Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q2 2022 Earnings Presentation
57 slides from Horizon Bancorp's earnings presentation, Jul 27, 2022
Slide 1: Investor Presentation | July 27, 2022
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® A NASDAQ Traded Company - Symbol HBNC INVESTOR PRESENTATION | JULY 27, 2022
Slide 2: Forward-Looking Statements
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 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,
Slide 3: Corporate Overview
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Corporate Overview 3
Slide 4: 2Q22 Highlights
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 4 2Q22 Highlights Record Earnings • Record diluted EPS of $0.57 • ROATE of 19.86%* and ROAA of 1.33% • Pre-tax, pre-provision net income* up 13.1% from the linked quarter and 18.9% from the prior year period Organic loan growth • To
Slide 5: Why Horizon? A High-Performing Operator in Growth Markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 5 Disciplined operating culture Compelling value supported by commitment to dividend Well-established long-term growth goals Very attractive Midwest markets Deliberate mix of businesses delivers very strong operational performance W
Slide 6: Seasoned Management Team
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 6 Craig M. Dwight Chairman & CEO • 43 Years of Banking Experience • 23 Years as President or CEO of Bank Mark E. Secor EVP & Chief Financial Officer • 33 Years of Banking and Public Accounting Experience • 13 Years with Horizon as C
Slide 7: A History of Profitable Growth
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® A History of Profitable Growth Positioned Well for Future Organic Growth $0.72 $0.76 $0.91 $1.13 $1.22 $1.26 $1.31 $1.39 $1.40 $1.55 $1.85 $1.76 $2.08 $2.65 $3.14 $3.96 $4.25 $5.24 $5.89 $7.36 $7.64 $5 $7 $7 $7 $7 $8 $9 $9 $10 $13 $
Slide 8: Built to Outpace GDP & Industry Over Long-Term
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 8 * U.S. Bureau of Economic Analysis, retrieved from FRED, Federal Reserve Bank of St. Louis, fred.stlouisfed.org, April 18, 2022. Built to Outpace GDP & Industry Over Long-Term Assets Grew 29% ex. PPP During 2021 23% 5% 21% 23% 8%
Slide 9: Multiple Revenue Streams Diversifies Risk
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 9 Multiple Revenue Streams Diversifies Risk 9 Retail Banking Business Banking Mortgage Banking Wealth Management Complementary Revenue Streams that are Counter-Cyclical to Varying Economic Cycles Serving the Right Side of Chicago He
Slide 10: Core and growth markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 10 Michigan City, IN / La Porte, IN (Legacy) Indianapolis, IN (Growth) Northwest Indiana (Growth) Lafayette, IN (Growth) Southwest Michigan* (Growth) $1.3B Deposits $687M Deposits $609M Deposits $330M Deposits$501M Deposits 8 Branch
Slide 11: Digital Banking Excellence
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Digital Banking Excellence Sophisticated Internal Capabilities Supported by Best-in-Class Third Parties 11 NEW IN 2022 • Online deposit accounting opening platform to include time deposit, IRA and HSA accounts • Develop real-time AP
Slide 12: Community Banking at Scale
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Community Banking at Scale Efficient Utilization of Talent, Technology & Branch Network 12 50 50 50 60 65 81 32 32 46 56 62 63 74 73 78 665 701 716 839 788 900 0 200 400 600 800 1000 - 50 100 150 200 250 2016 2017 2018 2019 2020 202
Slide 13: Productive Use of Capital
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 13 Productive Use of Capital Deploying capital through productive acquisitions and to drive organic growth • Completed acquisition of 14 Michigan branches and associated deposits and loans in 3Q21, adding mass and scale to Horizon’s
Slide 14: Financial Highlights
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 14 Financial Highlights
Slide 15: Strong Core Earnings
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 15 $ M $24.5 $28.2 $23.4 $25.7 $29.1 $22.2 $23.0 $23.7 $23.6 $24.2 $0.50 $0.52 $0.54 $0.54 $0.56 2Q21 3Q21 4Q21 1Q22 2Q22 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 13.94% 14.34% 14.45% 14.56% 16.84% 2
Slide 16: Asset Sensitive Balance Sheet Drives Higher Net Interest Income
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 16 Asset Sensitive Balance Sheet Drives Higher Net Interest Income with Rising Rates • Of the $2.0 billion of adjustable rate loans, $1.2 billion adjust with a rate change to their index • Deposit BETA’s range from 4.0% for consumer
Slide 17: Net interest margin trends
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 3.66% 3.71% 3.63% 3.61% 3.58% 3.60% 3.59% 3.43% 3.46% 3.61% 3.67% 3.49% 3.44% 3.35% 3.27% 3.44% 3.17% 3.13% 3.12% 2.86% 2.93% 3.12% 0.48% 0.50% 0.55% 0.63% 0.70% 0.82% 0.93% 1.07% 1.19% 1.13% 1.10% 1.04% 0.95% 0.60% 0.53% 0.45% 0.40
Slide 18: Investment Portfolio Significant Contribution to Interest Income
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Federal agency CMO, 3% State and municipal, 51% Federal agency MBS, 19% Private labeled MBS, 1% U.S. Treasury, 18% Corporate, 8% Total Investments at 6/30/22 $3.1B 18 • $3 billion investment portfolio is expected to be maintained du
Slide 19: Capital and OCI impact on TCE
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 19 • Other Comprehensive Income (“OCI”) loss reduced Tangible Common Equity (“TCE”) by 46bps in the second quarter • We have the intent and ability to hold the investments to maturity and no plans to sell • Cashflows can be used to
Slide 20: Stable Low Cost Core Deposits
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Non-interest bearing 23% Interest bearing(1) 64% CDs 13% 20 • In-market relationships, strategic pricing and runoff of higher-priced time deposits, contributed to total deposit cost of 0.11% • Deposit beta’s have lagged short term r
Slide 21: Good Expense Control
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 57.7% 54.9% 62.7% 58.7% 55.6% 57.5% 56.2% 58.3% 58.7% 56.1% 2Q21 3Q21 4Q21 1Q22 2Q22 Efficiency Ratio Adj. Efficiency Ratio • Annualized non-interest expense was 1.95% of average assets, supporting full year 2022 target of less than
Slide 22: Loan Portfolio Review
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Loan Portfolio Review 22
Slide 23: Robust Commercial Loan Growth
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Northern Indiana, 19% Central Indiana, 30% Other, 3% Michigan, 48% Geography at 6/30/22 Non-Owner Occupied Real Estate, 49.3% C&I, 23.8% Owner Occ. Real Estate, 23.1% Agriculture, 2.4% Develop./Land, 1.0% Res. Spec. Homes, 0.4% Cate
Slide 24: Excellent Consumer Loan Growth
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 24 • Excellent Production in 2021, Q1 2022 & Q2 2022 • Production – 2021 $397M, Q1 2022 $147M, Q2 2022 $195M • Expect momentum to continue through Q3 • Consumer loans increased 12.6%, or 50.5% annualized, during Q2 2022 • Indirect o
Slide 25: Residential mortgage portfolio
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 25 Jumbo, 47.2% Rental, 0.9% Conforming, 46.6% Construction, 5.3% Total Outstanding at 6/30/22 $609M • Gain on sale of mortgage loans (“GOS”) and mortgage warehousing income constituted only 5.6% of total 2Q22 revenue • GOS income t
Slide 26: Strong Asset Quality Metrics
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® $39 $1,412 $136 $284 0.04% 0.01% 2Q21 3Q21 4Q21 1Q22 2Q22 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $22,322 $29,374 $19,019 $20,113 $20,206 0.63% 0.80% 0.53% 0.54% 0.51% 2Q21 3Q21 4Q21 1Q22 2Q22 Non-Performing Loans NPLs (pe
Slide 27: Key Franchise Highlights
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 27 Key Franchise Highlights Positioned well for growth in 2022 and 2023, expansion of consumer dealer network, 20% increase in CLOs, 14 offices acquired and closed 10 offices in 2021 and closing 7 more offices in 2022 Excess liquidi
Slide 28: Exceeding Announced 2022 Goals
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Annual Commercial Loan Growth 10% 10-14% 16.90% Reduction in Mortgage Originations 15-18% 15-18% 28.80% Annual Consumer Loan Growth 5-9% 10-14% 33.70% Annual Expenses to Average Assets <2.00% <2.00% 1.99% ROAA >1.20% >1.30% 1.32% RO
Slide 29: Appendix
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 29 Appendix
Slide 30: Stable Credit Loss Reserves
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 30 (1) Net Reserve Build is equal to the provision for credit losses net of net charge-offs/recoveries. Stable Credit Loss Reserves ($000s, unaudited) 12/31/21 Net Reserve(1) 1Q22 Net Reserve(1) 2Q22 6/30/22 Commercial $ 40,775 $ (2
Slide 31: Gross Loans at 6/30/22
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Commercial, $2,364M, 60% Residential Mortgage, $609M, 15% Consumer, $849M, 22% Mortgage Warehouse, $116M, 3% Held For Sale, $3M, 0% 31 Gross Loans at 6/30/22 $3.9B Commercial Loans by Industry ($M) 6/30/22 Balance % of Commercial Po
Slide 32: Non-Owner Occupied CRE
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 1% 2% 2% 3% 3% 5% 6% 6% 7% 7% 10% Farm Land Mini Storage Lessors - Residential 1-4 All Others Medical Office Warehouse/ Industrial Retail Lessors Student Housing Motel Office (except medical) Lessors - Residential Multi Note: Data a
Slide 33: Stable Loan Yields
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Commercial loans: • 63% fixed / 37% variable • 24% of variable rate commercial loans have floors, 25% of which are at their floor Retained mortgage loans: • 56% fixed / 44% variable • 93% of variable rate mortgage loans have floors,
Slide 34: Robust Capital Foundation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.1% 11.6% 12.0% 11.3% 12.0% 12.3% 11.2% 11.8% 12.2% 12.0% 12.1% 11.8% 2017 2018 2019 2020 2021 2Q22 9.9% 10.1% 10.5% 10.7% 9.1% 9.8% 9.7% 10.0% 10.2% 9.1% 8.9% 9.0% 2017 2018 2019 2020 2021 2Q22 12.9% 13.4% 14.0% 14.9% 15.7% 15.8%
Slide 35: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 35 (1) Footnote Index included in Appendix (see slide 54 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2016 2017 2018 2019 2020 2021 6/30/21 9/30/2
Slide 36: Leader In Our Core Markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 36 Leader In Our Core Markets Source: S&P Global Market Intelligence. Deposit data as of 6/30/21, estimated pro forma for recent or pending transactions per S&P Global Market Intelligence MSA HBNC Rank HBNC Branches HBNC Market Shar
Slide 37: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 37 Slide 4 • Pre-tax, pre-provision income excludes income tax expense and credit loss expense. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) • Return on average tangible eq
Slide 38: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 38 Slide 17 • Adjusted net interest income and adjusted net interest margin excludes prepayment penalties on borrowings and acquisition-related purchase accounting adjustments. Adjusted cost of core funds includes average balances o
Slide 39: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 39 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Net income as reported 24,859$ 23,563$ 21,425$ 23,071$ 22,173$ Acquisition expenses - - 884 799 242 Tax effect - - (184) (166) (51) Ne
Slide 40: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 40 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Diluted EPS as reported 0.57$ 0.54$ 0.49$ 0.52$ 0.50$ Acquisition expenses - - 0.02 0.02 0.01 Tax effect - - - - - Diluted EPS excludi
Slide 41: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 41 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Average assets 7,476,238$ 7,319,675$ 7,461,343$ 6,507,673$ 6,142,507$ Return on average assets ("ROAA") as reported 1.33% 1.31% 1.14%
Slide 42: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 42 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Average common equity 677,299$ 716,341$ 719,643$ 724,412$ 706,652$ Return on average common equity ("ROACE") as reported 14.72% 13.34%
Slide 43: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 43 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Average common equity 677,299$ 716,341$ 719,643$ 724,412$ 706,652$ Less: Average intangible assets 175,321 176,356 179,594 174,920 173
Slide 44: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 44 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Pre-tax income 28,834$ 27,102$ 25,505$ 27,127$ 25,943$ Provision for credit losses 240 (1,386) (2,071) 1,112 (1,492) Pre-tax, pre-prov
Slide 45: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 45 Footnote Index June 30, March 31, December 31, September 30, June 30, March 31, 2022 2022 2021 2021 2021 2021 Net interest income as reported 53,008$ 48,171$ 49,976$ 46,544$ 42,632$ 42,538$ Average interest earning assets 6,927,3
Slide 46: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 46 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2020 2020 2020 2020 2019 2019 2019 2019 Net interest income as reported 43,622$ 43,397$ 42,996$ 40,925$ 41,519$ 43,463$ 41
Slide 47: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 47 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2018 2018 2018 2018 2017 2017 2017 2017 Net interest income as reported 33,836$ 33,772$ 33,550$ 33,411$ 31,455$ 27,879$ 27
Slide 48: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 48 Footnote Index December 31, September 30, June 30, March 31, 2016 2016 2016 2016 Net interest income as reported 20,939$ 24,410$ 20,869$ 19,774$ Average interest earning assets 2,932,145 2,957,944 2,471,354 2,367,250 Net interest
Slide 49: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 49 Footnote Index June 30, March 31, December 31, September 30, June 30, March 31, 2022 2022 2021 2021 2021 2021 Total interest expense as reported 4,564$ 3,911$ 4,142$ 4,324$ 4,788$ 5,051$ Average interest bearing liabilities 5,411
Slide 50: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 50 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2020 2020 2020 2020 2019 2019 2019 2019 Total interest expense as reported 9,612$ 6,749$ 7,348$ 10,729$ 11,879$ 12,248$ 12
Slide 51: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 51 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2018 2018 2018 2018 2017 2017 2017 2017 Total interest expense as reported 9,894$ 8,499$ 7,191$ 6,015$ 5,319$ 4,191$ 3,607
Slide 52: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 52 Footnote Index December 31, September 30, June 30, March 31, 2016 2016 2016 2016 Total interest expense as reported 8,450$ 4,552$ 3,781$ 3,754$ Average interest bearing liabilities 2,369,810 2,443,986 2,058,463 1,974,325 Annualiz
Slide 53: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 53 Footnote Index June 30, March 31, 2022 2022 Total deposit interest expense as reported 1,677$ 1,496$ Average interest bearing deposits 4,540,959 4,478,621 Annualized total deposit interest expense as a percentage of average inter
Slide 54: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 54 Footnote Index June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 36,368$ 36,610$ 39,370$ 34,349$ 33,388$ Net interest income
Slide 55: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 55 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits 19,957$ -$ 19,957$ 19,735$ -$ 19,735$ Net occupancy ex
Slide 56: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 56 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits 20,549$ (202)$ 20,347$ 18,901$ (25)$ 18,876$ Net occup
Slide 57: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 57 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits 17,730$ -$ 17,730$ 16,871$ -$ 16,871$ Net occupancy ex