Q2 2024 Horizon Bancorp Inc Earnings Call

Yeah.

Operator: Good morning, everyone, and welcome to the Horizon Bancorp, Inc. conference call to discuss financial results for the second quarter of 2024. All participants will be in listen-only mode.

Operator: Good morning, everyone, and welcome to the Horizon Bancorp Inc. Con Prince Call did a stress financial result for the second quarter of 2024.

Speaker Change: Good morning, everyone and welcome to the Horizon Bancorp, Inc Conference call to discuss financial results for the second quarter of 'twenty 'twenty four.

Operator: Albert Spence will be a listen-only mode.

Speaker Change: Participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by his ear.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone.

Operator: Should you need assistance, please say no to the conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, may press star, then one, on your touch-tone phone. To withdraw your question, please press star, then two.

After today's presentation there'll be an opportunity to ask questions.

Speaker Change: I'll ask a question you May press Star then one on your Touchtone phone.

Speaker Change: To withdraw your question. Please press Star then two.

Operator: To withdraw your question, please press star then two. Before turning the call over to management, please remember that today's call may contain statements that are forward-looking in nature. Additional information about factors that could cause actual results to differ materially is contained in Horizon's most recent Form 10-K and its later filings with the Securities and Exchange Commission. In addition, management may 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.

Operator: Before turning the call over to management, please remember that today's call may contain statements that are forward-looking in nature. These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed, including those factors noted in the slide piece presentation. Additional information about factors that could cause actual results to differ materially is contained in Horizon's most recent Form 10-K and its later filings with the Securities and Exchange Commission. In addition, management may refer to certain non-GAAP financial measures that are intended to help investors understand Horizon's business. Reconciliation for these measures is contained in the presentation.

Speaker Change: Before turning the call over to management. Please remember that today's call may contain statements that are forward looking in nature.

Speaker Change: These statements are subject to risks uncertainties and other factors that could cause actual results to differ materially from those discussed including those factors noted in the slide presentation.

Speaker Change: Additional information about factors that could cause actual results to differ materially is contained in horizon's. Most recent Form 10-K, and its later filings with the Securities and Exchange Commission.

Speaker Change: In addition management may refer to certain non-GAAP financial measures that are intended to help investors understand horizon's fits us.

Speaker Change: Reconciliations for these measures are contained in the presentation.

Operator: The company assumes no obligation to update any forward-looking statements made during the call.

Speaker Change: The company assumes no obligation to update any forward looking statements made during the call.

Operator: For anyone who does not already have a copy of the press release and supplemental presentation issued by Horizon yesterday, they can be accessed on the company's website, horizonbank.com. Representing Horizon today are Executive Vice President and Senior Operations Officer Kathy DeRutter, Executive Vice President, Corporate Secretary, and General Counsel Todd Etzler. Executive Vice President and Chief Commercial Banking Officer Lynn Kerber; Executive Vice President and Chief Financial Officer John Stewart; Executive Vice President and Chief Administration Officer Mark Secor; and Chief Financial Officer and President Tom Prame. At this time, I would like to turn the call over to Mr. Thomas Prame. Please go ahead, sir.

Operator: For anyone who does not already have a copy of the press release and supplemental presentation issued by Horizon yesterday, they can be accessed at the company's website, HorizonBank.com.

Speaker Change: For anyone who does not already have a copy of the press release and supplemental presentation issue by horizon yesterday, they can be accessed at the company's website horizon Bank Dot com.

Speaker Change: Representing horizon today, our executive Vice President and senior operations Officer, Kathy to reader.

Operator: Representing Horizon today are Executive Vice President and Senior Operations Officer Kathy DeRuter. Executive Vice President, Corporate Secretary and General Counsel Todd Esler. Executive Vice President and Chief Commercial Banking Officer Lynn Kerber. Executive Vice President and Chief Financial Officer, John Stewart. Executive Vice President and Chief Administration Officer Mark Secker and Chief Financial Officer and President Tom Prem.

Todd Essilor: Executive Vice President Corporate Secretary and General Counsel Todd Essilor.

Lynn M. Kerber: Executive Vice President and Chief commercial banking Officer, Linda Kerber.

Lynn M. Kerber: Executive Vice President and Chief Financial Officer, John Stewart.

Speaker Change: Executive Vice President and Chief Administration Officer, Mark Tucker, and Chief Financial Officer, and President Tom frame at this time I would like to turn the call over to Mister Thomas Crane.

Thomas Prem: At this time, I would like to turn the call over to Mr. Thomas Prem.

Thomas Prem: Please go ahead, sir. Good morning, and thank you for participating in today's call. As we begin this morning, I wanted to introduce John Stewart, Risen's new Chief Financial Officer. John is familiar to many on the call from his various leadership roles in the financial services industry over the last two decades. He's done a tremendous job on boarding during the quarter, and we look forward to the many positive contributions he brings to our leadership team in organization. Thank you, John.

Speaker Change: Go ahead Sir.

Thomas M. Prame: Good morning, and thank you for participating in today's call. As we begin this morning, I wanted to introduce Jon Stewart, Horizon's new Chief Financial Officer. John is familiar to many on the call from his various leadership roles in the financial services industry over the last two decades. He's done a tremendous job onboarding during the quarter, and we look forward to the many positive contributions he will bring to our leadership team and organization. Thank you, John.

Thomas M. Prame: Good morning, and thank you for participating in today's call.

Speaker Change: We begin this morning I wanted to introduce Jon Stewart rises new Chief Financial Officer, John is familiar to many on the call as various leadership roles in the financial services industry over the last two decades. He has done a tremendous job onboarding during the quarter and we look forward to the many positive contributions she brings to our leadership team and organization. Thank you John.

Thomas M. Prame: And again, welcome to Horizon. Horizon's positive second quarter results, displayed on page four, reflect the organization's commitment to continually enhance our financial performance. The quarter reflected sequential growth in revenue and pre-tax, pre-revision income driven by a third consecutive quarter of expanded net interest income and margin. Loan growth in the quarter was robust, driven primarily by our relationship-based commercial lending teams. This growth was complemented by consistent positive credit trends in non-performing loans and charge-offs.

Thomas Prem: And again, welcome to Horizon. Horizon’s positive second quarter results displayed on page four reflect the organization’s commitment to continuing hands our financial performance. The quarter reflected sequential growth and revenue, and pre-tax previewed is an income. Driven by a third consecutive quarter of expanded network just income and margin. See and come growth as well as prudent expense management. Loan growth in the quarter was robust. Driven primarily by our relationship base commercial lending teams. This growth was complemented by consistent positive credit trends in non-performing loans in charge of. The team continues to find ample opportunities to grow in our local markets while maintaining our positive credit trends through proactive portfolio management and maintaining a diversified lending portfolio.

Speaker Change: And again welcome to horizon.

Horizons positive second quarter results displayed on page four reflect the organization's commitment to continually enhance our financial performance the quarter reflected sequential growth in revenue and pretax pre provision income driven by a third consecutive quarter of expanded net interest income and margin.

Speaker Change: Income growth as well as prudent expense management.

Speaker Change: Loan growth in the quarter was robust driven primarily by our relationship based commercial lending teams. This growth was complemented by consistent positive credit trends in nonperforming loans and charge offs.

Thomas M. Prame: The team continues to find ample opportunities to grow in our local markets while maintaining our positive credit trends through proactive portfolio management and maintaining a diversified lending portfolio. As our first quarter results displayed, the company has positive momentum on many fronts through a more profitable balance sheet, realizing investments in our fee-income businesses, and a well-managed expense. As highlighted in my opening comments, we're very pleased with the success in the quarter. A significant part of this success was loan growth and continued excellent credit quality. To provide additional insight into this part of our business model, I'll transition the presentation to our Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber.

Speaker Change: The team continues to find ample opportunities to grow in our local markets, while maintaining our positive credit trends through proactive portfolio management and maintaining a diversified lending portfolio.

Thomas Prem: Horizon’s deposit portfolio had a solid quarter, which stability in its core consumer and commercial relationships that was balanced with a cost-effective approach to public funds balances. The granular and tender deposit base displayed very strong trends in the quarter with resiliency and core balances, and overall the pod that costs increasing minimally. As our first quarter results displayed, the company has positive momentum on many fronts through a more profitable balance sheet, realizing investments in our fee and come businesses, and a well-managed expenses. As highlighting in my opening comments, we're very pleased with success in the quarter. I'd say the infant part of the success was long-growth and continued excellent credit quality to provide additional insight into this part of our business model.

Speaker Change: Horizon's deposit portfolio had a solid quarter with stability in its core consumer and commercial relationships that was balanced with a cost effective approach to public funds balances.

Speaker Change: The granular and tender deposit base displayed very strong trends in the quarter with resiliency and core balances and overall deposit costs increasing minimally.

Speaker Change: It's our first quarter results displayed the company has positive momentum on many fronts through a more profitable balance sheet, realizing investments in our fee income businesses and a well managed expenses.

Lynn M. Kerber: Beginning on slide five, we have an overview of the loan portfolio as of June 30th, with a mix of 60% commercial, 17% residential, and 22% consumer, which remains relatively unchanged from our prior quarter. However, loan growth was strong in the quarter, with an increase in loan balances of $205 million, or 17.8% annualized. The growth reflected new production, predominantly in commercial loans and mortgage loans, while we de-emphasize lower-yielding consumer originations consistent with our ongoing balance sheet repositioning. Our improving mix resulted in an average new production coupon of 7.93% for the second quarter.

Speaker Change: As highlighted in my opening comments, we're very pleased with the success in the court.

Speaker Change: And part of success with loan growth and continued excellent credit quality.

Lynn M. Kerber: Additional insight into this part of our business model I'll transition the presentation to our executive Vice President and Chief commercial banking Officer Lynn curb.

Lynn Kerber: I'll transition the presentation to our Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber.

Lynn: Thank you Thomas.

Lynn Kerber: Thank you, Thomas. Beginning on slide five, we have an overview of the own portfolio as of June 30th, but a mix of 60% commercial, 17% residential, and 22% consumer, which remains relatively unchanged from our prior quarter. Loam growth was strong in the quarter, with an increase in loan balances of $205 million, or 17.8% annualized. The growth reflected in new production predominantly in commercial loans and mortgage loans, while we de-emphasize lower yielding consumer origination, consistent with our ongoing balance sheet and recovery positioning. Our improving mix resulted in the average new production coupon of 7.93% for the second quarter.

Lynn M. Kerber: Beginning on slide five we have an overview of the loan portfolio as of June 30th, but the mix of 60% commercial 17% residential and 22% consumer which remains relatively unchanged from our prior quarter.

Speaker Change: Loan growth was strong in the quarter with an increase in loan balances of $205 million or 17, 8% annualized.

Lynn M. Kerber: The growth reflected new production predominantly in commercial loans and mortgage loans, while we deemphasize lower yielding consumer origination consistent with our ongoing balance sheet repositioning.

Lynn M. Kerber: Our improving mix resulted in average new production coupon of 7.93% for the second quarter.

Lynn M. Kerber: Commercial loans, including equipment finance, increased $155 million. Residential mortgage loans increased $16 million, and consumer loans increased $22 million. Transitioning to some detail on each portfolio, we have commercial loans highlighted on slide six. Commercial loans increased $154.8 million for the second quarter, representing 22.6% on an annualized basis.

Lynn Kerber: Commercial loans, including equipment finance, increased $155 million; residential mortgage loans increased $16 million; and consumer loans increased $22 million.

Lynn M. Kerber: Commercial loans, including equipment finance increased 155 million.

Lynn M. Kerber: Financial mortgage loans increased $16 million.

Lynn M. Kerber: Tumor loans increased 22 million.

Lynn M. Kerber: Transitioning just some detail on each portfolio, we have commercial loans highlighted on slide six.

Lynn Kerber: Transitioning to some detail on each portfolio, we have commercial loans highlighted on slide six. Commercial loans increased $154.8 million for the second quarter, representing 22.6% on an annualized basis. Loam fundings were very consistent with prior quarters. However, they were influenced by three larger loans that closed the last week of a quarter. Additionally, we experienced modest increased dualization online to credit, combined with a higher volume of previously closed construction loans funding within the quarter. The pace of unscheduled payoffs flowed within the second quarter, which also helps commercial loan balances. The core commercial pipeline continues to be strong with the opportunities for continued growth, with a team remaining diligent and sound credit underwriting and pricing discipline.

Lynn M. Kerber: Loans increased $154 $8 million for the second quarter, representing 22.6% on an annualized basis.

Lynn M. Kerber: Loan fundings were very consistent with prior quarters. However, they were influenced by three larger loans closed the last week of the quarter.

Lynn M. Kerber: Additionally, we experienced modest increased utilization on lines of credit combined with a higher volume of previously closed construction loans funding within the quarter. The core commercial pipeline continues to be strong, with opportunities for continued growth, with the team remaining diligent on sound credit underwriting and pricing discipline. Activity continues to be well diversified by industry and geography, and our portfolio mix continues to be roughly 73% CRE and 27% C&I.

Lynn M. Kerber: Additionally, we experienced modest increased utilization on lines of credit.

Lynn M. Kerber: Combined with a higher volume of previously closed construction loans funding within the quarter.

Lynn M. Kerber: The pace of unscheduled payoffs.

Lynn M. Kerber: Load within the second quarter, which also helps commercial loan balance.

Lynn M. Kerber: Our core commercial pipeline continues to be strong with opportunities for continued growth with a team remaining diligent on sound credit underwriting and pricing discipline.

Lynn Kerber: Activity continues to be well-diversified by industry and geography, and our portfolio continues to be roughly 73% CRE at 27% CRE at 27% CRE. You will note that our CRE, non-oneract migration at 180% and our CRE, three year growth rate at 20% are conservative and compare favorably to the UBPR peer group ratio of 240% and growth of the defined CRE. Commercial Credit Quality remains strong with low past dues, low amount performing low levels, and net recoveries of $3,000 year to the 2024.

Lynn M. Kerber: Activity continues to be well diversified by industry and geography, and our portfolio mix continues to be roughly.

Lynn M. Kerber: 3% CRE at 27% C&I.

Lynn M. Kerber: You'll note that our CRE non owner occupied ratio at 180% and our CRE three year growth rate at 20% are conservative compared favorably to the peer our peer group ratio of 240% and growth of 55%.

Lynn M. Kerber: Commercial credit quality remains strong, with low past dues, low non-performing loan levels, and net recoveries of $3,000 year-to-date in 2024. With a heightened focus on the elevated interest rate environment, we've included a summary of maturing CRE loans for 2024 and 2025 on slide 7. Maturing CRE loans with interest rates below 7% represent 4% of the portfolio for the remainder of this year and 6% for 2025. We believe rates and maturities are well managed in our CRE portfolio to limit exposure to rate-related credit risk at this time. Turning to slide 8, consumer loan balances increased $22 million during the quarter, reflective of an 8.4% annualized growth. The mortgage portfolio grew $16 million, representing 8.1% annualized growth.

Lynn M. Kerber: Commercial credit quality remains strong with low past dues low nonperforming loan level and net recoveries of $3000 year to date 2024.

Lynn Kerber: With a heightened focus on the elevated interest rate environment, we've included a summary of maturing CR-E-bones for 24 at 25 on fly 7. Maturing CR-E-bones with interest rates below 7% represent 4% of the portfolio for the remainder of the year and 6% for 2025. We believe rates and maturities are well-managed in our CR-E-Cortfolio to limit exposure to rate-related credit risk at this time.

Lynn M. Kerber: With a heightened focus on the elevated interest rate environment. We've included a summary of maturing CRE you Bohn for 'twenty four 'twenty five on slide seven.

Lynn M. Kerber: CRE loans with interest rates below 7% represent 4% of the portfolio for the remainder of this year and 6% for 2025, we believe rates and maturities are well managed and our CRE portfolio to limit exposure to rate related credit risk at this time.

Lynn M. Kerber: Turning to slide eight consumer loan balances increased $22 million during the quarter reflective of an eight 4% annualized growth.

Lynn Kerber: Turning to fly to 8, consumer loan balances increase $22 million during the quarter, reflective of an 8.4% annualized growth. The mortgage portfolio grew $16 million, representing 8.1% annualized growth. The focus remains on high credit quality borrowers with an ability to pay and significant equity in their homes. Overall, credit quality remains satisfactory in the consumer and mortgage portfolios, with delinquencies and charge-offs within targeted ranges.

Lynn M. Kerber: The mortgage portfolio grew $16 million, representing an eight 1% annualized growth.

Thomas M. Prame: The focus remains on high-credit-quality borrowers with the ability to pay and significant equity in their homes. Overall, credit quality remains satisfactory in the consumer and mortgage portfolios, with delinquencies and charge-offs within targeted ranges. Transitioning to credit quality, our asset quality metrics continue to be strong, as outlined on slide nine. Substandard loans of $51.2 million represented 1.06% of loans, which is well within the range of recent, period, and level. Non-performing loans remain low and were relatively unchanged for the quarter at $19.3 million, representing 0.4% of total loans.

Speaker Change: The focus remains on high credit quality borrowers with an ability to pay and significant equity in their homes overall credit quality remains satisfactory in the consumer and mortgage portfolios with delinquencies and charge offs within targeted range.

Lynn M. Kerber: Okay.

Lynn M. Kerber: Transitioning to credit quality, our asset quality metrics continue to be strong as outlined on slide nine.

Lynn Kerber: Transitioning to credit quality, our asset quality metrics continue to be strong as outlined on fly 9. Substandard loans of $51.2 million represented 1.06% of loans, which is well within the range of recent period and levels. Mount performing loans remain low and we're relatively unchanged for the quarter at $19.3 million, representing 0.4% of total loans. That charge-offs for the second quarter were $584,000, representing an annualized charge-off rate of five basis points, with charge-offs predominantly in the indirect consumer loan. Finally, our allowance for credit losses increased in the quarter to $52.2 million, primarily attributed to growth within the quarter, and was offset by small reductions of dedicated specific reserves in the economic forecast.

Speaker Change: Substandard loans and $51.2 million, representing 1.06% of loans, which is well within the range of recent period end level.

Speaker Change: Nonperforming loans remained low and were relatively unchanged for the quarter at $19 $3 million, representing 24% of total loans.

Thomas M. Prame: Net charge-offs for the second quarter were $584,000, representing an annualized charge-off rate of five basis points, with charge-offs predominantly in the indirect consumer volume. Finally, our allowance for credit losses increased in the quarter to $2.37 million. Provision expense of $2.37 million is a combination of the ACL increase of $1.8 million represented by loan growth and recognition of the modest quarterly change charge-off of $584,000. The allowance represents 1.08% of total gross loans, which we believe is appropriate given credit performance and the current economic forecast. Now I'd like to turn things back to Thomas, who will provide an overview of our deposit portfolio.

Speaker Change: Net charge offs for the second quarter were 584000, representing an annualized charge off rate of five basis point with charge offs predominantly in the indirect consumer loans.

Lynn M. Kerber: Finally, our allowance for credit losses increased in the quarter to $52.2 million, primarily attributed to growth within the quarter and was offset by small reductions of dedicated specific reserves and economic forecast.

Lynn Kerber: Prevision expense of $2.37 million was a combination of the ACL increase of $1.8 million represented by loan growth and recognition of the modest, quarterly-chains charge-off of $584,000. The allowance represents 1.08% of total growth loans, which we believe is appropriate given credit performance and current economic forecast. You should reserve amounts, and the way the provision will be driven by loan growth and make economic forecasts and credit trends.

Lynn M. Kerber: Criticism expense of $2.37 million of accommodation of the ECL increase of $1.8 million represented by loan growth and recognition of the modest quarterly change charge off of 584000.

Lynn M. Kerber: The allowance represents 1.08% of total gross loans, which we believe is appropriate given credit performance and current economic forecast used.

Lynn M. Kerber: Future reserve amounts and related provision won't be driven by loan growth and make.

Lynn M. Kerber: Economic forecasts and credit trends.

Lynn M. Kerber: Now I'd like to turn things back to Thomas who will provide an overview of our deposit portfolio.

Thomas Prem: Now, I'd like to turn things back to comments. We'll provide an overview of our deposit portfolios. Thank you, Lynn. And as always, great insight and information. As we mentioned earlier, we're pleased to see the possible minimum in our net interest margin. This momentum is partially a result of the strength and resiliency of our granular deposit base that's displayed on slides 10 and 11. Horizonscore consumer and commercial balances were consistent from the first quarter, highlighted by stable, non-interest-bearing deposit balances. Additionally, the company continues to take a practical approach to public funds, focusing on operating relationships while balancing pricing and duration in the portfolio.

Thomas: Thank you Lynn and there's always great insight and information.

Thomas: As we mentioned earlier, we're pleased to see the positive momentum in our net interest margin. This momentum is partially a result of the strength and resiliency of our tenured and granular deposit base that is displayed on slides 10 and 11.

Thomas M. Prame: Horizon's core consumer and commercial balances were consistent from the first quarter, highlighted by stable non-interest-bearing deposit balances. Additionally, the company continues to take a practical approach to public funds, focusing on operating relationships while balancing pricing and duration in the portfolio. Our newly added resources to our treasury management team are making an impact, gathering new relationships and expanding WalletShare with our core commercial lending clients. As currently positioned, we believe the deposit portfolio will benefit the organization in a down-rate environment with its granular composition and long-standing relationships in our local market.

Thomas: Horizon's core consumer and commercial balances were consistent from the first quarter highlighted by stable noninterest bearing deposit balances. Additionally, the company continues to take a practical approach to public funds focusing on operating relationships, while balancing pricing and duration in the portfolio.

Thomas Prem: Our newly added resources to our Treasury Management Team are making an impact, gathering new relationships, hand-expanding wallets here, where their core commercial lending clients.

Thomas: Our newly added resources to our Treasury management team are making an impact gathering new relationships and expanding wallet share where their core commercial lending clients. As currently positioned we believe the deposit portfolio will benefit the organization in a down rate environment with its granular composition and long standing relationships and our local market.

Thomas Prem: As currently positioned, we believe that the deposit portfolio will benefit the organization in a down-rate environment with its granular composition and long-standing relationships in our local markets. The portfolio is very stable, with approximately 50% of the balances in relationship-based checking accounts, would clients that know and trust Horizon well.

Lynn M. Kerber: Yeah.

Thomas M. Prame: Their portfolio is very stable, with approximately 50% of the balances in relationship-based checking accounts with clients that know and trust Horizon well. Now, I will hand the presentation over to our Executive Vice President and Chief Financial Officer, Jon Stewart, who will walk through some additional balance sheet highlights and other key financial metrics.

Speaker Change: The portfolio is very stable with approximately 50% of the balances and relationship based checking accounts with clients that know entrust horizon well.

John Stewart: Let me hand the presentation over to our Executive Vice President and Chief Financial Officer, John Stewart, who will walk through some additional balance sheet highlights and other key financial metrics. Great, thank you, Thomas. As noted on slide 12, there were no purchases of investment securities during the quarter, which was the primary driver of period and balances declining by about $30 million. While the fully tax-equivalent portfolio yield was unchanged when compared to the last quarter at 2.39%. Going forward, you can expect similar trends to continue for the foreseeable future. As cash flows from the portfolio are profitably redeployed elsewhere on the balance sheet.

John Stewart: Let me hand, the presentation over to our executive Vice President and Chief Financial Officer, John Stewart, who will walk through some additional balance sheet highlights and other key financial metrics.

Jon Stewart: Great. Thank you, Thomas.

Thomas: Great. Thank you Thomas.

Jon Stewart: As noted on slide 12, there were no purchases of investment securities during the quarter, which was the primary driver of period imbalances declining by about $30 million, while the fully tax-equivalent portfolio yield was unchanged when compared to the last quarter at 2.39%. Going forward, you can expect similar trends to continue for the foreseeable future, as cash flows from the portfolio are profitably redeployed elsewhere on the balance sheet. At the bottom of the slide, you can see the anticipated cash flows for the next four quarters, as well as the expected FTE roll-off yield, which is a new disclosure we hope you will find helpful.

John Stewart: As noted on slide 12, there were no purchases of investment securities during the quarter, which was the primary driver of period end balances declining by about $30 million.

Speaker Change: While the fully tax equivalent portfolio yield was unchanged when compared to the last quarter at 2.39%.

Speaker Change: Going forward you can expect similar trends to continue for the foreseeable future as cash flows from the portfolio our profitably redeployed elsewhere on the balance sheet.

John Stewart: At the bottom of the slide, you can see the anticipated cash flows for the next four quarters, as well as the expected FTE rolloff yield, which is a new disclosure we hope you will find helpful. Turning to slide 13, the benefits of the asset repositioning strategy were, again, evident this quarter, driving a favorable shift in the mix of earning assets, which, coupled with discipline, loan pricing, and well-controlled interspersing funding cost, drove a 14 basis point increase in the FTE net risk margin during the quarter to 2.64%. This result was better than anticipated, which drove net interest income to the higher end of the guidance range for the quarter.

Speaker Change: At the bottom of the slide you can see the anticipated cash flows for the next four quarters as well as the expected FTE roll off yield which is a new disclosure. We hope you will find helpful.

Jon Stewart: Turning to slide 13, the benefits of the asset repositioning strategy were again evident this quarter, driving a favorable shift in the mix of earning assets, which, coupled with disciplined loan pricing and well-controlled interest-bearing funding costs, drove a 14-basis point increase in the FTE net interest margin during the quarter to 2.64%. This result was better than anticipated, which drove net interest income to the higher end of the guidance range for the quarter

Speaker Change: Turning to slide 13, the benefits of the asset repositioning strategy were again evident this quarter driving a favorable shift in the mix of earning assets, which coupled with disciplined loan pricing and well controlled interest bearing funding costs drove a 14 basis point increase in the F. T E net interest margin during the <unk>.

Speaker Change: Water to 2.64%.

Speaker Change: This result was better than anticipated, which drove net interest income to the higher end of the guidance range for the quarter.

Jon Stewart: Looking ahead, you'll note that end-of-period loans are well above the average, which bodes well for both net interest income growth and modest further NIM expansion in Q3, even as funding costs will see a bit more lift relative to Q2 to fund that growth. Beyond Q3 into Q4, the NIM expansion likely moderates some, absent any rate cuts or meaningful changes further out on the curve. As you can see on slide 14, it was a relatively good quarter for the company on the fee income front, delivering $10.5 million in revenue near the upper end of the guidance range for the quarter. Seasonal increases in both interchange fees and mortgage gain on sale drove the late quarter increase.

Speaker Change: Looking ahead, you'll note that end of period loans are well above the average, which bodes well for both net interest income growth and modest further NIM expansion in Q3, even as funding costs, we'll see a bit more left relative to Q2 to fund that growth.

John Stewart: Looking ahead, you'll note that end-up period loans are well above the average, which bodes well for both net interest income growth and modest further-nim expansion in Q3, even as funding costs will be a bit more left relative to Q2 to fund that growth. Beyond Q3 and Q4, the nim expansion likely moderates some apps in any rate cuts or meaningful changes further out on the curve. As you can see on slide 14, it was a relatively good quarter for the company on the FTE income front, delivering $10.5 million in revenue, near the upper end of the guidance range for the quarter.

Speaker Change: Beyond Q3 into Q4, the NIM expansion likely moderate some absent any rate cuts or meaningful changes further out on the curve.

Speaker Change: As you can see on slide 14, it was a relatively good quarter for the company on the fee income Friday, delivering 10, and a half million dollars in revenue near the upper end of the guidance range for the quarter.

John Stewart: Seasonal increases in both interchange fees and mortgage gain on sale drove the length quarter increase. Looking ahead to the remainder of the year, targeted hiring and treasury management, mortgage and private wealth should continue to deliver positive momentum. We would expect FTE income to run rate in the 10 and a half to $11 million range per quarter for the remainder of the year. As evident on slide 15, it was a good expense quarter for the company, coming in at the low end of the prior guidance. Seasonal declines in occupancy expense and well-controlled outside services expense were generally offset by additional hiring and related expense in the quarter, volume-driven loan fees, and elevated levels of operational loss.

Speaker Change: Seasonal increases in both interchange fees and mortgage gain on sale drove the linked quarter increase.

Jon Stewart: Looking ahead to the remainder of the year, targeted hiring and treasury management, mortgage, and private wealth should continue to deliver positive momentum. We would expect fee income to run at a rate in the $10.5 to $11 million range per quarter for the remainder of the year. As evident on slide 15, it was a good expense quarter for the company coming in at the low end of the prior guidance. Seasonal declines in occupancy expense and well-controlled outside services expense were generally offset by additional hiring and related expense in the quarter, volume-driven loan fees, and elevated levels of operational loss.

Speaker Change: Looking ahead to the remainder of the year targeted hiring and Treasury management mortgage and private wealth should continue to deliver positive momentum. We would expect fee income to run rate and the 10 and a half to $11 million range per quarter for the remainder of the year.

Speaker Change: As evident on slide 15, it was a good expense quarter for the company coming in at the low end of the prior guidance.

Speaker Change: Declines in occupancy expense and well controlled outside services expense were generally offset by additional hiring and related expense in the quarter volume driven loan fees and elevated levels of operational loss.

John Stewart: Looking ahead, while investments in the business will drive the quarterly expense run rate modestly higher in the second half of the year, we would remain disciplined in our approach, and therefore continue to expect annualized expenses to remain less than 2% of average total assets, even with the flowing asset growth we noted earlier. Turning to capital on slide 16, we saw some modest compression in risk-based ratios, as strong long growth laid in the quarter-help drive risk-weighted asset growth from Q1. That said, we continued to feel good about the company's capital position, with slower growth anticipated for the back half of the year relative to the first. And continued runoff and investment securities, as previously noted, we would expect all regulatory capital ratios to increase from here over the second half of the year.

Jon Stewart: Looking ahead, while investments in the business will drive the quarterly expense run rate modestly higher in the second half of the year, we would remain disciplined in our approach and therefore continue to expect annualized expenses to remain less than 2% of average total assets, even with the slowing asset growth we noted earlier. Turning to capital on slide 16, we saw some modest compression in risk-based ratios as strong loan growth late in the quarter helped drive risk-weighted asset growth from Q1. We continue to feel good about the company's capital position.

Speaker Change: Looking ahead, while investments in the business will drive the quarterly expense run rate modestly higher in the second half of the year.

Speaker Change: We would remain disciplined in our approach and therefore continue to expect annualized expenses to remain less than 2% of average total assets.

Speaker Change: Even with the slowing asset growth, we noted earlier.

Speaker Change: Turning to capital on Slide 16, we saw some modest compression in risk based ratios as strong loan growth late in the quarter helped drive risk weighted asset growth from Q1.

Speaker Change: That said, we continue to feel good about the Companys capital position.

Jon Stewart: With slower growth anticipated for the back half of the year relative to the first and continued runoff in investment securities, as previously noted, we'd expect all regulatory capital ratios to increase from here over the second half of the year. Now that the reinvestment activities from the security sale in Q4 of 2023 have been completed, we are moving towards a higher-level outlook methodology, which provides you with our current view for the remainder of the year. You can see the key balance sheet assumptions articulated in the first two sections of this slide.

Speaker Change: With slower growth anticipated for the back half of the year relative to the first and continued run off in investment Securities. As previously noted we would expect all regulatory capital ratios to increase from here over the second half of the year.

Speaker Change: Finally, turning to the outlook on slide 17.

John Stewart: Finally, turning to the outlook on Slide 17. Now that the reinvestment activities from the security sale in Q4 of 2023 have been completed, we are moving towards a higher level outlook methodology, which provides you with our current view for the remainder of the year. You can see the key balance sheet assumptions articulated in the first two sections on the slide. In short, loan and asset growth is expected to moderate from the recent pace, and deposits should remain relatively stable. Excluding any impact from rate cuts, we would expect modest further NIM expansion in Q3, as the average earning asset mix will benefit from loan growth late in the second quarter.

Speaker Change: Now that the reinvestment activities from the security sale in Q4 of 2023 have been completed we are moving towards a higher level outlook methodology, which provides you with our current view for the remainder of the year.

Speaker Change: You can see the key balance sheet assumptions articulated in the first two sections on this slide in short loan and asset growth is expected to moderate from the recent pace and deposits should remain relatively stable.

Jon Stewart: In short, loan and asset growth is expected to moderate from the recent pace, and deposits should remain relatively stable. Excluding any impact from rate cuts, we would expect modest further NIM expansion in Q3, as the average earning asset mix will benefit from loan growth late in the second quarter. As mentioned previously, the pace of Q4 NIM expansion will likely moderate, again, excluding any impact from rate cuts. Combined, we would anticipate net interest income to grow in the upper single-digit range for the second half of 2024 when compared with the first.

Speaker Change: Excluding any impact from rate cuts, we would expect modest further NIM expansion in Q3 as the average earning asset mix will benefit from loan growth late in the second quarter.

John Stewart: As mentioned previously, the pace of Q4 NIM expansion will likely moderate, again excluding any impact from rate cuts. Combined, we would anticipate net interest income to grow in the upper single-digit range for the second half of 2024 when compared with the first. Fiancum should continue with some positive momentum through the second half of the year, with the quarterly run rate in the ten and a half to eleven million dollar range. While quarterly expenses in the second half of the year will increase modestly from 37 and a half million reported in Q2, they are expected to remain less than 2% annualized of average assets.

Speaker Change: As mentioned previously the pace of Q4, NIM expansion will likely moderate again, excluding any impact from rate cuts.

Speaker Change: Combined we would anticipate net interest income to grow in the upper single digit range for the second half of 'twenty 'twenty four when compared with the first.

Jon Stewart: Fee income should continue with some positive momentum through the second half of the year, with the quarterly run rate in the $10.5 million to $11 million range. While quarterly expenses in the second half of the year will increase modestly from $37.5 million reported in Q2, they are expected to remain less than 2% annualized of average assets. Finally, the effective tax rate for the full year should be in the 9.5% to 10% range. With that, I'll turn the call back over to Thomas.

Speaker Change: Fee income should continue with some positive momentum through the second half of the year with a quarterly run rate in the 10 and a half to $11 million range.

Speaker Change: While quarterly expenses in the second half of the year will increase modestly from 37 and a half million reported in Q2. They are expected to remain less than 2% annualized of average assets.

John Stewart: Finally, the effective tax rate for the full year should be in the nine-and-a-half to ten percent range.

Speaker Change: Finally, the effective tax rate for the full year should be in the 9.5% to 10% range.

Thomas Prem: With that, I'll turn the call back over to Congress. Thank you, John. As outlined in our presentation, we see continued positive momentum for the horizon for the second half of 2024. We are in excellent growth markets in the Midwest; they are economically attractive for businesses and individuals. Our loan growth is strong and aligned with our historical low credit risk profile. The commercial pipeline continues to be positive, and the benefits of the castles from our security portfolio will allow for positive reinvestment across the balance sheet. The resiliency of our core deposit base maintains its great value, with additional opportunity to help improve our financial performance as rates decline.

Speaker Change: With that I'll turn the call back over to Thomas.

Thomas: Thank you John.

Thomas M. Prame: As outlined in our presentation, we see continued positive momentum for the Horizon for the second half of 2020. We are in excellent growth markets in the Midwest. They're economically attractive for businesses and individuals. Our loan growth is strong and aligned with our historical low credit risk profile. The commercial pipeline continues to be positive, and the benefits of the cash flows from our securities portfolio will allow for positive reinvestment across the balance sheet.

Thomas: As outlined in our presentation, we see continued positive momentum for the horizon for the second half of 2024.

Speaker Change: We're in excellent growth markets in the Midwest, there economically attractive for businesses and individuals.

Speaker Change: Our loan growth is strong and aligned with our historical low credit risk profile the.

Thomas: The commercial pipeline continues to be positive and the benefits of the cash flows from our securities portfolio will allow for positive reinvestment across the balance sheet.

Thomas M. Prame: The resiliency of our core deposit base maintains its great value, with additional opportunity to help improve our financial performance as rates decline. The company also continues to have significant funding capacity if needed. Horizon has a lean and operating culture that consistently adapts to its markets and its environment to deliver long-term shareholder value. We are strategically investing in improving our revenue models, maintaining our excellent credit profile, and capturing efficiencies in how we deliver our products and our services.

Thomas: The resiliency of our core deposit base maintained its great value with additional opportunity to help improve our financial performance as rates decline.

Thomas Prem: The company also continues to have significant funding capacity if needed. The horizon has a lean and operating culture that consistently adapts to its markets and its environment to deliver long-term shareholder value. We are strategically investing in improving our revenue models, maintaining our excellent credit profile, and capturing efficiencies in how we deliver our products in our service. and lastly, we believe Horizon is still a very compelling value, supported by a 30-plus years of commitment to our dividend and recently offering a 4.2% dividend yield.

Thomas: The company also continues to have significant funding capacity if needed.

Thomas: Horizon has a lean and operating culture that consistently adapts to its markets and its environment to deliver long term shareholder value.

Thomas: We are strategically investing in improving our revenue models, maintaining our excellent credit profile and capturing efficiencies in how we deliver our products and our services.

Thomas M. Prame: And lastly, we believe Horizon is still a very compelling value, supported by our 30 plus years of commitment to our dividend and recently offering a 4.2% dividend yield. As always, we thank you in advance for joining us for our presentation this morning. This concludes our prepared remarks, and I will ask our operator to please open the lines for questions.

Speaker Change: And lastly, we believe horizon is still a very compelling value.

Thomas: Supported by our 30 plus years of commitment to our dividend and recently offering a 4.2% dividend yield.

Thomas Prem: As always, we thank you in advance for joining our presentation this morning.

Speaker Change: As always we thank you in advance for joining our presentation. This morning. This concludes our prepared remarks and I'll ask the operator to please open the lines for questions.

Operator: This concludes our prepared remarks, and I'll ask our operator to please open the lines for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star if and one on your touch-tone phone. If you are using a speaker phone, please pick up your hands before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Terry McEvoy with Stevens. Please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you were using a speakerphone. Please pick up your handset before pressing the keys.

Operator: To withdraw your question, please press star if and two. At this time, we will pause momentarily to assemble our roster.

Thomas: Withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Terry Mcevoy: The first question comes from Terry McEvoy with Steven. Please go ahead. Thanks.

Thomas: The first question comes from Terry Mcevilly with Stephens. Please go ahead.

Terence James McEvoy: Thanks, good morning everyone. Good morning, Terry.

Terence James McEvoy: Thanks, Good morning, everyone.

John Stewart: Good morning, everyone. Martin Terry. Maybe just start with the margin outlook. Could you talk about the assumption for interest-bearing deposit costs? Looks like last quarter you had a nice benefit from lower time deposits, now averaging below 4%. But looks like your promo rates are 4% to 5% when I just look at your website. Be helpful if you could run through the underlying assumptions there.

Thomas: Terry.

Terence James McEvoy: Maybe just start with the margin outlook. Could you talk about the assumption for interest-bearing deposit costs? Looks like last quarter you had a nice benefit from lower time deposits now averaging below 4%, though it looks like your promo rates are 4 to 5% when I just look at your website, so it'd be helpful if you could kind of run through the underlying assumptions there.

Jon Stewart: Yeah, hey, Terry, thanks for the question. It's John.

John Stewart: Hey, Terry. Thanks for the question. It's John. Yes, so we acted at the corner, as I noted in the prepared remarks. We had some pretty strong long growth in the end of the quarter. That was corresponded with some pretty strong funding growth to the other side of the balance sheet. So, as we think about the starting point for interest-bearing deposit costs. If you will, in the beginning of this quarter, there in there were 256 if you run through them in the second quarter. They're in the low two sixties as starting point for this quarter. Thank you for that.

Jon Stewart: Yeah, so we exited the quarter, as I noted in the prepared remarks, we had some pretty strong loan growth at the end of the quarter that was correlated with some pretty strong funding growth on the other side of the balance sheet. So as we think about the starting point for interest-bearing deposit costs, if you will, into the beginning of this quarter, they're there in there were 256. If you kind of run through them in the second quarter, they're in the low 260s as a starting point for this quarter.

Thomas M. Prame: Thank you for that. And then, I apologize if this is the presentation, but could you talk about any purchases of jumbo mortgages? Did that occur in the second quarter? And then, it looks like there was C&I growth. How did leasing come into play in Q2 as well?

Terry Mcevoy: And then I apologize if this is the presentation.

Thomas Prem: But could you talk about any purchases of the jumbo mortgages that occur in the second quarter? And then, looks like there were C and I growth. How did leasing come into play in Q2 as well?

Speaker Change: Quarter in and then it.

Terence James McEvoy: It looks like there was C&I growth how did leasing come into play in Q2 as well.

Lynn M. Kerber: Thanks again, Terry. As you look at our second quarter, John's comments earlier mentioned the fact that we were done with the redeployment strategy around security sales in the fourth quarter. In the second quarter, if you look at our transactional portfolios, including our indirect auto, that portfolio was up about $20 million. So the aggregate growth of 200 million, about 90% of it was through our organic franchise. I'll pass this over to Lynn to talk a little bit about leasing specifically.

Terence James McEvoy: Thanks, Ken curious as you look at our second quarter Johns comments earlier had mentioned the fact that.

Thomas Prem: Thanks, Andreas. As you look at our second quarter, John's comments earlier mentioned the fact that we're done with the redeployment strategy around the security sales in the fourth quarter. And the second quarter, if you look at our transactional portfolios, including our indirect auto, that portfolio was up about $20 million. So with the agriculture growth of $200 million, about 90% of what was through our organic franchise, help that sort of lend to talk a little bit about leasing specifically.

Terence James McEvoy: We're done with the redeployment strategy around the security sales for the fourth quarter and the second quarter. If you look at our transactional portfolios, including our indirect auto that portfolio was up about $20 million. So in the aggregate growth of $200 million about 90% of it was through our organic franchise I'll pass over to Linda talked a little bit about leasing specifically.

Lynn Kerber: Good morning, Terry. How are you? Great. Thanks, Glenn. Regarding leasing, our team is really ramping up very nicely. As you know, we had most of our funding the first quarter, kind of late in the quarter. Second quarter was really spread more throughout the quarter. And really ramping up and shaping up nicely for Q3. I think I had shared previously. You know, we were targeting 110, 120 million dollars per year. And I would say, at this time, we're on pace to achieve that. Thanks for that, and I just know your positive credit trend stands out this morning.

Lynn M. Kerber: Good morning, Terry. How are you?

Linda: Good morning, Terry how are you.

Lynn M. Kerber: Great. Thanks, Lynn. Yeah.

Terry: Great. Thanks Lynn.

Lynn M. Kerber: Regarding leasing, our team is really ramping up very nicely. As you know, we had most of our funding in the first quarter kind of late in the quarter. Second quarter was really spread more throughout the quarter and really ramping up and shaping up nicely for Q3. I think I had shared previously, you know, we were targeting $110, $120 million for the year. And I would say at this time that we're on pace to achieve that.

Linda: Regarding our leasing and our team is.

Linda: Really ramping up very nicely.

Speaker Change: As you know you had most of our funding in the first quarter kind of late in the quarter second quarter.

Speaker Change: We spent more throughout the quarter.

Linda: And really ramping up in shaping up nicely for Q3, I think I had shared previously we were targeting.

Linda: <unk> hundred $20 million for here and I would say at this time, we're on pace to achieve that.

Terence James McEvoy: Thanks for that, and I just note your positive credit trend stands out this morning based on a few other things I've evaluated, which has taken up my time. Thank you for taking my questions.

Speaker Change: Thanks for that and I just note your positive credit trends stand out. This morning based on a few other things I have evaluated with just taken up my time.

Terry Mcevoy: Based on a few other, thanks, I've evaluated, which has taken up my time.

Terry Mcevoy: Thank you for taking my question. Okay, great. I appreciate all the color.

Thomas: For taking my questions.

Thomas: Yeah.

Nathan James Race: Our next question comes from Nathan Race with Piper Sandler. Please go ahead.

Nathan James Race: Our next question comes from Nathan race with Piper Sandler. Please go ahead.

Nathan James Race: Hi everyone. Good morning.

Speaker Change: Hi, everyone. Good morning, Thanks for taking my questions.

Lynn M. Kerber: Thanks for taking the questions. Just curious as you think about kind of the loan growth drivers for the back half of the year. I think the guidance is kind of low to mid-single digits. Just curious in terms of how you guys expect to achieve that. Is it continued C&I and leasing growth or any other factors that go into play there?

Lynn M. Kerber: consistent year over year. And when I reviewed the first and second quarter of this year compared to last year, the new funding or initial funding balance was very consistent. We did see a little bit of a timing difference between Q1 and Q2. And, you know, I don't know that that's going to always be the same rate as Q2, right? There are some changes from quarter to quarter.

Lynn M. Kerber: But as we look towards the end of the year, there are some things that we're looking at. The initial funding, I think, will be pretty consistent. But as noted in my prepared remarks, we are having some construction funding right now on previously approved loans. So I expect that that's going to continue during the building season in Michigan and Indiana. We've also had some slowdowns and unscheduled payoffs, I think primarily due to the rate environment. But, overall, I would say our outlook is good. If rates start to be reduced towards the end of the year, that could spark some additional activity.

Thomas M. Prame: Okay, great. And then just in terms of funding that loan growth in the back half of the year. I appreciate the disclosures on slide 12 in terms of the quarterly cash flow coming off the securities portfolio. Should that support the large amount of loan growth in the back half of the year, or do you guys see a need to maybe tap some wholesale sources just given kind of a stable deposit outlook over the next couple quarters?

Speaker Change: And then just in terms of.

Nathan James Race: Funding that loan growth in the back half of the year I. Appreciate the added disclosures on slide 12 in terms of the quarterly cash flow coming off the securities portfolio should that support the large amount of loan growth in the back half of the area do you guys see a need to maybe test. Some wholesale sources, just given kind of stable deposit outlook over the next couple of quarters.

Speaker Change: Thanks, Nathan again for the question as you look at our loan growth in the mid single digits overall in the portfolio as we mentioned earlier, it's primarily going to be driven on the commercial side with the mix within that commercial growth representing what the portfolio looks like that's going to be complemented by our continuing mix change that we talked about the top of the house, taking lower yielding consumer assets.

Thomas M. Prame: Overall, in the portfolio, as we mentioned earlier, it's primarily going to be driven on the commercial side with the mix within that commercial growth representing what the portfolio already looks like. That's going to be complemented by our continuing mixtures we talked about at the top of the house, taking lower yielding consumer assets, letting those go to cash, and then being able to fund a lot of the growth in commercial. That, combined with the securities run-out that John outlined up front, that's going to give us more than enough liquidity to fund any type of loan growth without really having to have significant deposit growth in the quarter and for the remainder of the year. Okay, great, very helpful. And if I could just ask...

John Stewart: Letting those go to cash and then being able to fund a lot of the growth in commercial that combined with the securities run out that John outlined upfront, that's going to give us more than enough liquidity to fund any type of loan growth without really having to have significant deposit growth in the court and for the remainder of the year.

Speaker Change: Okay, great very helpful and if I could just ask one more on the appetite for.

Speaker Change: Share repurchases going forward, you know had some growth in TCE, but it seems like you guys are still seeing good organic growth opportunities as well I know the stocks went up over the last several weeks similar to the.

Speaker Change: Group, but just any updated thoughts parmesan, perhaps reengage on.

Speaker Change: Repurchases going forward.

Thomas M. Prame: Yes, thank you. And we also recognize that the math could be really appealing right now for potential stock buybacks and or securities repositioning. Again, we're going to continue to evaluate the capital allocation options throughout the remainder of the year. As we are, as our earnings momentum continues, and we continue to grow capital levels, we're going to remain diligent, examining all potential options, and our primary focus is going to be on making sure we deliver shareholder value.

Speaker Change: Thank you Dan we also recognize that the math can be really appealing right now for potential stay back stock.

Speaker Change: Stock buyback <unk> Securities repositioning again, we're going to continue to evaluate the capital allocation options throughout the remainder of the year.

Nathan James Race: Okay, great. I appreciate all the color. Thank you.

Terry Mcevoy: Thank you.

Damon Paul DelMonte: Our next question comes from Damon DelMonte with KBW. Please go ahead.

Damon Delmonte: Our next question comes from Damon DelMonte, David, with KBW. Please go ahead. Good morning, everyone. Thanks for hitting my questions. Everybody's doing well.

Damon Paul DelMonte: Hey, good morning, everyone. Thanks for taking my question. I hope everybody's doing well, and welcome aboard, John. So, first question, just kind of regarding the margin outlook. I kind of took from the commentary that, you know, you're caveating it with the no changes to rates, but what happens if the Fed does cut rates here in the back half of this year and then, you know, a few times as we go through 25? How would you expect the margin to respond to that?

Damon Delmonte: And welcome, welcome aboard, John. So first question is kind of regarding the margin outlook. I kind of took from the commentary that you know, your caveat with no changes to race. But what happens if the Fed does cut race here in the back after this year? And then, you know, a few times as you go through 25, how would you expect the margin to respond to that? Yeah, Damon, thanks for the question. Yeah, so as the outlook our articulated, there's one 25-based point caught in the middle of the years. That doesn't have much of a middle of a fourth quarter of, excuse me.

Jon Stewart: Yeah, Damon, thanks for the question. Yeah, so as the Outlook articulated, there's one 25-basepoint cut in the middle of the year, so that doesn't have much of a impact on the outlook for this year. As we look at the balance sheet today, you know, on a static balance sheet, a 25-basepoint rate cut is marginally accretive to NIM.

John Stewart: So that doesn't have much of an impact on the outlook for this year. As we look at the balance sheet today, you know, on a static balance sheet, a 25-based point rate cut is marginally accretive to the NIM. That would be our expectation in the proceeding 30 days. So, you know, if you just kind of work through the balance sheet, we've got about 25% of our loans that will reprise inside 30 days on the very front end of the curve. You know, not much in securities and the cash position. You can see if there's not a meaningful contributor on the other side of the balance sheet.

Jon Stewart: That would be our expectation in the preceding 30 days. So, you know, if you just kind of work through the balance sheet, we've got about 25% of our loans that will reprice inside 30 days on the very front end of the curve. You know, not much in securities, and the cash position; you can see that there's not a meaningful contributor. On the other side of the balance sheet, there's not a lot of contractual repricing on the liability base outside of the trust preferreds, so how much margin lift we get from 25-basepoints really comes from our ability to manage down non-maturity interest-bearing deposit costs. The team around here has got a lot of experience doing that.

John Stewart: There's not a lot of contractual repricing on the liability base outside of the trust preferred. So how much margin lift we get from 25 basis points really comes from our ability to manage down non maturity, interspereying to pause across. The team around here's got a lot of experience doing that. Our expectation would be that we could do so such that rate cuts are a creative to the margin and immediate term. Absent rate cuts, do you look over the course of the year or the next four to six quarters, I should say, you know, a lot of the dynamics that you saw in place this quarter will remain in place.

Jon Stewart: Our expectation would be that we could do so such that rate cuts are accretive to the margin in the immediate term. But absent rate cuts, if you look over the course of the year or the next four to six quarters, I should say, you know, a lot of the dynamics that you saw in place this quarter will remain in place. As Thomas just mentioned, there's a positive earning asset makeshift that will take place.

Speaker Change: It would be that we could do so such that the rate cuts are accretive to the margin in immediate term.

Speaker Change: Absent a rate cut do you look over the course of the year or the next four to six quarters I should say a you know a lot of the dynamics that you saw in place this quarter will remain in place as Thomas just just mentioned, there's a positive earning asset mix shift that will take place. There's no plan to reinvest securities cash flows. So those will either all the cash.

John Stewart: As Tom has just just mentioned, there's a positive earning asset, makeshift that will take place. There's no plan to reinvest securities cash flows, so those leave it around the cash for fun loans. That's a creative on the earning asset side. Absent any rate cuts. And then, you know, while the deposit base or the funding side becomes a little harder to predict, looking out that far. You know, again, I think all things being considered with the growth and dynamics that we see in the balance sheet today. No rate cuts are probably marginal and creative to the, to the, to the mall look over the foreseeable future might not necessarily be in a straight line.

Jon Stewart: There's no plan to reinvest securities cash flows, so they'll leave the role to cash for fund loans. That's a creative on the earning asset side, absent any rate cuts. And then, you know, while the deposit base or the funding side becomes a little harder to predict, looking out that far, you know, again, I think, all things being considered with the growth and the dynamics that we see in the balance sheet today, no rate cuts are probably marginally accretive to the NIM outlook over the foreseeable future. It might not necessarily be in a straight line, as there are some timing differences between cash flows and maturities, but generally, over that time frame, I think that is a reasonable expectation.

Thomas: Fund loans, that's accretive on the earning asset side not absent any rate cuts.

Speaker Change: And then you know while the deposit base or the funding side becomes a little harder to predict looking out that far I. You know again, I think all things being considered with the growth dynamics that we see in the balance sheet today no rate cuts are probably marginally accretive to the to the NIM outlook over the foreseeable future might not necessarily be in a straight line.

John Stewart: Is there are some time differences between cash flows and maturity, but generally over the time frame, I think that that is a reasonable expectation.

Speaker Change: There are some timing differences between cash flows and maturities, but but generally over that time frame I think that that is a reasonable expectation.

Damon Paul DelMonte: Got it. That's great, Culler. And then my second question, you know, credit trends have obviously remained very strong. You know, as you kind of think about the provisioning here in the back half of the year, do you feel like, you know, kind of the average of the first two quarters is a reasonable quarterly run rate, or do you think maybe there's some underlying trends that are starting to percolate a little bit, and you think you need to kind of keep a little bit higher level?

Damon Delmonte: Got it. That's great color. Thank you.

Speaker Change: Got it that's great color. Thank you and then my second question you know credit trends have obviously remained very strong you know us.

Damon Delmonte: And then, this is my second question: you know, credit trends have obviously been very strong. You know, as you kind of think about the provisioning here in the back after the year. Do you feel like, you know, kind of the average of the first two quarters is a reasonable quarterly run rate, or do you think maybe there's some underlying trends that are starting to portfolio a little bit and you think you need to kind of keep a little bit higher level. Yeah, in regards to the ACL. I don't know if you participated in the Q1 call, but we have to rebalance our balance sheet and change in mix that affected the first quarter.

Speaker Change: You can kind of think about the provisioning here in the back half of the year do you feel like you know kind of the average of the first two quarters is a reasonable quarterly run rate or do you think maybe there was some underlying trends that are starting to percolate, a little bit and you think you need to kind of.

Speaker Change: Keep it a little bit higher level.

Lynn M. Kerber: Yeah, in regards to the ACL, I don't know if you participated in the Q1 call, but we had some rebalancing of our balance sheet and change in mix that affected the first quarter. I would say, generally speaking, both Q1 and Q2, we had the release of some dedicated specific reserves. So I don't know that I would do an average of those necessarily.

Speaker Change: Yeah in regards to the ACL.

Speaker Change: Well if you participated in the Q1 call that we had some rebalancing of our balance sheet and change in mix.

Speaker Change: That affected the first quarter.

John Stewart: I would say, generally speaking, both Q1 and Q2, we have the release of some dedicated specifically there. So, I don't know that I would do an average of those necessarily, but as far as factors driving it going forward, I think principally, this point is going to be driven by a loan growth, as you can see for this quarter, and our credit metrics have been really solid, and so we're just going to continue to monitor those. So, I think it's going to be primarily driven by growth and the economic forecast.

Speaker Change: I would say generally speaking both Q1 and Q2, we had the release of some dedicated specific reserves. So.

Speaker Change: So I don't know that I was doing the average of those necessarily.

Lynn M. Kerber: But as far as factors driving it going forward, I think principally, at this point, it's going to be driven by loan growth. As you can see for this quarter, and our credit metrics have been really solid, and so we're just going to continue to monitor those. I think it's going to be primarily driven by growth and the economic forecast.

Speaker Change: As far as factors driving it going forward.

Damon Delmonte: Got it. Okay.

Damon Paul DelMonte: Got it, okay, great, that's all that I had. Everything else was asked and answered, thank you.

Damon Delmonte: Great, that's all that I had; everything else was asked and answered. Thank you.

Brian Martin: The next question comes from Brian Martin, with Jenny Montgomery. Please go ahead. Thank you. Good morning, everyone. Just, you know, one question on the margin, I think Damon just asked my question, but in terms of, you know, the margin ended the month, you know, about the quarter, can you tell us where you exit at the quarter in the month of June on the margin? Yeah, hey, Brian. So, the margin in the month of June was pretty consistent with the quarter overall, but as Lynn noted in her prepare the marks, and you can see in the end of period balance, she versus the average, most of the growth came right at the end of the quarter.

Brian Joseph Martin: The next question comes from Brian Martin with Janney Montgomery. Please go ahead.

Brian Joseph Martin: One question on the margin, I think Damon just asked my question, but in terms of where the margin ended the month of the quarter, can you tell us where you exited the quarter in the month of June on the margin?

Jon Stewart: Hey Barron, the margin in the month of June was pretty consistent with the quarter overall, but as Lynn noted in her prepared remarks, and you can see in the end-of-period balance sheet versus the average, most of the growth came right at the end of the quarter. But for the month of June, the margin was pretty consistent with the full quarter, at 264.

Lynn Kerber: But for the month of June, the margin was pretty consistent with the full quarter to 64. Got you. Okay. Yep. And in just in terms of credit, you know, I guess, like I said, everything looks really nice. In terms of, you know, anything on the horizon, in terms of looking at, you know, the C and I portfolio. Is there, can you talk about just kind of any trends just seeing within that C and I portfolio still still healthy or is there anything to be mindful of, you know, as you kind of trend lower here? Yeah.

Brian Joseph Martin: Gotcha. Okay. Yep.

Brian Joseph Martin: And just in terms of credit, you know, like I said, everything looks really nice. In terms of, you know, anything on the horizon in terms of looking at, you know, the C&I portfolio, is there, can you talk about just kind of any trends you're seeing within that C&I portfolio that are still very healthy? Is there anything to be mindful of, you know, as you kind of trend forward here?

Lynn M. Kerber: Yeah, well, as you can see, our overall metrics are solid. Our commercial past dues have been extremely low. We're in a net recovery position this year.

Lynn Kerber: Well, so as you can see, our overall metrics. Our, our solid, our commercial past dues have been extremely low and in that recovery position this year. I will tell you that third and fourth quarter of the last year. We saw some impact on some of our C and I customers with a revenue run rate. Fortunately, we've got some very well-seasoned customers, and they made some changes to their business model. So, you know, at this point, we're seeing some of them start to actually improve from what we saw in the third fourth quarter or with some other their revenue rates.

Lynn M. Kerber: I will tell you that in the third and fourth quarter of last year, we saw some impact on some of our C&I customers' revenue run rates. Fortunately, we've got some very well-seasoned customers, and they've made some changes to their business models. So you know, at this point, we're seeing some of them start to actually improve from what we saw in the third and fourth quarter with some of their revenue rates. So I'm not seeing anything overly concerning at this point. Okay.

Speaker Change: Improved from what we saw in the third and fourth quarter with some weather there revenue rates.

Brian Martin: So, I'm not seeing anything overly concerning at this point. Okay. Thank you for that. And then just, you know, I guess one of the things was, you know, actually, you know, it was already as an answer. So, I'm, I'm all good. Thank you, guys.

Speaker Change: So I'm not seeing anything overly concerning at this point.

Brian Joseph Martin: Okay, thank you for that. And then just, you know, I guess one other thing was, no, actually, you know, it was already asked and answered. So I'm all good. Thank you, guys.

Speaker Change: Okay.

Speaker Change: Thank you for that and then just you know I guess, one one of the thing with.

Speaker Change: Actually you know it was already asked and answered so I'm all good. Thank you guys.

Speaker Change: Thank you.

Brian Martin: Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thomas Prem: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Thank you, Megan. Again, thank you for participating. Today's earnings call. The team had a very productive second quarter with positive momentum and our key or any metrics heading into the second half of 2024.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.

Thomas M. Prame: Thank you, Megan. Again, thank you for participating in today's call. The team had a very productive second quarter with positive momentum and our key earning metrics heading into the second half of 2024. We appreciate your attendance today, and we look forward to our next quarterly update.

Speaker Change: Thank you Meghan again, thank you for participating in today's earnings call. The team had a very productive second quarter with positive momentum in our key or any metrics heading into the second half of 2024. We appreciate your attendance today and we look forward to our next quarterly update.

Thomas Prem: We appreciate your attendance today, and we look forward to our next quarterly update.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: You may now disconnect.

Speaker Change: Yes.

Speaker Change: With regard.

Speaker Change: Presumably.