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Horizon Bancorp, Inc. Reports First Quarter 2022 EPS of $0.54 on Record Profitability, Higher Fees and Pre–Tax, Pre–Provision Net Income, and Organic Growth in Total, Commercial and Consumer Loans
Source: Nasdaq GlobeNewswire / 27 Apr 2022 16:35:02 America/New_York
MICHIGAN CITY, Ind., April 27, 2022 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three months ending March 31, 2022.
“The intentional build out of Horizon’s lending teams, technology, durable customer relationships, and low–cost Midwest deposit franchise is reflected in the Company’s first quarter loan growth, higher fees and pre–tax, pre–provision net income, and record earnings,” Chairman and CEO Craig M. Dwight said. “We believe our asset sensitive balance sheet, strong credit quality and scalable business model will continue to provide an excellent foundation for organic growth in commercial and consumer lending, revenue and profits, along with incremental improvement in operating leverage through 2022.”
First Quarter 2022 Highlights
- Net income grew to a record $23.6 million, up 10.0% from the linked quarter and 15.4% from the prior year period. Diluted earnings per share (“EPS”) of $0.54 was up from $0.49 for the fourth quarter of 2021 and $0.46 for the first quarter of 2021.
- Pre–tax, pre–provision net income grew to $25.7 million, up 9.7% from the linked quarter and 6.1% from the prior year period. 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.) Horizon recorded a provision release of $1.4 million in the quarter and $2.1 million in the linked quarter, as well as provision expense of $367,000 in the prior year period.
- Reported net interest margin (“NIM”) was 2.99% and adjusted NIM was 2.93%, with reported NIM increasing by two basis points and adjusted NIM increasing by seven basis points from the fourth quarter of 2021. (See the “Non-GAAP Reconciliation of Net Interest Margin” table below for the definition of this non–GAAP calculation of adjusted NIM.)
- The Company was asset sensitive as of March 31, 2022 but less than the previous quarter as additional cash was deployed to higher yielding assets. Due to the deployment of cash the base case estimate increased over $10.0 million from last quarter and reduced estimates for parallel rate shocks to the balance sheet, at a 100 basis point shock and 200 basis point shock, to net interest income increases of approximately $2.5 million and $3.8 million, respectively.
- The steepening of the yield curve during the first quarter resulted in unrealized losses on available for sale investments of $73.6 million compared to unrealized gains of $7.2 million at December 31, 2021. The impact to the tangible capital ratio was a decrease of 67 basis points from 7.61% at December 31, 2021 to 6.94% at March 31, 2022, an 8.8% decrease.
- The Bank's capital is still robust with leverage and risk based capital ratios of 9.7% and 15.21%, respectively.
- Total loans, excluding Federal Paycheck Protection Program (“PPP”) loans and sold commercial participation loans, grew by 2.3%, or 9.5% annualized, during the first quarter to $3.66 billion at period end from $3.57 billion on December 31, 2021.
- Commercial loans, excluding PPP loans and sold commercial participation loans, grew by 3.3%, or 13.5% annualized, during the first quarter to a record $2.20 billion from $2.13 billion on December 31, 2021.
- Consumer loans grew by 3.7%, or 14.9% annualized, during the first quarter to a record $753.9 million at period end.
- The decline in residential mortgage loans slowed during the first quarter with a 0.2% reduction to $593.4 million at period end, as refinancing activity decreased and we experienced movement to adjustable rate products which are held on the balance sheet. Gain on sale of mortgage loans and mortgage warehouse income only constituted 4.7% of total revenue in the first quarter of 2022.
- Non–interest expense was $36.6 million in the quarter, or 2.03% of average assets on an annualized basis, compared to $39.4 million, or 2.09%, in the fourth quarter of 2021 and $32.2 million, or 2.20%, in the first quarter of 2021. As previously disclosed, acquisition–related and non–recurring Department of Labor (“DOL”) Employee Stock Ownership Plan (“ESOP“) settlement expenses totaled $2.8 million in the fourth quarter of 2021.
- The efficiency ratio for the period was 58.74% compared to 62.69% for the fourth quarter of 2021 and 57.03% for the first quarter of 2021. The adjusted efficiency ratio was 58.74% compared to 58.25% for the fourth quarter of 2021 and 57.97% for the first quarter of 2021. (See the “Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below.)
- As part of the Company’s annual branch performance review of Horizon Bank’s (the “Bank”) retail network, Horizon’s Board of Directors approved the permanent closure of seven branch locations in the second half of 2022. We expect to incur a one–time charge of approximately $432,000 with an earn–back period of approximately six months.
- Horizon’s in–market consumer and commercial deposit relationships, including those on–boarded as part of its branch acquisition near the end of the third quarter of 2021, combined with strategic pricing moves to manage deposit growth and runoff of higher–priced time deposits, contributed to continued improvement in the cost of interest bearing liabilities, which declined to 0.30% in the quarter, compared to 0.31% in the fourth quarter of 2021 and 0.50% in the first quarter of 2021.
- Asset quality remains favorable as evidenced by non–performing loans at 0.54% of total loans at period end and net charge–offs to average loans represented 0.00% for the first quarter of 2022.
Summary For the Three Months Ended March 31, December 31, March 31, Net Interest Income and Net Interest Margin 2022 2021 2021 Net interest income $ 48,171 $ 49,976 $ 42,538 Net interest margin 2.99 % 2.97 % 3.29 % Adjusted net interest margin 2.93 % 2.86 % 3.17 % “Sequential quarter net interest margin expansion begins to illustrate the Company’s asset sensitive balance sheet positioning.” Mr. Dwight said. “We expect to see continued NIM improvement in 2022 driven by both rates and loan volume, along with deposit betas that we believe will remain in line with or better than in–footprint competition, given Horizon’s mix of commercial and retail relationships, strong marketplace positioning and conservative expectations for higher–priced deposit runoff.”
For the Three Months Ended March 31, December 31, March 31, Asset Yields and Funding Costs 2022 2021 2021 Interest earning assets 3.22 % 3.20 % 3.66 % Interest bearing liabilities 0.30 % 0.31 % 0.50 % For the Three Months Ended Non–interest Income and March 31, December 31, March 31, Mortgage Banking Income 2022 2021 2021 Total non–interest income $ 14,155 $ 12,828 $ 13,873 Gain on sale of mortgage loans 2,027 4,167 5,296 Mortgage servicing income net of impairment 3,489 300 213 For the Three Months Ended March 31, December 31, March 31, Non–interest Expense 2022 2021 2021 Total non–interest expense $ 36,610 $ 39,370 $ 32,172 Annualized non–interest expense to average assets 2.03 % 2.09 % 2.20 % For the Three Months Ended March 31, December 31, March 31, Credit Quality 2022 2021 2021 Allowance for credit losses to total loans 1.41 % 1.51 % 1.56 % Non–performing loans to total loans 0.54 % 0.53 % 0.68 % Percent of net charge–offs to average loans outstanding for the period 0.00 % 0.04 % 0.01 % Allowance for December 31, Net Reserve March 31, Credit Losses 2021 1Q22 2022 Commercial $ 40,775 $ (2,986 ) $ 37,789 Retail Mortgage 3,856 495 4,351 Warehouse 1,059 (4 ) 1,055 Consumer 8,596 717 9,313 Allowance for Credit Losses (“ACL”) $ 54,286 $ (1,778 ) $ 52,508 ACL / Total Loans 1.51 % 1.41 % Acquired Loan Discount (“ALD”) $ 9,097 $ (769 ) $ 8,328 “Our 2.03% annualized non–interest expense to average assets continues to represent an improvement over the prior quarter and the first quarter supports our full–year 2022 target of less than 2% for this performance metric,” Mr. Dwight said. “Even with nationwide wage inflation and the ongoing operating costs associated with our branch acquisition last fall, we believe our scalable and technology–enabled model, along with our disciplined expense management culture and annual branch network review process, will enable us to achieve our target for the full year.”
Income Statement Highlights
Net income for the first quarter of 2022 was $23.6 million, or $0.54 diluted earnings per share, compared to $21.4 million, or $0.49, for the linked quarter and $20.4 million, or $0.46, for the prior year period. This represents the highest quarterly net income in the Company’s history.
Adjusted net income for the first quarter of 2022 was $23.6 million, or $0.54 diluted earnings per share, compared to $23.7 million, or $0.54, for the linked quarter and $19.7 million, or $0.44, 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. (See the “Non–GAAP Reconciliation of Net Income” table below.)
The increase in net income for the first quarter of 2022 when compared to the fourth quarter of 2021 reflects an increase in non–interest income of $1.3 million, a decrease in non–interest expense of $2.8 million and a decrease in income tax expense of $541,000. These items were offset by a decrease in net interest income of $1.8 million and a decrease in provision release of $685,000 for the first quarter of 2022 when compared to the fourth quarter of 2021.
Interest income includes the recognition of PPP loan interest and net loan processing fees totaling $457,000 in the first quarter of 2022, compared to $2.1 million in the linked quarter. On March 31, 2022, the Company had $141,000 in net deferred PPP loan processing fees outstanding and $6.7 million in PPP loans outstanding. PPP loan net deferred fees and loans outstanding at December 31, 2021 were $561,000 and $25.8 million, respectively.
First quarter 2022 income from the gain on sale of mortgage loans totaled $2.0 million, down from $4.2 million in the linked quarter and down from $5.3 million in the prior year period.
Non–interest expense of $36.6 million in the first quarter of 2022, including ongoing operating expenses associated with the September 2021 acquisition of 14 branches and low–cost deposits to expand Horizon’s Michigan franchise, reflected a $1.8 million decrease in other losses, a $814,000 decrease in salaries and employee benefits, a decrease of $258,000 in loan expenses and a decrease of $224,000 in professional fees, offset by an increase in occupancy expense of $357,000 and an increase in outside services and consultants of $268,000 from the linked quarter. As previously disclosed, acquisition–related and non–recurring DOL ESOP settlement expenses totaled $2.8 million in the fourth quarter of 2021.
The increase in net income for the first quarter of 2022 when compared to the same prior year period reflects an increase in net interest income of $5.6 million, a decrease in credit loss expense of $1.8 million and an increase in non–interest income of $282,000, offset by an increase in non–interest expense of $4.4 million and an increase in income tax expense of $89,000.
Non–GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Net income as reported $ 23,563 $ 21,425 $ 23,071 $ 22,173 $ 20,422 Acquisition expenses — 884 799 242 — Tax effect — (184 ) (166 ) (51 ) — Net income excluding acquisition expenses 23,563 22,125 23,704 22,364 20,422 Credit loss expense acquired loans — — 2,034 — — Tax effect — — (427 ) — — Net income excluding credit loss expense acquired loans 23,563 22,125 25,311 22,364 20,422 Gain on sale of ESOP trustee accounts — — (2,329 ) — — Tax effect — — 489 — — Net income excluding gain on sale of ESOP trustee accounts 23,563 22,125 23,471 22,364 20,422 DOL ESOP settlement expenses — 1,900 — — — Tax effect — (315 ) — — — Net income excluding DOL ESOP settlement expenses 23,563 23,710 23,471 22,364 20,422 (Gain) / loss on sale of investment securities — — — — (914 ) Tax effect — — — — 192 Net income excluding (gain) / loss on sale of investment securities 23,563 23,710 23,471 22,364 19,700 Death benefit on bank owned life insurance (“BOLI”) — — (517 ) (266 ) — Net income excluding death benefit on BOLI 23,563 23,710 22,954 22,098 19,700 Prepayment penalties on borrowings — — — 125 — Tax effect — — — (26 ) — Net income excluding prepayment penalties on borrowings 23,563 23,710 22,954 22,197 19,700 Adjusted net income $ 23,563 $ 23,710 $ 22,954 $ 22,197 $ 19,700 Non–GAAP Reconciliation of Diluted Earnings per Share (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Diluted earnings per share (“EPS”) as reported $ 0.54 $ 0.49 $ 0.52 $ 0.50 $ 0.46 Acquisition expenses — 0.02 0.02 0.01 — Tax effect — — — — — Diluted EPS excluding acquisition expenses 0.54 0.51 0.54 0.51 0.46 Credit loss expense acquired loans — — 0.05 — — Tax effect — — (0.01 ) — — Diluted EPS excluding credit loss expense acquired loans 0.54 0.51 0.58 0.51 0.46 Gain on sale of ESOP trustee accounts — — (0.05 ) — — Tax effect — — 0.01 — — Diluted EPS excluding gain on sale of ESOP trustee accounts 0.54 0.51 0.54 0.51 0.46 DOL ESOP settlement expenses — 0.04 — — — Tax effect — (0.01 ) — — — Diluted EPS excluding DOL ESOP settlement expenses 0.54 0.54 0.54 0.51 0.46 (Gain) / loss on sale of investment securities — — — — (0.02 ) Tax effect — — — — — Diluted EPS excluding (gain) / loss on sale of investment securities 0.54 0.54 0.54 0.51 0.44 Death benefit on bank owned life insurance (“BOLI”) — — (0.02 ) (0.01 ) — Diluted EPS excluding death benefit on BOLI 0.54 0.54 0.52 0.50 0.44 Prepayment penalties on borrowings — — — — — Tax effect — — — — — Diluted EPS excluding prepayment penalties on borrowings 0.54 0.54 0.52 0.50 0.44 Adjusted diluted EPS $ 0.54 $ 0.54 $ 0.52 $ 0.50 $ 0.44 Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Pre–tax income $ 27,102 $ 25,505 $ 27,127 $ 25,943 $ 23,872 Credit loss expense (1,386 ) (2,071 ) 1,112 (1,492 ) 367 Pre–tax, pre–provision net income $ 25,716 $ 23,434 $ 28,239 $ 24,451 $ 24,239 Pre–tax, pre–provision net income $ 25,716 $ 23,434 $ 28,239 $ 24,451 $ 24,239 Acquisition expenses — 884 799 242 — Gain on sale of ESOP trustee accounts — — (2,329 ) — — DOL ESOP settlement expenses — 1,900 — — — (Gain) / loss on sale of investment securities — — — — (914 ) Death benefit on BOLI — — (517 ) (266 ) — Prepayment penalties on borrowings — — — 125 — Adjusted pre–tax, pre–provision net income $ 25,716 $ 26,218 $ 26,192 $ 24,552 $ 23,325 Horizon’s net interest margin increased to 2.99% for the first quarter of 2022 compared to 2.97% for the fourth quarter of 2021. The increase in net interest margin reflects an increase in the yield on interest earning assets of two basis points and a decrease in the cost of interest bearing liabilities of one basis point. Interest income from acquisition–related purchase accounting adjustments was $903,000 lower during the first quarter of 2022 when compared to the fourth quarter of 2021.
Horizon’s net interest margin decreased to 2.99% for the first quarter of 2022 compared to 3.29% for the first quarter of 2021. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 44 basis points offset by a decrease in the cost of interest bearing liabilities of 20 basis points.
The net interest margin was impacted during the first quarter of 2022 and fourth quarter of 2021 by PPP loans that were originated. Horizon estimates that the PPP loans increased the net interest margin by 2 basis points for the first quarter of 2022 and 10 basis points for the fourth quarter of 2021, respectively. 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 net interest margin was also impacted during the first quarter of 2022 and fourth quarter of 2021 by excess liquidity carried on the balance sheet through increased deposits. Horizon estimates that the excess liquidity compressed the net interest margin by 11 basis points for the first quarter of 2022 and 32 basis points for the fourth quarter of 2021, respectively. This assumes that the excess liquidity was not included in average interest earning assets or interest income and was excluded from non–interest bearing deposits.
Non–GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Net interest income as reported $ 48,171 $ 49,976 $ 46,544 $ 42,632 $ 42,538 Average interest earning assets 6,800,549 6,938,258 6,033,088 5,659,384 5,439,634 Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) 2.99 % 2.97 % 3.17 % 3.14 % 3.29 % Net interest income as reported $ 48,171 $ 49,976 $ 46,544 $ 42,632 $ 42,538 Acquisition–related purchase accounting adjustments (“PAUs”) (916 ) (1,819 ) (875 ) (230 ) (1,579 ) Prepayment penalties on borrowings — — — 125 — Adjusted net interest income $ 47,255 $ 48,157 $ 45,669 $ 42,527 $ 40,959 Adjusted net interest margin 2.93 % 2.86 % 3.12 % 3.13 % 3.17 % Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.93% for the first quarter of 2021, compared to 2.86% for the linked quarter and 3.17% for the first quarter of 2020. Interest income from acquisition–related purchase accounting adjustments was $916,000, $1.8 million and $1.6 million for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
Lending Activity
Total loan balances were $3.72 billion, or $3.66 billion excluding PPP loans and sold commercial participation loans, on March 31, 2022. Total loans were $3.66 billion, or $3.57 billion excluding PPP loans and sold commercial participation loans, on December 31, 2021. During the three months ended March 31, 2022, commercial loans, excluding PPP loans and sold commercial participation loans, increased $70.9 million and consumer loans increased $26.6 million, offset by decreases in PPP loans of $19.1 million, loans held for sale of $8.8 million, sold commercial participation loans of $6.4 million mortgage warehouse loans of $3.9 million and residential mortgage loans of $1.0 million. PPP loan income was $457,000, $2.1 million and $3.2 million for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
Following a recent review of commercial participation loan sold agreements, the Company determined that total loan balance amounts must include all commercial participations sold with a corresponding secured borrowing, as they do not qualify for sales treatment based on accounting guidelines. This resulted in revising December 31, 2021 net loan and borrowing line items on the balance sheet with the March 31, 2022 reporting. Net loan and borrowing line items for December 31, 2021 was $56.5 million of commercial participations sold and for March 31, 2022 was $50.5 million of commercial participations sold.
Loan Growth by Type, Excluding Acquired Loans (Dollars in Thousands, Unaudited) March 31, December 31, Amount QTD Annualized 2022 2021 Change % Change % Change Commercial, excluding PPP loans and
sold commercial participation loans$ 2,202,568 $ 2,131,644 $ 70,924 3.3 % 13.5 % PPP loans 6,705 25,844 (19,139 ) (74.1 )% (300.3 )% Sold commercial participation loans 50,054 56,457 (6,403 ) (11.3 )% (46.0 )% Residential mortgage 593,372 594,382 (1,010 ) (0.2 )% (0.7 )% Consumer 753,900 727,259 26,641 3.7 % 14.9 % Subtotal 3,606,599 3,535,586 71,013 2.0 % 8.1 % Loans held for sale 3,781 12,579 (8,798 ) (69.9 )% (283.7 )% Mortgage warehouse 105,118 109,031 (3,913 ) (3.6 )% (14.6 )% Total loans $ 3,715,498 $ 3,657,196 $ 58,302 1.6 % 6.5 % Total loans, excluding PPP loans and
sold commercial participation loans$ 3,658,739 $ 3,574,895 $ 83,844 2.3 % 9.5 % Residential mortgage lending activity for the three months ended March 31, 2022 generated $2.0 million in income from the gain on sale of mortgage loans, decreasing $2.1 million from the fourth quarter of 2021 and $3.3 million from the first quarter of 2021. Total mortgage origination volume for the first quarter of 2022, including loans placed into the portfolio, totaled $118.9 million, representing a decrease of 20.9% from fourth quarter 2021 levels, and a decrease of 23.5% from the first quarter of 2021. As a percentage of total mortgage loan originations, 44% of the volume was from refinancings and 56% was from loans for new home purchases during the first quarter of 2022. Total origination volume of mortgage loans sold to the secondary market totaled $81.3 million, representing a decrease of 15.1% from the fourth quarter of 2021 and a decrease of 35.5% from the first quarter of 2021.
Gain on sale of mortgage loans and mortgage warehousing income was 4.7% of total revenue for the three months ended March 31, 2022, compared to 8.6% for the linked quarter and 13.8% for the three months ended March 31, 2021.
Deposit Activity
Total deposit balances were $5.85 billion on March 31, 2022 compared to $5.80 billion on December 31, 2021, an increase of $48.5 million.
Deposit Growth by Type, Excluding Acquired Deposits (Dollars in Thousands, Unaudited) March 31, December 31, Amount QTD Annualized 2022 2022 Change % Change % Change Non–interest bearing $ 1,325,570 $ 1,360,338 $ (34,768 ) (2.6 )% (10.4 )% Interest bearing 3,782,644 3,711,767 70,877 1.9 % 7.7 % Time deposits 743,283 730,886 12,397 1.7 % 6.9 % Total deposits $ 5,851,497 $ 5,802,991 $ 48,506 0.8 % 3.4 % Expense Management Three Months Ended March 31, December 31, 2022 2021 Adjusted Non–interest Expense Actual Acquisition
&
Non–
Recurring
ExpensesAdjusted Actual Acquisition
&
Non–
Recurring
ExpensesAdjusted Amount
ChangePercent
ChangeSalaries and employee benefits $ 19,735 $ — $ 19,735 $ 20,549 $ (202 ) $ 20,347 $ (612 ) (3.0 )% Net occupancy expenses 3,561 — 3,561 3,204 — 3,204 357 11.1 % Data processing 2,537 — 2,537 2,672 (1 ) 2,671 (134 ) (5.0 )% Professional fees 314 — 314 562 (45 ) 517 (203 ) (39.3 )% Outside services and consultants 2,525 — 2,525 2,197 (162 ) 2,035 490 24.1 % Loan expense 2,545 — 2,545 2,803 (83 ) 2,720 (175 ) (6.4 )% FDIC insurance expense 725 — 725 798 (6 ) 792 (67 ) (8.5 )% Other losses 168 — 168 1,925 (1,904 ) 21 147 700.0 % Other expense 4,500 — 4,500 4,660 (381 ) 4,279 221 5.2 % Total non–interest expense $ 36,610 $ — $ 36,610 $ 39,370 $ (2,784 ) $ 36,586 $ 24 0.1 % Annualized non–interest expense to average assets 2.03 % 2.03 % 2.09 % 1.95 % Total non–interest expense was $2.8 million lower in the first quarter of 2022 when compared to the fourth quarter of 2021. The decrease was primarily due to a decrease in other losses of $1.8 million as a result of the $1.9 million ESOP settlement expense recorded in the fourth quarter of 2021 and a decrease in salaries and employee benefits expense of $814,000. Excluding acquisition–related expenses and non–recurring DOL ESOP settlement expenses, total non–interest expense increased $24,000 in the first quarter of 2022 when compared to the fourth quarter of 2021. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below for these non–GAAP calculations.)
Three Months Ended March 31, March 31, 2022 2021 Non–interest Expense Actual Actual Amount
ChangePercent
ChangeSalaries and employee benefits $ 19,735 $ 16,871 $ 2,864 17.0 % Net occupancy expenses 3,561 3,318 243 7.3 % Data processing 2,537 2,376 161 6.8 % Professional fees 314 544 (230 ) (42.3 )% Outside services and consultants 2,525 1,702 823 48.4 % Loan expense 2,545 2,822 (277 ) (9.8 )% FDIC insurance expense 725 800 (75 ) (9.4 )% Other losses 168 283 (115 ) (40.6 )% Other expense 4,500 3,456 1,044 30.2 % Total non–interest expense $ 36,610 $ 32,172 $ 4,438 13.8 % Annualized non–interest expense to average assets 2.03 % 2.20 % Total non–interest expense was $4.4 million higher in the first quarter of 2022 when compared to the first quarter of 2021. The increases in expenses was primarily due to an increase in salaries and employee benefits of $2.9 million, an increase in other expense of $1.0 million, an increase in outside services and consultants of $823,000 and an increase in net occupancy expenses of $243,000, offset by a decrease of $277,000 in loan expense and a decrease of $230,000 in professional fees.
Annualized non–interest expense as a percent of average assets was 2.03%, 2.09% and 2.20% for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Annualized non–interest expense, excluding acquisition expenses and non–recurring DOL ESOP settlement expenses, as a percent of average assets was 2.03%, 1.95% and 2.20% for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below for these non–GAAP calculations.)
Income tax expense totaled $3.5 million for the first quarter of 2022, a decrease of $541,000 when compared to the fourth quarter of 2021 and an increase of $89,000 when compared to the first quarter of 2021.
Capital
The capital resources of the Company and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2022. Stockholders’ equity totaled $677.5 million at March 31, 2022 and the ratio of average stockholders’ equity to average assets was 9.79% for the three months ended March 31, 2022.
Tangible book value per common share (“TBVPS”) declined $1.03 in the first quarter of 2022 to $11.55 at period end, as unrealized net losses on securities available for sale (“AFS”) of $1.48 per common share reduced other comprehensive income (“OCI”) by $64.3 million in the first three months of this year. Fluctuations in the fair market value of AFS are widely expected to be recorded by banks in the first quarter of 2022.
The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of March 31, 2022.
Actual Required for Capital
Adequacy PurposesRequired for Capital
Adequacy Purposes
with Capital BufferWell Capitalized
Under Prompt
Corrective Action
ProvisionsAmount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk–weighted assets) Consolidated $ 733,695 15.21 % $ 385,869 8.00 % $ 506,452 10.50 % N/A N/A Bank 685,676 14.22 % 385,665 8.00 % 506,186 10.50 % $ 482,082 10.00 % Tier 1 capital (to risk–weighted assets) Consolidated 679,232 14.08 % 289,401 6.00 % 409,985 8.50 % N/A N/A Bank 631,214 13.09 % 289,249 6.00 % 409,769 8.50 % 385,665 8.00 % Common equity tier 1 capital (to risk–weighted assets) Consolidated 541,696 11.64 % 217,051 4.50 % 337,635 7.00 % N/A N/A Bank 631,214 13.09 % 216,937 4.50 % 337,457 7.00 % 313,353 6.50 % Tier 1 capital (to average assets) Consolidated 679,232 9.70 % 280,233 4.00 % 280,233 4.00 % N/A N/A Bank 631,214 9.03 % 279,627 4.00 % 279,627 4.00 % 349,534 5.00 % 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 March 31, 2022, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $575.3 million in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank had approximately $2.3 billion of unpledged investment securities at March 31, 2022.
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, 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 net 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 and financial results without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP information identified herein and its most comparable GAAP measures.
Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Total stockholders’ equity $ 677,450 $ 723,209 $ 708,542 $ 710,374 $ 689,379 Less: Intangible assets 174,588 175,513 183,938 172,398 173,296 Total tangible stockholders’ equity $ 502,862 $ 547,696 $ 524,604 $ 537,976 $ 516,083 Common shares outstanding 43,572,796 43,547,942 43,520,694 43,950,720 43,949,189 Book value per common share $ 15.56 $ 16.61 $ 16.28 $ 16.16 $ 15.69 Tangible book value per common share $ 11.55 $ 12.58 $ 12.05 $ 12.24 $ 11.74 Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Non–interest expense as reported $ 36,610 $ 39,370 $ 34,349 $ 33,388 $ 32,172 Net interest income as reported 48,171 49,976 46,544 42,632 42,538 Non–interest income as reported $ 14,155 $ 12,828 $ 16,044 $ 15,207 $ 13,873 Non–interest expense / (Net interest income + Non–interest income)
(“Efficiency Ratio”)58.74 % 62.69 % 54.88 % 57.73 % 57.03 % Non–interest expense as reported $ 36,610 $ 39,370 $ 34,349 $ 33,388 $ 32,172 Acquisition expenses — (884 ) (799 ) (242 ) — DOL ESOP settlement expenses — (1,900 ) — — — Non–interest expense excluding acquisition and DOL ESOP settlement expenses 36,610 36,586 33,550 33,146 32,172 Net interest income as reported 48,171 49,976 46,544 42,632 42,538 Prepayment penalties on borrowings — — — 125 — Net interest income excluding prepayment penalties on borrowings 48,171 49,976 46,544 42,757 42,538 Non–interest income as reported 14,155 12,828 16,044 15,207 13,873 Gain on sale of ESOP trustee accounts — — (2,329 ) — — (Gain) / loss on sale of investment securities — — — — (914 ) Death benefit on BOLI — — (517 ) (266 ) — Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI $ 14,155 $ 12,828 $ 13,198 $ 14,941 $ 12,959 Adjusted efficiency ratio 58.74 % 58.25 % 56.16 % 57.45 % 57.97 % Non–GAAP Reconciliation of Return on Average Assets (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Average assets $ 7,319,675 $ 7,461,343 $ 6,507,673 $ 6,142,507 $ 5,936,149 Return on average assets (“ROAA”) as reported 1.31 % 1.14 % 1.41 % 1.45 % 1.40 % Acquisition expenses — 0.05 0.05 0.02 — Tax effect — (0.01 ) (0.01 ) — — ROAA excluding acquisition expenses 1.31 1.18 1.45 1.47 1.40 Credit loss expense acquired loans — — 0.12 — — Tax effect — — (0.03 ) — — ROAA excluding credit loss expense on acquired loans 1.31 1.18 1.54 1.47 1.40 Gain on sale of ESOP trustee accounts — — (0.14 ) — — Tax effect — — 0.03 — — ROAA excluding gain on sale of ESOP trustee accounts 1.31 1.18 1.43 1.47 1.40 DOL ESOP settlement expenses — 0.10 — — — Tax effect — (0.02 ) — — — ROAA excluding DOL ESOP settlement expenses 1.31 1.26 1.43 1.47 1.40 (Gain) / loss on sale of investment securities — — — — (0.06 ) Tax effect — — — — 0.01 ROAA excluding (gain) / loss on sale of investment securities 1.31 1.26 1.43 1.47 1.35 Death benefit on BOLI — — (0.03 ) (0.02 ) — ROAA excluding death benefit on BOLI 1.31 1.26 1.40 1.45 1.35 Prepayment penalties on borrowings — — — 0.01 — Tax effect — — — — — ROAA excluding prepayment penalties on borrowings 1.31 1.26 1.40 1.46 1.35 Adjusted ROAA 1.31 % 1.26 % 1.40 % 1.46 % 1.35 % Non–GAAP Reconciliation of Return on Average Common Equity (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Average common equity $ 716,341 $ 719,643 $ 724,412 $ 706,652 $ 697,401 Return on average common equity (“ROACE”) as reported 13.34 % 11.81 % 12.64 % 12.59 % 11.88 % Acquisition expenses — 0.49 0.44 0.14 — Tax effect — (0.10 ) (0.09 ) (0.03 ) — ROACE excluding acquisition expenses 13.34 12.20 12.99 12.70 11.88 Credit loss expense acquired loans — — 1.11 — — Tax effect — — (0.23 ) — — ROACE excluding credit loss expense acquired loans 13.34 12.20 13.87 12.70 11.88 Gain on sale of ESOP trustee accounts — — (1.28 ) — — Tax effect — — 0.27 — — ROACE excluding gain on sale of ESOP trustee accounts 13.34 12.20 12.86 12.70 11.88 DOL ESOP settlement expenses — 1.05 — — — Tax effect — (0.17 ) — — — ROACE excluding DOL ESOP settlement expenses 13.34 13.08 12.86 12.70 11.88 (Gain) / loss on sale of investment securities — — — — (0.53 ) Tax effect — — — — 0.11 ROACE excluding (gain) / loss on sale of investment securities 13.34 13.08 12.86 12.70 11.46 Death benefit on BOLI — — (0.28 ) (0.15 ) — ROACE excluding death benefit on BOLI 13.34 13.08 12.58 12.55 11.46 Prepayment penalties on borrowings — — — 0.07 — Tax effect — — — (0.01 ) — ROACE excluding prepayment penalties on borrowings 13.34 % 13.08 % 12.58 % 12.61 % 11.46 % Adjusted ROACE 13.34 % 13.08 % 12.58 % 12.61 % 11.46 % Non–GAAP Reconciliation of Return on Average Tangible Equity (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Average common equity $ 716,341 $ 719,643 $ 724,412 $ 706,652 $ 697,401 Less: Average intangible assets 176,356 179,594 174,920 173,905 174,785 Average tangible equity $ 539,985 $ 540,049 $ 549,492 $ 532,747 $ 522,616 Return on average tangible equity (“ROATE”) as reported 17.70 % 15.74 % 16.66 % 16.69 % 15.85 % Acquisition expenses — 0.65 0.58 0.18 — Tax effect — (0.14 ) (0.12 ) (0.04 ) — ROATE excluding acquisition expenses 17.70 16.25 17.12 16.83 15.85 Credit loss expense acquired loans — — 1.47 — — Tax effect — — (0.31 ) — — ROATE excluding credit loss expense acquired loans 17.70 16.25 18.28 16.83 15.85 Gain on sale of ESOP trustee accounts — — (1.68 ) — — Tax effect — — 0.35 — — ROATE excluding gain on sale of ESOP trustee accounts 17.70 16.25 16.95 16.83 15.85 DOL ESOP settlement expenses — 1.40 — — — Tax effect — (0.23 ) — — — ROATE excluding DOL ESOP settlement expenses 17.70 17.42 16.95 16.83 15.85 (Gain) / loss on sale of investment securities — — — — (0.71 ) Tax effect — — — — 0.15 ROATE excluding (gain) / loss on sale of investment securities 17.70 17.42 16.95 16.83 15.29 Death benefit on BOLI — — (0.37 ) (0.20 ) — ROATE excluding death benefit on BOLI 17.70 17.42 16.58 16.63 15.29 Prepayment penalties on borrowings — — — 0.09 — Tax effect — — — (0.02 ) — ROATE excluding prepayment penalties on borrowings 17.70 % 17.42 % 16.58 % 16.70 % 15.29 % Adjusted ROATE 17.70 % 17.42 % 16.58 % 16.70 % 15.29 % Earnings Conference Call
As previously announced, Horizon will host a conference call to review its first quarter financial results and operating performance.
Participants may access the live conference call on April 28, 2022 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833–974–2379 from the United States, 866–450–4696 from Canada or 412–317–5772 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.
A telephone replay of the call will be available approximately one hour after the end of the conference through May 5, 2022. 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 7430984.
About Horizon Bancorp, Inc.
Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.4 billion–asset bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon’s retail offerings include prime residential, indirect auto, and other secured consumer lending to in–market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in–market business banking and treasury management services, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana’s Michigan City, is available at horizonbank.com and investor.horizonbank.com.
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.
Contact: Mark E. Secor Chief Financial Officer Phone: (219) 873-2611 Fax: (219) 874-9280 Date: April 27, 2022 Financial Highlights (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Balance sheet: Total assets $ 7,420,328 $ 7,374,903 $ 7,534,240 $ 6,109,227 $ 6,055,528 Interest earning deposits & federal funds sold 20,827 502,364 872,540 209,304 444,239 Interest earning time deposits 4,046 4,782 5,767 6,994 7,983 Investment securities 3,118,641 2,713,255 2,438,874 1,844,470 1,423,825 Commercial loans 2,259,327 2,176,959 2,173,200 2,104,627 2,177,858 Mortgage warehouse loans 105,118 109,031 169,909 205,311 266,246 Residential mortgage loans 593,372 594,382 603,540 559,437 581,929 Consumer loans 753,900 727,259 713,432 650,144 638,403 Earning assets 6,883,254 6,865,051 7,006,513 5,610,538 5,571,304 Non–interest bearing deposit accounts 1,325,570 1,360,338 1,324,757 1,102,950 1,133,412 Interest bearing transaction accounts 3,782,644 3,711,767 3,875,882 3,105,328 2,947,438 Time deposits 743,283 730,886 779,260 573,348 640,966 Borrowings 728,664 675,753 670,753 439,094 481,488 Subordinated notes 58,786 58,750 58,713 58,676 58,640 Junior subordinated debentures issued to capital trusts 56,850 56,785 56,722 56,662 56,604 Total stockholders’ equity 677,450 723,209 708,542 710,374 689,379 Financial Highlights (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Income statement: Net interest income $ 48,171 $ 49,976 $ 46,544 $ 42,632 $ 42,538 Credit loss expense (recovery) (1,386 ) (2,071 ) 1,112 (1,492 ) 367 Non–interest income 14,155 12,828 16,044 15,207 13,873 Non–interest expense 36,610 39,370 34,349 33,388 32,172 Income tax expense 3,539 4,080 4,056 3,770 3,450 Net income $ 23,563 $ 21,425 $ 23,071 $ 22,173 $ 20,422 Per share data: Basic earnings per share $ 0.54 $ 0.49 $ 0.53 $ 0.50 $ 0.46 Diluted earnings per share 0.54 0.49 0.52 0.50 0.46 Cash dividends declared per common share 0.15 0.15 0.15 0.13 0.13 Book value per common share 15.56 16.61 16.28 16.16 15.69 Tangible book value per common share 11.55 12.58 12.05 12.24 11.74 Market value – high 23.45 21.14 18.47 19.13 19.94 Market value – low $ 18.67 $ 18.01 $ 15.83 $ 16.98 $ 15.43 Weighted average shares outstanding – Basis 43,554,713 43,534,298 43,810,729 43,950,501 43,919,549 Weighted average shares outstanding – Diluted 43,734,556 43,733,416 43,958,870 44,111,103 44,072,581 Key ratios: Return on average assets 1.31 % 1.14 % 1.41 % 1.45 % 1.40 % Return on average common stockholders’ equity 13.34 11.81 12.64 12.59 11.88 Net interest margin 2.99 2.97 3.17 3.14 3.29 Allowance for credit losses to total loans 1.41 1.51 1.55 1.58 1.56 Average equity to average assets 9.79 9.64 11.13 11.50 11.75 Efficiency ratio 58.74 62.69 54.88 57.73 57.03 Annualized non–interest expense to average assets 2.03 2.09 2.09 2.18 2.20 Bank only capital ratios: Tier 1 capital to average assets 9.03 8.50 8.38 8.79 8.81 Tier 1 capital to risk weighted assets 13.09 13.69 11.86 12.80 12.71 Total capital to risk weighted assets 14.22 14.72 12.97 14.09 13.86 Financial Highlights (Dollars in Thousands Except Ratios, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Loan data: Substandard loans $ 57,928 $ 56,968 $ 91,317 $ 82,488 $ 86,472 30 to 89 days delinquent 6,358 8,536 3,997 3,336 5,099 Non–performing loans: 90 days and greater delinquent – accruing interest 107 145 200 — 267 Trouble debt restructures – accruing interest 2,372 2,391 2,433 1,853 1,828 Trouble debt restructures – non–accrual 1,501 1,521 1,604 2,294 2,271 Non–accrual loans 16,133 14,962 25,137 18,175 20,700 Total non–performing loans $ 20,113 $ 19,019 $ 29,374 $ 22,322 $ 25,066 Non–performing loans to total loans 0.54 % 0.53 % 0.80 % 0.63 % 0.68 % Allocation of the Allowance for Credit Losses (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Commercial $ 37,789 $ 40,775 $ 43,121 $ 41,766 $ 42,980 Residential mortgage 4,351 3,856 3,737 4,108 4,229 Mortgage warehouse 1,055 1,059 1,054 1,155 1,163 Consumer 9,313 8,596 8,867 8,620 8,814 Total $ 52,508 $ 54,286 $ 56,779 $ 55,649 $ 57,186 Net Charge–offs (Recoveries) (Dollars in Thousands Except Ratios, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Commercial $ 38 $ 926 $ (25 ) $ 40 $ 158 Residential mortgage (10 ) 126 (29 ) (23 ) (65 ) Mortgage warehouse — — — — — Consumer 108 360 36 22 115 Total $ 136 $ 1,412 $ (18 ) $ 39 $ 208 Percent of net charge–offs (recoveries) to average loans
outstanding for the period0.00 % 0.04 % 0.00 % 0.00 % 0.01 % Total Non–performing Loans (Dollars in Thousands Except Ratios, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Commercial $ 7,844 $ 7,509 $ 16,121 $ 10,345 $ 12,802 Residential mortgage 8,584 8,005 8,641 7,841 7,916 Mortgage warehouse — — — — — Consumer 3,685 3,505 4,612 4,136 4,348 Total $ 20,113 $ 19,019 $ 29,374 $ 22,322 $ 25,066 Non–performing loans to total loans 0.54 % 0.53 % 0.80 % 0.63 % 0.68 % Other Real Estate Owned and Repossessed Assets (Dollars in Thousands, Unaudited) March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Commercial $ 2,245 $ 2,861 $ 2,861 $ 1,400 $ 1,696 Residential mortgage 170 695 117 37 37 Mortgage warehouse — — — — — Consumer 5 5 29 46 — Total $ 2,420 $ 3,561 $ 3,007 $ 1,483 $ 1,733 Average Balance Sheets (Dollars in Thousands, Unaudited) Three Months Ended Three Months Ended March 31, 2022 March 31, 2021 Average
BalanceInterest Average
RateAverage
BalanceInterest Average
RateAssets Interest earning assets Federal funds sold $ 237,605 $ 91 0.16 % $ 267,241 $ 66 0.10 % Interest earning deposits 20,673 24 0.47 % 25,527 31 0.49 % Investment securities – taxable 1,646,525 7,391 1.82 % 410,063 1,451 1.44 % Investment securities – non–taxable(1) 1,279,082 6,697 2.69 % 956,464 5,223 2.80 % Loans receivable(2) (3) 3,616,664 37,879 4.26 % 3,780,339 40,818 4.39 % Total interest earning assets 6,800,549 52,082 3.22 % 5,439,634 47,589 3.66 % Non–interest earning assets Cash and due from banks 104,676 85,269 Allowance for credit losses (54,307 ) (57,779 ) Other assets 468,757 469,025 Total average assets $ 7,319,675 $ 5,936,149 Liabilities and Stockholders’ Equity Interest bearing liabilities Interest bearing deposits $ 4,478,621 $ 1,496 0.14 % $ 3,524,103 $ 2,343 0.27 % Borrowings 503,846 1,043 0.84 % 365,586 1,231 1.37 % Repurchase agreements 139,742 37 0.11 % 111,692 38 0.14 % Subordinated notes 58,763 880 6.07 % 58,616 880 6.09 % Junior subordinated debentures issued to capital trusts 56,807 455 3.25 % 56,571 559 4.01 % Total interest bearing liabilities 5,237,779 3,911 0.30 % 4,116,568 5,051 0.50 % Non–interest bearing liabilities Demand deposits 1,322,781 1,063,268 Accrued interest payable and other liabilities 42,774 58,912 Stockholders’ equity 716,341 697,401 Total average liabilities and stockholders’ equity $ 7,319,675 $ 5,936,149 Net interest income / spread $ 48,171 2.92 % $ 42,538 3.16 % Net interest income as a percent of average interest earning assets(1) 2.99 % 3.29 % (1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis. (2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate. (3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis. Condensed Consolidated Balance Sheets (Dollars in Thousands) March 31,
2022December 31,
2021(Unaudited) Assets Cash and due from banks $ 120,954 $ 593,508 Interest earning time deposits 4,046 4,782 Investment securities, available for sale 1,112,512 1,160,812 Investment securities, held to maturity (fair value $1,827,845 and $1,559,991) 2,006,129 1,552,443 Loans held for sale 3,781 12,579 Loans, net of allowance for credit losses of $52,508 and $54,286 3,659,209 3,590,331 Premises and equipment, net 93,075 93,441 Federal Home Loan Bank stock 24,242 24,440 Goodwill 154,572 154,572 Other intangible assets 20,016 20,941 Interest receivable 27,476 26,137 Cash value of life insurance 97,660 97,150 Other assets 96,656 80,753 Total assets $ 7,420,328 $ 7,411,889 Liabilities Deposits Non–interest bearing $ 1,325,570 $ 1,360,338 Interest bearing 4,525,927 4,442,653 Total deposits 5,851,497 5,802,991 Borrowings 728,664 712,739 Subordinated notes 58,786 58,750 Junior subordinated debentures issued to capital trusts 56,850 56,785 Interest payable 1,420 2,235 Other liabilities 45,661 55,180 Total liabilities 6,742,878 6,688,680 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 43,874,763 and 43,766,931 shares,
Outstanding 43,572,796 and 43,547,942 shares— — Additional paid–in capital 351,522 352,122 Retained earnings 380,700 363,742 Accumulated other comprehensive income (54,772 ) 7,345 Total stockholders’ equity 677,450 723,209 Total liabilities and stockholders’ equity $ 7,420,328 $ 7,411,889 Condensed Consolidated Statements of Income (Dollars in Thousands Except Per Share Data, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Interest income Loans receivable $ 37,879 $ 41,171 $ 40,392 $ 39,236 $ 40,818 Investment securities – taxable 7,506 6,491 4,565 2,528 1,548 Investment securities – non–taxable 6,697 6,456 5,911 5,656 5,223 Total interest income 52,082 54,118 50,868 47,420 47,589 Interest expense Deposits 1,496 1,663 1,808 2,053 2,343 Borrowed funds 1,080 1,061 1,075 1,296 1,269 Subordinated notes 880 881 880 881 880 Junior subordinated debentures issued to capital trusts 455 537 561 558 559 Total interest expense 3,911 4,142 4,324 4,788 5,051 Net interest income 48,171 49,976 46,544 42,632 42,538 Credit loss expense (recovery) (1,386 ) (2,071 ) 1,112 (1,492 ) 367 Net interest income after credit loss expense (recovery) 49,557 52,047 45,432 44,124 42,171 Non–interest Income Service charges on deposit accounts 2,795 2,510 2,291 2,157 2,234 Wire transfer fees 159 205 210 222 255 Interchange fees 2,780 3,082 2,587 2,892 2,340 Fiduciary activities 1,503 1,591 2,124 1,961 1,743 Gains / (losses) on sale of investment securities — — — — 914 Gain on sale of mortgage loans 2,027 4,167 4,088 5,612 5,296 Mortgage servicing income net of impairment 3,489 300 336 1,503 213 Increase in cash value of bank owned life insurance 510 547 534 502 511 Death benefit on bank owned life insurance — — 517 266 — Other income 892 426 3,357 92 367 Total non–interest income 14,155 12,828 16,044 15,207 13,873 Non–interest expense Salaries and employee benefits 19,735 20,549 18,901 17,730 16,871 Net occupancy expenses 3,561 3,204 2,935 3,084 3,318 Data processing 2,537 2,672 2,526 2,388 2,376 Professional fees 314 562 522 588 544 Outside services and consultants 2,525 2,197 2,330 2,220 1,702 Loan expense 2,545 2,803 2,645 3,107 2,822 FDIC insurance expense 725 798 279 500 800 Other losses 168 1,925 69 6 283 Other expenses 4,500 4,660 4,142 3,765 3,456 Total non–interest expense 36,610 39,370 34,349 33,388 32,172 Income before income taxes 27,102 25,505 27,127 25,943 23,872 Income tax expense 3,539 4,080 4,056 3,770 3,450 Net income $ 23,563 $ 21,425 $ 23,071 $ 22,173 $ 20,422 Basic earnings per share $ 0.54 $ 0.49 $ 0.53 $ 0.50 $ 0.46 Diluted earnings per share 0.54 0.49 0.52 0.50 0.46
- Net income grew to a record $23.6 million, up 10.0% from the linked quarter and 15.4% from the prior year period. Diluted earnings per share (“EPS”) of $0.54 was up from $0.49 for the fourth quarter of 2021 and $0.46 for the first quarter of 2021.