Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q3 2022 Earnings Presentation
57 slides from Horizon Bancorp's earnings presentation, Oct 26, 2022
Slide 1: Investor Presentation | October 26, 2022
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® A NASDAQ Traded Company - Symbol HBNC INVESTOR PRESENTATION | OCTOBER 26, 2022
Slide 2: Forward-Looking Statements
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Forward-Looking Statements This 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,
Slide 3: Corporate Overview
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Corporate Overview 3
Slide 4: 3Q22 Highlights Meeting or Exceeding Our 2022 Goals
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 3Q22 Highlights Meeting or Exceeding Our 2022 Goals Goals 3Q22 Change % vs. Linked Quarter Year-to- date Total Loan Growth, Annualized(1) 7.8% 14.5% Commercial Loan Growth, Annualized(1) 10-14% 1.80% 13.80% Consumer Loan Growth, Ann
Slide 5: Why Horizon? A High-Performing Operator in Growth Markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 5 Disciplined operating culture Compelling value supported by commitment to dividend Well-established long-term growth goals Very attractive Midwest markets Diversified mix of businesses delivers very strong operational performance
Slide 6: Seasoned Management Team
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 6 Mark E. Secor EVP & Chief Financial Officer • 33 Years of Banking and Public Accounting Experience • 13 Years with Horizon as CFO and EVP of Horizon Kathie A. DeRuiter EVP & Senior Operations Officer • 32 Years of Banking and Oper
Slide 7: A History of Profitable Growth
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® A History of Profitable Growth Positioned Well for Future Organic Growth $0.72 $0.76 $0.91 $1.13 $1.22 $1.26 $1.31 $1.39 $1.40 $1.55 $1.85 $1.76 $2.08 $2.65 $3.14 $3.96 $4.25 $5.24 $5.89 $7.36 $7.72 $5 $7 $7 $7 $7 $8 $9 $9 $10 $13 $
Slide 8: Built to Outpace GDP & Industry Over Long-Term
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 8 * U.S. Bureau of Economic Analysis, retrieved from FRED, Federal Reserve Bank of St. Louis, fred.stlouisfed.org, April 18, 2022. Built to Outpace GDP & Industry Over Long-Term Assets Grew 29% ex. PPP During 2021 23% 5% 21% 23% 8%
Slide 9: Multiple Revenue Streams Diversifies Risk
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 9 Multiple Revenue Streams Diversifies Risk 9 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 He
Slide 10: Market Overview: Legacy and Growth Markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 10 Michigan City, IN / La Porte, IN (Legacy) Indianapolis, IN (Growth) Northwest Indiana (Growth) Lafayette, IN (Growth) Southwest Michigan* (Growth) $1.2B Deposits $791M Deposits $709M Deposits $344M Deposits$561M Deposits 8 Branch
Slide 11: Digital Banking Excellence
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 ® Digital Banking Excellence Sophisticated Internal Capabilities Supported by Best-in-Class Third Parties NEW IN 2022 • Online deposit accounting opening platform to include time deposit, IRA and HSA accounts • Develop real-time API a
Slide 12: Community Banking at Scale
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 ® Community Banking at Scale Efficient Utilization of Talent, Technology & Branch Network 50 50 50 60 65 81 32 32 46 56 62 63 74 73 78 665 701 716 839 788 900 0 200 400 600 800 1000 - 50 100 150 200 250 2016 2017 2018 2019 2020 2021 E
Slide 13: Productive Use of Capital
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 13 Productive Use of Capital Deploying capital through productive acquisitions and to drive organic growth • Completed acquisition of 14 Michigan branches and associated deposits and loans in 3Q21, adding mass and scale to Horizon’s
Slide 14: Financial Highlights
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 14 Financial Highlights
Slide 15: Strong Core Earnings
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 15 $ M $28.2 $23.4 $25.7 $29.1 $25.2 $23.0 $23.7 $23.6 $24.2 $23.8 $0.52 $0.54 $0.54 $0.56 $0.55 3Q21 4Q21 1Q22 2Q22 3Q22 Adj. Net Income(1) Pre-tax, Pre-provision Income Adj. Net Income Adj. EPS 14.34% 14.45% 14.56% 16.84% 14.71% 3
Slide 16: Balance Sheet Management as Deposit Betas are Increasing
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 16 Balance Sheet Management As Deposit Betas are Increasing • Of the $2.0 billion of adjustable rate loans, $1.2 billion adjust with a rate change to their index • Deposit betas range from 5.0% for consumer deposits to 60.0% on mone
Slide 17: Net Interest Margin
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 3.66% 3.71% 3.63% 3.61% 3.58% 3.60% 3.59% 3.43% 3.46% 3.61% 3.67% 3.49% 3.44% 3.35% 3.27% 3.44% 3.17% 3.13% 3.12% 2.86% 2.93% 3.12% 3.08% 0.48% 0.50% 0.55% 0.63% 0.70% 0.82% 0.93% 1.07% 1.19% 1.13% 1.10% 1.04% 0.95% 0.60% 0.53% 0.45
Slide 18: Investment Portfolio
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Fed Agy CMO, 3% State and Muni, 51% Fed Agy MBS, 18% Private labeled MBS, 1% U.S. Treasury, 19% Corp, 8% Total Investments at 9/30/22 $3.0B 18 • Investment portfolio cash flows are helping to fund higher yielding loans • Book yield
Slide 19: Capital and AOCI Impact
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 ® 19 • Accumulated Other Comprehensive Income (“AOCI”) loss reduced Tangible Common Equity (“TCE”) to 6.25%, or by 3.55%, in the third quarter • We have the intent and ability to hold the investments to maturity and no plans to sell •
Slide 20: Stable Low Cost Core Deposits
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Non-interest bearing 23% Interest bearing(1) 64% CDs 13% 20 • In-market relationships and strategic pricing, contributed to total deposit cost of 0.28% • Deposit beta’s have lagged short term rate increases as we are disciplined in
Slide 21: Good Expense Control
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® • Annualized non-interest expense was 1.99% of average assets, supporting full year 2022 target of less than 2% • Planned 2022 branch rationalization payback in approximately six months after one time charges of ~ $380,000 recorded
Slide 22: Loan Portfolio Review
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Loan Portfolio Review 22
Slide 23: Robust Commercial Loan Growth
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Northern Indiana, 19% Central Indiana, 29%Other, 3% Michigan, 49% Geography at 9/30/22 Non-Owner Occupied Real Estate, 49.9% C&I, 23.5% Owner Occ. Real Estate, 22.7% Agriculture, 2.4% Develop./Land, 1.0% Res. Spec. Homes, 0.5% Categ
Slide 24: Excellent Consumer Loan Growth
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 24 • Excellent Production in 2021, Q1 2022, Q2 2022 & Q3 2022 • Strong production of $149M • Portfolio gained $51 million, representing 6.0% quarterly growth, or 23.9% annualized • Continued high quality originations YTD with 87% Lo
Slide 25: Prime Mortgage Loan Portfolio
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 25 Jumbo, 47.2% Rental, 0.9% Conforming, 46.6% Construction, 5.3% Total Outstanding at 9/30/22 $635M Prime Mortgage Loan Portfolio • Gain on sale of mortgage loans (“GOS”) and mortgage warehousing income constituted only 3.8% of tot
Slide 26: Strong Asset Quality Metrics
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® -$18 $1,412 $136 $284 $138 0.04% 0.01% 3Q21 4Q21 1Q22 2Q22 3Q22 Net Charge Offs NCOs NCOs/Average Loans $ 0 0 0 s $29,374 $19,019 $20,113 $20,206 $19,158 0.80% 0.53% 0.54% 0.51% 0.48% 3Q21 4Q21 1Q22 2Q22 3Q22 Non-Performing Loans NP
Slide 27: Key Franchise Highlights
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 27 Key Franchise Highlights Positioned well for growth in 2022 and 2023, expansion of consumer dealer network, 20% increase in CLOs, 14 offices acquired and closed 10 offices in 2021 and closing 7 more offices in 2022 Granular low c
Slide 28: Exceeding Announced 2022 Goals
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Annual Commercial Loan Growth 10% 10-14% 13.8% Reduction in Mortgage Originations 15-18% 15-18% 27.07% Annual Consumer Loan Growth 5-9% 10-14% 31.70% Annual Expenses to Average Assets <2.00% <2.00% 1.99% ROAA >1.20% >1.30% 1.29% ROA
Slide 29: Appendix
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 29 Appendix
Slide 30: 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 ® 30 (1) Net Reserve Build is equal to the provision for credit losses net of net charge-offs/recoveries. Stable Credit Loss Reserves ($000s, unaudited) 9/30/22 Net Reserve(1) 3Q22 Net Reserve(1) 2Q22 Net Reserve(1) 1Q22 12/31/21 Comm
Slide 31: Gross Loans and Commercial Loans by Industry
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Commercial, $2,404M, 60% Residential Mortgage, $635M, 16% Consumer, $900M, 22% Mortgage Warehouse, $74M, 2% Held For Sale, $2M, 0% 31 Gross Loans at 9/30/22 $4.0B Commercial Loans by Industry ($M) 9/30/22 Balance % of Commercial Por
Slide 32: Commercial Loan Composition by Industry
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 1% 2% 3% 3% 3% 6% 6% 7% 7% 7% 9% Farm Land Mini Storage All Others Lessors - Residential 1-4 Medical Office Warehouse/ Industrial Lessors Student Housing Retail Motel Office (except medical) Lessors - Residential Multi Note: Data as
Slide 33: Stable Loan Yields
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® Commercial loans: • 64% fixed / 36% variable • 24% of variable rate commercial loans have floors, 16% of which are at their floor Retained mortgage loans: • 57% fixed / 43% variable • 94% of variable rate mortgage loans have floors,
Slide 34: Robust Capital Foundation
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 11.1% 11.6% 12.0% 11.3% 12.0% 11.2% 11.2% 11.8% 12.2% 12.0% 12.1% 11.3% 2017 2018 2019 2020 2021 3Q22 9.9% 10.1% 10.5% 10.7% 9.1% 9.6% 9.7% 10.0% 10.2% 9.1% 8.9% 9.1% 2017 2018 2019 2020 2021 3Q22 12.9% 13.4% 14.0% 14.9% 15.7% 14.5%
Slide 35: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 35 (1) Footnote Index included in Appendix (see slide 54 for non-GAAP reconciliation) (2) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2016 2017 2018 2019 2020 2021 9/30/21 12/31/
Slide 36: Leader In Our Core Markets
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 36 Leader In Our Core Markets Source: S&P Global Market Intelligence. Deposit data as of 6/30/22, estimated pro forma for recent or pending transactions per S&P Global Market Intelligence MSA HBNC Rank HBNC Branches HBNC Market Shar
Slide 37: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 37 Slide 5 • Return on average tangible equity excludes average intangible assets from average equity. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) Slide 15 • Adjusted net
Slide 38: Use of Non-GAAP Financial Measures
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 38 Slides 39-57 Use of Non-GAAP Financial Measures • Certain information set forth in the presentation materials refers to financial measures determined by methods other than in accordance with GAAP. Horizon believes these non-GAAP
Slide 39: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 39 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Net income as reported 23,821$ 24,859$ 23,563$ 21,425$ 23,071$ Acquisition expenses - - - 884 799 Tax effect - - - (184) (166) Ne
Slide 40: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 40 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Diluted EPS as reported 0.55$ 0.57$ 0.54$ 0.49$ 0.52$ Acquisition expenses - - - 0.02 0.02 Tax effect - - - - - Diluted EPS exclu
Slide 41: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 41 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Average assets 7,635,102$ 7,476,238$ 7,319,675$ 7,461,343$ 6,507,673$ Return on average assets ("ROAA") as reported 1.24% 1.33% 1
Slide 42: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 42 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Average common equity 680,376$ 677,299$ 716,341$ 719,643$ 724,412$ Return on average common equity ("ROACE") as reported 13.89% 1
Slide 43: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 43 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Average common equity 680,376$ 677,299$ 716,341$ 719,643$ 724,412$ Less: Average intangible assets 173,546 175,321 176,356 179,59
Slide 44: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 44 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Pre-tax income 25,834$ 28,834$ 27,102$ 25,505$ 27,127$ Provision for credit losses (601) 240 (1,386) (2,071) 1,112 Pre-tax, pre-p
Slide 45: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 45 Footnote Index September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2022 2022 2022 2021 2021 2021 2021 Net interest income as reported 53,395$ 53,008$ 48,171$ 49,976$ 46,544$ 42,632$ 42,538$ Average inte
Slide 46: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 46 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2020 2020 2020 2020 2019 2019 2019 2019 Net interest income as reported 43,622$ 43,397$ 42,996$ 40,925$ 41,519$ 43,463$ 41
Slide 47: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 47 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2018 2018 2018 2018 2017 2017 2017 2017 Net interest income as reported 33,836$ 33,772$ 33,550$ 33,411$ 31,455$ 27,879$ 27
Slide 48: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 48 Footnote Index December 31, September 30, June 30, March 31, 2016 2016 2016 2016 Net interest income as reported 20,939$ 24,410$ 20,869$ 19,774$ Average interest earning assets 2,932,145 2,957,944 2,471,354 2,367,250 Net interest
Slide 49: Footnote Index
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 49 Footnote Index September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2022 2022 2022 2021 2021 2021 2021 Total interest expense as reported 9,635$ 4,564$ 3,911$ 4,142$ 4,324$ 4,788$ 5,051$ Average interest
Slide 50: 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 ® 50 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2020 2020 2020 2020 2019 2019 2019 2019 Total interest expense as reported 9,612$ 6,749$ 7,348$ 10,729$ 11,879$ 12,248$ 12
Slide 51: 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 ® 51 Footnote Index December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2018 2018 2018 2018 2017 2017 2017 2017 Total interest expense as reported 9,894$ 8,499$ 7,191$ 6,015$ 5,319$ 4,191$ 3,607
Slide 52: 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 ® 52 Footnote Index December 31, September 30, June 30, March 31, 2016 2016 2016 2016 Total interest expense as reported 8,450$ 4,552$ 3,781$ 3,754$ Average interest bearing liabilities 2,369,810 2,443,986 2,058,463 1,974,325 Annualiz
Slide 53: 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 ® 53 Footnote Index June 30, June 30, 2022 2022 Total deposit interest expense as reported 4,116$ 1,677$ Average interest bearing deposits 4,478,741 4,540,959 Annualized total deposit interest expense as a percentage of average intere
Slide 54: 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 ® 54 Footnote Index September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Non-GAAP Calculation of Efficiency Ratio Non-interest expense as reported 38,350$ 36,368$ 36,610$ 39,370$ 34,349$ Net interest in
Slide 55: 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 ® 55 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits
Slide 56: 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 ® 56 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits 20,549$ (202)$ 20,347$ 18,901$ (25)$ 18,876$ Net occup
Slide 57: 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 ® 57 Footnote Index Actual Acquisition & Non- Recurring Expenses Adjusted Actual Acquisition & Non- Recurring Expenses Adjusted Non-interest Expense Salaries and employee benefits 17,730$ -$ 17,730$ 16,871$ -$ 16,871$ Net occupancy ex