Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Q3 2023 Earnings Presentation
31 slides from Horizon Bancorp's earnings presentation, Oct 26, 2023
Slide 1: Investor Presentation October 25, 2023
A NASDAQ Traded Company - Symbol HBNC I N V E S TO R P R E S E N TAT I O N O C TO B E R 2 5 , 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: 3Q23 Highlights
3Q23 Highlights Third Quarter Highlights ($000s except per share data) 3Q23 2Q23 • Earned solid net income of $16.2 million, or $0.37/share Income Statement Net interest income $42,090 $46,160 o Linked quarter EPS included ~$0.02 from swap termination NIM 2.41% 2.69%* Adjusted NIM** 2.38% 2.57% • To
Slide 5: Our Indiana & Michigan Markets
Our Indiana & Michigan 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 volatility compared to majo
Slide 6: 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 ~$83.0MM, East 13.1% annualized Michigan, 7% Central Northern Indiana, Michigan, 31% 9% • Net funding of $97 million for Q3 compa
Slide 7: Diversified Commercial Loans By Industry
Diversified Commercial Loans By Industry Commercial Loans - $2.589 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 ~$0.7 Billion Lessors - Residential Health Care,
Slide 8: Prime Consumer Loans
Prime Consumer Loans Direct Quarter Highlights Auto, 2.2% Consumer Direct Home Indirect Equity Auto, Term, • Increased ~$64 million, consistent with plan 41.9% 6.3% • YTD net recovery ~ 1 basis points Total Consumer Outstanding • Average portfolio yield of 8.05% in the quarter $1.0B o Average new pr
Slide 9: Prime Mortgage Loans
Prime Mortgage Loans Construction, Quarter Highlights 3.7% • Mortgage portfolio size was stable, with new production primarily consisting of higher yielding jumbo loans Total • ~67% of YTD production is saleable Conforming, Outstanding Jumbo, 49.9% 45.4% $675M • Results aligning with industry Q3: $5
Slide 10: Strong Asset Quality Metrics
Strong Asset Quality Metrics Net Charge Offs Non-Performing Loans (period end) 0.02% 0.52% 0.52% 0.48% 0.47% 0.45% 0.01% 0.01% 0.01% $722 0.00% $21,840 $19,797 $22,109 $379 $19,158 $19,448 $285 $000s $000s $274 $138 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Commercial Resi Real Estate Commer
Slide 11: 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% 0.47% 0.15% 0.00% 0.01% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Nonperforming assets as % of assets 3.
Slide 12: Granular and Tenured Deposits
Granular and Tenured Deposits Seasoned, Core Deposit Base • Consumer: $9K avg. account balance 11 year avg. tenure 82% • Commercial: $11K avg. account balance 10 year avg. tenure • Public: $880K avg. account balance 11 year avg. tenure 26% 50% of Balances in Checking Accounts Total • Daily operating
Slide 13: Deposit Stability & Strength
Deposit Stability & Strength Stability in Core Relationships Maintain Key Relationships Borrowings • Cons/Comm Portfolio ($27MM) • Public Funds $18MM • Flat linked quarter • Combined Changed (0.64%) • Continued price competition • Significant liquidity capacity • Consumer portfolio $4MM/0.17% • Larg
Slide 14: Fee Income Rebuild
Fee Income Rebuild Non-interest Income ($000s) Quarter Highlights $15,000 $12,500 $11,830 • Continuing to build consistent and $10,997 sustainable fee income platform $10,674 $10,188 $10,000 $9,620 • 7.6% growth over linked quarter o Primarily driven by higher mortgage- $7,500 related income and oth
Slide 15: Hallmark Focus on Expense Management
Hallmark Focus on Expense Management Non-interest Expense Quarter Highlights ($000s) $40,000 $36,816 $36,262 $36,168 $35,711 $34,524 $35,000 • Lowered non-interest expenses from levels in linked and year-ago periods $30,000 o Lower salaries & benefits more than offset increase in FDIC insurance expe
Slide 16: Continued Focus on Pricing Discipline
Continued Focus on Pricing Discipline HBNC Average Loan Yields and Deposit Costs 5.78% 5.86% Yield 5.44% 5.49% 5.02% 5.32% 5.05% 414 bps 4.61% 389 bps 4.38% 4.34% 4.33% 4.67% 4.22% 4.25% 4.10% 4.24% 4.31% 4.17% 4.19% 4.19% 1.60% 4.12% 1.72% 1.24% HBNC Cost 1.35% 0.75% 1.04% 0.36% 0.71% 0.27% 0.22% 0
Slide 17: High-Quality Investment Portfolio
High-Quality Investment Portfolio Investment portfolio cash flows are helping to Fed Agy CMO, fund higher yielding loans Corp, 3% 8% • Book yield of 2.21% U.S. Treasury, 20% • Effective duration of ~6.7 years at MRQ end o Available for Sale (AFS) portfolio ~5.6 years o Held to Maturity (HTM) portfol
Slide 18: 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% 7.2% 10.7% 10.2% 10.0% 9.1% 9.2% 7.6% 6.6% 6.7% 4.0% 2020 2021 2022 3Q23 2020 2021 2022 3Q23 CET1 Ratio (%) Total RBC Ratio (%) 14.3% 14.2% 13.8% 13.6% 14.9% 15.4% 11.9% 12.1% 14.6% 11.4% 11.4% 1
Slide 19: 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 20: Updated 2023 Expectations
Updated 2023 Expectations 3Q 2023 4Q 2023 FY 2023 Actual Expectation Expectation Total Loan Growth Annualized 8.2% 4-5% 6-7% Net Interest Margin 2.41% 2.33-2.38% 2.50-2.55% Net Interest Income $42.1 M $40-$42 M $174-$176 M Non-Interest Income $11.8 M $10-$11 M $43-$44 M Non-Interest Expense $36.2 M
Slide 21: Why Horizon?
Why Horizon? A High-Performing Operator in Growth Markets Very attractive Midwest markets Strategic branch distribution throughout key markets and university towns that offer a greater quality of life Desirable economic environment with significant investment in infrastructure, and major industries
Slide 22: Appendix
Appendix E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 22
Slide 23: Diversified & Granular Loan Portfolio
Diversified & Granular Loan Portfolio % of % of Total Commercial Loans by 9/30/23 Commercial Loan Industry ($M) Balance Portfolio Portfolio Lessors – Residential Multi Family $256 9.9% 5.9% Health Care, Educational & Social 205 7.9% 4.7% Warehouse/Industrial 168 6.5% 3.9% Individual and Other Servic
Slide 24: Footnote Index
Footnote Index Slide 4 • Adjusted net interest income and adjusted net interest margin exclude acquisition-related purchase accounting adjustments and swap termination fees. (See further in the Appendix for a reconciliation of these non-GAAP amounts to their GAAP counterparts.) • Pre-tax, pre-provis
Slide 25: Non-GAAP Reconciliation of Net Interest Margin
Footnote Index Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 Net interest income as reported $ 42,090 $ 46,160 $ 45,237 $ 48,782 $ 51,861 Average interest earnin
Slide 26: 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 September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 Pre-tax income $ 17,489 $ 20,215 $ 20,091 $ 23,814 $ 25,834 Provision for credit losse
Slide 27: 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 September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 Average common equity $ 715,485 $ 710,953 $ 693,472 $ 660,188 $ 680,376 Less: Average
Slide 28: Non-GAAP Reconciliation of Cost of Deposits
Footnote Index Non-GAAP Reconciliation of Cost of Deposits (Dollars in Thousands, Unaudited) Three Months Ended September 30, June 30, March 31, 2023 2023 2023 Total deposit interest expense as reported $ 24,704 $ 18,958 $ 14,819 Average interest bearing deposits 4,538,698 4,445,074 4,502,199 Annual
Slide 29: 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 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, 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 31: 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 ® 31