HBNC - Earnings call transcript Q4 2020

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Operator

Good morning everyone. And welcome to the Horizon Bancorp Conference Call to discuss financial results for the third month ending December 31, 2020. All participants are in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please limit yourself to one question and one follow-up.

questions, re-enter further question have you you the may queue. If recorded. this event note is Please being

Before over forward-looking noted those the and to may statements turning differ call presentation. subject in other contain today's remember are those cause statements the call factors that materially that slide that actual risks, from factors are to in could These to nature. uncertainties management, results please including discussed

Horizon’s differ about XX-K factors cause materially that filings. is and current to in information related Additional actual contained could results

In like of during Commercial management company’s and to and call. website turn Mark Dennis will www.horizonbank.com. Banking intended the would Representing for are Executive and to the Officer, supplemental session. be not Financial statements Company the for Horizon’s and joined [Indiscernible] Vice Vice addition, The anyone measures Secor. certain and yesterday, obligation Executive Craig forward-looking Officer They by Chairman Chief Executive Chief measures that and President President Please presentation Horizon Chief At today are issued to made any CEO business. I by non-GAAP are update time, call can the the contained Kuhn these answer press understand at the access over Craig and Horizon’s Horizon this presentation. ahead. Chairman question it Dwight. no financial Officer, in release the to help go a If investors copy you does assumes already have Reconciliations Dwight;

Craig Dwight

conference good Corp. Horizon call. and thank in bank Thank for quarter morning. you And you, earnings participating fourth Anita,

you'll year, highlights Starting we by increased presentation income as on for X% prior that the summarize Our Slide comments will follow excellent year. published the yesterday over today January by XXXX net evidenced Horizon’s XX. find X, investor

had four mortgage to were the interest during and we one maintain a loan was employees. mortgage to warehouse and net true year a of expense that an obstacles family control, quality record drivers stable the ability testament it to year our to volume, confront, good impressive the our all Given Key margin. production and

we basis by total solid also to addition, total five basis assets chart at points maintained In state quality NPAs, over at that as approximately We're points of low in payments at our drops proud the fixed made loans. to for uninterrupted on we asset that have XX cash years, dividends. future shareholders, hand costs, to to company XX quarters have dividend holding we of XX including and cover evidenced

seasoned X titled Next management a will team. you are seasoned slide that leadership team, we observe

recessions commercial Counsel, General the Lynn in and strong we administration have history years. Todd our have XXXX, promoted Executive Of as Etzler performance overseen Vice credit through multiple Presidents. financial We newest over Kerber and officer note of managed past senior XX December special our

grew outpacing record Indiana which successful consolidator, rates expansions we've Slide include in established facing of in XX company achieving growth interest the the acquisitions and Michigan. in and dark new green. available excellent other X%, Indiana highlighted Michigan a on we growth clearly mergers cost than track -- markets. completed primary and record and as as XXXX. opportunities you'll improvement dark and X, to university diversified an current move economies of our exit new believe As we is loans. our market traditionally GDP in living. well college and be XX% consumers evidenced and has show Michigan acquisitions. organic in expansion of seats. balanced brown banks Slide markets economic majority We're is has Horizon by low once to a Horizon’s this area high high county adjacent from spaces, pressures and and as With state will well unemployment footprint increase industry to XX% areas again migration Horizon’s mergers rates. demonstrates and during balance which XXXX, in advantage take the economies the by or see other and Horizons continue term on goals environment, excluding M&A growth outbound long occurred and and more challenging footprint market to operating a towns In and Slide opportunities Indiana a living government that base reduction in X track continue positioned look proven dense X and achieving opportunities. organic stable we the meaningful Therefore, through continues and for meaningfully are and and XX for to of that growth businesses sheet Illinois, represent PPP of primarily time our our On the Both Horizons and continued. taxes related our

U.S. the X.X%. As rate XX, which of X.X%, unemployment was national of December Indiana's is unemployment below rate

will levels a highlights X.X% was unemployment November from helps primary in The Horizons we footprint are area. Midland that Rapids are that region's and City, some to While the in Grand serve in the our of Bay XX% continue Michigan's exciting X.X%, geographically disperse loans are of X.X% Slide events credit increase to rate in state markets. was slight overall reporting ranging Indiana, markets and in risk X we engaged XX% parts the enhance from place Michigan. taking western our in XX. economic where central to

by of and to risk that priority therefore positive to protocols and Indiana's first prior the are of Indiana. to Slide protocols is wellbeing county elevated and restrictive Michigan's of versus and return still in by XX, our to to comparable started continue more COVID-XX in Horizon have county Currently by and our Indiana's offices impact January. were banking we daily continue are ago. Slide restrictions XX, digital than November On current through adhere COVID-XX we closely branches The trend channels all and impacts cases virtual quarters appointment digital through safety chart on the of right, in are the average rates XX% processed way channels. transactions we compared Though Horizon’s employees in to taking positivity and to open markets. downward looking will pandemic December year monitor Moving limited In being continue COVID-XX XX% use to to the their place driven shifted on its to of are digital December color response, away downwards COVID-XX system. navigate to at our operate. customers where reported communities, and our our pandemic the base code took branch safety our the trend access titled numbers the businesses Prior reopening due platform. the digital customer of from majority on place was well have to accelerated the only. XXXX, transactions its transforming all stages monthly one has the

week. center As included focus in activity. online our answered virtual December on to XXXX account the adding locations, teller days interactions from year month are call improve interactive and This times, banking in locations well you'll -- our accounts users Xam wait online teller in allow made of customer XX% in ago. were experience Other service capacity increased XX% of see to customer Horizon enhancing the hours opening expanding increase by chats chat six at end increased machines XX% the shortened edition that bots. horizons a December Xpm, and experience was XX one as virtual with active in over and of of to on technology teller over the chart XXXX from prepared fourth left, expanded in digital investments this all checking for online

the Secor. financial Mark? Executive Officer you to introduce President Mark for bank's highlights to Chief privilege Now Financial Vice it's my and Horizon’s

Mark Secor

navigate Craig. with company's pretax quarter income and tax ability results. forgiveness our prepayment We the of the fourth non-interest benefits XX, the the drop these and long income, bottom credit operating in interest share on incurred solar results demonstrate interest from line earnings results income earnings fourth and adjusted through income, stated the the expense you, strong as fourth Thank Horizon’s current record Starting environment. impacted net investments. were company's highest record realize to high income, net tax to Several Slide PPP recognized activities debt results pre-provision per net quarter quarter during term recorded to the and continue fees cost we history. retirement

of margin our in to for build compared fee have the that point during the in adjusted additional primarily continue Slide for impacted from been third income forgiveness, the increases PPP identified. positively government the expense XX seasonal recognized of are modeling. points XX, XX basis and by additional appropriately We was to four with points stimulus we portfolio, that allowance quarter sectors the credit state the stress current loan margin lending, net as we believe, basis was quarter. contraction reserve basis given our We loan

compared quarter points basis accounting margin also excess XX loan compared liquidity third addition, net in a seven positively the quarter. impacted fees loan recognized in the points adding the compared in In income positively was the basis XX third loan basis from the yield to to to XX, to during three the compressed yield reduction impacted quarter. fourth the yield. purchase Slide the point PPP recognized points Higher third basis also the quarter, additional

a CD XX, pricing costs funding million bearing liquidity help and X% in we've with pressure is XXX paste cost in lower costs. fourth high point some position. with drop originated The of margin mix a reduce points deposits continued non-interest downward point are XX of additional as during XXXX, continue deposits funds. portfolios first yield to resulting some our the loans matured reduction the the rates, growth Slide funding during along our new will basis [ph] quarter As and costs two term on continue an The to in XX during in product to quarter. contributed of also costs basis mature in funding realized. basis to deposits margin interest reprice XX. the total expected conservative XXXX as of to deposit asset XXXX strong and decrease in bearing CDs cost at core the Since maintained costs quarter. pressure reduce of led is Slide average opportunities lower stabilization investments, additional strong and our

over Also, of $XXX investments. loan warehouse increased the term PPP $XX loan when portfolio cost liquidity in start portion cash we balances million with average weighted XX selling the also We long of million and up interest million levels of advances additional returning liquidity the normal of help in a expect term utilize in investment To to to $XX escalate. fourth and quarter. building forgiveness a longer X.XX% cash, utilizing rates million the during prepaid FHLB we from

million $X.X payback of While the will interest our loss a on fourth quarter onetime reflected expense one a net than from year less prepayment, results the there pre-tax be savings.

the adding Looking ahead, working growth and portfolio $XXX in to additional we portfolio. million on currently the investment anticipate are

non opportunities and flow charges will the as related as in mortgage cash to income of record strong for liquidity earning to It look the mortgage and quarter. are we gains see drove We on revenue mortgage we asset gain from sale impairment the for right utilize the assets. income the continue servicing quarter. primary our our level additional Slide solid record our non-interest XX, increase percentage mortgage saw income contributors need to to non-interest production high the and the continued

strong national based from also refinancing Slide third and fee mortgage other XXXX. going line income the contributions top over We increase to expect continue business the local into XX. all Based quarter. activity, we saw on

higher driver fourth adjusted increase increased salary and Increased expenses operating future accruals. for strong to in the were compensation as year efficiency other results ratio were the investments efficiency expenses, very and There benefit items quarter were and the fourth primary full improved of lines, saw payments increases efforts. costs the also operating merited XX.X%. line an quarter, in During performance we as our based but made

activity customer bank real in downs owned the one the reduce increase our and assets. to company's estate As time write

as XX five has which currently you rigorous rigorous last Horizon channels years. in the part to review are a know, consolidations digital locations being operating used. customer habits We're of includes the change over branch as the retail process annual many branch As normal led in evaluations of and more of another process

our higher of have and XX.X continues in potentially costs Horizon loan we at in holding by very characteristics strong we we driven are and as a in franchise at our which positioned $XX XXXX already Accordingly, representing operating loans, to of maintain loans holding have uncertain on are record X.XX just ahead, Slide debt, June. when primarily the raised of loans. to the XX, a operating for discussed, and in and our models at as the did and maximizing approximately was call our the committed shareholder retail financial the Slide digital, XX. to quarter efficiency further to all by bill to portfolios. our maintaining. fourth improve of times, to debt mobile dividend position interest percentage Overall, or sectors remote on for quarters leveraging XXXX quarters We balance we XX subordinated in which we further supplemented include capital refining we made in believe, scalability and of intend pleased December Looking $XXX,XXX very the and X.XX, over look December credit, forward $XXX remains investments of ahead. our allowance The centers. million the liquidity banking well with at loss the the million for for CECL company year. adopt while loans total it from these of reserve risk start continue results capital challenging XX, well nature of we with our to fixed in the performance acquired PPP was cash, allocations million level, a company had this due discounts excluding the of perspective, XX, current are as expenses

it loan Craig. portfolios, For turn back additional comments some on to over our I'll

Craig Dwight

Mark. Thank you,

and is manage Slide billion advantages interest chart as total margin. $X.X loan in the XX, loans. loans consumer net mix well itself commercial the right our provides in XX% provides to and which diversified, granularity At The chart credit it like left Horizon’s this diversified. diversifies portfolio, loan the with loans are within commercial our on residential risk at we the XX% on Horizon, and in our well on Looking

manages X% in risk residential of and perform linear is housing in-house multifamily this $XX Horizon lending limit Our legal an key at loans to at the approximately million, capital single well to $XX segment limit loans points which largest maintaining below commercial our continues is at million. Other of sector well. make, total by

that Our granularity excluding loan is commercial further average fact enhanced by $XXX,XXX is the loans. PPP Horizon’s only

of of are X.X% number Horizon’s an commercial are Now in are payments their moving excess Slide of are the update has team borrower totaled payments. making dollars from loans XX% stages XX.X% for products bank loan only Horizon’s hotels and our X% construction of of December of on The The the business Horizon through Interest interest loans and interest. and at plans to significantly deferrals commercial down our scheduled less portfolio, on XX loan of and our diversified of have an principal staff. in those offering XX regularly the declined deferral or of of to from loans total making our The and so line a balance on been deferral XXX. traditional customers April reflects standard loans as commercial a loans a interest The are X% guarantors a of and line-up December two scheduled cash deferrals deferred various its lenders meeting XX mortgage Of million and June deferment down this two retention resume commercial or June with XX, into with remodeling. credit the in deferrals as payment principal of seasoned diligent the their still loan deferral and consumer XX are same with back reviews lending X%. risks represent sponsor experienced on team only Slide on portfolio. this these on sheets, more commercial is regional to banks. of minimal deferral administration credit the Horizon’s financial has and to strategy. XX. commercial in place loan XX loan XX year. peak Overall in majority payments loan loans in in rates low dollars under and deferrals remaining than peer

underwriting, of quality metrics We commercial at history loan quarter have favorable loan be and commercial favorable, and a culture prudent to end. asset continued

Moving for that elevated continues and segments to Horizon monitoring. -- titled, escalated its high monitoring rate Slide XX, emphasis exhibit most with ozone sectors the deferrals.

per XX the rates. that The that have resulting XX time we is the the making of As of majority continuing of to economic a percentage of in starting we in access were December leisure that have and multiple end, and hotel only minute. -- more of modifications on fourth COVID-XX highest as wave with dollars XX% million. XX through payments This have portfolio hospitality. payment are payment just segments to the of due total referrals. to year to modified deferrals our occupancy principal this it relationship. made non-essential with cycles XXX the managed outstanding Hotel hotels XX. as improvement from of considerable cover billion monitor loans to assets the The long XX% increased the excess the hotel The $XX two to drop in any hotels, interest on include of hotels, total in Horizon’s other sponsors in loans is seeing sector increase to I'll be in and interest continued are are businesses and October are are the quarter. liquid XX% restaurants, and second operators, touch portfolio borrowers our portfolio September

interest no and portfolio This with the it in all with restaurants. and million to minimum only deferrals. deferment, Next, loans making X.X having well payments perform payment continues principal interest borrowers

the term Good performance, owner low amount franchises. good is in Our that at is operators current this average fact long loan and due portfolio corporate the XXX,XXX.

went leisure Overall, hospitality. loan business golf or value actually and consists ratios and increased since can majority entities than In in borrowers hotels of segment largest loans been Hotel located Slide to COVID-XX portfolio strong courses the loan a golf this that one the rounds an Next, the open saw highway you monthly Most of XXX,XXX All an closing diverse the of highway along performing secured hotels Indianapolis are ways the XXX,XXX exhibits number located average see balances those only by amount courses, movie of our convention modification. courses. venues. see consisting payment resort industry as This golf are that theatres, uncooperative the under in only establishment quarter that into on we with borrowers small titled is played well this of have in fitness general, communities. located of and third related of financed zoo. segment XX, loan of map Interstate Horizon’s one a vast restrictions. locations locations the the upon one interstate XXXX. you'll including where of to low during with of in areas with segment sporting rebounding or bowling are exception we interest they due centers, group are metropolitan dependent along non-accrual faster Hotels Sector

which can November strong stress of two in to for less open see occupancy. corner XX. low and XXXX. fourth metrics COVID-XX build to XX% in The the low provision the last at loss total points. in the related in Horizon’s of October, left as continues rates than the which decline for of The the metrics chart our in with allocation throughout quarter adoption characteristics in upper right was total XX% five XXXX, loans, to slide to early and basis portfolio exhibits pandemic. credit our portfolios in of quality charge-offs The low the the is primary dropping basis higher Horizon upper business, result during report loan loans and was points. COVID-XX, Even hotel left chart chart corner And with expense you the to of average reserves in from due Our manageable the exhibits occupancy of XX CECL to and lower quarters December provision non-performing for was asset net XX, the wave. for expense are nature general Horizon’s second total The loans of as November October, still this kind the a in

loans, decline X.XX%. total of lower fourth distressed loans. loans, non-performing on loss banks the in with CECL. was other experienced PPP payoffs for have the right loss total X.X% that On line Slide highlights. received in in assets see from During quarter, excluding resulting adopted the XX primary loans The credit we key Horizon exhibits reserves you'll Horizon’s which [ph] a chart commercial credit corner slight allowance at to XX is franchise at

even seasoned rate, quality geographic position, a XX through and Thank earnings diversification Recession. are managed today's shares. robust operator; balance common This questions. management diversified for historical credit the markets, concludes quarter quality years team excellent payments good year. economic Great open good high We sheet, fourth earnings culture, are strong during has the well now Overall, who multiple lines presentation run capital please cycles, you. of uninterrupted dividend and

Operator

you. Thank

the We will answer Instructions]. now question session. [Operator and begin

Please first McEvoy comes from The today Stephens. go ahead. with question Terry

Terry McEvoy

Good morning, How you? guys. are

Craig Dwight

Good.

Mark Secor

Good Terry. Hi. morning,

Terry McEvoy

the users we come. some and of XXXX? for some to to transaction I data volume. appreciate more at should news branches bank in Mark, question consolidate hinted about expenses all a active with Maybe, you opportunities you. kind on think How maybe And

with that like said, look and year? of what So, should all this expenses kind trend

Mark Secor

should was thought -- we and quarter on to be the of where on but where didn't we fourth heavily loaded accruals didn't the they part foresee we as where were were side first we Well, be. benefits have going year, the we and salary expecting the going

year quarter, expensive and for we XXXX. I a had salary of benefits is the year year, to. the which at entire expenses elevated should other have into some the good picture fourth looking moving think full We the been alluded in we So -- the where here

to properties, other that bank or expense we're was items there write-downs take where trying had the category out on activity, some in of those are that as then get operating. owned loan those normal which we could forth so But sheet. maybe could the some customer continue who and balance expense of the to And And this one-time are through branch some earnings. to year. But will we the at rationalization for But are need be that that year. rationalization. reinvest we where come we at that next to looking And on are as There look as into of future we it ways. into looking looking get to we reinvest more we branch higher also

never statements. start we And forward year giving think Terry, a maintain to is the basis So, exactly good expense looking we do. of But then, to level. full the I going pretty with. What to can we're

Although to for or some in XXXX. move for salary into benefits to there increases inflationary forth the going are and up needing so times or pressure

Terry McEvoy

just as the like over kind Thanks. of it course on What of business are Though your warehouse year mortgage kind $XXX as the almost should a sounds near which And just of the year it term the as suggesting are million? the remain folks with well full then mortgage up, follow -- declines throughout is industry mortgage revenue, healthy. pretty thoughts XXXX. ended

Mark Secor

Yes.

pretty I first are its the and here, banking probably think into for we're as the about looking direction get we that think purchase. decline at rest quarter levels, warehousing based the this will of impact industry from into slows. still on the we coming level anticipating, year. mortgage as the But look national XX% refinancing good. they were both at follow following elevated it, a we at we're we what guidance Look I the also that which year is seeing if the Obviously,

Craig Dwight

is this Terry, Yes. Craig.

refinance in are the directly indexes published. with are that line We

taking. the historical is It trend trend they're So norms. whatever been we'll be same taking just that

Terry McEvoy

Thank you.

Craig Dwight

you. Thank

Mark Secor

Thanks.

Operator

comes question DelMonte next ahead. Please go from with The Damon KBW.

Damon DelMonte

going guys. it morning, good Hey, How's today?

Mark Secor

Morning good morning, David.

Craig Dwight

Hi. good morning, David. Morning

Damon DelMonte

Great.

the you of more the trend puts So that there? that just could of you over first of a go year. just little of the you what of I you elaborate question outlook could you bit talked Mark, core And margin Could and little think some please? kind about during around a back then those takes on course probably were factors. lower be that, the your just bit should the kind margin. on and some saying

Mark Secor

Yes, Damon.

Our a again continuing cash is liquidity since we try excess it even to at find had of as -- we're to utilize lot the this ways focus year cash and we with have to end. excess

to some comes from natural to be -- yield on we're is I through. rates yields there that pressure loan starting way its down. new the loan refinancing the think those product on some repricing stabilize, just are the or the working is going and and are seeing So, But

the portfolio lower be the more more we'll the million I pressure $XXX looking think is going to on put mix yields. of into investment to that, assets. we're And stated the at

the So pressure to put the yield. I think asset that's on going

on side. We the the CD have some is that of benefits out the of portfolio rolling and off funding

I think have is to assets some biggest I the the margin. probably the going there. pickup to mix But of the think see we'll impact So

on we're So income. focused growing net interest

continue on to the net it up depending assets. to to look wind those margin is, the want for mix to And increase our and interest cash want of get we where work. So to ways We that. grow income

Damon DelMonte

it. Got

helpful. guess then, you. question that's I maybe just Okay, Thank And for a Craig. broader

in you that was could you. if your and that's the thought refresher that And of disruption arising M&A Thank you also, market the then on little on mentioned for? comment could announced? opportunities You transaction from XXXX, us and opportunity look give TCF be you follow characteristics HBAN's geographies here just some a maybe could you

Craig Dwight

Damon. you, Thank Yes.

surprised Northwest our might that you Michigan, primary is Ohio. of Indiana focus Some and be

Illinois and I We Illinois are a looking problems the at in anymore, not term long exacerbated duration. that primarily think pandemic because there'll COVID-XX has issues the be

Indiana, opportunities encouraging. out hearing come discussions, are avoiding are Northwest recent We taking in least again, about at we're I some Ohio, that Michigan, saw think But M&A. so are And that announcements talking state. place we possible people in

XXXX we'll think I in M&A of our see yes, target a So reemergence footprint.

in Regarding three lot TCF's will time acquisition, increased disruption through it for their dollars. only or can't customers TCF talent, We the That's a remember years. four pursue disruption, Huntington we I pursue pursue customers through. whenever period. the be change third go advertising we there's of This vigorously. systems not market

opportunity the there's talent, as you think we only for Thank question. customers So going as forward. to up but not pick well

Damon DelMonte

you. Thank Great.

Operator

[Operator next with The go Instructions] question Nathan comes from Please Piper Race ahead. Sandler.

Nathan Race

Good Yes. guys. morning. Hi,

Craig Dwight

morning. Good

Nathan Race

I expand kind loan the I there's of of PPP was outlook. Obviously this geography. the some some with have just year. disruption related hoping M&A your to on opportunities just in growth

feeling So organic just just there think terms kind there's in I quarter. flattish growth Are an guys for more constructive loan XXXX? at of of if a from was outlook you last PPP curious update kind of less

Craig Dwight

I'll commercial stab have it us insight at well. Kuhn side take a maybe give then we'll Yes. as and the in some Dennis

objective for that's considering forthcoming. the had third be our Our healthy a line commendable some that's businesses. and taking quarters. is because permanent that which of in will to have working we loan see considerable a what's fourth place That And decline is to forgiveness maintain don't interesting said, of PPP the proceeds year, capital outstanding actually commercial into gone PPP credits

of quarter. invest should through utilization. earlier rebound we usage see in in we unlike line a advantage happen thought TCF Huntington might -- that now lenders, take But where we be So to until commercial commercial to credit burn of try up third don't they and picking fourth higher We that plan cash, transaction. the what there'd the

very of long had had The market markets. in will And year that Indianapolis. We that we some said, to good build some in pipelines? With had key how a payoffs last growth so our year. Michigan it take

pipelines rebuild. are But slowed they starting So down. to the

future That's and that. the return the our to in what forward. lenders commercial do add markets, reinvested growth good during historically And Dennis, and do So think mortgage in year. for profits have promising taking from I to this our we we want again you plan growth. business years, be will going to

Dennis Kuhn

I this think Craig again, over sense such hearing an who And active. that seeing said, today growth response. excellent that XXXX point early markets, those some are metrics the the fourth pipelines. at well we're in was you're and here growth And including key as markets in on unemployment, the our for our quarter performance bode is

well. very competitive. But It come be the for front. So we regard upheaval to opportunities is there Huntington again, course, to will TCF as that looking to are are opportunities the with of starting

Nathan Race

Got gears bounced about with the capital your And bit. over M&A days Obviously, consideration has comments with little it. back color. just thinking changing That's me a appreciate stock ongoing, these great a bit and little been and and deployment. just like

Just authorization your and as updated of curious to kind your the those back what's on just well, remaining going thoughts on overall upside your And there. lines? repurchases along

Craig Dwight

that excess earning Well, than faster Nathan, capitals do the I'm to assets we versa, do as we capital. something growing grow assets, capital. sorry, earning to have than with vice continue faster

do seriously is also sure our Mark, capital.. the are looking third a But we that thing. XXXX. of thing repurchases would our when I'm table. the on in at well not dividend it's acquisitions stock those add to as you as So part want And start. will definitely take some

Mark Secor

just had I have we we to X.X plan, left that going about -- shares million repurchase say, about in plan. current our

Nathan Race

becoming ratio a picture is guys been thoughts in curious, just common payout buybacks along as this Any and days, you. updated up, the so. XX% those clear range you credit peers? a relative both with to of or these dividends think terms I And are historical little year it's the lines? targeting more Got that there a in follow just Craig,

Craig Dwight

Nathan, ratio to directionally that line we done earnings historically. peers increase with And in keep we've with payout into dividends try our improvement.

look or changing. would don't to XX%, with line a we the so, low going in that Where see word in years versus we now, capital. needed and to we XX% And I today That We've were less mature retain is We're past, backwards. We're I ratio, what's see below. payout as for? of we acquisitions, all were larger are at five, with We that six had the end -- issue of more very rapid an company peers ago. kind the we mergers growth much the XX% company. more

Nathan Race

Thanks it. Got I appreciate all Great. color. guys. the

Craig Dwight

Thank the you questions. for

Operator

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

Brian Martin

Hey, good morning.

Craig Dwight

Good morning, Brian.

Brian Martin

how sheet the muddies XXXX that think if given I for of net expectations a income the the size PPP thinking focus, talk more interesting? the interest can -- just how Hey, that guess net about if here? just about dollars XXXX question the income perspective, on Can on about up, fluctuations the Mark, kind up? that you're just dollars one balance growth the But from what the versus follow margin of you the assuming -- in maybe just of you you if dollar interest that's of of to

Mark Secor

Yes.

-- stabilized I general we we think as the Brian. see the just the I margin, direction, it's as amount talk But I hopefully portion. we've as year I think loan the repriced continue can't give through obviously. you yields because about think we

economic There's Under scenario, I think we a are slight but they still current now, right year. could throughout that now, different have stabilizing. issues indicators. the economic there's pressure, change the

current net additional but from we through this to And the I back. So those will along And we'll help into through with create we're able income a be interest year, a forgiveness, while, liquidity is money accounts, quite the process the warehousing impact to cash transaction through portfolio. have what PPP and -- in see, the that that of coming last we up liquidity. come think this round, additional going was on working we assets round. would of That's lot putting biggest liquidity put bit for the our said, million, to already investment would be more we on as be sitting the but get $XXX also picked in

also deposit going then on we going driving start income. factor be reduce the are fees, the can be and as with the flow are the put outflow think there's balance the deposit If it's really part to our warehousing think of But see than be we investments. we we'll deposit need I driving loans to where into interest will to driving cash deposits put PPP some sheet. the to our the able think the assets. earning to So, of of -- go. grow because it's to yielding -- those But rid higher And to I getting goal pressures, and I be going what be net is levels

Brian Martin

Got you.

Okay. That's helpful.

Craig Dwight

And, Brian.

Brian Martin

ahead. Go

Craig Dwight

Craig, If XXXX. And expense adequate have given provision was should and increase, morning. Brian, good very near modest be anywhere anticipate going this we're margin maintain reserves. that the not well we be in we've the credit just I it or to built doing dollars up is that a

get strategy see XXXX, investment of in to the So, return as numbers you're pretty growth portfolio going into a to shrink it the earning the back and to good is year assets. higher where stronger bridge put to this net interest we margins

plan. that in recessions, that's mortgage So other times. in before We've done boom other our

well. it's pretty think worked I

Brian Martin

Yes.

just guys my Okay. strong Craig on just things the where here, the next maybe build some credit obviously, but in you And had was and -- comment, Thanks, And that quarter. adding. on quality Craig. question just of the kind builds, reserve are very was

to how of to kind to think reserve, we about kind here, of where that? COVID or may kind post Just trend of how think the about

Craig Dwight

Yes.

the And a reserves First taking as working it, the losses. is during aside what's talk different of But we We could and of that's place years manage think I bank. CECL future for back it's now. intended. earnings how set each in all, We all about that's mechanics XXs. in our great

working. of what loans the about is are smaller. I encouraged So that think But CECL is I'm number

round in next Thanks daily because and with But going the have located what the rates they had they summer our other cash I that's resort The the average comfortable that occupancy haven't primarily well Will would over going given flow with of of Probably occupancy Our demand. egregious to to And communities. hotel bridge program money returns the then consider out. coming rates, true conventional two from people Previously And to businesses. along October room stimulus is have then additional segment hotels, years the investors ago? to to have pretty doing decent their get Chicago PPP investor. like -- and summer. allocations modest to coming had has they through second worked sector higher they not. them the forward highways them. nothing for essential returns their rates communities. this this are that not very feel I through But resort gap. they progress. non in was PPP in actually influx We're

hearing to we're the retail can't the on a consumer credit side. I wait but to believe quality which not from not up other this retail all sitting on sure who's side business side about So get summertime. sectors. you, travel cash, is definitely but pent us the standpoint, I'm again. the consumer for demand the there through Probably I

Brian Martin

of the release. the this size just you Yes. classifieds your trend in assets, level the gave size levels maybe credit Help, for I the And hotel, credit sure. given just comments on quarter? the how think guys But

Craig Dwight

that the XXX seen, they've banks sector. a board dive broad things we credit. attack Number when state. about we to it third-party we company meeting two, and we review Two that I'll of accepted distressed troubled which said a let all And make the best well. I'm deep how a talk Dennis lot downgraded Yes. our at loans, over at of looked address that. back recommended December modification, independent comment, and loans. sure to basically, into board the do to as Number the They one, to banks and are came want not I to in doing sectors. the our were our gave perhaps loan we one

how them to talked confidence that gives cut would in team their I to get their the So accounts. plans about our help to lot side. Look a me costs. other for alternatives When of manage capital

So in substandard very did that, Dennis proud in with But have quarter. about an done. of what we've that, let talk we increase fourth And Dennis? I the loans

Dennis Kuhn

manufacturers, seed largest who's [Indiscernible]. of about $X potential a Sure. centered quarter a recapitalization a during second uptick XX% payoff Yes. couple of and We latest. working here a commercial $XX credits, quarter, in about on the quarter relationships, Seven course. million, as was Several That's saw couple of distributor, first agribusiness, fourth during million. other or an the

nothing So really that see. I we that think

paid those. of putting loans, our losses course, plans the with you watching worked, in and nonperforming we together quarter, two actively to the favorable were those during we're those, didn't saw results as loans workout said, bank, Craig off, managing have on in fourth the decrease As particular additional take that

charge working off. of just plan our So identifying, and a again, our it's limiting repeating history

Craig Dwight

all true been industry our end year. quarter in me surprised was It

it's based asset of the had has in formula. the they of cell back because formula, booked a quarter. loans in have building inventories haven't inventory. gone -- yet. now primarily out the we've asset formula, here year, Our in a based Throughout Their that they're been have first has but less couple inventory. growth, on think their to dependence we building, formula going and the be They're they And formula

performed well. pretty So we've in the credits side, actually they manufacturing in though downgrades even the

Brian Martin

the And including classified to was mention, the you Dennis, clear, or was Or special on you. level? mention? Got just $XX special size, that mentioned million, of be did level comment the the credit at

Craig Dwight

substandard That was so category. substandard, in the

Brian Martin

get inclusive And they mention. of the special how did

credit the does of -- that that how Or does direction the same size trending way? how was number, So quarter? the

Mark Secor

impact. significant was There

As when Craig loans, we step mentioned, has we downgrade. a modified took one

see And additional and the special there those are we movement they're was over stable, reversal But as to we're early and getting in will year starting expect the we of mention. reduce. the again, actually opportunity to review progressed, we certainly payments. we've mention actually seeing, within they're So making we'll that credits, special time are again, some

at of favorable. some But this again, be level migration. point seeing So, been has what of there'll course, we're

Craig Dwight

sponsors our by that most special of have But substandard. someone our portfolio sponsors forward. assets, going outstanding XX million can in XX% liquid went heeled the plus hotel of example, with support dollars well into mention, Yes. Brian, hotels very in

Brian Martin

Got you.

for guys. taking Thanks the Okay. questions,

Craig Dwight

Brian. questions, the for Thanks

Operator

our over any to conference turn would for to Craig question the now answer and concludes back This I closing Dwight session. like remarks.

Craig Dwight

And Thank in look in for earnings speaking thank today's call. again hopefully you you person to Anita forward the near future. and in to participating we you

this of great day. Have Let's side pandemic. to the get you. Thank other a

Operator

attending Thank for conference concluded. now you has presentation. This today's

may disconnect. You now

Horizon Bancorp (HBNC) 28 Jan 212020 Q4 Earnings call transcript