Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Horizon Bancorp (IN) (HBNC, Financial) reported positive net income growth for the third quarter of 2024, driven by expansion in net interest income and fee income.
- The company achieved a solid average loan growth of 10% annualized, primarily in commercial and mortgage loans.
- Horizon Bancorp (IN) (HBNC) maintained excellent credit quality with low past dues and nonperforming loan ratios.
- The deposit portfolio showed stability and growth, particularly in core noninterest-bearing balances.
- Strategic actions in the fourth quarter are expected to improve long-term shareholder value and operating performance in 2025.
Negative Points
- The quarter reflected slightly elevated expenses, which are expected to normalize as the company approaches 2025.
- Nonperforming loans increased in the quarter, primarily due to a few larger loans, although they are expected to resolve.
- The indirect auto loan portfolio continued to decline, impacting overall loan growth.
- The company anticipates a modest reduction in fee income in the fourth quarter due to seasonal declines in mortgage activity.
- The fourth quarter results are expected to be 'noisy' due to strategic actions, impacting clarity on some financial metrics.
Q & A Highlights
Q: Can you provide insights on where the net interest margin (NIM) might settle in 2025 and the expected benefits from potential Fed rate cuts?
A: John Stewart, Executive Vice President and Chief Financial Officer, explained that while a specific landing point for 2025 wasn't provided, several factors are expected to favorably impact the NIM. These include continued positive shifts in the earning asset mix, modest benefits from rate cuts, and the strategic placement of cash into higher-yielding assets. Additionally, the paydown of borrowings in early 2025 is expected to positively influence the margin.
Q: What is the fair value of the Held-to-Maturity (HTM) portfolio as of September 30, 2024?
A: John Stewart mentioned that he did not have the specific number on hand but would follow up with that information.
Q: Could you provide guidance on the yield for total loan maturities in the fourth quarter and expectations for interest-bearing deposit costs?
A: John Stewart noted that the total maturities in the loan portfolio are around 6%, with favorable roll-on effects from new production. For deposit costs, a similar beta to previous rate cuts is expected, with a reduction from the peak cost of 2.72% to around 2.50% in October.
Q: What internal progress and potential areas for upside surprise do you see within the bank?
A: Thomas Prame, President and CEO, highlighted strategic investments in core community banking, treasury management, wealth, and mortgage sectors. He anticipates a return to growth in loan portfolios, particularly in commercial loans, with a focus on maintaining a strong growth trajectory.
Q: Are there any plans to restructure the Held-to-Maturity portfolio or raise capital?
A: Thomas Prame stated that the recent strategic actions set the bank up positively for 2025, and there are no current plans to raise capital or restructure the HTM portfolio. However, they remain open to opportunities that could enhance shareholder value.
Q: What are the expectations for expenses in 2025?
A: John Stewart indicated that consensus estimates for expenses in 2025 are in the range of $155 to $160 million, aligning with the company's preliminary outlook.
Q: What are the current levels and expectations for the indirect auto loan portfolio?
A: Thomas Prame estimated a quarterly runoff of $30 to $35 million in the indirect auto loan portfolio, with a gradual decrease as the portfolio size reduces.
Q: How is the commercial loan pipeline performing, and what are the expectations for the equipment finance division?
A: Lynn Kerber, Executive Vice President and Chief Commercial Banking Officer, reported a stable commercial loan pipeline with consistent initial funding. The equipment finance division is meeting expectations, with $85 million in footings as of September 30, 2024, targeting $100 to $110 million for the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
