Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q1 2023 Earnings Presentation
47 slides from Horizon Bancorp's earnings presentation, Apr 27, 2023
Slide 1: Investor Presentation April 26, 2023
A NASDAQ Traded Company - Symbol HBNC I N V E S TO R P R E S E N TAT I O N A P R I L 2 6 , 2 0 2 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 ®
Slide 2: Important Information
Important Information 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 clai
Slide 3: Corporate Overview
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 ® 3
Slide 4: 1Q23 Highlights
1Q23 Highlights Change % vs. ($000s except per share data) 1Q23 4Q22 1Q22 Solid ROACE & ROATE & Disciplined Income Statement Expense Management Pre-tax, pre-provision net income* $20,333 (14.4)% (20.9)% • Diluted EPS of $0.42 Reported net income $18,228 (13.9)% (22.6)% • ROAA of 0.94% Diluted EPS $0
Slide 5: Diversified & Attractive Footprint
Diversified & Attractive Footprint $1.8B IN LOANS Serving the Right Side $1.8B IN of Chicago DEPOSITS Headquartered in Michigan City, IN, with 70+ locations in attractive markets in Indiana and Michigan Double commuter track addition to the South Shore train lines supports growth in Northwest Indian
Slide 6: Multiple High Growth & Stable Markets
Multiple High Growth & Stable Markets Northern Indiana Central Indiana Michigan $2.3B Deposits $1.5B Deposits $1.8B Deposits 27 Branches 18 Branches 26 Branches • Significant manufacturing expansion • Greater Indianapolis area a high growth • Positive and stable economic base segment for the Midwest
Slide 7: Indiana & Michigan
Indiana & Michigan Great Business & Living Environments Indiana(1) – National Rankings Michigan(2) – National Rankings #1 – Infrastructure #1 – Energy Sector Job Growth #1 – 25% of all U.S. Trade with Canada #1 – Manufacturing Output passes through Michigan #2 – Cost of Doing Business #3 – State for
Slide 8: Seasoned Management Team
Seasoned Management Team Craig M. Dwight Chairman & CEO • 45 Years of Banking Experience • 25 Years as President or CEO of Bank Thomas M. Prame Mark E. Secor President EVP & Chief Financial Officer • 29 Years of Banking Experience • 21 Years in Executive Leadership Roles • 35 Years of Banking and Pu
Slide 9: Q1 Performance
Q1 Performance 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
Slide 10: 2023 Goal Update
2023 Goal Update Goal Actual 2023 2023 YTD YTD Annual Commercial Loan Growth 6-9% 6.3% Annual Consumer Loan Growth 4-6% 24.4% Net Interest Margin 2.70-2.80% 2.67% $45 M Q1 Net Interest Income $185-$195 M $180 M Ann. Annual Expenses to Average Assets <1.90% 1.79% ROAA >1.10% 0.94% ROAE >11.70% 10.66%
Slide 11: Diversified Commercial Loans By Geography & Mix
Diversified Commercial Loans By Geography & Mix Quarter Highlights Geographic Dispersion West Northern Indiana, • Commercial loan portfolio increased by Michigan, 17% 14% ~$38 million, 6.3% annualized East Michigan, 7% • Net funding of $109 million for Q1 compared to Northern Michigan, Central $98 m
Slide 12: Diversified Commercial Loans By Industry
Diversified Commercial Loans By Industry Commercial Loans - $2.505 Billion Non-Owner Occupied CRE – Owner Occupied CRE – C&I Loans – 52% of Total Commercial Loans 23% of Total Commercial Loans 25% of Total Commercial Loans ~$1.3 Billion ~$0.6 Billion ~$0.6 Billion Lessors - Residential Health Care,
Slide 13: High Value Direct Consumer Loans
High Value Direct Consumer Loans Unsecured, Other, 0.7% 0.7% Quarter Highlights Direct Auto, RV & Boat, 4.9% 4.8% Home Equity Term, 10.1% • Consumer portfolio increased ~$56 million, primarily through addition of high quality HELOC purchase yielding ~ 9.25% Total Direct Outstanding • Organic balance
Slide 14: Quality Indirect Loans
Quality Indirect Loans Quarter Highlights 5 Year Indirect Balances ($ in millions) • Indirect portfolio increased $3MM, $482 $485 consistent with Q4 and 2023 plan $358 $373 $349 • Higher quality borrowers with capacity to repay • YTD net charge-offs of 26 basis points 2019 2020 2021 2022 1Q23 • New
Slide 15: Prime Mortgage Loans
Prime Mortgage Loans Construction, Quarter Highlights 5.8% • Mortgage portfolio increased $9MM, consistent with Q4 and 2023 plan • Strategy focused on saleable production Total Outstanding Jumbo, 48.3% • Results aligning with industry Conforming, $662M 44.8% Q1: $30MM orig., $785,000 fee income Q4:
Slide 16: Strong Asset Quality Metrics
Strong Asset Quality Metrics Net Charge Offs Non-Performing Loans (period end) 0.54% 0.52% 0.51% 0.01% 0.01% 0.01% 0.48% 0.47% 0.00% 0.00% $20,113 $20,206 $21,840 $19,797 $284 $379 $19,158 $000s $000s $285 $136 $138 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q22 3Q22 4Q22 1Q23 Commercial Resi Real Estate Commer
Slide 17: Proven Credit Quality Through Cycles
Proven Credit Quality Through Cycles Net charge offs as a % of average loans 3.50% HBNC U.S. commercial banks¹ 3.00% 2.50% 2.00% 1.50% 1.00% 0.48% 0.50% 0.41% 0.17% 0.00% 0.03% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Nonperforming assets as % of assets 3.00% H
Slide 18: Granular and Tenured Deposits
Granular and Tenured Deposits Seasoned, Core Deposit Base • Consumer: $14K avg. account balance 11 year avg. tenure • Commercial: $81K avg. account balance 10 year avg. tenure 75% • Public: $819K avg. account balance 11 year avg. tenure 19% 52% of Balances in Checking Accounts Total • Daily operatin
Slide 19: Deposit Stability & Strength
Deposit Stability & Strength Stability in Core Relationships Cyclical Balance Fluctuation Borrowings • Cons/Comm Portfolio ($34MM) • Public Funds ($122MM) • +169MM • Combined Changed (0.78%) • ($75MM) in March with elevated • Attractive funding cost at pricing ~50-75 bpts lower than Public • Consume
Slide 20: Financial Highlights
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 ® 20
Slide 21: Ample Available Liquidity
Ample Available Liquidity Available Liquidity • >$1.5B of available secured borrowings at March 31, 2023 • ~ $660M of unpledged securities at March 31, 2023 Term Borrowings • Moved short-term and higher cost funding to longer-term funding during 1Q23 • $1.1B of term borrowings at March 31, 2023 at a
Slide 22: Solid Regulatory Capital
Solid Regulatory Capital TCE / TA (%) Leverage Ratio (%) 9.1% 9.3% 8.6% 8.3% 10.7% 10.5% 9.3% 10.1% 10.0% 10.1% 8.8% 9.1% 7.2% 7.2% 9.9% 9.9% 9.1% 9.4% 9.5% 7.6% 9.0% 8.9% 6.6% 6.9% 4.0% 2018 2019 2020 2021 2022 1Q23 2018 2019 2020 2021 2022 1Q23 CET1 Ratio (%) Total RBC Ratio (%) 12.1% 12.0% 11.9%
Slide 23: Improving Tangible Common Equity
Improving Tangible Common Equity Accumulated Other Comprehensive Income metrics improved for the second consecutive quarter • Tangible Common Equity (“TCE”) was 6.87% in the first quarter compared to 6.56% in the fourth quarter • We have the intent and ability to hold the investments to maturity • R
Slide 24: Increasing Deposit Premiums
Increasing Deposit Premiums Core Deposit Premiums Remain Near Natural Balance Sheet Hedge Historic Lows Courtesy of Stifel Financial Corp. 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
Slide 25: Productive Use of Capital
Productive Use of Capital Deploying Capital Long-standing Dividend Strong Cash Position • Investing to leverage capital • 30+ years of uninterrupted • Strong cash position at the through organic loan growth quarterly cash dividend holding company currently represents approximately • Opportunistic ac
Slide 26: Favorable Core Return on Average Tangible Equity
Favorable Core Return on Average Tangible Equity Adj. Net Income(1) Adj. Net Interest Income(1) $29.1 $51.0 $50.8 $25.7 $48.4 $23.6 $24.2 $25.2 $23.8 $23.7 $45.9 $44.9 $21.2 $20.3 $18.6 $0.54 $0.56 $0.55 $0.48 $M $M $0.43 2.85% 3.06% 2.99% 2.83% 2.65% 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q22 3Q22 4Q22 1Q2
Slide 27: Investment Portfolio
Investment Portfolio Investment portfolio cash flows are helping to Fed Agy CMO, fund higher yielding loans Corp, 3% 8% • Book yield of 2.22%, effective duration of 6.58 years U.S. Treasury, 19% • Positive spread over total cost of funds • $25 million of cash flows during Q1 • Estimated $100 million
Slide 28: Disciplined Loan Pricing
Disciplined Loan Pricing Yield on Loans (%) / Total Average Loans ($B) 5.44% 5.02% 4.61% 4.38% 4.34% 4.33% 4.22% 4.25% 4.10% $4.1 $4.0 $3.9 $3.8 $3.8 $3.6 $3.6 $3.6 $3.5 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Total Average 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
Slide 29: Stable Core Deposits
Stable Core Deposits • In-market relationships and strategic pricing, contributed to total deposit cost of 1.04%(1) • Total deposit beta’s have accelerated in Q1 to 51% compared to 32% in the linked quarter • Stable and consistent deposit mix • Account and deposit retention data very strong to date
Slide 30: Balance Sheet Management
Balance Sheet Management Deposit Betas Drive Sensitivity • Actively managing balance sheet for continued elevated rates throughout 2023 • $2.3 billion of assets repricing in the next 12 months. $1.3 billion adjust with a rate change to their index within 90 days • Deposit betas range from 15% for co
Slide 31: Good Expense Control Offsets Lower Non-Interest Income
Good Expense Control Offsets Lower Non-Interest Income Non-interest Expense Non-interest Income ($000s) ($000s) $40,000 $15,000 $36,816 $14,155 $35,270 $35,404 $35,711 $34,524 $35,000 $12,434 $12,500 $30,000 $10,674 $10,188 $10,000 $9,620(1) $25,000 $20,000 $7,500 $15,000 1.95% $5,000 $10,000 1.90%
Slide 32: Closing Comments
Closing Comments 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
Slide 33: Why Horizon?
Why Horizon? A High-Performing Operator in Growth Markets Very attractive Midwest markets 30 minutes from downtown Chicago benefiting from Illinois exodus Attractive Midwest Markets with promising infrastructure investment Growing manufacturing, healthcare, and educational industries throughout the
Slide 34: Questions
Q&A 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 ® 34
Slide 35: Appendix
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 ® 35
Slide 36: Proven History of Organic Growth Supplemented by Strategic Acquisitions
Proven History of Organic Growth Supplemented by Strategic Acquisitions Horizon has grown assets at a 12% CAGR since 2000 via 15 acquisitions and organic expansion Pre-crisis Post-crisis Recent Expansion Year | Assets $bn (unless otherwise stated) Acquired assets 2 acquisitions 11 acquisitions 2 acq
Slide 37: Diversified Business Model Produces Consistent, Top Tier Profitability
Diversified Business Model Produces Consistent, Top Tier Profitability Leading returns over the past 10 years Historical Quarterly ROATCE vs. KRX¹ 30% HBNC KRX¹ Greater than KRX… 25% 3 years 85% 20% 19.9% 10 years 68% 18.0% 15% … of the time 10% 5% ~36% less volatile than 0% the KRX² 2012Q4 2013Q4 2
Slide 38: Diversified & Granular Loan Portfolio
Diversified & Granular Loan Portfolio % of % of Total Commercial Loans by 3/31/23 Commercial Loan Industry ($M) Balance Portfolio Portfolio Lessors – Residential Multi Family $250 10.0% 5.9% Health Care, Educational & Social 194 7.7% 4.6% Office (except medical) 165 6.6% 3.9% Warehouse/Industrial 16
Slide 39: Historical Financials
Historical Financials Year Ended December 31, Quarter Ended, ($M except per share data) 2017 2018 2019 2020 2021 2022 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 Balance Sheet: Total Assets $3,964 $4,247 $5,247 $5,887 $7,375 $7,873 $7,420 $7,641 $7,719 $7,873 $7,900 Gross Loans $2,838 $3,014 $3,641 $3,
Slide 40: Leader In Our Core Markets
Leader In Our Core Markets HBNC Deposits HBNC HBNC Market in Market MSA Rank Branches Share ($M) Michigan City-La Porte, IN 1 8 55.3% $1,184 Indianapolis-Carmel-Anderson, IN 16 8 1.0% 791 Chicago-Naperville-Elgin, IL-IN-WI 47 10 0.1% 709 Lafayette-West Lafayette, IN 4 5 7.1% 344 Lansing-East Lansing
Slide 41: Footnote Index
Footnote Index Slide 4 • 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.) • Pre-tax, pre-provision income excludes income tax expense and credit loss expe
Slide 42: Footnote Index
Footnote Index Slides 43-47 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
Slide 43: Footnote Index
Footnote Index Non-GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Net income as reported $ 18,228 $ 21,165 $ 23,821 $ 24,859 $ 23,563 (Gain)/loss on sale of investment securities
Slide 44: Footnote Index
Footnote Index Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Net interest income as reported $ 45,237 $ 48,782 $ 51,861 $ 52,044 $ 46,831 Average interest earning as
Slide 45: Footnote Index
Footnote Index Non-GAAP Reconciliation of Return on Average Tangible Equity (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Average common equity $ 693,472 $ 660,188 $ 680,376 $ 677,299 $ 716,341 Less: Average inta
Slide 46: Footnote Index
Footnote Index Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Net Income (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Pre-tax income $ 20,091 $ 23,814 $ 25,834 $ 28,834 $ 27,102 Provision for credit losses 24
Slide 47: Footnote Index
Footnote Index Non-GAAP Reconciliation of Cost of Deposits (Dollars in Thousands, Unaudited) Three Months Ended March 31, December 31, 2023 2022 Total deposit interest expense as reported $ 14,819 $ 10,520 Average interest bearing deposits 4,502,199 4,555,887 Annualized total deposit interest expens