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Horizon Bancorp, Inc. Reports Second Quarter 2024 Results Including EPS of $0.32, Net Interest Margin Expansion, and Growth in Net Interest Income and Loans
المصدر: Nasdaq GlobeNewswire / 24 يوليو 2024 16:05:01 America/New_York
MICHIGAN CITY, Ind., July 24, 2024 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”), the parent company of Horizon Bank (the “Bank”), announced its unaudited financial results for the three and six months ended June 30, 2024.
Net income for the three months ended June 30, 2024 was $14.1 million, or $0.32 per diluted share, compared to net income of $14.0 million, or $0.32, for the first quarter of 2024 and compared to net income of $18.8 million, or $0.43 per diluted share, for the second quarter of 2023.
Net income for the six months ended June 30, 2024 was $28.1 million, or $0.64 per diluted share, compared to net income of $37.0 million, or $0.85, for the six months ended June 30, 2023.
Second Quarter 2024 Highlights
- Net interest income increased for the third consecutive quarter to $45.3 million, compared to $43.3 million in the linked quarter of 2024. Net interest margin, on a fully taxable equivalent ("FTE") basis1, expanded for the third consecutive quarter to 2.64%, compared to 2.50% in the linked quarter of 2024.
- Total loans held for investment ("HFI") were $4.8 billion at period end, increasing by 4.4% during the quarter, led by organic commercial loan growth of $154.8 million, or 5.6% in the quarter.
- Credit quality continues to perform well, with non-accrual loans declining $0.8 million, to $18.3 million at June 30, 2024 from March 31, 2024. Annualized net charge-offs remain low, at 0.05% of average loans during the second quarter. Provision for loan losses of $2.4 million primarily reflected continued loan growth in the quarter.
- Deposits totaled $5.6 billion at period end, increasing by 0.9% during the quarter. Non-interest bearing deposit balances at June 30, 2024 were relatively consistent with balances at March 31, 2024.
“We are proud of the Company's performance during the second quarter, which was highlighted by sequential growth in revenue and pre-tax pre-provision income resulting from the strategic shift of Horizon’s balance sheet toward a more profitable earning asset mix, and diligent expense management. Importantly, the previously discussed balance sheet efforts drove improving loan yields, which coupled with the relative stability of our funding costs, yielded 14 basis points of net interest margin expansion in the quarter,” President and Chief Executive Officer Thomas M. Prame said. “In-market businesses and consumers remain at the center of Horizon’s strong credit performance and low-cost deposit franchise, and our Indiana and Michigan markets continue to provide excellent opportunities for organic growth. We are pleased with our performance during the first half of 2024, and remain committed to enhancing our financial performance throughout 2024."
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1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.Financial Highlights (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2024 2024 2023 2023 2023 Income statement: Net interest income $ 45,279 $ 43,288 $ 42,257 $ 42,090 $ 46,160 Credit loss expense 2,369 805 1,274 263 680 Non-interest income 10,485 9,929 (20,449 ) 11,830 10,997 Non-interest expense 37,522 37,107 39,330 36,168 36,262 Income tax expense 1,733 1,314 6,419 1,284 1,452 Net income $ 14,140 $ 13,991 $ (25,215 ) $ 16,205 $ 18,763 Per share data: Basic earnings per share $ 0.32 $ 0.32 $ (0.58 ) $ 0.37 $ 0.43 Diluted earnings per share 0.32 0.32 (0.58 ) 0.37 0.43 Cash dividends declared per common share 0.16 0.16 0.16 0.16 0.16 Book value per common share 16.62 16.49 16.47 15.89 16.25 Market value - high 12.74 14.44 14.65 12.68 11.10 Market value - low 11.29 11.75 9.33 9.90 7.75 Weighted average shares outstanding - Basic 43,712,059 43,663,610 43,649,585 43,646,609 43,639,987 Weighted average shares outstanding - Diluted 43,987,187 43,874,036 43,649,585 43,796,069 43,742,588 Common shares outstanding (end of period) 43,712,059 43,726,380 43,652,063 43,648,501 43,645,216 Key ratios: Return on average assets 0.73 % 0.72 % (1.27 )% 0.81 % 0.96 % Return on average stockholders' equity 7.83 7.76 (14.23 ) 8.99 10.59 Total equity to total assets 9.18 9.18 9.06 8.71 8.91 Total loans to deposit ratio 85.70 82.78 78.01 76.52 74.85 Annualized non-interest expense to average assets 1.94 1.90 1.98 1.81 1.86 Allowance for credit losses to HFI loans 1.08 1.09 1.13 1.14 1.17 Annualized net charge-offs of average total loans(1) 0.05 0.04 0.07 0.07 0.04 Efficiency ratio 67.29 69.73 180.35 67.08 63.44 Key metrics (Non-GAAP)(2): Net FTE interest margin 2.64 % 2.50 % 2.43 % 2.41 % 2.69 % Return on average tangible common equity 10.18 10.11 (18.76 ) 11.79 13.94 Tangible common equity to tangible assets 7.22 7.20 7.08 6.72 6.91 Tangible book value per common share $ 12.80 $ 12.65 $ 12.60 $ 12.00 $ 12.34 (1)Average total loans includes loans held for investment and held for sale. (2)Non-GAAP financial metrics. See non-GAAP reconciliation included herein for the most directly comparable GAAP measures. Income Statement Highlights
Net Interest Income
Net interest income was $45.3 million in the second quarter of 2024, compared to $43.3 million in the first quarter of 2024, driven by net FTE interest margin expansion during the quarter. Horizon’s net FTE interest margin1 was 2.64% for the second quarter of 2024, compared to 2.50% for the first quarter of 2024, attributable to the favorable mix shift in average interest earning assets toward higher-yielding loans against relatively stable costs of interest bearing liabilities. Interest accretion from the fair value of acquired loans did not contribute significantly to the second quarter net interest income, or net FTE interest margin.
Provision for Credit Losses
During the second quarter of 2024, the Company recorded a provision for credit losses of $2.4 million. This compares to a provision for credit losses of $0.8 million during the first quarter of 2024, and $0.7 million during the second quarter of 2023. The increase in the provision for credit losses during the second quarter of 2024 when compared with the first quarter of 2024 was primarily attributable to loan growth.
For the second quarter of 2024, the allowance for credit losses included net charge-offs of $0.6 million, or an annualized 0.05% of average loans outstanding, compared to net charge-offs of $0.4 million, or an annualized 0.04% of average loans outstanding for the first quarter of 2024, and net charge-offs of $0.3 million, or an annualized 0.04% of average loans outstanding, in the second quarter of 2023.
The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.08% at June 30, 2024, compared to 1.09% at March 31, 2024 and 1.17% at June 30, 2023.
Non-Interest Income
For the Quarter Ended June 30, March 31, December 31, September 30, June 30, (Dollars in Thousands) 2024 2024 2023 2023 2023 Non-interest Income Service charges on deposit accounts $ 3,130 $ 3,214 $ 3,092 $ 3,086 $ 3,021 Wire transfer fees 113 101 103 120 116 Interchange fees 3,826 3,109 3,224 3,186 3,584 Fiduciary activities 1,372 1,315 1,352 1,206 1,247 Gains (losses) on sale of investment securities — — (31,572 ) — 20 Gain on sale of mortgage loans 896 626 951 1,582 1,005 Mortgage servicing income net of impairment 450 439 724 631 640 Increase in cash value of bank owned life insurance 318 298 658 1,055 1,015 Other income 380 827 1,019 964 349 Total non-interest income $ 10,485 $ 9,929 $ (20,449 ) $ 11,830 $ 10,997 Total non-interest income was $10.5 million in the second quarter of 2024, compared to $9.9 million in the first quarter of 2024, due primarily to increased interchange fees and higher realized gain on sale of mortgage loans.
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1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.Non-Interest Expense
For the Quarter Ended June 30, March 31, December 31, September 30, June 30, (Dollars in Thousands) 2024 2024 2023 2023 2023 Non-interest Expense Salaries and employee benefits $ 20,583 $ 20,268 $ 21,877 $ 20,058 $ 20,162 Net occupancy expenses 3,192 3,546 3,260 3,283 3,249 Data processing 2,579 2,464 2,942 2,999 3,016 Professional fees 714 607 772 707 633 Outside services and consultants 3,058 3,359 2,394 2,316 2,515 Loan expense 1,038 719 1,345 1,120 1,397 FDIC insurance expense 1,315 1,320 1,200 1,300 840 Core deposit intangible amortization 844 872 903 903 903 Other losses 515 16 508 188 134 Other expense 3,684 3,936 4,129 3,294 3,413 Total non-interest expense $ 37,522 $ 37,107 $ 39,330 $ 36,168 $ 36,262 Income Taxes
Horizon's effective tax rate was 10.9% for the second quarter of 2024, as compared to 8.6% for the first quarter of 2024. The sequential increase in the effective tax rate brings the year-to-date effective tax rate to 9.8%, consistent with the Company's current estimated annual effective tax rate.
Balance Sheet
Total assets increased by $56.8 million, or 0.7%, to $7.91 billion as of June 30, 2024, from $7.86 billion as of March 31, 2024. The increase in total assets is primarily due to increases in gross loans HFI of $204.7 million, or 4.4%, to $4.8 billion as of June 30, 2024, compared to $4.6 billion as of March 31, 2024. Loan growth during the period was partially offset by a decrease in fed funds sold of $127.3 million, or 78.7%, to $34.5 million as of June 30, 2024, from $161.7 million as of March 31, 2024.
Total investment securities decreased $29.7 million, or 1.2%, to $2.4 billion as of June 30, 2024, from $2.5 billion as of March 31, 2024, primarily as a result of normal pay-downs and maturities. There were no purchases of investment securities during the second quarter of 2024.
Total loans HFI and loans held for sale increased to $4.8 billion as of June 30, 2024 compared to $4.6 billion as of March 31, 2024, led by organic commercial loan growth of $154.8 million.
Total deposit balances increased by $50.3 million, or 0.9%, to $5.6 billion on June 30, 2024 when compared to balances as of March 31, 2024.
All other interest bearing liabilities at June 30, 2024, primarily comprised of Federal Home Loan Bank of Indianapolis advances, remained relatively stable when compared to balances as of March 31, 2024.
Capital
The following table presents the consolidated regulatory capital ratios of the Company for the previous three quarters:
For the Quarter Ended June 30, March 31, December 31, 2024* 2024** 2023** Consolidated Capital Ratios Total capital (to risk-weighted assets) 13.36 % 13.75 % 14.04 % Tier 1 capital (to risk-weighted assets) 11.56 % 11.89 % 12.13 % Common equity tier 1 capital (to risk-weighted assets) 10.60 % 10.89 % 11.11 % Tier 1 capital (to average assets) 8.98 % 8.91 % 8.61 % *Preliminary estimate - may be subject to change **Prior periods have been revised (see disclosure below) During the second quarter of 2024 management corrected a prior computation of the Company’s total capital (to risk-weighted assets), Tier 1 capital (to risk-weighted assets), and Tier 1 capital (to average assets) ratios for purposes of the Company’s consolidated financial statements for holding companies filed with the Federal Reserve (the “Regulatory Filings”), which involved an incorrect classification of the Company’s subordinated notes as Tier 1 capital. The Company evaluated the effects of the incorrect classification to its previously filed Regulatory Filings and previously issued financial statements and determined the errors were not material to either of the prior periods noted above. The Company has amended its Regulatory Filings for the periods ended March 31, 2024 and December 31, 2023 to reclassify the subordinated notes balance from Tier 1 capital into Tier 2 capital. The correction of the classification had no effect on the Company’s consolidated balance sheets, statements of income, stockholders’ equity, or the amounts or disclosure of the regulatory capital ratios of the Bank as included in its call reports. The Company continues to exceed regulatory proxy ratios to be considered “well capitalized”, plus the capital conservation buffer, at June 30, 2024. The Company will reflect the reclassification of the subordinated notes described above in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.
As of June 30, 2024, the ratio of total stockholders’ equity to total assets is 9.18%. Book value per common share was $16.62, increasing $0.13 during the second quarter of 2024.
Tangible common equity1 totaled $559.5 million at June 30, 2024, and the ratio of tangible common equity to tangible assets1 was 7.22% at June 30, 2024. Tangible book value, which excludes intangible assets from total equity, per common share1 was $12.80, increasing $0.15 during the second quarter of 2024.
Credit Quality
As of June 30, 2024, total non-accrual loans decreased by $0.8 million, or 4.1%, from March 31, 2024, to 0.38% of total loans HFI. Total non-performing assets increased $0.2 million, or 0.8%, to $20.5 million, compared to $20.3 million as of March 31, 2024. The ratio of non-performing assets to total assets was unchanged compared to the first quarter of 2024.
As of June 30, 2024, net charge-offs increased by $0.2 million to $0.6 million, compared to $0.4 million as of March 31, 2024, but remain low at 0.05% annualized of average loan balances.
Earnings Conference Call
As previously announced, Horizon will host a conference call to review its second quarter financial results and operating performance.
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1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.Participants may access the live conference call on July 25, 2024 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 1-412-317-5772 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 August 2, 2024. The replay may be accessed by dialing 877-344-7529 from the United States, 855-669-9658 from Canada or 1–412–317-0088 from other international locations, and entering the access code 6800817.
About Horizon Bancorp, Inc.
Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion-asset commercial bank holding company for Horizon Bank, which serve 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 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, as well as equipment financing solutions for customers regionally and nationally, 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.
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, pre-tax, pre-provision net income, net interest margin, tangible stockholders’ equity and tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and return on average tangible equity. 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 and swap termination fees, 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.
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 (the “SEC”). 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: current financial conditions within the banking industry, including the effects of recent failures of other financial institutions, liquidity levels, and responses by the Federal Reserve, Department of the Treasury, and the Federal Deposit Insurance Corporation to address these issues; changes in the level and volatility of interest rates, changes in spreads on earning assets and changes in interest bearing liabilities; increased interest rate sensitivity; the ability of Horizon to remediate its material weaknesses in its internal control over financial reporting; continuing increases in inflation; loss of key Horizon personnel; increases in disintermediation; potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms take a greater market share of the payment systems; estimates of fair value of certain of Horizon’s assets and liabilities; changes in prepayment speeds, loan originations, credit losses, market values, collateral securing loans and other assets; changes in sources of liquidity; economic conditions and their impact on Horizon and its customers, including local and global economic recovery from the pandemic; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict and the Israel and Hamas conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Horizon’s reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s website (www.sec.gov). 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.
Condensed Consolidated Statements of Income (Dollars in Thousands Except Per Share Data, Unaudited) Three Months Ended Six Months Ended June 30, March 31, December 31, September 30, June 30, June 30, June 30, 2024 2024 2023 2023 2023 2024 2023 Interest Income Loans receivable $ 71,880 $ 66,954 $ 65,583 $ 63,003 $ 60,594 $ 138,834 $ 115,958 Investment securities - taxable 7,986 7,362 8,157 8,788 8,740 15,348 17,465 Investment securities - tax-exempt 6,377 6,451 6,767 7,002 7,059 12,828 14,615 Other 738 4,497 3,007 1,332 475 5,235 628 Total interest income 86,981 85,264 83,514 80,125 76,868 172,245 148,666 Interest Expense Deposits 28,447 27,990 27,376 24,704 18,958 56,437 33,777 Borrowed funds 11,213 11,930 11,765 11,224 9,718 23,143 19,489 Subordinated notes 829 831 870 880 881 1,660 1,761 Junior subordinated debentures issued to capital trusts 1,213 1,225 1,246 1,227 1,151 2,438 2,241 Total interest expense 41,702 41,976 41,257 38,035 30,708 83,678 57,268 Net Interest Income 45,279 43,288 42,257 42,090 46,160 88,567 91,397 Provision for loan losses 2,369 805 1,274 263 680 3,174 922 Net Interest Income after Provision for Loan Losses 42,910 42,483 40,983 41,827 45,480 85,393 90,475 Non-interest Income Service charges on deposit accounts 3,130 3,214 3,092 3,086 3,021 6,344 6,049 Wire transfer fees 113 101 103 120 116 214 225 Interchange fees 3,826 3,109 3,224 3,186 3,584 6,935 6,451 Fiduciary activities 1,372 1,315 1,352 1,206 1,247 2,687 2,522 Gains (losses) on sale of investment securities — — (31,572 ) — 20 — (480 ) Gain on sale of mortgage loans 896 626 951 1,582 1,005 1,522 1,790 Mortgage servicing income net of impairment 450 439 724 631 640 889 1,353 Increase in cash value of bank owned life insurance 318 298 658 1,055 1,015 616 1,996 Other income 380 827 1,019 964 349 1,207 711 Total non-interest income 10,485 9,929 (20,449 ) 11,830 10,997 20,414 20,617 Non-interest Expense Salaries and employee benefits 20,583 20,268 21,877 20,058 20,162 40,851 38,874 Net occupancy expenses 3,192 3,546 3,260 3,283 3,249 6,738 6,812 Data processing 2,579 2,464 2,942 2,999 3,016 5,043 5,685 Professional fees 714 607 772 707 633 1,321 1,166 Outside services and consultants 3,058 3,359 2,394 2,316 2,515 6,417 5,232 Loan expense 1,038 719 1,345 1,120 1,397 1,757 2,515 FDIC insurance expense 1,315 1,320 1,200 1,300 840 2,635 1,380 Core deposit intangible amortization 844 872 903 903 903 1,716 1,806 Other losses 515 16 508 188 134 531 355 Other expense 3,684 3,936 4,129 3,294 3,413 7,620 6,961 Total non-interest expense 37,522 37,107 39,330 36,168 36,262 74,629 70,786 Income /(Loss) Before Income Taxes 15,873 15,305 (18,796 ) 17,489 20,215 31,178 40,306 Income tax expense 1,733 1,314 6,419 1,284 1,452 3,047 3,315 Net Income /(Loss) $ 14,140 $ 13,991 $ (25,215 ) $ 16,205 $ 18,763 $ 28,131 $ 36,991 Basic Earnings /(Loss) Per Share $ 0.32 $ 0.32 $ (0.58 ) $ 0.37 $ 0.43 $ 0.64 $ 0.85 Diluted Earnings/(Loss) Per Share 0.32 0.32 (0.58 ) 0.37 0.43 0.64 0.85 Condensed Consolidated Balance Sheets (Dollars in Thousands) June 30,
2024March 31,
2024December 31,
2023September 30,
2023June 30,
2023Assets Interest earning assets Federal funds sold 34,453 161,704 401,672 71,576 115,794 Interest earning deposits 6,672 10,893 14,276 6,925 6,295 Federal Home Loan Bank stock 53,826 53,826 34,509 34,509 34,509 Investment securities, available for sale 527,054 535,319 547,251 865,168 905,813 Investment securities, held to maturity 1,904,281 1,925,725 1,945,638 1,966,483 1,983,496 Loans held for sale 2,440 922 1,418 2,828 6,933 Gross loans held for investment (HFI) 4,822,840 4,618,175 4,417,630 4,359,002 4,266,260 Total Interest earning assets 7,351,566 7,306,564 7,362,394 7,306,491 7,319,100 Non-interest earning assets Allowance for credit losses (52,215 ) (50,387 ) (50,029 ) (49,699 ) (49,976 ) Cash and due from banks 106,691 100,206 112,772 98,843 109,349 Cash value of life insurance 36,773 36,455 36,157 149,212 148,171 Other assets 165,656 160,593 177,061 152,280 133,476 Goodwill 155,211 155,211 155,211 155,211 155,211 Other intangible assets 11,910 12,754 13,626 14,530 15,433 Premises and equipment, net 93,695 94,303 94,583 94,716 95,053 Interest receivable 43,240 40,008 38,710 37,850 37,536 Total non-interest earning assets 560,961 549,143 578,091 652,943 644,253 Total assets 7,912,527 7,855,707 7,940,485 7,959,434 7,963,353 Liabilities Savings and money market deposits 3,364,726 3,350,673 3,369,149 3,322,788 3,289,474 Time deposits 1,178,389 1,136,121 1,179,739 1,250,606 1,249,803 Borrowings 1,229,165 1,219,812 1,217,020 1,214,016 1,186,407 Repurchase agreements 128,169 139,309 136,030 142,494 165,632 Subordinated notes 55,668 55,634 55,543 59,007 58,970 Junior subordinated debentures issued to capital trusts 57,369 57,315 57,258 57,201 57,143 Total interest earning liabilities 6,013,486 5,958,864 6,014,739 6,046,112 6,007,429 Non-interest bearing deposits 1,087,040 1,093,076 1,116,005 1,126,703 1,170,055 Interest payable 11,240 7,853 22,249 16,281 12,739 Other liabilities 74,096 74,664 68,680 76,969 63,887 Total liabilities 7,185,862 7,134,457 7,221,673 7,266,065 7,254,110 Stockholders’ Equity Preferred stock — — — — — Common stock — — — — — Additional paid-in capital 357,673 356,599 356,400 355,478 354,953 Retained earnings 442,977 435,927 429,021 461,325 452,209 Accumulated other comprehensive income (loss) (73,985 ) (71,276 ) (66,609 ) (123,434 ) (97,919 ) Total stockholders’ equity 726,665 721,250 718,812 693,369 709,243 Total liabilities and stockholders’ equity $ 7,912,527 $ 7,855,707 $ 7,940,485 $ 7,959,434 $ 7,963,353 Loans and Deposits (Dollars in Thousands, Unaudited) June 30, March 31, December 31, September 30, June 30, % Change 2024 2024 2023 2023 2023 Q2'24 vs Q1'24 Q2'24 vs Q2'23 Commercial: Commercial real estate 2,117,772 1,984,723 1,962,097 1,916,056 1,859,285 7 % 14 % Commercial & Industrial 786,788 765,043 712,863 673,188 646,994 3 % 22 % Total commercial 2,904,560 2,749,766 2,674,960 2,589,244 2,506,279 6 % 16 % Residential Real estate 797,956 782,071 681,136 675,399 674,751 2 % 18 % Mortgage warehouse 68,917 56,548 45,078 65,923 82,345 22 % (16 )% Consumer 1,051,407 1,029,790 1,016,456 1,028,436 1,002,885 2 % 5 % Total loans held for investment 4,822,840 4,618,175 4,417,630 4,359,002 4,266,260 4 % 13 % Loans held for sale 2,440 922 1,418 2,828 6,933 165 % (65 )% Total loans 4,825,280 4,619,097 4,419,048 4,361,830 4,273,193 4 % 13 % Deposits: Interest bearing deposits Savings and money market deposits 3,364,726 3,350,673 3,369,149 3,322,788 3,289,474 — % 2 % Time deposits 1,178,389 1,136,121 1,179,739 1,250,606 1,249,803 4 % (6 )% Total Interest bearing deposits 4,543,115 4,486,794 4,548,888 4,573,394 4,539,277 1 % — % Non-interest bearing deposits Non-interest bearing deposits 1,087,040 1,093,076 1,116,005 1,126,703 1,170,055 (1 )% (7 )% Total deposits 5,630,155 5,579,870 5,664,893 5,700,097 5,709,332 1 % (1 )% Average Balance Sheet (Dollars in Thousands, Unaudited) Three Months Ended June 30, 2024 March 31, 2024 June 30, 2023 Average
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Rate(4)Average
BalanceInterest(4) Average
Rate(4)Assets Interest earning assets Federal funds sold $ 47,805 $ 645 5.43 % $ 322,058 $ 4,387 5.48 % $ 30,926 $ 376 4.88 % Interest earning deposits 7,662 93 4.88 % 9,025 110 4.90 % 9,002 99 4.41 % Federal Home Loan Bank stock 53,827 1,521 11.36 % 37,949 784 8.31 % 33,322 508 6.11 % Investment securities - taxable(1) 1,309,305 6,465 1.99 % 1,326,246 6,578 1.99 % 1,673,439 8,232 1.97 % Investment securities - non-taxable(1) 1,132,065 8,072 2.87 % 1,149,957 8,166 2.86 % 1,240,931 8,935 2.89 % Total investment securities 2,441,370 14,537 2.39 % 2,476,203 14,744 2.39 % 2,914,370 17,167 2.36 % Loans receivable(2) (3) 4,662,124 72,208 6.23 % 4,448,324 67,307 6.09 % 4,225,020 60,843 5.78 % Total interest earning assets 7,212,788 89,004 4.96 % 7,293,559 87,332 4.82 % 7,212,640 78,993 4.39 % Non-interest earning assets Cash and due from banks 108,319 105,795 102,935 Allowance for credit losses (50,334 ) (49,960 ) (49,481 ) Other assets 508,555 486,652 573,932 Total average assets $ 7,779,328 $ 7,836,046 $ 7,840,026 Liabilities and Stockholders' Equity Interest bearing liabilities Interest bearing deposits $ 3,334,490 $ 17,405 2.10 % $ 3,323,227 $ 15,889 1.92 % $ 3,329,899 $ 10,388 1.25 % Time deposits 1,134,590 11,042 3.91 % 1,176,921 12,101 4.14 % 1,115,175 8,570 3.08 % Borrowings 1,184,172 10,187 3.46 % 1,200,728 10,904 3.65 % 1,176,702 9,035 3.08 % Repurchase agreements 125,144 1,026 3.30 % 138,052 1,026 2.99 % 140,606 683 1.95 % Subordinated notes 55,647 829 5.99 % 55,558 831 6.02 % 58,946 881 5.99 % Junior subordinated debentures issued to capital trusts 57,335 1,213 8.51 % 57,279 1,225 8.60 % 57,110 1,151 8.08 % Total interest bearing liabilities 5,891,378 41,702 2.85 % 5,951,765 41,976 2.84 % 5,878,438 30,708 2.10 % Non-interest bearing liabilities Demand deposits 1,080,676 1,077,183 1,186,520 Accrued interest payable and other liabilities 80,942 82,015 64,115 Stockholders' equity 726,332 725,083 710,953 Total average liabilities and stockholders' equity $ 7,779,328 $ 7,836,046 $ 7,840,026 Net FTE interest income (non-GAAP)(5) $ 47,302 $ 45,356 $ 48,285 Less FTE adjustments(4) (2,023 ) (2,068 ) (2,125 ) Net Interest Income $ 45,279 $ 43,288 $ 46,160 Net FTE interest margin (Non-GAAP)(4)(5) 2.64 % 2.50 % 2.69 % (1)Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. (2)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. (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. (4)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. Credit Quality (Dollars in Thousands Except Ratios, Unaudited) Quarter Ended June 30, March 31, December 31, September 30, June 30, % Change 2024 2024 2023 2023 2023 2Q24 vs 1Q24 2Q24 vs 2Q23 Non-accrual loans Commercial $ 4,321 $ 5,493 $ 7,362 $ 6,919 $ 8,275 (21 )% (48 )% Residential Real estate 8,489 8,725 8,058 7,644 7,927 (3 )% 7 % Mortgage warehouse — — — — — — % — % Consumer 5,453 4,835 4,290 4,493 4,594 13 % 19 % Total non-accrual loans $ 18,263 $ 19,053 $ 19,710 $ 19,056 $ 20,796 (4 )% (7 )% 90 days and greater delinquent - accruing interest $ 1,058 $ 108 $ 559 $ 392 $ 1,313 880 % (19 )% Total non-performing loans $ 19,321 $ 19,161 $ 20,269 $ 19,448 $ 22,109 1 % (5 )% Other real estate owned Commercial $ 1,111 $ 1,124 $ 1,124 $ 1,287 $ 1,567 (1 )% (29 )% Residential Real estate — — 182 32 107 — % (100 )% Mortgage warehouse — — — — — — % — % Consumer 57 50 205 72 7 14 % 714 % Total other real estate owned $ 1,168 $ 1,174 $ 1,511 $ 1,391 $ 1,681 (1 )% (31 )% Total non-performing assets $ 20,489 $ 20,335 $ 21,780 $ 20,839 $ 23,790 1 % (14 )% Loan data: Accruing 30 to 89 days past due loans 19,785 15,154 16,595 13,089 10,913 31 % 81 % Substandard loans $ 51,221 $ 47,469 $ 49,526 $ 47,563 $ 41,484 8 % 23 % Net charge-offs (recoveries) Commercial 54 (57 ) 233 142 101 195 % (47 )% Residential Real estate (5 ) (5 ) 21 (39 ) (10 ) — % 50 % Mortgage warehouse — — — — — — % — % Consumer 535 488 531 619 183 10 % 192 % Total net charge-offs $ 584 $ 426 $ 785 $ 722 $ 274 37 % 113 % Allowance for credit losses Commercial 31,941 30,514 29,736 29,472 30,354 5 % 5 % Residential Real estate 2,588 2,655 2,503 2,794 3,648 (3 )% (29 )% Mortgage warehouse 736 659 481 714 893 12 % (18 )% Consumer 16,950 16,559 17,309 16,719 15,081 2 % 12 % Total allowance for credit losses $ 52,215 $ 50,387 $ 50,029 $ 49,699 $ 49,976 4 % 4 % Credit quality ratios Non-accrual loans to HFI loans 0.38 % 0.41 % 0.45 % 0.44 % 0.49 % Non-performing assets to total assets 0.26 % 0.26 % 0.27 % 0.26 % 0.30 % Annualized net charge-offs of average total loans 0.05 % 0.04 % 0.07 % 0.07 % 0.04 % Allowance for credit losses to HFI loans 1.08 % 1.09 % 1.13 % 1.14 % 1.17 % Non–GAAP Reconciliation of Net Fully-Taxable Equivalent ("FTE") Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2024 2024 2023 2023 2023 Interest income (GAAP) (A) $ 86,981 $ 85,264 $ 83,514 $ 80,125 $ 76,868 Taxable-equivalent adjustment: Investment securities - tax exempt(1) $ 1,695 $ 1,715 $ 1,799 $ 1,861 $ 1,876 Loan receivable(2) $ 328 $ 353 $ 314 $ 251 $ 249 Interest income (non-GAAP) (B) $ 89,004 $ 87,332 $ 85,627 $ 82,237 $ 78,993 Interest expense (GAAP) (C) $ 41,702 $ 41,976 $ 41,257 $ 38,035 $ 30,708 Net interest income (GAAP) (D) = (A) - (C) $ 45,279 $ 43,288 $ 42,257 $ 42,090 $ 46,160 Net FTE interest income (non-GAAP) (E) = (B) - (C) $ 47,302 $ 45,356 $ 44,370 $ 44,202 $ 48,285 Average interest earning assets (F) 7,212,788 7,293,559 7,239,034 7,286,611 7,212,640 Net FTE interest margin (non-GAAP) (G) = (E*) / (F) 2.64 % 2.50 % 2.43 % 2.41 % 2.69 % (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 *Annualized Non–GAAP Reconciliation of Return on Average Tangible Common Equity (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2024 2024 2023 2023 2023 Net income (loss) (GAAP) (A) $ 14,140 $ 13,991 $ (25,215 ) $ 16,205 $ 18,763 Average stockholders' equity (B) $ 726,332 $ 725,083 $ 702,793 $ 715,485 $ 710,953 Average intangible assets (C) 167,659 168,519 169,401 170,301 171,177 Average tangible equity (Non-GAAP) (D) = (B) - (C) $ 558,673 $ 556,564 $ 533,392 $ 545,184 $ 539,776 Return on average tangible common equity ("ROACE") (non-GAAP) (E) = (A*) / (D) 10.18 % 10.11 % (18.76)% 11.79 % 13.94 % *Annualized Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2024 2024 2023 2023 2023 Total stockholders' equity (GAAP) (A) $ 726,665 $ 721,250 $ 718,812 $ 693,369 $ 709,243 Intangible assets (end of period) (B) 167,121 167,965 168,837 169,741 170,644 Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 559,544 $ 553,285 $ 549,975 $ 523,628 $ 538,599 Total assets (GAAP) (D) 7,912,527 7,855,707 7,940,485 7,959,434 7,963,353 Intangible assets (end of period) (B) 167,121 167,965 168,837 169,741 170,644 Total tangible assets (non-GAAP) (E) = (D) - (B) $ 7,745,406 $ 7,687,742 $ 7,771,648 $ 7,789,693 $ 7,792,709 Tangible common equity to tangible assets (Non-GAAP) (G) = (C) / (E) 7.22 % 7.20 % 7.08 % 6.72 % 6.91 % Non–GAAP Reconciliation of Tangible Book Value Per Share (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2024 2024 2023 2023 2023 Total stockholders' equity (GAAP) (A) $ 726,665 $ 721,250 $ 718,812 $ 693,369 $ 709,243 Intangible assets (end of period) (B) 167,121 167,965 168,837 169,741 170,644 Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 559,544 $ 553,285 $ 549,975 $ 523,628 $ 538,599 Common shares outstanding (D) 43,712,059 43,726,380 43,652,063 43,648,501 43,645,216 Tangible book value per common share (non-GAAP) (E) = (C) / (D) $ 12.80 $ 12.65 $ 12.60 $ 12.00 $ 12.34 Contact: John R. Stewart, CFA Chief Financial Officer Phone: (219) 814-5833 Fax: (219) 874–9280 Date: July 24, 2024 
