Bank's Q2 2025 Earnings Call: Unpacking Contradictions in Capital Strategy, Loan Growth, and Margin Outlook

Loan Growth and Asset Quality:
- Horizon Bancorp reported loan growth of 6% for the second quarter, with a 1.5% increase for the quarter and a 6.2% annualized growth rate.
- The growth was driven by strong demand in commercial and consumer loans, while the bank strategically reduced its indirect auto portfolio.
- Credit quality remained satisfactory with a 54 basis points nonperforming loans rate, and net charge-offs were low at 2 basis points.

Net Interest Margin Expansion:
- The bank's net interest margin improved by 19 basis points to 3.23% in the second quarter, excluding outsized interest recoveries.
- This expansion was attributed to strategic balance sheet management, disciplined pricing on loans and deposits, and favorable yield dynamics.

Deposit Trends and Funding Strategy:
- Horizon's core relationship balances remained relatively flat, with disciplined deposit pricing maintaining funding costs.
- The team leveraged diversified funding sources to manage costs effectively and position the portfolio well for future shareholder value.

Capital Accumulation and Strategic Use:
- The bank's capital ratios, including CET1, improved by 90 basis points over the last year, with ongoing capital generation from a profitable balance sheet.
- Management is considering potential capital actions, such as buybacks, while maintaining a disciplined approach to shareholder-friendly decisions.