Horizon Bank increases quarterly profit by 3.3% year-on-year
Horizon Bank reported a profit of $23.8 million in the third quarter.
That’s up 3.3% year-over-year, but down 4.2% from the second quarter.
The Michigan City-based bank earned 55 cents per share, down from 52 cents in the third quarter of last year, but down from 57 cents in the second quarter.
“We are proud of the performance of our merchant banking and consumer finance teams who delivered annualized loan growth of 7.8% in the third quarter, excluding PPP loans and commercial equity loans sold,” said said Chairman and CEO Craig Dwight. “This continued strong loan growth drove higher net interest income and more than offset headwinds from lower residential mortgage activity and wealth management fees, as well as higher cost funds due to rapidly rising interest rates.”
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In the third quarter, Horizon Bank posted a return of 1.24% on average assets and 18.71% on average tangible equity.
It grew lending 14.5% year-over-year and 7.9% quarter-over-quarter. Commercial loans rose 13.8% to a record $2.35 billion, while consumer loans rose 31.7% year-over-year to a record 899 .9 million.
“As the current economic environment continues to face rising inflation and supply chain disruption, we remain focused on positioning ourselves to continue to meet the changing needs of our customers,” said Dwight. “We believe our investments in talent to enhance our capabilities and prepare for the future support our disciplined growth trajectory, and with the benefit of our strong balance sheet and strong asset quality metrics, will continue to improve. our performance through the end of 2022 and into 2023.”
Net interest income increased by $387,000 in the third quarter. Dwight attributed it to strong loan growth.
“To support this level of growth, we had to increase borrowings and this impacted the adjusted net interest margin by four basis points in the quarter,” he said. “The overall cost of funds has been contained at 0.69%, which provides a strong margin for new loans to come. aggressively seek lower cost deposit funding Horizon’s deposit betas were 23% for the third quarter and in line with our expectation of around 35%, however additional pressure is expected as the Board of Governors Federal Reserve will likely continue to rapidly raise rates over the next few months.”
Horizon Bank made significant progress in the third quarter toward reducing its annualized ratio of non-interest expense to average assets to below 2%. It reached 1.99% at the end of the third quarter.
“We remain disciplined and focused on expense management, a critical part of our strategy given the economic uncertainty and rising inflation,” Dwight said. “However, we are confident in our ability to continue to reduce our annualized target to less than 2%. We expect the higher expense rate we incurred in the third quarter to be significantly reduced from the first. quarter of 2023. Additionally, in 2023, we expect to see the full year benefits of seven additional branch closures and associated cost savings.”