Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q4 2021 Earnings Presentation
56 slides from Horizon Bancorp's earnings presentation, Jan 26, 2022
Slide 1: Investor Presentation January 26, 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 | JANUARY 26, 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: 4Q21 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 4Q21 Highlights Record EPS for the year and strong Q4 • YTD Diluted EPS $1.98, or $2.00 adjusted* • QTD Diluted EPS $0.49, or $0.54 adjusted* • YTD ROACE of 12.23%, or 12.45% adjusted* • QTD ROACE of 11.81%, or 13.08% adjusted* 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 James D. "Jim" Neff President • 44 Years of Banking Experience • 4 Years as President • 21 Years as Senior Mortgage and Retail
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 $7.4 $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. YTD 2021 information not available at time of publication. Built to Outpace GDP & Industry Over Long-Term Assets Grew
Slide 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 • 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: Key Markets: Legacy and 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 ® 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 $74 $10 $20 $30 $40 $50 $60 $70 $80 $90 - 10 20 30 40 50 60 70 80 90 2017 2018 2019 2020 2021 Efficient Branch Network ($ millions) Total Branches Deposits/ Branch 12 48% 44% 57% 73% 75% 30% 40% 50% 60
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 $26.9 $24.2 $24.5 $28.2 $23.4$22.8 $19.7 $22.2 $23.0 $23.7 $0.52 $0.44 $0.50 $0.52 $0.54 4Q20 1Q21 2Q21 3Q21 4Q21 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 16.41% 13.56% 13.94% 14.34% 14.45% 4Q
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 as of September 30, 2021 • Of the $1.8 billion of adjustable rate loans, $925.0 million adjust immediately with a rate change • Deposit BETA’s range from 4.0% for consumer deposits to 45.0% on money
Slide 17: 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% 3.13% 3.12% 2.86% 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
Slide 18: 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 • 26% of variable rate commercial loans have floors, 78% of which are at their floor • PPP loans increased Q4 2021 loan yield ~ 16bps • PPP loans increased Q3 2021 loan yield ~ 21bps Reta
Slide 19: 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, 4% State and municipal, 55%Federal agency MBS, 23% Private labeled MBS, 5% U.S. Treasury, 4% Corporate, 9% Total Investments at 12/31/21 $2.7B 19 • $3 billion investment portfolio is expected to be maintained dur
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 • Average non-interest bearing balances increased 16% • In-market relationships, strategic pricing and runoff of higher-priced time deposits, contributed to continued reduc
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 ® 57.5% 57.0% 57.7% 54.9% 62.7% 56.5% 58.0% 57.5% 56.2% 58.3% 4Q20 1Q21 2Q21 3Q21 4Q21 Efficiency Ratio Adj. Efficiency Ratio • Annualized non-interest expense declined to 1.95% of average assets, excluding acquisition and non-recurri
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: 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 ® 23 • Positioned for Growth • Leverage 34 new Indirect Dealerships in the Northern Michigan market • Hire experienced Indirect Lending Representative for Northern Michigan and Central Indiana markets • Expanded Mortgage Broker progra
Slide 24: 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 ® 24 Jumbo, 43.6% Rental, 1.2% Conforming, 50.2% Construction, 5.0% Total Outstanding at 12/31/21 $594M • 70% of production sold YTD • Predominantly in-market lender • Positioned for Growth • Expanded geographic footprint to over 20 s
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, 20% Central Indiana, 29% Other, 3% Michigan, 48% Geography at 12/31/21 Non-Owner Occupied Real Estate, 48.7% C&I, 23.6% Owner Occ. Real Estate, 23.5% Agriculture, 2.6% Develop./Land, 1.1% Res. Spec. Homes, 0.5% Cat
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 ® $229 $208 $39 $1,412 0.01% 0.01% 0.04% 4Q20 1Q21 2Q21 3Q21 4Q21 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $26,807 $25,066 $22,322 $29,374 $19,0190.69% 0.68% 0.63% 0.80% 0.53% 4Q20 1Q21 2Q21 3Q21 4Q21 Non-Performing Loans NPL
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: 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% ANNUAL COMMERCIAL LOAN GROWTH Excluding PPP loans <2.00% ANNUAL EXPENSES TO AVERAGE ASSETS RATIO >1.20% ROAA >12.5% ROAE NET INTEREST INCOME $ GROWT
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: 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) Net Type of Loan # Net Balance % of Total % of Portfolio # Net Balance % of Total % of Portfolio Balance % Decrease Commercial 7 $28.3 96.9% 1.3% 6 $10.6 98.1% 0.5% -62.5% Mortgage (Retained Onl
Slide 31: 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 ® 31 Leveraging the CARES Act to provide additional support to small businesses and their employees • PPP loans totaled ~ $25.8 million through December 31, 2021 • Average loan size less than $130,000 • Continue to process PPP forgive
Slide 32: 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 ® 32 ($000s, unaudited) 12/31/20 Net Reserve(1) 1Q21 Net Reserve(1) 2Q21 Net Reserve(1) 3Q21 Net Reserve(1) 4Q21 12/31/21 Commercial $ 42,210 $ 770 $ (1,214) $ 1,355 $ (2,346) $ 40,775 Retail Mortgage 4,620 (391) (121) (371) 119 3,856
Slide 33: 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 ® 33 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 ® 33 FAVORABLE LOCATIONS Majority are located near major interst
Slide 34: 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, $2,157M, 60% Residential Mortgage, $594M, 17% Consumer, $727M, 20% Mortgage Warehouse, $109M, 3% Held For Sale, $13M, 0% 34 Gross Loans at 12/31/21 $3.6B Diversified & Granular Loan Portfolio Commercial Loans by Industry
Slide 35: Commercial Real Estate Loan Mix
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 2% 2% 2% 3% 3% 4% 5% 6% 7% 8% 11% Farm Land Lessors - Residential 1-4 Mini Storage All Others Medical Office Warehouse/ Industrial Lessors Student Housing Retail Motel Office (except medical) Lessors - Residential Multi Note: Data a
Slide 36: Robust Capital Foundation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.5% 11.1% 11.6% 12.0% 11.3% 11.7% 11.5% 11.5% 11.9% 11.7% 11.5% 12.0% 2016 2017 2018 2019 2020 2021 10.4% 9.9% 10.1% 10.5% 10.7% 9.2%9.3% 9.7% 9.9% 9.7% 9.0% 9.0% 2016 2017 2018 2019 2020 2021 13.9% 12.9% 13.4% 14.0% 14.9% 15.4% 1
Slide 37: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 37 (1) Footnote Index included in Appendix (see slide 52 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2016 2017 2018 2019 2020 2021 12/31/20 3/31/
Slide 38: 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 ® 38 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 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 Slide 4 • Adjusted net income and adjusted diluted EPS excludes one-time acquisition expenses, credit loss expense on acquired loans, gain on sale of ESOP trustee accounts, ESOP settlement expenses, (gain)/loss on sale of securit
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 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 41: 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 ® 41 Footnote Index December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2021 2021 2021 2021 2020 2021 2020 Net income as reported 21,425$ 23,071$ 22,173$ 20,422$ 21,893$ 87,091$ 68,499$ Acquisition exp
Slide 42: 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 ® 42 Footnote Index December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2021 2021 2021 2021 2020 2021 2020 Diluted EPS as reported 0.49$ 0.52$ 0.50$ 0.46$ 0.50$ 1.98$ 1.55$ Acquisition expenses 0.02 0.
Slide 43: 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 ® 43 Footnote Index December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2021 2021 2021 2021 2020 2021 2020 Average assets 7,461,343$ 6,507,673$ 6,142,507$ 5,936,149$ 5,864,086$ 6,514,251$ 5,628,783$ Re
Slide 44: 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 ® 44 Footnote Index December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2021 2021 2021 2021 2020 2021 2020 Average common equity 719,643$ 724,412$ 706,652$ 697,401$ 680,857$ 712,122$ 665,466$ Return on
Slide 45: 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 ® 45 Footnote Index December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 Pre-tax income 25,505$ 27,127$ 25,943$ 23,872$ 23,860$ Provision for credit losses (2,071) 1,112 (1,492) 367 3,042 Pre-tax, pre-pr
Slide 46: Footnote Index: Net Interest Margin 2020-2021
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 ® 46 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2021 2021 2021 2021 2020 2020 2020 2020 Net interest income as reported 49,976$ 46,544$ 42,632$ 42,538$ 43,622$ 43,397$ 42
Slide 47: 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 ® 47 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 48: 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 ® 48 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 49: Footnote Index: Cost of Funds 2020-2021
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 ® 49 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2021 2021 2021 2021 2020 2020 2020 2020 Total interest expense as reported 4,142$ 4,324$ 4,788$ 5,051$ 9,612$ 6,749$ 7,348
Slide 50: 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 ® 50 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 51: 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 ® 51 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 52: 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 ® 52 Footnote Index December 31, September 30, 2021 2021 Total deposit interest expense as reported 1,663$ 1,808$ Average interest bearing deposits 4,543,989 3,831,632 Annualized total deposit interest expense as a percentage of avera
Slide 53: 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 ® 53 Footnote Index December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 39,370$ 34,349$ 33,388$ 32,172$ 36,453$ Net interest inc
Slide 54: Footnote Index: Non-Interest Expense 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 ® 54 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits
Slide 55: Footnote Index: Non-Interest Expense 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 ® 55 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits 16,871$ -$ 16,871$ 20,030$ -$ 20,030$ Net occupancy ex
Slide 56: Footnote Index: Non-Interest Expense Twelve Months
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 74,051$ (227)$ 73,824$ 71,082$ -$ 71,082$ Net occupanc