Horizon Bancorp executes balance sheet repositioning, sees accretion

Horizon Bancorp announced the execution of a balance sheet repositioning related to its investment securities portfolio and bank owned life insurance policies. The company sold $382.7M in available-for-sale securities, composed of treasury, agency, corporate, and municipal securities with a weighted average book yield of 2.01% and average duration of 3.4 years. Additionally, Horizon surrendered $112.8M in bank owned life insurance. These transactions are designed to immediately improve net interest income and provide significant flexibility to the company’s go-forward funding strategies. The proceeds are expected to be re-deployed in the first half of 2024 into higher yielding loans and other liquid assets. Fourth quarter and full year 2023 net income is expected to reflect an after-tax impact of $32.7M, including a $31.6M pre-tax loss on the sale of securities. Horizon expects the results of these activities to be meaningfully accretive, with estimated annual contributions of $13M to net income and 30c to earnings per share. The company’s regulatory capital ratios remain above well capitalized levels after the transactions, with total capital to risk weighted assets at 13.7%, tier 1 capital at 12.8% and common equity tier 1 at 10.7% on a pro forma basis as of September 30. The transactions are expected to be neutral to tangible common equity and stockholders’ equity, while enhancing the efficiency of the bank’s balance sheet.