Horizon Bancorp, Inc. Reports Third Quarter 2024 Results, Including EPS of $0.41 and Continued Profitability Improvement, as well as Accretive Balance Sheet Initiatives
MICHIGAN CITY, Ind., Oct. 23, 2024 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC), Horizon Bancorp, Inc. ("Horizon" or the "Company"), the parent company of Horizon Bank (the "Bank"), announced its unaudited financial results for the three and nine months ended September 30, 2024.
Net income for the three months ended September 30, 2024 was $18.2 million, or $0.41 per diluted share, compared to net income of $14.1 million, or $0.32, for the second quarter of 2024 and compared to net income of $16.2 million, or $0.37 per diluted share, for the third quarter of 2023.
Net income for the nine months ended September 30, 2024 was $46.3 million, or $1.05 per diluted share, compared to net income of $53.2 million, or $1.21, for the nine months ended September 30, 2023.
Third Quarter 2024 Highlights
Net interest income increased for the fourth consecutive quarter to $46.9 million, compared to $45.3 million in the linked quarter of 2024. Net interest margin, on a fully taxable equivalent ("FTE") basis1, expanded for the fourth consecutive quarter to 2.66%, compared to 2.64% in the linked quarter of 2024.
Total loans held for investment ("HFI") were $4.8 billion at September 30, 2024, relatively unchanged from June 30, 2024 balances. However, consistent with the Company's stated growth strategy, the commercial portfolio showed continued organic growth momentum during the quarter, which was offset with planned run-off of lower-yielding indirect auto loans in the consumer loan portfolio.
Positive deposit growth of 1.7% during the quarter, to $5.7 billion at period end. The quarter was highlighted by stable non-interest bearing deposit balances and growth in core relationship consumer and commercial portfolios.
Credit quality remains strong, with annualized net charge offs of 0.03% of average loans during the third quarter. Non-performing assets to total assets of 0.32% remains well within expected ranges, with no material change in the loss outlook. Provision for loan losses of $1.0 million reflects continued positive credit performance.
"Horizon continues to execute well on its key strategic initiatives of consistently improving our operating performance through a more productive balance sheet, growth in non-interest income and continued disciplined in our operating model. As a result, we are optimistic on the positive momentum of the franchise through year-end 2024 and into 2025. During the quarter, our commercial team was able to deliver another quarter of quality loan growth, even coming off a strong end to the second quarter. The strength of Horizon's core deposit franchise showed solid performance, and our credit metrics remain well managed. These efforts led to a third consecutive quarter of sequential growth in pre-tax pre-provision income," President and Chief Executive Officer Thomas M. Prame said. "Importantly, we continue our efforts to optimize our business model, and are pleased to announce the repositioning of a portion of our securities portfolio and the intended sale of our mortgage warehouse business during the fourth quarter. These shareholder accretive actions are expected to yield sustainable improvement in the profitability of our business that will be evident in the fourth quarter, and positively impact Horizon's financial performance in 2025."
_________________________1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
Accretive Fourth Quarter 2024 Strategic Actions
Horizon announced strategic actions taking place in the fourth quarter of 2024, which are designed to simplify its business, strengthen the balance sheet and improve long-term structural profitability. In October, the Company completed the repositioning of about $325 million of available-for-sale securities. Additionally, the Company has signed a letter of intent to sell its mortgage warehouse business, which is expected to generate a gain-on-sale. Details on these actions, the use of proceeds, and the expected financial impact are available in the Company's third quarter 2024 investor presentation published at investor.horizonbank.com.
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,
2024
2024
2024
2023
2023
Income statement:
Net interest income
$
46,910
$
45,279
$
43,288
$
42,257
$
42,090
Credit loss expense
1,044
2,369
805
1,274
263
Non-interest income
11,511
10,485
9,929
(20,449
)
11,830
Non-interest expense
39,272
37,522
37,107
39,330
36,168
Income tax expense
(75
)
1,733
1,314
6,419
1,284
Net income
$
18,180
$
14,140
$
13,991
$
(25,215
)
$
16,205
Per share data:
Basic earnings per share
$
0.42
$
0.32
$
0.32
$
(0.58
)
$
0.37
Diluted earnings per share
0.41
0.32
0.32
(0.58
)
0.37
Cash dividends declared per common share
0.16
0.16
0.16
0.16
0.16
Book value per common share
17.27
16.62
16.49
16.47
15.89
Market value - high
16.57
12.74
14.44
14.65
12.68
Market value - low
11.89
11.29
11.75
9.33
9.90
Weighted average shares outstanding - Basic
43,712,059
43,712,059
43,663,610
43,649,585
43,646,609
Weighted average shares outstanding - Diluted
44,112,321
43,987,187
43,874,036
43,649,585
43,796,069
Common shares outstanding (end of period)
43,712,059
43,712,059
43,726,380
43,652,063
43,648,501
Key ratios:
Return on average assets
0.92
%
0.73
%
0.72
%
(1.27) %
0.81
%
Return on average stockholders' equity
9.80
7.83
7.76
(14.23
)
8.99
Total equity to total assets
9.52
9.18
9.18
9.06
8.71
Total loans to deposit ratio
83.92
85.70
82.78
78.01
76.52
Allowance for credit losses to HFI loans
1.10
1.08
1.09
1.13
1.14
Annualized net charge-offs of average total loans(1)
0.03
0.05
0.04
0.07
0.07
Efficiency ratio
67.22
67.29
69.73
180.35
67.08
Key metrics (Non-GAAP)(2) :
Net FTE interest margin
2.66
%
2.64
%
2.50
%
2.43
%
2.41
%
Return on average tangible common equity
12.65
10.18
10.11
(18.76
)
11.79
Tangible common equity to tangible assets
7.58
7.22
7.20
7.08
6.72
Tangible book value per common share
$
13.46
$
12.80
$
12.65
$
12.60
$
12.00
(1) Average total loans includes loans held for investment and held for sale.
(2) Non-GAAP financial metrics. See non-GAAP reconciliation included herein for the most directly comparable GAAP measures.
Income Statement Highlights
Net Interest Income
Net interest income was $46.9 million in the third quarter of 2024, compared to $45.3 million in the second quarter of 2024, driven by net growth in average interest earning assets of $117.5 million and continued net FTE interest margin expansion during the quarter. Horizon's net FTE interest margin1 was 2.66% for the third quarter of 2024, compared to 2.64% for the second quarter of 2024, attributable to the favorable mix shift in average interest earning assets toward higher-yielding loans and in the average funding mix toward lower-cost deposit balances. Interest accretion from the fair value of acquired loans did not contribute significantly to the third quarter net interest income, or net FTE interest margin.
Provision for Credit Losses
During the third quarter of 2024, the Company recorded a provision for credit losses of $1.0 million. This compares to a provision for credit losses of $2.4 million during the second quarter of 2024, and $0.3 million during the third quarter of 2023. The decrease in the provision for credit losses during the third quarter of 2024 when compared with the second quarter of 2024 was primarily attributable to less total loan growth in the current quarter relative to the prior quarter.
For the third quarter of 2024, the allowance for credit losses included net charge-offs of $0.4 million, or an annualized 0.03% of average loans outstanding, compared to net charge-offs of $0.6 million, or an annualized 0.05% of average loans outstanding for the second quarter of 2024, and net charge-offs of $0.7 million, or an annualized 0.07% of average loans outstanding, in the third quarter of 2023.
The Company's allowance for credit losses as a percentage of period-end loans HFI was 1.10% at September 30, 2024, compared to 1.08% at June 30, 2024 and 1.14% at September 30, 2023.
Non-Interest Income
For the Quarter Ended
September 30,
June 30,
March 31,
December 31,
September 30,
(Dollars in Thousands)
2024
2024
2024
2023
2023
Non-interest Income
Service charges on deposit accounts
$
3,320
$
3,130
$
3,214
$
3,092
$
3,086
Wire transfer fees
123
113
101
103
120
Interchange fees
3,511
3,826
3,109
3,224
3,186
Fiduciary activities
1,394
1,372
1,315
1,352
1,206
Gains (losses) on sale of investment securities
—
—
—
(31,572
)
—
Gain on sale of mortgage loans
1,622
896
626
951
1,582
Mortgage servicing income net of impairment
412
450
439
724
631
Increase in cash value of bank owned life insurance
349
318
298
658
1,055
Other income
780
380
827
1,019
964
Total non-interest income
$
11,511
$
10,485
$
9,929
$
(20,449
)
$
11,830
Total non-interest income was $11.5 million in the third quarter of 2024, compared to $10.5 million in the second quarter of 2024, due primarily to higher realized gains on sale of mortgage loans and increased other income.
_________________________1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
Non-Interest Expense
For the Quarter Ended
September 30,
June 30,
March 31,
December 31,
September 30,
(Dollars in Thousands)
2024
2024
2024
2023
2023
Non-interest Expense
Salaries and employee benefits
$
21,829
$
20,583
$
20,268
$
21,877
$
20,058
Net occupancy expenses
3,207
3,192
3,546
3,260
3,283
Data processing
2,977
2,579
2,464
2,942
2,999
Professional fees
676
714
607
772
707
Outside services and consultants
3,677
3,058
3,359
2,394
2,316
Loan expense
1,034
1,038
719
1,345
1,120
FDIC insurance expense
1,204
1,315
1,320
1,200
1,300
Core deposit intangible amortization
844
844
872
903
903
Other losses
297
515
16
508
188
Other expense
3,527
3,684
3,936
4,129
3,294
Total non-interest expense
$
39,272
$
37,522
$
37,107
$
39,330
$
36,168
Total non-interest expense was $39.3 million in the third quarter of 2024, compared with $37.5 million in the second quarter of 2024. The increase in non-interest expense during the third quarter of 2024 was primarily driven by a $1.2 million increase in salaries and employee benefits expense, which is partially attributable to a legacy benefits program expense, and a $0.6 million increase in outside services and consultants expense related to strategic initiatives.
Income Taxes
Horizon's effective tax rate was -0.4% for the third quarter of 2024, as compared to 10.9% for the second quarter of 2024. The decrease in the effective tax rate during the third quarter was primarily due to an increase in net realizable tax credits for the current year, which reduced the Company's estimated annual effective tax rate.
Balance Sheet
Total assets increased by $14.9 million, or 0.2%, to $7.93 billion as of September 30, 2024, from $7.91 billion as of June 30, 2024. The increase in total assets is primarily due to increases in federal funds sold of $79.5 million, or 230.6%, to $113.9 million as of September 30, 2024, compared to $34.5 million as of June 30, 2024. The increase in federal funds sold during the period was partially offset by a decrease in other assets of $46.6 million, or 28.1%, to $119.0 million as of September 30, 2024, from $165.7 million as of June 30, 2024.
Total investment securities remained unchanged, at $2.4 billion as of September 30, 2024, compared to June 30, 2024, as the positive market impact to available for sale securities was offset by normal pay-downs and maturities. There were no purchases of investment securities during the third quarter of 2024.
Total loans HFI and loans held for sale were relatively consistent at $4.8 billion as of September 30, 2024 compared to $4.8 billion as of June 30, 2024, as growth in commercial loans of $9.5 million were offset by a decline in consumer loans of $43.3 million.
Total deposit balances increased by $96.9 million, or 1.7%, to $5.7 billion as of September 30, 2024 when compared to balances as of June 30, 2024. Non-interest bearing deposit balances were essentially unchanged during the quarter.
Total borrowings decreased by $86.4 million, or 7.0%, to $1.1 billion as of September 30, 2024, primarily related to the repayment of a portion of Federal Home Loan Bank advances, when compared to balances as of June 30, 2024.
Capital
The following table presents the consolidated regulatory capital ratios of the Company for the previous three quarters:
For the Quarter Ended
September 30,
June 30,
March 31,
December 31,
2024*
2024
2024**
2023**
Consolidated Capital Ratios
Total capital (to risk-weighted assets)
13.52
%
13.41
%
13.75
%
14.04
%
Tier 1 capital (to risk-weighted assets)
11.70
%
11.59
%
11.89
%
12.13
%
Common equity tier 1 capital (to risk-weighted assets)
10.74
%
10.63
%
10.89
%
11.11
%
Tier 1 capital (to average assets)
9.01
%
9.02
%
8.91
%
8.61
%
*Preliminary estimate - may be subject to change
**Prior periods were previously revised (see disclosure in Form 10-Q for the quarterly period ending June 30, 2024)
As of September 30, 2024, the ratio of total stockholders' equity to total assets is 9.52%. Book value per common share was $17.27, increasing $0.65 during the third quarter of 2024.
Tangible common equity1 totaled $588.5 million at September 30, 2024, and the ratio of tangible common equity to tangible assets1 was 7.58% at September 30, 2024, up from 7.22% at June 30, 2024. Tangible book value, which excludes intangible assets from total equity, per common share1 was $13.46, increasing $0.66 during the third quarter of 2024.
Credit Quality
As of September 30, 2024, total non-accrual loans increased by $5.3 million, or 29.0%, from June 30, 2024, to 0.49% of total loans HFI. Total non-performing assets increased $5.1 million, or 25.0%, to $25.6 million, compared to $20.5 million as of June 30, 2024. The ratio of non-performing assets to total assets increased to 0.32% compared to 0.26% as of June 30, 2024.
As of September 30, 2024, net charge-offs decreased by $0.2 million to $0.4 million, compared to $0.6 million as of June 30, 2024 and remain just 0.03% annualized of average loans.
_________________________1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
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 24, 2024 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833-974-2379 from the United States, 866-450-4696 from Canada or 1-412-317-5772 from international locations and requesting the "Horizon Bancorp Call." Participants are asked to dial in approximately 10 minutes prior to the call.
A telephone replay of the call will be available approximately one hour after the end of the conference through November 1, 2024. The replay may be accessed by dialing 877-344-7529 from the United States, 855-669-9658 from Canada or 1–412–317-0088 from other international locations, and entering the access code 9847279.
About Horizon Bancorp, Inc.
Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion-asset commercial bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon's retail offerings include prime residential and other secured consumer lending to in-market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in-market business banking and treasury management services, as well as equipment financing solutions for customers regionally and nationally, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana's Michigan City, is available at horizonbank.com and investor.horizonbank.com.
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.
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; 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 aggregate effects of elevated inflation levels in recent years; 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; macroeconomic conditions and their impact on Horizon and its customers; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict and the Israel and Hamas conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Horizon's reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K) filed with the SEC and available at the SEC's website (www.sec.gov). Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.
Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
March 31,
December 31,
September 30,
September 30,
September 30,
2024
2024
2024
2023
2023
2024
2023
Interest Income
Loans receivable
$
75,488
$
71,880
$
66,954
$
65,583
$
63,003
$
214,322
$
178,961
Investment securities - taxable
8,133
7,986
7,362
8,157
8,788
23,481
26,253
Investment securities - tax-exempt
6,310
6,377
6,451
6,767
7,002
19,138
21,617
Other
957
738
4,497
3,007
1,332
6,192
1,960
Total interest income
90,888
86,981
85,264
83,514
80,125
263,133
228,791
Interest Expense
Deposits
30,787
28,447
27,990
27,376
24,704
87,224
58,481
Borrowed funds
11,131
11,213
11,930
11,765
11,224
34,274
30,713
Subordinated notes
830
829
831
870
880
2,490
2,641
Junior subordinated debentures issued to capital trusts
1,230
1,213
1,225
1,246
1,227
3,668
3,469
Total interest expense
43,978
41,702
41,976
41,257
38,035
127,656
95,304
Net Interest Income
46,910
45,279
43,288
42,257
42,090
135,477
133,487
Provision for loan losses
1,044
2,369
805
1,274
263
4,218
1,185
Net Interest Income after Provision for Loan Losses
45,866
42,910
42,483
40,983
41,827
131,259
132,302
Non-interest Income
Service charges on deposit accounts
3,320
3,130
3,214
3,092
3,086
9,664
9,135
Wire transfer fees
123
113
101
103
120
337
345
Interchange fees
3,511
3,826
3,109
3,224
3,186
10,446
9,637
Fiduciary activities
1,394
1,372
1,315
1,352
1,206
4,081
3,728
Gains (losses) on sale of investment securities
—
—
—
(31,572
)
—
—
(480
)
Gain on sale of mortgage loans
1,622
896
626
