Horizon Bancorp, Inc.

Good morning, everyone, and welcome to the Horizon Bank Corp, Inc. conference call to discuss financial results for the fourth quarter of 2024. All participants will be in a 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. 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, include those factors noted in the slide presentation. Additional information about the 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 DeRyder, Executive Vice President, Corporate Secretary and General Counsel, Todd Etzler. Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber. Executive Vice President and Chief Financial Officer, John Stewart. Executive Vice President and Chief Administration Officer, Mark Secor. And Chief Executive Officer and President, Thomas Prem. At this time, I would like to turn the call over to Thomas Prem. Please go ahead.

Good morning, and thank you for joining us. We're pleased to share our fourth quarter results, as well as the well-executed strategic initiatives outlined in our last earnings call, which has improved Horizon's ability to deliver long-term value to its shareholders. The outcome of the team's collective effort in the quarter resulted in exceptional loan growth, a significantly improved net interest income and margin, positive credit metrics, and a restructured expense base that will benefit the organization moving forward. Page four displays Horizon's positive fourth quarter results, reflecting the organization's commitment to continually advance our financial performance through accretive actions focused on shareholder value. The quarter delivered continued growth in our core revenue models, driven by a fifth consecutive quarter of expanded net interest margin. Additionally, the team produced annualized loan growth excluding warehouse balances of 10%, reflective of our commitment to dedicating resources to expanding profitable core commercial relationships while continuing to reduce the portfolio of lower yielding auto loans. As we move into 2025, the team remains confident on its ability to find ample lending opportunities in our local markets while maintaining the positive credit trends that have been the cornerstone of strength for the organization. Verizon's deposit portfolio displayed solid trends with core deposits remaining flat and the company electing to allow higher price transactional CD balances to roll off the balance sheet to improve the organization's overall profitability. The granular and tenured deposit base remained strong and benefited the organization with Fed rate cuts during the quarter. Our fourth quarter results continue to advance the financial health of the franchise through a more productive balance sheet, delivering strong net interest income and excellent credit metrics. As communicated previously, the organization expected the fourth quarter expenses to be elevated in select areas of compensation, benefits, and third-party services. Strategic initiatives in these areas, completed in the quarter, allowed the organization to restructure our goal-forward cost structure, which will lead to a more efficient baseline in 2025. John will provide additional insight on this topic later in the presentation. As I noted in my opening comments, we're very pleased with our results in the fourth quarter and the financial positioning of the organization heading into 2025. A key part of our optimism is the positive momentum of loan growth and quality credit metrics. 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. Good morning. I am pleased to share a very positive momentum and results in the fourth quarter. Total loan toll for investment, excluding mortgage warehouse, grew $123 million, representing 10% annualized growth. Growth was predominantly in our core commercial lending segments and increased activity in the retail mortgage lending segment. Net loan growth for the year, excluding the mortgage warehouse, was $408 million, representing growth of 9% for 2024. The net results also take into consideration the strategic reduction of indirect auto loans, which ended the year at $294 million. Transitioning to some detail on each portfolio, we had commercial loans highlighted on slide six. It was a very strong quarter for commercial lending with net loan growth of $164 million, representing 22% annualized growth. As noted in my third quarter remarks, production from quarter to quarter is impacted by the timing of new production, seasonal funding on construction and operating lines, and payoff activity. For the full year of 2024, our growth was $403 million, representing 15% increase. While the timing from quarter to quarter may vary, we anticipate our annualized growth rates remain generally consistent. We continue to stay focused on our core markets, primary segments of owner-occupied and non-owner-occupied commercial real estate, traditional C&I lending, and small and mid-ticket equipment finance. Commercial credit quality is performing well with December 31, 2024 key metrics at or below peer performance. Key metrics include past due loans greater than 30 days of 10 basis points, non-performing loan ratio declining from the third quarter ratio of 24 basis points to 19 basis points, and net recoveries of 95,000 for 2024. In addition, we observed positive migration in the fourth quarter with the upgrade and payoff of several non-performing credits. Turning to slide seven, Consumer loan balances decreased $42.1 million during the quarter, reflective of our continued wind-down in indirect auto lending. Excluding indirect auto lending, core consumer loans remained flat with primary activity being home equity lending. Residential mortgage lending modestly grew during the quarter. We continue to opportunistically expand our mortgage lending team with local in-market lenders that are relationship-focused, and work well with our commercial and retail teams. We expect to realize increased mortgage lending activities in 2025 through continued disciplined sales process and outbound calling efforts. Overall, credit quality remains satisfactory in the consumer and mortgage portfolios with delinquencies and charge-offs within targeted ranges. Our asset quality metrics continue to be strong as outlined on slide eight. Substandard loans of $43.2 million represented 0.89% of loans, reflecting a decrease for the quarter of $16.5 million. We are fortunate to have a large commercial non-accrual payoff as well as positive migration on several substandard commercial loans. Non-performing loans were $27 million, representing 56 basis points of total loans that excludes mortgage warehouse this quarter. The quarterly increase was predominantly consumer-revolving bonds, which are supported by credit enhancements and residential mortgage loans offset by reduction in commercial loans. The results in the fourth quarter remain within our historical ranges, and we do not expect this change to materially impact our outlook for performance in these segments. Net charge-offs for the fourth quarter were $621,000, reflecting an increase from most recent quarters. Charge-offs year-to-date remain predominantly in the consumer indirect auto portfolio. Finally, our allowance for credit losses decreased by approximately $900,000.25 to $52 million, resulting in the ACL loan ratio of 1.07%. Primary drivers in the ACL components are loan growth, the elimination of the mortgage warehouse allocation available for sale accounting, and changes in specific allocations. Provision expense of $1.2 million is a combination of the ACL increase, replenishing the reserve for fourth quarter charge-offs of $621,000, and a change in allocations for unfunded commitments. Future reserve amounts and related provision will be driven by loan growth and mix economic forecast and credit trends. Now I'd like to turn things back to Thomas, who will provide an overview of our deposit trends.