Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q1 2021 Earnings Presentation
49 slides from Horizon Bancorp's earnings presentation, Apr 28, 2021
Slide 1: Investor Presentation April 28, 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 | APRIL 28, 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: 1Q21 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 1Q21 Highlights Strong profitability • Net income of $20.4M, or $0.46 per share • ROAA of 1.40%, or 1.35% adjusted* • ROAE of 11.88%, or 11.46% adjusted* • Pre-tax, pre-provision net income of $24.2M, a 1Q record Further asset qua
Slide 5: Management team experience
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 • 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 6: 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 ® 6 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 Bancshares 2
Slide 7: 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 ® 7 * 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 8: 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 • S E N S I B L E A D V I C E ® 8 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 ® 8 Retail Banking Business Banking Mortgage Banking Wealth Management Complementary Reve
Slide 9: Core 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 ® 9 Michigan City, IN / La Porte, IN (Legacy) Indianapolis, IN (Growth) Northwest Indiana (Growth) Lafayette, IN (Growth) Southwest Michigan* (Growth) $1.1B Deposits $680M Deposits $548M Deposits $322M Deposits$413M Deposits 8 Branche
Slide 10: 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 ® 64,805 95,932 107,439 54% 68% 77% 50% 54% 58% 62% 66% 70% 74% 78% 82% 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000 March 2019 March 2020 March 2021 Active Online Banking Users Active Online Banking Users As a Percentage
Slide 11: 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 ® 11 Financial Highlights
Slide 12: Stable 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 ® 12 $ B $21.8 $23.7 $26.7 $26.9 $24.2 $11.2 $14.4 $19.4 $22.8 $19.7 $0.24 $0.32 $0.45 $0.52 $0.44 1Q20 2Q20 3Q20 4Q20 1Q21 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 1.63% 1.68% 1.76% 1.91% 1.59% 1Q20 2
Slide 13: 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 ® 3.36%3.42%3.31% 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% 0.66%0.63% 0.62% 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%
Slide 14: Declining Loan Yields Directionally Consistent with Funding Costs
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 first quarter 2021 loan yield an additional ~ 6bps • Increased the fourth quarter 2020 loan yield an additional ~ 15bps Commercial loans: • 63% fixed / 37% variable • 25% of variable rate commercial loans
Slide 15: Strong 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 24% Interest bearing(1) 62% CDs 14% 15 • Non-interest bearing balances increased 2% • In-market relationships, strategic pricing and runoff of higher-priced time deposits, contributed to continued reduction in t
Slide 16: 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, 42.8% Rental, 0.9% Conforming, 52.3% Construction, 4.0% Total Outstanding at 3/31/21 $582M 16 $365,865 $408,972 $756,859 $110,847 $155,561 2018 2019 2020 1Q20 (YTD) 1Q21 (YTD) $ 0 0 0 s $2,120 $1,914 -$3,716 $25 $213 $6,613 $
Slide 17: 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 ® 17 Efficiency Ratio(1) 1Q ’21 Highlights (1) Footnote Index included in Appendix (see slides 37-49 for non-GAAP reconciliation) Focus on Expense Control 58.8% 56.2% 55.6% 57.5% 57.0% 59.4% 56.5% 56.6% 56.5% 58.0% 1Q20 2Q20 3Q20 4Q20
Slide 18: 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 ® 18 ($000s, unaudited) 12/31/20 Net Reserve Build(1) 1Q21 3/31/21 Commercial $ 42,210 $ 770 $ 42,980 Retail Mortgage 4,620 (391) 4,229 Warehousing 1,267 (104) 1,163 Consumer 8,930 (116) 8,814 Allowance for Credit Losses $ 57,027 $ 15
Slide 19: 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 19
Slide 20: 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, $2,178M, 59% Residential Mortgage, $582M, 16% Consumer, $638M, 18% Mortgage Warehouse, $266M, 7% Held For Sale, $8M, 0% 20 Gross Loans at 3/31/21 $3.7B Diversified & Granular Loan Portfolio Commercial Loans by Industry (
Slide 21: Deferrals Decline to 2.5% of Loans
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 21 Deferrals Decline to 2.5% of Loans ($ in millions) Type of Loan # Net Balance # Net Balance # Net Balance # Net Balance Commercial 2 $5.5 53 $115.2 3 $5.9 33 $83.5 Mortgage (Retained Only) 26 5.2 0 0.0 13 1.4 0 0.0 Indirect Auto
Slide 22: Diversified Commercial Lending
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 ® • Experienced commercial lenders (20+ years on average) • Focus on in-market sponsors in resilient markets • Predominantly a secured lender with recourse to owners • Prudent underwriting standards Northern Indiana, 24% Central India
Slide 23: Higher-risk commercial sectors
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, 3.7% Restaurant, 1.5% Leisure & Hospitality, 0.8% 23 Hotels • 16 relationships with $142.8M outstanding across 36 loans • Average LTV of 58% and average loan size of ~ $4.0M • Approximately 77% select servi
Slide 24: Hotel Sector
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 HOTEL SECTOR 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 ® 24 FAVORABLE LOCATIONS Majority are located near major interstate highways or resort comm
Slide 25: 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 ® $404 $407 $823 $229 $208 0.01% 0.01% 0.02% 0.01% 0.01% 1Q20 2Q20 3Q20 4Q20 1Q21 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $24,002 $28,056 $29,314 $26,807 $25,066 0.65% 0.70% 0.72% 0.69% 0.68% 1Q20 2Q20 3Q20 4Q20 1Q21 Non-Per
Slide 26: 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 ® 26 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 an
Slide 27: 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 ® 27 Appendix
Slide 28: COVID-19 response for 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 29: 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 ® 29 Leveraging the CARES Act to provide additional support to small businesses and their employees • PPP loans totaled ~ $252.3 million through March 31, 2021 • Average loan size less than $119,000 • Continue to process PPP forgivene
Slide 30: Commercial real estate and owner occupied loans by sector
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% 4% 6% 7% 7% 10% Lessors - Residential 1-4 Farm Land Mini Storage All Others Medical Office Warehouse/ Industrial Lessors Student Housing Retail Motel Office (except medical) Lessors - Residential Multi Note: Data a
Slide 31: Quality Consumer 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 ® 31 • 99.4% secured consumer loans • 94.5% prime, with credit scores ≥700 for 82.6% of portfolio and <640 for 5.5% • Rescored annually • HELOC combined LTV limited to 89.9% • Strong asset quality through end of 1Q21 • 30-89 days past
Slide 32: Prime Mortgage 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 ® 32 Jumbo, 42.8% Rental, 0.9% Conforming, 52.3% Construction, 4.0% Total Outstanding at 3/31/21 $582M • 81% of production sold YTD • Predominantly in-market lender • Portfolio mortgages • Underwriting to Fannie Mae guidelines • Full
Slide 33: Strong Liquidity Position
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, 8% State and municipal, 81% Federal agency MBS, 7% U.S. Treasury, 3% Corporate, 1% 33 • Improved and strong liquidity position and borrowing capacity as of 3/31/21 • $1.4B securities portfolio consistently manage
Slide 34: Robust Capital Foundation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.5% 11.1% 11.6% 12.0% 11.3% 12.8% 11.5% 11.5% 11.9% 11.7% 11.5% 11.8% 2016 2017 2018 2019 2020 1Q21 10.4% 9.9% 10.1% 10.5% 10.7% 10.8% 9.3% 9.7% 9.9% 9.7% 9.0% 9.0% 2016 2017 2018 2019 2020 1Q21 13.9% 12.9% 13.4% 14.0% 14.9% 16.9%
Slide 35: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 35 (1) Footnote Index included in Appendix (see slide 49 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2015 2016 2017 2018 2019 2020 3/31/20 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 MSA HBNC Rank HBNC Branches HBNC Market Share Deposits in Market ($M) 2020 Median HHI '20-'25 Est. Pop. Change '20-'25 Est. HHI Change Michigan City-La Porte, IN 1 8 57.7% $1,150 $53,255 0.1% 6.8% India
Slide 37: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 37 Slide 12 • Adjusted net income and adjusted diluted EPS excludes one-time merger expenses, (gain)/loss on sale of securities and death benefit on bank owned life insurance, net of tax. (See further in the Appendix for a reconcili
Slide 38: Footnote Index: Pre-tax, pre-provision income
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 38 Footnote Index March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Pre-tax income 23,872$ 23,860$ 24,638$ 16,632$ 13,239$ Provision for credit losses 367 3,042 2,052 7,057 8,600 Pre-tax, pre-provision
Slide 39: Footnote Index: Adjusted net 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 ® 39 Footnote Index March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Net income as reported 20,422$ 21,893$ 20,312$ 14,639$ 11,655$ Merger expenses - - - - - Tax effect - - - - - Net income excluding me
Slide 40: Footnote Index: Diluted EPS
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, 2021 2020 2020 2020 2020 Net income as reported 0.46$ 0.50$ 0.46$ 0.33$ 0.26$ Merger expenses - - - - - Tax effect - - - - - Net income excluding merger expen
Slide 41: Footnote Index: ROAA
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, 2021 2020 2020 2020 2020 Average assets 5,936,149$ 5,864,086$ 5,768,691$ 5,620,695$ 5,257,332$ Return on average assets ("ROAA") as reported 1.40% 1.49% 1.40%
Slide 42: Footnote Index: 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 ® 42 Footnote Index March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Net interest income as reported 42,538$ 43,622$ 43,397$ 42,996$ 40,925$ Average interest earning assets 5,439,634 5,365,888 5,251,611
Slide 43: Footnote Index: Net Interest Margin 2018-2019
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 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 44: Footnote Index: Net Interest Margin 2016-2017
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 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 45: Footnote Index: Cost of 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 ® 45 Footnote Index March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Total interest expense as reported 5,051$ 9,612$ 6,749$ 7,348$ 10,729$ Average interest bearing liabilities 4,116,568 4,077,223 4,027
Slide 46: Footnote Index: Cost of funds 2018-2019
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 Total interest expense as reported 11,879$ 12,248$ 12,321$ 11,093$ 9,894$ 8,499$ 7
Slide 47: Footnote Index: Cost of funds 2016-2017
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 Total interest expense as reported 5,319$ 4,191$ 3,607$ 3,266$ 8,450$ 4,552$ 3,781
Slide 48: Footnote Index: 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 ® 48 Footnote Index March 31, December 31, 2021 2020 Total deposit interest expense as reported 2,343$ 2,718$ Average interest bearing deposits 3,524,103 3,450,824 Annualized total deposit interest expense as a percentage of average i
Slide 49: Footnote Index: 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 ® 49 Footnote Index March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 32,172$ 36,453$ 33,407$ 30,432$ 31,149$ Net interest income