Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Investor Presentation (June 2020)
45 slides from Horizon Bancorp's investor presentation, Jun 10, 2020
Slide 1: Investor Presentation
A NASDAQ Traded Company - Symbol HBNC Investor Presentation A NASDAQ Traded Company - Symbol HBNC Exhibit 99.1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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 t
Slide 3: Corporate Overview
HORIZON‘ ANK — BAN Corporate Overview 2 Pil ON AL SERVI
Slide 4: Seasoned Management Team
Seasoned Management Team 31 Years of Banking & Public Accounting Experience 11 Years with Horizon as CFO Executive Vice President of Horizon Previous position held at Horizon includes Chief Investment and Asset Liability Manager 35 Years of Banking Experience 2 Years as Chief Commercial Banking Offi
Slide 5: Diversified & Attractive Footprint
BRANCHES LOAN PRODUCTION OFFICE Diversified & Attractive Footprint $5.4B of Assets $3.7B of Loans $3.9B of Deposits Key Highlights (Q1 ‘20) 0.89% GAAP ROA 0.85% Adj. ROA(1) 1.62% Adj. PTPP ROA(1) 58.8% Eff. Ratio(1) 3.56% NIM Multiple Revenue Streams Diversifies Risk Retail Banking Business Banking
Slide 6: A History of Profitable Growth
A History of Profitable Growth Extensive and Diligent M&A Expertise Supplements Organic Growth 2002 - 2007 Organic M&A St. Joseph, MI South Bend, IN Elkhart, IN Merrillville, IN Anchor Mortgage Alliance Financial 2008 - 2013 Organic M&A Kalamazoo, MI Indianapolis, IN American Trust Heartland Bancsha
Slide 7: Attractive & Stable Midwest Markets
Attractive & Stable Midwest Markets Top 5 Markets by Deposits Michigan City, IN / La Porte, IN Indianapolis, IN Northwest Indiana Lafayette, IN Southwest Michigan* $1.0B Deposits $573M Deposits $511M Deposits $293M Deposits $341M Deposits 9 Branches 9 Branches 10 Branches 7 Branches 10 Branches Simi
Slide 8: Employees, Consumers, Businesses, Communities
Employees Consumers Businesses Communities Safety and well being of employees & families is our first priority Implemented pandemic plan in March after completing test run in February 2020 Lobby access by appointment only – all offices are open 42% of our employees working remotely Social distancing
Slide 9: Payment Deferrals as of May 31, 2020
Payment Deferrals as of May 31, 2020 * All other consists of sold mortgage loans and indirect loans not allocated to the sales offices.
Slide 10: Payroll Protection Program
Payroll Protection Program Through May 31, 2020 Leveraging the CARES Act to provide additional support to small businesses and their employees PPP loans totaled more than $300 million through May 31, 2020 Average loan size less than $135,000 As of 5/31/20, we have recorded approximately $11.1 millio
Slide 11: Financial Highlights
HORIZON‘ — BANK Financial Highlights ExXEEPR TIONAL SERVI
Slide 12: Solid Track Record of Consistent Growth & Profitability
Solid Track Record of Consistent Growth & Profitability (1) Footnote Index included in Appendix (see slide 36 for non-GAAP reconciliation)
Slide 13: Strong Core Earnings Power
Strong Core Earnings Power $000s $000s Footnote Index included in Appendix (see slides 35, 37-39 for non-GAAP reconciliation)
Slide 14: Stable Net Interest Margin
Stable Net Interest Margin Footnote Index included in Appendix (see slides 39 & 43 for non-GAAP reconciliation) Source: S&P Global Market Intelligence. (1) (1) (2)
Slide 15: Diverse Sources of Revenue
Diverse Sources of Revenue $000s $000s Mortgage Contribution Q1 ‘20 Non-interest Income Breakout $12.1M Q1 ‘20 Highlights $ in 000s Diverse sources of non-interest income – representing 22.8% of total revenue Continued strong mortgage contribution Mortgage banking (MRQ): Gain on sale of mortgage loa
Slide 16: Focus on Expense Control
Focus on Expense Control Efficiency Ratio(1) Non-interest Expense Breakout ($M) Highlights Remain focused on expense control and driving positive operating leverage Continue to rationalize retail locations as customers expand use of technology Closing 2 branches in 2020 Closed 11 branches in 2019 Cl
Slide 17: Strong Core Funding
Strong Core Funding Deposit Re-Pricing Opportunities Quick and decisive action to reprice deposits began immediately after the Fed’s interest rate cuts in March, making Horizon Bank one of the first in our markets to lower rates Account and deposit retention data very strong to date Interest rate re
Slide 18: Ample Sources of Liquidity
Ample Sources of Liquidity Improved and strong liquidity position and borrowing capacity as of 3/31/20 Pledging majority of municipal securities and PPP loans to the FRB for immediate available liquidity $1.1 billion securities portfolio consistently managed for liquidity rather than return. As of 3
Slide 19: Well Prepared to Implement CECL
Well Prepared to Implement CECL CECL Adoption ($000s, unaudited) 12/31/19 Impact Day One 1/1/20 NCOs Recoveries Reserve Build 3/31/20 Commercial $ 11,996 $ 13,618 $ 25,614 $ 20 $ 6,916 $ 32,550 Retail Mortgage 923 4,048 4,971 (17) 700 5,654 Warehousing 1,077 - 1,077 - (22) 1,055 Consumer 3,671 4,911
Slide 20: Robust Capital Foundation
Robust Capital Foundation Source: S&P Global Market Intelligence. Note: Company closed the acquisition of Salin Bancshares, Inc. in March 2019. TCE / TA (%) Leverage Ratio (%) CET1 Ratio (%) Total RBC Ratio (%) 4.0% Adequate + Buffer 10.5% 7.0% KBW Regional Bank Index Median
Slide 21: Loan Portfolio Review
HORIZON‘ ANK — BAN Loan Portfolio Review 2 Pil ON AL SERVI
Slide 22: Diversified and Granular Loan Portfolio
Diversified and Granular Loan Portfolio Yield on Loans (%) / Total Loans ($B) Gross Loan Composition ($M) – 3/31/20 Highlights as of 3/31/20 $3.7B Portfolio is diversified and granular; with an average commercial loan size of approximately $366.3k Mortgage portfolio: 97% prime with credit score ≥670
Slide 23: Quality Consumer Loan Portfolio
Quality Consumer Loan Portfolio As of 3/31/20: 99.2% secured consumer loans 95.0% prime, with credit scores ≥700 for 82.0% of portfolio and <640 for 5.0% Rescored annually HELOC combined LTV limited to 89.9% Strong asset quality through end of 1Q20 30-89 days past due 0.49% NPAs 0.60% March 31, 2020
Slide 24: Prime Mortgage Loan Portfolio
Prime Mortgage Loan Portfolio As of 3/31/20: 69% of production sold YTD Predominantly in-market lender Portfolio mortgages Underwriting to Fannie Mae guidelines Full documentation and employment, income and asset verification 97% prime with credit score ≥670 Strong asset quality through end of 1Q20
Slide 25: Diversified Commercial Lending
Diversified Commercial Lending Focus on in-market sponsors in resilient markets ~$2.1 billion of commercial loans as of 3/31/20 Prudent underwriting standards Commercial NPAs 0.47% Predominantly a secured lender with recourse to owners Experienced commercial lenders (20+ years on average) Metro Area
Slide 26: Low Levels of Concentrated Exposure
Non-Owner Occupied CRE – % of Total Commercial Loans Owner Occupied CRE – % of Total Commercial Loans 54% of Total Commercial Loans $1.1 billion 21% of Total Commercial Loans $0.4 billion C&I Loans – % of Total Commercial Loans 25% of Total Commercial Loans $0.5 billion Low Levels of Concentrated Ex
Slide 27: Sectors with Escalated Monitoring
Sectors with Escalated Monitoring Hotel, Restaurant and Retail Hotel 19 relationships with $135.3 million outstanding across 31 projects Average LTV of 50% and committed loan size of ~ $4.96 million 69% of balances in select service properties, 23% in economy properties and 8% in independent Marriot
Slide 28: Strong Asset Quality Entering 2020
Strong Asset Quality Entering 2020 $000s $000s $000s $000s CECL CECL (1) Footnote Index included in Appendix (see slide 45 for non-GAAP reconciliation)
Slide 29: Key Franchise Highlights
Key Franchise Highlights Seasoned management team – over 200 years combined banking experience Geographic diversification & exposure – strong market share in core footprint Stable Midwest markets with balanced industrial bases and growth opportunities High quality balance sheet with strong liquidity
Slide 30: Appendix
HORIZON‘ ANK —BANI Appendix 2 Pil ON AL SERVI
Slide 31: Historical Financials
Historical Financials Footnote Index included in Appendix (see slide 42 for non-GAAP reconciliation) As calculated by S&P Global Market Intelligence.
Slide 32: Leader In Our Core Markets
Leader In Our Core Markets Source: S&P Global Market Intelligence. Deposit data as of 6/30/19, estimated pro forma for recent or pending transactions per S&P Global Market Intelligence.
Slide 33: Historical Interest Coverage
Historical Interest Coverage Source: Company documents. Excludes one-time merger and restructuring charges, securities gains/losses, BOLI and other non-recurring items as listed in Company filings. Q1 2020 adjusted pre-tax income excludes provision expense primarily attributable to COVID-19 ($8.260M
Slide 34: Footnote Index
Footnote Index Slides 12-13 Adjusted net income and adjusted diluted EPS excludes one-time merger expenses, (gain)/loss on sale of securities, death benefit on bank owned life insurance and other one-time or non-recurring items, net of tax. (See further in the Appendix for a reconciliation of these
Slide 35: Footnote Index: Reconciliation of Net Income
HORIZON‘ —— BANK Footnote Index Net Income as sported Net income excluding merger expenses (Gain) /loss on sale of investment securities “Tax effect Net income excluding (gain) loss on sale of investment securities Death benefit on bank owned life insurance (BOLI Net income excluding death benefit o
Slide 36: Footnote Index: Annual Net Income Reconciliation
HORIZON: Footnote Index — BAN (ollacs in Thousands Except per Share, Unaudited) December 31, December 3h, ‘December 31, December 3h, December i, 2019 2018 2017 2016 2015 Net Income as eported ¥ Coy Bi Bir Boe Ds Menger expenses 5,650 487 3,656 6827 4389 Tax effect (ox) 102) 1,003) 1,998) 4,585) Neti
Slide 37: Reconciliation of Diluted Earnings per Share
HORIZON‘ OR EON Footnote Index ‘Non-GAAP Reconciliation of Diluted Earnings per Share (Unaudited) ‘Three Months Ended ‘March 31, December 31, September 30, June 30, March 31, 2020 2019 2019 2019 2019 Diluted earnings per share ("EPS") as reported $ 0.260 § 041 § 046 § 037° $ 0.28 lerger expenses - -
Slide 38: Reconciliation of Pre-Tax, Pre-Provision Income
_HORIZON' Footnote Index Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Income (Dollars in Thousands, Unaudited) Months Ended March 31, December 31, September 30, June 30, March 31, 2020 2019 19 Pre-tax income $ 13,239 $ 22,463 $ 245 19947 § 12,890 Provision for eredit losses 86 896 364 Pre-tax,
Slide 39: Reconciliation of Net Interest Margin
_HORIZON' Footnote Index ‘Non-GAAP Recon: of Net Interest Margin (Dollars in. “Thowands, Unaudited) ‘Three Months Ended March 31, December 31, September 30, June 30, March 31, Net interest income as reported $ 40,925 $ 41,519 $ 43,463 $ 41,529 $ 34,280 Average interest earning assets 4,746,202 4,748
Slide 40: Reconciliation of Non-interest Income
_HORIZON' Footnote Index ‘Non-GAAP Reconciliation of Non-interest Income (Dollars in thowss, Unaudited) Months Ended March 31, December 31, September 30, June 30, March 31, 2019 2019 2019 Non-interest income as reported $ 12,063 $ 11934 7 $ 10898 § 8712, ais) os on sale of investment securities 339)
Slide 41: Reconciliation of Non-interest Expense
_HORIZON' Footnote Index Non. iation of Non-i (Dollars in Thousands, Unaudited) ‘Three Months Ended March 31, December 31, September 30, June 30, ‘March 31, 2020 2019 2019 2019 2019 Non-interest expense as reported $ 31149 $ 30,650 $ 30,060 $ 31,584 $ 29,738 Merger expense: : - - (1,532) (4,118) Adj
Slide 42: Calculation of Efficiency Ratio
_HORIZON' Footnote Index (Dollars in Thousands, Unauelited) March 31, December 31, September 30, Tune 30, March 31, 2020 2019 2019 2019 2019 ‘Non-GAAP Calculation of Efficiency Ratio Non interest expense as reported $ 3AM $ 30,650 $ 30060. § 31584 $ 29,738 Netinterest income as reported 40,925 41519
Slide 43: Non-GAAP Liabilities
HORIZON‘ Footnote Index eon BANK Non-GAAP Liabilities Dollars in ‘Thousands, Unaudited) ‘Three Months Ended ‘Twelve Months Ended March 31, December 31, December 31, December 31, December 31, 2020 2019 2018 2016 ‘Total interest expense as reported $ 10,729 $ 4754 § 31,599 $ 16,383 $ 20,537 Average in
Slide 44: Reconciliation of Cost of Deposits
HORIZON Footnote Index — BANK Non-GAAP Reconciliation of Cost of Deposits (Dollars in ‘Thousands, Unaudited) March 31, March 31, December 31, 2020 2020 2019 (MTD) (QTD) (MTD) ‘Total deposit interest expense as reported $ 2,248 § 7.16 = $ 2,938 Average interest bearing deposits 3,215,325 3,225,323 3,
Slide 45: Reconciliation of Allowance for Credit Losses
— BAN HORIZON: Footnote Index Non-GAAP Reconciliation of Allowance for Credit Losses (ollars in Thousands, Unaudited) ‘Three Months Ended March 31, December 31, September30, June 30, March 31, 2020 2019 2019 2019 2019 Allowance for Credit Losses ("ACL") as reported S840 S—S«17,GGT._— SSS«7S9SG.SSCBB