Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q1 2022 Earnings Presentation
57 slides from Horizon Bancorp's earnings presentation, Apr 27, 2022
Slide 1: Investor Presentation | April 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 | APRIL 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: 1Q22 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 1Q22 Highlights Record Earnings • Record diluted EPS of $0.54, diluted • ROATE of 17.70%* and ROAA of 1.31% • Pre-tax, pre-provision net income* up 9.7% from the linked quarter and 6.1% from the prior year period Organic loan grow
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 $7.42 $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 Diversified & Attractive Footprint E X C E P T I O N A L S E R V I C E • Q U A L I T Y A D V I C E ® 9 Retail Banking Business Banking Mortgage Banking Wealth Management Complementary Reve
Slide 10: Growth and legacy markets 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 ® 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 • Encompass® digital m
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 $24.2 $24.5 $28.2 $23.4 $25.7 $19.7 $22.2 $23.0 $23.7 $23.6 $0.44 $0.50 $0.52 $0.54 $0.54 1Q21 2Q21 3Q21 4Q21 1Q22 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 13.56% 13.94% 14.34% 14.45% 14.56% 1
Slide 16: Asset Sensitive Balance Sheet
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 Liquidity Moved to Earning Assets • Of the $1.9 billion of adjustable rate loans, $1.1 billion adjust with a rate change to their index • Deposit BETA’s range from 4.0% for consumer deposits to 45.0%
Slide 17: Net interest margin and cost of core funds
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% 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% 0.35
Slide 18: Investment 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 ® Federal agency CMO, 3% State and municipal, 50% Federal agency MBS, 16% Private labeled MBS, 4% U.S. Treasury, 19% Corporate, 8% Total Investments at 3/31/22 $3.1B 18 • $3 billion investment portfolio is expected to be maintained du
Slide 19: Unrealized losses and tangible common equity impact
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 67bps in the first quarter • We have the intent and ability to hold the investments to maturity and no plans to sell • Cashflows can be used to f
Slide 20: Strong 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 continued reduction in total deposit cost to 0.10% • Account and depo
Slide 21: Focus on 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 ® 57.0% 57.7% 54.9% 62.7% 58.7% 58.0% 57.5% 56.2% 58.3% 58.7% 1Q21 2Q21 3Q21 4Q21 1Q22 Efficiency Ratio Adj. Efficiency Ratio • Annualized non-interest expense was 2.03% 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: Accelerating 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 3/31/22 Non-Owner Occupied Real Estate, 49.4% C&I, 23.1% Owner Occ. Real Estate, 23.7% Agriculture, 2.3% Develop./Land, 1.1% 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 and Q1 2022 • Production – 2021 $397M, Q1 2022 $147M • Consumer loans increased 3.7%, or 14.9% annualized, during Q1 2022 • Leverage 34 new Indirect Dealerships in the Northern Michigan market • Exp
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, 45.8% Rental, 1.0% Conforming, 47.3% Construction, 5.9% Total Outstanding at 3/31/22 $593M • 68% of production sold YTD • Gain on sale of mortgage loans (“GOS”) and mortgage warehousing income constituted 4.7% of total 1Q2
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 ® $208 $39 $1,412 $136 0.01% 0.04% 1Q21 2Q21 3Q21 4Q21 1Q22 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $25,066 $22,322 $29,374 $19,019 $20,113 0.68% 0.63% 0.80% 0.53% 0.54% 1Q21 2Q21 3Q21 4Q21 1Q22 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 plan to close 7 in 2022 Excess liquidity allo
Slide 28: 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 ® 2022 Goals E X C E P T I O N A L S E R V I C E • Q U A L I T Y A D V I C E ® 28 10-14% ANNUAL COMMERCIAL LOAN GROWTH Excluding PPP loans <2.00% ANNUAL EXPENSES TO AVERAGE ASSETS RATIO >1.30% ROAA >12.5% ROAE NET INTEREST INCOME $ GR
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 Build(1) 1Q22 3/31/22 Commercial $ 40,775 $ (2,986) $ 37,789
Slide 31: Diversified & Granular Loan 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 ® Commercial, $2,259M, 61%Residential Mortgage, $593M, 16% Consumer, $754M, 20% Mortgage Warehouse, $105M, 3% Held For Sale, $4M, 0% 31 Gross Loans at 3/31/22 $3.7B Diversified & Granular Loan Portfolio Commercial Loans by Industry ($
Slide 32: Non-Owner Occupied CRE and commercial loan mix
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% 2% 3% 4% 6% 7% 7% 7% 10% All Others Farm Land Mini Storage Lessors - Residential 1-4 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, 55% of which are at their floor • PPP loans increased Q1 2022 loan yield ~ 2bps • PPP loans increased Q4 2021 loan yield ~ 16bps Retai
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% 11.6%11.2% 11.8% 12.2% 12.0% 12.1% 12.1% 2017 2018 2019 2020 2021 1Q22 9.9% 10.1% 10.5% 10.7% 9.1% 9.7%9.7% 10.0% 10.2% 9.1% 8.9% 8.9% 2017 2018 2019 2020 2021 1Q22 12.9% 13.4% 14.0% 14.9% 15.7% 15.2% 1
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 ($M except per share data) 2016 2017 2018 2019 2020 2021 3/31/21 6/30/2
Slide 36: Leader In Our Core Markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 36 Leader In Our Core Markets Source: S&P Global Market Intelligence. Deposit data as of 6/30/21, estimated pro forma for recent or pending transactions per S&P Global Market Intelligence MSA HBNC Rank HBNC Branches HBNC Market Shar
Slide 37: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 37 Slide 4 • Pre-tax, pre-provision income excludes income tax expense and credit loss expense. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) • Return on average tangible eq
Slide 38: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 38 Slide 17 • Adjusted net interest income and adjusted net interest margin excludes prepayment penalties on borrowings and acquisition-related purchase accounting adjustments. Adjusted cost of core funds includes average balances o
Slide 39: Footnote Index: Net Income Reconciliation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 39 Footnote Index March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Net income as reported 23,563$ 21,425$ 23,071$ 22,173$ 20,422$ Acquisition expenses - 884 799 242 - Tax effect - (184) (166) (51) - N
Slide 40: Footnote Index: Diluted EPS Reconciliation
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Diluted EPS as reported 0.54$ 0.49$ 0.52$ 0.50$ 0.46$ Acquisition expenses - 0.02 0.02 0.01 - Tax effect - - - - - Diluted EPS exclud
Slide 41: Footnote Index: ROAA Reconciliation
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Average assets 7,319,675$ 7,461,343$ 6,507,673$ 6,142,507$ 5,936,149$ Return on average assets ("ROAA") as reported 1.31% 1.14% 1.41%
Slide 42: Footnote Index: ROACE Reconciliation
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Average common equity 716,341$ 719,643$ 724,412$ 706,652$ 697,401$ Return on average common equity ("ROACE") as reported 13.34% 11.81
Slide 43: Footnote Index: ROATE Reconciliation
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Average common equity 716,341$ 719,643$ 724,412$ 706,652$ 697,401$ Less: Average intangible assets 176,356 179,594 174,920 173,905 17
Slide 44: Footnote Index: Pre-Tax Pre-Provision Reconciliation
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Pre-tax income 27,102$ 25,505$ 27,127$ 25,943$ 23,872$ Provision for credit losses (1,386) (2,071) 1,112 (1,492) 367 Pre-tax, pre-pro
Slide 45: Non-GAAP Reconciliation of Net Interest Margin
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Net interest income as reported 48,171$ 49,976$ 46,544$ 42,632$ 42,538$ Average interest earning assets 6,800,549 6,938,258 6,033,088
Slide 46: Non-GAAP Reconciliation of Net Interest Margin 2019-2020
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: Non-GAAP Reconciliation of Net Interest Margin 2017-2018
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: Non-GAAP Reconciliation of Net Interest Margin 2016
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: Cost of Interest Bearing Liabilities
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Total interest expense as reported 3,911$ 4,142$ 4,324$ 4,788$ 5,051$ Average interest bearing liabilities 5,237,779 5,322,968 4,545,
Slide 50: Footnote Index: Cost of Liabilities 2019-2020
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: Cost of Liabilities 2017-2018
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: Cost of Liabilities 2016
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: Non-GAAP Reconciliation of Cost of 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 ® 53 Footnote Index March 31, December 31, 2022 2021 Total deposit interest expense as reported 1,496$ 1,663$ Average interest bearing deposits 4,478,621 4,543,989 Annualized total deposit interest expense as a percentage of average i
Slide 54: Non-GAAP Calculation of Efficiency Ratio
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 March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 36,610$ 39,370$ 34,349$ 33,388$ 32,172$ Net interest income
Slide 55: Non-GAAP Reconciliation of Non-Interest Expense
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 Non-interest Expense Salaries and employee benefits 19,735$ -$ 19,735$ Net occupancy expenses 3,561 - 3,561 Data processing 2,537 - 2,537 Professional fees 314
Slide 56: Non-GAAP Reconciliation of Non-Interest Expense
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: Non-GAAP Reconciliation of Non-Interest Expense
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