)

273

-100.0

%

Other losses

377

-

377

90

-

90

287

318.9

%

Other expenses

3,718

-

3,718

3,939

-

3,939

(221

)

-5.6

%

Total non-interest expense

$

30,650

$

-

$

30,650

$

30,060

$

-

$

30,060

$

590

2.0

%

Annualized Non-interest Exp. to Avg. Assets

2.32

%

2.32

%

2.34

%

2.34

%

Total non-interest expense was $4.5 million higher during the fourth quarter of 2019 compared to the same period of 2018. Salaries and employee benefits, net occupancy expense, loan expense, data processing, other expense and other losses increased $2.7 million, $605,000, $601,000, $481,000, $421,000 and $288,000, respectively. These increases were offset by a decrease of $393,000 in FDIC insurance and $121,000 in outside services and consultants. FDIC insurance decreased due to assessment credits the Bank received during the third quarter of 2019 as the FDIC reserve is currently overfunded. Excluding merger expenses, total non-interest expense increased $5.0 million during the fourth quarter of 2019 when compared to the same period of 2018.

Three Months Ended

December 31

December 31

2019

2018

Adjusted

Non-interest Expense

Actual

Merger Expenses

Adjusted

Actual

Merger
Expenses

Adjusted

Amount
Change

Percent
Change

Salaries and employee benefits

$

16,841

$

-

$

16,841

$

14,098

$

-

$

14,098

$

2,743

19.5

%

Net occupancy expenses

3,106

-

3,106

2,501

-

2,501

605

24.2

%

Data processing

2,235

-

2,235

1,754

-

1,754

481

27.4

%

Professional fees

520

-

520

612

(219

)

393

127

32.3

%

Outside services and consultants

1,415

-

1,415

1,536

(252

)

1,284

131

10.2

%

Loan expense

2,438

-

2,438

1,837

-

1,837

601

32.7

%

FDIC deposit insurance

-

-

-

393

-

393

(393

)

-100.0

%

Other losses

377

-

377

89

-

89

288

323.6

%

Other expenses

3,718

-

3,718

3,297

(16

)

3,281

437

13.3

%

Total non-interest expense

$

30,650

$

-

$

30,650

$

26,117

$

(487

)

$

25,630

$

5,020

19.6

%

Annualized Non-interest Exp. to Avg. Assets

2.32

%

2.32

%

2.48

%

2.43

%

Total non-interest expense was $19.5 million higher during the year ended December 31, 2019 when compared to the same period of 2018. Salaries and employee benefits, other expense, outside services and consultants, loan expense, net occupancy and data processing increased $8.6 million, $3.5 million, $2.9 million, $2.3 million, $1.7 million and $1.7 million, respectively. Offsetting these increases was a decrease in FDIC insurance of $1.2 million. FDIC insurance decreased due to the assessment credits the Bank received during the third quarter of 2019 as the FDIC reserve is currently overfunded. Excluding merger expenses, total non-interest expense increased $14.4 million during the year ended December 31, 2019 when compared to the same period of 2018.

Twelve Months Ended

December 31

December 31

2019

2018

Adjusted

Non-interest Expense

Actual

Merger
Expenses

Adjusted

Actual

Merger
Expenses

Adjusted

Amount
Change

Percent
Change

Salaries and employee benefits

$

65,206

$

(484

)

$

64,722

$

56,623

$

-

$

56,623

$

8,099

14.3

%

Net occupancy expenses

12,157

(75

)

12,082

10,482

-

10,482

1,600

15.3

%

Data processing

8,480

(360

)

8,120

6,816

-

6,816

1,304

19.1

%

Professional fees

1,946

(392

)

1,554

1,926

(219

)

1,707

(153

)

-9.0

%

Outside services and consultants

8,152

(2,466

)

5,686

5,271

(252

)

5,019

667

13.3

%

Loan expense

8,633

(2

)

8,631

6,341

-

6,341

2,290

36.1

%

FDIC deposit insurance

252

-

252

1,444

-

1,444

(1,192

)

-82.5

%

Other losses

740

(71

)

669

665

-

665

4

0.6

%

Other expenses

16,466

(1,800

)

14,666

12,948

(16

)

12,932

1,734

13.4

%

Total non-interest expense

$

122,032

$

(5,650

)

$

116,382

$

102,516

$

(487

)

$

102,029

$

14,353

14.1

%

Annualized Non-interest Exp. to Avg. Assets

2.47

%

2.36

%

2.52

%

2.51

%

Annualized non-interest expense as a percent of average assets were 2.32%, 2.34% and 2.48% for the three months ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively. Annualized non-interest expense, excluding merger expenses, as a percent of average assets continue to decline and were 2.32%, 2.34% and 2.43% for the three months ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.

Annualized non-interest expense as a percent of average assets were 2.47% and 2.52% for the years ended December 31, 2019 and 2018, respectively. Annualized non-interest expense, excluding merger expenses, as a percent of average assets were 2.36% and 2.51% for the years ended December 31, 2019 and 2018, respectively. Management believes that Horizon’s strategy to build mass and scale continues to prove effective for expense management.

Income tax expense totaled $3.9 million for the fourth quarter of 2019, a decrease of $84,000 when compared to the third quarter of 2019 and an increase of $1.4 million when compared to the fourth quarter of 2018. The decrease in income tax expense from the third quarter of 2019 was primarily due to a decrease in income before income taxes of $2.1 million when compared to the fourth quarter of 2019. The increase in income tax expense from the fourth quarter of 2018 was primarily due to an increase in income before income taxes of $6.8 million fourth quarter of 2019.

Income tax expense totaled $13.3 million for the year ended December 31, 2019, an increase of $2.9 million when compared to the same period of 2018. The increase in income tax expense from the year ended December 31, 2018 was primarily due to an increase in income before income taxes of $16.3 million when compared to the same period of 2019.

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, net interest margin, total loans and loan growth, the allowance for loan and lease losses, tangible stockholders’ equity, tangible book value per share, efficiency ratio, the return on average assets and the return on average 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, among others we have identified in our reconciliations. Horizon believes that these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non-core 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 figures identified herein and their most comparable GAAP measures.

Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share

(Dollars in Thousands Except per Share Data, Unaudited)

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

Total stockholders' equity

$

656,023

$

642,711

$

626,461

$

609,468

$

491,992

Less: Intangible assets

177,917

178,896

179,776

176,864

130,270

Total tangible stockholders' equity

$

478,106

$

463,815

$

446,685

$

432,604

$

361,722

Common shares outstanding

44,975,771

44,969,021

45,061,372

45,052,747

38,375,407

Tangible book value per common share

$

10.63

$

10.31

$

9.91

$

9.60

$

9.43

Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio

(Dollars in Thousands, Unaudited)

Three Months Ended

Twelve Months Ended

December 31

September 30

December 31

December 31

December 31

2019

2019

2018

2019

2018

Non-GAAP Calculation of Efficiency Ratio

Non-interest expense as reported

$

30,650

$

30,060

$

26,117

$

122,032

$

102,516

Net interest income as reported

41,519

43,463

33,836

160,791

134,569

Non-interest income as reported

11,934

11,514

8,477

43,058

34,413

Non-interest expense/(Net interest income + Non-interest income) ("Efficiency Ratio")

57.34

%

54.68

%

61.72

%

59.86

%

60.67

%

Non-GAAP Reconciliation of Adjusted Efficiency Ratio

Non-interest expense as reported

$

30,650

$

30,060

$

26,117

$

122,032

$

102,516

Merger expenses

-

-

(487

)

(5,650

)

(487

)

Non-interest expense excluding merger expenses

30,650

30,060

25,630

116,382

102,029

Net interest income as reported

41,519

43,463

33,836

160,791

134,569

Non-interest income as reported

11,934

11,514

8,477

43,058

34,413

(Gain)/loss on sale of investment securities

(10

)

-

332

75

443

Death benefit on bank owned life insurance ("BOLI")

-

(213

)

-

(580

)

(154

)

Non-interest income excluding loss on sale of investment securities and death benefit on BOLI

11,924

11,301

8,809

42,553

34,702

Adjusted efficiency ratio

57.35

%

54.89

%

60.10

%

57.23

%

60.28

%


Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity

(Dollars in Thousands, Unaudited)

Three Months Ended

Twelve Months Ended

December 31

September 30

December 31

December 31

December 31

2019

2019

2018

2019

2018

Non-GAAP Reconciliation of Return on Average Assets

Average Assets

$

5,250,574

$

5,107,259

$

4,179,140

$

4,933,058

$

4,062,635

Return on average assets ("ROAA") as reported

1.40

%

1.60

%

1.25

%

1.35

%

1.31

%

Merger expenses

0.00

%

0.00

%

0.05

%

0.11

%

0.01

%

Tax effect

0.00

%

0.00

%

-0.01

%

-0.02

%

0.00

%

ROAA excluding merger expenses

1.40

%

1.60

%

1.29

%

1.44

%

1.32

%

(Gain)/loss on sale of investment securities

0.00

%

0.00

%

0.03

%

0.00

%

0.01

%

Tax effect

0.00

%

0.00

%

-0.01

%

0.00

%

0.00

%

ROAA excluding gain on sale of investment securities

1.40

%

1.60

%

1.31

%

1.44

%

1.33

%

Death benefit on bank owned life insurance ("BOLI")

0.00

%

-0.02

%

0.00

%

-0.01

%

0.00

%

ROAA excluding death benefit on BOLI

1.40

%

1.58

%

1.31

%

1.43

%

1.33

%

Core ROAA

1.40

%

1.58

%

1.31

%

1.43

%

1.33

%

Non-GAAP Reconciliation of Return on Average Common Equity

Average Common Equity

$

653,071

$

640,770

$

485,662

$

605,719

$

473,420

Return on average common equity ("ROACE") as reported

11.26

%

12.72

%

10.73

%

10.98

%

11.22

%

Merger expenses

0.00

%

0.00

%

0.40

%

0.93

%

0.10

%

Tax effect

0.00

%

0.00

%

-0.08

%

-0.16

%

-0.02

%

ROACE excluding merger expenses

11.26

%

12.72

%

11.05

%

11.75

%

11.30

%

(Gain)/loss on sale of investment securities

-0.01

%

0.00

%

0.27

%

0.01

%

0.09

%

Tax effect

0.00

%

0.00

%

-0.06

%

0.00

%

-0.02

%

ROACE excluding gain on sale of investment securities

11.25

%

12.72

%

11.26

%

11.76

%

11.37

%

Death benefit on bank owned life insurance ("BOLI")

0.00

%

-0.13

%

0.00

%

-0.10

%

-0.03

%

ROAA excluding death benefit on BOLI

11.25

%

12.59

%

11.26

%

11.66

%

11.34

%

Core ROACE

11.25

%

12.59

%

11.26

%

11.66

%

11.34

%

About Horizon Bancorp, Inc.

Horizon Bancorp, Inc. is an independent, commercial bank holding company serving northern and central Indiana, and southern and central Michigan through its commercial banking subsidiary, Horizon Bank. Horizon may be reached online at www.horizonbank.com. Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC.

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections 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. 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 risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its Form 10-K. 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.

Contact:

Horizon Bancorp, Inc.
Mark E. Secor
Chief Financial Officer
(219) 873-2611
Fax: (219) 874-9280

HORIZON BANCORP, INC.
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

Balance sheet:

Total assets

$

5,244,363

$

5,186,714

$

5,098,682

$

5,051,639

$

4,246,688

Investment securities

1,048,978

977,536

887,187

893,469

810,460

Commercial loans

2,046,651

2,046,165

2,062,623

2,089,579

1,721,590

Mortgage warehouse loans

150,293

155,631

133,428

71,944

74,120

Residential mortgage loans

770,717

796,497

814,065

819,824

668,141

Consumer loans

669,180

668,332

654,552

639,710

549,481

Earnings assets

4,712,354

4,667,668

4,577,487

4,538,952

3,842,903

Non-interest bearing deposit accounts

709,760

756,707

810,350

811,768

642,129

Interest bearing transaction accounts

2,245,631

2,173,100

2,153,189

2,115,847

1,684,336

Time deposits

975,611

986,150

967,236

960,408

812,911

Borrowings

549,741

516,591

436,233

457,788

550,384

Subordinated debentures

56,311

56,250

56,194

55,310

37,837

Total stockholders' equity

656,023

642,711

626,461

609,468

491,992

Three months ended

Income statement:

Net interest income

$

41,519

$

43,463

$

41,529

$

34,280

$

33,836

Provision for loan losses

340

376

896

364

528

Non-interest income

11,934

11,514

10,898

8,712

8,477

Non-interest expenses

30,650

30,060

31,584

29,738

26,117

Income tax expense

3,920

4,004

3,305

2,074

2,535

Net income

$

18,543

$

20,537

$

16,642

$

10,816

$

13,133

Per share data:(1)

Basic earnings per share

$

0.41

$

0.46

$

0.37

$

0.28

$

0.34

Diluted earnings per share

0.41

0.46

0.37

0.28

0.34

Cash dividends declared per common share

0.12

0.12

0.12

0.10

0.10

Book value per common share

14.59

14.29

13.90

13.53

12.82

Tangible book value per common share

10.63

10.31

9.91

9.60

9.43

Market value - high

19.42

17.77

17.13

17.82

19.40

Market value - low

$

16.60

$

15.93

$

15.51

$

15.50

$

14.94

Weighted average shares outstanding - Basic

44,971,676

45,038,021

45,055,117

38,822,543

38,367,972

Weighted average shares outstanding - Diluted

45,103,065

45,113,730

45,130,408

38,906,172

38,488,002

Key ratios:

Return on average assets

1.40

%

1.60

%

1.32

%

1.02

%

1.25

%

Return on average common stockholders' equity

11.26

12.72

10.73

8.66

10.73

Net interest margin

3.58

3.82

3.73

3.62

3.60

Loan loss reserve to total loans

0.49

0.49

0.50

0.49

0.59

Average equity to average assets

12.44

12.55

12.32

11.76

11.62

Bank only capital ratios:

Tier 1 capital to average assets

9.49

9.35

9.52

10.99

9.34

Tier 1 capital to risk weighted assets

12.20

11.62

11.76

11.84

11.87

Total capital to risk weighted assets

12.65

12.08

12.23

12.30

12.43

Loan data:

Substandard loans

$

58,670

$

62,130

$

47,764

$

41,728

$

38,775

30 to 89 days delinquent

7,729

10,204

9,633

9,980

7,161

90 days and greater delinquent - accruing interest

146

34

391

192

568

Trouble debt restructures - accruing interest

3,354

3,491

2,198

2,532

2,002

Trouble debt restructures - non-accrual

2,006

1,807

1,576

1,349

1,057

Non-accural loans

15,679

13,823

14,764

15,313

11,548

Total non-performing loans

$

21,185

$

19,155

$

18,929

$

19,386

$

15,175

Non-performing loans to total loans

0.58

%

0.52

%

0.52

%

0.54

%

0.50

%

(1) Adjusted for 3:2 stock split on June 15, 2018


HORIZON BANCORP, INC.
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)

December 31

December 31

2019

2018

Balance sheet:

Total assets

$

5,244,363

$

4,246,688

Investment securities

1,048,978

810,460

Commercial loans

2,046,651

1,721,590

Mortgage warehouse loans

150,293

74,120

Residential mortgage loans

770,717

668,141

Consumer loans

669,180

549,481

Earnings assets

4,712,354

3,842,903

Non-interest bearing deposit accounts

709,760

642,129

Interest bearing transaction accounts

2,245,631

1,684,336

Time deposits

975,611

812,911

Borrowings

549,741

550,384

Subordinated debentures

56,311

37,837

Total stockholders' equity

656,023

491,992

Twelve months ended

Income statement:

Net interest income

$

160,791

$

134,569

Provision for loan losses

1,976

2,906

Non-interest income

43,058

34,413

Non-interest expenses

122,032

102,516

Income tax expense

13,303

10,443

Net income

$

66,538

$

53,117

Per share data:(1)

Basic earnings per share

$

1.53

$

1.39

Diluted earnings per share

1.53

1.38

Cash dividends declared per common share

0.46

0.40

Book value per common share

14.59

12.82

Tangible book value per common share

10.63

9.43

Market value - high

19.42

21.94

Market value - low

$

15.50

$

14.94

Weighted average shares outstanding - Basic

43,493,316

38,347,059

Weighted average shares outstanding - Diluted

43,598,373

38,495,231

Key ratios:

Return on average assets

1.35

%

1.31

%

Return on average common stockholders' equity

10.98

11.22

Net interest margin

3.69

3.71

Loan loss reserve to total loans

0.49

0.59

Average equity to average assets

12.28

11.65

Bank only capital ratios:

Tier 1 capital to average assets

9.49

9.34

Tier 1 capital to risk weighted assets

12.20

11.87

Total capital to risk weighted assets

12.65

12.43

Loan data:

Substandard loans

$

58,670

$

38,775

30 to 89 days delinquent

7,729

7,161

90 days and greater delinquent - accruing interest

146

568

Trouble debt restructures - accruing interest

3,354

2,002

Trouble debt restructures - non-accrual

2,006

1,057

Non-accural loans

15,679

11,548

Total non-performing loans

$

21,185

$

15,175

Non-performing loans to total loans

0.58

%

0.50

%

(1) Adjusted for 3:2 stock split on June 15, 2018


HORIZON BANCORP, INC.

Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

Commercial

$

11,996

$

12,082

$

11,881

$

11,556

$

10,495

Real estate

923

1,449

1,732

1,588

1,676

Mortgage warehousing

1,077

1,041

1,040

1,014

1,006

Consumer

3,671

3,384

3,652

3,663

4,643

Total

$

17,667

$

17,956

$

18,305

$

17,821

$

17,820

Net Charge-Offs (Recoveries)

(Dollars in Thousands, Unaudited)

Three Months Ended

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

Commercial

$

146

$

192

$

265

$

61

$

196

Real estate

40

(7

)

41

(27

)

47

Mortgage warehousing

-

-

-

-

-

Consumer

443

540

106

329

263

Total

$

629

$

725

$

412

$

363

$

506

Percent of net charge-offs to average loans outstanding for the period

0.02

%

0.02

%

0.01

%

0.01

%

0.02

%

Total Non-performing Loans

(Dollars in Thousands, Unaudited)

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

Commercial

$

7,347

$

8,193

$

8,697

$

9,750

$

6,903

Real estate

9,884

7,212

6,444

5,995

5,007

Mortgage warehousing

-

-

-

-

-

Consumer

3,954

3,750

3,788

3,641

3,265

Total

$

21,185

$

19,155

$

18,929

$

19,386

$

15,175

Non-performing loans to total loans

0.58

%

0.52

%

0.52

%

0.54

%

0.55

%

Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

December 31

September 30

June 30

March 31

December 31

2019

2019

2019

2019

2018

Commercial

$

3,698

$

3,972

$

3,694

$

3,496

$

1,967

Real estate

28

48

113

126

60

Mortgage warehousing

-

-

-

-

-

Consumer

-

24

48

30

48

Total

$

3,726

$

4,044

$

3,855

$

3,652

$

2,075


HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)

Three Months Ended

Three Months Ended

December 31, 2019

December 31, 2018

Average
Balance

Interest

Average
Rate

Average
Balance

Interest

Average
Rate

Assets

Interest-earning assets

Federal funds sold

$

40,657

$

172

1.68

%

$

10,093

$

62

2.44

%

Interest-earning deposits

12,665

58

1.82

%

21,763

93

1.70

%

Investment securities - taxable

491,160

2,824

2.28

%

432,620

2,734

2.51

%

Investment securities - non-taxable(1)

545,832

3,575

3.26

%

364,236

2,324

3.20

%

Loans receivable(2)(3)

3,657,903

46,769

5.10

%

2,980,110

38,517

5.14

%

Total interest-earning assets(1)

4,748,217

53,398

4.57

%

3,808,822

43,730

4.63

%

Non-interest-earning assets

Cash and due from banks

75,248

44,732

Allowance for loan losses

(17,916

)

(17,792

)

Other assets

445,025

343,378

Total average assets

$

5,250,574

$

4,179,140

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

3,255,725

$

8,767

1.07

%

$

2,526,209

$

6,411

1.01

%

Borrowings

484,729

2,281

1.87

%

458,485

2,882

2.49

%

Subordinated debentures

54,489

831

6.05

%

36,616

601

6.51

%

Total interest-bearing liabilities

3,794,943

11,879

1.24

%

3,021,310

9,894

1.30

%

Non-interest-bearing liabilities

Demand deposits

747,513

656,114

Accrued interest payable and other liabilities

55,047

16,054

Stockholders' equity

653,071

485,662

Total average liabilities and stockholders' equity

$

5,250,574

$

4,179,140

Net interest income/spread

$

41,519

3.33

%

$

33,836

3.33

%

Net interest income as a percentage of average interest-earning assets(1)

3.58

%

3.60

%

(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 computations 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.


HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)

Twelve Months Ended

Twelve Months Ended

December 31, 2019

December 31, 2018

Average
Balance

Interest

Average
Rate

Average
Balance

Interest

Average
Rate

Assets

Interest-earning assets

Federal funds sold

$

21,301

$

511

2.40

%

$

4,696

$

115

2.45

%

Interest-earning deposits

19,601

342

1.74

%

24,491

393

1.60

%

Investment securities - taxable

474,833

11,753

2.48

%

431,970

10,113

2.34

%

Investment securities - non-taxable(1)

454,066

12,095

3.34

%

326,040

8,069

3.13

%

Loans receivable(2)(3)

3,500,649

183,631

5.27

%

2,910,741

147,478

5.08

%

Total interest-earning assets(1)

4,470,450

208,332

4.75

%

3,697,938

166,168

4.56

%

Non-interest-earning assets

Cash and due from banks

62,920

44,645

Allowance for loan losses

(18,019

)

(16,964

)

Other assets

417,707

337,016

Total average assets

$

4,933,058

$

4,062,635

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

3,007,937

$

33,690

1.12

%

$

2,418,987

$

18,225

0.75

%

Borrowings

468,159

10,672

2.28

%

492,830

11,009

2.23

%

Subordinated debentures

50,134

3,179

6.34

%

36,547

2,365

6.47

%

Total interest-bearing liabilities

3,526,230

47,541

1.35

%

2,948,364

31,599

1.07

%

Non-interest-bearing liabilities

Demand deposits

757,389

624,576

Accrued interest payable and other liabilities

43,720

16,275

Stockholders' equity

605,719

473,420

Total average liabilities and stockholders' equity

$

4,933,058

$

4,062,635

Net interest income/spread

$

160,791

3.40

%

$

134,569

3.49

%

Net interest income as a percentage of average interest-earning assets(1)

3.69

%

3.71

%

(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 computations 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.


HORIZON BANCORP, INC.
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)

December 31

December 31

2019

2018

(Unaudited)

Assets

Cash and due from banks

$

98,831

$

58,492

Interest-earning time deposits

8,455

15,744

Investment securities, available for sale

841,079

600,348

Investment securities, held to maturity (fair value of $215,147 and $208,273)

207,899

210,112

Loans held for sale

4,088

1,038

Loans, net of allowance for loan losses of $17,667 and $17,820

3,619,174

2,995,512

Premises and equipment, net

92,209

74,331

Federal Home Loan Bank stock

22,447

18,073

Goodwill

151,238

119,880

Other intangible assets

26,679

10,390

Interest receivable

18,828

14,239

Cash value of life insurance

95,577

88,062

Other assets

57,859

40,467

Total assets

$

5,244,363

$

4,246,688

Liabilities

Deposits

Non-interest bearing

$

709,760

$

642,129

Interest bearing

3,221,242

2,497,247

Total deposits

3,931,002

3,139,376

Borrowings

549,741

550,384

Subordinated debentures

56,311

37,837

Interest payable

3,062

2,031

Other liabilities

48,224

25,068

Total liabilities

4,588,340

3,754,696

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 (1)

Issued 45,000,840 and 38,400,476 shares (1), Outstanding 44,975,771 and 38,375,407 shares (1)

-

-

Additional paid-in capital

379,853

276,101

Retained earnings

269,738

224,035

Accumulated other comprehensive income (loss)

6,432

(8,144

)

Total stockholders' equity

656,023

491,992

Total liabilities and stockholders' equity

$

5,244,363

$

4,246,688

(1) Adjusted for 3:2 stock split on June 15, 2018


HORIZON BANCORP, INC.
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)

Three Months Ended

Twelve Months Ended

December 31

December 31

2019

2018

2019

2018

Interest Income

Loans receivable

$

46,769

$

38,517

$

183,631

$

147,478

Investment securities

Taxable

3,054

2,889

12,606

10,621

Tax exempt

3,575

2,324

12,095

8,069

Total interest income

53,398

43,730

208,332

166,168

Interest Expense

Deposits

8,767

6,411

33,690

18,225

Borrowed funds

2,281

2,882

10,672

11,009

Subordinated debentures

831

601

3,179

2,365

Total interest expense

11,879

9,894

47,541

31,599

Net Interest Income

41,519

33,836

160,791

134,569

Provision for loan losses

340

528

1,976

2,906

Net Interest Income after Provision for Loan Losses

41,179

33,308

158,815

131,663

Non-interest Income

Service charges on deposit accounts

2,766

1,958

9,959

7,762

Wire transfer fees

179

122

653

612

Interchange fees

1,996

1,422

7,655

5,715

Fiduciary activities

2,594

2,229

8,580

7,827

Gains (losses) on sale of investment securities (includes $10 and $(332)

for the three months ended December 31, 2019 and 2018, respectively, and $(75) and $(443) for the twelve months ended December 31, 2019 and 2018, respectively, related to accumulated other comprehensive earnings reclassifications)

10

(332

)

(75

)

(443

)

Gain on sale of mortgage loans

3,119

1,455

9,208

6,613

Mortgage servicing income net of impairment

294

697

1,914

2,120

Increase in cash value of bank owned life insurance

566

532

2,190

1,912

Death benefit on bank owned life insurance

-

-

580

154

Other income

410

394

2,394

2,141

Total non-interest income

11,934

8,477

43,058

34,413

Non-interest Expense

Salaries and employee benefits

16,841

14,098

65,206

56,623

Net occupancy expenses

3,106

2,501

12,157

10,482

Data processing

2,235

1,754

8,480

6,816

Professional fees

520

612

1,946

1,926

Outside services and consultants

1,415

1,536

8,152

5,271

Loan expense

2,438

1,837

8,633

6,341

FDIC insurance expense

-

393

252

1,444

Other losses

377

89

740

665

Other expense

3,718

3,297

16,466

12,948

Total non-interest expense

30,650

26,117

122,032

102,516

Income Before Income Taxes

22,463

15,668

79,841

63,560

Income tax expense (includes $2 and $(70) for the three months ended

December 31, 2019 and 2018, respectively, and $(16) and $(93) for the twelve months ended December 31, 2019 and 2018, respectivley, related to income tax expense (benefit) from reclassification items)

3,920

2,535

13,303

10,443

Net Income

$

18,543

$

13,133

$

66,538

$

53,117

Basic Earnings Per Share (1)

$

0.41

$

0.34

$

1.53

$

1.39

Diluted Earnings Per Share (1)

0.41

0.34

1.53

1.38

(1) Adjusted for 3:2 stock split on June 15, 2018