Horizon Bancorp(US:HBNC)2025-10-23 13:30Financial Data and Key Metrics Changes - Horizon Bancorp's net interest margin expanded for the eighth consecutive quarter, reaching 3.52% in Q3, with an exit run rate above 4% in September [5][17][20] - The company reported a net loan total for investment of $162 million, with a $210 million impact from the runoff and sale of indirect auto loans [10][12] - The allowance for credit losses decreased to $50.2 million, representing 1.04% of loans held for investment, with a net release of $3.6 million in provisions [12][25] Business Line Data and Key Metrics Changes - Commercial loans grew by $58 million in Q3, representing a 7% annualized increase, while residential mortgage lending volumes remained flat [10][11] - The combined relationship-based fee income categories, including service charges and card income, showed an increase from the previous quarter [5][24] Market Data and Key Metrics Changes - The company experienced predicted outflows in higher-cost non-core transactional accounts as part of its balance sheet restructuring plan [5][14] - Non-interest income was impacted by a $299 million loss in the sale of securities and a $7.7 million loss on the sale of the indirect auto loan portfolio [21][22] Company Strategy and Development Direction - Horizon Bancorp is focused on creating durable returns and sustainable long-term value for shareholders through disciplined capital management and profitable growth strategies [6][30] - The company plans to pursue M&A opportunities that are accretive to its community banking platform, with a focus on franchises that enhance profitability [35][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering superior community banking performance and capital generation metrics moving into 2026 [6][30] - The outlook for Q4 includes expectations for net interest margin expansion to 4.15% to 4.25%, with total reported expenses approximating $40 million [27][28] Other Important Information - The company has made significant improvements in its deposit portfolio, enhancing growth and stability in core client relationships [14][15] - The effective tax rate for Q4 is expected to be in the range of 18% to 20%, reflecting stronger pre-tax income [28] Q&A Session Summary Question: Update on the new narrative for Horizon Bancorp Inc. - Management indicated that the company is positioned to generate capital at a greater pace and will focus on measured deployment strategies for profitable growth [34][35] Question: Criteria for potential M&A opportunities - M&A will focus on franchises that add to the current profitable franchise, with potential targets in Michigan and Indiana [36][39] Question: Balance sheet's rate neutrality - Management acknowledged a modest asset sensitivity but emphasized that the balance sheet is designed to be rate neutral [42] Question: Trends in credit quality and areas of stress - Non-performing loans increased slightly, but management noted that the overall credit profile remains strong, with no significant areas of concern [58][61] Question: Loan growth outlook for 2026 - The company anticipates mid-single-digit loan growth driven primarily by commercial lending, with no immediate need for significant headcount increases [70][71]