Horizon Bancorp Inc 8-K, filed May 25, 2021
Horizon Bancorp Inc (HBNC)
About this 8-K
Horizon Bancorp Inc filed this 8-K on May 25, 2021.
Items reported
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
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Item 8.01 Other Events
On May 25, 2021, Horizon Bank (“Horizon Bank”), a wholly owned subsidiary of Horizon Bancorp, Inc. (the “Company”), entered into a definitive purchase and assumption agreement (the “Purchase Agreement”) to acquire 14 TCF National Bank (“TCF”) branches in 11 Michigan counties with approximately $976 million in deposits and $278 million in associated loans, which are being divested by TCF Financial Corporation in connection with its merger with Huntington Bancshares Incorporated. The transaction, which is expected to be completed by the end of the third quarter of 2021, is subject to regulatory approval and other customary closing conditions and adjustments.
On May 25, 2021, the Company issued a press release announcing the signing of the Purchase Agreement and an investor conference call to discuss the transaction to be held on May 26, 2021 at 7:30 a.m. CT (8:30 a.m. ET). A copy of the press release and investor presentation are attached as Exhibits 99.1 and 99.2, respectively, to this Form 8-K and are incorporated herein by reference.
The information contained herein, including the attached investor presentation, are furnished pursuant to this Item 8.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 nor shall the information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 except as may be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release dated May 25, 2021 | |
| 99.2 | Investor Presentation | |
| 104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document) | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: May 25, 2021 | HORIZON BANCORP, INC. | |||||||
| By: | /s/ Mark E. Secor |
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| Mark E. Secor, | ||||||||
| Executive Vice President & Chief Financial Officer | ||||||||
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Exhibit 99.1
Horizon Bank to Acquire 14 TCF National Bank Branches in
Michigan with $976 Million in Deposits and $278 Million in Loans
Extends Horizon’s Midwest retail franchise in 11 Michigan counties
MICHIGAN CITY, Ind., May 25, 2021 — Horizon Bank, a wholly owned subsidiary of Horizon Bancorp, Inc. (NASDAQ GS: HBNC) (“Horizon”), has entered into a definitive purchase and assumption agreement to acquire 14 TCF National Bank (“TCF”) branches in 11 Michigan counties with approximately $976 million in deposits and $278 million in associated loans, which are being divested by TCF Financial Corporation in connection with its merger with Huntington Bancshares Incorporated.
“We are excited to welcome Horizon Bank’s newest employees and customers and introduce them to our record of exceptional service to consumers, small businesses, non-profits and municipalities across Michigan and Indiana,” Chairman and CEO Craig M. Dwight said. “This financially and strategically attractive transaction is a logical extension of our efficient retail franchise, which is designed to further enhance our low-cost core deposit and funding capability to support loan growth in a recovering economy.”
The transaction, which is expected to be completed by the end of the third quarter of 2021, is subject to regulatory approval and other customary closing conditions and adjustments. Horizon expects to add over 50,000 primarily retail and small business customer accounts and the entire workforce of the acquired branches.
Currently, Horizon Bank operates 74 bank branches, including 15 in Michigan, and customers across its diverse and economically attractive Midwestern markets conduct a majority of their transactions through its convenient digital and virtual banking channels.
Transaction Summary
Horizon Bank agreed to pay 1.75% premium on deposits acquired at closing, or $17.1 million based on deposits outstanding of approximately $976 million at March 31, 2021. Horizon expects the transaction to be in excess of 17% accretive to 2022 earnings per share, excluding non-recurring transaction-related expenses. Tangible book value dilution is expected to be 5.0%, with a TBV earnback of approximately two years. An internal rate of return of approximately 21% is anticipated.
The transaction is expected to expand Horizon’s already low-cost core deposit franchise, even with conservative runoff and attrition assumptions. Deposit accounts to be acquired have an average relationship life of more than 10 years. The 0.08% average cost of acquired deposits is expected to further reduce Horizon’s total deposit cost, which was an average of 0.21% in the first quarter of 2021.
The low operating cost of the branches to be acquired should also further reduce Horizon’s comparatively low efficiency ratio and non-interest expense to average assets ratio.
Horizon Bank is also acquiring performing residential mortgage, consumer, and small business loans associated with the branches at a 3.50% discount. Based on due diligence conducted on the portfolio to be acquired, Horizon believes the loan discount is more than sufficient to cover any credit risk exposure. Loans outstanding for the portfolio to be acquired totaled approximately $278 million at March 31, 2021, more than 86% of which were associated with deposit accounts at the 14 branches.
As an experienced integrator, the Michigan branch transaction will be Horizon Bank’s 15th acquisition since 2002 and fifth in the last five years, productively deploying excess capital and cash currently held at the holding company.
“We have a demonstrated history of integrating cultures, prioritizing community involvement and retaining seasoned local bankers, which continue to be key components to our future success,” added Dwight.
Donnelly Penman & Partners served as financial advisor and Warner Norcross + Judd LLP served as legal advisor to Horizon on the transaction.
Investor Presentation and Conference Call
An investor presentation with additional information, including a complete list of acquired branches, will be available at https://investor.horizonbank.com/news-and-presentations.
Horizon will also host an investor conference call tomorrow morning to review its branch transaction plans. Participants may access the live conference call on May 26, 2021 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 877-317-6789 from the United States, 866-450-4696 from Canada or 412-317-6789 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.
A telephone replay of the call will be available for approximately one week following the live conference. The replay may be accessed by dialing 877-344-7529 from the United States, 855-669-9658 from Canada or 412-317-0088 from other international locations, and entering the access code 10156750.
About Horizon Bancorp, Inc.
Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $6.1 billion-asset bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon’s retail offerings include prime residential, indirect auto, and other secured consumer
lending to in-market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in-market business banking and treasury management services, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana’s Michigan City, is available at horizonbank.com and investor.horizonbank.com.
Forward Looking Statements
This press release may contain forward-looking statements regarding the financial performance, business prospects, growth, and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “expect,” “pro forma,” “intend,” “plan,” “believe,” “will,” “should,” and similar expressions in connection with any discussion of future operating or financial performance.
Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its most recent annual and quarterly reports on Form 10-K and Form 10-Q and the following: the possibility that the transaction does not close when expected or at all because required regulatory approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, the effects of the COVID-19 pandemic interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Horizon currently and intends to operate; the ability to promptly and effectively integrate the acquired branches into the business of Horizon Bank; the reaction of the companies’ customers, employees and counterparties to the transaction; and the diversion of management time on transaction-related issues. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.
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Investor Contact:
Contact: Mark Secor
Chief Financial Officer
Phone: (219) 873-2611
Media Contact:
Contact: Amy Phares
Public Relations Manager
Phone: (219) 874-9208
Exhibit 99.2 Extension of Low-Cost Deposit Franchise with Acquisition of 14 Michigan Branches INVESTOR PRESENTATION | MAY 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 Exhibit 99.2 Extension of Low-Cost Deposit Franchise with Acquisition of 14 Michigan Branches INVESTOR PRESENTATION | MAY 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
Important Information Forward-Looking Statements This presentation may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in these presentation materials should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its most recent annual and quarterly reports on Form 10-K and Form 10-Q and the following: the possibility that the transaction does not close when expected or at all because required regulatory approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of the effects of the COVID-19 pandemic changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Horizon currently and intends to operate; the ability to promptly and effectively integrate the acquired branches into the business of Horizon Bank; the reaction of the companies’ customers, employees and counterparties to the transaction; and the diversion of management time on transaction-related issues. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law. Non-GAAP Measures Certain non-GAAP financial measures are presented herein. Horizon believes they are useful to investors and provide a greater understanding of Horizon’s business without giving effect to non-recurring costs and non-core items. For each non-GAAP financial measure, we have presented comparable GAAP measures and reconciliations of the non-GAAP measures to those GAAP measures in the Appendix to this presentation. ® 2 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Important Information Forward-Looking Statements This presentation may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in these presentation materials should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its most recent annual and quarterly reports on Form 10-K and Form 10-Q and the following: the possibility that the transaction does not close when expected or at all because required regulatory approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of the effects of the COVID-19 pandemic changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Horizon currently and intends to operate; the ability to promptly and effectively integrate the acquired branches into the business of Horizon Bank; the reaction of the companies’ customers, employees and counterparties to the transaction; and the diversion of management time on transaction-related issues. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law. Non-GAAP Measures Certain non-GAAP financial measures are presented herein. Horizon believes they are useful to investors and provide a greater understanding of Horizon’s business without giving effect to non-recurring costs and non-core items. For each non-GAAP financial measure, we have presented comparable GAAP measures and reconciliations of the non-GAAP measures to those GAAP measures in the Appendix to this presentation. ® 2 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Branch Acquisition Summary 14 branches, ~$976M of deposits and ~$278M of loans 1.75% premium on deposits with 14 TCF National Bank branches in Michigan Attractive Pricing 0.08% average cost of deposits, expected to further reduce HBNC’s total deposit cost, which Low-Cost Core Deposits was an average of 0.21% in the first quarter of 2021 compared to a peer median of 0.27%* Low operating cost of 14 branches should reduce HBNC’s already low efficiency ratio of Low-Cost Operations 57.03% and annualized OpEx-to-average-assets ratio of 2.20% Acquiring mortgage, consumer and small business loans at a 3.5% discount Performing Loans Expected to exceed 17% accretion to 2022 EPS Highly Accretive TBV dilution of 5.0% with an earnback of approximately two years Modest TBV Dilution Exceeds HBNC hurdle rates including approximately 21% internal rate of return Strong IRR Very productive deployment of excess holding-company capital and $60.0 million of cash Deploying Capital down-streamed to the bank, with no external capital raise required for this transaction Adds mass and scale in Midland and provides entry to other attractive markets in the Complementary Markets northern and central regions of Michigan’s lower peninsula th th Michigan branch transaction will be HBNC’s 15 acquisition since ‘02 and 5 since ’17, and Proven Integrator the company continues to evaluate additional M&A opportunities Closing by the end of 3Q21, subject to regulatory approval and customary closing conditions and adjustments; conservative attrition assumptions given industry-wide surge in deposits Key Assumptions from federal stimulus funding, in addition to normal runoff; and approximately $2M in pre-tax non-recurring transaction-related expenses * HBNC data as of 1Q21. Peer medians for U.S. commercial banks with $3B-$7B in assets, according to most-recent quarter data available from S&P Global Market Intelligence. ® 3 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Branch Acquisition Summary 14 branches, ~$976M of deposits and ~$278M of loans 1.75% premium on deposits with 14 TCF National Bank branches in Michigan Attractive Pricing 0.08% average cost of deposits, expected to further reduce HBNC’s total deposit cost, which Low-Cost Core Deposits was an average of 0.21% in the first quarter of 2021 compared to a peer median of 0.27%* Low operating cost of 14 branches should reduce HBNC’s already low efficiency ratio of Low-Cost Operations 57.03% and annualized OpEx-to-average-assets ratio of 2.20% Acquiring mortgage, consumer and small business loans at a 3.5% discount Performing Loans Expected to exceed 17% accretion to 2022 EPS Highly Accretive TBV dilution of 5.0% with an earnback of approximately two years Modest TBV Dilution Exceeds HBNC hurdle rates including approximately 21% internal rate of return Strong IRR Very productive deployment of excess holding-company capital and $60.0 million of cash Deploying Capital down-streamed to the bank, with no external capital raise required for this transaction Adds mass and scale in Midland and provides entry to other attractive markets in the Complementary Markets northern and central regions of Michigan’s lower peninsula th th Michigan branch transaction will be HBNC’s 15 acquisition since ‘02 and 5 since ’17, and Proven Integrator the company continues to evaluate additional M&A opportunities Closing by the end of 3Q21, subject to regulatory approval and customary closing conditions and adjustments; conservative attrition assumptions given industry-wide surge in deposits Key Assumptions from federal stimulus funding, in addition to normal runoff; and approximately $2M in pre-tax non-recurring transaction-related expenses * HBNC data as of 1Q21. Peer medians for U.S. commercial banks with $3B-$7B in assets, according to most-recent quarter data available from S&P Global Market Intelligence. ® 3 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Logical Market Extension Charlevoix Otsego 14 Branches in 11 Counties WISCONSIN Crawford Logical extension of Horizon’s low-cost core deposit franchise Wexford in Michigan to further enhance already low-cost funding Roscommon Missaukee capability to support overall growth Arenac MICHIGAN Mecosta Arenac County Newaygo County Midland Newaygo Shiawassee Charlevoix County Otsego County Crawford County Roscommon County Current Mecosta County Shiawassee County Footprint Midland County Wexford County Missaukee County OHIO ILLINOIS Branches to be Acquired Current Footprint 0.08% >10 years Av. Deposit Cost Av. Deposit Account Tenure INDIANA Familiar and respected local competitor with culture of commitment to longstanding community banking relationships with their neighbors KENTUCKY ® ® 4 4 E E X X C C E E P P T T II O O N N A A L L S S E E R R V V II C C E E • • S S E E N N S S II B B L L E E A A D D V V II C C E E Logical Market Extension Charlevoix Otsego 14 Branches in 11 Counties WISCONSIN Crawford Logical extension of Horizon’s low-cost core deposit franchise Wexford in Michigan to further enhance already low-cost funding Roscommon Missaukee capability to support overall growth Arenac MICHIGAN Mecosta Arenac County Newaygo County Midland Newaygo Shiawassee Charlevoix County Otsego County Crawford County Roscommon County Current Mecosta County Shiawassee County Footprint Midland County Wexford County Missaukee County OHIO ILLINOIS Branches to be Acquired Current Footprint 0.08% >10 years Av. Deposit Cost Av. Deposit Account Tenure INDIANA Familiar and respected local competitor with culture of commitment to longstanding community banking relationships with their neighbors KENTUCKY ® ® 4 4 E E X X C C E E P P T T II O O N N A A L L S S E E R R V V II C C E E • • S S E E N N S S II B B L L E E A A D D V V II C C E E
Acquiring 14 Branches in 11 Counties Deal takes Michigan up to 35% of deposits and 45% of loans* Average Branch Size of $69 Million Arenac County Newaygo County • 220 S. Main Street, Standish • 211 West Main Street., Fremont • 144 W. Huron Road, Au Gres Otsego County Charlevoix County • 521 W. Main Street, Gaylord • 1425 Bridge Street, Charlevoix Roscommon County Crawford County • 7409 W. Houghton Lake Drive, Houghton Lake • 2500 S I-75 Business Loop, Grayling Shiawassee County Mecosta County • 310 N. Shiawassee Street, Corunna • 125 N. Michigan Ave., Big Rapids • 1345 E. M21, Owosso Midland County Wexford County • 2910 Jefferson Ave., Midland • 1408 N. Mitchell Street, Cadillac • 302 S. Mitchell Street, Cadillac Missaukee County • 101 N. Roland Street, McBain * Pro forma total company deposits and loans based on Michigan balances at HBNC and branches to be acquired on 3/31/2021. ® 5 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Acquiring 14 Branches in 11 Counties Deal takes Michigan up to 35% of deposits and 45% of loans* Average Branch Size of $69 Million Arenac County Newaygo County • 220 S. Main Street, Standish • 211 West Main Street., Fremont • 144 W. Huron Road, Au Gres Otsego County Charlevoix County • 521 W. Main Street, Gaylord • 1425 Bridge Street, Charlevoix Roscommon County Crawford County • 7409 W. Houghton Lake Drive, Houghton Lake • 2500 S I-75 Business Loop, Grayling Shiawassee County Mecosta County • 310 N. Shiawassee Street, Corunna • 125 N. Michigan Ave., Big Rapids • 1345 E. M21, Owosso Midland County Wexford County • 2910 Jefferson Ave., Midland • 1408 N. Mitchell Street, Cadillac • 302 S. Mitchell Street, Cadillac Missaukee County • 101 N. Roland Street, McBain * Pro forma total company deposits and loans based on Michigan balances at HBNC and branches to be acquired on 3/31/2021. ® 5 E X C E P T I O 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 and Successful Integrator th Branch transaction will be the bank’s 15 acquisition since ‘02 Experienced internal operations and integration team Three bank owned and operated call centers to be fully staffed and open extended hours to support integration 2014 - 2021 st • 1 Mtg. • Bargersville All 14 acquired branches will open as Horizon Bank locations at • Summit • Lafayette close • Peoples • Wolverine Deposit customers of acquired branches will continue to be served • Farmers • Salin the by same employees they know and trust, with the full workforce offered Horizon Bank positions • LaPorte • 14 MI branches (pending) • CNB Mentors assigned to each office to assist with post data processing $5.9 6.00 80 questions $5.2 70 Treasury management one on one contact with municipalities to 5.00 $68 assist with conversion $67 $4.2 60 $4.0 2008 - 2013 4.00 50 $53 • American Trust $3.1 2002 - 2007 3.00 40 $2.7 • Heartland • Anchor Mortgage Bancshares $2.1 30 $1.8 $33 $1.8 2.00 • Alliance Financial $1.5 $1.4 $1.4 $1.3 $1.3 $1.2 20 $1.1 $24 $0.9 $21 $20 $20 $0.8 1.00 $0.7 $18 10 $13 $10 $9 $9 $8 $5 $7 $7 $7 $7 - - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Assets ($B) Net Income ($M) ® 6 E X C E P T I O 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 and Successful Integrator th Branch transaction will be the bank’s 15 acquisition since ‘02 Experienced internal operations and integration team Three bank owned and operated call centers to be fully staffed and open extended hours to support integration 2014 - 2021 st • 1 Mtg. • Bargersville All 14 acquired branches will open as Horizon Bank locations at • Summit • Lafayette close • Peoples • Wolverine Deposit customers of acquired branches will continue to be served • Farmers • Salin the by same employees they know and trust, with the full workforce offered Horizon Bank positions • LaPorte • 14 MI branches (pending) • CNB Mentors assigned to each office to assist with post data processing $5.9 6.00 80 questions $5.2 70 Treasury management one on one contact with municipalities to 5.00 $68 assist with conversion $67 $4.2 60 $4.0 2008 - 2013 4.00 50 $53 • American Trust $3.1 2002 - 2007 3.00 40 $2.7 • Heartland • Anchor Mortgage Bancshares $2.1 30 $1.8 $33 $1.8 2.00 • Alliance Financial $1.5 $1.4 $1.4 $1.3 $1.3 $1.2 20 $1.1 $24 $0.9 $21 $20 $20 $0.8 1.00 $0.7 $18 10 $13 $10 $9 $9 $8 $5 $7 $7 $7 $7 - - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Assets ($B) Net Income ($M) ® 6 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Low-Cost Core Deposit Franchise Enhanced with New Branches to be Acquired 1Q21 Average Deposit Cost* HBNC Acquiring Pro Forma Non-interest bearing 0.00% 0.00% 0.00% Interest bearing 0.10% 0.03% 0.09% (excluding CDs) Time Deposits (CDs) 1.00% 0.50% 0.92% Total Deposits 0.21% 0.08% 0.18% Pro Forma HBNC Acquiring Non-interest CDs CDs CDs Non-interest bearing 13% 13% 14% Non-interest bearing 24% bearing 27% 39% Total Total Total Deposits at Deposits at Deposits 3/31/21 3/31/21 $975.7M $4.7B $5.7B Interest bearing Interest bearing Interest bearing ex CDs ex CDs ex CDs 48% 60% 62% *Average cost of total deposits includes average balances of non-interest bearing deposits. ® 7 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Low-Cost Core Deposit Franchise Enhanced with New Branches to be Acquired 1Q21 Average Deposit Cost* HBNC Acquiring Pro Forma Non-interest bearing 0.00% 0.00% 0.00% Interest bearing 0.10% 0.03% 0.09% (excluding CDs) Time Deposits (CDs) 1.00% 0.50% 0.92% Total Deposits 0.21% 0.08% 0.18% Pro Forma HBNC Acquiring Non-interest CDs CDs CDs Non-interest bearing 13% 13% 14% Non-interest bearing 24% bearing 27% 39% Total Total Total Deposits at Deposits at Deposits 3/31/21 3/31/21 $975.7M $4.7B $5.7B Interest bearing Interest bearing Interest bearing ex CDs ex CDs ex CDs 48% 60% 62% *Average cost of total deposits includes average balances of non-interest bearing deposits. ® 7 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Mortgage, Consumer & Small Biz Loans Completed extensive due diligence on performing portfolio 1Q21 Average Yield HBNC Acquiring Pro Forma Total Loans 4.39% 4.22% 4.38% HBNC Pro Forma Mortgage Mortgage Held For Sale, Held For Sale, Warehouse, Warehouse, 0% 0% 7% 7% Acquiring Consumer, Consumer, 18% 18% Mortgage Total Gross Held For Sale, Warehouse, 0% Loans at 0% Loans at 3/31/21 3/31/21 Resi Resi $4.0B $3.7B Mortgage, Mortgage, 16% 17% Consumer, Commercial, Commercial, 26% 58% 59% Total Loans $278.2M Resi Commercial, Mortgage, 46% 28% ® 8 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Mortgage, Consumer & Small Biz Loans Completed extensive due diligence on performing portfolio 1Q21 Average Yield HBNC Acquiring Pro Forma Total Loans 4.39% 4.22% 4.38% HBNC Pro Forma Mortgage Mortgage Held For Sale, Held For Sale, Warehouse, Warehouse, 0% 0% 7% 7% Acquiring Consumer, Consumer, 18% 18% Mortgage Total Gross Held For Sale, Warehouse, 0% Loans at 0% Loans at 3/31/21 3/31/21 Resi Resi $4.0B $3.7B Mortgage, Mortgage, 16% 17% Consumer, Commercial, Commercial, 26% 58% 59% Total Loans $278.2M Resi Commercial, Mortgage, 46% 28% ® 8 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Fit with Low-Cost Operating Model • Low operating cost of acquired branches reduces efficiency ratio of 57.0% to 54.6%, or 55.4%* adjusted Efficiency Ratio 60.0% 59.0% 58.0% 57.0% 56.0% 55.0% 54.0% 53.0% 52.0% 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Pro Forma* Efficiency Ratio 58.8% 56.2% 55.6% 57.5% 57.0% 54.6% Adj. Efficiency Ratio* 59.4% 56.5% 56.6% 56.5% 58.0% 55.4% * Pro forma includes HBNC’s 1Q21 results plus the first quarter estimated pro forma impact of the branch acquisition. The adjusted efficiency ratio is a non-GAAP financial metric used to provide a greater understanding of a bank’s level of non-interest expense as a percentage of total revenue and is reconciled to comparable GAAP measures in the appendix of this presentation. ® E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E 9Fit with Low-Cost Operating Model • Low operating cost of acquired branches reduces efficiency ratio of 57.0% to 54.6%, or 55.4%* adjusted Efficiency Ratio 60.0% 59.0% 58.0% 57.0% 56.0% 55.0% 54.0% 53.0% 52.0% 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Pro Forma* Efficiency Ratio 58.8% 56.2% 55.6% 57.5% 57.0% 54.6% Adj. Efficiency Ratio* 59.4% 56.5% 56.6% 56.5% 58.0% 55.4% * Pro forma includes HBNC’s 1Q21 results plus the first quarter estimated pro forma impact of the branch acquisition. The adjusted efficiency ratio is a non-GAAP financial metric used to provide a greater understanding of a bank’s level of non-interest expense as a percentage of total revenue and is reconciled to comparable GAAP measures in the appendix of this presentation. ® E X C E P T I O 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
Bank and Holding Company Capital Impact of Deal • $60.0 million in Holding Company cash down-streamed to the Bank • Projected earnings would increase Holding Company TCE/TA ratio to 8%* by the middle of 2022 Holding Company Capital Ratios Total Capital Ratio (%) TCE / TA (%)* Leverage Ratio (%) Tier 1 Ratio (%) 16.9 15.8 % 14.9 % 13.8 % % 10.8 8.8% % 8.9% 7.3% 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 Bank Capital Ratios TCE / TA (%)* Total Capital Ratio (%) Leverage Ratio (%) Tier 1 Ratio (%) 13.9 13.5 12.7 12.5 % % % % 8.8% 8.6% 8.0% 8.0% 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 * The tangible common equity (TCE) ratio is a non-GAAP metric utilized to provide a greater understanding of the capital adequacy of financial services companies and is reconciled to comparable GAAP measures in the appendix of this presentation. ® 10 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Bank and Holding Company Capital Impact of Deal • $60.0 million in Holding Company cash down-streamed to the Bank • Projected earnings would increase Holding Company TCE/TA ratio to 8%* by the middle of 2022 Holding Company Capital Ratios Total Capital Ratio (%) TCE / TA (%)* Leverage Ratio (%) Tier 1 Ratio (%) 16.9 15.8 % 14.9 % 13.8 % % 10.8 8.8% % 8.9% 7.3% 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 Bank Capital Ratios TCE / TA (%)* Total Capital Ratio (%) Leverage Ratio (%) Tier 1 Ratio (%) 13.9 13.5 12.7 12.5 % % % % 8.8% 8.6% 8.0% 8.0% 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 1Q21 Pro-Forma 2Q21 * The tangible common equity (TCE) ratio is a non-GAAP metric utilized to provide a greater understanding of the capital adequacy of financial services companies and is reconciled to comparable GAAP measures in the appendix of this presentation. ® 10 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Accretion Upside of Liquidity Deployment • Expected to be 17.1% accretive to EPS in 2022, the first full year after closing, with conservative assumptions including ~5.0% loan growth and ~18% deposit runoff/ attrition from close until year end 2022 • Excess liquidity deployed into securities with an average yield of 1.50% • Additional EPS upside potential as securities are redeployed into loans (illustrated below) 38.0% 32.1% 33.0% 28.0% 23.0% 17.1% 18.0% 13.0% Anticipated Future Loan Yield on Securities Production 8.0% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Yield on Securities Note: Chart is for illustrative purposes only. Actual accretion will be dependent upon timing of liquidity deployment, loan mix and yields. ® 11 E X C E P T I O 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 EPS AccretionAccretion Upside of Liquidity Deployment • Expected to be 17.1% accretive to EPS in 2022, the first full year after closing, with conservative assumptions including ~5.0% loan growth and ~18% deposit runoff/ attrition from close until year end 2022 • Excess liquidity deployed into securities with an average yield of 1.50% • Additional EPS upside potential as securities are redeployed into loans (illustrated below) 38.0% 32.1% 33.0% 28.0% 23.0% 17.1% 18.0% 13.0% Anticipated Future Loan Yield on Securities Production 8.0% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Yield on Securities Note: Chart is for illustrative purposes only. Actual accretion will be dependent upon timing of liquidity deployment, loan mix and yields. ® 11 E X C E P T I O 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 EPS Accretion
Appendix ® 12 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Appendix ® 12 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Footnote Index Slides 14-16 Use of Non-GAAP Financial Measures • Certain information set forth in the presentation materials refers to financial measures determined by methods other than in accordance with GAAP. Horizon believes these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to purchase accounting impacts, one-time acquisition and other non-recurring costs and non-core items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. ® 13 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Footnote Index Slides 14-16 Use of Non-GAAP Financial Measures • Certain information set forth in the presentation materials refers to financial measures determined by methods other than in accordance with GAAP. Horizon believes these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to purchase accounting impacts, one-time acquisition and other non-recurring costs and non-core items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. ® 13 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Footnote Index Three Months Ended 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 interest bearing deposits ( Cost of Interest Bearing 0.27% 0.31% Deposits ) Average interest bearing deposits 3,524,103 3,450,824 Average non-interest bearing deposits 1,063,268 1,037,232 Average total deposits $ 4,587,371 $ 4,488,056 Annualzied deposit interest expense as a percentage of average 0.21% 0.24% total deposits ( Cost of Total Deposits ) ® 14 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Footnote Index Three Months Ended 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 interest bearing deposits ( Cost of Interest Bearing 0.27% 0.31% Deposits ) Average interest bearing deposits 3,524,103 3,450,824 Average non-interest bearing deposits 1,063,268 1,037,232 Average total deposits $ 4,587,371 $ 4,488,056 Annualzied deposit interest expense as a percentage of average 0.21% 0.24% total deposits ( Cost of Total Deposits ) ® 14 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Footnote Index Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio (Dollars in Thousands, Unaudited) Three Months Ended March 31, March 31, December 31, September 30, June 30, March 31, 2021 2021 2020 2020 2020 2020 (Pro Forma) Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported $ 34,174 $ 32,172 $ 36,453 $ 33,407 $ 30,432 $ 31,149 Net interest income as reported 47,916 42,538 43,622 43,397 42,996 40,925 Non-interest income as reported 14,684 13,873 19,733 16,700 11,125 12,063 Non-interest expense/ (Net interest income + Non-interest income) ( Efficiency Ratio ) 54.59% 57.03% 57.54% 55.59% 56.23% 58.79% Non-GAAP Reconciliation of Adjusted Efficiency Ratio Non-interest expense as reported $ 34,174 $ 32,172 $ 36,453 $ 33,407 $ 30,432 $ 31,149 Merger expenses - - - - - - Non-interest expense excluding merger expenses 34,174 32,172 36,453 33,407 30,432 31,149 Net interest income as reported 47,916 42,538 43,622 43,397 42,996 40,925 Prepayment penalties on borrowings - - 3,804 - - - Net interest income excluding prepayment penalties on borrowings 47,916 42,538 47,426 43,397 42,996 40,925 Non-interest income as reported 14,684 13,873 19,733 16,700 11,125 12,063 (Gain)/loss on sale of investment securities (914) (914) (2,622) (1,088) (248) (339) Death benefit on bank owned life insurance ( BOLI ) - - - (31) - (233) Non-interest income excluding (gain)/loss on sale of investment securities and death benefit on BOLI $ 13,770 $ 12,959 $ 17,111 $ 15,581 $ 10,877 $ 11,491 Adjusted efficiency ratio 55.40% 57.97% 56.48% 56.64% 56.49% 59.43% ® 15 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Footnote Index Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio (Dollars in Thousands, Unaudited) Three Months Ended March 31, March 31, December 31, September 30, June 30, March 31, 2021 2021 2020 2020 2020 2020 (Pro Forma) Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported $ 34,174 $ 32,172 $ 36,453 $ 33,407 $ 30,432 $ 31,149 Net interest income as reported 47,916 42,538 43,622 43,397 42,996 40,925 Non-interest income as reported 14,684 13,873 19,733 16,700 11,125 12,063 Non-interest expense/ (Net interest income + Non-interest income) ( Efficiency Ratio ) 54.59% 57.03% 57.54% 55.59% 56.23% 58.79% Non-GAAP Reconciliation of Adjusted Efficiency Ratio Non-interest expense as reported $ 34,174 $ 32,172 $ 36,453 $ 33,407 $ 30,432 $ 31,149 Merger expenses - - - - - - Non-interest expense excluding merger expenses 34,174 32,172 36,453 33,407 30,432 31,149 Net interest income as reported 47,916 42,538 43,622 43,397 42,996 40,925 Prepayment penalties on borrowings - - 3,804 - - - Net interest income excluding prepayment penalties on borrowings 47,916 42,538 47,426 43,397 42,996 40,925 Non-interest income as reported 14,684 13,873 19,733 16,700 11,125 12,063 (Gain)/loss on sale of investment securities (914) (914) (2,622) (1,088) (248) (339) Death benefit on bank owned life insurance ( BOLI ) - - - (31) - (233) Non-interest income excluding (gain)/loss on sale of investment securities and death benefit on BOLI $ 13,770 $ 12,959 $ 17,111 $ 15,581 $ 10,877 $ 11,491 Adjusted efficiency ratio 55.40% 57.97% 56.48% 56.64% 56.49% 59.43% ® 15 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E
Footnote Index Non-GAAP Reconciliation of Tangible Common Equity to Tangible Assets Ratio (Dollars in Thousands, Unaudited) Holding Company Bank June 30, March 31, June 30, March 31, 2021 2021 2021 2021 (Pro Forma) (Pro Forma) Tangible Common Equity Total stockholders' equity $ 697,946 $ 689,379 $ 746,784 $ 678,217 Less: Intangible assets 196,125 173,296 196,125 173,296 Total tangible common equity 501,821 516,083 550,659 504,921 Tangible Assets Total assets $ 7,066,904 $ 6,055,528 $ 7,046,951 $ 6,035,575 Less: Intangible assets 196,125 173,296 196,125 173,296 Total tangible assets 6,870,779 5,882,232 6,850,826 5,862,279 Tangible Common Equity to Tangible Assets Ratio Tangible common equity / tangible assets 7.3% 8.8% 8.0% 8.6% ® 16 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E Footnote Index Non-GAAP Reconciliation of Tangible Common Equity to Tangible Assets Ratio (Dollars in Thousands, Unaudited) Holding Company Bank June 30, March 31, June 30, March 31, 2021 2021 2021 2021 (Pro Forma) (Pro Forma) Tangible Common Equity Total stockholders' equity $ 697,946 $ 689,379 $ 746,784 $ 678,217 Less: Intangible assets 196,125 173,296 196,125 173,296 Total tangible common equity 501,821 516,083 550,659 504,921 Tangible Assets Total assets $ 7,066,904 $ 6,055,528 $ 7,046,951 $ 6,035,575 Less: Intangible assets 196,125 173,296 196,125 173,296 Total tangible assets 6,870,779 5,882,232 6,850,826 5,862,279 Tangible Common Equity to Tangible Assets Ratio Tangible common equity / tangible assets 7.3% 8.8% 8.0% 8.6% ® 16 E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E