Horizon Bancorp(US:HBNC)2025-04-24 13:30Financial Data and Key Metrics Changes - Horizon's first quarter earnings reflect a sixth consecutive quarter of margin expansion, now above 3% [4] - The net interest margin increased by eight basis points to 3.04% [16] - Total expenses for the quarter were $39.3 million, showing a sequential decline in salaries and benefits [21][22] 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 increase [7][8] - Consumer loan balances decreased by $40 million, primarily due to a reduction in indirect auto lending [9][10] - Non-interest income included a $7 million gain from the sale of the mortgage warehouse business [20] Market Data and Key Metrics Changes - Key markets showing growth included Troy, Kalamazoo, Grand Rapids, and Midland, Michigan, as well as Northwest Indiana [8] - Commercial credit quality metrics remained strong, with past due loans greater than thirty days at 14 basis points and a non-performing loan ratio of 27 basis points [9][11] Company Strategy and Development Direction - The company is focused on executing an asset mix strategy towards higher yielding lending portfolios [6] - Horizon aims to enhance shareholder returns through various options, including stock repurchases and balance sheet repositioning [32] - The outlook for loan growth remains unchanged in the mid-single digit range for the year [24] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive outlook due to strong local market presence and diversified portfolio [48][49] - The company is monitoring macroeconomic trends and their potential impact on the portfolio [13] - Management anticipates continued margin expansion and stable pipelines for commercial loans [17][24] Other Important Information - The allowance for credit losses increased by approximately $700,000 to $52.7 million, with an ACL to loan ratio of 1.07% [12] - The company expects total reported expenses for 2025 to be flat to up low single digits relative to 2024 [25] Q&A Session Summary Question: Can you unpack the capital optionality from the warehouse team and any appetite for share repurchases? - Management noted that they are pleased with their capital strategy and are considering stock repurchases due to attractive price-to-book levels [30][32] Question: What is the yield pickup as you run off indirect auto and fund commercial loans? - The effective yield on the indirect auto portfolio is in the mid-3s, while the average weighted rate for the commercial book was roughly 7-7.15% [37][40] Question: How is the mood of your client base regarding loan growth? - Management indicated a positive outlook, emphasizing strong local market engagement and a diversified portfolio [47][48] Question: What are the dynamics occurring on the funding side regarding deposit growth? - Management noted a shift towards more time deposits and less commercial growth, with competitive dynamics varying by market [82] Question: How do you weigh efficiency efforts with plans to hire veteran bankers? - The commercial team has been stable, with no immediate plans for wholesale additions, focusing instead on maximizing current capacity [75] Question: How do you weigh the worsening economic forecast into reserve levels? - Management acknowledged that economic forecasts could impact the allowance ratio, but specific reserves released masked some of the changes [78]