Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q2 2023 Earnings Presentation
37 slides from Horizon Bancorp's earnings presentation, Jul 27, 2023
Slide 1: Investor Presentation July 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 J U LY 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: Seasoned Management Team
Seasoned Management Team Thomas M. Prame Mark E. Secor President & Chief Executive Officer EVP & Chief Financial Officer • 29 Years of Banking Experience • 21 Years in Executive Leadership Roles • 35 Years of Banking and Public Accounting Experience • 15 Years with Horizon as CFO and EVP of Horizon
Slide 4: Our Indiana & Michigan Markets
Our Indiana & Michigan Markets Highly Attractive Loans $1.8B We serve some of the most economically attractive Midwest markets through more than 70 strategically located, full-service branchess in Indiana and Michigan. Deposits Our markets have desirable business and investment environments, lower t
Slide 5: 2Q23 Highlights
2Q23 Highlights Profitability • Solid net income of $18.8 million* / adjusted $17.6 Change % million** vs. ($000s except per share data) 2Q23 • NIM of 2.69%* / adjusted 2.57%** 1Q23 • Increase in non-interest income of 14% from Q1 Income Statement Pre-tax, pre-provision net income** $20,895 2.76% •
Slide 6: Diversified Commercial Loans By Geography & Mix
Diversified Commercial Loans By Geography & Mix Quarter Highlights Geographic Dispersion Northern West Indiana, • Commercial loan portfolio increased by Michigan, 19% 13% ~$820,000, 0.1% annualized East Michigan, • Net funding of $128 million for Q2 compared to 7% Central Northern Indiana, $109 mill
Slide 7: Diversified Commercial Loans By Industry
Diversified Commercial Loans By Industry Commercial Loans - $2.506 Billion Non-Owner Occupied CRE – Owner Occupied CRE – C&I Loans – 51% of Total Commercial Loans 23% of Total Commercial Loans 26% of Total Commercial Loans ~$1.3 Billion ~$0.6 Billion ~$0.6 Billion Lessors - Residential Health Care,
Slide 8: CRE Category Diversity
CRE Category Diversity Office CRE Retail CRE Greater Indianapolis Southeast MI 1% Grand Rapids / Holland Greater Kalamazoo 3% 3% 2% 6% 5% 5% 4% 1% 4% 1% Greater Kalamazoo 6% 4% NW Indiana 11% Greater Lansing 7% Grand Rapids / Holland Southeast MI Greater Indianapolis 11% NW Indiana Greater Lansing 1
Slide 9: Well-Managed CRE Maturities
Well-Managed CRE Maturities 4% of portfolio matures in 2H23 2023 Maturities Remaining 2024 Maturities Average Rate 6.66% Average Rate 6.02% Balance % of Total Adjusted CRE* Balance % of Total Adjusted CRE* 10% $000s $000s 5% 4% $178,709 2% $91,134 $77,829 $36,619 All rates <6.00% rate All rates <6.0
Slide 10: Prime Consumer Loans
Prime Consumer Loans Direct Quarter Highlights Auto, 2.4% Consumer Direct Home Equity Term, • Increased ~$2 million, consistent with plan Indirect 6.2% Auto, 46.6% • YTD net recovery of 1 basis points Total Consumer Outstanding • New production yield ~1.18% higher on average $1.0B than total consume
Slide 11: Prime Mortgage Loans
Prime Mortgage Loans Construction, Quarter Highlights 7.0% • Mortgage portfolio increased $12MM, consisting of higher yielding jumbo loans • ~70% of YTD production is saleable Total Outstanding Jumbo, 49.1% • Results aligning with industry Conforming, $675M 42.9% Q2: $68MM orig., $1.0M fee income Q1
Slide 12: Strong Asset Quality Metrics
Strong Asset Quality Metrics Net Charge Offs Non-Performing Loans (period end) 0.01% 0.01% 0.01% 0.01% 0.51% 0.52% 0.52% 0.48% 0.47% 0.00% $284 $285 $379 $21,840 $22,109 $20,206 $19,158 $19,797 $274 $000s $000s $138 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22 1Q23 2Q23 Commercial Resi Real Estate Commer
Slide 13: 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% 0.50% 0.50% 0.41% 0.15% 0.00% 0.01% 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 14: Granular and Tenured Deposits
Granular and Tenured Deposits Seasoned, Core Deposit Base • Consumer: $14K avg. account balance 11 year avg. tenure • Commercial: $80K avg. account balance 10 year avg. tenure 79% • Public: $910K avg. account balance 11 year avg. tenure 27% 50% of Balances in Checking Accounts Total • Daily operatin
Slide 15: Deposit Stability & Strength
Deposit Stability & Strength Stability in Core Relationships Cyclical Balance Fluctuation Borrowings • Cons/Comm Portfolio ($109MM) • Public Funds $118MM • +40MM • Combined Changed (2.54%) • Retained relationships • Attractive funding cost at ~50-75 bpts lower than Public • Consumer portfolio ($55MM
Slide 16: Ample Available Liquidity
Ample Available Liquidity Available Liquidity • >$1.5B of immediately available secured borrowings at June 30, 2023 • ~ $650M of unpledged securities at June 30, 2023 Term Borrowings • $1.2B of term borrowings at June 30, 2023 at a weighted average fixed rate of 3.47% and an expected duration of ~ 9
Slide 17: Fee Income Rebuild
Fee Income Rebuild Non-interest Income ($000s) Quarter Highlights $15,000 $12,434 $12,500 • Continuing to rebuild fee income following $10,997 contributions from cyclical mortgage $10,674 $10,188 production in 2021 and early 2022 $9,620 $10,000 • Diversified growth from the linked quarter reflected
Slide 18: Hallmark Focus on Expense Management
Hallmark Focus on Expense Management Non-interest Expense Quarter Highlights ($000s) $40,000 $36,816 $36,262 $35,404 $35,711 • Non-interest expense to average assets $35,000 $34,524 annualized o 1.86% for 2Q23 $30,000 o 1.82% for YTD23 o On track with <1.90% expectation for FY23 $25,000 • Reflects m
Slide 19: Disciplined Pricing & Stabilizing Costs
Disciplined Pricing & Stabilizing Costs Loan Yields and Deposit Costs 5.78% 5.44% 5.02% 4.38% 4.34% 4.33% 4.61% 4.22% 4.25% 4.10% 1.04% 1.35% 0.71% 0.21% 0.17% 0.14% 0.11% 0.10% 0.11% 0.28% $5.9 $5.8 $5.9 $5.8 $5.9 $5.8 $5.6 $4.8 $5.0 $4.6 $4.0 $4.1 $4.2 $3.8 $3.8 $3.9 $3.6 $3.5 $3.6 $3.6 1Q21 2Q21
Slide 20: 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 6.41 years U.S. Treasury, 19% • Positive spread over total cost of funds • $41 million of cash flows during Q2 • Estimated $60 million
Slide 21: Solid Regulatory Capital
Solid Regulatory Capital TCE / TA (%) Leverage Ratio (%) 9.9% 9.9% 9.0% 9.5% 9.3% 8.9% 9.1% 9.3% 8.6% 8.3% 7.2% 7.2% 10.5% 10.7% 9.3% 10.1% 10.2% 9.7% 9.1% 9.2% 8.8% 7.6% 6.6% 6.9% 4.0% 2018 2019 2020 2021 2022 2Q23 2018 2019 2020 2021 2022 2Q23 CET1 Ratio (%) Total RBC Ratio (%) 14.3% 14.2% 13.7% 1
Slide 22: Improving Tangible Common Equity
Improving Tangible Common Equity $12.34 $12.17 TCE/TA continues to grow $11.59 $11.11 100bp parallel shock to AFS investments 6.9% 6.9% $10.82 over the next quarter, the TCE ratio would 6.6% 6.5% be an estimated 6.6% 6.3% Accumulated Other Comprehensive Income 2Q22 3Q22 4Q22 1Q23 2Q23 metrics increa
Slide 23: Productive Use of Capital
Productive Use of Capital Strong Cash Position Deploying Capital Long-standing Dividend • Investing to leverage capital • 30+ years of uninterrupted • Currently represents through organic loan growth quarterly cash dividend approximately 8 quarters of the current dividend plus • Opportunistic acquis
Slide 24: Updated 2023 Expectations
Updated 2023 Expectations Actual FY 2023 2023 Expectation YTD Total Loan Growth 2.6% 6-8% Net Interest Margin 2.68% 2.55-2.65% Net Interest Income $91M $175-$185 M Non-Interest Income $21M $42-$45 M Annual Expenses to Average Assets 1.82% <1.90% ROAA 0.95% 0.93%-0.97% ROAE 10.62% 10.50%-10.90% TCE /
Slide 25: Why Horizon?
Why Horizon? A High-Performing Operator in Growth Markets Very attractive Midwest markets Attractive Midwest Markets with strategic branch distribution throughout key growth areas and university towns Significant inflow of businesses and households due to desirable economic environment, quality of l
Slide 26: Appendix
Appendix E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 26
Slide 27: Diversified & Granular Loan Portfolio
Diversified & Granular Loan Portfolio % of % of Total Commercial Loans by 6/30/23 Commercial Loan Industry ($M) Balance Portfolio Portfolio Lessors – Residential Multi Family $249 9.9% 5.8% Health Care, Educational & Social 204 8.1% 4.8% Individual and Other Services 162 6.5% 3.8% Office (except med
Slide 28: Leader In Our Core Markets
Leader In Our Core Markets HBNC Deposits HBNC HBNC Market in Market MSA Rank Branches Share ($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 29: Footnote Index
Footnote Index Slide 5 • Adjusted net income and adjusted diluted EPS excludes swap termination fee and gain/(loss) on sale of investment securities, net of tax and death benefit on bank owned life insurance. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP c
Slide 30: Non-GAAP Reconciliation of Net Income
Footnote Index Non-GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Net income as reported $ 18,763 $ 18,228 $ 21,165 $ 23,821 $ 24,859 Swap termination fee (1,453) - - - - Tax effec
Slide 31: Non-GAAP Reconciliation of Net Interest Margin
Footnote Index Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Net interest income as reported $ 46,160 $ 45,237 $ 48,782 $ 51,861 $ 52,044 Average interest earning ass
Slide 32: Non-GAAP Reconciliation of Return on Average Tangible Equity
Footnote Index Non-GAAP Reconciliation of Return on Average Tangible Equity (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Average common equity $ 710,953 $ 693,472 $ 660,188 $ 680,376 $ 677,299 Less: Average intan
Slide 33: Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Net Income
Footnote Index Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Net Income (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Pre-tax income $ 20,215 $ 20,091 $ 23,814 $ 25,834 $ 28,834 Provision for credit losses 680
Slide 34: Non-GAAP Reconciliation of Cost of Deposits
Footnote Index Non-GAAP Reconciliation of Cost of Deposits (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, 2023 2023 Total deposit interest expense as reported $ 18,958 $ 14,819 Average interest bearing deposits 4,445,074 4,502,199 Annualized total deposit interest expense as
Slide 35: Non-GAAP Reconciliation of Cost of Deposits
Footnote Index Non-GAAP Reconciliation of Cost of Deposits (Dollars in Thousands, Unaudited) Three Months Ended December 31, September 30, June 30, March 31, 2022 2022 2022 2022 Total deposit interest expense as reported $ 10,520 $ 4,116 $ 1,677 $ 1,496 Average interest bearing deposits 4,555,887 4,
Slide 36: Non-GAAP Reconciliation of Cost of Deposits
Footnote Index Non-GAAP Reconciliation of Cost of Deposits (Dollars in Thousands, Unaudited) Three Months Ended December 31, September 30, June 30, March 31, 2021 2021 2021 2021 Total deposit interest expense as reported $ 1,663 $ 1,808 $ 2,053 $ 2,343 Average interest bearing deposits 4,543,989 3,8
Slide 37: Investor Relations Contact
Investor Relations Contact Mark E. Secor Executive Vice President and Chief Financial Officer Horizon Bancorp, Inc. 515 Franklin Street Michigan City, IN 46360 219-873–2611 Investor.HorizonBank.com 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