Item 2. Management’s Discussion and Analysis
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward–Looking Statements
This report contains certain forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to Horizon Bancorp, Inc. (“Horizon” or the “Company”) and Horizon Bank (the “Bank”). Horizon intends such forward–looking statements to be covered by the safe harbor provisions for forward–looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for the purposes of these safe harbor provisions. Statements in this report should be considered in conjunction with the other information available about Horizon, including the information in the other filings we make with the Securities and Exchange Commission. 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,” “expect,” “estimate,” “project,” “intend,” “plan,” “believe,” “could,” “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.
Actual results may differ materially, adversely or positively, from the expectations of the Company that are expressed or implied by any forward–looking statement. Risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward–looking statement include but are not limited to:
• effects on Horizon’s business resulting from new U.S. domestic or foreign governmental trade measures, including but not limited to tariffs, import and export controls, foreign exchange intervention accomplished to offset the effects of trade policy or in response to currency volatility, and other restrictions on free trade;
• uncertain conditions within the domestic and international macroeconomic environment, including trade policy, monetary and fiscal policy, and conditions in the investment, credit, interest rate, and derivatives markets, and their impact on Horizon and its customers;
• current financial conditions within the banking industry;
• changes in the level and volatility of interest rates, spreads on earning assets and interest bearing liabilities, and interest rate sensitivity;
• the aggregate effects of elevated inflation levels in recent years;
• loss of key Horizon personnel;
• macroeconomic conditions and their impact on Horizon and its customers;
• the increasing use of Bitcoin and other crypto currencies and/or stable coin and the possible impact these alternative currencies may have on deposit disintermediation and income derived from payment systems;
• the effect of interest rates on net interest rate margin and their impact on mortgage loan volumes and the outflow of deposits;
• increases in disintermediation, as new technologies allow consumers to complete financial transactions without the assistance of banks;
• potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms (e.g., Apple Pay or Bitcoin) take a greater market share of the payment systems;
• estimates of fair value of certain of Horizon’s assets and liabilities;
• volatility and disruption in financial markets;
• changes in prepayment speeds, loan originations, credit losses and market values, collateral securing loans and other assets;
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
• changes in sources of liquidity;
• potential risk of environmental liability related to lending and acquisition activities;
• changes in the competitive environment in Horizon’s market areas and among other financial service providers;
• legislation and/or regulation affecting the financial services industry as a whole, and Horizon and its subsidiaries in particular;
• changes in regulatory supervision and oversight, including monetary policy and capital requirements;
• changes in accounting policies or procedures as may be adopted and required by regulatory agencies;
• litigation, regulatory enforcement, tax, and legal compliance risk and costs, as applicable generally and specifically to the financial and fiduciary (generally and as an ESOP fiduciary) environment, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same;
• the effects and costs of governmental investigations or related actions by third parties;
• rapid technological developments and changes;
• the risks presented by cyber terrorism and data security breaches;
• the rising costs of effective cybersecurity;
• containing costs and expenses;
• the ability of the U.S. federal government to manage federal debt limits;
• the potential influence on the U.S. financial markets and economy from the effects of climate change and social justice initiatives;
• the risks of expansion through mergers and acquisitions, including unexpected credit quality problems with acquired loans, difficulty integrating acquired operations and material differences in the actual financial results of such transactions compared with Horizon’s initial expectations, including the full realization of anticipated cost savings; and
• acts of terrorism, war and global conflicts, such as the Russia-Ukraine and Israel-Hamas conflicts, and the potential impact they may have on supply chains, the availability of commodities, commodity prices, inflationary pressure and the overall U.S. and global financial markets.
The foregoing list of important factors is not exclusive, and you are cautioned not to place undue reliance on these forward–looking statements, which speak only as of the date of this document or, in the case of documents incorporated by reference, the dates of those documents. We do not undertake to update any forward–looking statements, whether written or oral, that may be made from time to time by us or on our behalf. For a detailed discussion of the risks and uncertainties that may cause our actual results or performance to differ materially from the results or performance expressed or implied by forward–looking statements, see “Risk Factors” in Item 1A of Part I of our 2024 Annual Report on Form 10–K, in Item 1A of Part II of this Quarterly Report on Form 10–Q, and in the subsequent reports we file with the SEC.
Critical Accounting Estimates
The notes to the consolidated financial statements included in Item 8 of the Company’s 2024 Annual Report on Form 10–K contain a summary of the Company’s significant accounting policies. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The Company considers these policies to be its critical accounting estimates. Management has identified as critical accounting policies the allowance for credit losses, goodwill and intangible assets, mortgage servicing rights, hedge accounting and valuation measurements.
For additional information regarding critical accounting estimates, see Note 1 – Nature of Operations and Summary of Significant Accounting Policies included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 2024.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Results of Operations
Net Income
Net income increased $9.9 million to $23.9 million, or $0.54 per diluted share, during the three months ended March 31, 2025 when compared to $14.0 million, or $0.32 per diluted share, for the s ame period in 2024. The increase in net income from the prior year period reflects an increase in interest income of $3.9 million, a decrease of in interest expense of $5.1 million and an increase in non-interest income of $6.6 million. The increase was partially offset by an increase in non-interest expense of $2.2 million and an increase in tax expense of $2.8 million.
Net Interest Income
Net interest income increased $9.0 million, or 20.7% during the three months ended March 31, 2025, to $52.3 million, when compared to the same period in 2024. While average earning assets decreased, the reported net FTE interest margin 1 increased by 54 basis points, to 3.04% for the three months ended March 31, 2025 compared to the year ago period, attributable to the favorable mix shift in both average interest earning assets toward higher-yielding loans and the funding mix toward lower cost deposit liabilities. Interest accretion from the fair value of acquired loans did not contribute significantly to the first quarter net interest income, or net FTE interest margin 1 .
1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Following are the average balance sheets for the three months ended (dollars in thousands):
Average Balance Sheet
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2025 March 31, 2024
Average
Balance (7)
Interest Average
Rate Average
Balance (7)
Interest Average
Rate
Assets
Interest earning assets
Interest earning deposits (incl. Fed Funds Sold) $ 223,148 $ 2,487 4.52 % $ 331,083 $ 4,497 5.46 %
Federal Home Loan Bank stock (1)
51,769 1,012 7.93 % 37,949 784 8.31 %
Investment securities - taxable (2)
974,109 5,027 2.09 % 1,326,246 6,578 1.99 %
Investment securities - non-taxable (2)
1,120,249 7,838 2.84 % 1,149,957 8,166 2.86 %
Total investment securities 2,094,358 12,865 2.49 % 2,476,203 14,744 2.39 %
Loans receivable (3) (4)
4,865,449 74,840 6.24 % 4,448,324 67,307 6.09 %
Total interest earning assets $ 7,234,724 91,204 5.11 % $ 7,293,559 87,332 4.82 %
Non-interest earning assets
Cash and due from banks 88,624 105,795
Allowance for credit losses (51,863) (49,960)
Other assets 483,765 486,652
Total average assets $ 7,755,250 $ 7,836,046
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing demand deposits $ 1,750,446 $ 6,491 1.50 % $ 1,658,709 $ 6,516 1.58 %
Saving and money market deposits 1,674,590 8,263 2.00 % 1,664,518 9,373 2.26 %
Time deposits 1,212,386 10,847 3.63 % 1,176,921 12,101 4.14 %
Total Deposits 4,637,422 25,601 2.24 % 4,500,148 27,990 2.50 %
Borrowings 971,496 8,772 3.66 % 1,200,728 10,904 3.65 %
Repurchase agreements 88,469 416 1.91 % 138,052 1,026 2.99 %
Subordinated notes 55,750 829 6.03 % 55,558 831 6.02 %
Junior subordinated debentures issued to capital trusts 57,497 1,290 9.10 % 57,279 1,225 8.60 %
Total interest bearing liabilities 5,810,634 36,908 2.58 % 5,951,765 41,976 2.84 %
Non-interest bearing liabilities
Demand deposits 1,085,826 1,077,183
Accrued interest payable and other liabilities 78,521 82,015
Stockholders' equity 780,269 725,083
Total average liabilities and stockholders' equity $ 7,755,250 $ 7,836,046
Net FTE interest income (non-GAAP) (5) (6)
$ 54,296 $ 45,356
Less FTE adjustments (5)
2,029 2,068
Net Interest Income $ 52,267 $ 43,288
Net FTE interest margin (Non-GAAP) (5) (6)
3.04 % 2.50 %
(1) Includes dividend income on FHLB stock.
(2) 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.
(3) Includes fees on loans held for sale and held for investment. The inclusion of loan fees does not have a material effect on the average interest rate.
(4) 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.
(5) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative. The Company adjusts interest income and average rates for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate
(5) Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
(6) Includes dividend income on FHLB stock.
(7) Average balances are calculated on a daily average basis
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
The following table illustrates the impact of changes in the volume of interest earning assets and interest bearing liabilities and interest rates on net interest income for the periods indicated.
Three Months Ended March 31, 2025 vs.
Three Months Ended March 31, 2024
Total
Change Change
Due To
Volume Change
Due To
Rate
Interest Income
Interest-bearing deposits in banks $ (2,010) $ (1,289) $ (721)
Federal Home Loan Bank stock 228 272 (44)
Investment securities - taxable (1,551) (1,802) 251
Investment securities - non-taxable (328) (208) (120)
Loans receivable 7,533 6,383 1,150
Total interest income 3,872 3,356 516
Interest Expense
Interest-bearing demand deposits (25) 350 (375)
Savings and money market savings deposits (1,110) 57 (1,167)
Time deposits (1,254) 353 (1,607)
Borrowings (2,132) (2,069) (63)
Repurchase agreements (610) (299) (311)
Subordinated notes (2) 3 (5)
Junior subordinated debentures issued to capital trusts 65 5 60
Total interest expense (5,068) (1,600) (3,468)
Net FTE interest income (Non-GAAP) 8,940 4,956 3,984
Less change in FTE adjustments (39)
Net Interest Income $ 8,979
Non-Interest Income
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 2025 2024 $ Change % Change
Non-interest Income
Service charges on deposit accounts $ 3,208 $ 3,214 $ (6) — %
Wire transfer fees 71 101 (30) (30) %
Interchange fees 3,241 3,109 132 4 %
Fiduciary activities 1,326 1,315 11 1 %
Loss on sale of investment securities (407) — (407) — %
Gain on sale of mortgage loans 1,076 626 450 72 %
Mortgage servicing income net of impairment 385 439 (54) (12) %
Increase in cash value of bank owned life insurance 335 298 37 12 %
Other income 7,264 827 6,437 778 %
Total non-interest income $ 16,499 $ 9,929 $ 6,570 66 %
Total non-interest income increased $6.6 million for the three months ended March 31, 2025 compared to the same period in 2024. The primary components of the change were as follows:
Gain on sale of mortgage loans increased by $0.4 million, or 71.9%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by higher volumes of sold loans.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, increased by $6.4 million during the three months ended March 31, 2025 primarily due to the gain on sale of the Company's mortgage warehouse business to an unrelated third party, which resulted in a pre-tax gain of $7.0 million.
Non-Interest Expense
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 2025 2024 $ Change % Change
Non-interest Expense
Salaries and employee benefits $ 22,414 $ 20,268 $ 2,146 11 %
Net occupancy expenses 3,702 3,546 156 4 %
Data processing 2,872 2,464 408 17 %
Professional fees 826 607 219 36 %
Outside services and consultants 3,265 3,359 (94) (3) %
Loan expense 689 719 (30) (4) %
FDIC insurance expense 1,288 1,320 (32) (2) %
Core deposit intangible amortization 816 872 (56) (6) %
Merger related expense 305 — 305 — %
Other losses 228 16 212 1325 %
Other expense 2,901 3,936 (1,035) (26) %
Total non-interest expense $ 39,306 $ 37,107 $ 2,199 6 %
Non-interest expense increased $2.2 million for the three months ended March 31, 2025 compared to the same period in 2024. The primary components of the change were as follows:
Salaries and employee benefits expense increased by $2.1 million for the three months ended March 31, 2025 when compared to the same period a year ago. The increase is partially attributable to growth in salary expense related to ongoing hiring efforts in revenue generating roles in commercial lending, equipment finance and treasury management. Additionally, the prior comparable period benefited from from a favorable expense adjustment on a legacy compensation program that was terminated in the fourth quarter of 2024.
Other expenses, which includes corporate and other service expenses, decreased by $1.0 million for the three months ended March 31, 2025 when compared to the same period in 2024 partially due to decreases in marketing and advertising expenses.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments
Three Months Ended
March 31, 2025 March 31, 2024
Allowance for Credit Losses on Loans
Balance at beginning of period $ 51,980 $ 50,029
Provision for credit losses on loans 1,543 669
Net loan (charge-offs) recoveries:
Commercial $ 47 $ 172
Residential Real estate 47 5
Mortgage warehouse — —
Consumer (963) (488)
Total net loan charge-offs $ (869) $ (311)
Balance at end of period $ 52,654 $ 50,387
Liability for Unfunded Lending Commitments
Balance at beginning of period $ 2,149 $ 615
Provision (reversal) for credit losses on unfunded lending commitments (149) 135
Balance at end of period $ 2,000 $ 750
Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments $ 54,654 $ 51,137
Horizon assesses the adequacy of its Allowance for Credit Losses (“ACL”) by regularly reviewing the performance of its loan portfolio against various economic backdrops, which periodically change. During the three months ended March 31, 2025, the Company recorded a provision for credit losses on loans of $1.5 million. This compares to a provision for credit losses on loans of $0.7 million compared to the same period in 2024. The increase in the provision for credit losses when compared to the year ago period was primarily attributable to loan growth experienced during the quarter.
For the three months ended March 31, 2025, net loan charge-offs increased by $0.6 million to $0.9 million, compared to $0.3 million to the same period in 2024. The increase in charge-offs was primarily due to increases in the consumer portfolio as a result of the run-off of the indirect auto portfolio.
The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.07% at March 31, 2025, compared to 1.09% at March 31, 2024.
As of March 31, 2025, the liability for unfunded lending commitments was $2.0 million compared to $0.8 million as of March 31, 2024. The increase in liability for unfunded lending commitments was due to increases in unfunded lending commitments outstanding when compared to the prior period.
Income Taxes
The Company’s income tax expense for the three months ended March 31, 2025 was $4.1 million c ompared to $1.3 million for the same period in 2024 , resulting in effective tax rates of 14.7% and 8.6%, respectively. The increase in the effective tax rate for the for the three months ended March 31, 2025 was primarily due to expectations of higher pre-tax income in first quarter of 2025 as compared to 2024 , causing tax preferential items to have a less favorable impact.
The effective income tax rates differed from the U.S. statutory federal income tax rates of 21% during the comparable periods primarily due to the effect of tax exempt income from securities, loans, and life insurance policies, and net tax benefits from tax credit investments.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Financial Condition
Total assets decreased by $172.5 million, or 2.2%, as of March 31, 2025, from $7.8 billion as of December 31, 2024. The decrease in total assets is primarily due to decreases in cash and cash equivalents of $123.8 million, or 42.2%, to $169.7 million as of March 31, 2025, and a decrease in loans held for sale of $64.3 million, to $3.3 million as a result of the Company's sale of its mortgage warehouse business. The decrease was partially offset by increase in loans HFI of $62.1 million or 1.3% to $4.9 billion.
Total investment securities decreased $26.1 million, or 1.2%, to $2.1 billion as of March 31, 2025 when compared to balances as of December 31, 2024. The decrease is primarily a result of amortization and maturities, as well as the sale of one corporate debt security. There were no purchases of investment securities during the three months ended March 31, 2025.
Total loans HFI increased to $4.9 billion as of March 31, 2025 compared to $4.8 billion as of December 31, 2024, led by organic commercial loan growth of $103.3 million. The company continues to maintain a balanced growth profile across various geographies, products and industries, and holds a diverse lending portfolio consisting primarily of commercial real estate, consumer, residential and commercial and industrial portfolios.
Total deposit balances increased by $165.1 million, or 2.9%, to $5.8 billion on March 31, 2025 when compared to balances as of December 31, 2024. The Company maintains a granular and tenured deposit base, with a continued focus on core commercial and consumer deposit gathering.
Total borrowings decreased by $332.2 million, or 27.0%, to $900.1 million as of March 31, 2025 when compared to balances as of December 31, 2024, primarily related to repayment of a portion of Federal Home Loan Bank advances.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Investment securities are comprised of the following as of (dollars in thousands):
March 31, 2025 December 31, 2024
Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Available for sale
U.S. Treasury, federal agencies, and government sponsored agencies $ 2,258 $ 1,850 $ 2,258 $ 1,801
State and municipal 243,099 199,429 243,521 201,834
U.S. government agency mortgage-backed securities 17,394 14,462 17,984 14,543
Private labeled mortgage-backed pools — — — —
Corporate notes 18,258 15,690 18,259 15,499
Total available for sale investment securities $ 281,009 $ 231,431 $ 282,022 $ 233,677
Held to maturity
U.S. Treasury, federal agencies, and government sponsored agencies $ 275,854 $ 241,412 $ 278,383 $ 239,130
State and municipal 1,039,749 849,623 1,048,862 866,706
U.S. government agency mortgage-backed securities 343,057 295,642 349,726 294,822
Private labeled mortgage–backed pools 28,558 25,069 29,278 25,320
Corporate notes 156,773 138,381 161,599 140,290
Total held to maturity investment securities $ 1,843,991 $ 1,550,127 $ 1,867,848 $ 1,566,268
Investment securities available for sale decreased $2.2 million since December 31, 2024 to $231.4 million and securities held to maturity decreased $23.8 million since December 31, 2024 to $1.8 billion as of March 31, 2025. The decrease in total investments was due to sale of certain corporate debt securities and maturities on investment securities. There were no purchases of investment securities through the three months ended March 31, 2025.
Credit Quality
The ACL balance at March 31, 2025 was $52.7 million, or 1.07% of period-end loans HFI compared to an ACL balance of $52.0 million at December 31, 2024 or 1.07% of loans HFI. The increase in the ACL was primarily due to the growth in commercial loans.
As of March 31, 2025, total non-accrual loans increased by $3.0 million, or 11.7%, from December 31, 2024, to 0.59% of total loans HFI. Total non-performing assets increased $4.0 million, or 14.8%, from December 31, 2024, to 0.41% of total assets.
During the three months ended March 31, 2025, net charge-offs were $0.9 million, or 7 basis points annualized of average loans in the period, an increase from $0.3 million, or 4 basis point annualized of average loans in the year ago comparable period.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Credit Quality
(Dollars in Thousands Except Ratios, Unaudited)
Quarter Ended
March 31, December 31,
2025 2024
Non-accrual loans
Commercial $ 8,172 $ 5,658
Residential Real estate 12,763 11,215
Consumer 7,875 8,919
Total non-accrual loans $ 28,810 $ 25,792
90 days and greater delinquent - accruing interest $ 1,582 $ 1,166
Total non-performing loans $ 30,392 $ 26,958
Other real estate owned
Commercial $ 360 $ 407
Residential Real estate 641 —
Consumer 34 17
Total other real estate owned $ 1,035 $ 424
Total non-performing assets $ 31,427 $ 27,382
Net charge-offs (recoveries)
Commercial $ (47) $ (32)
Residential Real estate (47) (10)
Consumer 963 668
Total net charge-offs $ 869 $ 626
Allowance for credit losses
Commercial $ 32,640 $ 30,953
Residential Real estate 3,167 2,715
Consumer 16,847 18,312
Total allowance for credit losses $ 52,654 $ 51,980
Credit quality ratios
Non-accrual loans to HFI loans 0.59 % 0.53 %
Non-performing assets to total assets 0.41 % 0.35 %
Annualized net charge-offs of average total loans 0.07 % 0.05 %
Allowance for credit losses to HFI loans 1.07 % 1.07 %
Allowance for credit losses to nonaccrual loans 173.25 % 192.82 %
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 FHLB. At March 31,
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
2025, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.78 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $1.70 billion at December 31, 2024.
The cash flows from the operating, investing and financing activities of the Company resulted in a net decrease in cash, cash equivalents and restricted cash of $123.8 million during the three months ended March 31, 2025, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $15.2 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, provided cash of $38.9 million mainly due to growth in the loan portfolio, which used cash of $47.2 million. Financing activities used cash of $177.9 million, largely resulting from the repayment of long-term borrowings of $530.1 million and $7.1 million in dividends paid on common stock during the first nine months of 2024.
Capital Resources
The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2025. Stockholders’ equity totaled $776.1 million as of March 31, 2025, compared to $763.6 million as of December 31, 2024. For the three months ended March 31, 2025, the ratio of average stockholders’ equity to average assets was 10.06% compared to 9.25% for same period in 2024. The increase in stockholders’ equity during the period was due to changes in accumulated other comprehensive loss related to unrealized gains on available-for-sale securities and retention of earnings, which is primarily offset by cash dividend payments on outstanding common stock.
As of March 31, 2025, the ratio of total stockholders’ equity to total assets is 10.17%. Book value per common share was $17.72, increasing $0.26 compared to December 31, 2024.
Tangible common equity 1 totaled $611.4 million at March 31, 2025, and the ratio of tangible common equity to tangible assets 1 was 8.19% at March 31, 2025. Tangible book value, which excludes intangible assets from total equity, per common share 1 was $13.96, increasing $0.28 compared to December 31, 2024.
Horizon declared common stock dividends in the amount of $0.16 per share during the three months ended March 31, 2025 and $0.16 per share for the same period in 2024. The dividend payout ratio (dividends as a percent of basic earnings per share) was 29.09% and 50.00% for the three months ended March 31, 2025 and 2024, respectively. For additional information regarding dividends, see Horizon’s 2024 Annual Report on Form 10–K.
1 N on-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Use of Non-GAAP Financial Measures
In addition to financial measures presented in accordance with GAAP, this document refers to non-GAAP financial measures, which Horizon believes are helpful to investors and provide a greater understanding of our business and financial results without the impact of items or events that may obscure trends in the Company’s underlying performance. 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 document for reconciliations of the non-GAAP information identified herein and its most comparable GAAP measures.
Non–GAAP Reconciliation of Net Fully-Taxable Equivalent ("FTE") Interest Margin
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2025 March 31, 2024
Interest income (GAAP) (A) $ 89,175 $ 85,264
Taxable-equivalent adjustment:
Investment securities - tax exempt (1)
$ 1,646 $ 1,715
Loan receivable (2)
383 353
Total taxable-equivalent adjustment (3)
$ 2,029 $ 2,068
Interest income (non-GAAP) (B) $ 91,204 $ 87,332
Interest expense (GAAP) (C) $ 36,908 $ 41,976
Net interest income (GAAP) (D) =(A) - (C) $ 52,267 $ 43,288
Net FTE interest income (non-GAAP) (E) = (B) - (C) $ 54,296 $ 45,356
Average interest earning assets (F) $ 7,234,724 $ 7,293,559
Net FTE interest margin (non-GAAP) (G) = (E*) / (F) 3.04 % 2.50 %
(1) The following represents municipal securities interest income for investment securities classified as available-for-sale and held-to-maturity
(2) The following represents municipal loan interest income for loan receivables classified as held for sale and held for investment
(3) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative. The Company adjusts interest income for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate
*Annualized
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the three months ended March 31, 2025 and 2024
Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2025 December 31, 2024
Total stockholders' equity (GAAP) (A) $ 776,061 $ 763,582
Intangible assets (end of period) (B) 164,618 165,434
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 611,443 $ 598,148
Total assets (GAAP) (D) 7,628,636 7,801,146
Intangible assets (end of period) (B) 164,618 165,434
Total tangible assets (non-GAAP) (E) = (D) - (B) $ 7,464,018 $ 7,635,712
Tangible common equity to tangible assets (Non-GAAP) (G) = (C) / (E) 8.19 % 7.83 %
Non–GAAP Reconciliation of Tangible Book Value Per Share
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2025 December 31, 2024
Total stockholders' equity (GAAP) (A) $ 776,061 $ 763,582
Intangible assets (end of period) (B) 164,618 165,434
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 611,443 $ 598,148
Common shares outstanding (D) 43,785,932 43,722,086
Tangible book value per common share (non-GAAP) (E) = (C) / (D) $ 13.96 $ 13.68
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.