Horizon Bancorp(US:HBNC)2023-05-10 20:39Financial Performance - Net income for the first quarter 2023 was $18.2 million, down from $21.2 million in the fourth quarter 2022 and $23.6 million in the first quarter 2022[165]. - Diluted earnings per share (EPS) were $0.42, compared to $0.48 for the fourth quarter 2022 and $0.54 for the first quarter 2022[165]. - Total non-interest income for the first quarter was $9.62 million, down from $10.67 million in the fourth quarter 2022 and $14.15 million in the first quarter 2022[167]. - Consolidated net income for the three-month period ended March 31, 2023, was $18.2 million, or $0.42 diluted earnings per share, down from $23.6 million, or $0.54 diluted earnings per share for the same period in 2022[192]. - The decrease in net income was attributed to a $1.6 million decline in net interest income, a $1.6 million increase in credit loss expense, and a $4.5 million decrease in non-interest income[192]. - Net interest income for the three months ended March 31, 2023, was $45.2 million, a decrease of $1.6 million from $46.8 million in the same period of 2022[194]. - The dividend payout ratio increased to 38.1% in Q1 2023 from 27.8% in Q1 2022, with dividends declared at $0.16 per share[216]. - Pre-tax, pre-provision net income for Q1 2023 was $20.333 million, compared to $23.745 million in Q1 2022[224]. - Adjusted diluted earnings per share for Q1 2023 was $0.43, consistent with Q4 2022[222]. Deposits and Loans - Total deposits at the end of the first quarter 2023 were $5.70 billion, a decrease of $155.8 million from the previous quarter, primarily due to a $122.2 million reduction in municipal and public depositors[165]. - Consumer and commercial deposits totaled $4.28 billion, declining by $33.6 million during the quarter[165]. - The loan-to-deposit ratio was 74.5% at the end of the quarter, with total loans increasing at an annualized rate of 8.3% year-to-date and 2.1% quarter-over-quarter[165]. - As of March 31, 2023, Horizon's total assets increased to $7.9 billion, up approximately $25.5 million from December 31, 2022, primarily driven by a growth in net loans of $89.9 million[184]. - Net loans reached $4.2 billion, with commercial loans increasing by $38.0 million, consumer loans by $58.3 million, and residential mortgage loans by $9.2 million since December 31, 2022[186]. - Total deposits decreased by $155.8 million to $5.7 billion, mainly due to a $122.2 million reduction in municipal and public depositors' balances[188]. - Total borrowings rose to $1.3 billion as of March 31, 2023, from $1.1 billion as of December 31, 2022, primarily due to the decrease in total deposits[190]. Expenses and Efficiency - Non-interest expense for the first quarter was $34.5 million, a decline of 3.3% from the linked quarter and 2.1% from the prior year period[165]. - Total non-interest expense decreased by $746,000 to $34.524 million in Q1 2023 compared to Q1 2022, primarily due to a $1.0 million reduction in salaries and employee benefits[209]. - Salaries and employee benefits expense decreased by 5.2% from $19.735 million in Q1 2022 to $18.712 million in Q1 2023[209]. - The annualized non-interest expense as a percentage of average assets was 1.79% for Q1 2023, down from 1.95% in Q1 2022[210]. - Adjusted efficiency ratio improved to 62.37% for the three months ended March 31, 2023, compared to 60.06% in the previous quarter[231]. Capital and Equity - Stockholders' equity increased to $702.6 million at March 31, 2023, compared to $677.4 million at December 31, 2022, driven by a decrease in accumulated other comprehensive loss and net income generation[191]. - Total stockholders' equity increased to $702,559,000 as of March 31, 2023, up from $677,375,000 at December 31, 2022, representing a growth of 3.5%[229]. - Tangible stockholders' equity rose to $531,012,000, compared to $504,925,000 at December 31, 2022, reflecting an increase of 5.2%[229]. - Book value per common share increased to $16.11, up from $15.55 in the previous quarter, marking a rise of 3.6%[229]. - Average common equity rose to $693,472,000, up from $660,188,000 in the previous quarter, representing a growth of 5.0%[235]. Credit Quality - The allowance for credit losses to total loans was 1.17%, compared to 1.21% at December 31, 2022[167]. - Credit loss expense totaled $242,000 for the three months ended March 31, 2023, compared to a recovery of $1.4 million for the same period in 2022[202]. - The Allowance for Credit Losses (ACL) balance was $49.5 million, or 1.17% of total loans, as of March 31, 2023, down from 1.21% at December 31, 2022[203]. - Non-performing loans decreased by $2.0 million to $19.8 million as of March 31, 2023, compared to $21.8 million at December 31, 2022[204]. Regulatory and Legal Matters - Horizon's disclosure controls and procedures were found to be ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting[241]. - Horizon identified material weaknesses in internal control over financial reporting, particularly regarding loans, investments, and cash flow disclosures[242]. - Remediation efforts are ongoing, with an estimated completion date prior to the end of fiscal 2023[243]. - A putative class action lawsuit was filed against Horizon on April 20, 2023, alleging materially false statements and failure to disclose adverse facts[246]. - Management believes the lawsuit is without merit and intends to defend against it vigorously[247]. - Recent high-profile bank failures have negatively impacted customer confidence in regional banks, potentially affecting Horizon's liquidity and results of operations[249].