Horizon Bancorp, Inc. · NASDAQ:HBNC
Horizon Bancorp — Investor Day (February 2023)
52 slides from Horizon Bancorp's investor day presentation, Feb 21, 2023
Slide 1: Virtual Investor Day, February 21, 2023
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 VIRTUAL INVESTOR DAY | FEBRUARY 21, 2023
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 presentation 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: Submit your questions
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 Submit your questions at any time during presentations and Q&A sessions Trouble with this form? Send your questions to HBNC@lambert.com.
Slide 4: Craig M. Dwight, Chairman & CEO
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 ® Craig M. Dwight Chairman & Chief Executive Officer 4
Slide 5: Welcome
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 ® Welcome 5 Mark E. Secor EVP & Chief Financial Officer Kathie A. DeRuiter EVP & Senior Operations Officer Scott T. Kosik SVP & Director of Digital Banking Craig M. Dwight Chairman & CEO Lynn M. Kerber EVP & Chief Commercial Banking O
Slide 6: 2023 Investor Day Agenda
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 ® 2023 Investor Day Agenda 6 2022 Results and 2023 Market Outlook Craig Dwight 2023 Plan Overview Thomas Prame Investments in Technology and Digital Banking Roadmap Kathie DeRuiter and Scott Kosik Question and Answer Session Commercia
Slide 7: Attractive and Stable 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 ® MICHIGAN INDIANA Midland Lansing Troy Columbus Indianapolis Lafayette Fort Wayne South Bend Cadillac Charlevoix Attractive and Stable Markets Available water with fewer and lower risk of natural disasters Strength of Markets 150 yea
Slide 8: Multiple High 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 ® 8 Northern Indiana Central Indiana Michigan $2.4B Deposits $1.5B Deposits $1.9B Deposits 27 Branches 18 Branches 26 Branches • Positive and stable economic base comparable to markets in Northern Indiana • Grand Rapids one of the mos
Slide 9: 2022 Results
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 ® 2022 Results 9 2022 Goals 2022 Results Annual Commercial Loan Growth 10 - 14% 11% Reduction in Mortgage Originations 15 - 18% 35% Annual Consumer Loan Growth 10 - 14% 31% Annual Expenses to Average Assets <2.00% 1.90% ROAA >1.30% 1.
Slide 10: 2022 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 ® 2022 Highlights Growth Expansion Improved Efficiencies Increased Net Income 21 out of the past 22 years Digital Expansion Continued expansion of our digital brand Workforce Reduction Completion of a reduction in workforce at Decembe
Slide 11: Thomas M. Prame, President
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 ® Thomas M. Prame President 11
Slide 12: A Diverse and Growing Platform
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 Diverse and Growing Platform 12 As of 12/31/2022 Loans Deposits Non Interest Income Commercial • Growing Markets $2,467 $3,306 $5.2 Consumer • +70 branches $968 $2,552 $13.4 Mortgage • Adaptable Platform $723 - $12.8 Wealth • Rece
Slide 13: 2023 Strategic Outlook
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 ® 2023 Strategic Outlook Continued Commitment To Our Shareholders, Clients and Advisors People First Culture • Building the highest quality team • Career planning • Succession plans • Advisor groups • Community engagement Balance Shee
Slide 14: 2023 Objectives
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 ® 2023 Objectives Performance Metrics 2023 Objectives Annual Commercial Loan Growth 6 – 9% Annual Consumer Loan Growth 4 – 6% Net Interest Margin 2.70 – 2.80% Net Interest Income $185 - $195 Million Annual Expenses to Average Assets <
Slide 15: Kathie A. DeRuiter, Senior Operations Officer
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 ® Kathie A. DeRuiter Executive Vice President & Senior Operations Officer 15
Slide 16: Technology Investments
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 ® Systems and programs needed by particular business units, including: Velocity, Ellie Mae, Verafin, ADP, Finastra and others Strategic Applications 01 Maintenance costs, staffing, and outsourced expenses Core 02 PC & network hardware
Slide 17: Investing in Experience and Efficiency
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 ® • Continued investment in technology to advance client facing applications, improve internal workflows and strengthen infrastructure • Unrestricted innovation at a lower cost • Custom core development and functionality • Robotic pro
Slide 18: Executing Our Plan, Realizing Tangible Benefits
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 ® Executing Our Plan Realizing Tangible Benefits 18 2019 2020 Live Chat – Omnichannel Customer Service 24/7 (Equiv. 6FTEs) Secure File Exchange Portal and Digital Signature for $450mm PPP Loans 2021 Encompass Mortgage LOS and Compensa
Slide 19: Innovation Through Investment in Top Talent
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 ® Investment in applications to enhance customer experience coupled with talent investment is the recipe for successful implementation and value creation • Technology is increasingly complex, specialization allows for continued produc
Slide 20: Scott Kosik, Director of Digital Banking
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 ® Scott Kosik Senior Vice President, Director of Digital Banking 20
Slide 21: Digital Banking: Primary Point of Engagement
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 ® 2121 Digital Banking: Primary Point of Engagement Digital Clients(1) 2019 2022 92k 130k Mobile App Downloads 2019 2022 18k 45k Checking Accounts Opened Digitally % of Total(2) 2019 2022 0% 21% Digital Transactions % of Total 2019 20
Slide 22: Four Pillars to Digital Success
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 ® Four Pillars to Digital Success Investing in the Right Client Facing Solutions Financial Wellness • CardHub • CreditAdvisor • Alert improvements Sales & Offers • Digital account opening enhancements • Apply for mortgage, home equity
Slide 23: Empowering Financial Wellness: CreditAdvisor
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 ® 23 • Free credit score updates and insight • Fraud monitoring and ability to dispute inaccuracies • Financial wellness education and credit score simulator • Personalized money saving offers • Full integration to digital platform Em
Slide 24: Unified Card Management Through CardHub
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 ® CardHub is powered by Fiserv Integrated Payments to Drive Value Unified Card Management Through CardHub 24 • Get cards quick (digital issuance) • Use cards easily (push to mobile wallet) • Manage cards on the go (on/off, lost, stole
Slide 25: Efficient Digital Account Opening
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 ® 4,257 5,689 4,687 89 479 411 2020 2021 2022 Savings Volume and Composition Since Inception(1) Traditional Digital 98% 92% 7,562 9,195 8,746 152 2,350 2,310 2020 2021 2022 Checking Volume and Composition Since Inception(1) Traditiona
Slide 26: Q&A Session
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 ® Q&A Session 26 Craig Dwight, Thomas Prame, Kathie DeRuiter and Scott Kosik
Slide 27: Lynn Kerber, Chief Commercial Banking Officer
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 ® Lynn Kerber Executive Vice President & Chief Commercial Banking Officer 27
Slide 28: Strong Commercial Loan Growth Trend and Outlook
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 ® $1,679 $1,541 $1,532 $1,648 $1,820 $369 $506 $451 $503 $647 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 CRE C&I Strong Commercial Loan Growth Trend and Outlook 28 Excludes Paycheck Protection Program Loans • Targeted grow
Slide 29: Commercial Loan Portfolio Diversified & Granular
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 Commercial Loan Portfolio Diversified & Granular Northern Indiana, 13% Central Indiana, 34% Other, 3% Southwest Michigan, 17% Northern Michigan, 11% East Michigan, 7% West Michigan, 15% Non-Owner Occupied Real Estate, 47% C&I, 26
Slide 30: Strategies for 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 ® Strategies for Growth 30 Specialization & Community Support Products and Services Relationship Focused • Consultative approach • Responsive service • Experienced team with industry specialization • Local knowledge and decision makin
Slide 31: Focus on Customer Experience and Operational 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 ® Focus on Customer Experience and Operational Excellence 31 Automation of Internal Processes Sales Management Application Process and Compliance Support Digital Small Business Lending Commercial Loan Origination System
Slide 32: Noe Najera, Senior Retail & Mortgage Lending Officer
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 ® Noe Najera Executive Vice President, Senior Retail & Mortgage Lending Officer 32
Slide 33: Diverse Retail Lending Platform
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 ® Diverse Retail Lending Platform 33 Mortgage & Warehouse Lending Consumer Lending Retail Branches • 70+ locations • Focused on customer needs and responsive service • Attractive markets • Community engagement and leadership • New Gar
Slide 34: Consumer and Mortgage Loan Growth and Outlook
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 ® $233 $321 $297 $354 $467 $314 $349 $358 $373 $482 $669 $770 $624 $594 $653 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Direct Indirect Mortgage Consumer and Mortgage Loan Growth and Outlook 34 • Targeted growth of 4 to 6%
Slide 35: Consumer Direct Loan Portfolio Positioned for 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 ® 35 Consumer Direct Loan Portfolio Positioned for Growth • Consumer direct loan targeted growth of 6 to 8% in 2023 • Production expected to exceed $225 million in 2023 • TCF locations fully on board and producing better than expected
Slide 36: Consumer Indirect 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 ® 36 • Anticipate portfolio to remain relatively flat in 2023 • Expanding margins with new originations replacing roll-off • Production efforts focused on new origination yields while maintaining credit standards • Continued relations
Slide 37: 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 ® 37 Prime Mortgage Loan Portfolio • Targeted growth of 2 to 4% • Retail production reflective of MBA forecast ~$400 million • Adding 3 to 5 new investors to provide added choice for customers and flexibility in product offerings • Di
Slide 38: Q&A Session
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 ® Q&A Session 38 Craig Dwight, Thomas Prame, Lynn Kerber and Noe Najera
Slide 39: Mark Secor, Chief Financial Officer
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 ® Mark Secor Executive Vice President & Chief Financial Officer 39
Slide 40: Key Financial Trends
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 ® 60.39 25.27 2.95 27.14 6.98 2018 2019 2020 2021 2022 Net Income Growth HBNC Publicly Traded Banks $5.0B -$10.0B in Assets (Median) 1.31 1.35 1.22 1.34 1.24 2018 2019 2020 2021 2022 Return on Average Assets HBNC Publicly Traded Banks
Slide 41: Net Interest Margin Trend and Outlook
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 ® 3.47% 3.46% 3.27% 2.96% 2.93% 0.88% 1.11% 0.63% 0.32% 0.54% 1.79% 2.16% 0.36% 0.08% 1.68% 2018 2019 2020 2021 2022 Adj. NIM (1) Adj. Cost of Core Funds (1) Avg. Fed Funds Rate (2) • Deposit beta current rate cycle is 24 basis points
Slide 42: Significant Liquidity
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 ® Significant Liquidity 42 Sources of Liquidity $1,169 $251 $420 $897 $2,737 Tier 1: Cash/Equivalents Tier 2: Outstanding Advances Tier 3: Brokered Deposits Capacity Other Liquidity Total as of December 31, 2022
Slide 43: 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 ® Productive Use of Capital Deploying Capital • Investing to leverage capital through organic loan growth • Opportunistic acquisitions with focus on lease models • Stock buyback to be evaluated when interest rates stabilize Long-stand
Slide 44: 2023 Objectives
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 ® 2023 Objectives Performance Metrics 2023 Objectives Annual Commercial Loan Growth 6 – 9% Annual Consumer Loan Growth 4 – 6% Net Interest Margin 2.70 – 2.80% Net Interest Income $185 - $195 Million Annual Expenses to Average Assets <
Slide 45: Q&A Session
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 ® Q&A Session 45 Craig Dwight, Thomas Prame and Mark Secor
Slide 46: Virtual Investor Day, February 21, 2023
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 VIRTUAL INVESTOR DAY | FEBRUARY 21, 2023 46
Slide 47: 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 ® 47 Appendix
Slide 48: 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 ® Strong Asset Quality Metrics $1,480 $2,129 $1,863 $1,641 $843 2018 2019 2020 2021 2022 Net Charge-Offs NCO's $15,175 $21,185 $26,807 $19,019 $21,840 2018 2019 2020 2021 2022 Non-Performing Loans NPL's $2,906 $1,976 $20,751 ($2,084)
Slide 49: Historical Financials
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 49 (1) As calculated by S&P Global Market Intelligence. Historical Financials ($M except per share data) 2017 2018 2019 2020 2021 2022 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 Balance Sheet: Total Assets $3,964 $4,247 $5,247 $5,887
Slide 50: Use of Non-GAAP Financial Measures
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 50 Slide 40 • Adjusted net interest margin excludes prepayment penalties on borrowings and acquisition-related purchase accounting adjustments. Average cost of core funds includes average balances of non-interest bearing deposits an
Slide 51: Non-GAAP Reconciliation of Net Interest Margin
E X C E P T I O N A L S E R V I C E • S E N S I B L E A D V I C E ® 51 Footnote Index December 31, December 31, December 31, December 31, December 31, 2022 2021 2020 2019 2018 Net interest income as reported 199,518$ 175,805$ 165,530$ 156,393$ 131,923$ Average interest earning assets 6,977,407 6,035
Slide 52: Non-GAAP Reconciliation of Cost of Core Funds
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, December 31, December 31, December 31, December 31, 2022 2021 2020 2019 2018 Total interest expense as reported 36,515$ 18,305$ 34,438$ 47,541$ 31,599$ Average interest bearing liabilities 5,467,018 4,