Horizon Bancorp (HBNC) Q3 2024 Earnings Transcript

Core Insights - The company reported positive momentum in Q3, with revenue growth, improved credit metrics, and a productive balance sheet, despite slightly elevated expenses expected to normalize by 2025 [1][3][20] - Strategic actions initiated in Q4 aim to enhance long-term shareholder value and improve operating performance [1][17][25] Financial Performance - Q3 results showed a solid average loan growth of 10% annualized, driven by strong net interest income and fee income [3][5] - Commercial loans increased by $9.5 million, reflecting a 1.3% annualized growth, while consumer loan balances decreased by $43 million due to a planned reduction in indirect auto loans [5][7] - The net interest margin (NIM) improved to 2.66%, marking the fourth consecutive quarter of sequential margin improvement, with expectations for further expansion in Q4 [12][21] Deposit Trends - The deposit portfolio exhibited solid growth, with stability in core noninterest-bearing balances, benefiting from commercial and consumer deposit gathering efforts [2][11] - The company anticipates that its deposit portfolio will remain stable, focusing on core retail and commercial customers [21][25] Credit Quality - Commercial credit quality remains strong, with past dues at three basis points and a nonperforming loan ratio of 24 basis points [6][7] - The allowance for credit losses increased to $52.9 million, reflecting adjustments for economic forecasts, with a modest increase in specific reserves [9][10] Strategic Initiatives - The company plans to sell approximately $325 million in securities and intends to sell its mortgage warehouse business, aiming to improve structural profitability and simplify its business model [17][18] - Proceeds from the securities sales are expected to enhance the net interest margin and tangible book value per share [18][19] Outlook - The company expects total loan balances to remain relatively unchanged, with core commercial growth offset by the runoff of the indirect auto portfolio [20][21] - Anticipated NIM expansion of 15 to 20 basis points in Q4 is expected to drive an increase in net interest income in the upper single-digit percentage range compared to Q3 [21][22]