EX-99.1 2 a4thqtr2020earningsrelease.htm EX-99.1 Document

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Contact:Mark E. Secor
Chief Financial Officer
Phone:(219) 873-2611
Fax:(219) 874-9280
Date:January 27, 2021

FOR IMMEDIATE RELEASE

Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results

Michigan City, Indiana, January 27, 2021 (GLOBE NEWSWIRE) — (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three and twelve months ending December 31, 2020.

“Horizon closed 2020 with record quarterly top– and bottom–line results, supported by continued strength in mortgage lending and other fee–generating businesses, the benefits of our work to deleverage and optimize returns on total earning assets, and favorable deferral trends and credit quality metrics,” Chairman and CEO Craig M. Dwight said. “Entering the new year with strong liquidity, capital, and reserves, we see clear opportunities to enhance the bank’s operating efficiency, deepen in–market retail and commercial customer relationships, and help to strengthen our resilient Indiana and Michigan communities in 2021.”

Fourth Quarter 2020 Highlights

•Earned record net income of $21.9 million, or $0.50 diluted earnings per share, compared to $20.3 million, or $0.46 diluted earnings per share, for the third quarter of 2020 and $18.5 million, or $0.41 diluted earnings per share, for the fourth quarter of 2019.

•Grew pre–tax, pre–provision net income to a record $26.9 million for the quarter, compared to $26.7 million for the third quarter of 2020 and $22.8 million for the fourth quarter of 2019. This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense. (See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income” table below.)

•Grew net interest income to a record $43.6 million for the quarter, compared to $43.4 million for the third quarter of 2020 and $41.5 million for the fourth quarter of 2019. Adjusted net interest income for the quarter was $45.0 million compared to $41.9 million for the third quarter of 2020. (See the “Non–GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” tables below.)

•Reported return on average assets (“ROAA”) of 1.49% and return on average common equity (“ROACE”) of 12.79% in the quarter, as well as adjusted ROAA of 1.56% and adjusted ROACE of 13.33%, excluding the impact of gains on sale of investment securities and prepayment penalties on borrowings, net of tax. (See the “Non–GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” tables below.)

•Grew mortgage–related non–interest income by 8.5% from the linked quarter and 138.6% from the prior year period, with gain on mortgage loan sales of $7.8 million and net mortgage servicing income of $327,000. The bank originated $186.1 million in mortgage loans during the quarter, down 10.1% from the third quarter of 2020 and up 63.3% from the fourth quarter of 2019.

•Total non–interest income, excluding securities gains, grew to a record $17.1 million, up 9.6% from the linked quarter and 43.5% from the prior year period, supported by increases in mortgage–related gains and servicing income, banking and fiduciary fees.
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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results

•Reported net interest margin (“NIM”) of 3.34% and adjusted NIM of 3.44%, with reported NIM declining by 5 basis points and adjusted NIM increasing by 17 basis points from the third quarter of 2020. (See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this non–GAAP calculation). An estimated 18 basis points attributed to PPP lending improved the margin, offset by an estimated 10 and 7 basis point compression, respectively, attributed to the subordinated notes and excess liquidity held during the quarter, for both NIM and adjusted NIM.

•Increased the allowance for credit losses (“ACL”) by 1.3% during the quarter and 222.8% year–to–date to $57.0 million at period end, representing 1.47% of total loans, reflecting January 2020 implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in the allocation for the Company’s identified stressed portfolios. ACL at period end also represented 1.55% of loans excluding $208.9 million in Federal Paycheck Protection Program (“PPP”) loans, and 212.7% of non–performing loans.

•COVID–19 deferral levels improved to 3.5% of total loans at period end, compared to 4.1% on September 30, 2020 and 14.3% on June 30, 2020 and the bank experienced no material specific loan losses attributed to COVID–19 closures in 2020.

•Maintained solid asset quality metrics, including non–performing and delinquent loans representing 0.69% and 0.19% of total loans, respectively, at December 31, 2020, while net charge–offs were 0.01% of average loans for the period.

•The efficiency ratio for the period was 57.54% compared to 55.59% for the third quarter of 2020. The adjusted efficiency ratio was 56.48% compared to 56.64% for the third quarter of 2020. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” tables below.)

•Horizon’s tangible book value per share increased from $10.63 at December 31, 2019 to $11.78 at December 31, 2020, which includes the accounting adjustment for CECL as of January 1, 2020. 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” tables below.)

•Maintained strong liquidity position including approximately $1.6 billion in cash and investment securities, which is approximately 26.3% of total assets, and approximately $1.0 billion in unused availability on lines of credit, at December 31, 2020.

•Horizon has reported over thirty years of uninterrupted dividends and as of year–end had in excess of $127 million in cash at the holding company, which provides us with considerable future optionality to build shareholder value.

Summary
For the Three Months Ended
December 31,September 30,December 31,
Net Interest Income and Net Interest Margin202020202019
Net interest income$43,622 $43,397 $41,519 
Net interest margin3.34 %3.39 %3.58 %
Adjusted net interest margin3.44 %3.27 %3.49 %


For the Three Months Ended
December 31,September 30,December 31,
Asset Yields and Funding Costs202020202019
Interest earning assets4.05 %3.90 %4.57 %
Interest bearing liabilities0.94 %0.67 %1.24 %

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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
The yield on interest earning assets for the fourth quarter of 2020 was impacted by PPP loans and higher liquidity levels. Horizon estimates PPP loans increased the yield by 15 basis points and higher liquidity levels compressed the yield by 8 basis points. Horizon estimates PPP loans decreased the yield on interest earning assets by 6 basis point for the third quarter of 2020. The funding costs on interest bearing liabilities increased by an estimated 37 basis points for the fourth quarter of 2020 as a result of prepayment penalties on borrowings.
For the Three Months Ended
Non–interest Income and December 31,September 30,December 31,
Mortgage Banking Income202020202019
Total non–interest income$19,733 $16,700 $11,934 
Gain on sale of mortgage loans7,815 8,813 3,119 
Mortgage servicing income net of impairment327 (1,308)294 

For the Three Months Ended
December 31,September 30,December 31,
Non–interest Expense202020202019
Total non–interest expense$36,453 $33,407 $30,432 
Annualized non–interest expense to average assets2.47 %2.30 %2.32 %

For the Three Months Ended
December 31,September 30,December 31,
Credit Quality202020202019
Allowance for credit losses to total loans1.47 %1.39 %0.49 %
Non–performing loans to total loans0.69 0.72 0.58 
Percent of net charge–offs to average loans outstanding for the period0.01 0.02 0.02 

CECL Adoption
Allowance forDecember 31,January 1,Net Reserve BuildDecember 31,
Credit Losses2019Impact20201Q202Q203Q204Q202020
Commercial$11,996 $13,618 $25,614 $6,936 $6,597 $648 $2,415 $42,210 
Retail Mortgage923 4,048 4,971 683 178 (368)(844)4,620 
Warehouse1,077 — 1,077 (22)135 60 17 1,267 
Consumer3,671 4,911 8,582 599 (260)889 (880)8,930 
Allowance for Credit Losses (“ACL”)$17,667 $22,577 $40,244 $8,196 $6,650 $1,229 $708 $57,027 
ACL / Total Loans0.49 %1.10 %1.47 %
Acquired Loan Discount (“ALD”)$20,228 $(2,786)$17,442 $(1,436)$(1,532)$(1,541)$(1,439)$11,494 

Horizon’s asset quality metrics continued to remain favorable through the fourth quarter, with low levels of delinquency and other real estate owned and a decrease in non–performing loans. Horizon’s reserve build reflects adoption of CECL on January 1, 2020 and the increase in the Company’s quarterly allocations to cover potential future loan losses related to economic factors and the nature and characteristics of its loan portfolios, primarily related to the impact on non–essential businesses caused by COVID–19 closures and the slow pace of reopening and economic recovery. Through December 31, 2020, Horizon has not recorded any material specific loan losses attributed to COVID–19 closures. Lower losses are attributable to Horizon working with its customers to provide payment modifications to help assist our customers as they manage through the economic slowdown due to the pandemic and the location of a high percentage of our retail and
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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
restaurant loans have benefited from the influx of Chicago residents into our markets. In addition, during the quarter Horizon made good progress on lowering its non–performing assets as a result of payoffs received on two non–performing credits.

During the fourth quarter, $2.0 million of the ACL related to the January 1, 2020, transfer of acquired loan discounts to the ACL was used in the payoff on two non–performing credits and a portion included with the $2.5 million of acquisition related income recognized during the quarter.

Income Statement Highlights

Net income for the fourth quarter of 2020 was $21.9 million, or $0.50 diluted earnings per share, compared to $20.3 million, or $0.46, for the linked quarter and $18.5 million, or $0.41, for the prior year period.

Adjusted net income for the fourth quarter of 2020 was $22.8 million, or $0.52 diluted earnings per share, compared to $19.4 million, or $0.45, for the linked quarter and $18.5 million, or $0.41, for the prior year period. Adjusted net income, which is not calculated according to generally accepted accounting principles (“GAAP”), is a measure that Horizon uses to provide a greater understanding of operating profitability.

The increase in net income for the fourth quarter of 2020 when compared to the third quarter of 2020 reflects an increase in non–interest income of $3.0 million, an increase of $225,000 in net interest income and a decrease in income tax expense of $2.4 million, offset by an increase in non–interest expense of $3.0 million and an increase in credit loss expense of $990,000.

Interest income includes the recognition of PPP loan processing fees totaling $4.6 million in the fourth quarter of 2020, compared to $2.2 million in the linked quarter. On December 31, 2020, the Company had $4.0 million in deferred PPP loan processing fees outstanding and $208.9 million in PPP loans outstanding. PPP deferred fees and loans outstanding at September 30, 2020 were $8.0 million and $310.8 million, respectively. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness.

Fourth quarter 2020 income from the gain on sale of mortgage loans, totaled $7.8 million in the fourth quarter of 2020, down from $8.8 million in the linked quarter and up from $3.1 million in the prior year period.

Non–interest expense of $36.5 million in the fourth quarter of 2020 reflected a $1.2 million increase in salaries and employee benefits expense from the linked quarter. The increase in salaries and employee benefits expense reflected higher performance–based compensation accruals due to the record 2020 net interest income, non–interest income revenues and other key performance metrics. The increase in other losses included mostly one–time items including losses on liquidation of bank owned real estate held from previous branch closings.

The increase in net income for the fourth quarter of 2020 when compared to the prior year period reflects an increase in net interest income of $2.1 million, an increase in non–interest income of $7.8 million and a decrease in income tax expense of $2.0 million, offset by an increase in non–interest expense of $5.8 million and an increase in credit loss expense of $2.7 million.

Net income for the year ended December 31, 2020 was $68.5 million, or $1.55 diluted earnings per share, compared to $66.5 million, or $1.53 diluted earnings per share, for the year ended December 31, 2019. Adjusted net income for the year ended December 31, 2020 was $67.8 million, or $1.53 diluted earnings per share, compared to $70.7 million, or $1.63 diluted earnings per share for the year ended December 31, 2019. The increase in net income for the year ended December 31, 2020 when compared to the prior year reflects an increase in net interest income of $10.1 million, an increase in non–interest income of $16.6 million and a decrease in income tax expense of $3.4 million, offset by an increase in the provision for credit loss expense of $18.8 million and an increase in non–interest expense of $9.4 million.

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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Non–GAAP Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Net income as reported$21,893 $20,312 $14,639 $11,655 $18,543 $68,499 $66,538 
Merger expenses— — — — — — 5,650 
Tax effect— — — — — — (987)
Net income excluding merger expenses21,893 20,312 14,639 11,655 18,543 68,499 71,201 
(Gain) / loss on sale of investment securities(2,622)(1,088)(248)(339)(10)(4,297)75 
Tax effect551 228 52 71 2 902 (16)
Net income excluding (gain) / loss on sale of investment securities19,822 19,452 14,443 11,387 18,535 65,104 71,260 
Death benefit on bank owned life insurance (“BOLI”)— (31)— (233)— (264)(580)
Net income excluding death benefit on BOLI19,822 19,421 14,443 11,154 18,535 64,840 70,680 
Prepayment penalties on borrowings3,804 — — — — 3,804 — 
Tax effect(799)— — — — (799)— 
Net income excluding prepayment penalties on borrowings22,827 19,421 14,443 11,154 18,535 67,845 70,680 
Adjusted net income$22,827 $19,421 $14,443 $11,154 $18,535 $67,845 $70,680 

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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Non–GAAP Reconciliation of Diluted Earnings per Share
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Diluted earnings per share (“EPS”) as reported$0.50 $0.46 $0.33 $0.26 $0.41 $1.55 $1.53 
Merger expenses— — — — — — 0.13 
Tax effect— — — — — — (0.02)
Diluted EPS excluding merger expenses0.50 0.46 0.33 0.26 0.41 1.55 1.64 
(Gain) / loss on sale of investment securities(0.06)(0.02)(0.01)(0.01)— (0.10)— 
Tax effect0.01 0.01 — — — 0.02 — 
Diluted EPS excluding (gain) / loss on sale of investment securities0.45 0.45 0.32 0.25 0.41 1.47 1.64 
Death benefit on bank owned life insurance (“BOLI”)— — — (0.01)— (0.01)(0.01)
Diluted EPS excluding death benefit on BOLI0.45 0.45 0.32 0.24 0.41 1.46 1.63 
Prepayment penalties on borrowings0.09 — — — — 0.09 — 
Tax effect(0.02)— — — — (0.02)— 
Diluted EPS excluding prepayment penalties on borrowings0.52 0.45 0.32 0.24 0.41 1.53 1.63 
Adjusted diluted EPS$0.52 $0.45 $0.32 $0.24 $0.41 $1.53 $1.63 

Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Pre–tax income$23,860 $24,638 $16,632 $13,239 $22,463 $78,369 $79,841 
Credit loss expense3,042 2,052 7,057 8,600 340 20,751 1,976 
Pre–tax, pre–provision income$26,902 $26,690 $23,689 $21,839 $22,803 $99,120 $81,817 
Pre–tax, pre–provision income$26,902 $26,690 $23,689 $21,839 $22,803 $99,120 $81,817 
Merger expenses— — — — — — 5,650 
(Gain) / loss on sale of investment securities(2,622)(1,088)(248)(339)(10)(4,297)75 
Death benefit on BOLI— (31)— (233)— (264)(580)
Prepayment penalties on borrowings3,804 — — — — 3,804 — 
Adjusted pre–tax, pre–provision income$28,084 $25,571 $23,441 $21,267 $22,793 $98,363 $86,962 


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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Horizon’s net interest margin decreased to 3.34% for the fourth quarter of 2020 compared to 3.39% for the third quarter of 2020. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 27 basis points, offset by an increase in the yield of interest earning assets of 15 basis points. Interest income from acquisition–related purchase accounting adjustments was $973,000 higher during the fourth quarter of 2020 when compared to the third quarter of 2020.

Horizon’s net interest margin decreased to 3.34% for the fourth quarter of 2020 when compared to 3.58% for the fourth quarter of 2019. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 52 basis points offset by a decrease in the cost of interest bearing liabilities of 30 basis points.

Horizon’s net interest margin decreased to 3.44% for the year ended December 31, 2020 compared to 3.69% for the prior year. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 64 basis points offset by a decrease in the cost of interest bearing liabilities of 48 basis points.

The net interest margin was impacted during the third and fourth quarters of 2020 due to the PPP loans that were originated. Horizon estimates that the PPP loans increased the net interest margin by 18 basis points in the fourth quarter and compressed the margin 4 basis points for the third quarter. This assumes these PPP loans were not included in average interest earning assets or interest income and were primarily funded by the growth in non–interest bearing deposits. The increase to the net interest margin for the twelve months of 2020 using the same assumptions was estimated to be 3 basis points.

The net interest margin was impacted during the third and fourth quarters of 2020 due to higher liquidity levels impacting the mix of interest earning assets. Horizon estimates the higher liquidity levels compressed the net interest margin by 7 basis points for the fourth quarter and 3 basis points for the third quarter. This assumes the higher liquidity level was not included in average interest earning assets or interest income. The compression to the net interest margin for the twelve months of 2020 using the same assumptions was estimated to be 4 basis points.

The net interest margin was also impacted during the third and fourth quarters of 2020 due to the issuance of $60.0 million in subordinated notes in June 2020. Horizon estimates that the subordinated notes compressed the net interest margin by 10 basis points for both the third and fourth quarters. This assumes the subordinated notes were not included in average interest bearing liabilities or interest expense and were primarily offset by a reduction in cash. The compression to the net interest margin for the twelve months of 2020 using the same assumptions was estimated to be 6 basis points.

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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Net interest income as reported$43,622 $43,397 $42,996 $40,925 $41,519 $170,940 $160,791 
Average interest earning assets5,365,888 5,251,611 5,112,636 4,746,202 4,748,217 5,120,106 4,470,450 
Net interest income as a percentage of average interest earning assets (“Net Interest Margin”)3.34 %3.39 %3.47 %3.56 %3.58 %3.44 %3.69 %
Net interest income as reported$43,622 $43,397 $42,996 $40,925 $41,519 $170,940 $160,791 
Acquisition–related purchase accounting adjustments (“PAUs”)(2,461)(1,488)(1,553)(1,434)(1,042)(6,936)(5,590)
Prepayment penalties on borrowings3,804 — — — — 3,804 — 
Adjusted net interest income$44,965 $41,909 $41,443 $39,491 $40,477 $167,808 $155,201 
Adjusted net interest margin3.44 %3.27 %3.35 %3.44 %3.49 %3.38 %3.57 %

Net interest margin, excluding acquisition–related purchase accounting adjustments and prepayment penalties on borrowings (“adjusted net interest margin”), was 3.44% for the fourth quarter of 2020 compared to 3.27% for the prior quarter and 3.49% for the fourth quarter of 2019. Interest income from acquisition–related purchase accounting adjustments was $2.5 million, $1.5 million and $1.0 million for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Adjusted net interest margin was 3.38% for the year ended December 31, 2020 compared to 3.57% for the prior year. Interest income from acquisition–related purchase accounting adjustments was $6.9 million and $5.6 million for the years ended December 31, 2020 and 2019.

Lending Activity

Total loans were $3.88 billion, or $3.67 billion excluding PPP lending, on December 31, 2020. Total loans were $4.04 billion, or $3.73 billion excluding PPP lending, on September 30, 2020 and $3.64 billion on December 31, 2019. During the year ended December 31, 2020, commercial loans increased $145.6 million, mortgage warehouse loans increased $245.3 million, and loans held for sale increased $9.4 million, offset by a decrease in residential mortgage loans of $146.4 million and a decrease in consumer loans of $14.0 million.


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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Loan Growth by Type, Excluding Acquired Loans
(Dollars in Thousands, Unaudited)
December 31,December 31,AmountPercent
20202019ChangeChange
Commercial$2,192,271 $2,046,651 $145,620 7.1%
Residential mortgage624,286 770,717 (146,431)(19.0)%
Consumer655,200 669,180 (13,980)(2.1)%
Subtotal3,471,757 3,486,548 (14,791)(0.4)%
Loans held for sale13,538 4,088 9,450 231.2%
Mortgage warehouse395,626 150,293 245,333 163.2%
Total loans$3,880,921 $3,640,929 $239,992 6.6%
Residential mortgage lending activity for the three months ended December 31, 2020 generated $7.8 million in income from the gain on sale of mortgage loans, a decrease of $1.0 million from the third quarter of 2020's record level and an increase of $4.7 million from the fourth quarter of 2019. Total origination volume for the fourth quarter of 2020, including loans placed into the portfolio, totaled $186.1 million, representing a decrease of 10.1% from third quarter 2020 levels, and an increase of 63.3% from the fourth quarter of 2019. As a percentage of total originations, 58% of fourth quarter 2020 volume was related to refinances and 42% was for new purchases. Total origination volume of loans sold to the secondary market totaled $157.7 million, representing a decrease of 5.2% from the third quarter of 2020 and an increase of 88.8% from the fourth quarter of 2019.

Expense Management

Three Months Ended
December 31,September 30,AmountPercent
Non–interest Expense20202020ChangeChange
Salaries and employee benefits$20,030 $18,832 $1,198 6.4%
Net occupancy expenses3,262 3,107 155 5.0%
Data processing2,126 2,237 (111)(5.0)%
Professional fees691 688 3 0.4%
Outside services and consultants2,083 1,561 522 33.4%
Loan expense2,961 2,876 85 3.0%
FDIC insurance expense900 570 330 57.9%
Other losses735 114 621 544.7%
Other expense3,665 3,422 243 7.1%
Total non–interest expense$36,453 $33,407 $3,046 9.1%
Annualized non–interest expense to average assets2.47 %2.30 %

Total non–interest expense was $3.0 million higher in the fourth quarter of 2020 when compared to the third quarter of 2020. Increased salaries and employee benefits reflected higher performance–based compensation accruals following improved financial performance in the second half of this year. Higher FDIC insurance expense reflected significant growth in deposits through the end of the fourth quarter of 2020. Outside services and consultants, other losses and other expenses were partially offset by a decrease in data processing.

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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Three Months Ended
December 31,December 31,AmountPercent
Non–interest Expense20202019ChangeChange
Salaries and employee benefits$20,030 $16,841 $3,189 18.9%
Net occupancy expenses3,262 3,106 156 5.0%
Data processing2,126 2,235 (109)(4.9)%
Professional fees691 520 171 32.9%
Outside services and consultants2,083 1,415 668 47.2%
Loan expense2,961 2,438 523 21.5%
FDIC insurance expense900 — 900 —%
Other losses735 377 358 95.0%
Other expense3,665 3,718 (53)(1.4)%
Total non–interest expense$36,453 $30,650 $5,803 18.9%
Annualized non–interest expense to average assets2.47 %2.32 %

Total non–interest expense was $5.8 million higher in the fourth quarter of 2020 when compared to the fourth quarter of 2019. Increases in salaries and employee benefits, FDIC insurance expense, outside services and consultants, loan expense and other losses were offset in part by decreases in data processing and other expense.

Twelve Months Ended
December 31,December 31,
20202019Adjusted
Non–interest ExpenseActualMerger
Expenses		AdjustedActualMerger
Expenses		AdjustedAmount
Change		Percent
Change
Salaries and employee benefits$71,082 $— $71,082 $65,206 $(484)$64,722 $6,360 9.8%
Net occupancy expenses12,811 — 12,811 12,157 (75)12,082 729 6.0%
Data processing9,200 — 9,200 8,480 (360)8,120 1,080 13.3%
Professional fees2,433 — 2,433 1,946 (392)1,554 879 56.6%
Outside services and consultants7,318 — 7,318 8,152 (2,466)5,686 1,632 28.7%
Loan expense10,628 — 10,628 8,633 (2)8,631 1,997 23.1%
FDIC insurance expense1,855 — 1,855 252 — 252 1,603 636.1%
Other losses1,162 — 1,162 740 (71)669 493 73.7%
Other expense14,952 — 14,952 16,466 (1,800)14,666 286 2.0%
Total non–interest expense$131,441 $— $131,441 $122,032 $(5,650)$116,382 $15,059 12.9%
Annualized non–interest expense to average assets2.34 %2.34 %2.47 %2.36 %

Total non–interest expense was $9.4 million higher for the year ended December 31, 2020 when compared to the prior year. Increases in salaries and employee benefits, loan expenses, data processing, FDIC insurance expense and net occupancy expenses were offset in part by decreases in outside services and consultants expense and other expense.

Annualized non–interest expense as a percent of average assets were 2.47%, 2.30% and 2.32% for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Annualized non–interest expense as a percent of average assets were 2.34% and 2.47% for the years ended December 31, 2020 and 2019, respectively. Annualized non–interest expense, excluding merger expenses, as a percent of average assets were 2.34% and 2.36% for the years ended December 31, 2020 and 2019, respectively.

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Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Income tax expense totaled $2.0 million for the fourth quarter of 2020, a decrease of $2.4 million when compared to the third quarter of 2020 and a decrease of $2.0 million when compared to the fourth quarter of 2019. The decrease in income tax expense in the fourth quarter of 2020 compared to the third quarter of 2020 and the fourth quarter of 2019 was primarily due to the ability to recognize solar tax credits from completed projects the Company has invested in along with an increase in tax exempt municipal investments.
Income tax expense totaled $9.9 million for the year ended December 31, 2020, a decrease of $3.4 million when compared to the same prior year period. The decrease in income tax expense was primarily due to the solar tax credits, an increase in tax exempt municipal investments and lower taxable income.

Capital

The capital resources of the Company and Horizon Bank (the “Bank”) exceeded regulatory capital ratios for “well capitalized” banks at December 31, 2020. Stockholders’ equity totaled $692.2 million at December 31, 2020 and the ratio of average stockholders’ equity to average assets was 11.82% for the year ended December 31, 2020.

Capital levels benefited from the Company’s previously disclosed public offering of subordinated notes raising $60.0 million in June 2020. Horizon’s fortress balance sheet at December 31, 2020 maintained adequate regulatory capital ratios when stress testing for highly adverse scenarios.

The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of December 31, 2020.

ActualRequired for Capital Adequacy PurposesRequired for Capital Adequacy Purposes with Capital BufferWell Capitalized
Under Prompt Corrective Action Provisions
AmountRatioAmountRatioAmountRatioAmountRatio
Total capital (to risk–weighted assets)
Consolidated$650,206 14.92 %$348,617 8.00 %$457,560 10.50 %N/AN/A
Bank532,315 12.21 %348,810 8.00 %457,813 10.50 %$436,013 10.00%
Tier 1 capital (to risk–weighted assets)
Consolidated606,395 13.92 %261,462 6.00 %370,404 8.50 %N/AN/A
Bank492,221 11.29 %261,606 6.00 %370,609 8.50 %348,808 8.00%
Common equity tier 1 capital (to risk–weighted assets)
Consolidated491,281 11.27 %196,096 4.50 %305,038 7.00 %N/AN/A
Bank492,221 11.29 %196,205 4.50 %305,207 7.00 %283,407 6.50%
Tier 1 capital (to average assets)
Consolidated606,395 10.66 %227,453 4.00 %227,453 4.00 %N/AN/A
Bank492,221 8.71 %226,158 4.00 %226,158 4.00 %282,697 5.00 %

“The strength and resilience of Horizon’s business is demonstrated by the Company’s strong operating fundamentals, ability to consistently generate retained earnings and growth in tangible book value per share and the Company’s healthy capital position overall,” said Mr. Dwight. “Accordingly, we will continue to be opportunistic with share repurchases under our current buyback authorization, and we remain committed to maintaining our current quarterly cash dividend.”


11
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Liquidity

The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the “FHLB”). At December 31, 2020, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.04 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank had approximately $632.4 million of unpledged investment securities at December 31, 2020.



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 credit losses, tangible stockholders’ equity, tangible book value per share, efficiency ratio, the return on average assets, the return on average equity and pre–tax, pre–provision income. 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 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–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 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, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Total stockholders’ equity$692,216 $670,293 $652,206 $630,842 $656,023 
Less: Intangible assets175,140 175,107 176,020 176,961 177,917 
Total tangible stockholders’ equity$517,076 $495,186 $476,186 $453,881 $478,106 
Common shares outstanding43,880,562 43,874,353 43,821,878 43,763,623 44,975,771 
Book value per common share$15.78 $15.28 $14.88 $14.41 $14.59 
Tangible book value per common share$11.78 $11.29 $10.87 $10.37 $10.63 


12
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Non–interest expense as reported$36,453 $33,407 $30,432 $31,149 $30,650 $131,441 $122,032 
Net interest income as reported43,622 43,397 42,996 40,925 41,519 170,940 160,791 
Non–interest income as reported$19,733 $16,700 $11,125 $12,063 $11,934 $59,621 $43,058 
Non–interest expense / (Net interest income + Non–interest income)
(“Efficiency Ratio”)		57.54 %55.59 %56.23 %58.79 %57.34 %57.01 %59.86 %
Non–interest expense as reported$36,453 $33,407 $30,432 $31,149 $30,650 $131,441 $122,032 
Merger expenses— — — — — — (5,650)
Non–interest expense excluding merger expenses36,453 33,407 30,432 31,149 30,650 131,441 116,382 
Net interest income as reported43,622 43,397 42,996 40,925 41,519 170,940 160,791 
Prepayment penalties on borrowings3,804 — — — — 3,804 — 
Net interest income excluding prepayment penalties on borrowings47,426 43,397 42,996 40,925 41,519 174,744 160,791 
Non–interest income as reported19,733 16,700 11,125 12,063 11,934 59,621 43,058 
(Gain) / loss on sale of investment securities(2,622)(1,088)(248)(339)(10)(4,297)75 
Death benefit on BOLI— (31)— (233)— (264)(580)
Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI$17,111 $15,581 $10,877 $11,491 $11,924 $55,060 $42,553 
Adjusted efficiency ratio56.48 %56.64 %56.49 %59.43 %57.35 %57.20 %57.23 %


13
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Average assets$5,864,086 $5,768,691 $5,620,695 $5,257,332 $5,250,574 $5,628,783 $4,933,058 
Return on average assets (“ROAA”) as reported1.49 %1.40 %1.05 %0.89 %1.40 %1.22 %1.35 %
Merger expenses— — — — — — 0.11 
Tax effect— — — — — — (0.02)
ROAA excluding merger expenses1.49 1.40 1.05 0.89 1.40 1.22 1.44 
(Gain) / loss on sale of investment securities(0.18)(0.08)(0.02)(0.03)— (0.08)— 
Tax effect0.04 0.02 — 0.01 — 0.02 — 
ROAA excluding (gain) / loss on sale of investment securities1.35 1.34 1.03 0.87 1.40 1.16 1.44 
Death benefit on BOLI— — — (0.02)— — (0.01)
ROAA excluding death benefit on BOLI1.35 1.34 1.03 0.85 1.40 1.16 1.43 
Prepayment penalties on borrowings0.26 — — — — 0.07 — 
Tax effect(0.05)— — — — (0.01)— 
ROAA excluding prepayment penalties on borrowings1.56 %1.34 %1.03 %0.85 %1.40 %1.22 %1.43 %
Adjusted ROAA1.56 %1.34 %1.03 %0.85 %1.40 %1.22 %1.43 %


14
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
Three Months EndedTwelve Months Ended
December 31,September 30,June 30,March 31,December 31,December 31,December 31,
2020202020202020201920202019
Average common equity$680,857 $668,797 $649,490 $667,588 $653,071 $665,466 $605,719 
Return on average common equity (“ROACE”) as reported12.79 %12.08 %9.07 %7.02 %11.26 %10.29 %10.98 %
Merger expenses— — — — — — 0.93 
Tax effect— — — — — — (0.16)
ROACE excluding merger expenses12.79 12.08 9.07 7.02 11.26 10.29 11.75 
(Gain) / loss on sale of investment securities(1.53)(0.65)(0.15)(0.20)(0.01)(0.65)0.01 
Tax effect0.32 0.14 0.03 0.04 — 0.14 — 
ROACE excluding (gain) / loss on sale of investment securities11.58 11.57 8.95 6.86 11.25 9.78 11.76 
Death benefit on BOLI— (0.02)— (0.14)— (0.04)(0.10)
ROACE excluding death benefit on BOLI11.58 11.55 8.95 6.72 11.25 9.74 11.66 
Prepayment penalties on borrowings2.22 — — — — 0.57 — 
Tax effect(0.47)— — — — (0.12)— 
ROACE excluding prepayment penalties on borrowings13.33 %11.55 %8.95 %6.72 %11.25 %10.19 %11.66 %
Adjusted ROACE13.33 %11.55 %8.95 %6.72 %11.25 %10.19 %11.66 %

Conference Call

As previously announced, Horizon will host a conference call to review its fourth quarter financial results and operating performance.

Participants may access the live conference call on January 28, 2021 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 877–317–6789 from the United States, 866–450–4696 from Canada or 412–317–6789 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 February 4, 2021. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 412–317–0088 from other international locations, and entering the access code 10150632.

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.


15
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
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. 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 Horizon’s Annual Report on Form 10–K and its quarterly reports on Form 10–Q. Further, statements about the effects of the COVID–19 pandemic on our business, operations, financial performance, and prospects may constitute forward–looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward–looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.


Financial Highlights
(Dollars in Thousands, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Balance sheet:
Total assets$5,886,614 $5,790,143 $5,739,262 $5,351,325 $5,246,829 
Investment securities1,302,701 1,195,613 1,126,075 1,099,943 1,042,675 
Commercial loans2,192,271 2,321,608 2,312,715 2,050,402 2,046,651 
Mortgage warehouse loans395,626 374,653 300,386 223,519 150,293 
Residential mortgage loans624,286 675,220 704,410 757,529 770,717 
Consumer loans655,200 658,884 660,871 675,849 669,180 
Earning assets5,206,645 5,262,054 5,143,978 4,835,934 4,706,051 
Non–interest bearing deposit accounts1,053,242 1,016,646 981,868 709,978 709,760 
Interest bearing transaction accounts2,802,673 2,600,691 2,510,854 2,264,576 2,245,631 
Time deposits675,218 718,952 814,877 907,717 975,611 
Borrowings475,000 587,473 583,073 704,613 549,741 
Subordinated notes58,603 58,566 58,824 — — 
Junior subordinated debentures issued to capital trusts56,548 56,491 56,437 56,374 56,311 
Total stockholders’ equity692,216 670,293 652,206 630,842 656,023 


16
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
Three Months Ended
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Income statement:
Net interest income$43,622 $43,397 $42,996 $40,925 $41,519 
Credit loss expense3,042 2,052 7,057 8,600 340 
Non–interest income19,733 16,700 11,125 12,063 11,934 
Non–interest expense36,453 33,407 30,432 31,149 30,650 
Income tax expense1,967 4,326 1,993 1,584 3,920 
Net income$21,893 $20,312 $14,639 $11,655 $18,543 
Per share data:
Basic earnings per share$0.50 $0.46 $0.33 $0.26 $0.41 
Diluted earnings per share0.50 0.46 0.33 0.26 0.41 
Cash dividends declared per common share0.12 0.12 0.12 0.12 0.12 
Book value per common share15.78 15.28 14.88 14.41 14.59 
Tangible book value per common share11.78 11.29 10.87 10.37 10.63 
Market value – high15.86 11.48 12.44 18.79 19.42 
Market value – low$10.16 $9.05 $8.40 $7.97 $16.60 
Weighted average shares outstanding – Basis43,862,435 43,862,435 43,781,249 44,658,512 44,971,676 
Weighted average shares outstanding – Diluted43,903,881 43,903,881 43,802,794 44,756,716 45,103,065 
Key ratios:
Return on average assets1.49 %1.40 %1.05 %0.89 %1.40 %
Return on average common stockholders’ equity12.79 12.08 9.07 7.02 11.26 
Net interest margin3.34 3.39 3.47 3.56 3.58 
Allowance for credit losses to total loans1.47 1.39 1.38 1.30 0.49 
Average equity to average assets11.61 11.59 11.56 12.70 12.44 
Bank only capital ratios:
Tier 1 capital to average assets8.71 8.57 8.48 9.43 9.49 
Tier 1 capital to risk weighted assets11.29 10.67 10.49 11.83 12.20 
Total capital to risk weighted assets12.21 11.56 11.74 12.67 12.65 



17
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Financial Highlights
(Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
Twelve Months Ended
December 31,December 31,
20202019
Income statement:
Net interest income$170,940 $160,791 
Credit loss expense20,751 1,976 
Non–interest income59,621 43,058 
Non–interest expense131,441 122,032 
Income tax expense9,870 13,303 
Net income$68,499 $66,538 
Per share data:
Basic earnings per share$1.56 $1.53 
Diluted earnings per share1.55 1.53 
Cash dividends declared per common share0.48 0.46 
Book value per common share15.78 14.59 
Tangible book value per common share11.78 10.63 
Market value – high18.79 19.42 
Market value – low$7.97 $15.50 
Weighted average shares outstanding – Basis44,044,737 43,493,316 
Weighted average shares outstanding – Diluted44,123,208 43,598,373 
Key ratios:
Return on average assets1.22 %1.35 %
Return on average common stockholders’ equity10.29 10.98 
Net interest margin3.44 3.69 
Allowance for credit losses to total loans1.47 0.49 
Average equity to average assets11.82 12.28 
Bank only capital ratios:
Tier 1 capital to average assets8.71 9.49 
Tier 1 capital to risk weighted assets11.29 12.20 
Total capital to risk weighted assets12.21 12.65 


18
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Financial Highlights
(Dollars in Thousands Except Ratios, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Loan data:
Substandard loans$98,874 $88,286 $61,385 $61,322 $58,670 
30 to 89 days delinquent6,938 5,513 4,029 12,017 7,729 
Non–performing loans:
90 days and greater delinquent – accruing interest262 331 123 246 146 
Trouble debt restructures – accruing interest1,793 1,825 2,039 2,115 3,354 
Trouble debt restructures – non–accrual2,610 2,704 3,443 3,360 2,006 
Non–accrual loans22,142 24,454 22,451 18,281 15,679 
Total non–performing loans$26,807 $29,314 $28,056 $24,002 $21,185 
Non–performing loans to total loans0.69 %0.72 %0.70 %0.65 %0.58 %


Allocation of the Allowance for Credit Losses
(Dollars in Thousands, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Commercial $42,210 $39,795 $39,147 $32,550 $11,996 
Residential mortgage4,620 5,464 5,832 5,654 923 
Mortgage warehouse1,267 1,250 1,190 1,055 1,077 
Consumer8,930 9,810 8,921 9,181 3,671 
Total$57,027 $56,319 $55,090 $48,440 $17,667 

Net Charge–offs (Recoveries)
(Dollars in Thousands Except Ratios, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Commercial $23 $488 $6 $(20)$146 
Residential mortgage(10)136 24 17 40 
Mortgage warehouse— — — — — 
Consumer216 199 377 407 443 
Total$229 $823 $407 $404 $629 
Percent of net charge–offs (recoveries) to average loans outstanding for the period0.01 %0.02 %0.01 %0.01 %0.02 %

19
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Total Non–performing Loans
(Dollars in Thousands Except Ratios, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Commercial $14,348 $16,169 $14,238 $9,579 $7,347 
Residential mortgage7,994 9,209 9,945 10,411 9,884 
Mortgage warehouse— — — — — 
Consumer4,465 3,936 3,873 4,012 3,954 
Total$26,807 $29,314 $28,056 $24,002 $21,185 
Non–performing loans to total loans0.69 %0.72 %0.70 %0.65 %0.58 %

Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Commercial $1,908 $2,191 $2,374 $2,464 $3,698 
Residential mortgage— 70 249 336 28 
Mortgage warehouse— — — — — 
Consumer— 80 20 13 — 
Total$1,908 $2,341 $2,643 $2,813 $3,726 

20
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Average Balance Sheets
(Dollars in Thousands, Unaudited)
Three Months EndedThree Months Ended
December 31, 2020December 31, 2019
Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate
Assets
Interest earning assets
Federal funds sold$112,139 $29 0.10 %$40,657 $172 1.68 %
Interest earning deposits28,507 52 0.73 %12,665 58 1.82 %
Investment securities – taxable408,412 1,489 1.45 %491,160 2,824 2.28 %
Investment securities – non–taxable (1)
866,182 4,919 2.86 %545,832 3,575 3.26 %
Loans receivable (2) (3)
3,950,648 46,745 4.72 %3,657,903 46,769 5.10 %
Total interest earning assets5,365,888 53,234 4.05 %4,748,217 53,398 4.57 %
Non–interest earning assets
Cash and due from banks79,753 75,248 
Allowance for credit losses(56,657)(17,916)
Other assets475,102 445,025 
Total average assets$5,864,086 $5,250,574 
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits$3,450,824 $2,718 0.31 %$3,255,725 $8,767 1.07 %
Borrowings511,306 5,456 4.25 %484,729 2,281 1.87 %
Subordinated notes58,581 871 5.91 %— — — %
Junior subordinated debentures issued to capital trusts56,512 567 3.99 %54,489 831 6.05 %
Total interest bearing liabilities4,077,223 9,612 0.94 %3,794,943 11,879 1.24 %
Non–interest bearing liabilities
Demand deposits1,037,232 747,513 
Accrued interest payable and other liabilities68,774 55,047 
Stockholders’ equity680,857 653,071 
Total average liabilities and stockholders’ equity$5,864,086 $5,250,574 
Net interest income / spread$43,622 3.11 %$41,519 3.33 %
Net interest income as a percent of average interest earning assets (1)
3.34 %3.58 %
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.

21
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Average Balance Sheets
(Dollars in Thousands, Unaudited)
Twelve Months EndedTwelve Months Ended
December 31, 2020December 31, 2019
Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate
Assets
Interest earning assets
Federal funds sold$61,408 $154 0.25 %$21,301 $511 2.40 %
Interest earning deposits25,943 268 1.03 %19,601 342 1.74 %
Investment securities – taxable459,551 8,071 1.76 %474,833 11,753 2.48 %
Investment securities – non–taxable (1)
706,092 17,213 3.09 %454,066 12,095 3.34 %
Loans receivable (2) (3)
3,867,112 179,672 4.66 %3,500,649 183,631 5.27 %
Total interest earning assets5,120,106 205,378 4.11 %4,470,450 208,332 4.75 %
Non–interest earning assets
Cash and due from banks84,065 62,920 
Allowance for credit losses(46,329)(18,019)
Other assets470,941 417,707 
Total average assets$5,628,783 $4,933,058 
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits$3,327,917 $18,556 0.56 %$3,007,937 $33,690 1.12 %
Borrowings559,953 11,430 2.04 %468,159 10,672 2.28 %
Subordinated notes30,610 1,824 5.96 %— — — %
Junior subordinated debentures issued to capital trusts56,427 2,628 4.66 %50,134 3,179 6.34 %
Total interest bearing liabilities3,974,907 34,438 0.87 %3,526,230 47,541 1.35 %
Non–interest bearing liabilities
Demand deposits919,449 757,389 
Accrued interest payable and other liabilities68,961 43,720 
Stockholders’ equity665,466 605,719 
Total average liabilities and stockholders’ equity$5,628,783 $4,933,058 
Net interest income / spread$170,940 3.24 %$160,791 3.40 %
Net interest income as a percent of average interest earning assets (1)
3.44 %3.69 %
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.

22
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
December 31,
2020		December 31,
2019
(Unaudited)
Assets
Cash and due from banks$249,711 $98,831 
Interest earning time deposits8,965 8,455 
Investment securities, available for sale1,134,025 834,776 
Investment securities, held to maturity (fair value $179,990 and $215,147)
168,676 207,899 
Loans held for sale13,538 4,088 
Loans, net of allowance for credit losses of $57,027 and $17,667
3,810,356 3,619,174 
Premises and equipment, net92,416 92,209 
Federal Home Loan Bank stock23,023 22,447 
Goodwill151,238 151,238 
Other intangible assets23,902 26,679 
Interest receivable21,396 18,828 
Cash value of life insurance96,751 95,577 
Other assets92,617 66,628 
Total assets$5,886,614 $5,246,829 
Liabilities
Deposits
Non–interest bearing$1,053,242 $709,760 
Interest bearing3,477,891 3,221,242 
Total deposits4,531,133 3,931,002 
Borrowings475,000 549,741 
Subordinated notes58,603 — 
Junior subordinated debentures issued to capital trusts56,548 56,311 
Interest payable2,712 3,062 
Other liabilities70,402 50,690 
Total liabilities5,194,398 4,590,806 
Commitments and contingent liabilities
Stockholders’ equity
Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares
— — 
Common stock, no par value, Authorized 99,000,000 shares
   Issued 43,905,631 and 45,000,840 shares,
   Outstanding 43,880,562 and 44,975,771 shares
— — 
Additional paid–in capital362,945 379,853 
Retained earnings301,419 269,738 
Accumulated other comprehensive income27,852 6,432 
Total stockholders’ equity692,216 656,023 
Total liabilities and stockholders’ equity$5,886,614 $5,246,829 

23
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Condensed Consolidated Statements of Income
(Dollars in Thousands Except Per Share Data, Unaudited)
Three Months Ended
December 31,September 30,June 30,March 31,December 31,
20202020202020202019
Interest income
Loans receivable$46,745 $44,051 $43,918 $44,958 $46,769 
Investment securities – taxable1,570 1,704 2,321 2,898 3,054 
Investment securities – non–taxable4,919 4,391 4,105 3,798 3,575 
Total interest income53,234 50,146 50,344 51,654 53,398 
Interest expense
Deposits2,718 3,616 4,506 7,716 8,767 
Borrowed funds5,456 1,662 2,074 2,238 2,281 
Subordinated notes871 895 58 — — 
Junior subordinated debentures issued to capital trusts567 576 710 775 831 
Total interest expense9,612 6,749 7,348 10,729 11,879 
Net interest income43,622 43,397 42,996 40,925 41,519 
Credit loss expense3,042 2,052 7,057 8,600 340 
Net interest income after credit loss expense40,580 41,345 35,939 32,325 41,179 
Non–interest Income
Service charges on deposit accounts2,360 2,154 1,888 2,446 2,766 
Wire transfer fees301 298 230 171 179 
Interchange fees2,645 2,438 2,327 1,896 1,996 
Fiduciary activities2,747 2,105 1,765 2,528 2,594 
Gains / (losses) on sale of investment securities2,622 1,088 248 339 10 
Gain on sale of mortgage loans7,815 8,813 6,620 3,473 3,119 
Mortgage servicing income net of impairment327 (1,308)(2,760)25 294 
Increase in cash value of bank owned life insurance566 566 557 554 566 
Death benefit on bank owned life insurance— 31 — 233 — 
Other income350 515 250 398 410 
Total non–interest income19,733 16,700 11,125 12,063 11,934 
Non–interest expense
Salaries and employee benefits20,030 18,832 15,629 16,591 16,841 
Net occupancy expenses3,262 3,107 3,190 3,252 3,106 
Data processing2,126 2,237 2,432 2,405 2,235 
Professional fees691 688 518 536 520 
Outside services and consultants2,083 1,561 1,759 1,915 1,415 
Loan expense2,961 2,876 2,692 2,099 2,438 
FDIC insurance expense900 570 235 150 — 
Other losses735 114 193 120 377 
Other expenses3,665 3,422 3,784 4,081 3,718 
Total non–interest expense36,453 33,407 30,432 31,149 30,650 
Income before income taxes23,860 24,638 16,632 13,239 22,463 
Income tax expense1,967 4,326 1,993 1,584 3,920 
Net income$21,893 $20,312 $14,639 $11,655 $18,543 
Basic earnings per share$0.50 $0.46 $0.33 $0.26 $0.41 
Diluted earnings per share0.50 0.46 0.33 0.26 0.41 

24
Horizon Bancorp, Inc. Announces Record Fourth Quarter 2020 Financial Results
Condensed Consolidated Statements of Income
(Dollars in Thousands, Expect Per Share Data, Unaudited)
Twelve Months Ended
December 31,
20202019
Interest income
Loans receivable$179,672 $183,631 
Investment securities – taxable8,493 12,606 
Investment securities – non–taxable17,213 12,095 
Total interest income205,378 208,332 
Interest expense
Deposits18,556 33,690 
Borrowed funds11,430 10,672 
Subordinated notes1,824 — 
Junior subordinated debentures issued to capital trusts2,628 3,179 
Total interest expense34,438 47,541 
Net interest income170,940 160,791 
Credit loss expense20,751 1,976 
Net interest income after credit loss expense150,189 158,815 
Non–interest income
Service charges on deposit accounts8,848 9,959 
Wire transfer fees1,000 653 
Interchange fees9,306 7,655 
Fiduciary activities9,145 8,580 
Gains / (losses) on sale of investment securities4,297 (75)
Gain on sale of mortgage loans26,721 9,208 
Mortgage servicing income net of impairment(3,716)1,914 
Increase in cash value of bank owned life insurance2,243 2,190 
Death benefit on bank owned life insurance264 580 
Other income1,513 2,394 
Total non–interest income59,621 43,058 
Non-interest expense
Salaries and employee benefits71,082 65,206 
Net occupancy expenses12,811 12,157 
Data processing9,200 8,480 
Professional fees2,433 1,946 
Outside services and consultants7,318 8,152 
Loan expense10,628 8,633 
FDIC insurance expense1,855 252 
Other losses1,162 740 
Other expense14,952 16,466 
Total non–interest expense131,441 122,032 
Income before income taxes78,369 79,841 
Income tax expense9,870 13,303 
Net income$68,499 $66,538 
Basic earnings per share$1.56 $1.53 
Diluted earnings per share$1.55 $1.53 

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