Q1 2025 Horizon Bancorp Inc Earnings Call
Okay.
Good morning, everyone and welcome to the Horizon Bancorp, Inc Conference call to discuss financial results for the first quarter of 2025.
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Speaker Change: Before turning the call over to the management. Please remember that today's call may contain statements that are forward looking in nature.
Statements are subject to risks.
Speaker Change: Uncertainties and other factors that could cause actual results to differ materially from those discussed including risk factors noted in the slide presentation.
Speaker Change: Additional information about factors that could cause actual results to differ materially is contained with horizon smart tuition Form 10-K, and its latest filings with the Securities and Exchange Commission.
Speaker Change: In addition management may refer to certain non <unk> financial measures that are intended to help investors.
Speaker Change: Horizon business.
Speaker Change: Reconciliations for these measures are contained in the presentation.
Speaker Change: The company assumes no obligation to update any forward looking statements made during the call.
Speaker Change: For anyone who does not already have a copy of the press release and supplemental presentation issued by horizon yesterday.
Speaker Change: Can be accessed at the company's website horizon Bank Dot com.
Speaker Change: Representing Horizons, Jr, Executive Vice President with plenty of Operation Officer Kirsty their return.
Speaker Change: Executive Vice President Corporate Secretary, and General Counsel and Scott Estes.
Speaker Change: Executive Vice President and Chief commercial banking officer and games cover.
Speaker Change: Executive Vice President and Chief Financial Officer jumped to work.
Mark Secor: Executive Vice President and Chief Administration Officer, Mark Secor, and Chief Executive Officer unprecedented Osprey.
Thomas: At this time I would like to turn the conference over to Thomas <unk>. Please go ahead Sir.
Speaker Change: Good morning, and thank you for joining us <unk> first quarter earnings reflect the continued positive momentum in our core financial performance metrics in management's commitment to deliver long term value to its shareholders.
Speaker Change: Our results are highlighted by our sixth consecutive quarter of margin expansion now above 3% quality loan growth and exceptional credit metrics.
Speaker Change: And our funding base continues to deliver value even in uncertain economic environment.
Speaker Change: The team also delivered a more efficient expense base entering 2025 and completed the successful sale of our mortgage warehouse business, adding optionality to our capital position.
Speaker Change: Page four provides insight into the quarter's results.
Speaker Change: Display positive growth in our revenue model with the margin continuing to expand and annualized loan growth of 5% driven by a solid performance of our commercial team at 14% annualized.
Speaker Change: Noninterest income was aligned with expectations and reflected the positive gain from the sale of the mortgage warehouse division of $7 million.
Speaker Change: Additionally, the team delivered on the forecasted significant step down in expense run rate from the fourth quarter.
Speaker Change: This will add to our operating leverage in 2025, as we continue to be prudent on expenses, while expanding topline revenue.
Speaker Change: Our first quarter results advance the financial health of the organization and.
Speaker Change: As stated in my opening comments, we're very pleased with our momentum jumping into 2025.
Speaker Change: As noted in previous quarters, a key element of our Gulfport success will be the execution of our asset mix strategy to higher yielding lending portfolios that are accretive to the long term franchise value of our community banking model.
Speaker Change: To provide additional insight on our lending growth and credit performance, while transitioning the presentation to our executive Vice President and Chief commercial banking Officer Lynn correct.
Speaker Change: Thank you Thomas.
Lynn Correct: Good morning during the first quarter, our loan growth performed well and is consistent with our expectations total loans held for investment grew $63 million and was principally in our core commercial lending segment with net loan growth of $105 million and also increased activity in the residential mortgage lending.
Speaker Change: Segment.
Speaker Change: This growth was partially funded by our planned continued reduction in indirect auto loans of $36 million.
Speaker Change: Transitioning to some detail on each portfolio, we have commercial loans highlighted on slide six as noted commercial loans grew $105 million, which represented a 14% annualized increase for the quarter.
Speaker Change: Our activity for the quarter was 58% commercial real estate, both owner occupied and non owner occupied and 42% commercial and industrial which is considered a favorable mix, reflecting positive growth in our C&I category continuing to increasingly diversify our commercial book we can.
Speaker Change: <unk> to be well diversified with no individual sector exceeding 10% of our commercial portfolio and no more than 6% of total loans in.
Speaker Change: In the first quarter, we benefited from growth in key markets of Troy <unk> Grand Rapids in Midland, Michigan, and northwest, Indiana, as well as small ticket equipment originations.
Speaker Change: The timing from quarter to quarter May vary we anticipate our annualized growth rates remained generally consistent we continue to stay focused in our core markets primary segments of owner occupied and non owner occupied commercial real estate.
Speaker Change: Additional C&I lending and small and mid ticket equipment finance.
Speaker Change: Pipelines remain stable at this time and we are staying highly engaged with our client and prospect.
Speaker Change: <unk> impact from the macroeconomic environment.
Speaker Change: Commercial credit quality is performing well with March 31, 2025 key metrics at or below peer performance.
Speaker Change: Key metrics include past due loans greater than 30 days of 14 basis point nonperforming loan ratio of 27 basis points and net recoveries of $42000 year to date.
Speaker Change: Turning to slide seven consumer loan balances decreased $40 million during the quarter reflective of our continued wind down in the indirect auto lending.
Speaker Change: Excluding the indirect auto lending core consumer loans remained flat with primary activity being residential mortgage and home equity lending.
Speaker Change: Residential mortgage lending modestly grew during the quarter, we continue to opportunistically expand our mortgage lending team with local in market lenders that our relationship focus and work well with our commercial and retail teams. We expect to realize increased mortgage lending activities in 2025 drove continued disciplined.
Speaker Change: Sales approach and the outbound calling effort.
Speaker Change: Overall credit quality remained satisfactory in the consumer and mortgage portfolios with delinquencies and charge offs within targeted ranges with improvement in past students for the first quarter versus prior quarters in 2024.
Speaker Change: Okay.
Speaker Change: Our asset quality metrics continued to be strong and perform was within satisfactory ranges as outlined on slide eight.
Speaker Change: Sub standard and nonperforming loans of $67 million represented 136% of loans, reflecting an increase of $2 million for the quarter.
Speaker Change: Nonperforming loans were $30 million, representing 62 basis points of total loans held for investment.
Speaker Change: The modest quarterly increase was predominantly in residential loans of $2 million and commercial loans of $2 $5 million offset by a reduction in revolving lines of $1 $2 million the.
Speaker Change: The results in the first quarter remain within historical ranges and we do not expect this change to materially impact our outlook performance in these segments at this time.
Speaker Change: Net charge offs for the first quarter continued to be low at $874000, representing seven basis points on an annualized basis, both nonperforming loans and net charge offs continue to perform at or below peer data for our U V P. Our bank group.
Speaker Change: Finally, our allowance for credit losses increased by approximately 700000 in the quarter to $52 $7 million with the ACL to loan ratio of 1.07%.
Speaker Change: Primary drivers in the ACL components, our loan growth and increased economic forecast allocation and a positive elimination of a larger specific reserve.
Speaker Change: Revision expense of $1 $4 million reflects the net effect of these key components.
Speaker Change: Future reserve amounts and related provision will be driven by loan growth and mix economic forecasts and credit trends recent.
Speaker Change: A recent national macroeconomic trends and the impact of tariffs on our portfolio continue to be actively monitored and May result in additional allocations in the course of 2025.
Thomas: Now I'd like to turn things back to Thomas who will provide an overview of our deposit trends.
Thomas: Thank you Lynn.
Thomas: Moving onto our deposit portfolio displayed on slide nine.
Thomas: <unk> core relationship balances were stable within the quarter with noninterest bearing deposits up modestly from the fourth quarter.
Thomas: Organization remains disciplined in its approach to deposit pricing and took advantage of the market volatility in the first quarter to improve the cost of its funding position and enhance the profitability of the balance sheet.
Thomas: We believe the deposit portfolio is positioned well to continue to benefit the organization moving forward with its granted composition and long standing relationships in our local markets.
Thomas: We are pleased with the value created by our relationship based banking model and the dexterity of the team has displayed leveraging multiple funding options, while balancing cost and duration within the portfolio.
Thomas: Let me hand, the presentation over to our executive Vice President and Chief Financial Officer, John Stewart.
John Stewart: Who will walk through additional first quarter highlights as well as our outlook for the remainder of 2025.
John Stewart: Thank you Thomas.
John Stewart: Turning to slide 10, consistent with our expectations. The Q1 net interest margin increased by another eight basis points to 3.0% to 4%.
John Stewart: Recall as we noted last quarter. The Q4 reported net interest margin of 297% did benefit by about five basis points from outsized interest recoveries unresolved commercial loans.
John Stewart: Which if adjusted for yielded an even wider margin expansion in Q1.
Margin expansion this quarter was again driven by the execution of our organic balance sheet strategies.
John Stewart: Resulting in an improved mix of both earning assets and liabilities when compared to the prior quarter averages.
John Stewart: Additionally, and importantly, excluding the Q4 commercial loan interest recoveries just noted loan yields were relatively unchanged in the first quarter.
John Stewart: Which is a result of the continued remixing of the loan portfolio towards higher yielding commercial assets.
John Stewart: The combination of these factors resulted in just a two basis point decline in earning asset yields in Q1.
John Stewart: Combined with further reductions in our deposit cost from the Q4 fed funds cuts drove a strong sequential widening of the net interest margin.
John Stewart: Looking ahead. Many of these same favorable dynamics are expected to persist for the balance of the year such that we would still expect additional margin expansion as the year progresses.
John Stewart: Recall, we previously anticipated paying down $200 million of federal home loan bank advances in late March and early April.
John Stewart: However, you may have noted the $330 million reduction in borrowings in Q1, which was more than planned.
John Stewart: In addition to the late March maturity, which was repaid as expected rate volatility earlier in the quarter gave us the opportunity to pay down. Some advanced is ahead of schedule.
Therefore, we would anticipate our borrowing position to remain relatively similar to March 31 balances for the remainder of the year.
John Stewart: Finally, there continues to be a great deal of volatility in the forward rate expectations for fed funds for the balance of the year.
John Stewart: Our current outlook assumes two cuts in June and September as.
John Stewart: As mentioned last quarter, we do not view short end rate changes to be a major driver of our net interest margin outlook.
John Stewart: Rather net interest income and margin performance will be a factor of our continued strategic execution on both sides of the balance sheet. Thus there is no change to our outlook for full year net interest income growth to be in the mid teens.
John Stewart: Slide 11 provides a profile of the remaining investment securities.
John Stewart: And projected cash flows and yield roll off for the coming year.
John Stewart: As has been the case for a while now we do not intend to reinvest cash flows in 2025.
John Stewart: Rather we will continue to use those proceeds to fund organic relationship based commercial loan growth.
John Stewart: As you can see on slide 12 reported noninterest income included the previously disclosed 7 million gain on the sale of our mortgage warehouse business, which closed in January as well as a small loss on the sale of a single corporate bond.
John Stewart: Excluding those items and the loss on sale of Securities in Q4, noninterest income declined modestly from the prior quarter, mainly related to normal seasonal declines in interchange fees.
John Stewart: That said when compared with a year ago period, we are pleased to see generally favorable results in many of our key client facing items, such as mortgage interchange and fiduciary activity and stability in our service charges.
John Stewart: Our outlook for 2025 remains unchanged for growth in the low single digits.
John Stewart: This comparable excludes the securities losses in both 2024, and 2025 and the $7 million gain in the first quarter.
John Stewart: On Slide 13, you can see it was a strong expense quarter for the company as the successful execution of our Q4 efforts led to the sequential decline in Q1 in line with expectations.
John Stewart: Total expenses were $39 3 million, which included $305000 of expense directly related to the warehouse sale.
John Stewart: As anticipated given the previously discussed items that impacted Q4 results, we experienced a nice sequential decline in salaries and benefits and outside services expense, which should now approximate a go forward run rate for these key expense lines.
John Stewart: While we were pleased with this quarter's results. Our work is not done and we understand the need to control expenses as we right size the balance sheet.
John Stewart: Such we continue to expect full year 2025 expense growth to be flat to up low single digits.
John Stewart: Turning to capital on Slide 14, the positive momentum in the last few quarters continued again this quarter with strong linked quarter increases in all capital ratios and tangible book value per share the.
John Stewart: The increases were driven by organic profitability the realized gain on the warehouse business and the strategic repositioning of the balance sheet, which has restricted growth in risk weighted assets and total assets.
John Stewart: Going forward further improvement in the Companys capital ratios as expected given our outlook for stronger profitability and a continued disciplined approach to balance sheet growth.
John Stewart: While we are constantly evaluating the investment of this capital with the goal being to put any excess to work in the most accretive and risk averse ways, while adding to the long term franchise value of the company.
John Stewart: Finally, turning to slide 15 in short there is no change to our full year outlook.
John Stewart: And we continue to expect 2025 to represent a significant step forward for the company both in terms of recurring and predictable operating profitability and momentum in our core operations.
There are a few items I'd like to highlight.
John Stewart: Our expectations for growth in loans held for investment are unchanged in the mid single digit range for the year.
John Stewart: This is net of the continued runoff of indirect auto which should total about $100 million for the full year.
John Stewart: Deposit growth expectations remain unchanged in the low single digits, but with a slightly different mix modestly more time deposit growth and less commercial growth versus prior expectations.
John Stewart: Under our base set of assumptions, which now includes 225 basis point Fed fund cuts in June and September our net interest income growth expectations for the full year 2025 remain unchanged in the mid teens.
John Stewart: Total reported expenses for 2025 are still expected to be flat to up low single digits relative to the reported full year 2024.
John Stewart: And the full year effective tax rate for 2025 is still expected to be in the mid teens.
Thomas: And with that I'll turn the presentation back over to Thomas.
Thomas: Thank you Jon and I appreciate the summary of the quarter and our outlook for 2025 as you can see from our first quarter results. We continue to see a bright future for horizon, and we're delighted with the momentum across the franchise and the continued positive advancement in our core operating performance.
This is the end of our prepared remarks and I welcome the operator to open up the line for questions for our management team.
Thomas: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Thomas: If you're using speakerphone, please pick up your handset before pressing the keys.
Thomas: To withdraw your question. Please press Star then two.
Thomas: The first question comes from the line of Brendan Nosal Hovde Group. Please go ahead.
Brendan Nosal: Good morning, folks hope, you're all doing well.
Thomas: Yeah.
Speaker Change: First of all congrats on the quarter and then second of all just to start off here on capital.
Speaker Change: Thank you folks noted in the release, we added capital Optionality from the warehouse gain can you, maybe just unpack that a little bit more and specifically hit on any appetite to repurchase shares at some point this year. Thanks.
Speaker Change: Sure Brian Thanks for the question I. Appreciate this is Thomas So if you look over the last year, we've been very pleased with our overall capital strategy about redeployment into restructuring the balance sheet. You also made some strategic investments in some of our digital technologies and teams to increase our overall asset and lending.
Speaker Change: Portfolios.
Speaker Change: We look at our capital, we really look at our chance to enhance our overall shareholder returns multiple options in front of us everything from stock repurchases dividend increase balance sheet repositioning M&A.
Speaker Change: As we talked about our fourth quarter results. We don't believe right now the market is really providing the option to further restructure our securities portfolio at a level that would be.
Speaker Change: Beneficial to our shareholders, but we also recognize today that.
Speaker Change: Buybacks are more attractive, especially when you look at the price to book levels in the markets that we're experiencing.
Speaker Change: Believe there's a lot of intrinsic value on our stock price at these levels and this will be one of the one of several expert do is we're going to be looking at Korea.
Speaker Change: Let's see very actively in the near future.
Speaker Change: We're very fortunate that our business right now is creating a lot of capital it's growing at a very good clip and we love. The fact that we're going to have some optionality here in the near term.
Speaker Change: Alright fantastic I appreciate the thoughts there maybe one more from me more of a modeling question.
Speaker Change: Looking at average, earning assets, meaning there is a fair bit of noise, just given the strategic actions you're taking on borrowings in the quarter, just kind of curious where do you see the average earning asset base lending in the second quarter, just given the timing of some of those borrowing pay down thanks.
John Stewart: Yeah, Hey, Brian It's John Thanks for the question.
John Stewart: Yes, I mean, you could see in the release, where the end of period, earning assets are and so those are slightly below the averages. That's that's how we would expect it to play out in the second quarter here now I think full year over full year, you saw us about seven $3 billion in average, earning assets last year, it'll be down a little bit from that this year.
John Stewart: You know again on some of the deleveraging activity.
John Stewart: That we've had over the last couple of quarters in place here. So yes, I think that's how you can think about the averages as they as the year progresses.
John Stewart: Alright, Thank you for taking my questions I appreciate it.
John Stewart: Okay.
Speaker Change: The next question comes from the line of Terry Mcevoy Stephens. Please go ahead.
Speaker Change: Thanks, Good morning, everybody.
Speaker Change: First off John Thanks for talking about the borrowings in your prepared remarks.
Speaker Change: Maybe a question for you. The can you just run through the yield pickup as you run off indirect and fund commercial loans and then I'll also ask are you still comfortable with that $3 15 to $3 20 exit NIM for the end of 2025.
Speaker Change: Yeah sure. Thanks Terry.
Speaker Change: Handle a couple of those and then hand, the commercial loan discussion over to Lynn.
Speaker Change: The yield runoff in the indirect auto portfolio the effective yield is in the mid threes.
Speaker Change: So thats favorable as we roll those into the commercial assets that you talked about.
Speaker Change: Yes, no change to the outlook for NII or the margin for the full year versus what we discussed last quarter.
Speaker Change: There's a lot of volatility out there rate expectations have changed pretty materially.
Speaker Change: If anything we're probably lower end of that range versus the higher end of that range, but that's splitting hairs. At this point I would I would call it pretty unchanged here.
Speaker Change: Here early in the year.
Lynn Correct: I'll hand, it to lend for commercial loan production.
Terry: Good morning, Terry.
Lynn Correct: Just a couple of comments on.
Speaker Change: Rates coming on and rates going off in the commercial book.
Speaker Change: For the first quarter, our average weighted rate for our commercial book was roughly seven 715.
Speaker Change: And then in the leasing department those are a little bit higher spread and those are averaging $8 40 for the quarter.
Speaker Change: So anywhere between seven and eight is our new role on depending on the product type and then as we've covered in the past our maturities that are rolling off are in the 6% for.
Speaker Change: For 2025 maturities.
Speaker Change: And roughly 5% off our 2026 maturities. So we have some pick up there.
John Stewart: Within our commercial book as well as rearranging your overall loan portfolio as John mentioned.
Speaker Change: Consumer and redeploying that.
Speaker Change: Thank you both and then maybe another question for you on the C&I growth.
Speaker Change: In the quarter.
Speaker Change: Could you just comment on was specific markets industries borrowers getting ahead of potential impact from tariffs any any color there on the 40 plus.
Speaker Change: A growth.
Speaker Change: Sure.
Speaker Change: Traditionally we've been roughly 70 30 between real estate and C&I.
Speaker Change: And this quarter it was a little bit more C&I roughly.
Speaker Change: Roughly 40%.
Speaker Change: We view that as a positive so that we don't get too concentrated in commercial.
Speaker Change: I'd say that a good majority of that is.
Speaker Change: As a result of our new equipment Finance Division.
Speaker Change: That's all small ticket C&I type credit.
Speaker Change: It is spread amongst several states.
Speaker Change: So it's pretty well diversified from that standpoint, and then if you look at the industries, that's and it's very well diversified there are two really less than 10% by sector construction manufacturing.
Speaker Change: Professional scientific healthcare some essential transportation.
Speaker Change: I would say, it's pretty diversified Terry.
Speaker Change: Not really any concentration that I observed at this point.
Speaker Change: Thank you for taking my questions.
Damon Delmonte: The next question comes from the line of Damon Delmonte <unk>. Please go ahead.
Damon Delmonte: Hey, good morning, I hope everybody is doing well today.
Damon Delmonte: Just first question just regarding the outlook for loan growth I appreciate all the color and commentary around that.
Speaker Change: You know Thomas could you talk a little bit about kind of the mood of your client base I think your your outlook seems to be a little bit more optimistic than some of your peers and kind of just wondering what you guys are seeing and hearing and kind of what gives you the confidence for a positive outlook.
Thank you I appreciate the question.
Speaker Change: I look at across our five plus positive first.
Speaker Change: First I'll start with our talent in our markets as we've talked about before.
Speaker Change: We are a franchise, it's truly embedded in the <unk>.
Speaker Change: Local communities and the talent that we have there is I always I always use the reference they punch above their weight.
Speaker Change: When I look at our leadership in our business model, having local market presidents, having regional presidents' being able to be nimble and quickly react I think gives us a competitive advantage in that space the.
Speaker Change: The second part, where we're very diversified portfolio, which when as outlined several times and there's a couple of slides in the deck to talk about the granularity of our platform.
Speaker Change: We're not.
Speaker Change: And just in the commercial real estate, we do everything from your small business loans up to your I'll say, it's smaller.
Speaker Change: Our smaller commercial sized loans, but most importantly, when I look at it.
Speaker Change: It's about consistency.
Speaker Change: We arent, we arent stretching our box.
Speaker Change: <unk>, knowing that come to us are going to get a quick answer is going to be the.
Speaker Change: Same answer they probably would have gotten six months ago, and so I think the reputation in the market is helping us out quite a bit.
Speaker Change: Let it also mentioned we've got a couple of platforms that are in their infancy stages that are growing at.
Speaker Change: A modest clip and I'm very measured clip and they just haven't experienced the runoff yet and so as those portfolios mature probably feel a little bit.
Speaker Change: Less growth year over year growth in those portfolios. So I'd say, we've got some really good tailwind behind us.
Speaker Change: Got it and have your customers really expressed any concern or shown like some pause just kind of given the ongoing noise out of D C with tariff and trade war potential issues.
Lynn Correct: I'll talk to the consumer side first and then I'll pass over to Lynn for the commercial side on the consumer side, we aren't seeing the impact.
Speaker Change: And to that yes had anything that I would say.
Speaker Change: Job losses, again, where we're located we don't have a lot of say massive government agencies that are going to be.
Lend: Filling up different local rules and for us on the consumer side, it's been relatively consistent we don't have a consumer portfolio that would be high risk such as credit card, we've been deleveraging auto and so I see from that standpoint, we're in really good shape around the credit side and I'll pass over to lend on commercial.
Damon Delmonte: Yes, good morning Damon.
Damon Delmonte: Really at this point, it's just really too early to tell what the impact is going to be and I'm sure Gary and I. Appreciate every day when you watch the news and headlines it's bouncing all over the place.
Damon Delmonte: Alright.
Damon Delmonte: I would say I really just being.
Damon Delmonte: Cautious and watchful.
Damon Delmonte: And as we are underwriting any new construction projects you know, we always look hard at our sponsors their liquidity.
Damon Delmonte: Interest in construction reserves, that's not going to change we're going to continue to do that.
Damon Delmonte: And probably be more mindful of it in this environment.
Damon Delmonte: But we do monitor our construction loans very closely everything's on track, we don't see any.
Damon Delmonte: Issues with current projects.
Damon Delmonte: As far as the customer outlook I think with the rate environment, that's actually been working in their favor a little bit.
Damon Delmonte: But the rates reducing a bit.
Damon Delmonte: Treasuries.
Damon Delmonte: Our pipeline hasn't really been unchanged at this point so right now it's more about a lot.
Damon Delmonte: <unk>.
Damon Delmonte: I wish I had better information, but.
Damon Delmonte: It's really just a watch right now yes.
Speaker Change: No that's all very helpful and I appreciate it.
Speaker Change: And while I have you I think in your prepared remarks, you mentioned.
Speaker Change: Ongoing investments in the mortgage banking platform.
Speaker Change: You just talk a little bit about I guess.
Speaker Change: How the pipeline looks going into the middle part of the year.
Speaker Change: Obviously, the mortgage market has been a challenging segment of the economy and just kind of curious how you guys are feeling about pipelines and potential.
Speaker Change: A potential pickup in gain on sale over the next couple of quarters.
Speaker Change: Thanks.
Yeah. Thanks for the question I think as you saw year over year, we've had a nice change in our overall mortgage originations.
Speaker Change: Quarter over quarter, I anticipate we'll see a little bit of a spring Brian season.
A bit of a pickup it's really not so much whether or not we have folks on the ground and return fever. Its inquiry now in our local markets, whether or not we have inventory.
Speaker Change: And that's really been.
Speaker Change: Probably say the the part that we're seeing here in the Midwest I know the MBA forecast is looking to have a little bit more positive second third quarter, we're anticipating we could see a little bit of a bump for us, but I would say within our markets. We are serving right now it's mainly inventory so I could see us being just slightly below perhaps the MBA forecast on a quarter over quarter increase.
Speaker Change: You've got superposition, while continuing to grow.
Speaker Change: Great I appreciate all the color. Thank you very much everyone.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Nathan race Piper Sandler. Please go ahead.
Nathan Race: Hey, everyone. Good morning, Thanks for taking my questions.
Nathan Race: Just curious what youre seeing from a deposit pricing perspective, these days across our footprint deposit cost ticked up about three basis points linked quarter. So just curious how you're thinking about the trajectory of deposit costs, assuming the fed remains on hold at least through the second quarter.
Speaker Change: Hey, Thanks, John Thanks for the question.
Speaker Change: Yeah, I mean varies by market varies by category and we have some competitive dynamics that are different depending on where in our geography, you said, but I would just say generally speaking.
Speaker Change: I mean, if youre, if youre talking about kind of.
Speaker Change: To be competitive in the time space, you're probably in the low fours.
Speaker Change: You know to be to be very competitive in the in the commercial money market space, you're probably not too dissimilar from that.
Speaker Change: Mix did change in the quarter more towards time deposits and I think that was that.
Speaker Change: That might be some of the delta in the deposit costs that you are referencing there but.
Speaker Change: We ended near the bottom of the range for the quarter, we would anticipate fed.
Speaker Change: Fed unchanged, there's probably not going to be a whole lot of change in total deposit costs on a go forward basis, and then we would obviously.
Speaker Change: Expect to see some some benefit as we've seen in the past when the fed does start to change rates, but it.
Speaker Change: It's as much about mix as anything else at this point.
Speaker Change: Right got it and John to your last point can you just remind us in terms of the amount of exception or higher.
John Stewart: Deposits that can kind of reprice fairly quickly once the fed cuts presumably later this year.
John Stewart: I don't know if we put specific dollars out there for that but we do have we have some public fund balances in our in our base that we could certainly reprice.
John Stewart: And our CD book is very short I think the weighted average duration of the CD book is only six or seven months at this point so.
John Stewart: We have a fair amount of of those balances that have the ability to reprice lower as well.
Speaker Change: Okay got it and then just lastly to update us in terms of the amount of loans that are fixed rate on the commercial side that could reprice higher.
John Stewart: <unk> of this year.
John Stewart: The amount of commercial loans that could reprice higher I think that that's largely because that what youre asking.
John Stewart: Just kind of.
John Stewart:
John Stewart: Back book repricing.
John Stewart: Yeah. So I'll take that question for 2025 this is our CRE maturities.
John Stewart: We have roughly $139 million that's under 7%.
John Stewart: Average rate is at 6%.
John Stewart: We've got probably 100, and 125 basis pick up on that portfolio.
John Stewart: And then.
John Stewart: 2026, they've got up roughly $161 million less than 7% and that's an average of 5%. So I just want a 200 basis point pick up based on today's rate environment.
John Stewart: Okay perfect I appreciate all the color thanks, everyone.
Speaker Change: The next question comes from the line of David Long Raymond James. Please go ahead.
Speaker Change: Good morning, everyone.
David Long: So it was great to see the efficiency initiatives bear fruit in the quarter, how do you weigh the efficiency efforts with plans to hire veteran bankers is there still an appetite to add producers on the commercial side.
So I'll take that question.
David Long: Really our commercial team has been pretty.
David Long: Overall stable and the number of Ftes that we had we dialed back three years ago, we added.
David Long: Some key members strategically in several of our markets principally Troy.
David Long: Indianapolis.
David Long: As I looked at our stable of lenders. So we have capacity at this point.
David Long: So I'm not looking at a wholesale additional.
David Long: Lenders, we really are working within the capacity that we have we added a few people and northwest, Indiana about two years ago, they're all off of there.
David Long: Or is it non competes and they're out doing more business. So I feel like we have the capacity right now and don't need to add additional staffing there.
Speaker Change: Great. Thanks, a lot I appreciate it and then second question I had the reserve to loan ratio was pretty much unchanged in the quarter. It sounds like there was a specific reserve release in there, but how do you weigh the worsening economic forecast into the ultimate reserve levels at this point.
David Long: Sure. Thanks for the question.
David Long: We did actually make some economic changes in our model this quarter, but the specific reserve that was released is somewhat masked that.
David Long: So I would expect that the economic forecast that has impact on our allowance ratio as we move forward. This year again, it's pretty early to tell.
David Long: We subscribe to the Moody's economic scenarios.
David Long: And.
David Long: Those have been.
David Long: Fluid and changing a bit month to month, so there could be some additional impact there.
David Long: We had a rather large specific reserve so it did miss that.
David Long: Yeah.
Speaker Change: Great. Thanks for taking my questions.
David Long: Thank you.
Speaker Change: The next question comes from the line of Brian Martin Janney Montgomery. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: Just one question on the loan growth matter off maybe Lynn just the commercial the total loan growth I. Appreciate the color on just kind of the outlook for growth for the year, but just wondering how your outlook is for the C&I. The commercial book really in particular and kind of where those pipelines stand today on the on.
Speaker Change: On the commercial side.
Speaker Change: I would say our forecast is relatively unchanged at this point from what we've communicated previously we're watchful of the economic conditions.
Speaker Change: I would say that by and large our core commercial pipeline is pretty steady.
Speaker Change: We are seeing some lift in the equipment Finance division, that's bolstering that a bit.
Speaker Change: And so as I look forward for this year I still think we'll be in the mid to high single digits.
Speaker Change: Okay. So the mid to high single digits on the on the commercial side at this point, Okay. Perfect and then maybe just a follow up just on did I hear on I'm not sure in some of these remarks, when you talked about the deposit growth this year maybe being.
Speaker Change: A little bit more slanted towards Cds, and less from commercial and just if I heard that right just kind of trying to understand what what dynamics are occurring on the on the funding side.
Speaker Change: Okay. This is Thomas Thanks for the question and as we went into the year I think there was a natural assumption that we'd see some pivoting in the curve here, especially around CD pricing. The curve really has not moved as aggressively as we thought on CD pricing and its just attracting clients who are a little bit more liquidity to take out some term so I wouldn't.
Speaker Change: I'd say a shift in our client.
Speaker Change: And changing and we're losing clients I think it's just a shift of where they're holding their deposits right now since we talked about will probably a little less money markets than we originally anticipated a little bit more Cds in the near term.
Speaker Change: Gotcha, Okay, Alright, and then John I missed the comment maybe just early on in the on the on the borrowings could you just recap what you said on the on the borrowings in terms of I think in prepaid some of it. So it's less now is that is that the.
Speaker Change: High level.
John Stewart: Yes, Brian Thanks for the question, Yes, I mean, the short of it is we're just ahead of schedule.
We had anticipated paying off.
John Stewart: $200 million in March and April we've talked a lot about that since the fourth quarter repositioning our securities portfolio.
John Stewart: We were able to do some of that earlier in the quarter. So if you look at the end of period borrowing base its down about $330 million. So I'm pleased with the progress there.
John Stewart: Okay Gotcha alright.
John Stewart: Alright, I appreciate it thanks guys.
John Stewart: Okay.
Nathan Race: We have a follow up question from Nathan race Piper Sandler. Please go ahead.
Speaker Change: We've really been pleased with the momentum on the core deposit Brian.
Speaker Change: Mr. Lewis Your line is open.
Speaker Change: This.
Speaker Change: <unk> our question and answer session I would like to turn the conference back over to the management for any closing remarks.
Speaker Change: Again, thank you for participating in today's earnings call. We appreciate your time and interest in horizon, and we look forward to sharing our second quarter and July have a wonderful day.
Speaker Change: Yeah.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect Goodbye.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].