Horizon Bancorp(US:HBNC)2022-07-31 14:26Financial Data and Key Metrics Changes - Horizon Bancorp reported record earnings of $0.57 per share for Q2 2022, a 5.6% increase from $0.54 in Q1 2022 and $0.49 in Q4 2021 [9][10] - The pretax pre-provision net income for the quarter was $29.1 million, reflecting a 13.1% increase over the previous quarter [10] - The efficiency ratio improved to 55.6%, with a return on average assets of 1.33% and a return on average tangible equity of 19.9% [11][12] Business Line Data and Key Metrics Changes - Commercial loans grew by $108 million in Q2 2022, with an annualized growth rate of 19.7%, driven by increased loan officer numbers and demand in various sectors [41] - Consumer loans showed strong growth with an annualized rate of 50.5%, totaling $195 million in Q2 2022, compared to $147 million in Q1 2022 [42] - Mortgage loan production year-to-date decreased by 29% compared to the prior year, but this was better than industry forecasts [44] Market Data and Key Metrics Changes - The company noted strong demand in the Midwest markets, with significant investments in infrastructure and manufacturing, contributing to favorable economic conditions [14][16] - Indiana and Michigan are ranked in the top quartile for manufacturing output, with increased investments in the sector [17] Company Strategy and Development Direction - Horizon plans to close seven offices in 2022 to fund technology investments aimed at enhancing customer experience [8][54] - The company is focused on organic growth opportunities and maintaining a disciplined approach to managing expenses and capital [12][24] - Horizon's compounded annual growth rates from 2002 to 2021 were 13% for total assets and 20% for net income, indicating a strong growth trajectory [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining loan growth and maintaining strong asset quality despite potential economic challenges [41][88] - The company anticipates continued margin expansion due to rising interest rates and effective deposit cost management [32][78] - Horizon's capital position remains strong, allowing for flexibility in pursuing growth strategies and potential M&A opportunities in the future [25][105] Other Important Information - Horizon's technology investments have led to improved productivity, with assets per employee increasing from $5.4 million in 2016 to $8.7 million in 2021 [21] - The company maintains a consistent dividend policy, recently increasing its quarterly dividend by 6.3% [26] Q&A Session Summary Question: Cost savings from branch consolidations - Management indicated that cost savings from branch rationalization will be redirected to technology investments to enhance customer service [54] Question: Deposit beta trends - Management clarified that the deposit beta was 3% for the last quarter, with a target of 20% to 25% for the year as rates continue to rise [55] Question: Loan growth expectations - Management expects comparable loan production in Q3 and Q4, with strong pipelines in both consumer and commercial sectors [60] Question: Credit reserve outlook - Management stated that the reserve levels are appropriate and will be reflective of general macroeconomic conditions [88] Question: Expense outlook for the second half of the year - Management anticipates a slight increase in expenses due to rising salaries and benefits, but overall stability in other categories [91] Question: Effective tax rate expectations - The expected effective tax rate for the second half of the year is projected to be in the 14% to 15% range [95] Question: M&A strategy - Management indicated that M&A is not a priority at the moment, focusing instead on organic growth and optimizing the balance sheet [105]