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Horizon Bancorp(HBNC) - 2024 Q3 - Quarterly Report
HBNCHorizon Bancorp(HBNC)2024-11-12 21:16
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Net Income and Earnings - Net income increased by 2.0millionto2.0 million to 18.2 million, or 0.42pershare,forthethreemonthsendedSeptember30,2024,comparedto0.42 per share, for the three months ended September 30, 2024, compared to 16.2 million, or 0.37pershare,forthesameperiodin2023[173]−Netincomedeclinedby0.37 per share, for the same period in 2023[173] - Net income declined by 6.9 million to 46.3million,or46.3 million, or 1.06 per share, for the nine months ended September 30, 2024, compared to 53.2million,or53.2 million, or 1.22 per share, for the same period in 2023[174] - Net income (GAAP) for September 30, 2024, was 18.180million,upfrom18.180 million, up from 14.140 million in June 2024 and 13.991millioninMarch2024[221]NetInterestIncomeandMargin−Netinterestincomeincreasedby13.991 million in March 2024[221] Net Interest Income and Margin - Net interest income increased by 4.8 million, or 11.5%, for the three months ended September 30, 2024, driven by a 25 basis point increase in the net FTE interest margin to 2.66%[174] - The net FTE interest margin increased by 25 basis points to 2.66% for the three months ended September 30, 2024, due to a favorable mix shift in average interest-earning assets and funding mix[175] - Net interest income increased by 2.0millionto2.0 million to 135.5 million for the nine months ended September 30, 2024, compared to the same period in 2023[179] - Net FTE interest margin increased by 1 basis point to 2.60% for the nine months ended September 30, 2024[179] - Net FTE interest margin (Non-GAAP) was 2.66% for the three months ended September 30, 2024[177] - Net FTE interest margin (non-GAAP) for September 30, 2024, was 2.66%, compared to 2.64% in June 2024 and 2.50% in March 2024[219] - Net interest income (GAAP) for September 30, 2024, was 46.910million,upfrom46.910 million, up from 45.279 million in June 2024 and 43.288millioninMarch2024[219]InterestRatesandSensitivity−A100basispointsriseininterestrateswoulddecreasenetinterestincomeby43.288 million in March 2024[219] Interest Rates and Sensitivity - A 100 basis points rise in interest rates would decrease net interest income by 7.9 million (3.5%), while a 100 basis points fall would increase net interest income by 2.8million(1.32.8 million (1.3%)[226] - The company's net interest income is projected to decrease by 17.7 million (7.9%) with a 200 basis points rise in interest rates[226] - A 100 basis points rise in interest rates is expected to reduce net interest income by 7.9million(3.57.9 million (3.5%)[226] - A 100 basis points fall in interest rates is projected to increase net interest income by 2.8 million (1.3%)[226] - A 200 basis points fall in interest rates is expected to decrease net interest income by 2.7million(1.22.7 million (1.2%)[226] - The company uses earnings simulation models to assess net interest income sensitivity to interest rate changes over 12- and 24-month periods[225] - Deposit beta assumptions in the simulation model range from 12% to 80% based on underlying products[225] - The company's interest-bearing liabilities are projected to reprice faster than interest-earning assets for the next 100 basis points of declining interest rates[225] Non-Interest Income and Expense - Non-interest expense growth and a decline in non-interest income contributed to the decrease in net income for the nine months ended September 30, 2024[174] - The increase in net interest income for the three months ended September 30, 2024 was partially offset by an increase in non-interest expense compared to the year-ago period[173] - Total non-interest income declined by 0.3 million for the three months ended September 30, 2024, compared to the same period in 2023[186] - Total non-interest income for the nine months ended September 30, 2024, was 31.9million,downfrom31.9 million, down from 32.4 million in the same period in 2023[184] - Non-interest expense increased by 3.1millionforthethreemonthsendedSeptember30,2024,and3.1 million for the three months ended September 30, 2024, and 6.9 million for the nine months ended September 30, 2024, driven by higher salaries, outside services, and other expenses[191] - Salaries and employee benefits expense increased by 1.8millionforthethreemonthsendedSeptember30,2024,and1.8 million for the three months ended September 30, 2024, and 3.7 million for the nine months ended September 30, 2024, due to hiring efforts and legacy benefits program expenses[192][193] Loans and Deposits - Total loans HFI increased by 383.5million,or8.8383.5 million, or 8.8%, to 4.8 billion as of September 30, 2024, led by organic commercial loan growth[205] - Total deposit balances increased by 62.1million,or1.162.1 million, or 1.1%, to 5.7 billion as of September 30, 2024, with a focus on core commercial and consumer deposits[206] - Total borrowings decreased by 87.9million,or6.587.9 million, or 6.5%, to 1.3 billion as of September 30, 2024, due to repayment of Federal Home Loan Bank advances[207] - Loans receivable averaged 4,775.8millionwithanaveragerateof6.324,775.8 million with an average rate of 6.32% for the three months ended September 30, 2024[177] - Interest-bearing deposits averaged 3,386.2 million with an average rate of 2.14% for the three months ended September 30, 2024[177] Credit Quality and Allowance for Credit Losses - The ACL balance increased to 52.9million,or1.1052.9 million, or 1.10% of period-end loans HFI, up from 50.0 million at December 31, 2023[210] - Total non-accrual loans increased by 3.9million,or19.63.9 million, or 19.6%, to 0.49% of total loans HFI as of September 30, 2024[211] - Net charge-offs for the three months ended September 30, 2024, were 0.4 million, or 3 basis points annualized of average loans[212] - Total non-performing assets increased by 3.8million,or17.43.8 million, or 17.4%, to 0.32% of total assets as of September 30, 2024[211] - Provision for credit losses on loans increased by 1.0 million for the three months ended September 30, 2024, and 4.2millionfortheninemonthsendedSeptember30,2024,drivenbyloangrowthandchangesineconomicforecasts[196][197]InvestmentSecuritiesandOtherAssets−Investmentsecuritiesavailableforsaledecreasedby4.2 million for the nine months ended September 30, 2024, driven by loan growth and changes in economic forecasts[196][197] Investment Securities and Other Assets - Investment securities available for sale decreased by 6.1 million to 541.2millionasofSeptember30,2024,comparedtoDecember31,2023[209]−Securitiesheldtomaturitydecreasedby541.2 million as of September 30, 2024, compared to December 31, 2023[209] - Securities held to maturity decreased by 57.3 million to 1.9billionasofSeptember30,2024[209]−FederalHomeLoanBankstockaveraged1.9 billion as of September 30, 2024[209] - Federal Home Loan Bank stock averaged 53.8 million with an average rate of 11.88% for the three months ended September 30, 2024[177] - The Bank had approximately 1.52billioninunusedcreditlineswithvariousmoneycenterbanksasofSeptember30,2024[215]EquityandCapitalRatios−Stockholders′equitytotaled1.52 billion in unused credit lines with various money center banks as of September 30, 2024[215] Equity and Capital Ratios - Stockholders' equity totaled 754.8 million as of September 30, 2024, compared to 718.8millionatDecember31,2023[216]−Tangiblecommonequitytotaled718.8 million at December 31, 2023[216] - Tangible common equity totaled 588.5 million at September 30, 2024, with a ratio of tangible common equity to tangible assets of 7.58%[216] - The dividend payout ratio was 45.3% for the first nine months of 2024, compared to 39.3% for the same period in 2023[216] - Total tangible common equity (non-GAAP) for September 30, 2024, was 588.544million,upfrom588.544 million, up from 559.544 million in June 2024 and 553.285millioninMarch2024[222]−Tangiblecommonequitytotangibleassets(non−GAAP)forSeptember30,2024,was7.58553.285 million in March 2024[222] - Tangible common equity to tangible assets (non-GAAP) for September 30, 2024, was 7.58%, compared to 7.22% in June 2024 and 7.20% in March 2024[222] - Tangible book value per common share (non-GAAP) for September 30, 2024, was 13.46, up from 12.80inJune2024and12.80 in June 2024 and 12.65 in March 2024[223] - Return on average tangible common equity (ROACE) (non-GAAP) for September 30, 2024, was 12.65%, compared to 10.18% in June 2024 and 10.11% in March 2024[221] Risks and Accounting Estimates - The company's critical accounting estimates include the allowance for credit losses, goodwill and intangible assets, mortgage servicing rights, hedge accounting, and valuation measurements[172] - The company identified risks such as changes in interest rates, inflation, and the impact of cryptocurrencies on deposit disintermediation and payment system income[169] - The company highlighted potential risks from cyber terrorism, data security breaches, and the rising costs of effective cybersecurity[170] - The company noted the risks of expansion through mergers and acquisitions, including unexpected credit quality problems and difficulty integrating acquired operations[170] Internal Controls and Reporting - The company's disclosure controls and procedures were effective as of September 30, 2024, ensuring timely and accurate reporting[228] - Horizon's disclosure controls and procedures were evaluated as effective as of September 30, 2024[228] - No material changes in internal control over financial reporting were identified during the fiscal quarter ended September 30, 2024[229] Interest Income and Expense Details - Total interest earning assets averaged 7,330.3millionwithanaveragerateof5.047,330.3 million with an average rate of 5.04% for the three months ended September 30, 2024[177] - Total interest bearing liabilities averaged 5,961.9 million with an average rate of 2.93% for the three months ended September 30, 2024[177] - Net FTE interest income (non-GAAP) was 48.9millionforthethreemonthsendedSeptember30,2024[177]−Netinterestincomewas48.9 million for the three months ended September 30, 2024[177] - Net interest income was 46.9 million for the three months ended September 30, 2024[177] - Total interest income increased by 10.8millionforthethreemonthsendedSeptember30,2024,comparedtothesameperiodin2023,drivenbyhigherloaninterestincome[183]−Netinterestincomeroseby10.8 million for the three months ended September 30, 2024, compared to the same period in 2023, driven by higher loan interest income[183] - Net interest income rose by 4.8 million for the three months ended September 30, 2024, compared to the same period in 2023, despite a 3.2milliondecreaseduetoratechanges[183]−Loansreceivableinterestincomeincreasedby3.2 million decrease due to rate changes[183] - Loans receivable interest income increased by 12.5 million for the three months ended September 30, 2024, compared to the same period in 2023, with a significant contribution from rate changes[183] - Interest-bearing deposits expense increased by 5.5millionforthethreemonthsendedSeptember30,2024,comparedtothesameperiodin2023,primarilyduetoratechanges[183]−FederalHomeLoanBankstockinterestincomeincreasedby5.5 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to rate changes[183] - Federal Home Loan Bank stock interest income increased by 989,000 for the three months ended September 30, 2024, compared to the same period in 2023[183] - Interest income (GAAP) for September 30, 2024, was 90.888million,showinganincreasefrom90.888 million, showing an increase from 86.981 million in June 2024 and 85.264millioninMarch2024[219]ServiceChargesandFees−Servicechargesondepositaccountsincreasedto85.264 million in March 2024[219] Service Charges and Fees - Service charges on deposit accounts increased to 9.7 million for the nine months ended September 30, 2024, compared to 9.1millioninthesameperiodin2023[184]−Servicechargesondepositaccountsincreasedby9.1 million in the same period in 2023[184] - Service charges on deposit accounts increased by 0.2 million for the three months ended September 30, 2024, and 0.5millionfortheninemonthsendedSeptember30,2024,comparedtothesameperiodsin2023[187]−Interchangefeesincreasedby0.5 million for the nine months ended September 30, 2024, compared to the same periods in 2023[187] - Interchange fees increased by 0.3 million for the three months ended September 30, 2024, and 0.8millionfortheninemonthsendedSeptember30,2024,drivenbygrowthinqualifieddebitcardvolume[188]−Mortgageservicingincomedecreasedby0.8 million for the nine months ended September 30, 2024, driven by growth in qualified debit card volume[188] - Mortgage servicing income decreased by 0.2 million for the three months ended September 30, 2024, and 0.7millionfortheninemonthsendedSeptember30,2024,duetohigheramortizationexpenseofmortgageservicingrights[189]−Cashvalueofbank−ownedlifeinsurancedecreasedby0.7 million for the nine months ended September 30, 2024, due to higher amortization expense of mortgage servicing rights[189] - Cash value of bank-owned life insurance decreased by 0.7 million for the three months ended September 30, 2024, and 2.1millionfortheninemonthsendedSeptember30,2024,duetopolicysurrendersinQ42023[190]TotalAssetsandLiabilities−TotalaverageassetsfortheninemonthsendedSeptember30,2024,were2.1 million for the nine months ended September 30, 2024, due to policy surrenders in Q4 2023[190] Total Assets and Liabilities - Total average assets for the nine months ended September 30, 2024, were 7.82 billion, slightly lower than the $7.87 billion in the same period in 2023[181] - Net FTE interest margin (Non-GAAP) remained stable at 2.60% for the nine months ended September 30, 2024, compared to 2.59% in the same period in 2023[181]