Horizon Bancorp's Q1 2025: Navigating Contradictions in Deposits, Margins, and Growth Strategies

Deposit growth and competition, margin expectations and rate cut impact, deposit cost trends, commercial loan growth expectations, and capital allocation strategy are the key contradictions discussed in Horizon Bancorp's latest 2025Q1 earnings call.



Revenue and Margin Expansion:
- Horizon Bancorp reported a 6th consecutive quarter of margin expansion, with a margin now above 3%.
- This trend was supported by positive revenue growth, quality loan growth, and a disciplined approach to expenses.
- The margin expansion was driven by the remixing of the loan portfolio towards higher-yielding assets and reductions in deposit costs.

Loan Growth and Distribution:
- Total loans held for investment grew by $63 million, with commercial loans increasing by $105 million and a 14% annualized increase.
- This growth was primarily funded by a $36 million reduction in indirect auto loans.
- The growth in commercial loans was attributed to strong performance in key markets and a favorable mix of commercial real estate and industrial loans.

Deposit Trends and Funding Costs:
- Horizon's core relationship balances remained stable, with noninterest-bearing deposits up modestly.
- The organization improved its funding position by utilizing market volatility to enhance its profitability.
- The stability in deposit balances and positive interest margin expansion were supported by strategic management of deposit pricing and duration.

Capital and Shareholder Returns:
- The company achieved a significant gain from the sale of its mortgage warehouse business, adding optionality to the capital position.
- Horizon's capital ratios improved, driven by organic profitability, the realized gain from the warehouse sale, and strategic balance sheet repositioning.
- The company is actively considering various strategies to enhance shareholder returns, including share repurchases, dividend increases, and potential M&A opportunities.