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, with an exit run rate in September above 4% [5][16] - The net interest margin increased by 29 basis points to 3.52% for Q3, with expectations for further expansion in Q4 to a range of 4.15% to 4.25% [17][19] - Net loans held for investment decreased by $162 million, primarily due to the runoff and sale of the indirect auto loan portfolio [10] - The allowance for credit losses decreased to $50.2 million, representing an allowance to credit loss to loans held for investment of 1.04% [12] Business Line Data and Key Metrics Changes - Commercial loans increased by $58 million, representing a 7% annualized growth for the linked quarter [10] - The combined relationship-based fee income categories, including service charges, wealth, card, and mortgage income, performed well and increased from the previous quarter [6] - Noninterest 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 portfolio [21] Market Data and Key Metrics Changes - The core relationship balances in the deposit portfolio remained resilient, with planned outflows in higher-cost non-core transactional accounts [14] - The deposit portfolio is expected to decline in Q4 due to the targeted reduction of high-cost non-relationship balances [27] Company Strategy and Development Direction - The company aims to deliver durable returns and sustainable long-term value for shareholders through a disciplined operating model and focus on profitable growth [31] - Horizon plans to pursue logical and accretive M&A opportunities that enhance its community banking platform [37][40] - The company is focused on maintaining a strong credit profile while pursuing steady, diversified growth [11][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering superior community banking performance and peer-leading capital generation metrics moving into 2026 [7][31] - The company is monitoring economic conditions, with future provision expenses driven by anticipated loan growth and credit quality trends [13] Other Important Information - The company has made significant improvements in its securities portfolio, reducing credit risk and increasing liquidity [20] - The effective tax rate for Q4 is expected to be in the range of 18% to 20% due to stronger pretax income [28] Q&A Session Summary Question: Update on the new narrative for Horizon and strategic emphasis - Management highlighted a new focus on positive capital stewardship and a well-positioned balance sheet for capital generation [36][37] Question: Potential outlets for capital outside of organic loan growth and M&A - Management indicated that M&A opportunities would focus on franchises that add to the current profitable franchise, with a size range of $300 million to several billion dollars [39][40] Question: Trends in credit quality and areas of stress - Management noted that nonperforming loans increased slightly, but overall credit quality remains satisfactory, with no significant areas of concern [68][70] Question: Loan growth outlook for 2026 - Management anticipates mid-single-digit growth primarily from commercial lending, with no immediate need for significant additional headcount [88][89] Question: Capital accretion and buybacks - Management confirmed that buybacks are considered a potential option for creating shareholder value but are not the immediate focus [92]