Horizon Bancorp(US:HBNC)2025-04-24 18:37Financial Data and Key Metrics Changes - Horizon Bancorp reported a net interest margin increase of 8 basis points to 3.04% in Q1 2025, marking the sixth consecutive quarter of margin expansion [26][27] - Noninterest income included a $7 million gain from the sale of the mortgage warehouse business, contributing to overall positive revenue growth [33][34] - Total expenses for Q1 2025 were $39.3 million, reflecting a sequential decline in salaries and benefits and outside services expenses [35][36] Business Line Data and Key Metrics Changes - Total loans held for investment grew by $63 million, with commercial loans increasing by $105 million, representing a 14% annualized growth rate [12][13] - Consumer loan balances decreased by $40 million, primarily due to a reduction in indirect auto lending, while core consumer loans remained flat [16][18] - Credit quality metrics remained strong, with nonperforming loans at 62 basis points of total loans held for investment [19][20] Market Data and Key Metrics Changes - Key markets contributing to loan growth included Troy, Kalamazoo, Grand Rapids, and Midland in Michigan, as well as Northwest Indiana [14] - The company noted stable pipelines and strong engagement with clients regarding potential macroeconomic impacts [15] Company Strategy and Development Direction - The company aims to execute an asset mix strategy focusing on higher-yielding lending portfolios to enhance long-term franchise value [9] - Horizon Bancorp is committed to maintaining a disciplined approach to deposit pricing and leveraging market volatility to improve funding costs [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future, citing strong local market presence and diversified portfolios as competitive advantages [70][72] - The outlook for loan growth remains in the mid-single-digit range, with expectations for deposit growth in the low single digits [39][40] Other Important Information - The company completed the sale of its mortgage warehouse business, which added optionality to its capital position [7][8] - The allowance for credit losses increased by approximately $700,000 to $52.7 million, with a ratio of 1.07% to loans [20][21] Q&A Session Summary Question: Can you unpack the added capital optionality from the warehouse gain and any appetite for share repurchases? - Management indicated that they are pleased with their capital strategy and are considering multiple options, including stock repurchases, to enhance shareholder returns [48][50] Question: What is the yield pickup as you run off indirect and fund commercial loans? - The yield runoff in the indirect auto portfolio is in the mid-3s, while the average weighted rate for the commercial book was approximately 7.15% [58][61] Question: How is the mood of your client base, and what gives you confidence in your positive outlook? - Management noted a strong local presence and diversified portfolio as key factors contributing to their optimistic outlook, despite some caution among clients regarding macroeconomic conditions [68][70] Question: Can you provide an update on deposit pricing and trajectory? - Deposit costs have increased slightly, but management anticipates stability in total deposit costs moving forward, with potential benefits when the Fed changes rates [88][90] Question: How do you weigh efficiency efforts with plans to hire veteran bankers? - The commercial team has remained stable, and management does not foresee a need for wholesale additions of new lenders at this time [102][103]