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HB

HORIZON BANCORP INC /IN/ (HBNC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean beat on both EPS and revenue: diluted EPS of $0.54 versus $0.41 consensus (≈33% beat) and revenue of $67.4M versus $64.5M consensus (≈4.5% beat), aided by a $7.0M gain on sale of the mortgage warehouse business and sixth consecutive quarter of FTE net interest margin expansion to 3.04% . Values retrieved from S&P Global for consensus.
  • Core fundamentals improved: net interest income $52.3M, expenses fell to $39.3M after Q4 right-sizing, deposits grew $165.1M with non-interest-bearing up $62.5M, and borrowings declined $330.1M; credit remained strong with NCOs at 0.07% and NPLs at 0.59% of loans HFI .
  • Guidance reaffirmed: mid-teens net interest income growth, mid-single-digit loan growth (net of ~$100M indirect auto runoff), low-single-digit deposit growth, flat-to-low-single-digit expense growth, and mid-teens effective tax rate; exit 2025 NIM expected ~3.15–3.20% .
  • Capital optionality emerged post-sale gain and improving ratios; management highlighted active consideration of buybacks (citing intrinsic value at current P/B) alongside M&A and balance sheet repositioning strategies .

What Went Well and What Went Wrong

What Went Well

  • Margin and core earnings strengthened: net FTE interest margin rose 8 bps sequentially to 3.04%; net interest income was $52.3M; efficiency ratio improved to 57.16% on lower expenses .
  • Balance sheet and deposits: total deposits +$165.1M (3%), with non-interest-bearing +$62.5M and time deposits +$155.9M; borrowings reduced by $330.1M, improving funding mix .
  • Strategic execution: completed sale of mortgage warehouse business with $7.0M pre-tax gain, adding capital optionality; management reiterated mid-teens NII growth outlook for 2025 .
  • Quote: “Horizon’s first quarter earnings displayed continued positive momentum… sixth consecutive quarter of margin expansion, now above 3%… added optionality to our capital position through the successful sale of our mortgage warehouse business” — CEO Thomas Prame .

What Went Wrong

  • Non-performing assets ticked up: NPAs rose to $31.4M (0.41% of assets) from $27.4M in Q4, with non-accrual loans up to 0.59% of HFI; modest increases in residential and commercial non-accruals .
  • Loan growth mixed: consumer balances declined $40M with continued indirect auto runoff; total loans HFI rose only ~$62.8M, offset by warehouse sale .
  • Deposit costs/mix: linked-quarter deposit costs were up ~3 bps, with mix shifting toward time deposits; management expects little change until Fed cuts commence .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Diluted EPS ($)0.32 0.41 (0.25) 0.54
Net Income ($MM)14.0 18.2 (10.9) 23.9
Revenue ($MM)9.9 11.5 (29.0) 16.5
Net Interest Income ($MM)43.3 46.9 53.1 52.3
Net FTE Interest Margin (%)2.50 2.66 2.97 3.04
Total Expenses ($MM)37.1 39.3 44.9 39.3
Estimates vs Actual (Q1 2025)ConsensusActual
EPS ($)0.4050.5355
Revenue ($MM)64.567.39
EPS # of Estimates6—
Revenue # of Estimates5—

Values retrieved from S&P Global.

Segment breakdown – Loans HFI (period-end):

Category ($MM)Q4 2024Q1 2025Δ QoQ
Commercial Real Estate2,202.9 2,262.9 +60.0
Commercial & Industrial875.3 918.5 +43.2
Total Commercial3,078.2 3,181.5 +103.3
Residential Real Estate802.9 801.7 (1.2)
Consumer966.0 926.6 (39.4)
Loans HFI Total4,847.0 4,909.8 +62.8

KPIs

KPIQ4 2024Q1 2025
Deposits ($MM)5,600.7 5,765.8
Non-Interest-Bearing Deposits ($MM)1,064.8 1,127.3
Borrowings ($MM)1,142.3 812.2
NPLs / Loans HFI (%)0.53 0.59
NPAs / Assets (%)0.35 0.41
Annualized Net Charge-offs (%)0.05 0.07
ACL / Loans HFI (%)1.07 1.07
Efficiency Ratio (%)185.89 57.16
Tangible Book Value / Share ($)13.68 13.96

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024 call)Current Guidance (Q1 2025 call)Change
Net Interest Income GrowthFY 2025Mid-teens Mid-teens Maintained
Loans HFI GrowthFY 2025Mid-single digits; indirect auto runoff ≈$100M Mid-single digits; indirect auto runoff ≈$100M Maintained
Deposits GrowthFY 2025Low single digits Low single digits; mix more time deposits, less commercial vs prior Maintained (mix refined)
Net FTE Interest Margin (Exit)Q4 2025~3.15%–3.20% ~3.15%–3.20% (lower end possible) Maintained
Total ExpensesFY 2025Flat to up low single digits vs FY 2024 Flat to up low single digits Maintained
Effective Tax RateFY 2025Mid-teens Mid-teens Maintained
Borrowings2025Pay down $200M late Mar/early Apr Borrowings now down $330M in Q1; expect similar to Mar 31 balances for rest of year Accelerated paydown completed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Margin expansionFTE NIM 2.66%; improving mix FTE NIM 2.97%; exit run-rate low 3s FTE NIM 3.04%; expecting further expansion Ongoing improvement
Asset mix strategyRepositioning securities; planned warehouse sale Redeployed into higher-yield loans; indirect auto runoff Continued remix toward higher-yield commercial; indirect auto runoff Consistent execution
Deposit pricing/mixStable balances; core strength Reduced higher-cost CDs; benefitted from Fed cuts Competitive rates low-4s; mix tilted to time deposits; limited change until Fed cuts Mix shifts to CDs
Equipment financeAdded division; growing ~$140M 2024 production; 2025 target $150–$175M Contributes to C&I growth; diversified small-ticket originations Scaling steadily
Tariffs/macro watchNot prominentNeutral to front-end rate sensitivity Monitoring tariffs; customers cautious; pipeline steady Watchful stance
Capital deploymentNot highlightedBuybacks authorized (~1.1M shares); M&A optionality Buybacks more attractive at current P/B; multiple options (buybacks, dividend, M&A) Optionality increasing
Mortgage bankingSeasonal declines Seasonal; outlook low single-digit growth Spring pickup constrained by inventory; pipeline improving Gradual recovery

Management Commentary

  • “Q1 net interest margin increased by another 8 basis points to 3.04%… driven by improved mix and reductions in deposit costs from Q4 Fed funds cuts” — CFO John Stewart .
  • “Commercial loans grew $105 million… 58% CRE and 42% C&I… well diversified with no sector >10% of commercial portfolio” — CCO Lynn Kerber .
  • “We successfully sold our mortgage warehouse business, adding optionality to our capital position” — CEO Thomas Prame .
  • “No change to our full year outlook… loans mid-single-digit, deposits low single digits, NII growth mid-teens, expenses flat to up low single digits, tax rate mid-teens” — CFO John Stewart .

Q&A Highlights

  • Capital return: Management emphasized buybacks as attractive given intrinsic value and current P/B; buybacks among several strategies alongside dividends, repositioning, and M&A .
  • Margin path: Exit 2025 NIM still ~3.15–3.20%; FHLB advance paydowns and asset/liability mix are primary drivers; lower end of the range possible amid rate volatility .
  • Deposit dynamics: Competitive CD rates low-4%; deposit costs likely steady until Fed cuts; CD book duration 6–7 months supports repricing lower post cuts .
  • Back-book repricing: CRE maturities offer 100–125 bps pickup in 2025 (~$139M under 7% avg 6%) and 200 bps in 2026 ($161M under 7% avg 5%) .
  • Loan growth and pipelines: Commercial growth outlook mid-to-high single digits; equipment finance bolstering pipelines; cautious but steady client sentiment .

Estimates Context

  • Q1 2025 beats: EPS $0.54 vs $0.405 consensus and revenue $67.39M vs $64.50M consensus; 6 EPS estimates and 5 revenue estimates underpin the consensus. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential core improvement with FTE NIM at 3.04% and expenses down sharply sets a stronger run-rate entering Q2; expect additional margin expansion across 2025 .
  • Capital flexibility increases after $7M gain and stronger capital ratios; management flagged buybacks and M&A as active options—monitor authorization usage and announcements .
  • Funding mix improved: $330M borrowing reduction and deposit growth (notably non-interest-bearing) should support NIM resilience even if Fed timing shifts .
  • Commercial growth breadth (CRE/C&I) and equipment finance scaling underpin mid-single-digit loan growth guidance despite ~$100M indirect auto runoff .
  • Credit remains a bright spot: NCOs 0.07%, ACL 1.07% of loans, albeit with modest upticks in NPAs; minimal reserve pressure anticipated absent macro deterioration .
  • Near-term trading: Beat on EPS/revenue and reaffirmed guidance are positive catalysts; watch for any buyback initiation and NIM trajectory updates as Q2 reflects full impact of borrowing paydowns .
  • Medium-term thesis: Ongoing asset/liability remix, deposit granularity, and expense discipline position HBNC for operating leverage and TBV accretion; optionality on capital deployment adds upside .