Horizon Bancorp (HBNC) Q4 2024 earnings summary

Executive summary

• Achieved strong Q4 results with robust commercial loan growth (22% annualized), improved net interest margin, and positive credit metrics, despite a net loss of $10.9 million due to a $39.1 million pre-tax loss on securities sales and strategic expense actions.

• Strategic initiatives included balance sheet optimization, redeployment of liquidity into higher-yielding loans, and restructuring of the expense base, positioning for improved efficiency and profitability in 2025.

• Continued focus on expanding profitable core commercial relationships, reducing lower-yielding auto loans, and maintaining core deposit stability with intentional runoff of higher-cost CDs.

• Treasury management investments and a strong branch network provided competitive advantage in fluid deposit markets.

• $5 million tax valuation allowance reversal in Q4 benefited capital and tangible book value.

Financial highlights

• Net interest income rose to $53.1 million in Q4 2024 from $46.9 million in Q3, with net interest margin (FTE) expanding 31 basis points sequentially to 2.97%.

• Non-interest income loss of $28.95 million in Q4, driven by a $39.1 million pre-tax loss on securities sale.

• Non-interest expense elevated at $44.9 million, impacted by accelerated compensation and strategic outside services.

• Allowance for credit losses to HFI loans was 1.07% at year-end, with net charge-offs for Q4 at $621,000 (0.05% of average loans), mainly from the indirect auto portfolio.

• Total loans reached $4.91 billion and total deposits were $5.60 billion at year-end, with deposits declining mainly due to time deposit runoff.

Outlook and guidance

• Expect mid-single-digit loan growth for 2025, led by commercial loans, with continued runoff of indirect auto loans (~$100 million decline expected).

• Deposit balances projected to grow in the low single-digit range, with improved funding mix and reduced borrowings.

• Net interest income anticipated to grow in the mid-teens for 2025, driven by margin expansion; non-interest income to grow low-single digits (excluding Q4 securities loss).

• Non-interest expense run rate expected to be flat to up low single digits versus 2024; effective tax rate guidance set in the mid-teens.

• Management expects improved efficiency and greater shareholder returns in 2025 following strategic actions.