Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q2 2021 Earnings Presentation
49 slides from Horizon Bancorp's earnings presentation, Jul 27, 2021
Slide 1: Investor Presentation | July 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 | JULY 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: 2Q21 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 2Q21 Highlights Top-line growth • Stable NII and significantly higher non-interest income drive net income growth of 8.6% from 1Q21 and 51.5% from 2Q20 Strong profitability • EPS $0.50, includes $0.01 of M&A expense • ROAA of 1.45
Slide 5: 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 ® 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 ® 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 $6.1 $5 $7 $7 $7 $7 $8 $9 $9 $10 $13 $20 $
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
E X C E P T I O 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: Attractive Markets and 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 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 ® 73,340 92,498 105,240 113,081 65% 66% 75% 80% 48% 52% 56% 60% 64% 68% 72% 76% 80% 84% 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000 December 2018 December 2019 December 2020 June 2021 Active Online Banking Users A
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: 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 ® 12 $ M $23.7 $26.7 $26.9 $24.2 $24.5 $14.4 $19.4 $22.8 $19.7 $22.2 $0.32 $0.45 $0.52 $0.44 $0.50 2Q20 3Q20 4Q20 1Q21 2Q21 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 1.68% 1.76% 1.91% 1.59% 1.60% 2Q20 3
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% 3.13% 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%
Slide 14: Stable 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 second quarter 2021 loan yield an additional ~ 3bps • Increased the first quarter 2021 loan yield an additional ~ 6bps Commercial loans: • 62% fixed / 38% variable • 25% of variable rate commercial loans h
Slide 15: 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) 65% CDs 12% 15 • Average non-interest bearing balances increased 7% • In-market relationships, strategic pricing and runoff of higher-priced time deposits, contributed to continued reduct
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, 44.7% Rental, 0.9% Conforming, 50.5% Construction, 3.9% Total Outstanding at 6/30/21 $559M 16 $365,865 $408,972 $756,859 $363,644 $328,590 2018 2019 2020 2Q20 (YTD) 2Q21 (YTD) $ 0 0 0 s $2,120 $1,914 -$3,716 -$2,735 $1,716 $6
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) 2Q ’21 Highlights (1) Footnote Index included in Appendix (see slides 37-49 for non-GAAP reconciliation) Focus on Expense Control 56.2% 55.6% 57.5% 57.0% 57.7% 56.5% 56.6% 56.5% 58.0% 57.5% 2Q20 3Q20 4Q20 1Q21
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(1) 1Q21 Net Reserve(1) 2Q21 6/30/21 Commercial $ 42,210 $ 770 $ (1,214) $ 41,766 Retail Mortgage 4,620 (391) (121) 4,108 Warehousing 1,267 (104) (8) 1,155 Consumer 8,930 (116) (194) 8,620 A
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, $2,105M, 60% Residential Mortgage, $559M, 16% Consumer, $650M, 18% Mortgage Warehouse, $205M, 6% Held For Sale, $7M, 0% 20 Gross Loans at 6/30/21 $3.5B Diversified & Granular Loan Portfolio Commercial Loans by Industry (
Slide 21: 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 ® 21 • 99.4% secured consumer loans • 94.9% prime, with credit scores ≥700 for 83.9% of portfolio and <640 for 5.1% • Rescored annually • HELOC combined LTV limited to 89.9% • Strong asset quality through end of 2Q21 • 30-89 days past
Slide 22: Quality Commercial 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 ® • 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, 23% Central India
Slide 23: 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 ® 23 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 ® 23 FAVORABLE LOCATIONS Majority are located near major interstate highways or resort comm
Slide 24: 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 ® $407 $823 $229 $208 $390.01% 0.02% 0.01% 0.01% 2Q20 3Q20 4Q20 1Q21 2Q21 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $28,056 $29,314 $26,807 $25,066 $22,322 0.70% 0.72% 0.69% 0.68% 0.63% 2Q20 3Q20 4Q20 1Q21 2Q21 Non-Performing
Slide 25: Key Franchise Highlights
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 25 Key Franchise Highlights Positioned well for growth in 2022 and 2023, expansion of consumer dealer network, 20% increase in CLOs, 14 offices acquired, and closing 10 offices Geographic diversification & exposure – strong market s
Slide 26: Appendix
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 26 Appendix
Slide 27: COVID-19 Response: Employees, Consumers, Businesses, Communities
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® EMPLOYEES CONSUMERS BUSINESSES COMMUNITIES Safety and well being of employees & families is our first priority Installed sneeze guards, customer directional signage, implemented mask requirements, and continuing with sanitizing and
Slide 28: Deferrals Decline Over 40%
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 28 Deferrals Decline Over 40% ($ in millions) Type of Loan # Net Balance # Net Balance # Net Balance # Net Balance Commercial 3 $5.9 33 $83.5 0 $0.0 20 $50.8 Mortgage (Retained Only) 13 1.4 0 0.0 10 1.1 0 0.0 Indirect Auto 2 0.0 0 0
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 ~ $169.4 million through June 30, 2021 • Average loan size less than $93,000 • Continue to process PPP forgiveness
Slide 30: Hotels, Retail and Restaurants 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, 4.0% NOO - Retail, 3.7% Restaurant, 1.6% Leisure & Hospitality, 0.9% 30 Hotels • 16 relationships with $139.8M outstanding across 35 loans • Average LTV of 58% and average loan size of ~ $4.0M • Approximately 77% select servi
Slide 31: Commercial Loans by Industry
E X C E P T I O 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% 10% 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 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, 44.7% Rental, 0.9% Conforming, 50.5% Construction, 3.9% Total Outstanding at 6/30/21 $559M • 73% 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, 5% State and municipal, 68% Federal agency MBS, 9% Private labeled MBS, 2% U.S. Treasury, 11% Corporate, 5% 33 • Improved and strong liquidity position and borrowing capacity as of 6/30/21 • $1.8B securities port
Slide 34: Robust Capital Foundation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.5% 11.1% 11.6% 12.0% 11.3% 12.6% 11.5% 11.5% 11.9% 11.7% 11.5% 12.1% 2016 2017 2018 2019 2020 2Q21 10.4% 9.9% 10.1% 10.5% 10.7% 10.8% 9.3% 9.7% 9.9% 9.7% 9.0% 9.1% 2016 2017 2018 2019 2020 2Q21 13.9% 12.9% 13.4% 14.0% 14.9% 16.7%
Slide 35: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 35 (1) Footnote Index included in Appendix (see slide 49 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2015 2016 2017 2018 2019 2020 6/30/20 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 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 $53,255 0.1% 6.8% India
Slide 37: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 37 Slide 12 • Adjusted net income and adjusted diluted EPS excludes one-time merger expenses, (gain)/loss on sale of securities and death benefit on bank owned life insurance, net of tax. (See further in the Appendix for a reconcili
Slide 38: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 38 Footnote Index June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 Pre-tax income 25,943$ 23,872$ 23,860$ 24,638$ 16,632$ Provision for credit losses (1,492) 367 3,042 2,052 7,057 Pre-tax, pre-provisio
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, 2021 2021 2020 2020 2020 Net income as reported 22,173$ 20,422$ 21,893$ 20,312$ 14,639$ Acquisition expenses 242 - - - - Tax effect (51) - - - - Net income exc
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, 2021 2021 2020 2020 2020 Diluted EPS as reported 0.50$ 0.46$ 0.50$ 0.46$ 0.33$ Acquisition expenses 0.01 - - - - Tax effect - - - - - Diluted EPS excluding acq
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, 2021 2021 2020 2020 2020 Average assets 6,142,507$ 5,936,149$ 5,864,086$ 5,768,691$ 5,620,695$ Return on average assets ("ROAA") as reported 1.45% 1.40% 1.49%
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, March 31, 2021 2021 2020 2020 2020 2020 Net interest income as reported 42,632$ 42,538$ 43,622$ 43,397$ 42,996$ 40,925$ Average interest earning assets 5,659,3
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 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
E X C E P T I O 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
E X C E P T I O 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, 2021 2021 2020 2020 2020 2020 Total interest expense as reported 4,788$ 5,051$ 9,612$ 6,749$ 7,348$ 10,729$ Average interest bearing liabilities 4,24
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 Total interest expense as reported 11,879$ 12,248$ 12,321$ 11,093$ 9,894$ 8,499$ 7
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 Total interest expense as reported 5,319$ 4,191$ 3,607$ 3,266$ 8,450$ 4,552$ 3,781
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 June 30, March 31, 2021 2021 Total deposit interest expense as reported 2,053$ 2,343$ Average interest bearing deposits 3,680,796 3,524,103 Annualized total deposit interest expense as a percentage of average inter
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, 2021 2021 2020 2020 2020 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 33,388$ 32,172$ 36,453$ 33,407$ 30,432$ Net interest income