Horizon Bancorp, Inc.

Good morning, everyone, and welcome to the Horizon Bancorp, Inc. conference call to discuss financial results for the third quarter of 2024. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. Before turning the call over to the management, please remember that today's call may contain statements that are forward-looking in nature. These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed, including those factors noted in the slide presentation. Additional information about factors that could cause actual results to differ materially is contained in Horizon's most recent Form 10-K and its later filings with the Securities and Exchange Commission. In addition, management may refer to certain non-GAAP financial measures that are intended to help investors understand Horizon's business. Reconciliations for these measures are contained in the presentation. The company assumes no obligation to update any forward-looking statements made during the call. For anyone who does not already have a copy of the press release and supplemental presentation issued by Horizon yesterday, they can be accessed at the company's website, horizonbank.com. Representing Horizon today are Executive Vice President and Senior Operations Officer, Kathy DeRuiter, Executive Vice President, Corporate Security and General Counsel, Todd Etzler, Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, Executive Vice President and Chief Financial Officer, John Stewart, Executive Vice President and Chief Administration Office, Mark Secor, and Chief Executive Officer and President Thomas Prem. At this time, I would like to turn the call over to Mr. Thomas Prem. Please go ahead, sir.

Good morning and thank you for participating in today's call. We are pleased to share our third quarter results that display another quarter of positive net income growth highlighted by expansion of net interest income and fee income combined with excellent credit quality. Horizon's positive third quarter results displayed on page four reflect the organization's commitment to continue to enhance our financial performance. The quarter reflected continued growth in our revenue models, driven by a fourth consecutive quarter of expanded net interest income and continued fee income growth. Average loan growth for the quarter was solid at 10% annualized, coming off the strong late June production we previously reported. It also reflects continuation of our strategy to grow our core commercial portfolio, coupled with a planned runoff of lower-yielding auto loans. The team remains very confident on its ability to find ample lending opportunities to grow in our local markets while maintaining our positive credit trends displayed throughout 2024. Verizon's deposit portfolio displayed solid growth with stability in its core non-interest-bearing balances and the franchise realizing the benefits of its commercial and consumer deposit gathering efforts. The granular and commercial and consumer deposit gathering efforts. The granular and tender deposit base continues to showcase very strong and sticky trends, with overall deposit costs increasing slightly. As our third quarter results displayed, the company has positive momentum on many fronts through a more productive balance sheet, revenue growth, and excellent credit metrics. The quarter did reflect slightly elevated expenses that, as John will discuss in his presentation, we expect to transition back to more normalized levels as we approach 2025. Additionally, within today's presentation, John will also be sharing detail on strategic actions initiated in the fourth quarter, which will further advance our efforts to create long-term shareholder value and significantly improve our operating performance in 2025. As highlighted in my opening comments, we're very pleased with the success in the quarter in average loan growth, revenue expansion, and continued excellent credit quality. To provide additional insight on our lending performance, I'll transition the presentation to our Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber.

Thank you, Thomas. Beginning on slide five, we have an overview of the loan portfolio as of September 30th with a mix of 60% commercial, 17% residential, and 21% consumer, reflecting our strategic shift in loan portfolio mix. Average loans increased 10% annualized from the linked quarter However, period and loan growth was flat, with primary growth predominantly in commercial loans and mortgage loans, coupled with a continued decline in lower-yielding auto loans. Transitioning to some detail on each portfolio, we have commercial loans highlighted on slide 6. For the third quarter, commercial loans increased $9.5 million, representing 1.3% growth on an annualized basis. Initial loan fundings were generally consistent with typical activity levels. However, net total commercial loans were impacted due to the previously noted acceleration of production in the second quarter results and the higher than average payoffs and line of credit paydowns in the third quarter. The core commercial pipeline continues to be stable with opportunities for growth in traditional commercial categories and the ramp up of our equipment financing divisions. Our equipment finance division has been well received and is meeting our expectations for new originations. We are continuing to focus our efforts on opportunistic growth and continued asset quality. Activity continues to be well diversified by industry and geography, and our portfolio makes it be consistent with our overall portfolio composition. Commercial credit quality remains strong, with past dues at September 30th of three basis points non-performing loan ratio of 24 basis points, and net recoveries of $58,000 year-to-date 2024. Turning to slide seven, consumer loan balances decreased $43 million during the quarter, reflective of our planned reduction in the indirect auto. The mortgage portfolio grew $3 million, representing 2% annualized growth. Overall, credit quality remained satisfactory in the consumer and mortgage portfolios, with delinquency and charge-offs within targeted ranges. Our asset quality metrics continue to be strong as outlined on slide eight. Substandard loans of $59.8 million represented 1.24% of loans reflecting an increase for the quarter of $8.6 million. While there is an increase for the quarter, So, several of the downgrades are viewed as temporary in nature and expected to resolve through loan payoffs and or improving performance. Non-performing loans increased in the quarter to $24.4 million, representing 51 basis points of total loans. This increase was principally attributable to two larger home equity loans, totaling $1.7 million, a $2.6 million single credit in the commercial portfolio, and $602,000 in mortgage portfolio. While an increase, one home equity loan has already been paid off, and remaining loans have adequate collateral and engaged borrowers with working with our lenders. The results in the third quarter remain within historical ranges, incomparable to our peer group performance, and we do not expect this moderate change to materially impact our outlook for charge-offs at this time. Net charge-offs for the third quarter were 375,000, reflecting a decrease from our most recent quarters and representing three basis points on an annualized basis. Charge-offs year-to-date remain predominantly in the consumer indirect auto portfolio. Finally, our allowance for credit losses modestly increased by approximately $700,000 and a quarter to $52.9 million, resulting in an allowance-to-loan ratio of 1.10%. The increase is primarily reflective of adjustments to our economic forecast and an increase of $177,000 in specific reserves. Provision expense of $1 million is a combination of the allowance increase and replenishing the reserve for third-quarter charge-offs of the 375,000. Future reserve amounts and related provision will be driven by loan growth and mix, economic forecast and credit trends. Overall, we feel our portfolios are performing well and the reserve is adequate based on current and forecasted charge off trends. Now, I'd like to turn things back to Thomas who will provide an overview of our deposit trends.