Q2 2021 Horizon Bancorp Inc Earnings Call
Good morning, everyone and welcome to the Horizon Bancorp conference call to discuss financial results for the 3 months.
<unk> ended June 30th 'twenty 'twenty 1.
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Before turning the call over to management. Please remember that today's call may contain statements that are forward looking in nature.
Statements are subject to risks and uncertainties.
Factors that could cause actual results to differ materially from those discussed including those factors noted in our slide presentation. Additional information about factors that could cause actual results to differ materially is contained contained in horizon current 10-K. In later filings. In addition in addition management.
[noise] teasing refer to certain non-GAAP financial measures that are intended to help investors understand horizon's business. Reconciliations for these measures are contained in the presentation. The company assumes no obligation to update any forward looking statements made during the call. If anyone does not already have a copy of the press release and supplemental presentation.
Maybe issued by Horizon yesterday, you can access it at the company's website W.
W. W. W Dot horizon Bank Dot com.
Representing horizon today, our chairman and Chief Executive Officer, Craig Dwight and Executive Vice President and Chief Financial Officer, Mark C Corps, they will be joined by executive.
Patient resident and Chief commercial banking officer, Dennis Kuhn for the question and answer session. At this time I'd like to turn the call over to Horizon's, Chairman and CEO Craig Dwight.
Thank you Kate and good morning.
As you from participating in Horizon Bancorp second quarter.
Vice premiums carpet school, our comments today will follow the Investor presentation, We published yesterday July 27th.
I'm extremely proud of horizon steam and how they position the company well for the future.
As a result of this preparation we are very optimistic about horizon's, earning power over the next 2 years.
The momentum taking us into 2022 and 2023 includes welcoming new associates from the 14 branches. We are in the process of acquiring in a transaction that is on track to close in September.
This logical extension of our franchise includes adding approximately 50000 new households.
<unk>, 2 commercial lenders and low cost core deposits, we've already proven that mass and scale work to drive shareholder value and our pending branch acquisition only contributes to that momentum.
In addition, we are closing 10 branches by the end of August as we continue our effort to strive for further reductions in.
Our consistently low non interest expense to average asset ratio, which was just 2.18 per cent in the second quarter.
We expect to continue to achieve expense reductions, even as we deploy redeploy employees from the closing branches to fill open positions and re invest much of the savings into technology.
<unk> designed to enhance sales and the customer experience.
In addition, we've increased the number of commercial lenders since December 2020 by 20% with additional offers pending we've.
We've added volume capacity to our indirect auto lending program horizon is positioned well to seize upon future opportunities.
<unk>.
Starting on slide 4 company highlights horizon completed in the second quarter report.
<unk> strong quarterly earnings at $22.1 million driving the quarterly results were stable net interest income strong mortgage production and I'm a release in provision for credit loss reserve expense and continued.
Expense control.
Horizon return on average assets of 1.45% and return on average equity of 12.59% per the quarter continues to be robust and compare favorably to peer medians.
Given the size of our balance sheet highly efficient operations and talented work force, we believe horizon is well positioned.
Positioned to capitalize insignificant net organic and strategic growth opportunities within our attractive Midwestern markets.
As you'll see on slide 6 we've clearly demonstrated over the past 18, and a half years that horizon is a growth company with compounded annual average growth rates in total assets at $12.3 per cent and.
About 16%.
Year to date in 2020, 1 earnings are up 64 per cent compared to the first 6 months of last year.
During this time period, we demonstrated that our strategy of mass and scale has created shareholder value through both revenue growth and disciplined expense management, resulting in strong earnings for the second quarter.
Net in contributing to our growth as both the new and organic market expansions and 15 mergers and acquisitions, which includes our pending Michigan branch transaction.
Horizon is a company on the move and we continue to look for new opportunities in our current and adjacent Indiana, Michigan markets with a proven track record as a successful consolidator.
And the pressures that other banks are facing related to succession planning low interest rates and challenging operating environment. We are seeing a pickup in M&A discussions.
On slide 8 we remind you that horizon expansion and growth has occurred primarily in college and University towns and state or county.
Governmental seats.
Therefore, a majority of our footprint has an economic base that is traditionally more stable than other areas of Indiana and Michigan.
The pending branch acquisition expands our presence into college towns and in 8 of the 11 counties, where the acquired branches are located.
Horizon will either be number 1.2 or 3.
<unk> 3 in deposit market share.
In addition, horizon remains positioned well to take advantage of the outbound migration from Illinois, which continues to increase as consumers and businesses exit dense living spaces high taxes increase in car crime rates in the high cost of living.
Both Indiana, and Michigan continued to show improvement.
Economies as evidenced by our low unemployment rates and an increase in total work force.
Result of the tight labor markets, we are seeing some wage inflation.
Slide 9 highlights the primary markets, we were engaged in some exciting economic events, creating new business opportunities for horizon.
And digital transformation Horizons average monthly transactions continue to shift away from branches towards digital and virtual channels as.
As of last month 73 per cent of all transactions took place through our digital channels compared to 44 per cent in 2018.
The good news is that since that our branch network.
Moving on reopening in January 2021 the online activity has stayed relatively constant.
Which horizon embraced before the pandemic, which of course accelerated that trend is a key consideration in our annual branch performance review and consolidations, including the 10 branch closures scheduled for end of August.
Work section is at the end of June 'twenty, 'twenty 180 per cent of all checking accounts, where active online banking users, which is a 22% increase compared to 65 per cent active online banking users in 2018.
As a result of our investments made in technology over the prior Years' Horizon is well prepared for.
And at their increase in digital banking activity.
Now for our financial update so my privilege to introduce you horizon as bank Executive Vice President and Chief Financial Officer, Mark seek or Mark.
Thank you Craig.
Alright, and saw record net income for the second quarter with increases in both net interest income and noninterest income.
Over the first quarter, we're very pleased with these results in the core trends in the second quarter demonstrated.
Starting with slide 12, the company's second quarter results were supported by strong and stable core trends compared to the first quarter of 2020..1 we continued to record lower P. P. T income from fewer loans forgiven lower.
Future of accounting income and a reduction in the average loans attributed the P. P. P loan forgiveness, and lower mortgage and mortgage warehouse loan balances. However, net interest income increased with a higher level of interest earning assets with the move of assets from cash into the investment portfolio. This is 1 of horizon key objectives.
We're pretty focused on increasing net interest income dollars into leverage capital non.
Noninterest income reflected an increase over last quarter, primarily due to the 2 mortgage gain on sale income and interchange income in.
In addition to the recovery of $1.6 million of mortgage servicing right impairment contributed to the increase.
The second quarter.
Also benefited from a small release of $1.5 million from the allowance for credit losses due to continued strong credit performance low net charge offs and improving econometrics. We continue to believe we are appropriately reserved given the current state of our portfolio and the recovering economy and our seasonal modeling.
Slide 13.
13, the reduction in the adjusted margin of 4 basis points. During the quarter was positively impacted by 7 basis points from P. P. P income as net deferred fees recognized for loan forgiveness. This compares to a positive P. P. P impact of 10 basis points in the first quarter accounting for 3 of the 4 basis point decrease.
And the margin.
In addition high cash balances held during the quarter compressed the margin additional 21 basis points compared to 16 basis points in the first quarter.
We moved $421 million into the investment portfolio utilizing cash and liquidity from the reduction in loan balances and deposit growth.
Although helping to increase net interest income this higher mix of lower yielding investments puts pressure on the margin.
Slide 14.
The loan yield increased in the second quarter due to the reduction in the balances of lower yielding P. P. P in mortgage warehouse loans, even with the increase in the loan yield.
It absorbed the impact from PPP loan fees recognized during the quarter from only adding 3 basis points of the yield compared to the positive 6 basis points in the second quarter.
As loans continue to reprice, new product is originated at lower rates and the higher earning asset mix of investments additional downward pressure on.
<unk> yields as expected during 2020.1.
Slide 15 margin compression was tempered by our continued improvement in funding costs, which reflect horizon valuable and growing core deposit franchise.
CD portfolios 13 basis point decrease in price.
In pricing and reduce total funding costs. It has high cost term deposits matured during the quarter.
$240 million of Cds with an average cost of 72 basis points will mature during 2021 and continue to reduce our cost of funds.
As total deposits continue to grow we are also strategically pricing deposits.
Posits to manage liquidity instant inflows from transactional or transient sources.
This of course is balanced against our commitment to stand by our long standing customer relationships and high potential new opportunities in our growth markets in Indiana and Michigan.
The 7% growth in noninterest income noninterest bearing.
It's also contributed to lower funding costs in the second quarter.
Moving to slide 16.
Mortgage revenue from the gain on sale in mortgage related income continue to sport noninterest income as we also saw $1.6 million net recovery of noncash impairment charges from the mortgage servicing asset in the quarter.
Deposit a continued high level of mortgage production, 61% coming from purchase activity and strong percentage gains are the primary contributors to our noninterest income for the quarter.
Based on our local and national refinancing activity, we expect strong top line contributions to continue from the mortgage business in 2021.
Slide 17 during the second quarter, we saw operating expenses increased from the first quarter as we recorded less deferred costs from the origination of Pvp loans than in the first quarter.
An increase in health insurance costs and recorded losses for the sale of some legacy bank owned property.
Core operating expenses.
<unk> continued to be stable as we saw noninterest expense to total average assets declined to 2.18% and when adjusted for transaction cost to 2.16%.
Craig I already discussed our annual branch rationalization process that is leading us to close 10 branches next month this disciplined.
Processes.
Another part of our normal course of operation and has been key to our long record of running an efficient and stable retail franchise, while investing in horizon in digital mobile and remote banking as well as our communication centers.
Slide 18, the release of $1.5 million of the credit loss reserve was relative.
The rate was the result of overall continued improvement in the credit metrics and the econometrics within the seasonal model.
We continue to maintain allocations for sectors of loans with Hyatt with potentially higher risk of loss due to the nature and characteristics of these portfolios as they are monitored on a consistent basis.
With the release of the reserve the percentage of allowance to total loans increased to 1.58% at June 30, due to the decrease in total loans.
Balance of $10.5 million remains for discounts on acquired loans.
Overall, we are very pleased with our financial performance for the second quarter. We believe we are well positioned from a credit.
Liquidity and capital perspective, and look forward to refining our operating model to further improve our results in the quarters ahead for.
For some additional comments on our loan portfolio is I'll turn it back over to Craig.
Thank you Mark looking at the chart on Slide 20 horizon $3.5 billion in total loans are well diversified.
Credit because he per cent and commercial and 40% in residential mortgage and consumer loans.
Table on the right provides the granularity within our commercial loan portfolio, which itself was well diversified our single largest sector is in residential multifamily housing loans at 6% of total loans in this segment continues to perform well.
With the pandemic related distress business sectors have seen considerable improvements over the prior year's operating results, including the hotel restaurant hospitality and leisure industries Horizon is non owner occupied real estate portfolio also exhibit strong cash flow from our borrowers and low delinquency rates.
Horizon's consumer.
Before we will continue to reflect strong underwriting standards as evidenced by low delinquency at points to 4.1% and declining nonperforming loans at 0.641% at quarter end.
We are experiencing growth in our indirect automotive loan portfolio, which is all in market lending to.
To further support an increase in vol.
Alone we've added 11, new dealer relationships with another 10, plus applications pending and the new Michigan markets and.
In addition, we are expanding our RV and small bolt lending programs.
As a reminder, more than 99% of our consumer loans are secured and about 95 per cent or prime credits, we intend to maintain a secured.
Prime consumer lending focus even as we grow into our expanding footprint.
Horizon's commercial loan portfolio continues to reflect strong underwriting standards as evidenced by low delinquency at 0.03, or 1% and declining nonperforming loans at <unk> 49 of 1 per cent of total commercial loans at quarter end.
In horizon is predominantly a secured lender with recourse from the business owners and continues to follow prudent underwriting standards.
Horizon is commercial loan portfolio is well diversified by business sector and geographic locations throughout the states of Indiana and Michigan.
As mentioned earlier since December we've increased our number of commercial lenders.
Approximately 20 per cent with it.
Digital job officer offers or waiting to be accepted.
The staff additions are in growth markets of Troy in Kalamazoo, Michigan, and South Bend Lafayette in Indianapolis, Indiana. In addition, we will pick up 2 commercial lenders on the branches to be acquired.
We were also pleased to report that the.
The commercial pipelines are close to pre pandemic levels.
Now moving to our hotel sector hotels represent 4% of total loans. In this segment has been has seen a significant pick up in occupancy and average daily room rates through the second quarter of 2021 compared with the first quarter.
As of June 30, the average.
There's probably a occupancy rate was 74 per cent, which reflects 94 per cent of Horizon's total hotel loan dollars reporting.
It is an increase from 58 per cent is an occupancy as of March 21.
This compares favorably to the nationwide occupancy rates as of June 30 at 66 per cent.
Occupancy gains are primarily attributed to increased consumer travel along with a smaller increase in business travel Fortunately Horizons hotel portfolios, primarily located along Interstate highways and resort locations frequented by the consumer traveler and that tied to convention or entertainment venues found in larger metropolitan areas.
Average horizon continues to report strong asset quality metrics in the second quarter, we reported low net charge offs over the last 5 quarters of less than 3 basis points are.
Our credit loss provision expense Mark talked about we had a slight a $1.5 million and recovery.
[noise] Horizon's total nonperformer.
Loans to total loans ratio improved for the third consecutive quarter.
Our allowance for credit loss remains level at 1.58 per.
I sent a total loans.
To summarize horizon Bancorp key franchise high.
Highlights.
We are positioned well for earnings growth going into <unk>.
2 in 2023 as a result of our pending 14 branch acquisition 10 branch closures or pick up in loan demand.
An increase in commercial lenders expansion of our consumer loan dealer network and leveraging excess capital.
We are a seasoned management team, who has managed through multiple economic cycles and has a history of G.
20th growth Barak sitting in banking industry average growth rates.
We have robust capital position and excess cash at the holding company in excess of $125 million with an improving outlook to deploy capital in cash through a merger or acquisition or stock buybacks.
Horizon has maintained its solid historical compound.
Deliberate earnings growth rate of 16% over the past 22 years and.
The company has paid 30 years of uninterrupted cash dividends on our common shares and once again raise the dividend in the second quarter of 2021.
This now concludes our prepared remarks, and I'll turn it back over the operator for questions.
Thank you.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then 2 we ask that you limit yourself to 1 question and 1 follow up if you have additional.
Annual strength you may reenter the question queue.
First question is from Nathan race of Piper Sandler. Please go ahead.
Yeah, Hi, guys good morning.
Good morning, good morning.
Somebody do a kind of just dig into the loan growth outlook a bit.
P P P in the warehouse.
Quite a low last quarter, which I think it's encouraging to see you know as you look forward and I appreciate all the details with.
The commercial lender.
Team up weight per cent from your own and just given you know some.
From opportunities with some M&A related disruption.
It looks like it how are you guys kind of thinking about loan growth.
In the warehouse.
On a percentage basis in the back half of 'twenty 'twenty 1.
Uh huh.
Good morning. This is Dennis Kuhn and thank you for the question Nathan.
Again, we think we during the second quarter that we did see it.
Shift towards some growth obviously.
And from a standpoint of pipelines continuing to grow.
You know the second quarter, we saw a substantial increase in both our production and funded commercial loans in particular.
Over 50 million additional in each.
Mark Glory and as Craig said, we have returned at this point to pre pre pandemic level of 2019, and actually eclipsed that somewhat so our pipeline going into the third quarter is solid it's just over $100 million.
And.
Last quarter at this time, we reported about 115 million, but we ended up ended up eclipsing that significantly by over 30 million. So our pipelines are growing weekly new the investments in the new lenders there, they're starting to hit the ground.
And generate business. So again, our our outlook is positive I would say for some commercial loan growth we did see.
Continuing reduction in our revolving line usage during the second quarter, though so.
If that rebounds, which we have heard from some others that it has started to rebound but.
We again, we saw lower balances in utilization through the second quarter and revolving so.
But again the.
Investments in it and the lenders.
You know in some growth markets, where they are disrupted due.
Due to other at pending mergers and acquisitions.
Is showing some some momentum.
Okay.
Got it that's great color appreciate that and then maybe changing gears.
Thinking about expenses, obviously third quarter is going to be somewhat noisy with the tcf branches coming out in about half the quarter and then you also have the the 10 locations that you'll be consolidated as well on a legacy basis. So maybe as we look to the fourth quarter or the first quarter of next year, Mark any thoughts on just kind of where you expect.
The expense run rate to shake out.
Yeah Nate.
He is going to be noisy next quarter and it takes a while you know to get Oh, the cost saves in from the branches that we're not letting the the staff, though we're offering them employment all of their locations and we're going to absorb.
Then through attrition.
Over the next day, probably 9 to 12 months.
So that won't.
The initial cost save them you will also see some write down on fixed assets as we move them into bank on property that the branches and.
We do expect some write down.
But getting on into next year after the transaction and with the branch closures.
We've stated before our target and our goal is to get to a 2% of average asset range of expenses, where it too.
<unk> 16 adjusted today.
And our goal is to see that to get around that 2% and even sub 2.
As we get into next year.
Yeah.
Okay. That's helpful. I think you can do the math in terms of the operating expense run rate from that 2% target.
You guys have.
For the start of next year. So I appreciate all the color I'll step out. Thank you guys.
Thanks Nate.
The next question is from Terry Mcevoy of Stephens. Please go ahead.
Hey, good morning, guys.
Morning, Jerry Good morning, Gerry I, just maybe follow up on the <unk>.
Expense question I, just want to make sure I understand the message correctly the <unk>.
Cost savings coming from the 10 branches will be reinvested in the commercial hires in and maybe the digital platform is as well.
Is that the message here.
Yeah, I think that is our our messaging. Although you know we would anticipate some cost savings to help us continue to leverage.
But with the <unk> and also with the branches coming on them will continue to leverage our operating expense.
Okay, great. Thanks for that Mark and then.
Maybe also a follow up on 1 of our Nathan's questions on the on just the loan outlook, where do you kind of see the the warehouse the mortgage warehouse.
What's the right level.
Normal World and then just the kind of the run off of the of the mortgage portfolio, which we've seen really across the.
Where do you kind of see that portfolio leveling off as well, our or said another way what type of incremental pressure in the second half of this year do you see because of those 2 portfolios.
Yeah or response and that question has always been that we follow.
Directionally the mortgage.
Industry associations are outlook for refinance et cetera, and pay off so wherever they are predicting they're predicting a 25 per cent drop in production this year, and that's probably where our volume is gonna be it as well.
So if you follow that as well as the refinance index. It's published you can get a good feel for where we're headed.
Your bankers and tier I think with the shift you saw this quarter or 261 per cent being purchase activity and we are seeing prepayment speeds slowing which what contributed to recovering some of the servicing assets.
So there is some tapering to the refi although with rates.
It was a 10 year continuing to in depth I don't know if that's a good predictor or not.
Okay. Thank you both I appreciate it and we'll talk to you later.
Oh, and you asked about warehousing, though Terry we've always we've targeted about $125 million in a normal basis.
$100.125 million.
And but as long as we're still in this hum kind of a higher level of mortgage volume.
Sure.
You didn't see that on the on the higher side of those averages.
Perfect. Thanks again Mark.
The.
Tristan is from Damon Delmonte of K B W. Please go ahead.
Hey, good morning, guys hope everybody's doing well today.
Good morning.
So first question just trying to get a little bit more perspective on the margin Mark.
You have the.
The deposits coming on board from Tcf in the third quarter and year.
You talked already about system core margin pressure.
Just given some of the different puts and takes that you discussed before.
Can you kind of give a range of where you think that the core margin would be in the back half of the year.
Yeah, David it's going to depend a lot.
On what we're able to buy investments out going into the transaction and we're already in the process of buying them.
<unk> this quarter. So that you know we will have have earning assets from the cash that we're getting from the transaction.
You know I.
Again, I think it's a hard a predictor because.
With mix and not knowing exactly what the yield is going to be on the investment portfolio as we put those on but we targeted in the presentation on 1.5 per cent a yield in and we're able to do that and Anna.
And a little better so and we'll get more detail on that as the transaction closes and we are we have a more hard facts.
But I think it's encouraging that the loan yield a stabilized this quarter.
I think that that's an encouraging sign so.
To be able to pick a margin it's hard because we also we don't know how much cash is coming in and going out and we continue to see cash or deposits grow.
Got it.
The the focus we have and I know, it's not a margin answer, but it's to grow net interest income and that that will.
Continue to move forward with the additional investments we're putting in are managed for.
Cash, we're putting into the investment portfolio.
Jamie This is Craig tier 2 that recalled the transaction that we announced with 14 branches. We're Oh. This is really an operational leverage players where we were looking at a 17.
Per cent accretion to earnings per share next year.
The model that we used had a 1.5%.
<unk> yield so far we are substantially beating that yield in the investment portfolio through the.
Last couple of months.
That's what that is.
Update.
The investment yield later on in the fourth quarter, so you'll see the actual performances once it settles down so there'll be more color on that later on.
Right. Okay. That's helpful. Thank you and then just my second question just as it relates to the provision you know obviously credit trends.
You know legacy credit trends remain extremely well.
From we continue to have an improving economic outlook you know is.
Is it is it reasonable to expect another.
Reversal of the provision next quarter or do you think it's more likely that we just have very minimal to zero dollars type level.
Our thought is it's going to be.
Minimal and the reason for that you have perhaps 1 another wave of the new variant of COVID-19, the Delta variant.
And.
A lot of the PPP money will be spent through the summer so what's our cash balances of our customers on their balance sheet going into the slow winter months, where our plan is in.
In the third quarter to be calling on our borrowers to look at their cash balances into reassess or our credit quality going into fourth quarter. So we're still going to be a little cautious.
Okay, great. Thank you very much for the color I appreciate it.
Thank you David.
Again, if you have a question. Please press Star then 1.
Next question is from Brian Martin of Janney. Please go ahead.
Hey, good morning, guys.
Good morning, Brian Good morning, Brian.
Craig can you talk about now that I guess as you get the the branch transaction closed I think you've talked about.
Additional M&A opportunities and active discussions I guess, it sounds as though you're certainly.
We are interested in doing more activity I guess can you just put some it sounds like it's what in Indiana, and Michigan, where they're most are I know you've talked about Ohio in the past, but the greatest opportunities and just kind of just give us some ideas on site and are.
You guys, how big a deal you would look at doing.
Yes, Brian we have spent.
And hurdle rates and 1 of bits are to make the acquisition meaningful and worth our time, we'd like to see at least 3 per cent earnings accretion. So that's putting a deal has to be about 500 million or above to hit that number. The maximum size you know it could be anything larger than that the challenges.
Internal with the larger deals, though you have other players coming to look at them in their currency is a little richer than ours, who the math doesn't work on their favorite typically so we were more of the 500 million to probably 2 billion range is something we could be successful 1.
The state with the most discussion right now is Michigan hearing very little.
<unk> in Indiana, I think Indiana as Trillium Bolden with the good performance of our banks in general so.
Gotcha, Okay, perfect and then the other 1 from me was just a.
Maybe 1 or 2 from Mark just on the on the PPP timing.
You know the recognition that it sounded like maybe.
Maybe most of that would be recognized in the back half of the year and then.
In addition to that the accretion number was.
Quite a bit this quarter, just kind of curious if there's a if that kind of sets a new trend or that just kind of bouncing around.
Yeah. The P. P. P. I think you're right on you know, we're continuing to work through the forgiveness.
And it'll be through the back half and probably some dragging into our into the beginning of 'twenty 'twenty 2.
The purchase accounting I think it is just bouncing around Brian Theres still.
Some recoveries out there potentially but as the base is getting smaller.
Moller, you know there is going to be less and less impact of that a recovery of those marks.
Gotcha, Okay. Thank you.
And the next question is a follow up from Nathan race of Piper Sandler. Please go ahead.
Yeah.
Thank you for.
Just a question on the trends.
It looks like the mortgage gain on sale margin bounce back pretty noticeably in the second quarter from the <unk> just any thoughts on just that margin heading into the back half of the year would be helpful. And then also along those lines.
Wondering if you could quantify the MSR.
<unk> fair value write up that occurred in the second quarter as well.
Yeah, Yeah, the gain on sale percentage. It did come back I think there is support to have that continue to be at that level or better because of the 50 basis point a charge from the.
Taking the TS was there's going to be coming off so I think that's going to help support that are here as long as there's there's continued volume I'm. We're always state that if volume does start to decrease there is room to bring rates down as.
The market makers would start to bring those down to drive more volume.
So there there could start to see that but we're not seeing that yet.
The recovery of the the mortgage servicing right are we still we still have from the impairment. We took last year, we still have about a 3 and a half a million of that write down now we can't recover all of that.
And we don't know when it'll get recovered the recovery. This quarter was due to prepayment speeds that change in the value of the portfolio increased so we were able to bring back some of that overall impairment.
What I what I also saw it start to swing is as the prepayment.
That slowed we're able to see the amortization of the assets slow to hopefully see more actual mortgage servicing income come through to the to the income its income statement similar to what we probably saw prior to or not the mouth, but similar to what we would see happen prior to this last refinancing.
Steve.
Okay, great if I could just.
Sorry.
Our servicing portfolio is at a $1.5 billion.
Gotcha Okay.
That was all I had and I. Appreciate you guys, taking my follow up thanks, again nice quarter.
Boom.
Thanks Nate.
This concludes our question and answer session I would like to turn the conference back over to Craig Dwight for closing remarks.
Thank you Kate and thank you for participating in todays earnings call and we appreciate your investment in Horizon Bancorp and we look forward to talking with you again soon have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.