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HB

HORIZON BANCORP INC /IN/ (HBNC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 reported a net loss of $10.9M ($0.25) driven by a strategic $39.1M pre-tax securities loss; core results showed strong NII and NIM improvement (NII $53.1M; FTE NIM 2.97%, +31 bps q/q) as assets remixed to higher-yielding loans and lower-cost deposits .
  • Loans rose $108.6M q/q to $4.91B with 22.4% annualized commercial growth; deposits fell $126.4M as management intentionally let higher-cost time deposits roll off, improving funding mix .
  • Noninterest expense was elevated ($44.9M) from one-time items (stock comp acceleration, termination of a legacy benefits plan, strategic initiative costs); tax valuation allowance reversal ($5.1M) benefited capital and tangible book .
  • 2025 outlook: sequential NIM improvement with exit run-rate targeted at ~3.15–3.20%, mid-teens NII growth, expenses flat to low-single-digit up vs 2024, mid-teens effective tax rate; $200M FHLB advances to be paid down in late March/early April .
  • Potential stock catalysts: NIM trajectory, capital build with optionality for buybacks (1.1M shares authorized), Q1 2025 gain on mortgage warehouse sale, and further deposit cost normalization as rates decline .

What Went Well and What Went Wrong

  • What Went Well

    • Core earnings power improved: net interest income rose for the fifth straight quarter to $53.1M; FTE NIM expanded to 2.97% (+31 bps q/q) on asset remix into loans, lower-cost deposits, and modest rate tailwinds; ~5 bps NIM lift came from specific loan interest recoveries .
    • Commercial lending momentum: loans +$108.6M q/q (HFI); commercial grew at a 22.4% annualized rate; equipment finance ramped; management reiterated ample in-market opportunities .
    • Strategic repositioning completed: $332.2M AFS sale executed to redeploy into higher-yielding loans and reduce high-cost funding; go-forward expense baseline recalibrated; mortgage warehouse division sold for a gain effective Jan 17, to be recognized in Q1 2025 .
    • Quote: “We are very pleased with Horizon’s fourth quarter results, which displayed a significantly more profitable core business model…” — CEO Thomas Prame .

  • What Went Wrong

    • GAAP loss from restructuring: $39.1M pre-tax securities loss drove a $10.9M net loss and negative EPS (-$0.25), overshadowing otherwise stronger core NII/NIM progression .
    • Expense spike: noninterest expense rose to $44.9M on one-time compensation/benefits and strategic costs; management expects lower levels in 2025 (normalized ~$39.5–$40.0M quarterly run-rate) .
    • Funding and credit optics: total deposits -$126.4M q/q as high-cost CDs rolled off; nonperforming assets/total assets ticked up to 0.35% (from 0.32%); non-accrual loans/HFI rose to 0.53% (from 0.49%), though charge-offs remained low .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($USD Millions)$42.257 $46.910 $53.127
Non-interest (Loss)/Income ($USD Millions)$(20.449) $11.511 $(28.954)
Total Non-interest Expense ($USD Millions)$39.330 $39.272 $44.935
Provision for Credit Losses ($USD Millions)$1.274 $1.044 $1.171
Net (Loss) Income ($USD Millions)$(25.215) $18.180 $(10.882)
Diluted EPS ($)$(0.58) $0.41 $(0.25)
Net FTE Interest Margin (%) (non-GAAP)2.42% 2.66% 2.97%
Efficiency Ratio (%)180.35% 67.22% 185.89%
Return on Avg Assets (%)(1.27%) 0.92% (0.55%)

Notes: NIM is presented on a fully taxable equivalent (FTE) basis (non-GAAP) with reconciliations provided by the company .

Segment and Balance Mix

Loans/Deposits ($USD Thousands)Q4 2023Q3 2024Q4 2024
Commercial Real Estate1,962,097 2,105,459 2,202,858
Commercial & Industrial712,863 808,600 875,297
Total Commercial2,674,960 2,914,059 3,078,155
Residential Real Estate681,136 801,356 802,909
Mortgage Warehouse45,078 80,437 — (0)
Consumer1,016,456 1,008,144 965,976
Total Loans HFI4,417,630 4,803,996 4,847,040
Loans Held for Sale1,418 2,069 67,597
Savings & Money Market Deposits3,369,149 3,420,827 3,446,681
Time Deposits1,179,739 1,220,653 1,089,153
Non-interest Bearing Deposits1,116,005 1,085,535 1,064,818
Total Deposits5,664,893 5,727,015 5,600,652

KPIs and Credit Quality

KPIQ4 2023Q3 2024Q4 2024
Non-accrual Loans / HFI Loans (%)0.45% 0.49% 0.53%
Non-performing Assets / Total Assets (%)0.27% 0.32% 0.35%
ACL / HFI Loans (%)1.13% 1.10% 1.07%
Annualized Net Charge-offs / Avg Loans (%)0.07% 0.03% 0.05%
Tangible Common Equity / Tangible Assets (%)7.08% 7.58% 7.83%
Tangible Book Value/Share ($)$12.60 $13.46 $13.68
Cash Dividend/Share ($)$0.16 $0.16 $0.16

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE)FY 2025Continued expansion; Q4 2024 +15–20 bps vs Q3 (from Q3 call) Sequential quarterly improvement through 2025; exit ~3.15%–3.20% (Dec exit run-rate was ~3.03%) Clarified/raised specificity
Net Interest IncomeFY 2025H2 2024 upper single-digit growth vs H1 (from Q2 call) Mid-teens growth for full-year 2025 Higher growth outlook (next year)
Loans HFI GrowthFY 2025—Mid-single-digit growth; indirect auto to decline by ~$100M New
DepositsFY 2025Stable to modest growth (prior commentary) Low single-digit period-end growth; seasonal cadence (weaker Q1/Q4, stronger Q2/Q3) Clarified
FHLB Advances2025Expect benefit from paying down advances in 2025 Pay down $200M of FHLB advances in late March/early April (~4% cost) Maintained with timing specificity
Securities ReinvestmentFY 2025Focus on redeployments to loans; no Q3 purchases No reinvestment of 2025 securities cash flows; redeploy to relationship commercial loans Clarified
Noninterest ExpenseFY 2025Implied $155–$160M consensus range (Q3) Total 2025 expenses flat to low-single-digit up vs 2024; quarterly run-rate below Q4’s $44.9M, normalizing to ~$39.5–$40M Maintained/clarified lower run-rate
Effective Tax RateFY 202510%–12% initial view (Q3) Mid-teens; step up in Q1 and then ratable Raised
Mortgage WarehouseQ1 2025LOI to sell (Q3) Business sold for a gain effective Jan 17; gain recognized in Q1 2025 Executed
Capital DeploymentOngoingEvaluating buybacks; improved profitability to build capital (Q3) Buybacks a clear option; ~1.1M shares authorized Optionality emphasized
DividendOngoing$0.16/quarter $0.16 in Q4 2024 reported Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
NIM expansion and driversQ2: NIM +14 bps to 2.64% on asset remix; further modest expansion expected . Q3: NIM guided +15–20 bps in Q4; deposit costs declining post rate cuts .NIM 2.97% (+31 bps q/q); drivers: faster redeployment into loans, lower-cost deposits, Fed cuts, ~5 bps from interest recoveries; guide to sequential 2025 improvement, exit ~3.15–3.20% .Strengthening
Balance sheet remix (loans ↑, indirect auto ↓, securities ↓)Q2–Q3: Grow core commercial, run off indirect auto, no sec purchases; executed Q4 securities repositioning plan .$332.2M AFS sold; proceeds into higher-yield loans and paying down higher-cost funding; indirect auto to decline ~$100M in 2025 .Continuing
Equipment finance growthQ2: on pace for ~$110–$120M in 2024 . Q3: ~$85M ytd by 9/30; building cadence .~$140M 2024 production; target $150–$175M in 2025 .Expanding
Deposits and pricingQ3: stable core balances; spot IB deposit costs fell to ~2.50% in early Oct from ~2.72% in Aug .Intentional runoff of high-cost time deposits; competitive landscape fluid post rate cuts; granular base and treasury mgmt build-out support funding .Improving mix
Capital and buybacksQ3: optionality; evaluate buybacks as profitability improves .Explicit: 1.1M shares authorized for buyback; capital build expected in 2025 .More optionality
Tax rate outlookQ2: FY24 ETR 9.5%–10% . Q3: 2025 ETR 10%–12% .2025 mid-teens ETR; step-up in Q1 then ratable .Higher
Mortgage warehouseQ3: intent to sell .Sold effective Jan 17; Q1 gain .Completed

Management Commentary

  • “We are very pleased with Horizon’s fourth quarter results, which displayed a significantly more profitable core business model… These actions, combined with an impressive 22.4% annualized growth rate in commercial loans, increased the margin by 31 basis points from the third quarter.” — CEO Thomas Prame .
  • “Our Q4 net interest margin was stronger than anticipated, up 31 basis points… strategically redeploy[ed]… proceeds… into… commercial loan growth and… reduction of higher cost… deposits… Fed funds rate [cuts]… were beneficial… ~5 bps [from] interest recoveries.” — CFO John Stewart .
  • “We would anticipate sequential quarterly margin improvement over the course of the year… exit run rate… in the 3.15% to maybe 3.20% range.” — CFO John Stewart .
  • “Under our base set of assumptions… full-year 2025 net interest income will grow in the mid-teens… expenses for 2025 should be flat to up low single digits relative to… 2024… effective tax rate… in the mid-teens.” — CFO John Stewart .
  • “Sold the [mortgage warehouse] business for a gain, effective January 17th, which will be recognized in Q1 2025.” — Management .
  • On deposit competition: “We’ve been able to navigate… with a competitive advantage… 70 local branches… relationship banking… 40% more treasury management people…” — CEO Thomas Prame .

Q&A Highlights

  • Margin trajectory and drivers: December margin run-rate ~3.03%; 2025 exit ~3.15–3.20%; Q2 2025 uplift from $200M FHLB paydown; liability mix and commercial loan growth vs indirect auto runoff key levers .
  • Capital deployment: Building capital in 2025; buybacks are on the table with ~1.1M shares authorized .
  • Expense normalization: Ex-Q4 strategic items, run-rate guided to ~$39.5–$40.0M/quarter vs $44.9M reported; additional Q4 items ($2.0–$2.5M) were elevated but not recurring .
  • Reserve/credit outlook: ACL/loans (1.07%) seen as appropriate; loan growth and mix (indirect auto runoff) primary drivers; credit trends stable .
  • Loan pricing/mix: Fixed-rate commercial loans generally high-6s to 8% depending on term/credit; small-ticket leasing 7.5% to high-8% .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of analysis due to system request limits; as a result, we cannot assess beat/miss versus consensus for this quarter [GetEstimates error].
  • Implication: The GAAP loss in Q4 stems from the $39.1M securities loss; core revenue/margin trends improved, but we cannot benchmark these against published consensus in this report .

Key Takeaways for Investors

  • Core earnings power improved materially: five consecutive quarters of NII growth; FTE NIM 2.97% (+31 bps q/q) on remix to loans and lower-cost deposits, positioning for further sequential NIM gains in 2025 .
  • 2025 setup is constructive: mid-teens NII growth, expense normalization (flat to LSD up vs 2024), mid-teens ETR, and a balance sheet close to rate-neutral after Q4 actions .
  • Capital optionality rising: tangible capital improved; management explicitly flagged buybacks (1.1M shares authorized) alongside organic growth priorities .
  • Near-term catalysts: Q1 2025 gain on sale of the mortgage warehouse business; late-Q1/early-Q2 FHLB paydown; ongoing deposit repricing opportunities as rates decline .
  • Risk checks: Deposits down 2.2% q/q on CD runoff (by design); NPA/Assets and non-accrual ratios up modestly but remain low; charge-offs contained .
  • Watch list: Execution on mid-single-digit loan growth while shrinking indirect auto; maintaining pricing discipline; monitoring deposit competition as peers adjust post-Fed cuts .
  • Dividend maintained at $0.16 in Q4; trajectory will likely track core profitability improvements and capital build .