Horizon Bancorp(US:HBNC)2024-10-24 15:17Financial Data and Key Metrics Changes - Horizon Bancorp reported positive net income growth for Q3 2024, driven by expanded net interest income and fee income, alongside excellent credit quality [5][6] - Average loan growth for the quarter was solid at 10% annualized, reflecting a strategic focus on core commercial portfolio growth while reducing lower-yielding auto loans [6][9] - The net interest margin (NIM) increased by two basis points to 2.66%, marking the fourth consecutive quarter of improvement [15][16] Business Line Data and Key Metrics Changes - The loan portfolio mix as of September 30 consisted of 60% commercial, 17% residential, and 21% consumer loans, with commercial loans increasing by $9.5 million, or 1.3% annualized [9][10] - Consumer loan balances decreased by $43 million, while the mortgage portfolio grew by $3 million, representing 2% annualized growth [11] - Nonperforming loans increased to $24.4 million, or 51 basis points of total loans, primarily due to larger home equity loans and a single credit in the commercial portfolio [12] Market Data and Key Metrics Changes - The deposit portfolio showed solid growth, with stability in core noninterest-bearing balances, benefiting from commercial and consumer deposit gathering efforts [7][14] - The company anticipates that its deposit portfolio will remain stable, focusing on core retail and commercial customers while managing higher-priced non-relationship balances [22] Company Strategy and Development Direction - Horizon Bancorp is focused on simplifying its business model and investing in core community banking, with strategic investments in treasury management, wealth, and mortgage sectors [35][24] - The company plans to create further liquidity and improve financial performance as rates decline, with a lean operating culture aimed at delivering long-term shareholder value [25][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the financial outlook and positive momentum, expecting core commercial growth to continue while managing the runoff of the indirect auto portfolio [21][24] - The company anticipates net interest margin expansion of 15 to 20 basis points in Q4, driven by securities repositioning and further rate reductions [22] Other Important Information - Horizon Bancorp announced strategic actions including the sale of approximately $325 million in securities and the intent to sell the mortgage warehouse business, aimed at improving structural profitability [19][20] - The allowance for credit losses increased to $52.9 million, reflecting adjustments for economic forecasts and specific reserves [13] Q&A Session Summary Question: Margin outlook for 2025 - Management discussed the favorable factors affecting margin outlook, including earning asset mix changes and anticipated rate cuts [28] Question: Fair values of the HTM portfolio - Management did not have the specific number available but committed to follow up [30] Question: Yields on total maturities in Q4 - The total maturities in the loan portfolio for Q4 are expected to be around 6% [34] Question: Internal progress and potential areas for upside - Management highlighted strategic investments in community banking and anticipated mid to high single-digit loan growth in 2025 [35] Question: Thoughts on restructuring the HTM portfolio - Management indicated no immediate need to raise capital or restructure the HTM portfolio, focusing instead on organic growth [38] Question: Expense outlook for next year - Consensus estimates for expenses are in the range of $155 to $160 million [40] Question: Share repurchases and capital deployment - Management is open to evaluating share repurchases as profitability improves and capital positions strengthen [42] Question: Credit reserve levels - Management expressed comfort with the current reserve levels, indicating no significant changes unless credit trends shift [49] Question: Commercial pipeline and equipment finance - The commercial pipeline remains steady, with equipment finance meeting expectations [51]