EX-99.1 2 hb_8k102619ex.htm PRESS RELEASE ISSUED ON OCTOBER 23, 2019
Exhibit 99.1




Contact: Mark E. Secor
Chief Financial Officer
Phone: (219) 873-2611
Fax: (219) 874-9280
Date: October 23, 2019
FOR IMMEDIATE RELEASE
Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings
Michigan City, Indiana (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) today announced its unaudited financial results for the three-month and nine-month periods ended September 30, 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 quarter ended September 30, 2019 was $20.5 million, or $0.46 diluted earnings per share, compared to $13.1 million, or $0.34 diluted earnings per share, for the quarter ended September 30, 2018. This represents the highest quarterly net income and diluted earnings per share in the Company’s history.
•
Core net income for the quarter ended September 30, 2019 increased 54.4% to $20.3 million, or $0.45 diluted earnings per share, compared to $13.2 million, or $0.34 diluted earnings per share, for the same period in 2018. This represents the highest quarterly core net income and core diluted earnings per share in the Company’s history. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for a description of the elements of core net income.)
•
Net income for the first nine months of 2019 was $48.0 million, or $1.11 diluted earnings per share, compared to $40.0 million, or $1.04 diluted earnings per share, for the first nine months of 2018. This represents the highest year-to-date net income and diluted earnings per share as of September 30th in the Company’s history.
•
Core net income for the first nine months of 2019 was $52.1 million, or $1.21 diluted earnings per share, compared to $39.9 million, or $1.04 diluted earnings per share, for the first nine months of 2018. This represents the highest year-to-date core net income and core diluted earnings per share as of September 30th in the Company’s history. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for a description of the elements of core net income.)
•
Net interest margin for the quarter ended September 30, 2019 was 3.82% compared to 3.73% and 3.67% for the quarters ended June 30, 2019 and September 30, 2018, respectively. The increase in net interest margin from the second quarter of 2019 and third quarter of 2018 reflects an increase in the yield of interest-earning assets as loans continue to reprice upwards and a decrease in cost of borrowings, along with a stabilization in deposit pricing.
•
Core net interest margin for the quarter ended September 30, 2019 was 3.67% compared to 3.61% and 3.59% for the quarters ended June 30, 2019 and September 30, 2018, respectively. (See the “Non-GAAP Reconciliation of Net Interest Margin” table on page 5 for a description of the elements of core net interest margin.)
•
Return on average assets was 1.60% for the third quarter of 2019 compared to 1.26% for the third quarter of 2018. Return on average assets was 1.33% for both the first nine months of 2019 and 2018.

Pg. 2 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings
•
Core return on average assets for the third quarter of 2019 was 1.58% compared to 1.27% for the third quarter of 2018. Core return on average assets was 1.44% for the first nine months of 2019 compared to 1.32% for the first nine months of 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.)
•
Return on average equity was 12.72% for the third quarter of 2019 compared to 10.87% for the third quarter of 2018. Return on average equity was 10.88% for the first nine months of 2019 compared to 11.43% for the first nine months of 2018.
•
Core return on average equity for the third quarter of 2019 was 12.59% compared to 10.95% for the third quarter of 2018. Core return on average equity was 11.83% for the first nine months of 2019 compared to 11.41% for the first nine months of 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 $10.31 at September 30, 2019 compared to $9.91 and $9.04 at June 30, 2019 and September 30, 2018, respectively. This represents the highest tangible book value per share in the Company’s history.
•
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 September 30, 2019, Horizon had repurchased a total of 99,407 shares at an average price per share of $16.04.
•
Horizon consolidated its two Midland, Michigan full-service branches into one location on September 6, 2019.
Craig Dwight, Chairman and CEO of Horizon, commented:  “Horizon’s 2019 third quarter and year-to-date performance resulted in record earnings and demonstrate that our long range strategic plan to improve efficiency through an increase in mass and scale is working. Third quarter 2019 earnings increased to $20.5 million, or $0.46 diluted earnings per share, when compared to prior year period earnings of $13.1 million, or $0.34 diluted earnings per share. Year-to-date earnings increased to $48.0 million, or $1.11 diluted earnings per share, compared to $40.0 million, or $1.04 diluted earnings per share, for the prior year period.”
Dwight added, “Horizon’s growth story continues with total assets now reaching approximately $5.2 billion at September 30, 2019. In addition to the loans acquired from our acquisition of Salin Bank and Trust Company during the first quarter of 2019, which totaled approximately $568.9 million, we continue to experience year-to-date loan growth of $118.3 million from the markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo.”
Dwight concluded, “Horizon continues to maximize operational leverage through an increase in mass and scale as evident by the decrease in our adjusted efficiency ratio. Horizon’s adjusted efficiency ratio, excluding merger expenses, loss on sale of investment securities and death benefit on bank owned life insurance decreased to 54.89% for the third quarter of 2019 compared to 57.62% for the second quarter of 2019 and 60.17% for the third quarter of 2018. In addition, annualized non-interest expense to average assets, excluding merger expenses, fell to 2.34% for the third quarter of 2019 compared to 2.39% for the second quarter of 2019 and 2.48% for the third quarter of 2018. Our team continues to leverage new technologies and develop operational efficiencies. In addition, Horizon consolidated its two Midland, Michigan full-service branches into one location on September 6, 2019 in our continued efforts to improve branch efficiencies.”

Pg. 3 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings

Income Statement Highlights
Net income for the third quarter of 2019 was $20.5 million, or $0.46 diluted earnings per share, compared to $16.6 million, or $0.37 diluted earnings per share, for the second quarter of 2019 and $13.1 million, or $0.34 diluted earnings per share, for the third quarter of 2018. Excluding acquisition-related expenses, loss on sale of investment securities and death benefit on bank owned life insurance (“core net income”), core net income for the third quarter of 2019 was $20.3 million, or $0.46 diluted earnings per share, compared to $17.6 million, or $0.39 diluted earnings per share, for the second quarter of 2019 and $13.2 million, or $0.34 diluted earnings per share, for the third quarter of 2018.
The increase in net income and diluted earnings per share from the second quarter of 2019 to the third quarter of 2019 reflects increases in net interest income of $1.9 million and non-interest income of $616,000, in addition to decreases in non-interest expense of $1.5 million and provision for loan losses of $520,000, offset by an increase in income tax expense of $699,000.
The increase in net income from the third quarter of 2018 when compared to the same period of 2019 reflects increases in net interest income of $9.7 million and non-interest income of $2.8 million, in addition to a decrease in provision for loan losses of $800,000, offset by increases in non-interest expense of $4.4 million and income tax expense of $1.4 million.
Net income for the nine months ended September 30, 2019 was $48.0 million, or $1.11 diluted earnings per share, compared to $40.0 million, or $1.04 diluted earnings per share, for the nine months ended September 30, 2018. Core net income for the nine months ended September 30, 2019 was $52.1 million, or $1.21 diluted earnings per share, compared to $39.9 million, or $1.04 diluted earnings per share, for the nine months ended September 30, 2018. This represents a 16.3% increase in core diluted earnings per share for the first nine months of 2019 compared to the same period in 2018.
The increase in net income when comparing the first nine months of 2019 to the prior year period reflects increases in net interest income of $18.5 million and non-interest income of $5.2 million, in addition to a decrease in provision for loan losses of $742,000, offset by increases in non-interest expense of $15.0 million and income tax expense of $1.5 million.



Pg. 4 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings

Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
  
(Dollars in Thousands, Except per Share Data, Unaudited)

  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30
    
June 30
    
September 30
    
September 30
    
September 30
  
   
2019
    
2019
    
2018
    
2019
    
2018
  
Non-GAAP Reconciliation of Net Income
                              
Net income as reported
  
$
20,537
    
$
16,642
    
$
13,065
    
$
47,995
    
$
39,984
  
Merger expenses
    
-
      
1,532
      
-
      
5,650
      
-
  
Tax effect
    
-
      
(295
)
    
-
      
(987
)
    
-
  
Net income excluding merger expenses
    
20,537
      
17,879
      
13,065
      
52,658
      
39,984
  
                                         
Loss on sale of investment securities
    
-
      
100
      
122
      
85
      
111
  
Tax effect
    
-
      
(21
)
    
(25
)
    
(18
)
    
(23
)
Net income excluding loss on sale of investment securities
    
20,537
      
17,958
      
13,162
      
52,725
      
40,072
  
                                         
Death benefit on bank owned life insurance ("BOLI")
    
(213
)
    
(367
)
    
-
      
(580
)
    
(154
)
Net income excluding death benefit on BOLI
    
20,324
      
17,591
      
13,162
      
52,145
      
39,918
  
                                         
Core Net Income
  
$
20,324
    
$
17,591
    
$
13,162
    
$
52,145
    
$
39,918
  
                                         
                                         
Non-GAAP Reconciliation of Diluted Earnings per Share
                                        
Diluted earnings per share ("EPS") as reported
  
$
0.46
    
$
0.37
    
$
0.34
    
$
1.11
    
$
1.04
  
Merger expenses
    
-
      
0.03
      
-
      
0.13
      
-
  
Tax effect
    
-
      
-
      
-
      
(0.02
)
    
-
  
Diluted EPS excluding merger expenses
    
0.46
      
0.40
      
0.34
      
1.22
      
1.04
  
                                         
Loss on sale of investment securities
    
-
      
-
      
-
      
-
      
-
  
Tax effect
    
-
      
-
      
-
      
-
      
-
  
Diluted EPS excluding loss on sale of investment securities
    
0.46
      
0.40
      
0.34
      
1.22
      
1.04
  
                                         
Death benefit on BOLI
    
(0.01
)
    
(0.01
)
    
-
      
(0.01
)
    
-
  
Diluted EPS excluding death benefit on BOLI
    
0.45
      
0.39
      
0.34
      
1.21
      
1.04
  
                                         
Core Diluted EPS
  
$
0.45
    
$
0.39
    
$
0.34
    
$
1.21
    
$
1.04
  


Horizon’s net interest margin increased to 3.82% for the third quarter of 2019 when compared to 3.73% for the second quarter of 2019. The increase in net interest margin reflects an increase in the yield on interest-earning assets of six basis points as loans continued to reprice upwards along with an increase in commercial loan fees of $811,000 when compared to the second quarter of 2019. The cost of interest-bearing liabilities decreased by three basis points primarily from a decrease in the cost of borrowings. In addition, deposit pricing is reducing within the markets we serve in alignment with the recent decline in general market short-term interest rates.
Net interest margin increased to 3.82% for the third quarter of 2019 when compared to 3.67% for the third quarter of 2018. The increase in net interest margin was due to an increase in yield on interest-earning assets of 29 basis points, offset by an increase in the cost on interest-bearing liabilities of 22 basis points. The increase in the yield of interest-earning assets was primarily due to the increase in the yields on loans receivable of 34 basis points and non-taxable investment securities of 25 basis points. The increase in the yields on loans receivable was the result of loans repricing upwards along with an increase in commercial loan fees of $1.2 million when comparing the third quarter of 2019 to the third quarter of 2018. The cost of interest-bearing deposits increased by 33 basis points and was partially offset by a decrease in the cost on borrowings of 12 basis points.
Net interest margin decreased to 3.72% during the first nine months of 2019 when compared to 3.74% for the first nine months of 2018. This decrease reflects an increase in the cost of interest-bearing liabilities of 40 basis points, offset by an increase in the yield of interest-earning assets of 26 basis points. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits of 48 basis points and borrowings of 28 basis points. The increase in the yield of interest-earning assets was due to increases in the yields on loans receivable of 26 basis points, non-taxable investment securities of 37 basis points and taxable investment securities of 15 basis points.

Pg. 5 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings
Net interest margin, excluding acquisition-related purchase accounting adjustments (“core net interest margin”), was 3.67% for the third quarter of 2019 compared to 3.61% for the prior quarter and 3.59% for the third quarter of 2018. Interest income from acquisition-related purchase accounting adjustments was $1.7 million, $1.3 million and $789,000 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively. The increase in the core net interest margin during the third quarter of 2019 was due to a decrease of the cost on borrowings and an increase in the yield on earning assets from higher mortgage warehouse lending balances, loans continuing to reprice higher and the addition of acquired Salin loans.
Non-GAAP Reconciliation of Net Interest Margin
  
(Dollars in Thousands, Unaudited)

  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30
    
June 30
    
September 30
    
September 30
    
September 30
  
   
2019
    
2019
    
2018
    
2019
    
2018
  
Non-GAAP Reconciliation of Net Interest Margin
                              
Net interest income as reported
  
$
43,463
    
$
41,529
    
$
33,772
    
$
119,272
    
$
100,733
  
                                         
Average interest-earning assets
    
4,623,985
      
4,566,674
      
3,717,139
      
4,376,841
      
3,610,277
  
                                         
Net interest income as a percentage of average interest-earning assets ("Net Interest Margin")
    
3.82
%
    
3.73
%
    
3.67
%
    
3.72
%
    
3.74
%
                                         
Acquisition-related purchase accounting adjustments ("PAUs")
  
$
(1,739
)
  
$
(1,299
)
  
$
(789
)
  
$
(4,548
)
  
$
(4,460
)
                                         
Core net interest income
  
$
41,724
    
$
40,230
    
$
32,983
    
$
114,724
    
$
96,273
  
                                         
Core net interest margin
    
3.67
%
    
3.61
%
    
3.59
%
    
3.58
%
    
3.58
%


Lending Activity
Total loans increased $653.3 million from $3.014 billion as of December 31, 2018 to $3.668 billion as of September 30, 2019. Excluding acquired loans, total loans increased $84.4 million during the first nine months of 2019 as consumer loans increased by $33.7 million and mortgage warehouse loans increased by $81.5 million, offset by a decrease in commercial loans of $28.2 million and residential mortgage loans of $2.7 million.
Loan Growth by Type, Excluding Acquired Loans
  
(Dollars in Thousands, Unaudited)
  
                               
   
September 30
    
December 31
    
Amount
Change
    
Acquired
Loans
    
Amount
Change
    
Percent
Change
  
   
2019
    
2018
  
Commercial
  
$
2,046,165
    
$
1,721,590
    
$
324,575
    
$
(352,798
)
  
$
(28,223
)
    
-1.6
%
Residential mortgage
    
796,497
      
668,141
      
128,356
      
(131,008
)
    
(2,652
)
    
-0.4
%
Consumer
    
668,332
      
549,481
      
118,851
      
(85,112
)
    
33,739
      
6.1
%
Subtotal
    
3,510,994
      
2,939,212
      
571,782
      
(568,918
)
    
2,864
      
0.1
%
Held for sale loans
    
1,060
      
1,038
      
22
      
-
      
22
      
2.1
%
Mortgage warehouse loans
    
155,631
      
74,120
      
81,511
      
-
      
81,511
      
110.0
%
Total loans
  
$
3,667,685
    
$
3,014,370
    
$
653,315
    
$
(568,918
)
  
$
84,397
      
2.8
%





Pg. 6 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings
During the first nine months of 2019, Horizon Bank (the “Bank”) originated approximately $299.5 million of commercial loans, which is a 17% increase compared to the same period in 2018; however, only 56.5%, or $169.1 million, of these loan originations had been funded as of September 30, 2019. These originations were offset by commercial loan payoffs totaling approximately $226.0 million during the first nine months of 2019, which is a 69% 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 the first nine months of 2018, the Bank originated approximately $256.5 million of commercial loans; however, only 56.2%, or $144.1 million, of these loan originations had been funded as of September 30, 2018. These originations were offset by commercial loan payoffs totaling approximately $134.1 million during the first nine months of 2018.
Residential mortgage lending activity for the three months ended September 30, 2019 generated $2.7 million in income from the gain on sale of mortgage loans, an increase of $624,000 from the second quarter of 2019 and $863,000 from the third quarter of 2018. Total origination volume for the third quarter of 2019, including loans placed into portfolio, totaled $121.1 million, representing an increase of 8.7% from the second quarter of 2019 and an increase of 20.4% from the third quarter of 2018. Total origination volume for the third quarter of 2019 of loans sold to the secondary market totaled $95.0 million, representing an increase of 56.7% from the second quarter of 2019 and an increase of 60.3% from the third quarter of 2018.
Revenue derived from Horizon’s residential mortgage and warehouse lending activities was 5.8% of Horizon’s total revenue for the nine months ended September 30, 2019, which is comparable to the same prior year period.
The provision for loan losses totaled $376,000 for the third quarter of 2019 compared to $896,000 for the second quarter of 2019 and $1.2 million for the third quarter of 2018.
The provision for loan losses totaled $1.6 million for the first nine months of 2019 compared to $2.4 million for the first nine months of 2018.
The ratio of the allowance for loan losses to total loans decreased to 0.49% as of September 30, 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 0.65% as of September 30, 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 1.07% as of September 30, 2019 compared to 0.98% as of December 31, 2018.

Pg. 7 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings

Non-GAAP Allowance for Loan and Lease Loss Detail
  
As of September 30, 2019
  
(Dollars in Thousands, Unaudited)
  
                                                 
   
Pre-discount
Loan Balance
    
Allowance
for Loan Losses
(ALLL)
    
Loan
Discount
    
ALLL
+
Loan Discount
    
Loans, net
    
ALLL/
Pre-discount
Loan Balance
    
Loan Discount/
Pre-discount
Loan Balance
    
ALLL+Loan Discount/
Pre-discount
Loan Balance
  
Horizon Legacy
  
$
2,779,961
    
$
17,946
      
N/A
    
$
17,946
    
$
2,762,015
      
0.65
%
    
0.00
%
    
0.65
%
Heartland
    
5,244
      
-
      
589
      
589
      
4,655
      
0.00
%
    
11.23
%
    
11.23
%
Summit
    
16,191
      
-
      
987
      
987
      
15,204
      
0.00
%
    
6.10
%
    
6.10
%
Peoples
    
71,941
      
-
      
1,669
      
1,669
      
70,272
      
0.00
%
    
2.32
%
    
2.32
%
Kosciusko
    
30,580
      
-
      
528
      
528
      
30,052
      
0.00
%
    
1.73
%
    
1.73
%
LaPorte
    
70,442
      
10
      
2,461
      
2,471
      
67,971
      
0.01
%
    
3.49
%
    
3.50
%
CNB
    
3,498
      
-
      
88
      
88
      
3,410
      
0.00
%
    
2.52
%
    
2.52
%
Lafayette
    
63,805
      
-
      
519
      
519
      
63,286
      
0.00
%
    
0.81
%
    
0.81
%
Wolverine
    
136,829
      
-
      
729
      
729
      
136,100
      
0.00
%
    
0.53
%
    
0.53
%
Salin
    
489,194
      
-
      
13,797
      
13,797
      
475,397
      
0.00
%
    
2.82
%
    
2.82
%
Total
  
$
3,667,685
    
$
17,956
    
$
21,367
    
$
39,323
    
$
3,628,362
      
0.49
%
    
0.58
%
    
1.07
%


As of September 30, 2019, non-performing loans totaled $19.2 million, which reflects a two basis point increase in non-performing loans to total loans, or a $4.0 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 $1.3 million, non-performing real estate loans increased by $2.2 million and non-performing consumer loans increased by $485,000. Other real estate owned and repossessed assets totaled $4.0 million as of September 30, 2019 which is an increase of $2.0 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.
As of September 30, 2019, substandard loans totaled $62.1 million, which is an increase of $14.4 million from June 30, 2019. This increase in substandard loans was primarily due to four unrelated relationships, each from a different industry, being downgraded during the quarter. We do not believe this increase to be an indication of the overall quality of our loan portfolio as evident by our steady non-performing loans to total loans ratio of 0.52% as of September 30, 2019 and other non-performing and substandard relationships showing improvement.
Expense Management
Total non-interest expense was $1.5 million lower in the third quarter of 2019 when compared to the second quarter of 2019. FDIC insurance, other expense, professional fees, and outside services and consultants decreased by $638,000, $572,000, $263,000 and $103,000, respectively. Offsetting these decreases was an increase in loan expense of $150,000. 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 held steady at $30.1 million when comparing the third quarter of 2019 to the second quarter of 2019.

Pg. 8 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings

   
Three Months Ended
              
   
September 30
    
June 30
              
   
2019
    
2019
    
Adjusted
  
Non-interest Expense
  
Actual
    
Merger
Expenses
    
Adjusted
    
Actual
    
Merger
Expenses
    
Adjusted
    
Amount
Change
    
Percent
Change
  
Salaries and employee benefits
  
$
16,948
    
$
-
    
$
16,948
    
$
16,951
    
$
(482
)
  
$
16,469
    
$
479
      
2.9
%
Net occupancy expenses
    
3,131
      
-
      
3,131
      
3,148
      
(75
)
    
3,073
      
58
      
1.9
%
Data processing
    
2,140
      
-
      
2,140
      
2,139
      
(68
)
    
2,071
      
69
      
3.3
%
Professional fees
    
335
      
-
      
335
      
598
      
(153
)
    
445
      
(110
)
    
-24.7
%
Outside services and consultants
    
1,552
      
-
      
1,552
      
1,655
      
(176
)
    
1,479
      
73
      
4.9
%
Loan expense
    
2,198
      
-
      
2,198
      
2,048
      
(2
)
    
2,046
      
152
      
7.4
%
FDIC deposit insurance
    
(273
)
    
-
      
(273
)
    
365
      
-
      
365
      
(638
)
    
-174.8
%
Other losses
    
90
      
-
      
90
      
169
      
(69
)
    
100
      
(10
)
    
-10.0
%
Other expenses
    
3,939
      
-
      
3,939
      
4,511
      
(507
)
    
4,004
      
(65
)
    
-1.6
%
Total non-interest expense
  
$
30,060
    
$
-
    
$
30,060
    
$
31,584
    
$
(1,532
)
  
$
30,052
    
$
8
      
0.0
%
Annualized Non-interest Exp. to Avg. Assets
    
2.34
%
            
2.34
%
    
2.51
%
            
2.39
%
                


Total non-interest expense was $4.4 million higher during the third quarter of 2019 compared to the same period of 2018. Salaries and employee benefits, other expense, net occupancy expense, loan expense, data processing and outside services and consultants increased $2.6 million, $836,000, $636,000, $476,000, $381,000 and $348,000, respectively. These increases were offset by a decrease of $669,000 in FDIC insurance and $102,000 in professional fees. FDIC insurance decreased due to assessment credits the Bank received during the third quarter of 2019 as the FDIC reserve is currently overfunded.
   
Three Months Ended
              
   
September 30
    
September 30
              
   
2019
    
2018
    
Adjusted
  
Non-interest Expense
  
Actual
    
Merger
Expenses
    
Adjusted
    
Actual
    
Merger
Expenses
    
Adjusted
    
Amount
Change
    
Percent
Change
  
Salaries and employee benefits
  
$
16,948
    
$
-
    
$
16,948
    
$
14,343
    
$
-
    
$
14,343
    
$
2,605
      
18.2
%
Net occupancy expenses
    
3,131
      
-
      
3,131
      
2,495
      
-
      
2,495
      
636
      
25.5
%
Data processing
    
2,140
      
-
      
2,140
      
1,759
      
-
      
1,759
      
381
      
21.7
%
Professional fees
    
335
      
-
      
335
      
437
      
-
      
437
      
(102
)
    
-23.3
%
Outside services and consultants
    
1,552
      
-
      
1,552
      
1,204
      
-
      
1,204
      
348
      
28.9
%
Loan expense
    
2,198
      
-
      
2,198
      
1,722
      
-
      
1,722
      
476
      
27.6
%
FDIC deposit insurance
    
(273
)
    
-
      
(273
)
    
396
      
-
      
396
      
(669
)
    
-168.9
%
Other losses
    
90
      
-
      
90
      
161
      
-
      
161
      
(71
)
    
-44.1
%
Other expenses
    
3,939
      
-
      
3,939
      
3,103
      
-
      
3,103
      
836
      
26.9
%
Total non-interest expense
  
$
30,060
    
$
-
    
$
30,060
    
$
25,620
    
$
-
    
$
25,620
    
$
4,440
      
17.3
%
Annualized Non-interest Exp. to Avg. Assets
    
2.34
%
            
2.34
%
    
2.48
%
            
2.48
%
                


Total non-interest expense was $15.0 million higher during the first nine months of 2019 when compared to the first nine months of 2018. Salaries and employee benefits, other expenses, outside services and consultants, loan expense, data processing and net occupancy increased $5.8 million, $3.1 million, $3.0 million, $1.7 million, $1.2 million and $1.1 million, respectively. Offsetting these increases was a decrease in FDIC insurance of $799,000 and other losses of $213,000. 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 $9.3 million during the first nine months of 2019 when compared to the same period of 2018.

Pg. 9 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings

   
Nine Months Ended
              
   
September 30
    
September 30
    
Adjusted
  
   
2019
    
2018
    
Amount
Change
    
Percent
Change
  
Non-interest Expense
  
Actual
    
Merger
Expenses
    
Adjusted
    
Actual
    
Merger
Expenses
    
Adjusted
  
Salaries and employee benefits
  
$
48,365
    
$
(484
)
  
$
47,881
    
$
42,525
    
$
-
    
$
42,525
    
$
5,356
      
12.6
%
Net occupancy expenses
    
9,051
      
(75
)
    
8,976
      
7,981
      
-
      
7,981
      
995
      
12.5
%
Data processing
    
6,245
      
(360
)
    
5,885
      
5,062
      
-
      
5,062
      
823
      
16.3
%
Professional fees
    
1,426
      
(392
)
    
1,034
      
1,314
      
-
      
1,314
      
(280
)
    
-21.3
%
Outside services and consultants
    
6,737
      
(2,466
)
    
4,271
      
3,735
      
-
      
3,735
      
536
      
14.4
%
Loan expense
    
6,195
      
(2
)
    
6,193
      
4,504
      
-
      
4,504
      
1,689
      
37.5
%
FDIC deposit insurance
    
252
      
-
      
252
      
1,051
      
-
      
1,051
      
(799
)
    
-76.0
%
Other losses
    
363
      
(71
)
    
292
      
576
      
-
      
576
      
(284
)
    
-49.3
%
Other expenses
    
12,748
      
(1,800
)
    
10,948
      
9,651
      
-
      
9,651
      
1,297
      
13.4
%
Total non-interest expense
  
$
91,382
    
$
(5,650
)
  
$
85,732
    
$
76,399
    
$
-
    
$
76,399
    
$
9,333
      
12.2
%
Annualized Non-interest Exp. to Avg. Assets
    
2.53
%
            
2.38
%
    
2.54
%
            
2.54
%
                


Annualized non-interest expense as a percent of average assets were 2.34%, 2.51% and 2.48% for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively. Annualized non-interest expense, excluding merger expenses, as a percent of average assets continue to decline and were 2.34%, 2.39% and 2.48% for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.
Annualized non-interest expense as a percent of average assets were 2.53% and 2.54% for the first nine months of 2019 and 2018, respectively. Annualized non-interest expense, excluding merger expenses, as a percent of average assets were 2.38% and 2.54% for the first nine months of 2019 and 2018, respectively. Horizon’s strategy to build mass and scale continues to prove effective.
Income tax expense totaled $4.0 million for the third quarter of 2019, an increase of $699,000 when compared to the second quarter of 2019 and an increase of $1.4 million when compared to the third quarter of 2018. The increase in income tax expense from the second quarter of 2019 and the third quarter of 2018 was primarily due to increases in income before income taxes of $4.6 million and $8.9 million, respectively, when compared to the third quarter of 2019.
Income tax expense totaled $9.4 million for the first nine months of 2019, an increase of $1.5 million when compared to the first nine months of 2018. The increase in income tax expense from the first nine months of 2018 was primarily due to an increase in income before income taxes of $9.5 million when compared to the same period of 2019.

Pg. 10 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings
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, 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, to show 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)
  
                               
   
September 30
    
June 30
    
March 31
    
December 31
    
September 30
  
   
2019
    
2019
    
2019
    
2018
    
2018
  
Total stockholders' equity
  
$
642,711
    
$
626,461
    
$
609,468
    
$
491,992
    
$
477,594
  
Less: Intangible assets
    
178,896
      
179,776
      
176,864
      
130,270
      
130,755
  
Total tangible stockholders' equity
  
$
463,815
    
$
446,685
    
$
432,604
    
$
361,722
    
$
346,839
  
                                         
Common shares outstanding
    
44,969,021
      
45,061,372
      
45,052,747
      
38,375,407
      
38,367,890
  
                                         
Tangible book value per common share
  
$
10.31
    
$
9.91
    
$
9.60
    
$
9.43
    
$
9.04
  



Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
  
(Dollars in Thousands, Unaudited)

  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30
    
June 30
    
September 30
    
September 30
    
September 30
  
   
2019
    
2019
    
2018
    
2019
    
2018
  
Non-GAAP Calculation of Efficiency Ratio
                              
Non-interest expense as reported
  
$
30,060
    
$
31,584
    
$
25,620
    
$
91,382
    
$
76,399
  
                                         
Net interest income as reported
    
43,463
      
41,529
      
33,772
      
119,272
      
100,733
  
                                         
Non-interest income as reported
    
11,514
      
10,898
      
8,686
      
31,124
      
25,936
  
                                         
Non-interest expense/(Net interest income + Non-interest income) ("Efficiency Ratio")
    
54.68
%
    
60.24
%
    
60.34
%
    
60.76
%
    
60.31
%
                                         
Non-GAAP Reconciliation of Adjusted Efficiency Ratio
                                        
Non-interest expense as reported
  
$
30,060
    
$
31,584
    
$
25,620
    
$
91,382
    
$
76,399
  
Merger expenses
    
-
      
(1,532
)
    
-
      
(5,650
)
    
-
  
Non-interest expense excluding merger expenses
    
30,060
      
30,052
      
25,620
      
85,732
      
76,399
  
                                         
Net interest income as reported
    
43,463
      
41,529
      
33,772
      
119,272
      
100,733
  
                                         
Non-interest income as reported
    
11,514
      
10,898
      
8,686
      
31,124
      
25,936
  
Loss on sale of investment securities
    
-
      
100
      
122
      
85
      
111
  
Death benefit on bank owned life insurance ("BOLI")
    
(213
)
    
(367
)
    
-
      
(580
)
    
(154
)
Non-interest income excluding loss on sale of investment securities and death benefit on BOLI
    
11,301
      
10,631
      
8,808
      
30,629
      
25,893
  
                                         
Adjusted efficiency ratio
    
54.89
%
    
57.62
%
    
60.17
%
    
57.19
%
    
60.33
%



Pg. 11 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings


Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity
  
(Dollars in Thousands, Unaudited)

  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30
    
June 30
    
September 30
    
September 30
    
September 30
  
   
2019
    
2019
    
2018
    
2019
    
2018
  
Non-GAAP Reconciliation of Return on Average Assets
                              
Average assets
  
$
5,107,259
    
$
5,047,365
    
$
4,105,096
    
$
4,823,601
    
$
4,021,811
  
                                         
Return on average assets ("ROAA") as reported
    
1.60
%
    
1.32
%
    
1.26
%
    
1.33
%
    
1.33
%
Merger expenses
    
0.00
%
    
0.12
%
    
0.00
%
    
0.16
%
    
0.00
%
Tax effect
    
0.00
%
    
-0.02
%
    
0.00
%
    
-0.03
%
    
0.00
%
ROAA excluding merger expenses
    
1.60
%
    
1.42
%
    
1.26
%
    
1.46
%
    
1.33
%
                                         
Loss on sale of investment securities
    
0.00
%
    
0.01
%
    
0.01
%
    
0.00
%
    
0.00
%
Tax effect
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
ROAA excluding loss on sale of investment securities
    
1.60
%
    
1.43
%
    
1.27
%
    
1.46
%
    
1.33
%
                                         
Death benefit on bank owned life insurance ("BOLI")
    
-0.02
%
    
-0.03
%
    
0.00
%
    
-0.02
%
    
-0.01
%
ROAA excluding death benefit on BOLI
    
1.58
%
    
1.40
%
    
1.27
%
    
1.44
%
    
1.32
%
                                         
Core ROAA
    
1.58
%
    
1.40
%
    
1.27
%
    
1.44
%
    
1.32
%
                                         
Non-GAAP Reconciliation of Return on Average Common Equity
                                        
Average Common Equity
  
$
640,770
    
$
622,028
    
$
476,959
    
$
589,766
    
$
467,867
  
                                         
Return on average common equity ("ROACE") as reported
    
12.72
%
    
10.73
%
    
10.87
%
    
10.88
%
    
11.43
%
Merger expenses
    
0.00
%
    
0.99
%
    
0.00
%
    
1.28
%
    
0.00
%
Tax effect
    
0.00
%
    
-0.19
%
    
0.00
%
    
-0.22
%
    
0.00
%
ROACE excluding merger expenses
    
12.72
%
    
11.53
%
    
10.87
%
    
11.94
%
    
11.43
%
                                         
Loss on sale of investment securities
    
0.00
%
    
0.06
%
    
0.10
%
    
0.02
%
    
0.03
%
Tax effect
    
0.00
%
    
-0.01
%
    
-0.02
%
    
0.00
%
    
-0.01
%
ROACE excluding loss on sale of investment securities
    
12.72
%
    
11.58
%
    
10.95
%
    
11.96
%
    
11.45
%
                                         
Death benefit on bank owned life insurance ("BOLI")
    
-0.13
%
    
-0.24
%
    
0.00
%
    
-0.13
%
    
-0.04
%
ROACE excluding death benefit on BOLI
    
12.59
%
    
11.34
%
    
10.95
%
    
11.83
%
    
11.41
%
                                         
Core ROACE
    
12.59
%
    
11.34
%
    
10.95
%
    
11.83
%
    
11.41
%


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.

Pg. 12 cont. Horizon Bancorp, Inc. Announces Record Quarterly and Year-to-Date Earnings
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)
 
   
September 30
    
June 30
    
March 31
    
December 31
    
September 30
  
   
2019
    
2019
    
2019
    
2018
    
2018
  
Balance sheet:
                              
Total assets
  
$
5,186,714
    
$
5,098,682
    
$
5,051,639
    
$
4,246,688
    
$
4,150,561
  
Investment securities
    
977,536
      
887,187
      
893,469
      
810,460
      
766,153
  
Commercial loans
    
2,046,165
      
2,062,623
      
2,089,579
      
1,721,590
      
1,698,582
  
Mortgage warehouse loans
    
155,631
      
133,428
      
71,944
      
74,120
      
71,422
  
Residential mortgage loans
    
796,497
      
814,065
      
819,824
      
668,141
      
651,250
  
Consumer loans
    
668,332
      
654,552
      
639,710
      
549,481
      
536,132
  
Earning assets
    
4,667,668
      
4,577,487
      
4,538,952
      
3,842,903
      
3,743,592
  
Non-interest bearing deposit accounts
    
756,707
      
810,350
      
811,768
      
642,129
      
621,475
  
Interest bearing transaction accounts
    
2,173,100
      
2,153,189
      
2,115,847
      
1,684,336
      
1,605,825
  
Time deposits
    
986,150
      
967,236
      
960,408
      
812,911
      
901,254
  
Borrowings
    
516,591
      
436,233
      
457,788
      
550,384
      
477,719
  
Subordinated debentures
    
56,250
      
56,194
      
55,310
      
37,837
      
37,791
  
Total stockholders' equity
    
642,711
      
626,461
      
609,468
      
491,992
      
477,594
  
                                         
   
Three Months Ended
  
Income statement:
                                        
Net interest income
  
$
43,463
    
$
41,529
    
$
34,280
    
$
33,836
    
$
33,772
  
Provision for loan losses
    
376
      
896
      
364
      
528
      
1,176
  
Non-interest income
    
11,514
      
10,898
      
8,712
      
8,477
      
8,686
  
Non-interest expense
    
30,060
      
31,584
      
29,738
      
26,117
      
25,620
  
Income tax expense
    
4,004
      
3,305
      
2,074
      
2,535
      
2,597
  
Net income
  
$
20,537
    
$
16,642
    
$
10,816
    
$
13,133
    
$
13,065
  
                                         
Per share data: (1)
                                        
Basic earnings per share
  
$
0.46
    
$
0.37
    
$
0.28
    
$
0.34
    
$
0.34
  
Diluted earnings per share
    
0.46
      
0.37
      
0.28
      
0.34
      
0.34
  
Cash dividends declared per common share
    
0.12
      
0.12
      
0.10
      
0.10
      
0.10
  
Book value per common share
    
14.29
      
13.90
      
13.53
      
12.82
      
12.45
  
Tangible book value per common share
    
10.31
      
9.91
      
9.60
      
9.43
      
9.04
  
Market value - high
    
17.77
      
17.13
      
17.82
      
19.40
      
21.39
  
Market value - low
  
$
15.93
    
$
15.51
    
$
15.50
    
$
14.94
    
$
19.44
  
Weighted average shares outstanding - Basic
    
45,038,021
      
45,055,117
      
38,822,543
      
38,367,972
      
38,365,379
  
Weighted average shares outstanding - Diluted
    
45,113,730
      
45,130,408
      
38,906,172
      
38,488,002
      
38,534,970
  
                                         
Key ratios:
                                        
Return on average assets
    
1.60
%
    
1.32
%
    
1.02
%
    
1.25
%
    
1.26
%
Return on average common stockholders' equity
    
12.72
      
10.73
      
8.66
      
10.73
      
10.87
  
Net interest margin
    
3.82
      
3.73
      
3.62
      
3.60
      
3.67
  
Loan loss reserve to total loans
    
0.49
      
0.50
      
0.49
      
0.59
      
0.60
  
Average equity to average assets
    
12.55
      
12.32
      
11.76
      
11.62
      
11.62
  
Bank only capital ratios:
                                        
Tier 1 capital to average assets
    
9.39
      
9.52
      
10.99
      
9.38
      
9.53
  
Tier 1 capital to risk weighted assets
    
11.69
      
11.76
      
11.84
      
11.91
      
12.09
  
Total capital to risk weighted assets
    
12.14
      
12.23
      
12.30
      
12.47
      
12.66
  
                                         
Loan data:
                                        
Substandard loans
  
$
62,130
    
$
47,764
    
$
41,728
    
$
38,775
    
$
34,655
  
30 to 89 days delinquent
    
10,204
      
9,633
      
9,980
      
7,161
      
6,878
  
                                         
90 days and greater delinquent - accruing interest
  
$
34
    
$
391
    
$
192
    
$
568
    
$
202
  
Trouble debt restructures - accruing interest
    
3,491
      
2,198
      
2,532
      
2,002
      
1,830
  
Trouble debt restructures - non-accrual
    
1,807
      
1,576
      
1,349
      
1,057
      
1,077
  
Non-accrual loans
    
13,823
      
14,764
      
15,313
      
11,548
      
11,417
  
Total non-performing loans
  
$
19,155
    
$
18,929
    
$
19,386
    
$
15,175
    
$
14,526
  
Non-performing loans to total loans
    
0.52
%
    
0.52
%
    
0.54
%
    
0.50
%
    
0.49
%

  (1) Adjusted for 3:2 stock split on June 15, 2018
13

HORIZON BANCORP, INC.
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
   
September 30
    
September 30
  
   
2019
    
2018
  
Balance sheet:
            
Total assets
  
$
5,186,714
    
$
4,150,561
  
Investment securities
    
977,536
      
766,153
  
Commercial loans
    
2,046,165
      
1,698,582
  
Mortgage warehouse loans
    
155,631
      
71,422
  
Residential mortgage loans
    
796,497
      
651,250
  
Consumer loans
    
668,332
      
536,132
  
Earning assets
    
4,667,668
      
3,743,592
  
Non-interest bearing deposit accounts
    
756,707
      
621,475
  
Interest bearing transaction accounts
    
2,173,100
      
1,605,825
  
Time deposits
    
986,150
      
901,254
  
Borrowings
    
516,591
      
477,719
  
Subordinated debentures
    
56,250
      
37,791
  
Total stockholders' equity
    
642,711
      
477,594
  
                 
   
Nine Months Ended
  
Income statement:
                
Net interest income
  
$
119,272
    
$
100,733
  
Provision for loan losses
    
1,636
      
2,378
  
Non-interest income
    
31,124
      
25,936
  
Non-interest expense
    
91,382
      
76,399
  
Income tax expense
    
9,383
      
7,908
  
Net income
  
$
47,995
    
$
39,984
  
                 
Per share data: (1)
                
Basic earnings per share
  
$
1.12
    
$
1.04
  
Diluted earnings per share
    
1.11
      
1.04
  
Cash dividends declared per common share
    
0.34
      
0.30
  
Book value per common share
    
14.29
      
12.45
  
Tangible book value per common share
    
10.31
      
9.04
  
Market value - high
    
17.82
      
21.94
  
Market value - low
  
$
15.50
    
$
17.87
  
Weighted average shares outstanding - Basic
    
42,995,082
      
38,340,012
  
Weighted average shares outstanding - Diluted
    
43,070,095
      
38,503,403
  
                 
Key ratios:
                
Return on average assets
    
1.33
%
    
1.33
%
Return on average common stockholders' equity
    
10.88
      
11.43
  
Net interest margin
    
3.72
      
3.74
  
Loan loss reserve to total loans
    
0.49
      
0.60
  
Average equity to average assets
    
12.23
      
11.63
  
Bank only capital ratios:
                
Tier 1 capital to average assets
    
9.39
      
9.53
  
Tier 1 capital to risk weighted assets
    
11.69
      
12.09
  
Total capital to risk weighted assets
    
12.14
      
12.66
  
                 
Loan data:
                
Substandard loans
  
$
62,130
    
$
34,655
  
30 to 89 days delinquent
    
10,204
      
6,878
  
                 
90 days and greater delinquent - accruing interest
  
$
34
    
$
202
  
Trouble debt restructures - accruing interest
    
3,491
      
1,830
  
Trouble debt restructures - non-accrual
    
1,807
      
1,077
  
Non-accrual loans
    
13,823
      
11,417
  
Total non-performing loans
  
$
19,155
    
$
14,526
  
Non-performing loans to total loans
    
0.52
%
    
0.49
%
                 
(1) Adjusted for 3:2 stock split on June 15, 2018                
  
14

HORIZON BANCORP, INC.
Allocation of the Allowance for Loan and Lease Losses
  
(Dollars in Thousands, Unaudited)
  
                               
   
September 30
    
June 30
    
March 31
    
December 31
    
September 30
  
   
2019
    
2019
    
2019
    
2018
    
2018
  
Commercial
  
$
12,082
    
$
11,881
    
$
11,556
    
$
10,495
    
$
10,581
  
Real estate
    
1,449
      
1,732
      
1,588
      
1,676
      
1,574
  
Mortgage warehousing
    
1,041
      
1,040
      
1,014
      
1,006
      
1,030
  
Consumer
    
3,384
      
3,652
      
3,663
      
4,643
      
4,613
  
Total
  
$
17,956
    
$
18,305
    
$
17,821
    
$
17,820
    
$
17,798
  


Net Charge-offs (Recoveries)
  
(Dollars in Thousands, Unaudited)
  
                               
   
Three Months Ended
  
   
September 30
    
June 30
    
March 31
    
December 31
    
September 30
  
   
2019
    
2019
    
2019
    
2018
    
2018
  
Commercial
  
$
192
    
$
265
    
$
61
    
$
196
    
$
179
  
Real estate
    
(7
)
    
41
      
(27
)
    
47
      
(2
)
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
540
      
106
      
329
      
263
      
272
  
Total
  
$
725
    
$
412
    
$
363
    
$
506
    
$
449
  
Percent of net charge-offs to average loans outstanding for the period
    
0.02
%
    
0.01
%
    
0.01
%
    
0.02
%
    
0.02
%


Total Non-performing Loans
  
(Dollars in Thousands, Unaudited)
  
                               
   
September 30
    
June 30
    
March 31
    
December 31
    
September 30
  
   
2019
    
2019
    
2019
    
2018
    
2018
  
Commercial
  
$
8,193
    
$
8,697
    
$
9,750
    
$
6,903
    
$
8,355
  
Real estate
    
7,212
      
6,444
      
5,995
      
5,007
      
3,754
  
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
3,750
      
3,788
      
3,641
      
3,265
      
2,417
  
Total
  
$
19,155
    
$
18,929
    
$
19,386
    
$
15,175
    
$
14,526
  
Non-performing loans to total loans
    
0.52
%
    
0.52
%
    
0.54
%
    
0.55
%
    
0.49
%


Other Real Estate Owned and Repossessed Assets
  
(Dollars in Thousands, Unaudited)
  
                               
   
September 30
    
June 30
    
March 31
    
December 31
    
September 30
  
   
2019
    
2019
    
2019
    
2018
    
2018
  
Commercial
  
$
3,972
    
$
3,694
    
$
3,496
    
$
1,967
    
$
2,181
  
Real estate
    
48
      
113
      
126
      
60
      
58
  
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
24
      
48
      
30
      
48
      
26
  
Total
  
$
4,044
    
$
3,855
    
$
3,652
    
$
2,075
    
$
2,265
  



15

HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
   
Three Months Ended
    
Three Months Ended
  
   
September 30, 2019
    
September 30, 2018
  
   
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
  
Assets
                                    
Interest-earning assets
                                    
Federal funds sold
  
$
18,133
    
$
115
      
2.52
%
  
$
3,840
    
$
24
      
2.48
%
Interest-earning deposits
    
17,823
      
93
      
2.07
%
    
24,494
      
104
      
1.68
%
Investment securities - taxable
    
478,764
      
2,949
      
2.44
%
    
421,681
      
2,611
      
2.46
%
Investment securities - non-taxable(1)
    
462,997
      
3,099
      
3.36
%
    
324,289
      
2,010
      
3.11
%
Loans receivable(2)(3)
    
3,646,268
      
49,455
      
5.41
%
    
2,942,835
      
37,522
      
5.07
%
Total interest-earning assets(1)
    
4,623,985
      
55,711
      
4.87
%
    
3,717,139
      
42,271
      
4.58
%
                                                 
Non-interest-earning assets
                                                
Cash and due from banks
    
66,970
                      
45,864
                  
Allowance for loan losses
    
(18,277
)
                    
(17,090
)
                
Other assets
    
434,581
                      
359,183
                  
        
                        
                 
Total average assets
  
$
5,107,259
                    
$
4,105,096
                  
                                                 
Liabilities and Stockholders' Equity
                                                
Interest-bearing liabilities
                                                
Interest-bearing deposits
  
$
3,132,852
    
$
9,109
      
1.15
%
  
$
2,438,450
    
$
5,023
      
0.82
%
Borrowings
    
413,859
      
2,275
      
2.18
%
    
496,054
      
2,876
      
2.30
%
Subordinated debentures
    
54,433
      
864
      
6.30
%
    
36,570
      
600
      
6.51
%
Total interest-bearing liabilities
    
3,601,144
      
12,248
      
1.35
%
    
2,971,074
      
8,499
      
1.13
%
                                                 
Non-interest-bearing liabilities
                                                
Demand deposits
    
818,164
                      
640,983
                  
Accrued interest payable and other liabilities
    
47,181
                      
16,080
                  
Stockholders' equity
    
640,770
                      
476,959
                  
        
                        
                 
Total average liabilities and stockholders' equity
  
$
5,107,259
                    
$
4,105,096
                  
                
                        
         
Net interest income/spread
          
$
43,463
      
3.52
%
          
$
33,772
      
3.44
%
Net interest income as a percent of average interest-earning assets(1)
                    
3.82
%
                    
3.67
%
                                                 

(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.


16

HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
   
Nine Months Ended
    
Nine Months Ended
  
   
September 30, 2019
    
September 30, 2018
  
   
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
  
Assets
                                    
Interest-earning assets
                                    
Federal funds sold
  
$
14,778
    
$
339
      
3.07
%
  
$
2,845
    
$
53
      
2.49
%
Interest-earning deposits
    
21,938
      
284
      
1.73
%
    
25,411
      
300
      
1.58
%
Investment securities - taxable
    
469,330
      
8,929
      
2.54
%
    
413,617
      
7,379
      
2.39
%
Investment securities - non-taxable(1)
    
423,141
      
8,520
      
3.37
%
    
313,168
      
5,745
      
3.00
%
Loans receivable(2)(3)
    
3,447,654
      
136,862
      
5.32
%
    
2,855,236
      
108,961
      
5.06
%
Total interest-earning assets(1)
    
4,376,841
      
154,934
      
4.81
%
    
3,610,277
      
122,438
      
4.55
%
                                                 
Non-interest-earning assets
                                                
Cash and due from banks
    
58,890
                      
44,605
                  
Allowance for loan losses
    
(18,053
)
                    
(16,686
)
                
Other assets
    
405,923
                      
383,615
                  
         
                         
                 
Total average assets
  
$
4,823,601
                    
$
4,021,811
                  
                                                 
Liabilities and Stockholders' Equity
                                                
Interest-bearing liabilities
                                                
Interest-bearing deposits
  
$
2,924,433
    
$
24,923
      
1.14
%
  
$
2,382,864
    
$
11,814
      
0.66
%
Borrowings
    
462,575
      
8,391
      
2.43
%
    
504,349
      
8,127
      
2.15
%
Subordinated debentures
    
48,666
      
2,348
      
6.45
%
    
36,524
      
1,764
      
6.46
%
Total interest-bearing liabilities
    
3,435,674
      
35,662
      
1.39
%
    
2,923,737
      
21,705
      
0.99
%
                                                 
Non-interest-bearing liabilities
                                                
Demand deposits
    
760,717
                      
613,866
                  
Accrued interest payable and other liabilities
    
37,444
                      
16,341
                  
Stockholders' equity
    
589,766
                      
467,867
                  
         
                         
                 
Total average liabilities and stockholders' equity
  
$
4,823,601
                    
$
4,021,811
                  
                 
                         
         
Net interest income/spread
          
$
119,272
      
3.42
%
          
$
100,733
      
3.55
%
Net interest income as a percent of average interest-earning assets(1)
                    
3.72
%
                    
3.74
%

(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.
17

HORIZON BANCORP, INC.
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
   
September 30
    
December 31
  
   
2019
    
2018
  
Assets
   ( Unaudited)        
Cash and due from banks
  
$
91,279
    
$
58,492
  
Interest-earning time deposits
    
8,455
      
15,744
  
Investment securities, available for sale
    
767,230
      
600,348
  
Investment securities, held to maturity (fair value of $217,718 and $208,273)
    
210,306
      
210,112
  
Loans held for sale
    
1,060
      
1,038
  
Loans, net of allowance for loan losses of $17,956 and $17,820
    
3,648,669
      
2,995,512
  
Premises and equipment, net
    
92,800
      
74,331
  
Federal Home Loan Bank stock
    
22,447
      
18,073
  
Goodwill
    
151,238
      
119,880
  
Other intangible assets
    
27,658
      
10,390
  
Interest receivable
    
18,282
      
14,239
  
Cash value of life insurance
    
95,011
      
88,062
  
Other assets
    
52,279
      
40,467
  
Total assets
  
$
5,186,714
    
$
4,246,688
  
Liabilities
                
Deposits
                
Non-interest bearing
  
$
756,707
    
$
642,129
  
Interest bearing
    
3,159,250
      
2,497,247
  
Total deposits
    
3,915,957
      
3,139,376
  
Borrowings
    
516,591
      
550,384
  
Subordinated debentures
    
56,250
      
37,837
  
Interest payable
    
2,725
      
2,031
  
Other liabilities
    
52,480
      
25,068
  
Total liabilities
    
4,544,003
      
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 (Restated - See Note 1)
                
Issued 44,994,090 and 38,400,476 shares (Restated - See Note 1),
Outstanding 44,969,021 and 38,375,407 shares (Restated - See Note 1)
    
-
      
-
  
Additional paid-in capital
    
379,448
      
276,101
  
Retained earnings
    
256,617
      
224,035
  
Accumulated other comprehensive income (loss)
    
6,646
      
(8,144
)
Total stockholders' equity
    
642,711
      
491,992
  
Total liabilities and stockholders' equity
  
$
5,186,714
    
$
4,246,688
  
                 
(1) Adjusted for 3:2 stock split on June 15, 2018                



18
HORIZON BANCORP, INC.
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)
   
Three Months Ended
    
Nine Months Ended
  
   
September 30
    
September 30
  
   
2019
    
2018
    
2019
    
2018
  
Interest Income
                        
Loans receivable
  
$
49,455
    
$
37,522
    
$
136,862
    
$
108,961
  
Investment securities
                                
Taxable
    
3,157
      
2,739
      
9,552
      
7,732
  
Tax exempt
    
3,099
      
2,010
      
8,520
      
5,745
  
Total interest income
    
55,711
      
42,271
      
154,934
      
122,438
  
Interest Expense
                                
Deposits
    
9,109
      
5,023
      
24,923
      
11,814
  
Borrowed funds
    
2,275
      
2,876
      
8,391
      
8,127
  
Subordinated debentures
    
864
      
600
      
2,348
      
1,764
  
Total interest expense
    
12,248
      
8,499
      
35,662
      
21,705
  
Net Interest Income
    
43,463
      
33,772
      
119,272
      
100,733
  
Provision for loan losses
    
376
      
1,176
      
1,636
      
2,378
  
Net Interest Income after Provision for Loan Losses
    
43,087
      
32,596
      
117,636
      
98,355
  
Non-interest Income
                                
Service charges on deposit accounts
    
2,836
      
2,009
      
7,193
      
5,804
  
Wire transfer fees
    
189
      
160
      
474
      
490
  
Interchange fees
    
2,138
      
1,410
      
5,659
      
4,293
  
Fiduciary activities
    
1,834
      
1,855
      
5,986
      
5,598
  
Gains (losses) on sale of investment securities (includes $0 and $(122)for the three months ended September 30, 2019 and 2018, respectively, and $(85) and $(111) for the nine months ended September 30, 2019 and nine months ended September 30, 2018 related to accumulated other comprehensive earnings reclassifications)
    
-
      
(122
)
    
(85
)
    
(111
)
Gain on sale of mortgage loans
    
2,702
      
1,839
      
6,089
      
5,158
  
Mortgage servicing income net of impairment
    
444
      
563
      
1,620
      
1,423
  
Increase in cash value of bank owned life insurance
    
556
      
503
      
1,624
      
1,380
  
Death benefit on bank owned life insurance
    
213
      
-
      
580
      
154
  
Other income
    
602
      
469
      
1,984
      
1,747
  
Total non-interest income
    
11,514
      
8,686
      
31,124
      
25,936
  
Non-interest Expense
                                
Salaries and employee benefits
    
16,948
      
14,343
      
48,365
      
42,525
  
Net occupancy expenses
    
3,131
      
2,495
      
9,051
      
7,981
  
Data processing
    
2,140
      
1,759
      
6,245
      
5,062
  
Professional fees
    
335
      
437
      
1,426
      
1,314
  
Outside services and consultants
    
1,552
      
1,204
      
6,737
      
3,735
  
Loan expense
    
2,198
      
1,722
      
6,195
      
4,504
  
FDIC insurance expense
    
(273
)
    
396
      
252
      
1,051
  
Other losses
    
90
      
161
      
363
      
576
  
Other expense
    
3,939
      
3,103
      
12,748
      
9,651
  
Total non-interest expense
    
30,060
      
25,620
      
91,382
      
76,399
  
Income Before Income Taxes
    
24,541
      
15,662
      
57,378
      
47,892
  
Income tax expense (includes $0 and $(25) for the three months ended September 30, 2019 and 2018, respectively, and $(18) and $(23) for the nine months ended September 30, 2019 and nine months ended September 30, 2018 related to income tax expense (benefit) from reclassification items)
    
4,004
      
2,597
      
9,383
      
7,908
  
Net Income
  
$
20,537
    
$
13,065
    
$
47,995
    
$
39,984
  
Basic Earnings Per Share (Restated - See Note 1)
  
$
0.46
    
$
0.34
    
$
1.12
    
$
1.04
  
Diluted Earnings Per Share (Restated - See Note 1)
    
0.46
      
0.34
      
1.11
      
1.04
  

(1) Adjusted for 3:2 stock split on June 15, 2018
19