Horizon Bancorp (HBNC) Q3 2025 Earnings Transcript

Core Insights - The company has demonstrated resilience in its relationship-based deposit portfolios, with a focus on managing outflows from higher-cost non-core transactional accounts as part of its balance sheet restructuring plan [1][4] - The net interest margin has expanded for the eighth consecutive quarter, reaching an exit run rate above 4% in September, driven by solid results from the commercial loan engine and a strong core client-driven deposit franchise [2][15] - The balance sheet restructuring has exceeded initial expectations, positioning the company for top-tier financial outcomes and sustainable long-term value for shareholders [3][31] Financial Performance - The net interest margin increased by 29 basis points to 3.52% in Q3, with expectations for further expansion into the range of 4.15% to 4.25% in Q4 [15][19] - Loan balances decreased by $162 million, primarily due to the planned runoff and sale of lower-yielding indirect auto loans, but net commercial loan growth was $58 million, representing a 7% annualized increase [6][14] - Noninterest income was impacted by a $299 million loss on the sale of securities, but fee-based businesses performed well, with expectations for high single-digit year-over-year growth in Q4 [21][23] Credit Quality - Credit quality remains satisfactory, with substandard loans and nonperforming loans at 1.31% and 0.64%, respectively, consistent with historical performance [9][53] - Net charge-offs for the quarter totaled $800,000, representing an annualized charge-off rate of 5 basis points, with year-to-date charge-offs at $1.9 million [9][10] - The allowance for credit losses decreased to $50.2 million, reflecting a reduction in loss rates, particularly in the indirect auto loan portfolio [10][12] Strategic Outlook - The company is focused on maintaining steady diversified growth and disciplined pricing, with an emphasis on profitable loan growth and excellent credit quality as cornerstones of its strategy [5][7] - The outlook for 2026 includes alignment with consensus estimates for earnings per share at approximately $2, with low double-digit growth anticipated in non-FTE net interest income [29][30] - The company is positioned to explore M&A opportunities that are logical and accretive to its community banking platform, with a focus on franchises that enhance profitability [34][37]