Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q3 2021 Earnings Presentation
52 slides from Horizon Bancorp's earnings presentation, Oct 27, 2021
Slide 1: Investor Presentation | October 27, 2021
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 | OCTOBER 27, 2021
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: 3Q21 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 3Q21 Highlights Top-line growth • Stable non-interest income and higher net interest income drive net income growth of 4.0% from 2Q21 and 13.6% from 3Q20 Strong profitability • EPS $0.52 • ROAE of 12.64%, or 12.58% adjusted* • Pre
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: Executive 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 • 32 Years of Banking & Public Accounting Experience • 12 Years with Horizon as CFO Executive Vice President of Horizon • 36 Years of Banking Experience • 11 Years with Horizon, 3 years as Chief Commercial Banking Officer • 42 Yea
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 Extensive and Diligent M&A Expertise Supplements Organic Growth $0.7 $0.8 $0.9 $1.1 $1.2 $1.3 $1.3 $1.4 $1.4 $1.5 $1.8 $1.8 $2.1 $2.7 $3.1 $4.0 $4.2 $5.2 $5.9 $7.5 $5 $7 $7 $7 $7 $8 $9 $9 $10 $13 $20 $
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. Built to Outpace GDP & Industry Over Long-Term Assets Grew 8% ex. PPP During 2020 and are Expected to Remain Stable i
Slide 9: Multiple Revenue Streams Diversifies Risk; Attractive Footprint
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: Markets overview: legacy 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 Transformation
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 Digital Transformation History of Optimizing and Diversifying Customer Channels 2021 PROGRESS & IMPACT FUTURE INITIATIVES & OUTLOOK Multi-channel delivery to meet customers needs • Serving customers through convenient digital and
Slide 12: Multi-channel Delivery Enhancing Branch Network Efficiency
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 ® 62 63 74 73 78 $46 $50 $53 $62 $77 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 - 10 20 30 40 50 60 70 80 90 2017 2018 2019 2020 3Q21 Efficient Branch Network ($ millions) Total Branches Deposits/ Branch 12 48% 44% 57% 73% 76% 30% 40% 50%
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 $26.7 $26.9 $24.2 $24.5 $28.2 $19.4 $22.8 $19.7 $22.2 $23.0 $0.45 $0.52 $0.44 $0.50 $0.52 3Q20 4Q20 1Q21 2Q21 3Q21 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 1.76% 1.91% 1.59% 1.60% 1.60% 3Q20 4
Slide 16: 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 ® 3.45% 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% 0.50% 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 17: 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 ® PPP loans: • Increased the third quarter 2021 loan yield an additional ~ 21bps • Increased the second quarter 2021 loan yield an additional ~ 7bps Commercial loans: • 63% fixed / 37% variable • 26% of variable rate commercial loans
Slide 18: Investment Portfolio 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 ® Federal agency CMO, 6% State and municipal, 57% Federal agency MBS, 19% Private labeled MBS, 4% U.S. Treasury, 5% Corporate, 9% Total Investments at 9/30/21 $2.4B 18 • $2.4B investment portfolio consistently managed for liquidity ra
Slide 19: 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 22% Interest bearing(1) 65% CDs 13% 19 • Average non-interest bearing balances increased 4% • In-market relationships, strategic pricing and runoff of higher-priced time deposits, contributed to continued reduct
Slide 20: Mortgage Contribution
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 ® Jumbo, 42.5% Rental, 1.1% Conforming, 52.6% Construction, 3.8% Total Outstanding at 9/30/21 $603M 20 $365,865 $408,972 $756,859 $570,712 $472,937 2018 2019 2020 3Q20 (YTD) 3Q21 (YTD) $ 0 0 0 s $2,120 $1,914 -$3,716 -$4,043 $2,052 $6
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 ® 21 Efficiency Ratio(1) 3Q ’21 Highlights (1) Footnote Index included in Appendix (see slides 41-52 for non-GAAP reconciliation) Focus on Expense Control 55.6% 57.5% 57.0% 57.7% 54.9% 56.6% 56.5% 58.0% 57.5% 56.2% 3Q20 4Q20 1Q21 2Q21
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: 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, $2,173M, 59% Residential Mortgage, $604M, 17% Consumer, $713M, 19% Mortgage Warehouse, $170M, 5% Held For Sale, $5M, 0% 23 Gross Loans at 9/30/21 $3.7B Diversified & Granular Loan Portfolio Commercial Loans by Industry (
Slide 24: Consumer Loan Portfolio Positioned for 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 • 99.5% secured consumer loans • 95.6% prime, with credit scores ≥700 for 85.6% of portfolio and <640 for 4.4% • Rescored annually • HELOC combined LTV limited to 89.9% • Low delinquency at 0.38% and YTD net charge-offs at 4 basi
Slide 25: 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, 21% Central Indiana, 29% Other, 3% Michigan, 47% Geography at 9/30/21 Non-Owner Occupied Real Estate, 47.0% C&I, 26.3% Owner Occ. Real Estate, 22.1% Agriculture, 2.7% Develop./Land, 1.5% Res. Spec. Homes, 0.5% Cate
Slide 26: Hotels Return To Normal Occupancy Rates
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 ® 26 Hotels Return To Normal Occupancy Rates Predominately Highway Locations & Limited Service Properties 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 ® 26 FAVORABLE LOCATIONS Majority are located near major interst
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 closing 10 offices Geographic diversification & exposure – strong market s
Slide 28: 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 ® 28 Appendix
Slide 29: COVID-19 response: employees, consumers, businesses, communities
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 ® EMPLOYEES CONSUMERS BUSINESSES COMMUNITIES Safety and well being of employees & families is our first priority Installed sneeze guards, customer directional signage, implemented mask requirements, and continuing with sanitizing and
Slide 30: Low Deferral Rates
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 Low Deferral Rates ($ in millions) Type of Loan # Net Balance # Net Balance # Net Balance # Net Balance Commercial 0 $0.0 20 $50.8 0 $0.0 7 $28.3 Mortgage (Retained Only) 10 1.1 0 0.0 4 0.8 0 0.0 Indirect Auto 4 0.0 0 0.0 2 0.0 0
Slide 31: 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 ® 31 ($000s, unaudited) 12/31/20 Net Reserve(1) 1Q21 Net Reserve(1) 2Q21 Net Reserve(1) 3Q21 9/30/21 Commercial $ 42,210 $ 770 $ (1,214) $ 1,355 $ 43,121 Retail Mortgage 4,620 (391) (121) (371) 3,737 Warehousing 1,267 (104) (8) (101)
Slide 32: 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 ® $823 $229 $208 $39 0.02% 0.01% 0.01% 3Q20 4Q20 1Q21 2Q21 3Q21 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $29,314 $26,807 $25,066 $22,322 $29,374 0.72% 0.69% 0.68% 0.63% 0.80% 3Q20 4Q20 1Q21 2Q21 3Q21 Non-Performing Loans NPLs
Slide 33: Payroll Protection Program
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 ® 33 Leveraging the CARES Act to provide additional support to small businesses and their employees • PPP loans totaled ~ $92.3 million through September 30, 2021 • Average loan size less than $121,000 • Continue to process PPP forgiv
Slide 34: Hotel, retail and restaurant loan exposure
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 ® Hotel, 3.9% NOO - Retail, 3.8% Restaurant, 1.6% Leisure & Hospitality, 1.0% 34 Hotels • 18 relationships with $142.8M outstanding across 35 loans • Average LTV of 58% and average loan size of ~ $4.2M • Approximately 77% select servi
Slide 35: Commercial real estate loans by type
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 ® 2% 2% 2% 3% 3% 4% 5% 6% 7% 7% 9% Farm Land Lessors - Residential 1-4 Mini Storage All Others Medical Office Warehouse/ Industrial Lessors Student Housing Retail Motel Office (except medical) Lessors - Residential Multi Note: Data as
Slide 36: 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 ® 36 Jumbo, 42.5% Rental, 1.1% Conforming, 52.6% Construction, 3.8% Total Outstanding at 9/30/21 $603M • 73% of production sold YTD • Predominantly in-market lender • Portfolio mortgages • Underwriting to Fannie Mae guidelines • Full
Slide 37: Robust Capital Foundation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.5% 11.1% 11.6% 12.0% 11.3% 11.7% 11.5% 11.5% 11.9% 11.7% 11.5% 12.0% 2016 2017 2018 2019 2020 3Q21 10.4% 9.9% 10.1% 10.5% 10.7% 10.0% 9.3% 9.7% 9.9% 9.7% 9.0% 9.0% 2016 2017 2018 2019 2020 3Q21 13.9% 12.9% 13.4% 14.0% 14.9% 15.3%
Slide 38: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 38 (1) Footnote Index included in Appendix (see slide 52 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2015 2016 2017 2018 2019 2020 9/30/20 12/31/
Slide 39: 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 ® 39 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 40: Footnote definitions
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 Slide 15 • Adjusted net income and adjusted diluted EPS excludes one-time merger expenses, credit loss expense on acquired loans, gain on sale of ESOP trustee accounts, (gain)/loss on sale of securities, prepayment penalties on b
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 September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Pre-tax income 27,127$ 25,943$ 23,872$ 23,860$ 24,638$ Provision for credit losses 1,112 (1,492) 367 3,042 2,052 Pre-tax, pre-pro
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 September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Net income as reported 23,071$ 22,173$ 20,422$ 21,893$ 20,312$ Acquisition expenses 799 242 - - - Tax effect (166) (51) - - - Net
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 September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Diluted EPS as reported 0.52$ 0.50$ 0.46$ 0.50$ 0.46$ Acquisition expenses 0.02 0.01 - - - Tax effect - - - - - Diluted EPS exclu
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 September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Average assets 6,507,673$ 6,142,507$ 5,936,149$ 5,864,086$ 5,768,691$ Return on average assets ("ROAA") as reported 1.41% 1.45% 1
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 September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2021 2021 2021 2020 2020 2020 2020 Net interest income as reported 46,544$ 42,632$ 42,538$ 43,622$ 43,397$ 42,996$ 40,925$ Average inte
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, 2019 2019 2019 2019 2018 2018 2018 2018 Net interest income as reported 41,519$ 43,463$ 41,529$ 34,280$ 33,836$ 33,772$ 33
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, 2017 2017 2017 2017 2016 2016 2016 2016 Net interest income as reported 31,455$ 27,879$ 27,198$ 25,568$ 20,939$ 24,410$ 20
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 September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2021 2021 2021 2020 2020 2020 2020 Total interest expense as reported 4,324$ 4,788$ 5,051$ 9,612$ 6,749$ 7,348$ 10,729$ Average interes
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 December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2019 2019 2019 2019 2018 2018 2018 2018 Total interest expense as reported 11,879$ 12,248$ 12,321$ 11,093$ 9,894$ 8,499$ 7
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, 2017 2017 2017 2017 2016 2016 2016 2016 Total interest expense as reported 5,319$ 4,191$ 3,607$ 3,266$ 8,450$ 4,552$ 3,781
Slide 51: 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 ® 51 Footnote Index September 30, June 30, 2021 2021 Total deposit interest expense as reported 1,808$ 2,053$ Average interest bearing deposits 3,831,632 3,680,796 Annualized total deposit interest expense as a percentage of average i
Slide 52: Non-GAAP Efficiency Ratio 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 ® 52 Footnote Index September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 34,349$ 33,388$ 32,172$ 36,453$ 33,407$ Net interest in