Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q4 2023 Earnings Presentation
34 slides from Horizon Bancorp's earnings presentation, Jan 25, 2024
Slide 1: Investor Presentation January 24, 2024
A NASDAQ Traded Company - Symbol HBNC I N V E S TO R P R E S E N TAT I O N J A N U A RY 2 4 , 2 0 2 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 ®
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: Experienced Leadership Team
Experienced Leadership Team Thomas M. Prame Mark E. Secor President & Chief Executive Officer EVP & Chief Financial Officer • 29 Years of Banking Experience • 2 Years with Horizon • 35 Years of Banking and Public Accounting Experience • 16 Years with Horizon Kathie A. DeRuiter Lynn M. Kerber EVP & S
Slide 4: 4Q23 Highlights
4Q23 Highlights Fourth Quarter Highlights ($000s except per share data) 4Q23 3Q23 • Strong annualized loan growth – 5.2% Income Statement o Led by 13.1% annualized growth in commercial Net interest income $42,257 $42,090 o Launch of Horizon Equipment Finance expected to NIM 2.43% 2.41% meaningfully
Slide 5: Diversified Commercial Loans By Geography & Mix
Diversified Commercial Loans By Geography & Mix Quarter Highlights Geographic Dispersion Northern West Indiana, Michigan, 13% 19% • Commercial loan portfolio increased by ~$85.7MM, East 13.1% annualized Michigan, Total 7% Outstanding Central Northern Michigan, $2.7B Indiana, 31% 9% • Gross funding o
Slide 6: Diversified & Granular Loan Portfolio
Diversified & Granular Loan Portfolio % of % of Total Commercial Loans by 12/31/23 Commercial Loan Industry ($M) Balance Portfolio Portfolio Lessors – Residential Multi Family $271 10.1% 6.1% Mortgage Health Care, Educational & Social 232 8.7% 5.3% Warehouse, Held For Sale, Warehouse/Industrial 170
Slide 7: Prime Consumer Loans
Prime Consumer Loans Quarter Highlights Home Equity Consumer Direct Term, 6.5% HELOCs, Direct 49.5% • Increased ~$27MM, consistent with plan Auto, o Growth attributed to transactional purchases 2.0% • YTD net recovery less than ~ 1 basis point Total Outstanding • Average portfolio yield of 8.26% in
Slide 8: Prime Mortgage Loans
Prime Mortgage Loans Construction, Quarter Highlights 3.9% • Mortgage portfolio increased by ~$5.7MM, 3.4% annualized Total • Results aligning with industry Outstanding Conforming, Jumbo, 50.1% Q4: $58MM originations 45.0% $681M Q3: $59MM originations Q2: $68MM originations • YTD net recovery less t
Slide 9: Strong Asset Quality Metrics
Strong Asset Quality Metrics Net Charge Offs Non-Performing Loans (period end) 0.02% 0.02% 0.52% 0.52% 0.47% 0.45% 0.01% 0.01% 0.01% 0.44% $722 $785 $21,840 $19,797 $22,109 $19,448 $19,625 $000s $379 $000s $285 $274 4Q22 1Q23 2Q23 3Q23 4Q23 4Q22 1Q23 2Q23 3Q23 4Q23 Commercial Resi Real Estate Commer
Slide 10: Higher Yielding Earning Asset Focus
Higher Yielding Earning Asset Focus Improvement in earning asset yield of 21 bps from linked quarter • Loan growth driven in high yielding originations, improving portfolio yields in flat rate environment • Securities portfolio yield improved post balance sheet restructuring • Higher yielding cash p
Slide 11: Deposit Stability & Strength
Deposit Stability & Strength Stability in Core Relationships Maintain Key Relationships Borrowings • Cons/Comm Portfolio $47MM • Public Funds ($83MM) • Flat linked quarter • Combined balance changed 1.14% • Continued price competition • Significant liquidity capacity • Consumer portfolio: ($2MM)/(0.
Slide 12: Positioned for Further NIM Expansion
Positioned for Further NIM Expansion NIM expansion in the fourth quarter • The increase in the interest earning asset yield more than outpaced the increase in interest bearing liability costs • The balance sheet restructure had minimal impact during the quarter, benefits will come in future periods
Slide 13: Continued Focus on Pricing Discipline
Continued Focus on Pricing Discipline Average Loan Yields and Deposit Costs HBNC Yield 6.04% 5.78% 5.86% 5.44% 5.02% 5.71% 4.61% 5.36% 5.50% 4.25% 4.38% 4.34% 4.33% 4.22% 4.10% 5.10% 411 bps 4.67% 376 bps 4.20% 4.14% 4.17% 4.17% 4.11% 4.25% 1.95% 1.63% 1.93% HBNC 1.72% 1.26% Cost 1.35% 0.75% 1.04% 0
Slide 14: Stabilizing Fee Income
Stabilizing Fee Income Adjusted Non-interest Income Excluding Securities Gains and Losses* Quarter Highlights ($000s) • $11.1MM in adjusted non-interest income* $11,830 o Excluding $31.6MM loss on sale of $10,977 $11,123 AFS securities $10,674 $2,019 $10,120 $1,384 $1,677 o Including $397,000 reduct
Slide 15: Diligent Expense Management
Diligent Expense Management Adjusted Non-interest Expense* Quarter Highlights ($000s) $38,625 • $38.6MM in adjusted operating expenses* $35,711 $36,262 $36,168 $17,453 $34,524 o Excluding $705,000 in extraordinary $15,733 $16,100 $16,110 expenses associated with previously $15,812 disclosed staffing
Slide 16: High-Quality Investment Securities
High-Quality Investment Securities • Portfolio with positive spread over deposit costs • Cash flows to support funding of higher yielding loans 4Q22 1Q23 2Q23 3Q23 4Q23 Scheduled Next Scheduled Next Quarter* 12 Months* Roll-off / Cash Flow $28,000 $25,000 $41,000 $26,000 $28,000 $34,000 $105,000 Sal
Slide 17: Capital Position Provides Flexibility
Capital Position Provides Flexibility TCE / TA (%) Leverage Ratio (%) 9.0% 9.5% 9.4% 8.9% 8.6% 8.3% 7.2% 7.4% 10.7% 10.2% 9.6% 9.1% 9.2% 7.6% 7.1% 6.6% 4.0% 2020 2021 2022 2023 2020 2021 2022 2023 CET1 Ratio (%) Total RBC Ratio (%) 14.3% 14.2% 14.0% 13.6% 14.9% 15.4% 11.9% 12.1% 11.6% 14.4% 11.4% 13
Slide 18: 2024 Outlook
2024 Outlook Full Year Outlook 1Q 2024 4Q 2023 Adjusted * Expectation • Momentum in Net Interest Income o Targeting annualized loan growth of 8- 9% accelerating in Q2 with leasing team o Deploy excess cash into higher yielding loans/assets throughout 2024 o Continued discipline pricing of new loan p
Slide 19: Why Horizon?
Why Horizon? Distribution in Excellent Growth Markets Economically Attractive Horizon’s branches are located strategically in markets with attractive business environments, tax rates, housing affordability, infrastructure and quality of life. Our markets are stable and strong with reduced Loans vola
Slide 20: Why Horizon?
Why Horizon? Positive Momentum Moving into 2024 Very attractive Midwest markets Strategic branch distribution throughout highly desirable markets Core markets are experiencing significant investment in infrastructure and strong, growing local economies Flourishing ecosystem of diverse industry of su
Slide 21: 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 ® 21
Slide 22: Diversified Commercial Loans By Industry
Diversified Commercial Loans By Industry Commercial Loans - $2.675 Billion Non-Owner Occupied CRE – Owner Occupied CRE – C&I Loans – 50% of Total Commercial Loans 23% of Total Commercial Loans 27% of Total Commercial Loans ~$1.3 Billion ~$0.6 Billion ~$0.7 Billion Lessors - Residential Health Care,
Slide 23: Granular and Tenured Deposits
Granular and Tenured Deposits Seasoned, Core Deposit Base • Consumer: $9K avg. account balance 11 year avg. tenure 79% • Commercial: $11K avg. account balance 10 year avg. tenure • Public: $880K avg. account balance 11 year avg. tenure 25% 54% of Balances in Checking Accounts • Daily operating accou
Slide 24: 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% 0.49% 0.15% 0.00% 0.02% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Nonperforming assets as % of assets 3.
Slide 25: Footnote Index
Footnote Index Slide 4 • Adjusted net income and adjusted diluted earnings per share exclude swap termination fees, gain/(loss) on sale of investment securities and extraordinary expenses, including costs associated with previously disclosed staffing changes, the launch of Horizon Equipment Finance
Slide 26: Non-GAAP Reconciliation of Net Income
Footnote Index Non-GAAP Reconciliation of Net Income (Dollars in Thousands, Unaudited) Three Months Ended Twelve Months Ended December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2023 2023 2023 2023 2022 2023 2022 Net income as reported $ (25,215) $ 16,205 $ 18,763 $
Slide 27: Non-GAAP Reconciliation of Diluted Earnings per Share
Footnote Index Non-GAAP Reconciliation of Diluted Earnings per Share (Dollars in Thousands, Unaudited) Three Months Ended Twelve Months Ended December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2023 2023 2023 2023 2022 2023 2022 Diluted EPS as reported $ (0.58) $ 0.3
Slide 28: Non-GAAP Reconciliation of Non-Interest Expense
Footnote Index Non-GAAP Reconciliation of Non-Interest Expense (Dollars in Thousands, Unaudited) Three Months Ended December 31, September 30, 2023 2023 Extraordinary Extraordinary Actual Expenses Adjusted Actual Expenses Adjusted Non-interest Expense Salaries and employee benefits $ 21,877 $ (705)
Slide 29: Non-GAAP Reconciliation of Non-Interest Expense
Footnote Index Non-GAAP Reconciliation of Non-Interest Expense (Dollars in Thousands, Unaudited) Three Months Ended June 30, March 31, December 31, 2023 2023 2022 Extraordinary Extraordinary Extraordinary Actual Expenses Adjusted Actual Expenses Adjusted Actual Expenses Adjusted Non-interest Expense
Slide 30: 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, 2023 2023 2023 2023 Total deposit interest expense as reported $ 27,376 $ 24,704 $ 18,958 $ 14,819 Average interest bearing deposits 4,509,268
Slide 31: 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 32: 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 33: Non-GAAP Reconciliation of Non-Interest Income
Footnote Index Non-GAAP Reconciliation of Non-Interest Income (Dollars in Thousands, Unaudited) Three Months Ended December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2023 Non-interest Income Service charges on deposit accounts $ 3,092 $ 3,086 $ 3,021 $ 3,028 $ 2,947 Wire
Slide 34: 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 ® 34