Horizon Bancorp Inc 8-K, filed Apr 28, 2021
Horizon Bancorp Inc (HBNC)
8-K
2021-04-28
For: 2021-04-28
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Added on
April 11, 2026
About this 8-K
Horizon Bancorp Inc filed this 8-K on April 28, 2021.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2021
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices, including zip code)
(219 ) 879-0211
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Item 2.02 Results of Operations and Financial Condition
Earnings Release
On April 28, 2021, Horizon Bancorp, Inc. (the “Company”) issued a press release announcing earnings and other financial results for the three period ended March 31, 2021. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.
Item 7.01 Regulation FD Disclosure
Investor Presentation
The Company has prepared presentation materials (the “Investor Presentation”) that management intends to use during its previously announced Earnings Conference Call on Thursday, April 29, 2021 at 7:30 a.m. Central Time, and from time to time thereafter in presentations about the Company’s operations and performance. The Investor Presentation also contains information relating to the Company’s COVID–19 response and planning efforts to date. The Company may use the Investor Presentation, possibly with modifications, in presentations to current and potential investors, analysts, lenders, business partners, acquisition candidates, customers, employees and others with an interest in the Company and its business.
A copy of the Investor Presentation is furnished as Exhibit 99.2 to this report and incorporated here by reference. The Investor Presentation is also available on the Company’s investor website at www.horizonbank.com. Materials on the Company’s investor website are not part of or incorporated by reference into this report.
In accordance with General Instruction B.2 of Form 8–K, the information in this Current Report on Form 8–K, including Exhibits 99.1 and 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
| (d) Exhibits | |||||||||||
| EXHIBIT INDEX | |||||||||||
| Exhibit No. | Description | Location | |||||||||
| 99.1 | Attached | ||||||||||
| 99.2 | Attached | ||||||||||
| 104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document) | 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: | April 28, 2021 | HORIZON BANCORP, INC. | |||||||||
| By: | /s/ Mark E. Secor | ||||||||||
| Mark E. Secor, | |||||||||||
| Executive Vice President & Chief Financial Officer | |||||||||||
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| Contract: | Mark E. Secor | ||||
| Chief Financial Officer | |||||
| Phone: | (219) 873-2611 | ||||
| Fax: | (219) 874-9280 | ||||
| Date: | April 28, 2021 | ||||
FOR IMMEDIATE RELEASE
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
Michigan City, Indiana, April 28, 2021 (GLOBE NEWSWIRE) — (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three months ending March 31, 2021.
“Horizon completed the first quarter with over $6 billion in assets, strong profitability, modest provision expense, further reductions in deposit costs, and continued improvement in key asset quality metrics,“ Chairman and CEO Craig M. Dwight said. “Coming off a record year of residential lending, we were very pleased with mortgage activity and fee income in what has historically been our seasonally lightest volume quarter. In addition, our commercial pipeline of approved and unfunded loans and lines of credit, coupled with the current outlook of the businesses and communities we serve in growing Indiana and Michigan markets, leads us to anticipate improving demand from customer investments in plant and equipment, logistics and distribution, infrastructure, and other financing needs in a recovery economy. Given our balance sheet, highly efficient operations and talented workforce, we believe Horizon is very well positioned to capitalize on significant organic and strategic growth opportunities within our attractive Midwestern markets.”
First Quarter 2021 Highlights
•Earned net income of $20.4 million, or $0.46 diluted earnings per share, compared to $21.9 million, or $0.50 diluted earnings per share, for the fourth quarter of 2020 and $11.7 million, or $0.26 diluted earnings per share, for the first quarter of 2020.
•Pre–tax, pre–provision net income totaled a first–quarter record $24.2 million, compared to $26.9 million for the fourth quarter of 2020 and $21.8 million for the first three months of 2020. This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense. (See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income” table below.)
•Non–interest expense was $32.2 million in the quarter, or 2.20% of average assets on an annualized basis, compared to $36.5 million, or 2.47%, in the fourth quarter of 2020 and $31.1 million, or 2.38%, in the first quarter of 2020.
•The efficiency ratio for the period was 57.03% compared to 57.54% for the fourth quarter of 2020 and 58.79% for the first quarter of 2020. The adjusted efficiency ratio was 57.97% compared to 56.48% for the fourth quarter of 2020 and 59.43% for the first quarter of 2020. (See the “Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below.)
•Generated return on average assets (“ROAA”) of 1.40% and return on average common equity (“ROACE”) of 11.88% in the quarter, as well as adjusted ROAA of 1.35% and adjusted ROACE of 11.46%, excluding the impact of gains on sale of investment securities, net of tax. (See the “Non–GAAP Reconciliation of Return on Average Assets” and the “Non–GAAP Reconciliation of Return on Average Common Equity” tables below.)
1
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
•Following record residential lending last year and during what has historically been its seasonally lightest volume quarter, mortgage–related non–interest income remained strong in the first three months of 2021, with gain on mortgage loan sales of $5.3 million and net mortgage servicing income of $213,000. The bank originated $155.6 million in mortgage loans during the quarter, with 65% of volume from refinances, as Horizon continued to focus residential lending on prime borrowers in Indiana and Michigan markets.
•Net interest income was $42.5 million for the quarter, compared to $43.6 million for the fourth quarter of 2020 and $40.9 million for the first quarter of 2020. First quarter 2021 net interest income remained relatively stable in the current environment, given previously disclosed initiatives to optimize returns on earning assets, including increasing investment securities to 23.5% of assets from 22.1% in the fourth quarter of 2020 and 20.6% in the first quarter of 2020.
•Reported net interest margin (“NIM”) of 3.29% and adjusted NIM of 3.17%, with reported NIM declining by 5 basis points and adjusted NIM decreasing by 27 basis points from the fourth quarter of 2020. (See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this non–GAAP calculation.) An estimated 10 basis points attributed to Federal Paycheck Protection Program (“PPP”) lending improved the margin, offset by an estimated 16 basis point compression attributed to excess liquidity held during the quarter, for both NIM and adjusted NIM.
•Horizon’s in–market consumer and commercial deposit relationships, combined with strategic pricing moves to manage deposit growth and runoff of higher–priced time deposits, contributed to continued improvement in the cost of interest bearing liabilities, which declined to 0.50% in the quarter, compared to 0.94% in the fourth quarter of 2020 and 1.13% in the first quarter of 2020.
•Increased the allowance for credit losses (“ACL”) 0.3% year–to–date to $57.2 million at period end, representing 1.56% of total loans, reflecting implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in the Company’s general reserves. ACL at period end represented 1.67% of loans excluding $252.3 million in PPP loans, and 228.1% of non–performing loans.
•COVID–19 deferral levels improved to 2.7% of total loans at period end, compared to 3.3% on December 31, 2020, and the bank experienced no material specific loan losses attributable to COVID–19 closures.
•Maintained solid asset quality metrics at period end, including non–performing loans declining 6.5% during the quarter to $25.1 million, or 0.68% of total loans, and substandard loans declining 12.5% to $86.5 million, or 2.4% of total loans, while net charge–offs remained unchanged at 0.01% of average loans for the period.
•Loans excluding PPP lending totaled $3.42 billion on March 31, 2021, reflecting Horizon’s successful efforts to secure payoffs of loans previously classified as substandard, as well as cash reserves maintained by many current and prospective commercial borrowers and retail households through the quarter. Loans excluding PPP lending totaled $3.67 billion on December 31, 2020 and $3.71 billion on March 31, 2020.
•Horizon announced an 8.3% increase in its quarterly cash dividend in March to $0.13 per share, paying uninterrupted dividends for over 30 years. As of March 31, 2021, in excess of $127 million in cash was maintained at the holding company, providing considerable future optionality to build shareholder value.
•Horizon opened a new full–service branch on March 31, 2021 in Gary to improve access to financial services in this Northwest Indiana community.
Summary
| For the Three Months Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| Net Interest Income and Net Interest Margin | 2021 | 2020 | 2020 | |||||||||||||||||
| Net interest income | $ | 42,538 | $ | 43,622 | $ | 40,925 | ||||||||||||||
| Net interest margin | 3.29 | % | 3.34 | % | 3.56 | % | ||||||||||||||
| Adjusted net interest margin | 3.17 | % | 3.44 | % | 3.44 | % | ||||||||||||||
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Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
“As we indicated in January, net interest margin headwinds were expected in the near term,” Mr. Dwight commented. “While we saw asset repricing as anticipated in the first quarter, we further reduced funding costs through time deposit runoff and strategic deposit pricing. This approach was balanced with our commitment to stand by Indiana and Michigan businesses, municipalities, and communities for the long haul, even if it requires some excess liquidity in the short term while we position the bank for loan growth in the quarters ahead and redeploy excess cash into investments to improve net interest income.”
| For the Three Months Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| Asset Yields and Funding Costs | 2021 | 2020 | 2020 | |||||||||||||||||
| Interest earning assets | 3.66 | % | 4.05 | % | 4.47 | % | ||||||||||||||
| Interest bearing liabilities | 0.50 | % | 0.94 | % | 1.13 | % | ||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||
| Non–interest Income and | March 31, | December 31, | March 31, | |||||||||||||||||
| Mortgage Banking Income | 2021 | 2020 | 2020 | |||||||||||||||||
| Total non–interest income | $ | 13,873 | $ | 19,733 | $ | 12,063 | ||||||||||||||
| Gain on sale of mortgage loans | 5,296 | 7,815 | 3,473 | |||||||||||||||||
| Mortgage servicing income net of impairment | 213 | 327 | 25 | |||||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| Non–interest Expense | 2021 | 2020 | 2020 | |||||||||||||||||
| Total non–interest expense | $ | 32,172 | $ | 36,453 | $ | 31,149 | ||||||||||||||
| Annualized non–interest expense to average assets | 2.20 | % | 2.47 | % | 2.38 | % | ||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| Credit Quality | 2021 | 2020 | 2020 | |||||||||||||||||
| Allowance for credit losses to total loans | 1.56 | % | 1.47 | % | 1.30 | % | ||||||||||||||
| Non–performing loans to total loans | 0.68 | % | 0.69 | % | 0.65 | % | ||||||||||||||
| Percent of net charge–offs to average loans outstanding for the period | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
| Allowance for | December 31, | Net Reserve Build | March 31, | |||||||||||||||||||||||||||||
| Credit Losses | 2020 | 1Q20 | 2021 | |||||||||||||||||||||||||||||
| Commercial | $ | 42,210 | $ | 770 | $ | 42,980 | ||||||||||||||||||||||||||
| Retail Mortgage | 4,620 | (391) | 4,229 | |||||||||||||||||||||||||||||
| Warehouse | 1,267 | (104) | 1,163 | |||||||||||||||||||||||||||||
| Consumer | 8,930 | (116) | 8,814 | |||||||||||||||||||||||||||||
| Allowance for Credit Losses (“ACL”) | $ | 57,027 | $ | 159 | $ | 57,186 | ||||||||||||||||||||||||||
| ACL / Total Loans | 1.47 | % | 1.56 | % | ||||||||||||||||||||||||||||
| Acquired Loan Discount (“ALD”) | $ | 11,494 | $ | (221) | $ | 11,273 | ||||||||||||||||||||||||||
“We are very pleased with the continued improvement in our asset quality metrics, including reductions in non–performing and non–accrual loans, as well as meaningfully lower levels of substandard loans resulting from our team’s concerted workout efforts and the continued, steady reduction in COVID–19 deferral levels,” Mr. Dwight said.
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Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
“Horizon’s strong core operating fundamentals, consistent retained earnings generation and well–capitalized position, as defined by regulators, underscore the overall strength of our business,” said Mr. Dwight. “Horizon has paid uninterrupted quarterly cash dividends for over 30 years, and we were pleased to recently announce an 8.3% increase in this payout to shareholders to $0.13 per quarter.”
Income Statement Highlights
Net income for the first quarter of 2021 was $20.4 million, or $0.46 diluted earnings per share, compared to $21.9 million, or $0.50, for the linked quarter and $11.7 million, or $0.26, for the prior year period.
Adjusted net income for the first quarter of 2021 was $19.7 million, or $0.44 diluted earnings per share, compared to $22.8 million, or $0.52, for the linked quarter and $11.2 million, or $0.24, for the prior year period. Adjusted net income, which is not calculated according to generally accepted accounting principles (“GAAP”), is a measure that Horizon uses to provide a greater understanding of operating profitability.
The decrease in net income for the first quarter of 2021 when compared to the fourth quarter of 2020 reflects a decrease in non–interest income of $5.9 million, a decrease of $1.1 million in net interest income and an increase of $1.5 million in income tax expense, offset by a decrease in non–interest expense of $4.3 million and a decrease in credit loss expense of $2.7 million.
Interest income includes the recognition of PPP net loan processing fees totaling $3.2 million in the first quarter of 2021, compared to $4.6 million in the linked quarter. On March 31, 2021, the Company had $7.3 million in deferred PPP loan processing fees outstanding and $252.3 million in PPP loans outstanding. PPP deferred fees and loans outstanding at December 31, 2020 were $4.0 million and $208.9 million, respectively. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness.
First quarter 2021 income from the gain on sale of mortgage loans totaled $5.3 million, down from $7.8 million in the linked quarter and up from $3.5 million in the prior year period.
Non–interest expense of $32.2 million in the first quarter of 2021 reflected a $3.2 million decrease in salaries and employee benefits expense from the linked quarter. The level of salaries and employee benefits expense during the fourth quarter of 2020 reflected higher performance–based compensation accruals due to the record 2020 net interest income, non–interest income revenues and other key performance metrics.
The increase in net income for the first quarter of 2021 when compared to the same prior year period reflects an increase in non–interest income of $1.8 million, an increase in net interest income of $1.6 million and a decrease in credit loss expense of $8.2 million, offset by an increase in income tax expense of $1.9 million and an increase in non–interest expense of $1.0 million.
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Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Non–GAAP Reconciliation of Net Income | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||
| (Gain) / loss on sale of investment securities | (914) | (2,622) | (1,088) | (248) | (339) | |||||||||||||||||||||||||||||||||||||||
| Tax effect | 192 | 551 | 228 | 52 | 71 | |||||||||||||||||||||||||||||||||||||||
| Net income excluding (gain) / loss on sale of investment securities | 19,700 | 19,822 | 19,452 | 14,443 | 11,387 | |||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance (“BOLI”) | — | — | (31) | — | (233) | |||||||||||||||||||||||||||||||||||||||
| Net income excluding death benefit on BOLI | 19,700 | 19,822 | 19,421 | 14,443 | 11,154 | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 3,804 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Tax effect | — | (799) | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net income excluding prepayment penalties on borrowings | 19,700 | 22,827 | 19,421 | 14,443 | 11,154 | |||||||||||||||||||||||||||||||||||||||
| Adjusted net income | $ | 19,700 | $ | 22,827 | $ | 19,421 | $ | 14,443 | $ | 11,154 | ||||||||||||||||||||||||||||||||||
| Non–GAAP Reconciliation of Diluted Earnings per Share | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||||||||||||||
| Diluted earnings per share (“EPS”) as reported | $ | 0.46 | $ | 0.50 | $ | 0.46 | $ | 0.33 | $ | 0.26 | ||||||||||||||||||||||||||||||||||
| (Gain) / loss on sale of investment securities | (0.02) | (0.06) | (0.02) | (0.01) | (0.01) | |||||||||||||||||||||||||||||||||||||||
| Tax effect | — | 0.01 | 0.01 | — | — | |||||||||||||||||||||||||||||||||||||||
| Diluted EPS excluding (gain) / loss on sale of investment securities | 0.44 | 0.45 | 0.45 | 0.32 | 0.25 | |||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance (“BOLI”) | — | — | — | — | (0.01) | |||||||||||||||||||||||||||||||||||||||
| Diluted EPS excluding death benefit on BOLI | 0.44 | 0.45 | 0.45 | 0.32 | 0.24 | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 0.09 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Tax effect | — | (0.02) | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Diluted EPS excluding prepayment penalties on borrowings | 0.44 | 0.52 | 0.45 | 0.32 | 0.24 | |||||||||||||||||||||||||||||||||||||||
| Adjusted diluted EPS | $ | 0.44 | $ | 0.52 | $ | 0.45 | $ | 0.32 | $ | 0.24 | ||||||||||||||||||||||||||||||||||
5
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||
| Credit loss expense | 367 | 3,042 | 2,052 | 7,057 | 8,600 | |||||||||||||||||||||||||||||||||||||||
| Pre–tax, pre–provision income | $ | 24,239 | $ | 26,902 | $ | 26,690 | $ | 23,689 | $ | 21,839 | ||||||||||||||||||||||||||||||||||
| Pre–tax, pre–provision income | $ | 24,239 | $ | 26,902 | $ | 26,690 | $ | 23,689 | $ | 21,839 | ||||||||||||||||||||||||||||||||||
| (Gain) / loss on sale of investment securities | (914) | (2,622) | (1,088) | (248) | (339) | |||||||||||||||||||||||||||||||||||||||
| Death benefit on BOLI | — | — | (31) | — | (233) | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 3,804 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Adjusted pre–tax, pre–provision income | $ | 23,325 | $ | 28,084 | $ | 25,571 | $ | 23,441 | $ | 21,267 | ||||||||||||||||||||||||||||||||||
Horizon’s net interest margin decreased to 3.29% for the first quarter of 2021 compared to 3.34% for the fourth quarter of 2020. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 39 basis points, offset by a decrease in the cost of interest bearing liabilities of 44 basis points. Interest income from acquisition–related purchase accounting adjustments was $882,000 lower during the first quarter of 2021 when compared to the fourth quarter of 2020.
Horizon’s net interest margin decreased to 3.29% for the first quarter of 2021 when compared to 3.56% for the first quarter of 2020. The decrease in net interest margin reflects a decrease in the yield on interest earning assets of 81 basis points offset by a decrease in the cost of interest bearing liabilities of 63 basis points.
The net interest margin was impacted during the first quarter of 2021 and fourth quarter of 2020 due to the PPP loans that were originated. Horizon estimates that the PPP loans increased the net interest margin by 10 and 18 basis points for the first quarter of 2021 and the fourth quarter of 2020, respectively. This assumes these PPP loans were not included in average interest earning assets or interest income and were primarily funded by the growth in non–interest bearing deposits.
The net interest margin was also impacted during the first quarter of 2021 and fourth quarter of 2020 due to the excess liquidity carried on the balance sheet with the increase in deposits. Horizon estimates that the excess liquidity compressed the net interest margin by 16 and 7 basis points for the first quarter of 2021 and the fourth quarter of 2020, respectively. This assumes that the excess liquidity was not included in average interest earning assets or interest income and was excluded from non–interest bearing deposits.
| Non–GAAP Reconciliation of Net Interest Margin | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | 5,112,636 | 4,746,202 | |||||||||||||||||||||||||||||||||||||||
| Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) | 3.29 | % | 3.34 | % | 3.39 | % | 3.47 | % | 3.56 | % | ||||||||||||||||||||||||||||||||||
| Net interest income as reported | $ | 42,538 | $ | 43,622 | $ | 43,397 | $ | 42,996 | $ | 40,925 | ||||||||||||||||||||||||||||||||||
| Acquisition–related purchase accounting adjustments (“PAUs”) | (1,579) | (2,461) | (1,488) | (1,553) | (1,434) | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 3,804 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Adjusted net interest income | $ | 40,959 | $ | 44,965 | $ | 41,909 | $ | 41,443 | $ | 39,491 | ||||||||||||||||||||||||||||||||||
| Adjusted net interest margin | 3.17 | % | 3.44 | % | 3.27 | % | 3.35 | % | 3.44 | % | ||||||||||||||||||||||||||||||||||
6
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 3.17% for the first quarter of 2021 compared to 3.44% for the prior quarter and 3.44% for the first quarter of 2020. Interest income from acquisition–related purchase accounting adjustments was $1.6 million, $2.5 million and $1.4 million for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
Lending Activity
Total loans were $3.67 billion, or $3.42 billion excluding PPP loans, on March 31, 2021. Total loans were $3.88 billion, or $3.67 billion excluding PPP loans, on December 31, 2020. During the three months ended March 31, 2021, mortgage warehouse loans decreased $129.4 million, residential mortgage loans decreased $42.4 million, consumer loans decreased $16.8 million, commercial loans decreased $14.4 million and loans held for sale decreased $5.7 million.
| Loan Growth by Type, Excluding Acquired Loans | ||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||
| March 31, | December 31, | Amount | Percent | |||||||||||||||||||||||
| 2021 | 2020 | Change | Change | |||||||||||||||||||||||
| Commercial | $ | 2,177,858 | $ | 2,192,271 | $ | (14,413) | (0.7)% | |||||||||||||||||||
| Residential mortgage | 581,929 | 624,286 | (42,357) | (6.8)% | ||||||||||||||||||||||
| Consumer | 638,403 | 655,200 | (16,797) | (2.6)% | ||||||||||||||||||||||
| Subtotal | 3,398,190 | 3,471,757 | (73,567) | (2.1)% | ||||||||||||||||||||||
| Loans held for sale | 7,798 | 13,538 | (5,740) | (42.4)% | ||||||||||||||||||||||
| Mortgage warehouse | 266,246 | 395,626 | (129,380) | (32.7)% | ||||||||||||||||||||||
| Total loans | $ | 3,672,234 | $ | 3,880,921 | $ | (208,687) | (5.4)% | |||||||||||||||||||
Residential mortgage lending activity for the three months ended March 31, 2021 generated a first–quarter record $5.3 million in income from the gain on sale of mortgage loans, decreasing $2.5 million from the fourth quarter of 2020 and increasing $1.8 million from the first quarter of 2020. Total origination volume for the first quarter of 2021, including loans placed into the portfolio, totaled $155.6 million, representing a decrease of 16.4% from fourth quarter 2020 levels, and an increase of 40.3% from the first quarter of 2020. As a percentage of total originations, 65% of the volume was for refinances and 35% was for new purchases during the first quarter of 2021. Total origination volume of loans sold to the secondary market totaled $126.0 million, representing a decrease of 20.1% from the fourth quarter of 2020 and an increase of 86.5% from the first quarter of 2020.
Expense Management
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, | December 31, | Amount | Percent | |||||||||||||||||||||||||||||||||||||||||||||||
| Non–interest Expense | 2021 | 2020 | Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 16,871 | $ | 20,030 | $ | (3,159) | (15.8)% | |||||||||||||||||||||||||||||||||||||||||||
| Net occupancy expenses | 3,318 | 3,262 | 56 | 1.7% | ||||||||||||||||||||||||||||||||||||||||||||||
| Data processing | 2,376 | 2,126 | 250 | 11.8% | ||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | 544 | 691 | (147) | (21.3)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Outside services and consultants | 1,702 | 2,083 | (381) | (18.3)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Loan expense | 2,822 | 2,961 | (139) | (4.7)% | ||||||||||||||||||||||||||||||||||||||||||||||
| FDIC insurance expense | 800 | 900 | (100) | (11.1)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Other losses | 283 | 735 | (452) | (61.5)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Other expense | 3,456 | 3,665 | (209) | (5.7)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Total non–interest expense | $ | 32,172 | $ | 36,453 | $ | (4,281) | (11.7)% | |||||||||||||||||||||||||||||||||||||||||||
| Annualized non–interest expense to average assets | 2.20 | % | 2.47 | % | ||||||||||||||||||||||||||||||||||||||||||||||
7
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
Total non–interest expense was $4.3 million lower in the first quarter of 2021 when compared to the fourth quarter of 2020. The decrease in expenses was primarily due to the reduction in salary and employee benefits due to lower bonus accruals compared to the fourth quarter of 2020 and recording $678,000 of deferred PPP origination costs that reduced salary expense in the first quarter of 2021.
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | Amount | Percent | |||||||||||||||||||||||||||||||||||||||||||||||
| Non–interest Expense | 2021 | 2020 | Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 16,871 | $ | 16,591 | $ | 280 | 1.7% | |||||||||||||||||||||||||||||||||||||||||||
| Net occupancy expenses | 3,318 | 3,252 | 66 | 2.0% | ||||||||||||||||||||||||||||||||||||||||||||||
| Data processing | 2,376 | 2,405 | (29) | (1.2)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | 544 | 536 | 8 | 1.5% | ||||||||||||||||||||||||||||||||||||||||||||||
| Outside services and consultants | 1,702 | 1,915 | (213) | (11.1)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Loan expense | 2,822 | 2,099 | 723 | 34.4% | ||||||||||||||||||||||||||||||||||||||||||||||
| FDIC insurance expense | 800 | 150 | 650 | 433.3% | ||||||||||||||||||||||||||||||||||||||||||||||
| Other losses | 283 | 120 | 163 | 135.8% | ||||||||||||||||||||||||||||||||||||||||||||||
| Other expense | 3,456 | 4,081 | (625) | (15.3)% | ||||||||||||||||||||||||||||||||||||||||||||||
| Total non–interest expense | $ | 32,172 | $ | 31,149 | $ | 1,023 | 3.3% | |||||||||||||||||||||||||||||||||||||||||||
| Annualized non–interest expense to average assets | 2.20 | % | 2.38 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Total non–interest expense was $1.0 million higher in the first quarter of 2021 when compared to the first quarter of 2020. Increases in loan expense, FDIC insurance expense and salaries and employee benefits were offset in part by a decrease in other expense and outside services and consultants expense.
Annualized non–interest expense as a percent of average assets were 2.20%, 2.47% and 2.38% for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
Income tax expense totaled $3.5 million for the first quarter of 2021, an increase of $1.5 million when compared to the fourth quarter of 2020 and an increase of $1.9 million when compared to the first quarter of 2020. The increase in income tax expense in the first quarter of 2021 compared to the fourth quarter of 2020 and the first quarter of 2020 was primarily due to the fourth quarter of 2020 benefiting from the recognition of solar tax credits.
Capital
The capital resources of the Company and Horizon Bank (the “Bank”) exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2021. Stockholders’ equity totaled $689.4 million at March 31, 2021 and the ratio of average stockholders’ equity to average assets was 11.75% for the three months ended March 31, 2021.
Capital levels benefited from the Company’s previously disclosed public offering of subordinated notes raising $60.0 million in June 2020. Horizon’s fortress balance sheet at March 31, 2021 maintained adequate regulatory capital ratios when stress testing for highly adverse scenarios.
The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of March 31, 2021.
8
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Actual | Required for Capital Adequacy Purposes | Required for Capital Adequacy Purposes with Capital Buffer | Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||||||||||||||||
| Total capital (to risk–weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 669,098 | 16.94 | % | $ | 315,985 | 8.00 | % | $ | 414,730 | 10.50 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||
| Bank | 548,682 | 13.86 | % | 316,700 | 8.00 | % | 415,668 | 10.50 | % | $ | 395,874 | 10.00 | % | |||||||||||||||||||||||||||||||||||||
| Tier 1 capital (to risk–weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 622,085 | 15.75 | % | 236,985 | 6.00 | % | 335,728 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 503,222 | 12.71 | % | 237,556 | 6.00 | % | 336,537 | 8.50 | % | 316,741 | 8.00 | % | ||||||||||||||||||||||||||||||||||||||
| Common equity tier 1 capital (to risk–weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 506,877 | 12.84 | % | 177,644 | 4.50 | % | 276,335 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 503,222 | 12.71 | % | 178,167 | 4.50 | % | 277,148 | 7.00 | % | 257,352 | 6.50 | % | ||||||||||||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 622,085 | 10.82 | % | 229,976 | 4.00 | % | 229,976 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 503,222 | 8.81 | % | 228,478 | 4.00 | % | 228,478 | 4.00 | % | 285,597 | 5.00 | % | ||||||||||||||||||||||||||||||||||||||
Liquidity
The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the “FHLB”). At March 31, 2021, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $946.1 million in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank had approximately $772.8 million of unpledged investment securities at March 31, 2021.
Branch Network and Customer Experience
Horizon continues to implement its disciplined approach to enhancing the efficiency of its branch network on an ongoing basis, while leveraging technology to enhance the customer experience. At the same time, the Bank continues to invest in its Midwest footprint. On March 31, 2021, the Bank opened a new full–service branch in Gary to improve access to financial services to this Northwest Indiana city's population.
9
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
Use of Non–GAAP Financial Measures
Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non–GAAP financial measures relating to net income, diluted earnings per share, net interest margin, total loans and loan growth, the allowance for credit losses, tangible stockholders’ equity, tangible book value per share, efficiency ratio, the return on average assets, the return on average equity and pre–tax, pre–provision income. In each case, we have identified special circumstances that we consider to be non–recurring and have excluded them. We believe that this shows the impact of such events as acquisition–related purchase accounting adjustments, among others we have identified in our reconciliations. Horizon believes these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring 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. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP figures identified herein and their most comparable GAAP measures.
| Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 689,379 | $ | 692,216 | $ | 670,293 | $ | 652,206 | $ | 630,842 | ||||||||||||||||||||||
| Less: Intangible assets | 173,296 | 174,193 | 175,107 | 176,020 | 176,961 | |||||||||||||||||||||||||||
| Total tangible stockholders’ equity | $ | 516,083 | $ | 518,023 | $ | 495,186 | $ | 476,186 | $ | 453,881 | ||||||||||||||||||||||
| Common shares outstanding | 43,949,189 | 43,880,562 | 43,874,353 | 43,821,878 | 43,763,623 | |||||||||||||||||||||||||||
| Book value per common share | $ | 15.69 | $ | 15.78 | $ | 15.28 | $ | 14.88 | $ | 14.41 | ||||||||||||||||||||||
| Tangible book value per common share | $ | 11.74 | $ | 11.81 | $ | 11.29 | $ | 10.87 | $ | 10.37 | ||||||||||||||||||||||
10
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||||||||||||||
| Non–interest expense as reported | $ | 32,172 | $ | 36,453 | $ | 33,407 | $ | 30,432 | $ | 31,149 | ||||||||||||||||||||||||||||||||||
| Net interest income as reported | 42,538 | 43,622 | 43,397 | 42,996 | 40,925 | |||||||||||||||||||||||||||||||||||||||
| Non–interest income as reported | $ | 13,873 | $ | 19,733 | $ | 16,700 | $ | 11,125 | $ | 12,063 | ||||||||||||||||||||||||||||||||||
| Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”) | 57.03 | % | 57.54 | % | 55.59 | % | 56.23 | % | 58.79 | % | ||||||||||||||||||||||||||||||||||
| Non–interest expense as reported | $ | 32,172 | $ | 36,453 | $ | 33,407 | $ | 30,432 | $ | 31,149 | ||||||||||||||||||||||||||||||||||
| Net interest income as reported | 42,538 | 43,622 | 43,397 | 42,996 | 40,925 | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 3,804 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net interest income excluding prepayment penalties on borrowings | 42,538 | 47,426 | 43,397 | 42,996 | 40,925 | |||||||||||||||||||||||||||||||||||||||
| Non–interest income as reported | 13,873 | 19,733 | 16,700 | 11,125 | 12,063 | |||||||||||||||||||||||||||||||||||||||
| (Gain) / loss on sale of investment securities | (914) | (2,622) | (1,088) | (248) | (339) | |||||||||||||||||||||||||||||||||||||||
| Death benefit on BOLI | — | — | (31) | — | (233) | |||||||||||||||||||||||||||||||||||||||
| Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI | $ | 12,959 | $ | 17,111 | $ | 15,581 | $ | 10,877 | $ | 11,491 | ||||||||||||||||||||||||||||||||||
| Adjusted efficiency ratio | 57.97 | % | 56.48 | % | 56.64 | % | 56.49 | % | 59.43 | % | ||||||||||||||||||||||||||||||||||
| Non–GAAP Reconciliation of Return on Average Assets | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | % | 1.05 | % | 0.89 | % | ||||||||||||||||||||||||||||||||||
| (Gain) / loss on sale of investment securities | (0.06) | (0.18) | (0.08) | (0.02) | (0.03) | |||||||||||||||||||||||||||||||||||||||
| Tax effect | 0.01 | 0.04 | 0.02 | — | 0.01 | |||||||||||||||||||||||||||||||||||||||
| ROAA excluding (gain) / loss on sale of investment securities | 1.35 | 1.35 | 1.34 | 1.03 | 0.87 | |||||||||||||||||||||||||||||||||||||||
| Death benefit on BOLI | — | — | — | — | (0.02) | |||||||||||||||||||||||||||||||||||||||
| ROAA excluding death benefit on BOLI | 1.35 | 1.35 | 1.34 | 1.03 | 0.85 | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 0.26 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Tax effect | — | (0.05) | — | — | — | |||||||||||||||||||||||||||||||||||||||
| ROAA excluding prepayment penalties on borrowings | 1.35 | 1.56 | 1.34 | 1.03 | 0.85 | |||||||||||||||||||||||||||||||||||||||
| Adjusted ROAA | 1.35 | % | 1.56 | % | 1.34 | % | 1.03 | % | 0.85 | % | ||||||||||||||||||||||||||||||||||
11
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Non–GAAP Reconciliation of Return on Average Common Equity | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||||||||||||||
| Average common equity | $ | 697,401 | $ | 680,857 | $ | 668,797 | $ | 649,490 | $ | 667,588 | ||||||||||||||||||||||||||||||||||
| Return on average common equity (“ROACE”) as reported | 11.88 | % | 12.79 | % | 12.08 | % | 9.07 | % | 7.02 | % | ||||||||||||||||||||||||||||||||||
| (Gain) / loss on sale of investment securities | (0.53) | (1.53) | (0.65) | (0.15) | (0.20) | |||||||||||||||||||||||||||||||||||||||
| Tax effect | 0.11 | 0.32 | 0.14 | 0.03 | 0.04 | |||||||||||||||||||||||||||||||||||||||
| ROACE excluding (gain) / loss on sale of investment securities | 11.46 | 11.58 | 11.57 | 8.95 | 6.86 | |||||||||||||||||||||||||||||||||||||||
| Death benefit on BOLI | — | — | (0.02) | — | (0.14) | |||||||||||||||||||||||||||||||||||||||
| ROACE excluding death benefit on BOLI | 11.46 | 11.58 | 11.55 | 8.95 | 6.72 | |||||||||||||||||||||||||||||||||||||||
| Prepayment penalties on borrowings | — | 2.22 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Tax effect | — | (0.47) | — | — | — | |||||||||||||||||||||||||||||||||||||||
| ROACE excluding prepayment penalties on borrowings | 11.46 | % | 13.33 | % | 11.55 | % | 8.95 | % | 6.72 | % | ||||||||||||||||||||||||||||||||||
| Adjusted ROACE | 11.46 | % | 13.33 | % | 11.55 | % | 8.95 | % | 6.72 | % | ||||||||||||||||||||||||||||||||||
Conference Call
As previously announced, Horizon will host a conference call to review its first quarter financial results and operating performance.
Participants may access the live conference call on April 29, 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 approximately one hour after the end of the conference through May 6, 2021. 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 10153464.
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.
12
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
Forward Looking Statements
This press release may contain forward–looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon Bancorp, Inc. and its affiliates (collectively, “Horizon”). For these statements, Horizon claims the protection 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,” “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 Horizon’s Annual Report on Form 10–K and its quarterly reports on Form 10–Q. Further, statements about the effects of the COVID–19 pandemic on our business, operations, financial performance, and prospects may constitute forward–looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward–looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. 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.
| Financial Highlights | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Balance sheet: | ||||||||||||||||||||||||||||||||
| Total assets | $ | 6,055,528 | $ | 5,886,614 | $ | 5,790,143 | $ | 5,739,262 | $ | 5,351,325 | ||||||||||||||||||||||
| Interest earning deposits & federal funds sold | 444,239 | 158,979 | 15,707 | 82,328 | 7,191 | |||||||||||||||||||||||||||
| Interest earning time deposits | 7,983 | 8,965 | 9,213 | 9,247 | 9,239 | |||||||||||||||||||||||||||
| Investment securities | 1,423,825 | 1,302,701 | 1,195,613 | 1,126,075 | 1,099,943 | |||||||||||||||||||||||||||
| Commercial loans | 2,177,858 | 2,192,271 | 2,321,608 | 2,312,715 | 2,050,402 | |||||||||||||||||||||||||||
| Mortgage warehouse loans | 266,246 | 395,626 | 374,653 | 300,386 | 223,519 | |||||||||||||||||||||||||||
| Residential mortgage loans | 581,929 | 624,286 | 675,220 | 704,410 | 757,529 | |||||||||||||||||||||||||||
| Consumer loans | 638,403 | 655,200 | 658,884 | 660,871 | 675,849 | |||||||||||||||||||||||||||
| Earning assets | 5,571,304 | 5,374,589 | 5,286,974 | 5,235,553 | 4,852,364 | |||||||||||||||||||||||||||
| Non–interest bearing deposit accounts | 1,133,412 | 1,053,242 | 1,016,646 | 981,868 | 709,978 | |||||||||||||||||||||||||||
| Interest bearing transaction accounts | 2,947,438 | 2,802,673 | 2,600,691 | 2,510,854 | 1,923,260 | |||||||||||||||||||||||||||
| Time deposits | 640,966 | 675,218 | 718,952 | 814,877 | 1,249,033 | |||||||||||||||||||||||||||
| Borrowings | 481,488 | 475,000 | 587,473 | 583,073 | 704,613 | |||||||||||||||||||||||||||
| Subordinated notes | 58,640 | 58,603 | 58,566 | 58,824 | — | |||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 56,604 | 56,548 | 56,491 | 56,437 | 56,374 | |||||||||||||||||||||||||||
| Total stockholders’ equity | 689,379 | 692,216 | 670,293 | 652,206 | 630,842 | |||||||||||||||||||||||||||
13
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Financial Highlights | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Income statement: | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 42,538 | $ | 43,622 | $ | 43,397 | $ | 42,996 | $ | 40,925 | ||||||||||||||||||||||
| Credit loss expense | 367 | 3,042 | 2,052 | 7,057 | 8,600 | |||||||||||||||||||||||||||
| Non–interest income | 13,873 | 19,733 | 16,700 | 11,125 | 12,063 | |||||||||||||||||||||||||||
| Non–interest expense | 32,172 | 36,453 | 33,407 | 30,432 | 31,149 | |||||||||||||||||||||||||||
| Income tax expense | 3,450 | 1,967 | 4,326 | 1,993 | 1,584 | |||||||||||||||||||||||||||
| Net income | $ | 20,422 | $ | 21,893 | $ | 20,312 | $ | 14,639 | $ | 11,655 | ||||||||||||||||||||||
| Per share data: | ||||||||||||||||||||||||||||||||
| Basic earnings per share | $ | 0.46 | $ | 0.50 | $ | 0.46 | $ | 0.33 | $ | 0.26 | ||||||||||||||||||||||
| Diluted earnings per share | 0.46 | 0.50 | 0.46 | 0.33 | 0.26 | |||||||||||||||||||||||||||
| Cash dividends declared per common share | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | |||||||||||||||||||||||||||
| Book value per common share | 15.69 | 15.78 | 15.28 | 14.88 | 14.41 | |||||||||||||||||||||||||||
| Tangible book value per common share | 11.74 | 11.81 | 11.29 | 10.87 | 10.37 | |||||||||||||||||||||||||||
| Market value – high | 19.94 | 15.86 | 11.48 | 12.44 | 18.79 | |||||||||||||||||||||||||||
| Market value – low | $ | 15.43 | $ | 10.16 | $ | 9.05 | $ | 8.40 | $ | 7.97 | ||||||||||||||||||||||
| Weighted average shares outstanding – Basis | 43,919,549 | 43,862,435 | 43,862,435 | 43,781,249 | 44,658,512 | |||||||||||||||||||||||||||
| Weighted average shares outstanding – Diluted | 44,072,581 | 43,903,881 | 43,903,881 | 43,802,794 | 44,756,716 | |||||||||||||||||||||||||||
| Key ratios: | ||||||||||||||||||||||||||||||||
| Return on average assets | 1.40 | % | 1.49 | % | 1.40 | % | 1.05 | % | 0.89 | % | ||||||||||||||||||||||
| Return on average common stockholders’ equity | 11.88 | 12.79 | 12.08 | 9.07 | 7.02 | |||||||||||||||||||||||||||
| Net interest margin | 3.29 | 3.34 | 3.39 | 3.47 | 3.56 | |||||||||||||||||||||||||||
| Allowance for credit losses to total loans | 1.56 | 1.47 | 1.39 | 1.38 | 1.30 | |||||||||||||||||||||||||||
| Average equity to average assets | 11.75 | 11.61 | 11.59 | 11.56 | 12.70 | |||||||||||||||||||||||||||
| Bank only capital ratios: | ||||||||||||||||||||||||||||||||
| Tier 1 capital to average assets | 8.81 | 8.71 | 8.57 | 8.48 | 9.43 | |||||||||||||||||||||||||||
| Tier 1 capital to risk weighted assets | 12.71 | 11.29 | 10.67 | 10.49 | 11.83 | |||||||||||||||||||||||||||
| Total capital to risk weighted assets | 13.86 | 12.21 | 11.56 | 11.74 | 12.67 | |||||||||||||||||||||||||||
14
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Financial Highlights | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands Except Ratios, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Loan data: | ||||||||||||||||||||||||||||||||
| Substandard loans | $ | 86,472 | $ | 98,874 | $ | 88,286 | $ | 61,385 | $ | 61,322 | ||||||||||||||||||||||
| 30 to 89 days delinquent | 5,099 | 6,938 | 5,513 | 3,853 | 12,017 | |||||||||||||||||||||||||||
| Non–performing loans: | ||||||||||||||||||||||||||||||||
| 90 days and greater delinquent – accruing interest | 267 | 262 | 331 | 123 | 246 | |||||||||||||||||||||||||||
| Trouble debt restructures – accruing interest | 1,828 | 1,793 | 1,825 | 2,039 | 2,115 | |||||||||||||||||||||||||||
| Trouble debt restructures – non–accrual | 2,271 | 2,610 | 2,704 | 3,443 | 3,360 | |||||||||||||||||||||||||||
| Non–accrual loans | 20,700 | 22,142 | 24,454 | 22,451 | 18,281 | |||||||||||||||||||||||||||
| Total non–performing loans | $ | 25,066 | $ | 26,807 | $ | 29,314 | $ | 28,056 | $ | 24,002 | ||||||||||||||||||||||
| Non–performing loans to total loans | 0.68 | % | 0.69 | % | 0.72 | % | 0.70 | % | 0.65 | % | ||||||||||||||||||||||
| Allocation of the Allowance for Credit Losses | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Commercial | $ | 42,980 | $ | 42,210 | $ | 39,795 | $ | 39,147 | $ | 32,550 | ||||||||||||||||||||||
| Residential mortgage | 4,229 | 4,620 | 5,464 | 5,832 | 5,654 | |||||||||||||||||||||||||||
| Mortgage warehouse | 1,163 | 1,267 | 1,250 | 1,190 | 1,055 | |||||||||||||||||||||||||||
| Consumer | 8,814 | 8,930 | 9,810 | 8,921 | 9,181 | |||||||||||||||||||||||||||
| Total | $ | 57,186 | $ | 57,027 | $ | 56,319 | $ | 55,090 | $ | 48,440 | ||||||||||||||||||||||
| Net Charge–offs (Recoveries) | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands Except Ratios, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Commercial | $ | 158 | $ | 23 | $ | 488 | $ | 6 | $ | (20) | ||||||||||||||||||||||
| Residential mortgage | (65) | (10) | 136 | 24 | 17 | |||||||||||||||||||||||||||
| Mortgage warehouse | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | 115 | 216 | 199 | 377 | 407 | |||||||||||||||||||||||||||
| Total | $ | 208 | $ | 229 | $ | 823 | $ | 407 | $ | 404 | ||||||||||||||||||||||
| Percent of net charge–offs (recoveries) to average loans outstanding for the period | 0.01 | % | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||||||||||||||
15
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Total Non–performing Loans | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands Except Ratios, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Commercial | $ | 12,802 | $ | 14,348 | $ | 16,169 | $ | 14,238 | $ | 9,579 | ||||||||||||||||||||||
| Residential mortgage | 7,916 | 7,994 | 9,209 | 9,945 | 10,411 | |||||||||||||||||||||||||||
| Mortgage warehouse | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | 4,348 | 4,465 | 3,936 | 3,873 | 4,012 | |||||||||||||||||||||||||||
| Total | $ | 25,066 | $ | 26,807 | $ | 29,314 | $ | 28,056 | $ | 24,002 | ||||||||||||||||||||||
| Non–performing loans to total loans | 0.68 | % | 0.69 | % | 0.72 | % | 0.70 | % | 0.65 | % | ||||||||||||||||||||||
| Other Real Estate Owned and Repossessed Assets | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Commercial | $ | 1,696 | $ | 1,908 | $ | 2,191 | $ | 2,374 | $ | 2,464 | ||||||||||||||||||||||
| Residential mortgage | 37 | — | 70 | 249 | 336 | |||||||||||||||||||||||||||
| Mortgage warehouse | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | — | — | 80 | 20 | 13 | |||||||||||||||||||||||||||
| Total | $ | 1,733 | $ | 1,908 | $ | 2,341 | $ | 2,643 | $ | 2,813 | ||||||||||||||||||||||
16
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Average Balance Sheets | ||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | |||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||
| Interest earning assets | ||||||||||||||||||||||||||||||||||||||
| Federal funds sold | $ | 267,241 | $ | 66 | 0.10 | % | $ | 24,974 | $ | 96 | 1.55 | % | ||||||||||||||||||||||||||
| Interest earning deposits | 25,527 | 31 | 0.49 | % | 26,491 | 101 | 1.53 | % | ||||||||||||||||||||||||||||||
| Investment securities – taxable | 410,063 | 1,451 | 1.44 | % | 501,144 | 2,701 | 2.27 | % | ||||||||||||||||||||||||||||||
Investment securities – non–taxable (1) | 956,464 | 5,223 | 2.80 | % | 588,784 | 3,798 | 3.18 | % | ||||||||||||||||||||||||||||||
Loans receivable (2) (3) | 3,780,339 | 40,818 | 4.39 | % | 3,604,809 | 44,958 | 5.03 | % | ||||||||||||||||||||||||||||||
| Total interest earning assets | 5,439,634 | 47,589 | 3.66 | % | 4,746,202 | 51,654 | 4.47 | % | ||||||||||||||||||||||||||||||
| Non–interest earning assets | ||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 85,269 | 78,108 | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (57,779) | (24,468) | ||||||||||||||||||||||||||||||||||||
| Other assets | 469,025 | 457,490 | ||||||||||||||||||||||||||||||||||||
| Total average assets | $ | 5,936,149 | $ | 5,257,332 | ||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Interest bearing liabilities | ||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | $ | 3,524,103 | $ | 2,343 | 0.27 | % | $ | 3,225,323 | $ | 7,716 | 0.96 | % | ||||||||||||||||||||||||||
| Borrowings | 477,278 | 1,269 | 1.08 | % | 533,129 | 2,238 | 1.69 | % | ||||||||||||||||||||||||||||||
| Subordinated notes | 58,616 | 880 | 6.09 | % | — | — | — | % | ||||||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 56,571 | 559 | 4.01 | % | 56,333 | 775 | 5.53 | % | ||||||||||||||||||||||||||||||
| Total interest bearing liabilities | 4,116,568 | 5,051 | 0.50 | % | 3,814,785 | 10,729 | 1.13 | % | ||||||||||||||||||||||||||||||
| Non–interest bearing liabilities | ||||||||||||||||||||||||||||||||||||||
| Demand deposits | 1,063,268 | 717,257 | ||||||||||||||||||||||||||||||||||||
| Accrued interest payable and other liabilities | 58,912 | 57,702 | ||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 697,401 | 667,588 | ||||||||||||||||||||||||||||||||||||
| Total average liabilities and stockholders’ equity | $ | 5,936,149 | $ | 5,257,332 | ||||||||||||||||||||||||||||||||||
| Net interest income / spread | $ | 42,538 | 3.16 | % | $ | 40,925 | 3.34 | % | ||||||||||||||||||||||||||||||
Net interest income as a percent of average interest earning assets (1) | 3.29 | % | 3.56 | % | ||||||||||||||||||||||||||||||||||
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis. | ||||||||||||||||||||||||||||||||||||||
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate. | ||||||||||||||||||||||||||||||||||||||
(3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis. | ||||||||||||||||||||||||||||||||||||||
17
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Condensed Consolidated Balance Sheets | ||||||||||||||
| (Dollars in Thousands) | ||||||||||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||
| (Unaudited) | ||||||||||||||
| Assets | ||||||||||||||
| Cash and due from banks | $ | 529,336 | $ | 249,711 | ||||||||||
| Interest earning time deposits | 7,983 | 8,965 | ||||||||||||
| Investment securities, available for sale | 1,262,175 | 1,134,025 | ||||||||||||
Investment securities, held to maturity (fair value $170,949 and $179,990) | 161,650 | 168,676 | ||||||||||||
| Loans held for sale | 7,798 | 13,538 | ||||||||||||
Loans, net of allowance for credit losses of $57,186 and $57,027 | 3,607,250 | 3,810,356 | ||||||||||||
| Premises and equipment, net | 92,109 | 92,416 | ||||||||||||
| Federal Home Loan Bank stock | 23,023 | 23,023 | ||||||||||||
| Goodwill | 151,238 | 151,238 | ||||||||||||
| Other intangible assets | 22,058 | 22,955 | ||||||||||||
| Interest receivable | 20,951 | 21,396 | ||||||||||||
| Cash value of life insurance | 97,262 | 96,751 | ||||||||||||
| Other assets | 72,695 | 93,564 | ||||||||||||
| Total assets | $ | 6,055,528 | $ | 5,886,614 | ||||||||||
| Liabilities | ||||||||||||||
| Deposits | ||||||||||||||
| Non–interest bearing | $ | 1,133,412 | $ | 1,053,242 | ||||||||||
| Interest bearing | 3,588,404 | 3,477,891 | ||||||||||||
| Total deposits | 4,721,816 | 4,531,133 | ||||||||||||
| Borrowings | 481,488 | 475,000 | ||||||||||||
| Subordinated notes | 58,640 | 58,603 | ||||||||||||
| Junior subordinated debentures issued to capital trusts | 56,604 | 56,548 | ||||||||||||
| Interest payable | 1,772 | 2,712 | ||||||||||||
| Other liabilities | 45,829 | 70,402 | ||||||||||||
| Total liabilities | 5,366,149 | 5,194,398 | ||||||||||||
| Commitments and contingent liabilities | ||||||||||||||
| Stockholders’ equity | ||||||||||||||
Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares | — | — | ||||||||||||
Common stock, no par value, Authorized 99,000,000 shares Issued 43,974,258 and 43,905,631 shares, Outstanding 43,949,189 and 43,880,562 shares | — | — | ||||||||||||
| Additional paid–in capital | 362,613 | 362,945 | ||||||||||||
| Retained earnings | 316,080 | 301,419 | ||||||||||||
| Accumulated other comprehensive income | 10,686 | 27,852 | ||||||||||||
| Total stockholders’ equity | 689,379 | 692,216 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 6,055,528 | $ | 5,886,614 | ||||||||||
18
Horizon Bancorp, Inc. Announces First Quarter 2021 Financial Results
| Condensed Consolidated Statements of Income | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands Except Per Share Data, Unaudited) | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||||
| Loans receivable | $ | 40,818 | $ | 46,745 | $ | 44,051 | $ | 43,918 | $ | 44,958 | ||||||||||||||||||||||
| Investment securities – taxable | 1,548 | 1,570 | 1,704 | 2,321 | 2,898 | |||||||||||||||||||||||||||
| Investment securities – non–taxable | 5,223 | 4,919 | 4,391 | 4,105 | 3,798 | |||||||||||||||||||||||||||
| Total interest income | 47,589 | 53,234 | 50,146 | 50,344 | 51,654 | |||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||
| Deposits | 2,343 | 2,718 | 3,616 | 4,506 | 7,716 | |||||||||||||||||||||||||||
| Borrowed funds | 1,269 | 5,456 | 1,662 | 2,074 | 2,238 | |||||||||||||||||||||||||||
| Subordinated notes | 880 | 871 | 895 | 58 | — | |||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 559 | 567 | 576 | 710 | 775 | |||||||||||||||||||||||||||
| Total interest expense | 5,051 | 9,612 | 6,749 | 7,348 | 10,729 | |||||||||||||||||||||||||||
| Net interest income | 42,538 | 43,622 | 43,397 | 42,996 | 40,925 | |||||||||||||||||||||||||||
| Credit loss expense | 367 | 3,042 | 2,052 | 7,057 | 8,600 | |||||||||||||||||||||||||||
| Net interest income after credit loss expense | 42,171 | 40,580 | 41,345 | 35,939 | 32,325 | |||||||||||||||||||||||||||
| Non–interest Income | ||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 2,234 | 2,360 | 2,154 | 1,888 | 2,446 | |||||||||||||||||||||||||||
| Wire transfer fees | 255 | 301 | 298 | 230 | 171 | |||||||||||||||||||||||||||
| Interchange fees | 2,340 | 2,645 | 2,438 | 2,327 | 1,896 | |||||||||||||||||||||||||||
| Fiduciary activities | 1,743 | 2,747 | 2,105 | 1,765 | 2,528 | |||||||||||||||||||||||||||
| Gains / (losses) on sale of investment securities | 914 | 2,622 | 1,088 | 248 | 339 | |||||||||||||||||||||||||||
| Gain on sale of mortgage loans | 5,296 | 7,815 | 8,813 | 6,620 | 3,473 | |||||||||||||||||||||||||||
| Mortgage servicing income net of impairment | 213 | 327 | (1,308) | (2,760) | 25 | |||||||||||||||||||||||||||
| Increase in cash value of bank owned life insurance | 511 | 566 | 566 | 557 | 554 | |||||||||||||||||||||||||||
| Death benefit on bank owned life insurance | — | — | 31 | — | 233 | |||||||||||||||||||||||||||
| Other income | 367 | 350 | 515 | 250 | 398 | |||||||||||||||||||||||||||
| Total non–interest income | 13,873 | 19,733 | 16,700 | 11,125 | 12,063 | |||||||||||||||||||||||||||
| Non–interest expense | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 16,871 | 20,030 | 18,832 | 15,629 | 16,591 | |||||||||||||||||||||||||||
| Net occupancy expenses | 3,318 | 3,262 | 3,107 | 3,190 | 3,252 | |||||||||||||||||||||||||||
| Data processing | 2,376 | 2,126 | 2,237 | 2,432 | 2,405 | |||||||||||||||||||||||||||
| Professional fees | 544 | 691 | 688 | 518 | 536 | |||||||||||||||||||||||||||
| Outside services and consultants | 1,702 | 2,083 | 1,561 | 1,759 | 1,915 | |||||||||||||||||||||||||||
| Loan expense | 2,822 | 2,961 | 2,876 | 2,692 | 2,099 | |||||||||||||||||||||||||||
| FDIC insurance expense | 800 | 900 | 570 | 235 | 150 | |||||||||||||||||||||||||||
| Other losses | 283 | 735 | 114 | 193 | 120 | |||||||||||||||||||||||||||
| Other expenses | 3,456 | 3,665 | 3,422 | 3,784 | 4,081 | |||||||||||||||||||||||||||
| Total non–interest expense | 32,172 | 36,453 | 33,407 | 30,432 | 31,149 | |||||||||||||||||||||||||||
| Income before income taxes | 23,872 | 23,860 | 24,638 | 16,632 | 13,239 | |||||||||||||||||||||||||||
| Income tax expense | 3,450 | 1,967 | 4,326 | 1,993 | 1,584 | |||||||||||||||||||||||||||
| Net income | $ | 20,422 | $ | 21,893 | $ | 20,312 | $ | 14,639 | $ | 11,655 | ||||||||||||||||||||||
| Basic earnings per share | $ | 0.46 | $ | 0.50 | $ | 0.46 | $ | 0.33 | $ | 0.26 | ||||||||||||||||||||||
| Diluted earnings per share | 0.46 | 0.50 | 0.46 | 0.33 | 0.26 | |||||||||||||||||||||||||||
19
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
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, “Horizon”). For these statements, Horizon claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in the 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 (the “SEC”), including those described in Horizon’s Annual Report on Form 10-K for the year ended December 31, 2020 and other subsequent filings with the SEC. Further, statements about the effects of the COVID-19 pandemic on our business, operations, financial performance, and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. 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. Please see slides 38-49. Important Information 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 ® Corporate Overview 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 ® 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 quality improvement • Provision expense of $367K for modest allowance build • NPLs decline 6.5% during quarter to 0.68% of loans at 3/31 • Substandard loans decline 12.5% during quarter to 2.4% of loans at 3/31 • NCOs/average loans unchanged at 0.01% Disciplined expense management • Non-interest expense/average assets improved to 2.20% • Efficiency ratio improved to 57.03%, or 57.97% adjusted* Meaningful contributions from mortgage • $5.5M of mortgage related fees in what is historically the seasonally lightest volume quarter • Origination volume of $155.6M down 16.4% from record fourth quarter NIM compression tempered by funding costs • Expected NIM compression reflected anticipated asset pricing headwinds, partially offset by further reduction in cost of interest bearing liabilities to 0.50% and previously disclosed initiatives to optimize returns on earning assets including increasing investment securities to 23.5% ($000s except per share data) 1Q21 Change % vs. 4Q20 1Q20 Income Statement Net interest income $42,538 (2.5)% 3.9% Non-interest income $13,873 (29.7)% 15.0% Reported net income $20,422 (6.7)% 75.2% Diluted EPS $0.46 (8.0)% 76.9% Efficiency ratio 57.03% (0.51)% (1.76)% Return on Average Assets 1.40% (0.09)% 0.51% Return on Average Equity 11.88% (0.91)% 4.86% Balance Sheet Average earning assets $5,439,634 1.4% 14.6% Average total loans $3,780,339 -4.3% 4.9% Average total deposits $4,587,371 8.0% 16.4% Credit Quality Non-performing assets $26,799 (6.7)% (0.1)% Allowance for credit losses to total loans 1.56% 9 bps 26 bps NPA ratio 0.44% (5) bps (6) bps Net charge-offs to avg. loans for the period 0.01% 0 bps 0 bps * Excluding benefit from gains on sale of investment securities, net of tax
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 Years of Banking Experience • 22 Years as President or CEO of Bank • 43 Years of Banking Experience • 3 Years as President • 20 Years as Senior Mortgage and Retail Credit Officer Craig M. Dwight Chairman & CEO James D. "Jim" Neff President Dennis J. Kuhn EVP & Chief Commercial Banking Officer Mark E. Secor EVP & Chief Financial Officer • 31 Years of Banking and Operational Experience • 20 Years as Senior Bank Operations Officer Kathie A. DeRuiter EVP & Senior Operations Officer • 29 Years of Corporate Legal Experience and 10 years of General Counsel Experience • 3 Years as SVP and General Counsel Todd A. Etzler EVP & Corporate Secretary & General Counsel SEASONED LEADERSHIP • Executive team has collectively >200 total years’ banking experience • Horizon’s middle management team on average has >25 years of banking experience • Horizon’s employees understand the value of work Seasoned Management Team • 26 Years of Banking Experience • 4 Years with Horizon as Senior Commercial Credit Officer Lynn M. Kerber EVP & Commercial Credit Officer
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 2014 - 2021 Organic M&A • Carmel, IN • Ft. Wayne, IN • Grand Rapids, MI • Columbus, OH(1) • Noblesville, IN • Holland, MI • Gary, IN • 1st Mtg. • Summit • Peoples • Farmers • LaPorte • CNB • Bargersville • Lafayette • Wolverine • Salin 12 14 Organic Expansions M&A (1) Columbus location closed February 2018. 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 $5 $7 $7 $7 $7 $8 $9 $9 $10 $13 $20 $20 $18 $21 $24 $33 $53 $67 $68 - 10 20 30 40 50 60 70 80 - 1.00 2.00 3.00 4.00 5.00 6.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Assets ($B) Net Income ($M)
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 in 2021 11% 23% 5% 21% 23% 8% 3% 4% 6% 1% 10% 20% -5% 18% 28% 18% 26% 7% 24% 12% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 HBNC Annual Asset Growth, ex. PPP HBNC Annual Asset Growth, w/ PPP GDP Annual Growth* All Commercial Bank Annual Asset Growth* Well-Established Long-Term Goals Meaningfully outpace GDP and industry ~50/50 growth organic/acquired Organic growth of ≥3x GDP growth 2011 - 2020 2016 - 2020 16% average asset growth 4.5x GDP 2.7x banks 18% average asset growth 5.5x GDP 2.9x banks
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 Revenue Streams that are Counter-Cyclical to Varying Economic Cycles Serving the Right Side of Chicago Headquartered in Michigan City, IN, with 74 locations in attractive markets in Indiana and Michigan Double commuter track addition to the South Shore train lines supports growth in Northwest Indiana, which offers proximity to Chicago, with lower taxes and cost of living Major colleges and universities throughout footprint, including Notre Dame University, Purdue University, University of Michigan and Michigan State University Note: Total loan figures for Indiana and Michigan are as of 3/31/21 and do not include Mortgage Warehouse. INDIANA 3/31/21 Loans: $2.0B 61% of Loans MICHIGAN 3/31/21 Loans: $1.3B 39% of Loans OHIO ILLINOIS WISCONSIN KENTUCKY MICHIGAN $1.3B IN LOANS INDIANA $2.0B IN 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 ® 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 Branches 9 Branches 11 Branches 7 Branches8 Branches • Similar culture and economic base to legacy markets in Northern Indiana • Grand Rapids one of the most attractive markets in the Midwest • Purdue University collaborates with contiguous cities of Lafayette and West Lafayette • Subaru expanding facilities • Double commuter track addition to the South Shore train lines • High cost of living in Chicago • Population density of Chicago • Greater Indianapolis area exhibits strong growth • Significant manufacturing, healthcare, and education industries • Over $1.5B in public and private investments since 2012 • Double commuter track addition to the South Shore train lines Source: S&P Global Market Intelligence. Note: Core market demographics reflect MSA data. Deposit data as of 6/30/20. *Southwest Michigan defined as the MSAs of Niles, Grand Rapids-Kentwood and Kalamazoo-Portage. Demographic data weighted by HBNC deposits. Attractive & Stable Midwest Markets Top 5 Markets by Deposits Michigan City, IN La Porte, IN Indianapolis, IN Northwest Indiana Southwest Michigan* Lafayette, IN Median HHI $53,255 $65,306 $74,285 $58,856 $59,404 ’20 – ’25 HHI Growth 6.8% 11.2% 11.5% 11.8% 10.9% ’20 – ’25 Pop. Growth 0.12% 3.81% 0.08% 1.02% 3.86%
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 to Checking Accounts 10 • Approximately 77% of demand deposit account holders were active online banking users at March 31, 2021 • Approximately 74% of transactions in March 2021 were through digital or virtual channels 48% 44% 57% 73% 74% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 100,000 200,000 300,000 400,000 500,000 600,000 700,000 2017 2018 2019 2020 1Q21 Monthly Transaction Volume Digital Transactions Branch Transactions % Digital Transactions 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 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 ® 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 2Q20 3Q20 4Q20 1Q21 Adj. PTPP ROAA(1) Adj. PTPP ROAA $39.5 $41.4 $41.9 $45.0 $41.0 3.44% 3.35% 3.27% 3.44% 3.17% 1Q20 2Q20 3Q20 4Q20 1Q21 Adj. Net Interest Income(1) Adj. Net Interest Income Adj. NIM $ B (1) Footnote Index included in Appendix (see slides 37-49 for non-GAAP reconciliation) 0.85% 1.03% 1.34% 1.56% 1.35% 1Q20 2Q20 3Q20 4Q20 1Q21 Adj. ROAA(1) Adj. ROAA 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 ® 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% 0.50% 0.50%0.50% 0.55% 0.80% 1.05% 1.25%1.29% 1.53% 1.80% 2.01% 2.28% 2.50%2.50% 2.30% 1.83% 1.40% 0.25% 0.25% 0.25%0.25% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 Net Interest Margin Adj. NIM (1) Adj. Cost of Core Funds (1) Avg. Fed Funds Rate (2) • PPP loans increased the first quarter margin an additional ~ 10bps • Excess liquidity carried on the balance sheet compressed the first quarter margin ~ 16bps 13 (1) Footnote Index included in Appendix (see slides 37-49 for non-GAAP reconciliation) (2) Source: S&P Global Market Intelligence. 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 ® 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 have floors, 77% of which are at their floor Retained mortgage loans: • 34% fixed / 66% variable • 98% of variable rate mortgage loans have floors, 7% of which are at their floor Consumer loans: • 65% fixed / 35% variable • 45% of variable rate consumer loans have floors, 59% of which are at their floor 14 Declining Loan Yields Directionally Consistent with Funding Costs $3.6 $3.7 $3.7 $3.6 $3.7 $4.0 $4.0 $4.0 $3.8 5.27% 5.29% 5.41% 5.10% 5.03% 4.54% 4.39% 4.72% 4.39% 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 Yield on Loans (%) / Total Loans ($B) Total Loans Yield on 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 ® 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 total deposit cost to 0.21% • CDs maturing in 2021 total $359 million with a weighted average rate of 0.90% • Account and deposit retention data very strong to date Average Cost(1) Average Deposits ($000s) 1Q 2021 Average Balances 4Q 2020 Average Balances 1Q 2021 (QTD) 4Q 2020 (QTD) Non-interest bearing $1,063,268 $1,037,232 0.00% 0.00% Interest bearing (excluding CDs) $2,860,210 $ 2,757,275 0.10% 0.11% Time Deposits (CDs) $663,893 $693,549 1.00% 1.12% Total Deposits $ 4,587,371 $ 4,488,056 0.21% 0.24% (1) Footnote Index included in Appendix (see slides 37-49 for non-GAAP reconciliation) Strong Core Deposits CD Re-Pricing Opportunities Total Deposits at 3/31/21 $4.7B
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 $9,208 $26,721 $3,473 $5,296 2018 2019 2020 1Q20 (YTD) 1Q21 (YTD) Servicing, net Gain on Sale $ 0 0 0 s Mortgage Contribution Continued Strength in Mortgage Refinancings Represent 65% of Volume Mortgage Volume • Mortgage-related non-interest income remained strong in Q1, growing 57.5% year-over-year and contributing nearly 40% of total non-interest income in the period • 81% of production sold YTD • Predominantly in-market lender • Portfolio mortgages o Underwriting to Fannie Mae guidelines o Full documentation of employment, income and asset verification o 92.2% prime with credit score ≥670
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 1Q21 Efficiency Ratio Adj. Efficiency Ratio $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 1Q20 2Q20 3Q20 4Q20 1Q21 Non-interest Expense Breakout ($M) Salaries & Employee Benefits Net Occupancy Expenses Data Processing Professional Fees Outside Services & Consultants Loan Expense Other • More normalized performance-based compensation accruals o Nominal levels in 1Q20 at outset of pandemic, followed by elevated 4Q20 to reflect record full-year performance metrics o 2021 quarterly accruals expected to be more evenly distributed • Efficiency ratio improved to 57.03%, or 57.97% adjusted(1) for 1Q21 • Annualized non-interest expense improved to 2.20% of average assets for the three months ended March 31, 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 ® 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 $ 159 $ 57,186 ACL/Total Loans 1.47% 1.56% Acquired Loan Discount $ 11,494 $ (221) $ 11,273 (1) Net Reserve Build is equal to the provision for credit losses net of net charge-offs/recoveries. 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 ® Loan Portfolio Review 19
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 $3.7B Diversified & Granular Loan Portfolio Commercial Loans by Industry ($M) 3/31/21 Balance % of Commercial Portfolio % of Total Loan Portfolio Lessors – Residential Multi Family $225 10.3% 6.1% Health Care, Educational & Social 169 7.8% 4.6% Office (except medical) 156 7.2% 4.2% Hotel 143 6.6% 3.9% Construction 140 6.4% 3.8% Retail 135 6.2% 3.7% Individual and Other Services 133 6.1% 3.6% Real Estate Rental & Leasing 129 5.9% 3.5% Manufacturing 110 5.1% 3.0% Restaurants 92 4.2% 2.5% Lessors – Student Housing 83 3.8% 2.3% Warehouse/Industrial 82 3.8% 2.2% Professional & Technical Services 80 3.7% 2.2% Medical Office 69 3.2% 1.9% Retail Trade 63 2.9% 1.7% Mini Storage 53 2.4% 1.4% Transportation & Warehousing 43 2.0% 1.2% Farm Land 39 1.8% 1.1% Leisure and Hospitality 39 1.8% 1.1% Lessors – Residential 1–4 Family 35 1.6% 1.0% Government 25 1.1% 0.7% Wholesale Trade 25 1.1% 0.7% Agriculture 21 1.0% 0.6% Other 89 4.0% 2.4% Total $2,178 100.0% 59.4%
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 21 Deferrals Decline to 2.5% of Loans ($ 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 10 0.2 0 0.0 2 0.0 0 0.0 Direct 8 0.3 0 0.0 5 0.7 0 0.0 Consumer Revolving 1 0.0 3 0.3 2 0.1 0 0.0 Total 47 $11.2 56 $115.5 25 $8.1 33 $83.5 ($ in millions) Type of Loan # Net Balance # Net Balance # Net Balance # Net Balance Commercial 20 $31.7 35 $89.0 18 $38.8 18 $50.6 Mortgage (Retained Only) 21 4.7 5 0.5 11 1.3 2 0.1 Indirect Auto 10 0.2 0 0.0 2 0.0 0 0.0 Direct 5 0.2 3 0.1 3 0.7 2 0.0 Consumer Revolving 4 0.3 0 0.0 0 0.0 2 0.1 Total 60 $37.1 43 $89.6 34 $40.8 24 $50.8 Payment Extensions / Modifications By Type December 31, 2020 March 31, 2021 90 Days or Less Over 90 Days 90 Days or Less Over 90 Days Type Type Principal & Interest Interest Only Principal & Interest Interest Only Payment Extensions / Modifications By Term December 31, 2020 March 31, 2021 Type Type ($ in millions) Net Type of Loan # Net Balance % of Total % of Portfolio # Net Balance % of Total % of Portfolio Balance % Decrease Commercial 55 $120.7 95.3% 5.5% 36 $89.4 97.6% 4.1% -25.9% Mortgage (Retained Only) 26 5.2 4.1% 0.8% 13 1.4 1.5% 0.2% -73.1% Indirect Auto 10 0.2 0.3% 0.1% 2 0.0 0.0% 0.0% -100.0% Direct 8 0.3 0.2% 0.4% 5 0.7 0.8% 1.1% 133.3% Consumer Revolving 4 0.3 0.1% 0.1% 2 0.1 0.1% 0.0% -66.7% Total 103 $126.7 100.0% 3.3% 58 $91.6 100.0% 2.5% -27.7% Mortgage (Serviced Only) 66 56 Payment Extensions / Modifications By Loan Type December 31, 2020 March 31, 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 ® • 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 Indiana, 33% Other, 0% Michigan, 43% Geography at 3/31/21 Non-Owner Occupied Real Estate, 45.8% C&I, 29.6% Owner Occ. Real Estate, 20.1% Agriculture, 2.8% Develop./Land, 1.2% Res. Spec. Homes, 0.5% Category at 3/31/21 Geography at June 30, 2020 $2.2 billion in Total Commercial Loans Diversified Commercial Lending 22 • 30-89 days past due • 1Q21 – 0.11% • 4Q20 – 0.15% • NPLs • 1Q21 – 0.59% • 4Q20 – 0.65%
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 service / 11% full service / 7% independent / 5% economy properties • Modifications of $81.8M; (57%) • 93% of modifications paying interest monthly • Concentrated in Marriott, Hilton, IHG brands; (88%) • 70% of portfolio with sponsors exhibiting verified liquidity >$10M Non-Owner Occupied Retail • 75 loans with $134.8M outstanding (excluding PPP) • Average LTV 51% and average loan size of ~ $1.8M • Modifications of $3.1M; (2%) Restaurants • Over 156 loans with $56.5M outstanding (excluding PPP loans) • 36% full-service / 52% limited-service • Modifications of $1.9M; (3%) • Franchise restaurants $36.3M outstanding; (64%) • All loans making payments, no delinquency, 6 modified loans Leisure & Hospitality • 57 loans with $30.6M outstanding (excluding PPP loans) • Diverse borrowers, i.e. golf courses, entertainment facilities, fitness establishments, zoo • No modified loans Note: Modifications and outstandings as of 3/31/21 Sectors with Escalated Monitoring In-Footprint Focus with Many Longstanding Relationships $3.67B in Total Loans Outstanding at 3/31/21
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 communities, which have rebounded faster than hotels located in metropolitan areas 93% of modified hotel loans making interest payments monthly ALL HOTELS OPEN All hotel loans in Horizon’s portfolio are open for business Improving trends with the majority of Horizon’s hotel portfolio reporting average occupancy for March ‘21 at 58%, an improvement over the 34% reported for December ‘20 Strong brands including Marriott, Hilton, IHG, Wyndham, Choice Hotels and independent brands Borrowers are long-time operators that have managed through multiple economic cycles and most have liquid resources available to them . INDIANA MICHIGAN OHIO ILLINOIS WISCONSIN KENTUCKY 16 Relationships 36 Loans $143M Outstanding 3.9% of Total 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 ® $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-Performing Loans NPLs (period end) NPLs/Loans (period end) $ 0 0 0 s $8,600 $7,057 $2,052 $3,042 $367 1Q20 2Q20 3Q20 4Q20 1Q21 $ 0 0 0 s 25 CECL $48,440 $55,090 $56,319 $57,027 $57,186 1.30% 1.38% 1.39% 1.47% 1.56% 1Q20 2Q20 3Q20 4Q20 1Q21 ACL ACL/Loans Strong Asset Quality Metrics Allowance for Credit Losses (“ACL”) (CECL Implementation 1Q20) $ 0 0 0 s Credit Loss Expense (CECL Implementation 1Q20) 1Q21 ACL/Loans excluding PPP Loans = 1.67% 1Q21 ACL/Loans excluding PPP & Warehouse Loans = 1.81%
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 and growth opportunities High quality balance sheet with strong liquidity – approximately $2.0 billion of cash and securities as of 3/31/21 Robust capital position 15.8% Tier 1 and 16.9% Total RBC as of 3/31/21 Diversified loan portfolio and complementary counter-cyclical revenue streams Historical run rate demonstrates strong core operating earnings 30-year unbroken quarterly cash dividend record, with strong cash position at the holding company that represents approximately 17 quarters of the current dividend plus fixed 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 ® 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 ® 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 social distancing protocols. Substantial reduction in percentage of employees working remotely 100% of our branch locations are open to lobby traffic Payment Relief: • Approximately $2 million in consumer & mortgage loans with payment extensions, down from $63 million at June 30, 2020 • Continue to provide new loans to qualified applicants • Providing mortgage loan education programs • Providing additional financial assistance in the form of fee waivers, freeze on all debt collection activities Preferred SBA Lender: • Active Participant in all SBA loan programs (PPP, 7a, Express & 504) Payment Relief Programs: • Approximately $89 million in commercial loans with payment extensions, down from $470 million at June 30, 2020 • Processed and received approval for 3,807 PPP loans (Rounds One and Two), funding approximately $441.8 million • As of March 31, 2021, $185.7 million forgiven. Increased volunteerism in support of local not-for-profit entities Contributed over $300,000 to COVID-19 related not-for-profit efforts (local food banks, United Way, housing) Participated in community conference calls related to COVID-19 Partnered with local neighborhood housing partnerships to provide funding for low to moderate income families Partnered with local Certified Development Corporations to provide capital to small businesses 28 Note: Modification and PPP data as of March 31, 2021 COVID-19 Response Supporting Employees, Customers & 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 ® 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 forgiveness applications • Outstanding deferred fees ~ $7.3 million as of March 31, 2021 > $1M, 33% > $350K - $1M, 19% > $50K - $150K, 19% > $150K - $350K, 20% $50K and under, 9% 2,126 PPP Loans Outstanding Payroll Protection Program Through March 31, 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 ® 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 as of 3/31/21 0% 1% 1% 1% 2% 2% 2% 2% 3% 3% 4% Wholesale Trade All Others Leisure and Hospitality Professional & Technical Services Construction Manufacturing Restaurants Retail Trade Individuals and Other Services Health Care, Edu. Social Assist. Real Estate Rental & Leasing 1% 1% 1% 1% 2% 2% 2% 2% 3% 3% 3% 5% 5% Wholesale Trade Administrative Services Agriculture Retail Trade Transportation & Warehousing Real Estate Rental & Leasing All Others Professional & Technical Services Restaurants Manufacturing Individuals and Other Services Health Care, Educational Social Assist. Construction 30 Non-Owner Occupied CRE – % of Total Commercial Loans Owner Occupied CRE – % of Total Commercial Loans 49% of Total Commercial Loans $1.1 billion 20% of Total Commercial Loans $0.4 billion C&I Loans – % of Total Commercial Loans 31% of Total Commercial Loans $0.7 billion Low Levels of Concentrated Exposure Commercial Portfolio By Industry Type
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 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 due • 1Q21 – 0.24% • 4Q20 – 0.41% • NPLs • 1Q21 – 0.68% • 4Q20 – 0.68% Indirect Auto, 55.2% Direct Auto, 2.7% Home Equity Term, 4.6% HELOCs, 34.1% RV & Boat, 2.5% Unsecured, 0.6% Other, 0.3% Total Outstanding at 3/31/21 $638M Quality Consumer Loan Portfolio as of March 31, 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 ® 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 documentation of employment, income and asset verification • 92.2% prime with credit score ≥670 • Strong asset quality through end of 1Q21 • 30-89 days past due • 1Q21 – 0.21% • 4Q20 – 0.29% • NPLs • 1Q21 – 1.35% • 4Q20 – 1.36% Prime Mortgage Loan Portfolio as of March 31, 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 ® 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 managed for liquidity rather than return • Ample sources of liquidity at the holding company including ~$127.6M of unencumbered cash (as of 3/31/21) and increased security portfolio by ~$121.1M • Expected additional liquidity from forgiveness of PPP loans, warehouse loan balances returning to normal levels when refinance activity decreases and continued deposit growth • Deleverage strategy completed in 4th quarter by prepaying $83.0M in FHLB advances with a weighted average cost of 2.61% via $62.0M in cash and $21.0M in security sales resulting in ~ $1.2M in prepayment penalties, net of gain on sale of securities. Strong Liquidity Position Securities Portfolio at March 31, 2021: $1.4B Bank Level Liquidity ($M) (3/31/21) Available Unused Line Liquidity FHLB Advances $294 Federal Reserve Discount Window 472 Unsecured Fed Funds 180 TOTAL $946
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.5% 11.1% 11.6% 12.0% 11.3% 12.8% 11.5% 11.5% 11.9% 11.7% 11.5% 11.8% 2016 2017 2018 2019 2020 1Q21 10.4% 9.9% 10.1% 10.5% 10.7% 10.8% 9.3% 9.7% 9.9% 9.7% 9.0% 9.0% 2016 2017 2018 2019 2020 1Q21 13.9% 12.9% 13.4% 14.0% 14.9% 16.9% 13.2% 13.5% 13.7% 13.4% 13.8% 14.3% 2016 2017 2018 2019 2020 1Q21 Source: S&P Global Market Intelligence. Note: Company closed the acquisition of Salin Bancshares, Inc. in March 2019. 34 TCE / TA (%) Leverage Ratio (%) Total RBC Ratio (%) 4.0% Adequate + Buffer 7.0% KBW Regional Bank Index Median - MRQ Robust Capital Foundation 10.5% HBNC Ratio 8.3% 8.5% 8.8% 9.3% 9.1% 8.8% 8.7% 9.1% 9.2% 9.3% 8.5% 8.6% 2016 2017 2018 2019 2020 1Q21 CET1 Ratio (%)
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 35 (1) Footnote Index included in Appendix (see slide 49 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2015 2016 2017 2018 2019 2020 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 Balance Sheet: Total Assets $2,652 $3,141 $3,964 $4,247 $5,247 $5,887 $5,351 $5,739 $5,790 $5,887 $6,056 Gross Loans $1,757 $2,144 $2,838 $3,014 $3,641 $3,881 $3,714 $3,994 $4,043 $3,881 $3,672 Deposits $1,880 $2,471 $2,881 $3,139 $3,931 $4,531 $3,882 $4,308 $4,336 $4,531 $4,722 Tangible Common Equity $197 $255 $325 $362 $478 $517 $454 $476 $495 $518 $516 Profitability: Net Income $20.5 $23.9 $33.1 $53.1 $66.5 $68.5 $11.7 $14.6 $20.3 $21.9 $20.4 Return on Average Assets 0.87% 0.81% 0.97% 1.31% 1.35% 1.22% 0.89% 1.05% 1.40% 1.49% 1.40% Return on Average Equity 9.9% 7.9% 8.7% 11.2% 11.0% 10.3% 7.0% 9.1% 12.1% 12.8% 11.9% Net Interest Margin 3.56% 3.29% 3.75% 3.71% 3.69% 3.44% 3.56% 3.47% 3.29% 3.34% 3.29% Efficiency Ratio (1) 70.0% 71.5% 65.3% 60.7% 59.9% 57.0% 58.8% 56.2% 55.6% 57.5% 57.0% Asset Quality (2) : NPAs & 90+ PD / Assets 0.75% 0.44% 0.44% 0.41% 0.47% 0.49% 0.50% 0.53% 0.55% 0.49% 0.44% NPAs & 90+ PD / Loans + OREO 1.13% 0.65% 0.61% 0.57% 0.68% 0.74% 0.72% 0.77% 0.78% 0.74% 0.47% Reserves / Total Loans 0.83% 0.69% 0.58% 0.59% 0.49% 1.47% 1.30% 1.38% 1.39% 1.47% 1.56% NCOs / Avg. Loans 0.32% 0.08% 0.04% 0.05% 0.06% 0.05% 0.04% 0.04% 0.08% 0.02% 0.02% Bancorp Capital Ratios: TCE Ratio 7.6% 8.3% 8.5% 8.8% 9.4% 9.1% 8.8% 8.6% 8.8% 9.1% 8.8% Leverage Ratio 9.8% 10.4% 9.9% 10.1% 10.5% 10.7% 10.1% 10.8% 10.6% 10.7% 10.8% Tier 1 Capital Ratio 13.2% 13.2% 12.4% 12.8% 13.5% 14.0% 12.8% 13.4% 13.2% 14.0% 15.6% Total Capital Ratio 14.0% 13.9% 12.9% 13.4% 14.0% 14.9% 13.7% 14.4% 14.2% 14.9% 16.9% Year Ended December 31, Quarter Ended,
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 36 Leader In Our Core Markets MSA HBNC Rank HBNC Branches HBNC Market Share Deposits in Market ($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% Indianapolis-Carmel-Anderson, IN 16 9 1.0% 680 65,306 3.8% 11.2% Chicago-Naperville-Elgin, IL-IN-WI 67 10 0.1% 548 74,285 0.1% 11.5% Lafayette-West Lafayette, IN 4 7 8.4% 322 59,404 3.9% 10.9% Midland, MI 2 1 12.6% 255 69,009 0.0% 16.9% Niles, MI 4 5 9.9% 232 53,488 -0.5% 10.8% Lansing-East Lansing, MI 14 2 1.7% 150 61,675 1.6% 11.5% Logansport, IN 3 2 18.5% 148 50,939 -0.2% 9.9% Auburn, IN 3 3 16.1% 129 58,507 2.3% 9.4% Warsaw, IN 5 4 5.7% 101 65,982 2.0% 11.4% Grand Rapids-Kentwood, MI 21 2 0.4% 99 67,365 3.2% 11.9% Columbus, IN 6 2 6.1% 96 67,372 3.3% 12.8% Kalamazoo-Portage, MI 10 1 2.0% 82 63,546 2.6% 15.4% Fort Wayne, IN 14 4 1.0% 79 58,865 3.0% 10.6% Sturgis, MI 5 1 7.8% 68 55,036 0.4% 11.5% Marion, IN 6 1 7.4% 61 47,353 -1.9% 11.1% Kokomo, IN 7 2 3.4% 46 52,734 0.6% 7.5% Kendallville, IN 5 2 6.6% 44 59,362 1.0% 9.6% South Bend-Mishawaka, IN-MI 13 2 0.7% 35 58,213 1.4% 15.4% Saginaw, MI 13 1 0.7% 18 48,941 -1.8% 9.2% Elkhart-Goshen, IN 14 1 0.3% 12 65,928 2.5% 16.4% Total Franchise 73 $4,433 $60,882 1.3% 10.4% Source: S&P Global Market Intelligence. Deposit data as of 6/30/20, estimated pro forma for recent or pending transactions per S&P Global Market Intelligence
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 reconciliation of these non-GAAP amounts to their GAAP counterparts.) • Pre-tax, pre-provision income excludes income tax expense and credit loss expense. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) • Adjusted net interest income and adjusted net margin exclude acquisition-related purchase accounting adjustments. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) • Adjusted ROAA and Adjusted pre-tax, pre-provision ROAA 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 reconciliation of these non-GAAP amounts to their GAAP counterparts.) Slide 13 • 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 of non- interest bearing deposits and excludes prepayment penalties on borrowings. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) Slide 15 • Average cost of average total deposits includes average balances of non-interest bearing deposits. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) Slide 17 • Adjusted efficiency ratio excludes one-time merger expenses, (gain)/loss on sale of securities and death benefit on bank owned life insurance. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) Slides 38-49 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. 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 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 net income 24,239$ 26,902$ 26,690$ 23,689$ 21,839$ Pre-tax, pre-provision net income 24,239$ 26,902$ 26,690$ 23,689$ 21,839$ Merger expenses - - - - - (Gain)/loss on sale of investment securities (914) (2,622) (1,088) (248) (339) Death benefit on bank owned life insurance - - (31) - (233) Prepayment penalties on borrowings - 3,804 - - - Adjusted pre-tax, pre-provision net income 23,325$ 28,084$ 25,571$ 23,441$ 21,267$ Average Assets 5,936,149$ 5,864,086$ 5,768,691$ 5,620,695$ 5,257,332$ Unadjusted pre-tax, pre-provision ROAA 1.66% 1.83% 1.84% 1.70% 1.67% Adjusted pre-tax, pre-provision ROAA 1.59% 1.91% 1.76% 1.68% 1.63% Three Months Ended Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Net Income (Dollars in Thousands, Unaudited)
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 merger expenses 20,422 21,893 20,312 14,639 11,655 (Gain)/loss on sale of investment securities (914) (2,622) (1,088) (248) (339) Tax effect 192 551 228 52 71 Net income excluding (gain)/loss on sale of investment securities 19,700 19,822 19,452 14,443 11,387 Death benefit on bank owned life insurance ("BOLI") - - (31) - (233) Net income excluding death benefit on BOLI 19,700 19,822 19,421 14,443 11,154 Prepayment penalties on borrowings - 3,804 - - - Tax effect - (799) - - - Net income excluding prepayment penalties on borrowings 19,700 22,827 19,421 14,443 11,154 Adjusted net income 19,700$ 22,827$ 19,421$ 14,443$ 11,154$ Non-GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended
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 expenses 0.46 0.50 0.46 0.33 0.26 (Gain)/loss on sale of investment securities (0.02) (0.06) (0.02) (0.01) (0.01) Tax effect - 0.01 0.01 - - Net income excluding (gain)/loss on sale of investment securities 0.44 0.45 0.45 0.32 0.25 Death benefit on bank owned life insurance ("BOLI") - - - - (0.01) Net income excluding death benefit on BOLI 0.44 0.45 0.45 0.32 0.24 Prepayment penalties on borrowings - 0.09 - - - Tax effect - (0.02) - - - Net income excluding prepayment penalties on borrowings 0.44 0.52 0.45 0.32 0.24 Adjusted net income 0.44$ 0.52$ 0.45$ 0.32$ 0.24$ Three Months Ended Non-GAAP Reconciliation of Diluted Earnings per Share (Dollars in Thousands, Unaudited)
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% 1.05% 0.89% Merger expenses - - - - - Tax effect - - - - - ROAA excluding merger expenses 1.40 1.49 1.40 1.05 0.89 (Gain)/loss on sale of investment securities (0.06) (0.18) (0.08) (0.02) (0.03) Tax effect 0.01 0.04 0.02 - 0.01 ROAA excluding (gain)/loss on sale of investment securities 1.35 1.35 1.34 1.03 0.87 Death benefit on bank owned life insurance ("BOLI") - - - - (0.02) ROAA excluding death benefit on BOLI 1.35 1.35 1.34 1.03 0.85 Prepayment penalty on borrowings - 0.26 - - - Tax effect - (0.05) - - - ROAA excluding prepayment penalties on borrowings 1.35 1.56 1.34 1.03 0.85 Adjusted ROAA 1.35% 1.56% 1.34% 1.03% 0.85% Non-GAAP Reconciliation of Return on Average Assets (Dollars in Thousands, Unaudited) Three Months Ended
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 5,112,636 4,746,202 Net interest income as a percentage of average interest earning assets ("Net Interest Margin") 3.29% 3.34% 3.39% 3.47% 3.56% Net interest income as reported 42,538$ 43,622$ 43,397$ 42,996$ 40,925$ Prepayment penalties on borrowings - 3,804 - - - Acquisition-related purchase accounting adjustments ("PAU") (1,579) (2,461) (1,488) (1,553) (1,434) Adjusted net interest income 40,959$ 44,965$ 41,909$ 41,443$ 39,491$ Adjusted net interest margin 3.17% 3.44% 3.27% 3.35% 3.44% Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended
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$ 33,550$ 33,411$ Average interest earning assets 4,748,217 4,623,985 4,566,674 3,929,296 3,808,822 3,717,139 3,638,801 3,580,143 Net interest income as a percentage of average interest earning assets ("Net Interest Margin") 3.58% 3.82% 3.73% 3.62% 3.60% 3.67% 3.78% 3.81% Net interest income as reported 41,519$ 43,463$ 41,529$ 34,280$ 33,836$ 33,772$ 33,550$ 33,411$ Prepayment penalties on borrowings - - - - - - - - Acquisition-related purchase accounting adjustments ("PAU") (1,042) (1,739) (1,299) (1,510) (1,629) (789) (1,634) (2,037) Adjusted net interest income 40,477$ 41,724$ 40,230$ 32,770$ 32,207$ 32,983$ 31,916$ 31,374$ Adjusted net interest margin 3.49% 3.67% 3.61% 3.46% 3.43% 3.59% 3.60% 3.58% Three Months EndedThree Months Ended Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited)
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$ 20,869$ 19,774$ Average interest earning assets 3,471,169 3,078,611 2,943,627 2,797,429 2,932,145 2,957,944 2,471,354 2,367,250 Net interest income as a percentage of average interest earning assets ("Net Interest Margin") 3.71% 3.71% 3.84% 3.80% 2.92% 3.37% 3.48% 3.45% Net interest income as reported 31,455$ 27,879$ 27,198$ 25,568$ 20,939$ 24,410$ 20,869$ 19,774$ Prepayment penalties on borrowings - - - - 4,839 - - - Acquisition-related purchase accounting adjustments ("PAU") (868) (661) (939) (1,016) (900) (459) (397) (547) Adjusted net interest income 30,587$ 27,218$ 26,259$ 24,552$ 24,878$ 23,951$ 20,472$ 19,227$ Adjusted net interest margin 3.61% 3.63% 3.71% 3.66% 3.45% 3.31% 3.42% 3.36% Three Months Ended Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended
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 4,027,057 3,975,297 3,814,785 Annualized total interest expense as a percentage of average interest bearing liabilities ("Cost of Interest Bearing Liabilities") 0.50% 0.94% 0.67% 0.74% 1.13% Total interest expense as reported 5,051$ 9,612$ 6,749$ 7,348$ 10,729$ Prepayment penalties on borrowings - (3,804) - - - Adjusted interest expense 5,051$ 5,808$ 6,749$ 7,348$ 10,729$ Average interest bearing liablities 4,116,568 4,077,223 4,027,057 3,975,297 3,814,785 Average non-interest bearing deposits 1,063,268 1,037,232 996,427 924,890 717,257 Average core funding 5,179,836$ 5,114,455$ 5,023,484$ 4,900,187$ 4,532,042$ Annualzied adjusted interest expense as a percentage of average core funding ("Adjusted Cost of Core Funds") 0.40% 0.45% 0.53% 0.60% 0.95% Non-GAAP Reconciliation of Cost of Interest Bearing Liabilities (Dollars in Thousands, Unaudited) Three Months Ended
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$ 7,191$ 6,015$ Average interest bearing liabilities 3,794,943 3,601,144 3,570,713 3,131,276 3,021,310 2,971,074 2,929,913 2,869,372 Annualized total interest expense as a percentage of average interest bearing liabilities ("Cost of Interest Bearing Liabilities") 1.24% 1.35% 1.38% 1.44% 1.30% 1.13% 0.98% 0.85% Total interest expense as reported 11,879$ 12,248$ 12,321$ 11,093$ 9,894$ 8,499$ 7,191$ 6,015$ Prepayment penalties on borrowings - - - - - - - - Adjusted interest expense 11,879$ 12,248$ 12,321$ 11,093$ 9,894$ 8,499$ 7,191$ 6,015$ Average interest bearing liablities 3,794,943 3,601,144 3,570,713 3,131,276 3,021,310 2,971,074 2,929,913 2,869,372 Average non-interest bearing deposits 747,513 818,164 818,872 643,601 656,114 640,983 605,188 595,644 Average core funding 4,542,456$ 4,419,308$ 4,389,585$ 3,774,877$ 3,677,424$ 3,612,057$ 3,535,101$ 3,465,016$ Annualzied adjusted interest expense as a percentage of average core funding ("Adjusted Cost of Core Funds") 1.04% 1.10% 1.13% 1.19% 1.07% 0.93% 0.82% 0.70% Three Months Ended Non-GAAP Reconciliation of Cost of Interest Bearing Liabilities (Dollars in Thousands, Unaudited) Three Months Ended
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$ 3,754$ Average interest bearing liabilities 2,766,948 2,459,262 2,375,827 2,246,550 2,369,810 2,443,986 2,058,463 1,974,325 Annualized total interest expense as a percentage of average interest bearing liabilities ("Cost of Interest Bearing Liabilities") 0.76% 0.68% 0.61% 0.59% 1.42% 0.74% 0.74% 0.76% Total interest expense as reported 5,319$ 4,191$ 3,607$ 3,266$ 8,450$ 4,552$ 3,781$ 3,754$ Prepayment penalties on borrowings - - - - (4,839) - - - Adjusted interest expense 5,319$ 4,191$ 3,607$ 3,266$ 3,611$ 4,552$ 3,781$ 3,754$ Average interest bearing liablities 2,766,948 2,459,262 2,375,827 2,246,550 2,369,810 2,443,986 2,058,463 1,974,325 Average non-interest bearing deposits 603,733 540,109 499,446 491,154 504,274 462,253 364,822 339,141 Average core funding 3,370,681$ 2,999,371$ 2,875,273$ 2,737,704$ 2,874,084$ 2,906,239$ 2,423,285$ 2,313,466$ Annualzied adjusted interest expense as a percentage of average core funding ("Adjusted Cost of Core Funds") 0.63% 0.55% 0.50% 0.48% 0.50% 0.62% 0.63% 0.66% Three Months Ended Non-GAAP Reconciliation of Cost of Interest Bearing Liabilities (Dollars in Thousands, Unaudited) Three Months Ended
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 interest bearing deposits ("Cost of Interest Bearing Deposits") 0.27% 0.31% 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 total deposits ("Cost of Total Deposits") 0.21% 0.24% Three Months Ended
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 as reported 42,538 43,622 43,397 42,996 40,925 Non-interest income as reported 13,873 19,733 16,700 11,125 12,063 Non-interest expense/ (Net interest income + Non-interest income) ("Efficiency Ratio") 57.03% 57.54% 55.59% 56.23% 58.79% Non-GAAP Reconciliation of Adjusted Efficiency Ratio Non-interest expense as reported 32,172$ 36,453$ 33,407$ 30,432$ 31,149$ Merger expenses - - - - - Non-interest expense excluding merger expenses 32,172 36,453 33,407 30,432 31,149 Net interest income as reported 42,538 43,622 43,397 42,996 40,925 Prepayment penalties on borrowings - 3,804 - - - Net interest income excluding prepayment penalties on borrowings 42,538 47,426 43,397 42,996 40,925 Non-interest income as reported 13,873 19,733 16,700 11,125 12,063 (Gain)/loss on sale of investment securities (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 12,959$ 17,111$ 15,581$ 10,877$ 11,491$ Adjusted efficiency ratio 57.97% 56.48% 56.64% 56.49% 59.43% Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio (Dollars in Thousands, Unaudited) Three Months Ended