HBNC - Earnings call transcript Q1 2020

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Operator

Good morning, everyone and welcome to the Horizon Bancorp Conference call to discuss financial results for the three months ended March 31, 2020.

Before turning the call over to management, I would like to remind everyone that today's call may contain forward-looking statements related to Horizon that may generally be identified as describing the company's future plans, objectives, or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

For further information about the factors that could affect Horizon's future results, please see the company's most recent annual and quarterly reports filed on Forms 10-K and 10-Q.

mind as forward-looking which of made. in Horizon made they keep only speak the should that statements any by were You date on

risks does may after which affect to company. Horizon forward-looking from predict New statements duty the events to, the come they to, update no management revise and these they on and intend are cannot time how or has uncertainties and not date time, made. up or

this morning. which non-GAAP call, can CEO, Executive at extent Dwight. At will To company on an financial on Vice Executive to afternoon, conference with Jim published Banking like and Dennis Horizon's discussed on and Mr. and is investor that its also GAAP over Horizon measures reconciliations Representing the Wednesday turn as comparable website the information the Officer, Dwight; be and be well April are measures Neff; today XXth addressed is website in President is President, Craig would Secor; found as time, it Chairman Horizon I this on presentation Commercial to and news CFO, horizonbank.com. Mark release, available President Chief Vice available this and Kuhn.

Craig M. Dwight

in and accelerated national Thank quarter first supplemental XXXX, listening call. COVID-XX for XXth. call Horizon Horizon's of however, release We Horizon initiation the you, first you plans. Wednesday, imagine emergency once appreciate and late deck morning. April audience issued Grant earnings earnings an earnings good can the joining us our contemplated on its the

first areas of up operations. comments, on our supplemental the and At the session. for other will open Horizon's key Our slide of closely follow results comments response we'll call question-and-answer COVID-XX, to financial with a focus quarter the our conclusion deck today

this COVID-XX, to response quickly. Horizon's emergency national discuss to moved Now

declares a soon public and XXth first January on declared in Then on March COVID-XX. of Human thereafter, health States President Secretary Health States of national case and the was United The January United emergency Services XXth, COVID-XX the a the concerning States on United reported emergency. XXst, the

We national this of are Amazing have gone. things now in how day fast XX emergency.

March to pandemic review a the preparation We team our including better employees, phenomenal. been safety business for management existing our the pandemic home. to is our access environment This a and in by employees safe travel our to On what to we to order well-being was The statewide implemented in the response Indiana national XXth, helped And Governors effective employees. thereafter, lobbies provide Michigan and at emergency team we to plan, of March plan February discussions. mobilized customers Shortly duty review XXth, work of early Bank's for ban a and our customers offices and for Horizon emergency has our XXth, stay to only. March to community. prepare implemented all for limited managers always appointment of paramount on come. our and

business This the social lending by expansion three ITMs known at increase volume. of implementation call number and the response serve and our provide from also extended staffed. long national the call loan the forth hours approximately expansion to manage for teams as interactive to better Bank's been by The for remain our operational all in commercial locations put our four handle machines, record to customers; and hours employees customers to quick XX% remote is our teller our distancing mortgage and of to banking our locations; the and volume; fact offices incredible. best departments are has quick employees by emergency of this working the that with of of open and evidenced fully Horizon center

our serve employees to amazing of So customers. all for their to work you our thank

will see one you in On Michigan slide Page my This investor of X always on that our Chicago. right favorite a of states growth experiencing Prior of has Indiana are deck. residents been side avoid patients. associated and with the to slide COVID-XX, were Michigan deck, we COVID-XX, population high slides move the supplemental Illinois the those and business other located hospitals, Illinois. to large burdens and to related in Indiana the influx taxes doing in are Chicago, our especially looking living to of border Post along and Illinois to seeing

occupied Illinois opportunities relevant as their in the dense today homes lower living. residences living. Indiana safety is of side is located Bank and second from even safe are Michigan, of people seek side Chicago. addition, the and more as of owned Horizon right located right to environments urban by Being they In in located and seek fully on Chicago cost

X COVID-XX cases. reflects United the of our Michigan. to in of And rest and current in experiencing States Indiana the States, are Slide footprint similar our a markets the rise

plans that reopen. to will hopeful bend, curve move are to the continue our We start governors to and for forward will

reopen that that Illinois and will As appears before it of -- Indiana today, Michigan.

this positioned Horizon is well national into emergency. going

In well than Chief morning addition has our later Financial collectively years of field XXX solid banking strong experience. to liquidity, being from which more Horizon's will Officer, you and about this more hear and earnings, team related capitalized, leadership

through We have recessions. managed multiple

Our Directors Board provide oversight. of sound

Board the the has expansions in As XX and de therefore team over years, a and we adapt XX hard, to what are The to XX past group, demographics, job they conditions. and get sets. done, completed ever-changing well to know it to work experience, tenure, Horizon skill acquisitions means market novo diversified and

they've of even during delivery Horizon's the exhibits been service helped which during and and that X of non-branch our customers Slide channels customer-centric expect systems, time. to long-term to time have channels, environment. XX our this an our have been integral multichannel grown Horizon's resilient level plan strength speaks to turns of the for part delivery of current some strategic Slide deliver delivery stay-at-home

transactions XXXX, branch call of March of are decline due mobile for quarter our and digital surprising, increased quarter XX% XXXX. XX% first XX% of users to online Horizon's offices. and Not As banking volume active accounts the our XXXX, XX, center Horizon's continue platforms. to during consolidate of to migration customer efforts Horizon's and respectively banking and channels by of digital transactions the fourth to

focus To conclude revenue offsets to and net manage slide streams Great growth. represents balance this margin diversify pressure like comments, counter diversifies slide our origination economic on philosophy multiple cycles. included streams, on since my concentration related risk, Recession. risk. is Slide mortgage and revenue This to investor and Horizon's XX to loan interest the revenue slow management's Today, I'd Horizon in presentation titled robust has during volume headwinds to

to period rates. of investments, margin interest this diversifies of state well Horizon net positioned a declining further commercial In and going consumer emergency. mortgage addition, credit during is sheet Horizon's interest mix loans and of and balance helps risk into manage

and Now our to liquidity it's to to give introduce quarter you earnings Secor. management, first on Chief you results my pleasure Financial Officer, our an update Mark? Mark

Mark E. Secor

underscore some ourselves to we into our summarize results, believe environment. we Thank you, put want quarter Craig. first strong in headed of I which the position briefly the current

For slide our begin those XX. of I Slide on deck, you following on will

of share. diluted income the an to expense. from death $X.XX, income, from many first of down was net primarily fourth Core $XX.X earnings down important quarter you believe the fourth million per due trailing million, on credit the of $X.XX BOLI know, investments share Core profitability benefits. $X.X net As XXXX, of quarter measure we for per loss of our the sales and quarter gain was which is excludes core

fast margin, interest the $XX.X income the quarter quarter purchase XXXX. X points million slight first accounting during the first due for in of quarter. adjustments as pre-provision This less compared a adjustable rate to drop higher one drastic was an in cuts reduce to points basis expense. to compared costs a fourth funding decrease margin to core first day fourth need the the primarily net Pretax quarter to in The increase quarter quarter adjusted margin and along of quarter noninterest recognized first in X million stated for The was X.XX% $XX.X The due rate was the of created assets down. to declined down during the basis XXXX. with the react

cuts. to was the to Our rates drop response deposit rate follow

few This or magnitude plans, up policy with it a not data for keep prepared to we cut, rate something levels pricing asset each be the in the they of this. Great today. XXXX overnight is of like did days were was Within Fed's we interest we quickly. to done adjustments. the speed and deposit where our better due rate deposit work ready rates able were predict transactional rates to the were was Currently, Recession align lower While are actions, pricing to at when to the post products, rates move the March to deposit

and and quarter, increases all Employing were in some interchange quarter gain expense was on compared investments increase. reduction in the stable accrual XXXX, first income and quarter the seasonal shutdown, services, earnings. to servicing the by helped the new of the additional both service first increases quarter year. bonus in FDIC facility The Noninterest the typical the merit of current to XXXX the fee accruing Higher for $XXX,XXX partially seasonality on for down impairment to to of income loans last investments experienced in on fourth maintenance, additional but were to mortgage due for charge sale fees the mortgage increases Noninterest impacts service, and consulting linked fourth we asset. online IT, in lower offset customer level contributed offset of of higher the and insurance based right a the was expense compared impairment.

managing stable for time when rates to and allow market manage rate earnings. volatile. both key assets funding help net Slide and cycles on interest to various maintaining more margin reaction interest as times is over margin through in the in XX, the to it market disciplines place the Pricing move quick keep is

low on as in asset lower rates. will be yields will pressure and As we be remain product this term environment, new rate at there

deposit repricing the offset from roll-off. come additional deposits will However, to debt partially long-term this, and time

was rates the lowered The the have quick cost XXXX, basis reduction was for Slide reflect interest the points. show the To to current rate. XX, of XX the December to basis average discount rate-bearing quarter of been the average these month cost accounts points. first interest-bearing for overnight XX costs, deposit

For basis of as the rates points month during XX it was XXXX, March lower the month. were

will be the interest-bearing the last at for our additional mature. CDs the stated XX% accounts in remaining as portfolio over this months. The As opportunity for end quarters CD X.X rates the The repricing earlier, is CDs. average post March, next priced in deposits portfolio are were several term recession. of of at

strong period, than even the of capital XXXX, implementation Slide XX, into CECL. a maintains and next this in position XXXX with Horizon going significantly stronger

future these uncertain We and a for repurchases, optionality have paused possible times. we consider capital share on in raise

We are cash dividend. committed to shareholder maintain the quarterly

capital performing in the sustain have diligent at ensure we including costs, be would extreme. that The in capital In fixed range testing cash strong scenarios in company remains a to mild of currently stress need has order to from determine maintains taken action these of holding in scenarios. to adequate management to done is to This fact, Horizon plans what quarters XX dividends. been

a that portfolio the institution approximately are the XX.X%. accepts Bank for has approximately to the collateral. XX, of availability the a immediate $XXX our With starting is and in Slide portfolio and economic securities Reserve an liquidity portfolio. as liquidity immediate manage strong FHLB fund Currently, of XXXX, at needs XX.X% daily liquidity. discount additional of withstanding on billion than Horizon management are as assets municipal liquidity FRB of key securities, management. investment borrowing Horizon the securities March lines, basis This position, of municipal access million liquidity to at has investment median three Federal of municipal part cash pledge liquidity pledged the is of a Having is to window downturn. only access available Fed to total currently higher fourth $X.X peer with

highly loans of are FRB's The obligation In are except of segment PPP for program managed remaining corporate agency small essential we portfolio security service The of is which originate. as the general are or high-quality The for the bonds. liquidity investments in investments. are federal addition, we securities, entirely comprised participating holds rated a almost product. fund municipal portfolio largest and products, portfolio to

forward were move adoption, lot to of had implementation the Slide best implement model potential We forecasts of the known not incurred discussion a XX, time prior about prepared. with to the guidance, took what discussed, severity implementation and to on of The was Based economic as breadth the CECL place Act not positive. final our of and determined pandemic CECL of planned the the was the but the debate company delay CARES for details CECL. were also and the at we CECL. regarding ready the but to were fully

million. the equity negative need modeling charge of contributed. significant of So of XX% Xst, to acquired day also portfolio and it beginning one performing charge this the a our outlook January of created the $XX.X year for a loans, at at determined the economic Having

the increase We $XX.X also was are of as that to loan the discounts transferred deteriorated allowance impaired loans. acquired $X.X from purchased loans purchased to a XXX% million of million. credit This now credit allowance previous classified

forward allocation the moving to forward-looking quarter, a additional loan analysis million. calibration will expected those for and the in impact risk to the be loss first and current discussed our time, knowledge call. expense on categories, Now expense, most in on later credit levels portfolios first credit model's immediate shutdown short moving the specific highest Based categories was have included model. were had the pandemic, looked More of and the quarter $X.X our of be to global loss In to at the a the in loan in this detail.

With allowance at these of was loan performing the the loss allocations, discounts credit, acquired credit for loans to end additional for the total and was loss And the loan allowance discounts for at with acquired March. loans X.X% credit purchase X.XX%. at total of

some For President, would Banking, like Consumer on quality strong as and well our our as comments introduce I Jim to asset Neff. Morgan additional

James D. Neff

portfolios strong I'd time mortgage expected Horizon's And Thank have a to culture. economy. you, consumer level the unemployment, is about it forbearance impacts the Mark. depend talking have well. and like and by We averaging a overall, deterioration consumer $XXX and government of perform The stimulus the on lingering conservative checks these with spend and state morning. are relatively feel and The will mortgage Good we supported being our credit will to a of portfolios. consumer duration with extension along federal and in week, programs. and pandemic little

our like talk consumer the about you to of characteristics If turn to XX, Slide I'd portfolio.

secured We prime considered than an considered our was with rescore most the the This with on greater. We or score a of consumer a X% predominantly subprime portfolio credit, over are only of based portfolio the basis. customer's X% with a of recent credit XXX. score entire XXX data annual than being XX% less on was is portfolio unsecured. less And having credit portfolio rescore. lender, consumer XX% of the

home credit to and in had Michigan. Indiana hit XX.X%. we delinquent equity We strong XXst, as under of loans March and loans X.XX%. at only side, we equity limit and equity the On days within the asset X.XX%. term at XX of were the X% of CLTV branch NPAs lend And on when lines over our of footprint, the half just quality crisis were states

and consumer our balances. for the day extension receiving is are of period. April We portfolio for requests extensions, XXth, average Through payment represent a X.X% consumer XX extensions

the owner-occupied year-to-date. footprint. less secondary The within majority located portfolio. of overall Turning sold on our mortgage mortgage is new is Slide property roughly majority to X% branch our market, and portfolio total our our of XX, Rental the properties of portfolio, retail production than the XX%

prime require Our doctor income guidelines to nonprime with credit greater; XXX has credit some any X% private industry products. greater. score Fannie portfolio loans with that the score loan. considered exceeds or to CRA is of only portfolio portfolio or specialty XX% which verification Mae of less loan-to-value our With have be and of the XX% full XXX, documentation, and a the of a than scores assets. XXX considers employment, a are insurance, of program underwritten In of XX%, including exception the we mortgage and require and

warranted guidelines adjustments risk. underwriting pricing for compensate increased where tighten made and to steps taken to have We

adopted. underwriting properties and portfolio, asset estate other March Our to X.XX%, consumer end days strong over guidelines, portfolio their the which loans with Horizon $XXX,XXX. also real mortgage immediately investors continue tweak six has X.XX%, at as quality were a with delinquent at XXst, owned And the XX NPAs totaling at had

for Through customers mortgage portfolio others. for for up offering mortgage that days of for days deferments XXth, loans an servicing April to balances. of are our represented portfolio X.X% loans deferments average XXX our we're We and XX

highlights Those Executive mortgage Banking Horizon's Kuhn. And Dennis? to now the of consumer pleasure Vice Officer, are Dennis and introduce portfolio. Commercial President and the my Chief it's

Dennis J. Kuhn

of Thank products I'd highly portfolio group through to standard experienced you, to loan commercial a Jim. Horizon's some into of lending like traditional offering as insight professionals Good as throughout morning, provide bank everyone. Michigan community loan Indiana our our response Horizon commercial is dispersed footprint. lineup additional a a and well COVID-XX.

require a or typically primarily a and business project. relationship-driven, the owners lender of a are sponsors We of recourse the to secured

in Please provide Indiana commercial diversification based. and of followed represents Indianapolis standpoint, within refer by is geography. to our Lafayette type our by followed are have and single X% originated our Ohio, remaining our Midland overview Kalamazoo, market Within of XX% market, Wayne. then is Michigan, been XX% largest Indiana, by Fort commercial and Indiana, In the our through geographical Columbus, Rapids, Michigan more both legacy which Northwest while portfolio a is offices, our specifically. largest will Grand Slide loans Lansing. XX, an which From The market

for has in loans non-owner growth Our a occupied the recovery. strategic commercial post XX% combined category, real in real COVID-XX estate a priority recent and commercial years represent portfolios should of By assist markets loans, broad concentration while the in larger and of owner-occupied estate C&I been commercial accounts XX%.

move more portfolios. and Slides granular view to XX, XX you a of see if our please you'll Next,

X% portfolio, hotels, both our of type believe multifamily portfolios, followed demonstrates well information real to and total by and concentration this by diversified type. owner-occupied estate We the geographically the commercial office. no loans. exceeds regard Within largest non-owner occupied retail, With our category, is and C&I category by

CECL split as million the $X hotel credit Mark outstanding at restaurant well near as With the overview between of COVID-XX portfolio, and Secor insight regard $XXX first states. total quarter Slide the special represented provide which this categories bank hotel X.X% was an our our to the to to impacted by refer portfolios, immediately I'd end like our our loans. equally additional XX, initiated of provided measures two by into or adoption expense. of category loss please Now million, allocation quarter some

to operators metrics We highly challenges in of XX category strong faced, being very and have well-known in properties XX experienced financed relationships, the very with spite all this us.

We have service in portfolio XX% proximity We're and interstates select open doing by have weekly portfolio them. across us. includes been a loan-to-value predominant. close very of to analysis solid the the also and approximately are communicating Borrowers additional with information breakeven provided with

of at addition, many we will loan this the to issue how to clients, and as last In with things be the and regard provided well. have accessed they long SBA The have PPP ultimate executive these modifications program reopening. orders point

it chains, recognizable. loans just or service the and that which to The million locations. SBA regard establishments to has bank of our group million to very million million national a totals With up successful an category of of made of $XX $X.X limited full-service is borrowers long-time the restaurant the one also more names X% borrowers service with total of limited under another operating or full-service portfolio, portfolios are additional $XX includes are comprised loans. guarantees, number $XX who of outstanding restaurants. operators That with in of The

weekly drop group, the with to in borrowers loans down -- And the in estimates approximately category operators. smaller limited their our larger to an which of our performance. exposure our comes of category, range indicated first restaurant recover. number them revenues, in is near-breakeven a discussions a our XX% that been of has the to service typically putting end, independent so Historically, estimate to our -- of the that have XX% Within really

approximately commercial Additional portfolios we non-owner and interest of our deferrals. XX me, delinquent to Horizon second, assisting than actually estate first, have our -- modifications, -- the the categories same XX% borrowers. category. most include primary multifamily. days continue in to extension. be not have we must clients With the extensions, the time, lessors real entertain are COVID-XX protection. modifications; interest-only SBA in At of occupied two borrowers monitoring with to through and Borrowers thirds loan or been in real retail estate impacted our have two residential been closely loan XX% regard of balance of been the time with a payroll less requests is by conventional in and owner-occupied C&I excuse the the balance at principal modifications initiatives: non-owner-occupied

see processed were less. that PPP or This $XXX you over Slide to And and we refer of X,XXX round of one. million. of where approved we those were one overview round totaling approved date. for you'll please will received captures applications, If experience SBA requests our submitted during to XX $XXX,XXX Over XX% XX% the an

We as in we two smaller far, lower seeing participating average and and are round are a dollar demand generally thus well PPP of size.

of is recognize to have worked strong asset difference work in Horizon the for with incredible in our our challenges. withstanding of weekends entered sound history like I'd many Again, and our and a communities. period weeks. and a numerous Their employees evenings customers as this for quality making effort this position effort a

you now Craig. to back our sound We will with and unprecedented time, banking to while event. helping Thank practices act from you, your clients recover and for continue in accordance this prudently

Craig M. Dwight

for the Dennis, disclosures. you, detailed Thank

represents builds long-term Our is community. will At to do of business. customers employees, These points first of deliver support points this customers, we community. The Horizon, next A If and near-term we focus important shareholders. deliver value the the three two strong to during our pinnacle customers last emergency, continue employees, the we immediate value. well that market three shareholder community. share In and slide we brand of and on the triangle. displays At triangle to are retain aspect most national that the employees, the that the an believe and awareness. our build any points middle isosceles brand shareholder surround must and and is

we looks and protecting long even dividends. a book to payments the building opportunities the will you, they Great of new this the adopting as to about forward for it's shareholders, uninterrupted Recession. questions. it for we'll turn Horizon the that history Horizon norms, preserving national back to value and now and Bank during has the dividend tangible For over emergency. whatever be, Thank from may prepare moderator emerge

Operator

[Operator Instructions].

Please Race Our Nathan Piper ahead. Sandler. with first question will go come from

Nathan Race

well, good to morning. disclosures everyone's Hope guys, the was on doing and really start in all deck. I Hi appreciate added slide maybe just hoping I credit. the

and performed guys to fairly You obviously between XXXX Recession relative the XXXX. well Great during peers

guys at kind some just as maybe what stress and the the So assumptions guys going curious you look hear that portfolio scenario, underlying today and you be in scenario stress to anticipate of forward? I'd a curious that, of within economic

Craig M. Dwight

CECL Chicago everyone's Indiana for looking Index, doing some factors the question. indicators, time unemployment Fed the goodness. use U.S. leading we which at model, Michigan other the the thanks Nathan, Midwest claims in and our In including are well, here thank period. March indicators, that Economy econometrics And and we're

Moody's is the And which a Moody's focusing they've lagging to models is of issued. are Some that unemployment primarily XX kind comparing people at rates, indicator.

Our model benchmarked over of economy. with to a the has recessions alignment the history our directional that last years XX other we

with So we our feel econometrics. very comfortable

who to a forward. in portfolio, the what's concentrations, the quality mix, Regarding happen asset remain to and good long are That's how place. orders the knows the going feel to going we the answer difficult and question about going but stay-at-home

Nathan Race

borrowers, of the from recently, And that. or thus the what And caught to know I entire I Understood, then in total portfolio, along draws don't modification if in that the number line far lines, and you perhaps you're late kind curious, quarter some just that's you what I just Dennis those in if XQ. alluded just guys think credit helpful. C&I amount across of have requests putting have seen loan curious the hearing context of

Craig M. Dwight

Jim about about will and C&I modifications portfolio. Dennis talk can the the you talk I and

James D. Neff

of I On on overall, X.X% it but portfolio. in side, highlighted the and consumer the the mortgage mortgage the was slides,

the consumer, the it On X.X% was of portfolio.

we line seen personal equity at uptick credit, any of point far As in utilization and lines on of consumer this lines not time. credit as have home

Craig M. Dwight

to equity growth, utilization, And line hardly It's credit. been you both commercial modifications? regarding it's limited. as with as want any been home of do very about the lines well Dennis, flat talk

Dennis J. Kuhn

Sure.

I modifications, little standpoint and interest-only the from a of modifications, gave payment types you again, of deferrals. the of On painful bit context

interest-only has for days. Our typically first line been XX

bank. So million across X.X% in the outstandings that represents have loans our commercial portfolio, we've our been granted $XXX of That total for modified.

Craig M. Dwight

set they April? through, is XXth it the what, or What

Dennis J. Kuhn

April. Yes, that's

Craig M. Dwight

we're giving fairly compare information, may to not which come April out. current Nathan, a you have releases well XXth, other So that

want into Just doing of about And residents. an mass here. though. talk restaurants migration areas surprise. the really well the restaurants anecdotally, are briefly our the the therefore, I pretty market a to comment with our Illinois It's was takeout/pickup surprisingly which pleasant We're seeing orders, anecdotal

Dennis J. Kuhn

against Dennis as through line regard our And line utilization. we this again. uptick usage, With quarter, to Craig commercial is no mentioned, -- the first we December really saw

and monitoring daily surprising been a it -- been closely it's on somewhat basis. we're that's So

Craig M. Dwight

were back of the Yes. of collateral, from the they're account that now We And lines margin out margin in in accounts. with had our sync, borrowing and base they one credit in brought sync. alignment additional borrowing base was

have construction to one to continue just They loan not has with We did not we out ground, broke So gone and build elected that thought it an the best we far, the agreement. undeveloped well. tracking property. to borrower's have

was So mutual that a agreement.

Nathan Race

you will Chicago and all color. place the back speak And into to here given the in I going can as appreciate Indiana well. I great. requirements days shelter these Okay, particularly just all step from

Just Craig. one your of points

again Thanks color. guys. the appreciate I So

Craig M. Dwight

Nathan. Thank you

Operator

[Operator Instructions].

Solan Please Retail. come [ph] from ahead. Sam question go will next with Our

Unidentified Analyst

call and around $X or doing here securities debt wondering cash. more if like whether On was provide billion color of looks liquidity a Slide and hear potentially with the is raise. taking glad I for you that equity to a in the and XX, be position around it safe feeling is Thanks everybody's Initial capital use quite would that question and well far. so you could mentioned funds some raise. strong

Craig M. Dwight

And Yes and are Sam, family would debt it capital question and on everyone's well. raise thanks sub I well capital raise. in the your for The investigating contemplating doing noncumulative hope we first or question, as be preferred. asking a

have you as sure it at just this no can under always common plans I which we look alternatives. to not. think pricing, It's to going investigation or not expect. current We do We're we're issue at our if

unknown I of this gives in coming what's could be that this helps think possibly support with recession offensive. additional optionality to In also for happen emergency. the us during going it capital, powerful the to the meantime, very national COVID-XX it out of

should yet, additional at we've discussed. So Board view to question. preferred. could it -- at and we meetings, and/or disclose capital for if debt sub we it always we're it being sure you Thank do but your our And we noncumulative felt not we're we stack, look going that use our is regularly

Unidentified Analyst

the the That makes of chunk quick sense. in along was QX. good update. I stock the appreciate buyback repurchased lines obviously, a follow-up, program, One

sense. you uncertainty the So might with make uncertainty a and program this seems buyback getting what on the pause all the time any back look line to given like Do have up feel, running?

Craig M. Dwight

No. with emergency. coming -- the the part sure additional it excess national optionality power give more out of It's of with would another as capital us capital, this

on But the can't So on you right we always estimate give a reopening. now, reviewed an you. Thank be it will regular basis.

Unidentified Analyst

understand. Well it. Yup, appreciate I

Operator

Please from Montgomery. Janney go come Our Martin next will question Brian ahead. with

Brian Martin

Hey, hear you guys. well. Glad morning good are to

Nathan Race

morning Good Brian.

Brian Martin

things touch cost going -- the know getting on on two just one rate appreciate of hard just and here working cuts maybe -- the repriced. could those the if maybe bit or the I a Hey just funding lower Mark, kind me. for disclosure and impact you on

the flows how in impact impact on Just much core full second you margin, the the was quarter the how the that kind and much full thought if of current with through can of then give the cuts that some quarter in impact? -- of on rate how

Mark E. Secor

Yes. Thank Brian. you,

in the we March, that we the XX at of month in stated basis remarks funding points So were costs.

mathematically, to -- just credit was you we transactional XXXXish, entire really, at So look XX through. that our back mid-month, XX funding some that of that was points. And in our post-recession came costs portfolio if or basis

in assets in as maturing the But back we CDs stated, will new that a continue also where then be And would more on the additional that benefit. So get lag there's product. obviously, they reprice lag as to or a there's at were some the point. that

Craig M. Dwight

the point I'm the down. the color, there like, XXX just followed in to was the rate Reserve both, little treasury next the management we basis reductions, day. two by XX then cuts funding and you Federal Brian, And March, with led team extremely committee, the impressed give Bank how market

So our while funding very committee, lagging treasury management active, other team our within were markets. banks the were

did job. good a So they

Brian Martin

That's helpful. okay. Right,

kind And last just maybe a the it that of X it that was little what bit third more mitigate of part margin If is less and points, given margin. so is or funding -- side core that suggesting think the on is basis the Mark, actions down you're that come a down was through captured of to the fair it would on would think but I of quarter one two guess third about taking funding fourth come as that on mitigated is if you being side? in to the the one you're

Mark E. Secor

just side for right the assumption on points is on quarter. XX based your basis funding Yes, the the I think

Brian Martin

that by mentioned think I just the to little you expect COVID. expect area be duration that things, And from wealth? I talked of areas impact quarter, last and do income what or clarity was continue this, a we it -- you just fee had the perfect. you the more Do one was to, to I of maybe charges in impacted Okay, about on until it continue other guess, then the some two service bit get guess -- declined, that of you I thought

Mark E. Secor

think There's you're a because area that's happening. activity. going assumptions because activity I saw, what to coming we income shopping going Yes, out that's just I be on bit first so overdraft the going there's less to it no going we're interchange think it in it And one our to be less see just in to just just there's little and people quarter. into see of

Brian Martin

Okay, little possibly. bit to come so more a

Mark E. Secor

Yes.

Brian Martin

Yes.

kind of Okay. through if was And you you are that guys just then thought of last and how me little the give coming P&L perform -- in view on that can bit coming on how to one you just a for quarters? PPP expecting the just to how the program,

Craig M. Dwight

lifetime average to amortize for size with month the the range, Brian, loan in the look XX X.X%. of over those like average the $XXX,XXX the -- in fees our quarter fees We'll $XXX,XXX our loan.

payments do loans Our start months after the moratorium. interest six

to a amortized month as from years And X XX whole. so -- they

banks the significant that think changing that any aware amortization at on have been I We're would same daily. program of most that fees tracking schedule. keep We adopted reduce not has advisory current time. that. This

Thank we'll as you. we better the feel have get so a And quarter. into

Brian Martin

much. got guys. color it, Thanks I so the thanks. appreciate yes Okay,

Operator

next from Sandler. ahead. go will of Our Race come Nathan Piper Please question

Nathan Race

Yeah, thanks. hi,

I particular just of earlier, on couple prepared any apologize questions. NPLs this touched front, albeit the guys in you in but in follow-up on quarter, a remarks uptick if the small? that relatively the Just color

Mark E. Secor

the was was One a business. but loan a it of that was the total There one some totally It standpoint pretty you in came was small As We also ways. commercial had said, resolution centered manufacturer, a both to several movement service from credits unrelated. portfolio. couple was added increase.

don't general, And the portfolio, nothing that totally -- in unrelated. so we across no, we see,

Nathan Race

rate then And expectations that's perhaps? the to tax to, just or on where Mark, helpful. kind that's going back going Okay, forward, color of trend any

Mark E. Secor

of Yes. we down the down our provisioning, It's used extra comes the pretax calculations income impacts impact the obviously basically and same tax income from that -- other rate. the tax-free came the but had investments benefits or as

would with quarter. where per can So get you it were now extrapolate to of you come depending to where just on it from we out maybe I quarter net are your schedule a where we where think last to try income be,

Nathan Race

year, then any first last overall going was the think in forward, the Got it And by be so it. impacted forward? accretion little just a fourth I Okay. quarter but expectations, accretion elevated just CECL just on that on expectations color quarter relative going know to of I will

Mark E. Secor

slightly just get because it that will recognized. impacted $X.X be probably Yes, will allowance, we the the into million moved so

at there, and history it even seen but I an but here I scenario. still any gets -- why chunky always goes. foresee I've we've That's from our the it best past don't of know how the past. looked is changes So what average of

Nathan Race

basis of temporary in an next absolute the expect kind securities the static given that's the what you remain over bond expect you with excess are fund sheet? securities the book few clarify. I the kind quarter, to portfolio to that on or guys Got funding do lastly with quarters PPP the wanted to nature the just be you loans maybe of then balance on far do some that the maybe doing will thus And relatively on just it, but figured in PPP likely portfolio, liquidity just just the

Mark E. Secor

to be able get this cash, selling We going be we we're a good do in and money all -- You're environment. we point. not of funding all can't on to to to pledge and just not want sell the them immediately because would

into it so also it, we it loan. more that product not be closely. term fund it's XXth have have And And at actual the and with of PPP also out take pledge an to a opportunity monitoring can So do lending opportunity that the the we to in we're we're we discount as the advantage window the to September to going of it and looking Fed. until from get

we So us. that we're on going to just different opportunities funding that need they're providing based as manage

Nathan Race

Understood.

again you Thank follow-ups. taking the had. I all for that's Okay,

Craig M. Dwight

Nathan. Thanks

Operator

session. Mr. turn question-and-answer This closing like back remarks. to the conference any to will for over conclude Dwight our I'd

Craig M. Dwight

comments the Secor time. please forward phones first the conference answer you have call in call and call, questions Mark earnings We to our meantime, at to always me we next or any any if you look and about feel return callers Thank our calls. in our for for phone and our listeners free In or participating the company, July.

Have So good talk participating we'll today, you and day. for in thank July. you to a

Operator

Thank This you today's attending for our call. concludes presentation. conference

You disconnect. may now

Horizon Bancorp (HBNC) 2 May 202020 Q1 Earnings call transcript