Horizon Bancorp, Inc. Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
Is Horizon Bancorp, Inc. a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $989.92m | Estimated Revenue = $313.80m
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $1.37b | Revenue (TTM) = $-13.02m
Enterprise Value = $1.37b | Forward Revenue = $313.80m
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🧮 Calculation
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Horizon Bancorp, Inc. Stock Analysis
Analyst Opinions
11 Analysts have issued a Horizon Bancorp, Inc. forecast:
Analyst Opinions
11 Analysts have issued a Horizon Bancorp, Inc. forecast:
Horizon Bancorp, Inc. Events
Past Events
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JUL
23
Q2 2026 Earnings Call
2 months ago
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APR
23
Q1 2026 Earnings Call
5 months ago
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JAN
22
Q4 2025 Earnings Call
8 months ago
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OCT
23
Q3 2025 Earnings Call
11 months ago
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StocksGuide Free
Horizon Bancorp, Inc. — Q2 2026 Earnings Call
1. Management Discussion
Good morning, everyone, and welcome to the Horizon Bancorp, Inc. conference call to discuss financial results for the second quarter of 2026. [Operator Instructions] Now I will turn the call over to Todd Etzler, Executive Vice President, Corporate Secretary and General Counsel for the opening introduction.
Good morning, and welcome to our conference call to review Horizon's second quarter results. 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 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 may be accessed at the company's website, horizonbank.com.
Representing Horizon today are Executive Vice President and Senior Operations Officer, Kathie DeRuiter; Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber; Executive Vice President and Chief Legal and Risk Officer, Todd Etzler; Executive Vice President and Chief Financial Officer, John Stewart; and Chief Executive Officer and President, Thomas Prame. At this time, I will turn the call over to Thomas Prame. Thomas?
Thank you, Todd. Good morning, and we appreciate you joining us. Horizon's second quarter results continue to highlight the strength and durability of our community banking model and management team's commitment to delivering shareholder value. The quarter continued to show impressive results with a net interest margin in the mid-4.30% range, strong fee income performance and excellent credit trends. These results advance our capital levels with CET1 of 11.09% and total risk-based capital of 15.01% at the end of the quarter. As we unpack the first half of 2026 performance, we are pleased with our practical approach to balance sheet growth with year-to-date deposit growth of approximately 5% annualized, coupled with quality lending growth of approximately 4% annualized, led by a strong commercial loan performance of 5.7% annualized in the second quarter.
These results align well with our full year expectations and display our disciplined approach to growth on both sides of the balance sheet while maintaining the consistency in our net interest margin performance throughout the year. Our strategy of efficient balance sheet growth, coupled with expansion of our fee income verticals and conservative approach to credit positions the company well for continued positive shareholder value generation in the second half of 2026. As communicated to the market previously, the company did establish an accrual for legal expenses related to an unfavorable litigation decision in the second quarter.
We anticipate this accrual will remain in place until the company finalizes its appeal process in subsequent quarters. Excluding this one-time event, which represents earnings of approximately $0.05 per share in the quarter, the second quarter results were positive on many fronts, expanding on our momentum from the first quarter and aligned with our full year expectations. Overall, we believe it's been a very successful start to the first half of 2026, and John will provide more specific details concerning our second quarter and year-to-date results.
The performance level of the franchise to date and the positive financial results we have delivered for our shareholders have been very strong, and we remain optimistic on this outlook as we head into the second half of 2026. At this time, I'd like to hand the presentation over to Lynn Kerber, Horizon's Executive Vice President and Chief Commercial Banking Officer, to provide additional insight into the quarter's excellent lending and credit performance. Lynn?
Good morning. The second quarter was another solid quarter from a lending perspective and showed growth over the first quarter. We generated strong commercial growth, maintained stable credit metrics and continue to deploy capital in a disciplined manner despite a competitive market environment. What I find most encouraging is not just the level of growth, but the composition of that growth. We continue to win attractive relationship opportunities across our footprint while maintaining the underwriting and pricing discipline that supports long-term profitability.
As outlined on Page 4, loans held for investment ended the quarter at just under $5 billion, increasing approximately $81 million or 6.6% annualized. Commercial Banking continued to drive growth with commercial balances increasing approximately $64 million during the quarter. Residential and consumer portfolios contributed modest growth during the quarter and continue to perform well. Mortgage pipelines have improved entering the third quarter, supported by recent production trends and strategic hiring initiatives.
Page 5 provides an overview of our commercial lending portfolio and performance in the second quarter. The vast majority of our growth came from C&I lending, which increased approximately $62 million (sic) [ $63 million ] to 31% of the commercial portfolio. Growth was broad-based across the franchise with strong contributions from our Michigan markets as well as Indianapolis and Northwest Indiana.
While commercial balances increased meaningfully, commercial real estate balances remained relatively flat. This was primarily the result of elevated payoff activity rather than weaker production. The majority of payoffs occurred because customers successfully executed business plans through property sales or reached the natural conclusion of a financing need. We remain committed to our underwriting standards and rate discipline rather than compromising long-term credit quality or profitability.
Regarding the C&I activity, the strongest growth came from our community banking franchise and was augmented by our equipment finance team. Primary segments were professional services, construction services, property management, warehouse and logistics and utility-related businesses. Importantly, this growth was not driven by 1 or 2 large transactions, rather it reflects healthy activity across a broad group of customers and the continued success of our relationship banking strategy. These relationships often extend beyond lending and create opportunities for deposits, treasury management payments, which are strategic priorities for the bank.
Credit quality continues to be a significant strength for Horizon. Net charge-offs were approximately $605,000 or just 5 basis points annualized. That remains exceptionally low relative to both historical levels and peer performance. More importantly, we are not seeing deterioration in the underlying trends that would suggest a meaningful change in our outlook. Early-stage delinquencies remain low and well controlled, while borrower performance remained stable across the portfolio.
Substandard loans totaled $64.6 million or 1.3% of loans and were essentially unchanged from both the prior quarter and prior year. Nonperforming loans declined during the quarter to $34.9 million or 0.70% of loans. The key takeaway is that criticized asset levels remain stable, nonperforming loans improved and loss experience with the portfolio continues to be very low. The allowance for credit losses remained stable at $51.9 million or 1.05% of loans held for investment.
We believe the reserve remains appropriate given current portfolio performance and economic assumptions. Overall, we delivered another quarter of strong commercial growth led by C&I lending while maintaining disciplined underwriting and stable credit performance. With healthy pipelines, strong customer activity and a diversified portfolio, we believe Horizon remains well positioned to continue delivering profitable growth through the remainder of 2026.
I'll now turn the call back to Thomas for a discussion of deposit trends and the balance sheet.
Thank you, Lynn. Transitioning to our deposit portfolio displayed on Slide 8. Horizon's deposit portfolio for the first half of 2026 continued to deliver favorable performance with positive growth in its major categories of noninterest-bearing, interest-bearing segments with CD balances relatively flat year-to-date. As mentioned in our Q1 earnings comments, the company expected to be a net user of the strong deposit gathering efforts generated in the first quarter and leverage this liquidity as fuel for our quality loan growth in the second quarter.
This agility in our business model helped maintain our historically low cost of interest-bearing deposits, increasing only 4 basis points in the quarter, while providing ample funding capacity for loan growth, which was led by the commercial team in the second quarter. Year-to-date, deposits are up $125 million, representing a 4.8% annualized growth rate. As we move forward, the franchise remains highly engaged on pairing core deposit growth with common sense community lending efforts in our local markets.
These activities have produced solid year-to-date performances on both sides of the balance sheet, and we remain committed to this parallel strategy of growth and margin management as we approach the second half of 2026.
Let me hand the presentation over to our Executive Vice President and Chief Financial Officer, John Stewart, who will walk through additional income statement highlights and the continued positive outlook we see for the remainder of 2026. John?
Thank you, Thomas. As you can see on Slide 9, the net interest margin expanded by another 8 basis points in Q2 to 4.37%. As noted in Thomas' comments, we expected to be a net user of cash in the second quarter, which turned out to be the case, with average interest-earning cash down about $59 million. This result was certainly a favorable contributor to the margin expansion in Q2. As we have said all year, the movement of average cash quarter-to-quarter has the potential to impact the net interest margin percentage, but has little impact on net interest income dollars.
More notably, we saw expansion of the spread between loan yields and total deposit costs. Loan yields increased by 9 basis points versus the prior quarter compared with a 3 basis point increase in total deposit costs, inclusive of noninterest balances. This, coupled with the favorable earning asset mix shift previously mentioned, drove the margin expansion we experienced during the quarter.
Looking ahead, I'll make a few comments. Loan yield dynamics remain generally favorable. The weighted average new production rate on total loans was about 6.75% in Q2, which has continued thus far in July. This compares favorably to current book yields, as you can see, and expected cash flows over the coming quarters, which should approximate $150 million per quarter coming off in the 6.2% range. As noted last quarter, and as we saw in Q2, it was and continues to be our expectation that interest-bearing deposit costs trend modestly higher from here with no additional rate cuts.
Given the loan yield dynamics just mentioned, we do have some promotional deposit pricing in the markets aimed at winning new households and greater wallet share. During Q2, our weighted average deposit production costs were in the range of 2.3%, inclusive of the mix of production in noninterest-bearing balances. Therefore, marginal growth in loan and deposits should be generally supportive of our net interest margin and net interest income outlook.
Cash balances will continue to move the margin percentage around with balances ending the quarter $44 million above the average and our expectations for loan and deposit growth, we would anticipate average cash over the balance of the year to exceed the $102 million we saw in Q2. The result is that we anticipate the margin percentage to be in the range of 4.3% to 4.35% over the second half of the year.
Finally, you'll note that the outlook on Slide 13 now includes the general market expectations for 25 basis point Fed hike later in the year compared with 2 cuts in our initial 2026 outlook in January and no rate changes in our April update. As was the objective all along, we feel our interest rate exposure is very close to neutral, and therefore, our net interest income and margin outlook have remained unchanged all year.
As you can see on Slide 10, noninterest income results were strong during the quarter, growing 10% compared with the year ago period, led by fiduciary activities and mortgage, which each grew by about 20% year-on-year. Both business lines are benefiting from new leadership, investments in talent and improved sales management practices.
Additionally, we were pleased to see an acceleration in year-over-year growth in interchange fees as both card usage and spend experienced growth in the current period. On Slide 11, expenses came in at $43.8 million, which includes the previously announced $3.1 million legal charge. Excluding this item, expenses were modestly better than expectations and largely unchanged from the prior quarter as operational efficiency and positive operating leverage remain a focal point. We did see the anticipated uptick in salary expense and higher strategic marketing spend, which was largely offset by seasonal declines in benefits and occupancy costs and lower professional fees.
Turning to capital on Slide 12. While the aforementioned legal charge modestly impacted the growth in capital ratios, Q2 results drove another nice sequential increase with CET1 up 28 basis points to 11.09%. This result was driven by continued strong levels of operating profitability and modest sequential growth in risk-weighted assets as we continue to proactively manage the deployment of risk capital across the balance sheet. As we have previously communicated, we are very comfortable with the company's capital position, particularly considering the sustained high level of profitability we are expecting.
As our 2026 outlook suggests, the expectation is that we will continue to accrete capital quickly, which you will see over the balance of the year. Turning to Slide 13. Our guidance for 2026 is modestly more favorable. Period-end loan and deposit balances are still expected to grow mid-single digits, which would suggest loan and deposit growth to be well balanced in dollars over the second half of the year. As we have consistently noted, balance sheet growth will be driven by deposit growth going forward, and this strategy has not changed.
Non-FTE net interest income is still expected to grow in the low teens year-over-year with the FTE net interest margin over the second half of the year in the 4.30% to 4.35% range, assuming higher cash balances going forward. Average earning asset balances are still expected to modestly exceed $6 billion for the full year. This outlook now includes one 25-basis-point rate hike in October compared with no changes to rates in April. This change in assumption did not impact the outlook. Fee income is still expected to be in the mid-$40 million range for the year with results generally consistent quarter-to-quarter. Excluding the $3.1 million legal charge in the second quarter, expenses are now expected to be in the low to mid-$160 million range for the full year.
This would suggest a quarterly run rate similar to what we experienced in the first half of the year, excluding the legal charge. The effective tax rate is still anticipated to be in the range of 18% to 20%. Overall, we are pleased with the results over the first half of 2026. As the guidance suggests, it should be a strong second half of the year for Horizon as well. Balanced growth with durable peer-leading returns on assets, return on tangible common equity and top quartile capital generation. With that, I'll turn the call back over to Thomas.
Thank you, John, and I appreciate the financial insights and the updated outlook for 2026. Horizon's strategy remains consistent as we move into the second half of 2026 with a relentless focus on creating long-term shareholder value. We believe our current performance levels, reflecting durability in key financial metrics, coupled with consistent profitable growth, a disciplined operating model and peer-leading capital generation will produce a level of success that will warrant your continued investment in Horizon. We are confident in what we believe will be a very positive outlook for our shareholders in 2026, and we look forward to sharing our third quarter results in October.
At this time, I'd like to turn the presentation back over to our moderator to open up the line for questions for the management team.
[Operator Instructions] Our first question comes from Damon DelMonte with KBW.
2. Question Answer
Just want to start off with the margin. I appreciate the color, John, that you gave on the outlook there. Just want to make sure I understand the dynamics here. So basically, I think from a growth perspective, you're still seeing a positive benefit on the asset yield side, but it sounds like that the funding costs might get to kind of creep up a little bit, which could ultimately weigh on the margin from the 2Q level of 4.37% if you're guiding towards 4.30% to 4.35%. Is that the right way to think about it?
Damon, thanks for the question. Yes, not really. Let me see if I can clarify. So yes, as you alluded to, the trends on the asset side continue to be favorable, as I talked about in my prepared remarks, both in loans and in the bond portfolio, quite frankly, in terms of cash flow reinvestment money coming on versus what's coming off. marginal growth has the same dynamic with new production closer to 6.75% in the quarter, which, as I said, has continued here into July.
We will see some modest increase in interest-bearing deposit costs, but I think the net of those 2 is probably neutral, maybe slightly favorable. As it relates to the margin percentage itself, it's purely a mix issue with cash, Damon. So cash averaged $102 million in the second quarter.
Period end, it's well above that. And so far here in July, it's about $165 million. So it's simply carrying more cash, which is going to be marginally accretive to net interest income in dollars, but marginally dilutive to the percentage. So it's nothing more than that.
Got it. Okay. I was totally off base there. And then I guess just secondly on kind of loan growth, nice to hear the continued optimism there. I guess, Thomas -- or Lynn, any kind of updated view on what areas of the portfolio as well as the geographic footprint are kind of supporting this outlook?
Yes. As I've shared in the past, we're not looking at anything holistically different than what we've been doing. We're focused on community banking. Our portfolio mix has been pretty consistent. You do see that we've been trying to expand into C&I a bit more, just overall managing the mix of the portfolio and watching our real estate mix.
I think we've been very successful in that. The team is doing a great job. So I think you're just going to see a continuation of our day-to-day type strategies.
And the next question comes from Nathan Race with Piper Sandler.
John, I was wondering if you could just elaborate a bit more on the strategy in terms of keeping higher cash balances. Is that just given some of the strength in the pipeline, you just want to keep some excess cash around to fund that growth? Or is it just not necessarily wanting to kind of add duration in the bond portfolio with the kind of short duration securities portfolio that you guys have now?
Yes. Thanks for the question. I don't think it's actively managing cash to $100 million versus $150 million or something a little bit north of that. Cash would be -- would feel pretty normal at 2% to 3% of earning assets. I think it's just the timing of the ebbs and flows of deposit balances. So you saw cash $165 million in Q1. It was down in Q2. It's going to be kind of second half of the year near where it was in Q1. I just think it's not some very intentional strategy to hold a higher balance.
Okay. And then you mentioned new loan productions coming on, I think, at a blended rate of 6.75%. That's above a lot of peers that we see across the region. Just curious if you can comment on what you're seeing from a competitive pricing perspective and what's really allowing you to get kind of premium pricing on new loans. Is it -- is it mainly coming from the equipment team? Or any other color along those lines would be helpful.
Thanks for that question. Pricing has been, I'll say, fluid, dynamic over the last 6 months. the first quarter, I'll say it was very competitively aggressive. And we very intentionally tried to manage our spreads. I think by trying to negotiate that with our clients, of course, also gathering deposits along the way. I think we saw the benefit of that in the second quarter.
But it is very dependent on the competitor, the market and the product. And there are certain credit quality deals that I'll say that we'll be more aggressive on and just trying to manage overall pricing for your "average credit". So I don't know that it's one thing. It's just a matter of trying to make sure that we're aligned both market-wise and credit-wise.
Okay. Got it. And then maybe if I could just sneak one more in for Thomas or John. You guys mentioned how you're continuing to build capital at a pretty strong clip just given the profitability profile these days. Any targeted capital ratios that you guys are looking to manage to going forward?
And just how you guys think about kind of alternative avenues to deploy excess capital these days between buybacks? And just curious within that context as well, what you're kind of hearing and seeing on the acquisition front?
It's Thomas, thanks for the question. I'll pair this with John and some of the responses. First, I appreciate the acknowledgment of the capital generation of the profile of the bank right now. It's given us tons of optionality to create long-term shareholder value. We do not have a published capital level that we're shooting for that we've communicated out in the marketplace. As you look at us right now, CET1 just above 11%. I wouldn't consider us overcapitalized at that level.
Again, we're going to be accreting capital very well going forward. But when I look at our options, specifically speaking of M&A, as we've talked about before, we really feel as though we have a very strong organic growth strategy that is producing some top-tier results, both in our profitability metrics and also capital generation. And we're very optimistic about our ability to continue this organic strategy going forward at a very attractive pace, not only on the balance sheet, but also the fee income verticals and while maintaining our disciplined operating model.
Now M&A for us is really an accelerant to the strategy. And as opportunities come up in our ability to review these, we'll continue to be agile about making sure that we create a long-term shareholder value proposition. But capital is not going to burn a hole in our pocket. We'll be very disciplined about deploying that, especially as it comes to M&A and making sure that we keep a long-term view about how to create shareholder value and not just a short-term quarter-to-quarter. And John, I'll pass it over to you some thoughts on buybacks.
Sure. Thanks. Yes. So as we said in the prepared remarks, capital, again, the build was -- happened pretty quickly this quarter. The expectation would be that, that would continue. We can't use all that capital organically. We know that, at least not responsibly. And so as it relates to the buyback specifically, we've got 1.5 million shares left on the prior authorization.
We just will continue to evaluate that the same way we would any of the other capital deployment alternatives. I think it's fair to say we feel comfortable about the capital position looking forward. So we're going to have to do something with it at some point. And we certainly do feel like there's some intrinsic value upside to the business with the stability and the profitability mix that we see today as we look over the forecast horizon. So there's probably some intrinsic value upside to the shares as we feel. And so we'll take a look at all of them, including buybacks.
[Operator Instructions] Our next question comes from Brendan Nosal with Hovde Group.
Maybe just starting off here on kind of the footprint and kind of some changes in the backdrop. I had a deal announced in your neck of the woods in Northwest Indiana earlier this week. I know that it's early days, but just wondering, based on kind of your knowledge of that franchise, whether you think there's any opportunities to capitalize on dislocation, whether it's on the kind of the talent side or commercial clientele.
Thanks for the question. I appreciate it. I think as we look across our franchise, not only in Northwest Indiana, but also across Michigan, kind of Northeast Indiana, any time that there's going to be a transaction in the marketplace with Horizon's value proposition, our long roots in the marketplace, we see that we believe there's going to be an upside for us.
With any type of change, there's an opportunity for people to reevaluate whether it's relationships or what their go-forward plans are for employment. Horizon has had a great I'll say, brand in the marketplace around being successful in helping create careers and also helping clients. So I would anticipate as we see a disruption in the marketplace, we would benefit from that.
Okay. One more for me. Just you spoke to the competitive environment at various points in the call. I'm just kind of curious, when you look at the landscape, what do you think is more competitive right now? Is it lending? Or is it deposit gathering?
I think it depends which part of my franchise you're talking to. I think as you look out in the marketplace right now, large commercial real estate, I think, is extremely competitive, not only in pricing but also in structure. And then, of course, on the new deposit front, we are seeing some relatively elevated rates on CDs, especially as you get into some of the credit union markets.
But again, our business model is not a price-to-market strategy. Our business model truly is about relationship banking and our community model. So for us, I think as Lynn highlighted before, our ability to make sure that we have the right people, the right engagements in the marketplace, we should do pretty well on pricing. Our strategy is not to be lead the market with rate. Our strategy is to lead the market with people and talent and relationships.
And the next question comes from Brandon Rud with Stephens.
So I think you kind of alluded to it in the last question there, but the elevated payoffs in the commercial real estate portfolio, is that being more driven by building sales or hypercompetitive rates from other -- some other competitors?
Yes. As I shared in my prepared remarks, it's mostly attributable to our customers fulfilling their business purpose. So we've had some larger commercial real estate loans on the books. Those developers have reached a point where the business -- I'm sorry, the building project has reached their turning point that they want to sell it and reap the benefit of the investments that they made.
So I would say, when I looked at our payoff activity, it is really more around that. Or it may have been a working capital or short-term need for financing that has now been fulfilled. I'll be candid, there are a couple of deals that we did let go over pricing structure. Those customers were able to get something more aggressive in the market, and we elected not to compete on that.
Again, we're focused on the mix of our portfolio and our overall profitability. It's a hard decision sometimes, but we're looking at the bigger picture.
Got it. Okay. And then just maybe one question on the nonperforming loans. They were down in the quarter, but the mix changed a bit. Commercial ticked a bit higher. I guess, can you maybe talk about that portion of the nonperforming loans? Was that on the C&I side, CRE? Just any thoughts there?
Yes. So first of all, on the mortgage and consumer reduction, we had some clients that were in nonperforming status that we were able to upgrade. So we're very pleased with that. On the commercial, I don't think that there's anything there that's concerning to me. Our commercial real estate performing really well.
We do have a couple of larger credits. And when I say larger, like $2.5 million that moved into that bucket last year. One of them is rehabilitating, and we are hopeful that, that will be upgraded. And we have 2 that we're pursuing collection efforts, and it's just taking a little bit longer than expected. No concerns. It's just working through the process.
Relative to the changes, as I've shared in the past, I do see it as more of a migration. When I look at our criticized loans, those have been flat or declining. The only other thing I'll share is -- keep in mind that we added our equipment finance division roughly 2.5 years ago, and that portfolio is starting to season. So we'll start to see some activity there as well.
Got it. Okay. Maybe just one more modeling question, John. Thanks for the comments on the loans that are maturing and the new loan yields. What does the opportunity look like on the securities portfolio? What's the pickup in yield there now for those that are maturing?
Thanks for the question. Yes, reinvestment in the second quarter was in the high 4s. Reinvestment in the third quarter, just maybe we pivot a little bit and pull in the duration a little bit just given how the market has changed and spreads are pretty tight. So I would anticipate they're pretty neutral. So I would not expect a lot of change in terms of the earned yield on the balance sheet for securities.
And the next question comes from Brian Martin with Brean Capital.
Maybe just one. I think you guys mentioned just on the mix on the loan side, just kind of the real estate kind of where you -- where your concentration levels are? And kind of can you just remind us where are you expecting to kind of keep that? Or kind of what areas on the real estate side concentration are you -- what ratios or concentrations are you kind of targeting or maintaining?
It's John. So real quick, the concentration levels are about 235%. So we've got lots of room on the construction concentrations are even much lower than that. I think our expectation as capital at the bank continues to build that those continue to moderate lower, but we've got plenty of room there currently.
Okay. So both of them would go lower from where they are today is kind of your plan. Got you. Okay. And then how about just on -- I think, Lynn, you said that you commented on the payoffs this quarter. I guess, do you anticipate the payoffs being elevated kind of in the back half of the year? Or how are you thinking about that in terms of -- based on what your guidance is in terms of loans and just what your expectations are?
I would say that based on my knowledge of some pending payoffs, I would anticipate that Q3 may be similar to Q2. But again, it's more episodic than payoffs from just throughout the portfolio. So I wouldn't say there's going to be a wholesale change, at least for Q3, Q4, I would expect they would return to more of our normal pace.
Got you. Okay. And the -- John, I think you commented on the deposit pricing. What do you anticipate the deposit pricing? Did you say 2.30%? I forget what -- I couldn't hear what you said on what it was this quarter, but that level is kind of continuing into the third quarter here? I know you talked about the loan side, but just on the deposit side.
Yes, that was the weighted average, including noninterest-bearing balances for new production over the last few quarters. But of course, the ebb and flow of balances on the balance sheet will drive the deposit costs more than anything else. So I think maybe to pinpoint your question a little bit. So interest-bearing deposit costs were 1.94% in Q2. They were 1.95% in June and are 1.95% in July. So we just haven't really seen them move a whole lot.
Yes. Okay. That's what I was getting at. It's not much incremental, if anything, going higher on that front. So Okay. That's helpful. And then the last one for me was just -- you talked about M&A being an accelerant. If it is something you guys consider, can you just remind us what's important to you guys today? And if you did, I'm assuming nothing has changed, but just what is important if you go down that road to consider something on that front?
Thanks for the question. As we look at it, very much industrial logical. We would look for things that are either fill-ins or natural extensions of our franchise, but it really -- for us, we look at the core deposit franchise. There's lots of things you could do with the balance sheet, but we'll be looking for something that has attractive core deposits that we can continue to leverage cultural fits.
But again, you won't see us go significantly outside of those -- that strategy box. And we'll just be -- we'll be patient. And with our earnings profile, our history of being good acquirers, as things come to market, we are getting a nice chance to engage in those dialogues, and we'll remain agile, but also very disciplined in our approach.
And the next question comes from Nathan Race with Piper Sandler.
All right. This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Again, thank you for participating in today's earnings call. We appreciate your time and interest in Horizon. We look forward to sharing our third quarter results in October. Thank you very much, and have a wonderful day.
The conference has now concluded. Thank you for joining. You may now disconnect.
Horizon Bancorp, Inc. — Q2 2026 Earnings Call
Horizon Bancorp, Inc. — Q1 2026 Earnings Call
1. Management Discussion
Good morning, everyone, and welcome to the Horizon Bancorp conference call to discuss the financial results for the first quarter of 2026.
[Operator Instructions]
Now, I will turn the call over to Mr. Todd Etzler, Executive Vice President, Corporate Secretary and General Counsel, for the opening introduction. Please go ahead.
Good morning, and welcome to our conference call to review Horizon's first quarter results. 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 may be accessed at the company's website, horizonbank.com.
Representing Horizon today are Executive Vice President and Senior Operations Officer, Kathie DeRuiter; Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber; Executive Vice President and Chief Legal and Risk Officer, Todd Etzler; Executive Vice President and Chief Financial Officer, John Stewart; and Chief Executive Officer and President, Thomas Prame. At this time, I will turn the call over to Thomas Prame. Thomas?
Thank you, Todd. Good morning, and we appreciate you joining us. Horizon's first quarter results demonstrate the core strength of our community banking model and our commitment to shareholders to deliver a top-performing organization through durable peer-leading performance metrics and top quartile shareholder returns.
We are very pleased with the quarter's results, displaying an annualized return on average assets above 1.60%, return on average tangible common equity above 19% and continued durability in our net interest margin at 4.29%.
These results drove a meaningful increase in our CET1 by 40 basis points to 10.82% and improved total risk-based capital of 14.77% in the quarter. Specific highlights within the quarter were led by the team's excellent deposit gathering efforts with over $147 million in growth or 11% annualized.
These results were further enhanced by approximately $61 million of growth within the noninterest-bearing segments of the consumer and commercial portfolios.
Our commercial lending team had a solid performance with $34 million in growth within the quarter with elevated pipelines that we believe will continue to fuel solid balance sheet growth throughout 2026. The positive momentum in the commercial was counterbalanced by episodic mortgage refinance activity in early Q1, where management elected not to chase lower-yielding mortgages onto the balance sheet and remain steadfast on its disciplined pricing.
We feel confident in this decision. We have seen loan balances quickly align with full year growth estimates in early Q2. This momentum, combined with our strong deposit balances, positions the organization well for solid organic growth on both sides of the balance sheet in 2026.
Additionally, our fee income efforts continue to make solid progress with year-over-year growth in our core relationship banking segments of service charges, interchange fees and fiduciary services.
Complementing these efforts, we continue to display excellent credit metrics with low charge-offs and nonperforming loans below historical norms. As I mentioned at the beginning of my comments, we're very pleased with the first quarter results for our shareholders.
Additionally, we are confident in our full year outlook heading into Q2 with strong lending pipelines, positive deposit trends, fee income verticals gaining stride and expenses well managed. It was a good start to the year on many fronts.
Let me transition the presentation over to Horizon's Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, who will share our lending highlights for the quarter and our continued excellent credit performance. Lynn?
Good morning. This quarter reflected steady disciplined commercial growth despite a competitive lending landscape and a dynamic rate environment. We continue to prioritize high-quality commercial lending, a well-balanced portfolio mix and continued pricing discipline. Our credit metrics remain stable, and we are exiting the first quarter with solid momentum.
Total loans held for investment ended the quarter at $4.87 billion, driven by a $34.2 million increase in commercial loans. As Thomas mentioned previously, residential and consumer loans were down in the quarter by $32 million as the leadership team elected not to leverage the balance sheet for lower-yielding mortgages in the first quarter.
Residential mortgage lending remains an important offering, and we expect growth in subsequent quarters as the rate environment stabilizes and yields are more attractive. Commercial loan growth was concentrated in the Grand Rapids, Indianapolis and Northwest Indiana market.
We continue to diversify the portfolio with 37% of the net quarterly increase attributable to commercial and industrial loans compared to their 30% share of the overall commercial portfolio. This mix reinforced the strength of our commercial franchise.
Credit performance remains satisfactory and within historical ranges. Substandard loans were $63.4 million, representing 1.3% of total loans, which is consistent with the 1.22% to 1.36% range over the past year and down from $66.7 million or 1.36% in Q1 of last year.
Nonperforming loans are $37 million, representing 0.76% of total loans, consisting of $16.7 million in commercial loans, $10.6 million in residential real estate loans and $8.4 million in consumer loans.
While nonperforming loans have increased modestly over recent quarters, levels remain manageable and consistent with a well-diversified portfolio. We anticipate improvement in the subsequent quarters of 2026 as we are forecasting several loans returning to performing status, payoff or completion of the collection efforts.
These loans are well secured and/or appropriately reserved, and we do not expect an impact on losses. Net charge-offs were $626,000 or 5 basis points annualized, aligned with our historically low loss experience and favorable compared to the 15 basis points reported by our UBPR peer group for 2025.
The allowance for credit losses remained stable at $51.3 million or 1.05% of loans held for investment. The $391,000 provision reflects replenishment of charge-offs and a reduction in reserve for unfunded commitments.
Going forward, provision levels will continue to be influenced by loan growth, portfolio composition and economic conditions. Overall, we delivered a solid first quarter of commercial loan growth while maintaining our credit profile.
We expect continued momentum in 2026, supported by positive trends in lending activity early in Q2, increased residential mortgage and consumer origination activity.
We remain well positioned to serve high-quality clients across our markets, and our disciplined approach continues to support balanced sustainable growth and strong shareholder returns.
I'll now turn the commentary back to Thomas for an overview of our positive deposit trends.
Thank you, Lynn. Moving on to our deposit portfolio displayed on Slide 8. Horizon's deposit portfolio had a very positive first quarter in terms of growth, portfolio mix and cost.
As mentioned previously, the portfolio growth of approximately $147 million comprised a good mix across both the consumer and commercial segments. The quarter was highlighted by $61 million in noninterest-bearing growth, reflective of the organization's continued efforts to expand sticky primary banking relationships within its attractive markets throughout Indiana and Michigan.
Even with the excellent growth in balances, the team was successfully able to reduce overall interest-bearing costs by 7 basis points in the quarter through consistent portfolio reviews with local leadership and an agile approach to local market pricing.
The franchise has found good rhythm in its deposit gathering efforts, and we believe our deposit portfolio continues to be well positioned to meet the growth and margin expectations of the organization with its granular composition and long-standing relationships in our local markets.
Let me hand the presentation over to our Executive Vice President and Chief Financial Officer, John Stewart, who will walk through additional first quarter financial highlights and the continued positive momentum we see for the remainder of 2026. John?
Thank you, Thomas. Turning to Slide 9. Consistent with our original outlook for the year, the net interest margin in Q1 was unchanged from the prior quarter at 4.29%.
The objective all along was to build a balance sheet with a level of profitability that was durable and largely inoculated from changes in rates. Though one quarter does not necessarily make a trend, we feel good about the performance in Q1 and would note that our net interest margin and net interest income outlook is unchanged from our original guidance despite going from the assumption of 2 rate cuts previously to none today.
Specific to the first quarter, I would note that average interest-earning cash balances did exceed our internal projections by about $60 million. You will recall the Q1 guidance called for average earning asset balances to decline from Q4 related to lower cash balances at year-end.
This did not happen primarily because deposit growth was stronger than expected in the quarter, which we were pleased to see. However, these higher cash balances did negatively impact the margin percentage by about 4 basis points in Q1.
Away from cash, underlying margin trends remain supportive. New loan production in the quarter exceeded 6.6% compared with average loan yields in the quarter of 6.28% and roll-off yields just below 6%.
In the investment portfolio, we are anticipating another $75 million to $100 million of principal cash flows over the balance of the year at about 4.7%. Reinvestment rates in Q1 approximated 4.8%. These earning asset trends should largely be supportive of the net interest margin, even with the expectation that our interest-bearing deposit costs may be flat to up over the balance of the year with no further rate cuts.
As you can see on Slide 10, noninterest income got off to a nice start in Q1. Excluding the $7 million warehouse gain and modest securities losses in the first quarter a year ago, fees were up about 13% year-over-year.
This result was driven by strong year-over-year gains in service charges and fiduciary activities. While mortgage gain on sale was flat year-over-year, the team is off to a nice start in the second quarter, such that we would still anticipate full year results to reflect solid progress in this business.
On Slide 11, expenses came in at $40.7 million, in line with expectations, particularly considering the seasonal headwinds in benefits and occupancy expense. These areas were partially offset by lower levels of spend on outside business services and the timing of marketing spend.
Looking ahead, we would anticipate a modest increase in quarterly expense run rate in Q2 related to the full impact of annual merit increases and planned marketing spend for specific growth initiatives. That said, there is no change to our outlook for full year expenses in the mid-$160 million range.
Turning to capital on Slide 12. Once again, capital ratios improved quite strongly in the quarter with CET1 up 40 basis points to 10.82%. This result was driven by strong profitability levels and a modest sequential decline in risk-weighted assets as we continue to proactively manage the deployment of risk capital across the balance sheet.
As we have previously communicated, we are very comfortable with the company's capital position, particularly in light of the derisked balance sheet we now have and as our 2026 outlook suggests the expectation that we will continue to accrete capital quickly, which you will see over the course of the year.
Turning to Slide 13. Our guidance for 2026 has not changed. Period-end loan and deposit balances are still expected to grow mid-single digits, which continues to infer deposit growth modestly more than loan growth in dollars.
As we have consistently noted, ultimately, balance sheet growth will be driven by deposit growth going forward, and this strategy has not changed. Non-FTE net interest income is still expected to grow in the low teens year-over-year with the FTE net interest margin in the range of 4.25% to 4.35%.
Average earning asset balances are still expected to modestly exceed $6 billion for the full year. This outlook previously included the assumption for two 25 basis point rate cuts in April and October, which have now been removed.
This change in assumption did not impact the outlook. Fee income is still expected to be in the mid-$40 million range for the year with results generally consistent quarter-to-quarter.
Expenses in the mid-$160 million range is also unchanged. As noted in my prior remarks, for the reasons noted, we would anticipate a modest uptick in the quarterly run rate from the level seen in Q1.
The effective tax rate is still anticipated to land in the range of 18% to 20%. Overall, we are pleased with the start to the year in 2026.
And as the guidance suggests, it should be a strong year for Horizon, steady growth with durable peer-leading returns on assets, returns on tangible common equity and top quartile internal capital generation.
With that, I will turn the call back over to Thomas.
Thank you, John, and I appreciate the summary of the quarter and the updated outlook for 2026. As we look ahead, our thesis will remain consistent with management focused on creating sustainable long-term value for our shareholders through our disciplined operating model, consistent profitable growth and peer-leading capital generation.
As you can see from our financial results, we continue to build significant shareholder value and optionality with a durable top-tier financial earnings profile, excellent capital generation and a premier community banking franchise located in some of the best markets in the Midwest.
We're confident in what we believe will be a positive outlook for our shareholders in 2026, and we look forward to sharing our second quarter results in July.
At this time, I'd like to turn the presentation back over to our moderator to open up the line for questions for the management team. Thank you.
[Operator Instructions] And our first question for today will come from Brendan Nosal with the Hovde Group.
2. Question Answer
Maybe just starting off here on kind of deposit growth and the margin. Obviously, exceptional deposit growth this quarter, but there's a bit of a drag on the net interest margin just given that elevated cash position.
As you look towards loan pipelines, how quickly do you think you can deploy that excess cash and then tie that into how you see the margin trending in the near term?
Having extra cash from good strong deposit growth in the quarter is not a bad thing, didn't impact net interest income, but had a modest impact on the net interest margin, as you noted.
Looking forward, in the second quarter, we would anticipate being a modest net user of cash, so possibly see loan growth slightly exceed deposit growth for the second quarter. But as you look over the balance of the year, as the guidance would infer cash was 3-ish percent of earning assets in the first quarter.
If it's between 2% and 3% over the balance of the year, that's within the realm of our expectations. So not really worried about having to deploy it quickly here. We'll continue with our strategic objectives on the liability side of the balance sheet, most notably.
Okay. All right. Maybe one more for me, just kind of at a broader top level, relatively nice in-line quarter from a PPNR perspective.
Reiterated the guide for 2026 kind of up and down the expectations set, but the environment does continue to evolve here. So I'm curious if there are any areas in the outlook where you feel incrementally better or worse versus 3 months ago? Or is it as simple as progress according to plan?
Thanks for the call. This is Thomas. Appreciate the question. No, I go with your second part of your response there about as expected, the outlook looks very similar, very strong first quarter and look forward to the next subsequent quarters.
The next question will come from Brandon Rud with Stephens.
Maybe the first question to kind of continue on the deposit growth topic. Are you seeing these client wins coming from M&A disruption in your markets? Or is this coming from more similar sized peers?
And thanks for the question. For us, this deposit strategy started last year around how we organize weekly, daily as a team and just the expectations we're putting out across all positions, client-facing positions about growing both sides of the balance sheet.
And so it's not a strategy targeted at one specific institution and/or geography area. I'd say it's an elevated lift across the entire portfolio. As we talked about in some of our comments, the growth we saw was both in consumer and commercial, equally distributed and also is distributed across both sides of the franchise in Indiana and Michigan.
So for us, we really see this more of just a true step-up in our organic efforts and really not a specific target of a disruption in the marketplace and/or a specific institution.
Got it. Okay. And then maybe on the loan growth side, how much did payoff activity affect the commercial balances last quarter?
There's a -- growth slowed a little bit. I'm just curious, I think for the full year, correct me if I'm wrong, but I think the mid-single-digit guide kind of implies maybe a bit above that for commercial loan growth. So I'm just curious if 1Q is maybe outsized payoffs.
This is Lynn, and thank you for your question. Payoff activity actually was very consistent with our long-term averages.
I would attribute it your question really more to just a little bit of seasonality in the first quarter, also being selective in where we're lending. So I don't really see payoffs as contributing to that in the first quarter, really just kind of looking at seasonality as the organic run rate.
The next question will come from Damon DelMonte with KBW. Pardon me. It seems that Mr. DelMonte is back in the queue. We will move on to our next question with Mr. Nathan Race with Piper Sandler.
Thomas, I was wondering or maybe, Lynn, if you could update us just on the equipment leasing team build-out, what you're seeing from a production standpoint.
And I believe in the past, you've talked about the leasing build-out could be a benefit to fee income going forward. So we're just curious if you could touch on that unit in particular.
Sure. When we first launched the Equipment Finance division, our business plan had certain assumptions to it. And we're in effectively year 2 of that plan, and the team has been running volume-wise, income-wise, a little bit between our year 2 and year 3 of the plan. So it's been going really well. The team has been built out. We have capacity there. So it's going as expected.
Okay. Great. And then maybe for Thomas or John, just going back to the earlier question. When you think about the outlook and the guidance that you laid out, I mean, as you look at the macro landscape, and I appreciate the margin is pretty neutral to rate changes along the curve, but we just kind of think about what would it take to drive upside to that outlook?
Would it just be greater certainty from a macro perspective, some additional commercial hires? Or just kind of any thoughts on kind of what could be some sources to drive some outperformance to those expectations?
I think it would be right down the line of what you just spoke to. As we talked about before, a bit of our governance around our balance sheet around deposit growth and core deposit growth. We have a very strong lending team that also has shown some incredible discipline, not just on credit, but also on spreads.
So accelerating our deposits and keeping that pace would give us some capacity to continue to grow the balance sheet. From a perspective of talent, let's see -- I think we'd like to see some more talent adds in some of our key markets in Grand Rapids, Lansing, Detroit down in Indianapolis, which could give us some accelerated growth. But overall, I think we have a great franchise to drive 2026 and any type of additional adds just being added to that.
Okay. Got it. That's helpful. And just one last one on capital management priorities going forward. To the earlier point, you guys are building capital at really strong clips and absent a buyback or an increase in dividend or some acquisitions, it seems like you guys are going to be operating with some significant excess capital levels.
So we're just curious to maybe hear some updated thoughts on how you're thinking about managing that excess capital inflow just to kind of optimize the return on tangible as well.
I appreciate the question. And also thanks for the acknowledgment around the capital generation of the new profile of the balance sheet. It's exactly what we wanted to do for our shareholder value proposition heading in 2026 and beyond.
As we have discussed before, our positive level of capital generation really does give optionality for our shareholder value proposition and whether that's going to be deploying it in accretive profitability, expanding our existing business model, buyback of shares or reinvesting some of the expanding some of our teams.
These are all tools that are in our toolkit right now as we look forward into '26. As you mentioned, we are very comfortable right now with our current capital levels and also the additional growth in capital.
It's really not going to burn a hole in our pocket. We'll be continuing very disciplined in the approach on that and making sure we make sound decisions going forward around shareholder value. But again, very pleased with what the balance sheet is producing and also the outlook for our levels going forward.
The next question will come from Damon DelMonte with KBW.
Hopefully, you can hear me this time. Just had a question about the commercial loan outlook. Thomas, could you just kind of -- or maybe, Lynn, just give us a little bit of color as to what areas of the footprint and segments are driving the optimism?
As you can see from our historical performance, we've been pretty balanced in our overall portfolio mix and our originations. I don't anticipate that to change.
As I noted in my comments, we are looking to add some additional C&I and just diversify the overall portfolio, and we've been seeing the results of that over the last several quarters. So I don't expect our business model to change substantially. We're just balancing the right mix in the portfolio, pricing discipline and credit quality, of course. So no substantial changes.
As far as the outlook, I think it remains really unchanged at this point. We had communicated single-digit loan growth or mid-single-digit loan growth for the year. I think we're on track for that. So we're just really sticking to our knitting at this point in time.
Great. And then kind of with regards to market disruption, particularly in Michigan, are you seeing any opportunities to maybe add lending teams or target any potential additional hires?
We added to our team substantially over the last few years, and we feel like we have capacity with our existing team, very talented group of bankers, a lot of experience. So I feel good about that. That being said, we always have an eye for talent, and we'll look at that opportunist.
[Operator Instructions] our next question will come from Brian Martin with Brean Capital.
I wanted to just see if you could talk about just the -- it sounds like the pickup on the roll-off of the securities is maybe 10 basis points at this point.
Can you talk about where the pickup is on the loan portfolio? And then just in particular, what yields you're getting on the new commercial product?
And then also just in terms of growth, whether it be Lynn or somebody else, just obviously, the residential and consumer were down this quarter. I guess, can you talk about where is the appetite on the consumer and residential side? And just remind us what your growth outlook is for those components over the balance of the year?
Brian, it's John. I'll take the first part of that question and then pass it off to my teammates here on the loan growth discussion there.
So yes, we had some comments in the prepared remarks around the roll-on, roll-off dynamics in the loan portfolio. So new production coupon rate production in the quarter was just above 6.6%.
The roll-off was just under 6% as you kind of roll that forward for the balance of the year, about $150 million a quarter in amortization and payoff activity, absent any prepayment activity.
That's coming off at about 6.1%. So there is still some favorability between new production yields and what is coming off the balance sheet on the loan side. be true, maybe to a lesser extent, as you noted, on the securities portfolio. So as we look forward there for the balance of the year, it's a pretty consistent profile from what we saw in the first quarter in terms of anticipated cash flows.
And then if the environment were to look like it does, plus or minus today, we would still be kind of in line to roll-off yields or maybe slightly favorable. I wouldn't anticipate there being a lot of changes there. I'll pass the call to Thomas or Lynn on the loan side.
I know in the past, there's been some questions about our maturities. As far as 2026, we've got about $380 million in our commercial portfolio that's going to roll off. It's about 12%. Those have a weighted average rate of about 6% right now.
And then '27, it's about $318 million, about 10% of the portfolio that has a weighted average rate of just under 6%. So with origination rates on average in 7 plus, we've got 100 to 150 basis point pickup opportunity based on the current rate environment.
Got you. That's helpful. And then just in terms of the appetite on the consumer side and the residential, given they were down this quarter and with kind of a commentary about rates not being appropriate.
Yes. Thank you for the question. We still have appetite for both those products. We feel it's core in our overall community banking model. There is just some episodic pricing that happened at the end of 2025 and early 2026, specifically with the 10-year dipping down near 4% in our marketplace. There is some pricing sub-6% on some longer duration fixed assets that we elected not to play and a small refinance buying there.
Again, we don't see this as a long-term issue. We've already seen in April, the overall loan portfolio is performing extremely well on its growth aspects, aligning with John's earlier comments for the full year. So we believe the consumer side was more of just an episodic piece on the mortgage. We don't expect mortgage consumer to have a hockey stick growth this year to be relatively flat, maybe mildly up, mildly down, but again, relatively consistent overall performance.
Got you. Okay. And just to be clear, I think John said maybe a 660 was kind of -- I thought that was new production yield and from Lynn, it sounded though it was 7. Is that just commercial for Lynn and maybe 660 for the aggregate loan book? Is that what you...
Yes. John was looking at a blend, and I was looking at specific coupon rates for the first quarter. Yes.
Got you. Okay. I want to make sure that. And then just last one for me was just on the capital priorities. Can you talk about -- I think when you -- through the balance sheet restructuring, I think you talked about maybe waiting a couple of quarters, proving yourself out.
It seems like that's kind of -- that's working well here. Just in terms of the opportunities on the M&A side, can you remind us, is M&A something you guys are considering at this point? Or is it still a ways off?
And then just remind us of what your parameters are on potential M&A in terms of size or pricing or just anything that you can offer there, what the intent would be?
I appreciate the question. As we talked about earlier, for us with our capital deployment, it's all tools in the toolbox for us, whether that's M&A, whether that's doing buybacks or perhaps even expanding and up to also including just lending capital continue to grow.
When you look at our capital levels, I wouldn't say we screen higher than peers. I would say we're right in the range. As John mentioned earlier, we have a bit of a derisked balance sheet, which allows us some flexibility on how much capital we need to hold. But overall, we're just -- we're very pleased with our capital generation.
We do not have a specific plan right now of going out and saying that we're going out the M&A environment. Again, we'll continue to look at all options going forward for our shareholders and evaluate them with a long-term view to make sure that we're making right decisions and a very consistent and prudent decisions on capital deployment.
Okay. And then in the payback period, I guess, in terms of where it needs to be on an M&A deal or even on share repurchases, I guess, is that kind of sub 3 years? Is that kind of what you're thinking about in terms of where that payback is?
Brian, I think the market has made their own determination as to kind of where payback periods need to be, and if it's plus or minus 3 years. I wouldn't say we feel terribly differently about that. If you're willing to accept that on an acquisition, which comes with a certain level of risk, execution risk, integration risk and so on and so forth.
I think it would probably be our view that we would be willing to accept something longer than that for a risk-free transaction like stock repurchases, but we don't have any specific targets out there for that matter.
This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Thomas Prame for any closing remarks. Please go ahead.
Again, thank you for joining us today on our earnings call. We appreciate your time and your interest in Horizon. And also, we look forward to sharing our second quarter results in July. Thank you very much, and hope you have a fantastic week.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Horizon Bancorp, Inc. — Q1 2026 Earnings Call
Horizon Bancorp, Inc. — Q4 2025 Earnings Call
1. Management Discussion
Good morning, everyone, and welcome to the Horizon Bancorp Inc. Conference Call to discuss financial results for the fourth quarter of 2025. [Operator Instructions]. Now I will turn the call over to Mark Secor, Executive Vice President, Chief Administration Officer for the opening introduction.
Good morning, and welcome to our conference call to review the fourth quarter results. 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 may be accessed at the company's website, horizonbank.com.
Representing Horizon today are Executive Vice President and Senior Operations Officer, Kathie DeRuiter, Executive Vice President, Chief Administration Officer, Mark Secor; Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, Executive Vice President and Chief Financial Officer, John Stewart, and Chief Executive Officer and President, Thomas Prame.
At this time, I will turn the call over to Thomas Prame. Thomas?
Thank you, Mark. Good morning. We appreciate you joining us. Horizon's fourth quarter results demonstrated the core strength of our community banking model and the excellent execution of the balance sheet repositioning. We have delivered on our shareholder commitment to create a top-performing community bank with durable [indiscernible] in performance metrics and shareholder returns. The fourth quarter exceeded our prior performance estimates with annualized return on average assets above 1.6%, return on average equity approaching 16% and a net interest margin of 4.2%.
Within the quarter, loan growth and credit quality continued to be excellent, and the team performed well strategically reducing our portfolio of higher cost transactional deposits. Fee income continued to make progress, and our expense management efforts reflect our commitment to continually improve our operating leverage. We are very pleased with the fourth quarter results for our shareholders and the transparency of the quarter provided to highlight the strength of Horizon's core community banking model that truly remains the cornerstone of our value proposition.
Additionally, the company is kicking off the new year from a position of strength, with the franchise well positioned to deliver durable earnings and continued top-tier performance metrics. As we look ahead, our thesis remains consistent with management focused on creating sustainable long-term value for our shareholders through our disciplined operating model, consistent profitable growth and peer-leading capital generation. I'll pass the presentation over to Horizon's Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, who will share highlights for the quarter on our loan growth and our continued excellent credit performance. Lynn?
Good morning. Total loans were $4.9 billion at December 31, an increase of $60.7 million from September 30. Commercial Real Estate lending continues to be our lead strategy with modest declines in consumer loans and residential mortgage loans predominantly being sold into the secondary market. Commercial loans increased $76 million in the fourth quarter representing 9% growth on an annualized basis. Growth in the portfolio mirrored our overall portfolio mix with 28% in Commercial and Industrial and 72% in Commercial Real Estate. Our growth for the quarter was well balanced across our attractive footprint of Michigan and Indiana.
This quarter, we experienced growth primarily driven by the markets of Troy and Kalamazoo, Michigan, Lake County, Indiana, Metro Indianapolis and Johnson County in Central Indiana. As noted on Slide 5, our commercial portfolio is well diversified by geography and remains consistent with the overall mix. As referenced on Slide 15 of the appendix, our portfolio remains very granular with our largest segment, representing 6.3% of total loans. Overall, our pipeline remains steady and quarterly volumes are consistent with our averages for new origination activity, payoffs and net line of credit activity.
As we look forward to 2026, our focus remains on steady diversified growth, disciplined pricing and credit and growing well-rounded customer relationships to drive cross-sell activity with deposit gathering and treasury management services. Residential mortgage lending continues to be a foundation product for the bank, and volume has been predominantly sold in the secondary market to align with our strategy to create capacity for commercial lending activities and the generation of gain on sale fee income. Balances for the fourth quarter were essentially flat in alignment with this strategy.
Turning to credit quality and the allowance. Our credit quality metrics remain within expected ranges and are summarized on Slide 7 of the presentation deck. Substandard loans of $59.4 million represent 1.22% of loans for the fourth quarter, a decrease from 1.31% for the third quarter and 1.33% for the fourth quarter of 2024. Non-performing loans of $34.9 million represent 72 basis points of loans for the fourth quarter and increased from 64 basis points in the third quarter and 56 basis points for the fourth quarter of 2024. The increase of $3.9 million in the first quarter is an increase of $2.2 million in commercial nonaccrual loans, $831,000 in residential nonaccrual loans and approximately $800,000 increase in consumer loans over 90 days past due. While there is a modest increase in this metric, our overall substandard loans have decreased by $5.2 million or 8% from the year ago period, and our net charge-offs remain within historical ranges and continue to compare favorably to the industry.
Net charge-offs were $1 million in the quarter representing 8 basis points on an annualized basis. Net charge-off results for the full year were very positive, totaling approximately $2.9 million representing an annualized charge-off rate of 6 basis points. This is reflective of our conservative and consistent approach of Horizon's credit culture.
Finally, our allowance for credit losses increased from $50.2 million to $51.3 million, representing 1.05% of loans held for investment. The net increase of $1.127 million was predominantly related to economic forecast assumptions. The related provision for credit losses of $1.6 million consists of the $1.1 million increase in the allowance, replenishment of our fourth quarter charge-offs, offset by a reduction in reserve for unfunded commitments with the completion of several large construction loans. We continue to monitor economic conditions and future provision expense will be driven by anticipated loan growth and mix, economic factors and credit quality trends.
Now I'd like to turn things back to Thomas, who will provide an overview of our deposit trends.
Thank you, Lynn. Moving on to our deposit portfolio, displayed on Slide 8. Horizon's core relationship balances continue to show the strength of the franchises community banking model. As noted in our Q3 earnings call, a deliberate strategy for the fourth quarter was to further reduce the organization's exposure to high-cost transactional deposits.
As we review the quarter's results, we feel very confident in the strength of the deposit portfolio in terms of mix, relationship tenure and granularity entering 2026. Comparing the current portfolio to the fourth quarter 2024 provides good insight in the stability of the non interest-bearing balances, which are up year-over-year, and improved cost structure of the core relationships with the interest-bearing segments. The performance of the team transitioning and improving the profile of our balance sheet while capturing the benefits of previous rate cuts has created significant benefits for the organization heading into 2026. Additionally, we believe our deposit portfolio continues to have opportunity to benefit the organization moving forward, whether it's granting our composition and long-standing relationships in our local markets. The team is well positioned to fund our go-forward loans grow with a treasury management team that has renewed capacity, commercial relationship bankers with aligned deposit objectives, and an excellent branch distribution in some of the most attractive markets in Michigan and Indiana.
Let me hand the presentation to our Executive Vice President and Chief Financial Officer, John Stewart, who will walk through additional fourth quarter financial highlights, and provide an outlook to what we believe will be very successful in 2026.
Thank you, Thomas. Turning to Slide 9. Q4 marks the ninth consecutive quarter of net interest margin expansion, totaling 188 basis points from the low in Q3 of 2023. What you see now reflects the true economic profitability of our organic community banking operations without the distractions of the non-core assets and liabilities that were impeding our returns previously. Through these efforts, we believe we have built a balance sheet that is relatively neutral to changes in interest rates, with a cash flow profile that should create reliable returns for our shareholders.
As of the year-end, the restructuring activities are now complete, and balance sheet activity from here is expected to be marginal and tactical where growth will be driven primarily through commercial lending relationships funded with organic core deposit generation. Specific to Q4, the net interest margin increased by 77 basis points to 4.29% and above the upper end of our guidance range. Certainly, the remainder of the balance sheet repositioning played a big role in the link quarter expansion which can be seen in the transition of the earning asset base to more than 80% in loans and deposits are now 93% of total non-equity funding. The margin did see some modest upside relative to expectations from the decision to increase the planned deposit runoff to nearly $200 million in the quarter, which carried a weighted average cost exceeding 4% versus the planned $125 million.
However, on an organic basis, we continue to see notable stability in our loan yields as origination spreads held up well and reductions in our core deposit costs that exceeded prior expectations as realized deposit betas approached 40% for the rate cuts during the quarter. Looking ahead, to account for some of the favorable outcomes just mentioned, you will note that we have increased our net interest margin outlook for the full year 2026, which we now expect to be in the range of 4.25% to 4.35%. Importantly, as has been the objective all along, we are not anticipating there to be much volatility in that result over the year. New loan production coupons above 6.5% continued to exceed cash flows rolling off the book, at the same time, we are anticipating somewhere in the range of $75 million to $100 million of principal cash flows from the securities portfolio over the year, which is coming off at a weighted average FTE rate of approximately 4.75%. The replacement yields in January thus far have modestly exceeded that rate.
As you can see on Slide 10, reported noninterest income results were broadly in line with expectations at $11.5 million for the quarter. Excluding securities losses in the comparable period, total fee income was up 7% year-over-year, led by strong results in Wealth Management and total mortgage fees which grew 19% and 14%, respectively. Results in Q4 did include a BOLI death benefit of just under $600,000, which is included in other income. On Slide 11, at $40.6 million, expenses were generally in line with expectations and as planned, included $0.7 million related to the write-off of the remaining unamortized issuance expense for the subordinated notes we called on October 1. Absent this item, expenses were up modestly from the linked quarter related to seasonal occupancy-related expenses and higher marketing costs. Results also include episodic legal fees related to certain legacy items that have now largely concluded.
Turning to capital on Slide 12. Capital ratios have improved quite strongly in the quarter on the heels of a much more profitable balance sheet. Additionally, you'll recall in our prepared remarks last quarter that we anticipated the leverage ratio and the total risk-based ratio to revert closer to Q2 '25 levels as average assets caught up with the mid-Q3 balance sheet activities, and the prior subordinated debt issuance was repaid in early Q4. You can see that these results were consistent with those expectations. As we have previously communicated, we are comfortable with the company's current capital position, particularly against what is a significantly de-risked balance sheet. Additionally, as our 2026 outlook suggests our peer-leading levels of profitability will accrete capital very quickly. which you will see over the course of the coming year.
Turning to our 2026 guidance on Slide 13. Our overall outlook has generally improved from the preliminary commentary provided last quarter, which I will make a few comments about. Period-end loans and deposit balances are expected to grow mid-single digits. This outlook would suggest deposit balances will grow modestly more than loan balances. We anticipate balance sheet growth to be driven by organic deposit funding going forward, leveraging our relationship banking model and well-positioned 70-plus branches located throughout Indiana and Michigan. Non-FTE net interest income is now expected to grow in the low teens year-over-year. This will be driven by the FTE net interest margin in the range of 4.25% to 4.35%. Average earning asset balances are likely to modestly exceed $6 billion for the full year. The first quarter average earning assets are likely to be down from the fourth quarter averages, but should represent the low point for 2026. This outlook includes the assumption for two, 25 basis point rate cuts on in April and October but neither moves the needle much on the outlook as intended.
Fee income in the mid-$40 million range generally expresses the continuation of trends we have seen over the back half of 2025. Expenses in the mid-$160 million range represents standard inflationary expense growth, modestly higher expenses and medical benefits compared with 2025, and the continuation of ongoing growth and marketing efforts. Finally, the effective tax rate is still anticipated to land in the range of 18% to 20%. Overall, 2026 should be a strong year for Horizon, steady growth with durable peer-leading returns on assets, returns on tangible common equity and top quartile internal capital generation. With that, I'll turn the call back over to Thomas.
Thank you, John, and I appreciate the summary of the quarter and the updated outlook for the year. As you can see from our financial results, we're very well positioned entering 2026 to create significant shareholder value through durable top-tier financial metrics, excellent capital generation and the premier community banking franchise located in some of the best markets in the Midwest.
As the leadership team will continue to be front-footed in our execution and disciplined in our operating model, focusing on profitable growth and continued smart stewardship of capital decisions for our shareholders. We look forward to what we believe will be a very positive outlook for our shareholders, clients and the communities that we call home. At this time, I would like to turn the presentation back over to our moderator to open up the line lines for questions for the management team.
[Operator Instructions] The first question comes from Brendan Nosal with Hovde Group.
2. Question Answer
Maybe just to kind of start here at a top level. Like if you guys look at your outlook for 2026, pretty similar to to what you guys offered last quarter. As you look at kind of the opportunities and risks, like what did that outlook could end up going better for you guys? And conversely, where are some downside risks as you look at the year ahead.
Yes. Brendan, this is John. I think, first and foremost, I commented on this in my prepared remarks. We actually view the outlook to be slightly more favorable than it was when we initially gave it the NII, in particular, is where the leverage is a higher base and more growth in the low teens. I think as you kind of generally push that through the numbers, you'll get a non-FTE number that's closer to $260 million I think that's -- that guidance was maybe closer to mid-250s last quarter. FTE would be then about $4 million above that. So we do view there to be a more optimistic outlook, maybe the very modest offset to some of that NII upside would be on the expenses, but really nothing materially there.
Just maybe $1 million delta or something from what we had initially put out there. I think some of the levers as you kind of work your way through the year, it's really going to come down to the ability to grow organic core deposits to fund organic core commercial loan growth. And I think a favorable outcome on that front is probably the biggest leverage point to upside to the outlook. And conversely, the opposite would be true. The loan growth pipeline, Lynn can talk a lot more about this. We feel really good about it. Spreads have held up really well. The team has done a fantastic job on the asset side, and it's going to come down to the liability side, I think, most notably.
Okay. All right. That's helpful, John. Maybe sipping here to that topic of loan growth. Is there a point in which like the modest declines in the consumer category of loans eases, which would allow the high single-digit commercial loan growth to shine through more visibly in that net growth number?
Thomas, thanks for the question again. As we look at the portfolio of our loans, our business modeld is truly a commercial banking model. that has been our lead strategy and Lynn and her team has just done a fantastic job on that. Our consumer loan portfolio right now is primarily made up of HELOC and consumer closed-end mortgages that deal with real estate, we feel as though we are well positioned there. We have a great credit profile in that area. Again, that's something we feel like we're going to stretch and try to create demand and/or try to create excess growth in that -- we're taking on extra risk. So for us, it's a good product, but we're not seeing the consumer side to be something that we're going to probably push to accelerate we really found great value not only on the lending side in commercial, but truly getting the full relationships with the deposits.
Let me sneak 1 more in here. Just on asset quality. Can you unpack the rise in NPAs over the past couple of quarters? Like each quarter's increase is relatively small, but I think they've been up in 5 in the past 6. Like is this normalization from a low base? Or is there perhaps pockets of stress that you're seeing at this point?
I appreciate your observation. We had a very low base that we're starting from, and our overall metrics continue to be very strong and within the expected ranges for our portfolio and credit risk appetite. So recognizing that we're starting from a very low point, any increase while modest may appear to be a larger percent.
As I noted in my comments, substandard loans did increase this quarter, roughly $2.2 million of it was commercial, $800,000 mortgage, nonaccrual and over 90 days, $800,000 consumer. These are all relatively modest numbers. I don't see it as reflective of any one sector, any particular product. When I look at our commercial nonperforming, it's really more episodic with a customer. As I shared in some previous calls, we had one customer that started up a new business. They had road construction. It just caused some delays, sometimes we use nonaccrual as a tool to help them weather some of those challenges that they have. And the goal always is to hopefully get them back on the right path and upgrade them. Sometimes, however, we recognize that it might be a liquidation and try to work hand in hand with the customer. I think ultimately, though, if you look at the bigger picture, subsided loans has decreased for the last 3 quarters and roughly 8% for 2025. And if you look at commercial specifically, our criticized loans have actually decreased 17% since December '23 and 7% since December '24. So I think our overall metrics are good. I look at this just really as some migration through the buckets.
The next question comes from Nathan Race with Piper Sandler.
John, I was hoping you can just unpack some of the margin drivers over the course of this year. It seems like you guys are pretty well matched in terms of short-term rate-sensitive liabilities and assets. So wondering if you could just hit on kind of what the asset repricing tailwinds look like and kind of where you're originating new loans these days relative to the portfolio yield?
Thanks for the question. Yes, as I said in my prepared remarks, new originations, spreads continue to be really good. We see that continuing here in January. New origination yields continue to sit on a coupon basis above 6.5%. We've got cash flows coming off the portfolio on loan side that are still below 6%. So you do have some front book back-book pricing that will help as we just kind of grow through the year on the outside, it's going to come down to just core deposit generation. I think those are going to be the big drivers for the margin, as I mentioned earlier.
The only other margin leverage that will flow through over the course of the year is just whatever the cash balance ends up looking like. So as the guidance suggested based on where cash ended the year, the averages might be down in Q1 on a cash basis, the expectation deposit growth versus loan growth. The assumption there is that the access is just flowing back into cash for the time being for liquidity purposes and nothing else. And of course, that's not -- that's NII accretive, but maybe at the margin on a new percentage modestly dilutive. So those are -- wherever caps kind of land is going to be whether or not it's up a bit flat, whatever the outcome ends up being, but I think those are the big drivers.
Okay. That's really helpful. And changing gears a bit, as you alluded to in your comments, capital levels, just with the profitability profile are going to build a pretty strong clip. I could see most capital ratios increasing by 100 basis points year-over-year by the end of this year. So just curious, Thomas can update us on some of your capital deployment priorities, Imagine supporting growth still number one, but I would be curious to get your thoughts on the opportunity to deploy excess capital via acquisitions and kind of what you're seeing across that landscape these days?
Thanks for the question and also thanks for the recognition of the strong capital generation of the new profile of the organization. We're very pleased with the performance of the company and also the positive capital generation of results coming from the fourth quarter. Now as we have discussed previously there's ample opportunity internally to grow and expand our organic business model. We are located in some of the best markets in Michigan and Indiana, and we still see significant upside potential just through organic growth in our community banking model. This is going to continue to be our primary focus.
Now as we look at our capital levels going forward, as we mentioned in the third quarter, this isn't going to burn a hole in our pockets, in the near term, we believe we have ample run rate to build capital [indiscernible] with some of our industry peers. And again, as we review capital decisions in the future, we're going to continue to be disciplined about this and make sure that we focus on logical deployment that's accretive to our shareholder value proposition.
That's helpful. If I could just sneak one last one in. I appreciate the expense. Curious if that contemplates any additional commercial hires. Obviously, you guys have been active taking advantage of a disruption across your book in the past and there's obviously been some notable M&A announcements with some larger competitors that are maybe more focused on some southern geographies these days. So just curious what you see in terms of the opportunity to either add talent or just benefit on the existing team to grow share on the commercial side?
Yes. Thank you for that. First of all, I'd say we have a stellar team. At this point, I don't see that we're going to be adding, although there may be some opportunities presented that we consider some of the changes in the market. But our team has been performing really well, as you can see with our growth numbers, just doing a fantastic job not only in volumes, rate management and credit quality. So really pleased with them.
We do have a few retirements that are occurring. Really pleased with the candidates that we've hired and the talent there. So I would say that we're probably benefiting from some of that disruption and [indiscernible] there. We have expanded our treasury management team over the last year. We may look at some opportunistic additional adds throughout the year too.
The next question comes from Damon DelMonte with KBW.
First question, just on the outlook for fee income. I was hoping you could talk a little bit about some of the drivers that you see lead to the kind of mid-40s million of revenues for 2026. I don't know if it's going to be driven more by fiduciary duties or you have other treasury management services. Kind of I guess what are your key assumptions behind that growth?
Thanks for the question. This is John. As we kind of roll the year forward and look at our budgeted assumptions, there's not one piece of that fee business that is towing the line, so to speak, modest kind of low to mid [indiscernible] in service charges and interchange would be the assumption. We've got some specific initiatives in the market around interchange, but nothing -- we're not assuming anything in that outlook that would that would significantly change that view for 2026 anyway.
Fiduciary activities expect them to continue to be strong. Mortgage continue to grow and hopefully benefit rates. We'll kind of see what the rate environment does. But as we get back [indiscernible] strong year, we'll get a better strong quarter, excuse me, we'll get a better outlook there. But there's nothing in particular, Damon, that is really pushing the growth number for 2026. It's pretty well balanced.
Got it. Okay. That's helpful. And then just quickly on the margin. Do you have happen to have what the [indiscernible] was for December, kind of where you exited the year?
Yes, it was slightly a couple of basis points above where the full quarter average was, Damon.
Okay. And I mean, based on your commentary on, it seems like your guidance is including 225 basis point rate cut, so it kind of seems like again, what you've been saying, you guys seem to be pretty neutral. So we shouldn't see much movement either way if we do have a couple of cuts here in '26. Is that a fair characterization?
Yes. We continue to believe that's the case. We've walked through some of these numbers before. If on a static balance sheet, what happens inside 30 days, it's -- we'll probably need about a 30% beta on our non-time deposit balances, interest-bearing deposit balances to be neutral. We exceeded that in the fourth quarter. The assumption is that we would be able to kind of just achieve that in 2026. And so with that outcome with that set of assumptions, I think, yes, your statement is correct that the rate cuts would not significantly change the trajectory of NII or the margin for the year. Similarly, it's not a headwind if there's not a rate cut.
The next question comes from Terry McEvoy with Stephens.
Looking at the loan growth in 2025 on the commercial side, do you expect it to be weighted more towards CRE like we saw in the fourth quarter? Or do you expect more of a mix between C&I and CRE. And then I'm just curious, is leasing still, call it, a priority for Horizon?
Terry, in regards to your question, we've been really consistent with our commercial portfolio. Our net hasn't changed much over the last 3 years that I've been in the seat. If you look at our quarterly origination mix, it's generally pretty consistent with the overall book mix. We have been intentionally looking to adds additional C&I. Our equipment finance division has been a very nice complementary piece to that. Would I say it's a priority? I would say it's one of our core products. And so is it going to be outsized? No, it's going to be complementary to what we're doing.
And then as a follow-up, you opened up a pretty cool office in Kalamazoo last summer to just -- a history there. Lynn, I think you mentioned loan growth in that market. So my question is, are you planning to open up more offices, which, to John's point about funding loan growth, a new office would definitely help on the deposit generation side.
Thanks for the question. And I appreciate the commentary on the Kalamazoo office, very excited about that. And glad to be part of the renovation that's happening and what we feel is just an outstanding community. We do have another office that will be opening up this summer in Indianapolis that we started about a year ago, and that should be coming to fruition. We will look at some different opportunities throughout Michigan and some of the core markets that we talked about that we feel like there's an opportunity for additional distribution where our teams have just have done extremely well, carrying both loans and deposits could benefit from perhaps a second or third location. Those will primarily be in the Grand Rapids, [indiscernible], Holland area, that we feel so we've got the right people, the right teams, the right attrition just again a little bit more market reach through distribution. I wouldn't say it will be a wholesale branch strategy versus very optimistic as we see opportunities come to fruition in the marketplace.
The next question comes from Brian Martin with Janney Montgomery.
Just wondering, can you -- how has the pricing been both on the loan and deposit side in the markets? Have you seen any irrational pricing? It's been -- it sounds as though it's not irrational, but just hearing mixed commentary from other banks -- just thinking about that.
Yes, I'll speak to commercial. I would say that it really just depends on the segment of the customer under profile. I mean we are seeing some rates that for commercial real estate credit tenant, very attractive deal profile, it's pretty aggressive. We've been seeing some 180, 190 spreads, which is pretty low. And so -- is it irrational? I guess every organization has to make a decision on what works in the balance sheet. But -- it just -- it depends on the sector. I think for us, we're rise appropriately for the types of deals that we're doing. We're in market generally. And there are going to be some that are higher or a little bit lower. So I wouldn't say it's irrational. There's just some competitiveness in certain segments.
Thomas, I completely agree with Lynn's answer there. Horizon has positioned itself for decades of being a relationship bank, not a price lead bank so for us in our markets, where there's always been great competition. And for us, I think whether rates are up or down, we've seen over recovery in our marketplace, there's always a rational pricing down there both on loans and deposits. .
I think it gets to your go-to-market strategy. Our go-to-market strategy is really about being embedded in our communities doing more than just price and really about being a consultant to our clients, both on the loans and deposit side. So I think for us, our how we approach our clients, how we approach our community, it probably gives us a little bit of insulation from the edges on pricing and for us also from a -- not just a pricing but also a discipline around credit, I think it's been a forefront of the success we've seen over the years.
Got you. And last couple. Just in terms of the commercial pipeline, Lynn, did you talk about commercial loan pipeline here? I know you talked about what areas did well here in the fourth quarter. And geographically, which did better, but just the pipeline today, where that stands heading into first quarter?
There's always a little bit of seasonality. And so you look at the first couple of months of the year is usually a little bit quieter. It tends to pick up in the second quarter, third quarter. So you'll hear me talk about fluctuations from quarter-to-quarter. That being said, our pipeline is pretty strong and steady. You're just going to see some fluctuations from quarter-to-quarter. We might have a couple of larger loans in 1 quarter. We might have a larger commercial real estate project that goes to secondary market or a [indiscernible] that could impact results. But usually, it's pretty even. So at this point, I feel like it's steady as she goes, you just might see some fluctuations quarter-to-quarter based on seasonality.
Okay. So pipeline is only down from what it was last quarter. And just given seasonality and I guess your expectation would be as you kind of build loan growth, it's more second quarter and beyond, maybe less than the third quarter. Does that seem fair based on your comments?
I don't know that I would infer that. It's just first quarter is traditionally a little bit softer as far as originations. But the pipeline itself is solid, and we look out more than 80 days. We're tracking 30, 60, 90, 120 up to 180 days. So I don't see the pipeline softening at all. It's just -- my point was, you're just going to have some timing differences month-to-month. .
Got you. Okay. That's helpful. And I don't know if it's maybe for John, but I think someone talked about the loan repricing or kind of the back book repricing being one opportunity. What -- can you just remind us what that that loan repricing looks like throughout the year?
Sure. Yes, what I said before was new origination coupon yields have held up very well. Spreads have held up very well, new production continues to be in excess of 6.5% the roll-off amortizing, non-amortizing maturities, the cash flow coming off the book is still sitting below 6% in that 5.5% to 5.75% range and it's pretty evenly distributed by quarter throughout the year in 2026.
Right. And how much is repricing? John, I guess, in terms of -- throughout the year, it's pretty even by quarter, but just in aggregate, what's repricing this year at kind of that range.
Plus or minus $150 million a quarter.
Okay. And last one for me, just more housekeeping. I think, John, you said the average earning asset level. I you said there, but I thought it was down linked quarter but up thereafter. Is that kind of what you suggested?
Yes, that's right. Just based on where cash balances kind of ended the year, you might see that pull through the average slightly lower cash balances in Q1. We would anticipate that from -- that's the low point for the year, and it would grow and that the full year average would slightly exceed modestly exceed $6 billion that's -- we had scripted that in the guidance slide as well.
This concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.
Again, we want to thank everyone for participating in today's earnings call. We appreciate your time and so your interest in Horizon, and we look forward to sharing our first quarter results in April. Have a wonderful day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Horizon Bancorp, Inc. — Q4 2025 Earnings Call
Horizon Bancorp, Inc. — Q3 2025 Earnings Call
1. Management Discussion
Good morning, everyone, and welcome to the Horizon Bancorp, Inc. conference call to discuss financial results for the third quarter of 2025.
[Operator Instructions] At this time, I'd like to turn the floor over to Todd Etzler, Executive Vice President, Corporate Secretary and General Counsel, for the opening introduction.
Good morning, and welcome to our third quarter conference call. 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 the supplemental presentation issued by Horizon yesterday, they may be accessed at the company's website, horizonbank.com.
Representing Horizon today are Executive Vice President and Senior Operations Officer, Kathie DeRuiter; 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; and Chief Executive Officer and President, Thomas Prame.
At this time, I will turn the call over to Thomas Prame. Thomas?
Thank you, Todd. Good morning, and we appreciate you joining us.
Horizon's third quarter results, highlighted on Slide 3, display the successful execution of our previously announced strategic balance sheet repositioning and the continued excellent performance of our community banking franchise. The balance sheet restructuring effort has exceeded our initial expectations, and it is on pace to achieve the top-tier financial outcomes outlined in our plan. The team did an outstanding job on the equity and debt raises as well as the subsequent execution optimizing the securities and loan portfolios as well as the funding sources of our balance sheet.
Additionally, our third quarter results further evidence the continued strength of the organization's exceptional core community banking franchise. Our net interest margin continued to expand with the commercial loan engine producing solid results and the core client-driven deposit franchise displaying its strength. Horizon's credit quality remained excellent and the management team remains diligent on managing core operating expenses.
A few key items to note within the quarter results. The margin continued to expand for the eighth consecutive quarter with an exit run rate in September above 4%. Loan balances for the quarter reflect the planned runoff and sale of the lower-yielding indirect auto portfolio. Net of these activities, loans would have increased approximately $48 million, led by the efforts of our commercial banking teams. Our relationship-based deposit portfolios remained resilient in the quarter with predicted outflows within higher cost non-core transactional accounts as outlined in our balance sheet restructuring plan.
Additionally, the combined relationship-based fee income categories of service charges, wealth, card and mortgage income performed well and an increase from the third quarter, and expenses outside of the transaction-related activities remain well managed and aligned with our internal and market expectations. This provides confidence in our ability to deliver additional positive operating leverage moving forward with a more effective balance sheet.
Heading into Q4 and 2026, we are confident in delivering a superior community banking model to our shareholders, consisting of top-tier financial performance and a balance sheet producing peer-leading capital generation metrics. As we move forward in a front-footed position and with significant positive momentum, we will remain steadfast in our disciplined approach to create durable returns and sustainable long-term value for our shareholders.
Turning to Slide 4. As I mentioned previously, the team did a great job on the balance sheet restructuring with the majority of the initiatives comparing favorably to our expectations in terms of financial outcomes and timing. Our execution left minimal activities for the fourth quarter, which included the redemption of the previous sub debt that has already been completed and the continued modest reduction of select non-relationship high-cost transactional accounts. As previously mentioned, the team has already seen a significant positive increase in performance in September, and we are confident the fourth quarter will provide a clear outlook of Horizon's top-tier financial performance and peer-leading capital generation model. John will provide additional insight into our Q4 outlook and 2026 guidance during this presentation.
Overall, a very solid quarter, reflecting the disciplined execution of the balance sheet initiative, combined with the continued strength of the high-performing core banking franchise. A key element of our go-forward plan will be continued profitable loan growth and excellent credit quality that has been a cornerstone of Horizon's success.
I will transition the presentation to our Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, who will share highlights for the third quarter on our loan growth and continued excellent credit performance. Lynn?
Thank you, Thomas. Net loans held for investment decreased $162 million in the quarter, consisting principally of net growth in commercial loans of $58 million and the $210 million combined impact of quarterly runoff and sale of indirect auto loans. Commercial loans continues to be our primary lending focus at this time, driven by our core franchise and focus on traditional lending products. Net commercial loan growth for the second quarter was $58 million, representing 7% for the linked quarter annualized. Net growth in the quarter also reflects syndication of $10 million in equipment finance instruments with a net gain on sale of $300,000 in the quarter, representing a 3% gain on sale.
Overall, our pipeline remains steady and quarterly volumes are consistent with our averages for new origination activity, payoffs and that line of credit activity. As we look forward to 2026, our focus remains on steady diversified growth, disciplined pricing and credit and growing well-rounded customer relationships to drive cross-sell activity in deposit gathering and treasury management services. Residential mortgage lending continues to be a foundation product for the bank, and volume has been predominantly sold in the secondary market to align with our balance sheet strategies and the generation of gain on sale fee income. Balances for the third quarter were essentially flat in alignment with this strategy.
Turning to credit quality and the allowance. Credit quality remains satisfactory with substandard loans and nonperforming loans representing 1.31% and 0.64%, respectively, consistent with credit performance over the past year. Net charge-offs were $800,000 in the quarter, representing 7 basis points on an annualized basis, which compares to historical performance over the past year. Year-to-date charge-offs totaled $1.9 million, representing an annualized charge-off rate of 5 basis points.
Finally, our allowance for credit losses decreased to $50.2 million, representing an allowance to credit loss to loans held for investment of 1.04%. The reduction of $4.2 million consisted predominantly of release of reserves related to the indirect auto loan portfolio in the amount of $3.1 million as well as the benefit of a reduction in loss rate experience in the portfolio. Provision for credit losses was a net release of $3.6 million, which is a combination of the allowance reduction of $4.2 million, replenishment of quarterly charge-offs, modest changes in unfunded commitments and the release of the prior reserve on the Held-To-Maturity portfolio. We continue to monitor economic conditions and future provision expense will be driven by anticipated loan growth and mix, economic factors and credit quality trends.
Now I'd like to turn things back to Thomas, who will provide an overview of our deposit trends.
Thank you, Lynn. Moving on to our deposit portfolio displayed on Slide 9. Horizon's core relationship balances continue to show the strength of the franchise's community banking model. Noninterest balances remain resilient with planned outflow and higher rate transactional balances aligned with the balance sheet transformation. We are very pleased with the stability of the core client base relationships and optimistic about this segment of our deposit portfolio, fueling our loan growth in subsequent quarters.
Additionally, we believe our deposit portfolio continues to be well positioned to benefit the organization moving forward with its granular composition and long-standing relationships in our local markets. The team has made significant improvements in growth, enhancing our go-to-market activities for treasury management services and proven its agility by leveraging our excellent branch distribution and multiple funding options to create shareholder value.
Let me now hand the presentation over to our Executive Vice President and Chief Financial Officer, John Stewart, who will walk through additional third quarter financial highlights and our outlook for the remainder of 2025 and into 2026.
Thank you, Thomas. Turning to Slide 10. Q3 marks the eighth consecutive quarter of net interest margin expansion, totaling 110 basis points from Q4 of 2023. And as I will discuss in a minute, the expansion is planned to continue. That said, these results are the direct result of the execution of a series of intentional initiatives and transactions to reposition the mix and profitability of our balance sheet, which culminated in this quarter's activities. Most notably, we have completely changed the company's risk profile, significantly curtailing both liquidity and interest rate risk through these actions, while establishing a pro forma cash flow profile that should create durable returns for our shareholders.
Specific to Q3, the net interest margin increased by 29 basis points to 3.52%. While the margin this quarter was partially impacted by the repositioning of the balance sheet prior to those events, we continue to see the positive momentum in the margin, driven by the same key organic trends we have been experiencing for several quarters now, well-priced commercial loan growth leading the asset remix story, while core deposit balances continue to deliver stable funding costs.
Turning to the balance sheet repositioning. There was only a partial quarter impact in the 3.52% margin. The common equity raise closed on August 22, which was the same day all the bond sales were completed. $535 million of the reinvestment settled during the last 10 days of August, with the remaining roughly $45 million in purchases settling over the first 10 days of September. The Federal Home Loan Bank advances were also repaid during the last week of August. The $100 million subordinated debt issuance closed the last week of August and the targeted high-cost transactional funds runoff of about $275 million during the quarter took place over the last few weeks of September.
Therefore, while our September margin exceeded 4%, it too, does not capture the full benefit of the balance sheet repositioning. As you saw on Slide 4, there are still a few items yet to make their way through the margin. First, a full month of the $275 million in deposit runoff from September; second, the balance of the $125 million in targeted deposit runoff remaining as of quarter end, which we anticipate will largely take place over the fourth quarter.
And finally, the October 1 payoff of the $56.5 million of subordinated debt, which carried a cost of about 9.8%. Therefore, while we are expecting the margin to expand further in Q4 into the range of 4.15% to 4.25%, we should exit the year a bit above that in the range of 4.2% to 4.3%, where it should generally remain through 2026. This view is consistent with our prior expectations following the balance sheet efforts.
Slide 11 is a new slide showing an improved return, more liquid and lower risk profile of the securities portfolio in June compared with September. As you can see in the top left quadrant, the mix of the portfolio is significantly different, carrying less credit risk and a greater mix of highly liquid assets, and it is earning more with less overall duration. Additionally, the reliance on investments in our earning asset base has been reduced and notably, the portfolio uses significantly less capital. All that said, the new portfolio was constructed to complement the interest rate risk profile we set out to achieve with the new balance sheet, which is relative neutrality to changes in rates.
We intentionally purchased cash flows that are already fully extended with prepayment optionality that is significantly out of the money for the underlying borrowers. Our objective was to build a portfolio of stable cash flows at strong yields that complements the rest of the balance sheet and provides the functional liquidity it is ultimately there for.
As you can see on Slide 12, reported noninterest income was materially impacted by the balance sheet actions this quarter and included the $299 million loss on the sale of securities and the $7.7 million realized loss on the sale of the indirect auto portfolio, which includes the write-off of any related unamortized dealer reserve. The auto loss was partially offset by the associated release of the $3.1 million allowance for credit loss against this portfolio, all of which was contemplated in our original planning.
Excluding these items, which will not carry forward in our results, our fee-based businesses performed well during the quarter and for the first time, included about $300,000 of gains on the sale of syndicated equipment finance credits. This is a business line we expect will grow in contribution to our fee income throughout 2026. Additionally, service charges and interchange fees reflect our concerted efforts to grow the core client base and seasonally strong market activity.
Looking ahead to the fourth quarter, while we do anticipate some normal seasonal headwinds to impact service charges, interchange and mortgage and therefore, expect Q4 fees to approximate $11 million, this result would still express high single-digit year-over-year growth, excluding the securities loss in the year ago period.
On Slide 13, here, too, you can see the quarterly expense results were also impacted by our balance sheet activities. Specifically, the quarter includes the $12.7 million prepayment penalty on the repayment of the higher cost $700 million in Federal Home Loan Bank advances. Additionally, the quarter included about $900,000 of expenses directly attributable to these efforts that are not expected to carry forward. Excluding these 2 items, total noninterest expense was roughly flat linked quarter and is trending favorably compared with our previously issued full year guidance.
Turning to capital on Slide 14. While each of these metrics was ultimately impacted by the balance sheet activities, in all cases, the outcome exceeded our initial projections. It resulted in better-than-expected execution, resulting in lower realized losses. Just a couple of quick comments on a few of the metrics. First, the leverage ratio is expected to recover back closer to Q2 levels in the fourth quarter as the balance sheet reduction moves its way through the average asset denominator. Second, the total risk-based ratio is expected to revert back lower in Q4, closer to Q2 levels as the September 30 Tier 2 capital balance includes both the new and previously existing subordinated debt issuances.
As of October 1, we have repaid the more expensive $56.5 million prior issuance. As we have previously communicated, we are comfortable with the company's current capital position, particularly against what is a significantly derisked balance sheet. Additionally, as our outlook suggests, our peer-leading levels of profitability will accrete capital very quickly, which you will see in the coming quarters.
To provide some clarity on the other side of the balance sheet transition, we have provided an outlook specifically for the fourth quarter on Slide 15. Overall, we are pleased with the progress and the outcome of the balance sheet efforts, some of which will continue here in the fourth quarter. More notably, the strength of the core community banking franchise remains intact, and we are well positioned to deliver durable top-tier performance metrics starting in the fourth quarter.
There are a few items I'd like to highlight. Growth in loans held for investments is expected to remain in line with what we experienced in Q3 on a normalized basis, which is for mid-single-digit growth on an annualized basis. Most of the growth is expected to come from our organic commercial growth engine. Deposit balances will decline in Q4, primarily related to the remaining targeted reduction of high-cost non-relationship balances. Non-FTE net interest income is expected to grow in the high single-digit range from the reported Q3 figure. This will be driven by the continued expansion of the net interest margin into the range of 4.15% to 4.25%, while average earning assets will decline from Q3 to slightly below $6 billion from the impact of the planned deposit runoff and the subordinated debt redemption.
This outlook does include two 25 basis point rate cuts in October and December. Total reported expenses should approximate $40 million for the quarter, but will include about $700,000 of nonrecurring expense from the write-off of the unamortized issuance cost from the previously existing sub debt position. The Q4 effective tax rate should be in the range of 18% to 20%, which is attributable to overall stronger pretax income and a significantly smaller tax-exempt municipal exposure. Given the reduced tax-exempt exposure, it should also be noted that our fully tax equivalent adjustment to income is expected to be about $1 million per quarter going forward or about half of the prior run rate.
As our fourth quarter outlook illustrates, we are pleased with the performance levels Horizon will achieve going forward. Additionally, while we are currently finalizing our budget for 2026, we would like to provide a few comments on our initial view for the year. Overall, we are in alignment with the current consensus estimate for earnings per share at approximately $2 per share. Our initial look at full year non-FTE net interest income is for growth in the low double-digit range. Our FTE adjustment for 2026 should approximate $4 million, as noted earlier. The net interest margin on an FTE basis should remain relatively consistent in the range of 4.2% to 4.3%, which is in line with our prior projections following the balance sheet repositioning.
Our current view on fees and expenses is generally consistent with current consensus expectations. Similar to Q4, the effective tax rate is expected to approximate 18% to 20%. Overall, 2026 should be a strong year for Horizon, steady growth with durable peer-leading returns on assets, returns on tangible common equity and internal capital generation.
With that, I will turn the call back over to Thomas.
Thank you, John, and I appreciate the summary of the third quarter outlook for Q4 and initial guidepost for 2026. As you can see from our financial results, we are an organization that will quickly realize top-tier financial metrics and peer-leading capital generation performance. We expect that the well-executed balance sheet restructuring, combined with Horizon's long-standing and high-performing community banking model will deliver durable returns and sustainable long-term value for our shareholders.
As we move into 2026, we will be front-footed in our optionality to create further shareholder value through a disciplined operating model, focus on profitable growth and smart stewardship of the positive capital generation platform we have created. The third quarter was an excellent performance on many fronts for the team, and we look forward to continuing to deliver on our promise to create significant shareholder value moving forward.
This is the end of our prepared remarks, and I welcome the operator to open up the lines for questions for our management team.
Our first question today comes from Brendan Nosal from Hovde Group.
2. Question Answer
Maybe just kind of starting at a top-level strategic view here. It's just -- it's a vastly different company today than it was 1, 2, 3 years ago. And in recent years, the narrative has just been so focused around the securities book and capital. And now that you finally kind of put that issue to bed, can you just kind of update us on what you think the new narrative for Horizon is and the next major areas of strategic emphasis?
Thanks, Brendan. Thomas. I appreciate the question very much. We're very pleased with the organization as it exits Q3 and goes into Q4. And I think our financials are showing what we consider a new horizon heading into 2026. What you'll see with us is that we're going to be very consistent about the positive stewardship of capital that we're going to be delivering to our shareholders on a go-forward basis. Our new balance sheet is positioned well to generate capital at a significantly greater pace than before. We're also going to be very pleased with the optionality that this is going to present the organization, different than perhaps what you said before, we are a little bit more focused on the securities positioning.
But again, we're going to be very measured in our deployment strategies and don't feel like we need to go out and quickly do something, but rather take a very measured approach on profitable deployment options going forward. That could be, for us, as we move into '26, very logical and accretive M&A that's additive to the community banking platform that we just created, expansion or lift of teams or acquisition of fee income platforms that create durable and franchise value earnings profile. And also, we're going to be very front-footed position moving to '26. But again, we'll be very respectful of capital deployment strategies and making sure that we enhance shareholder value.
Okay. Maybe just as a follow-up to that on capital specifically. I guess, first, are there any other potential outlets for capital outside of organic loan growth and M&A? And then second, now that there's a potential M&A element to the story, just kind of take us through some of the criteria, whether it's size or geography or business mix that you would be interested in?
Sure. Thanks for the follow-up question. Specifically in M&A, Horizon has a great history of M&A success over -- for many decades. It's really been built on the fact of our great brand reputation in our core markets and also being just a really good company to transact with. As you look over the last couple of years, we have not been as well positioned in the space because of some of the earnings power that we had at the time and also the risk elements within the balance sheet. Heading into 2026, we have a significantly different and more efficient and derisked balance sheet that's going to be producing peer-leading financial metrics and top-tier capital generation.
Successful M&A for us is going to be consistently focused around franchises that add to the current franchise that we have that we feel is extremely profitable. The size will probably be between $300 million, $400 million up to several billion dollars. But again, it's going to be logical and very accretive to the franchise from a space. We think there's great opportunities for us in Michigan and also in our core markets of Indiana. And again, from a positioning standpoint, Horizon will be in a stronger position and very much more front-footed. Again, the profile of the organization is significantly different and more optimistic. And also the balance sheet is more attractive towards potential partners, who would look at Horizon as an opportunity for them to be a long-term partner with us.
Our next question comes from Terry McEvoy from Stephens.
Maybe start with a question for John. You mentioned the balance sheet being pretty rate neutral in terms of changes. When I just look at the mix today, a little more commercial heavy, fewer higher beta deposits and probably less fixed rate assets, which would tell me more asset sensitivity. Could you just kind of tell me where I'm wrong and how you can -- how you support that rate-neutral position?
Yes. Terry, thanks for the question. I appreciate that. Yes, I think as you look forward, I mean, the changes in the mix of the balance sheet would certainly lean us to be very modestly asset sensitive. We do a lot of -- obviously, the shock analysis, a lot of non-parallel shifts. And we really just don't see much change if we get a steepening or a flattening of the curve. We've got about 25% of loans are going to be floating on the asset side, a very modest amount of the securities portfolio is going to be floating. And then on the other side of the balance sheet, we do have some callable CDs in the structure and some really good deposit positioning such that we don't think that there'll be much of an impact from changes in rates either way.
And then maybe, Thomas, a follow-up question for you. There's the legacy bank in Michigan where generations of families and businesses have banked, that's going to be changing names. I guess my question is, how do you play more offense? And how do you balance that with some of the expense outlook that John talked about?
Thanks, I appreciate it very much. First, I agree. I think the opportunity for growth in Michigan is going to be very optimistic going forward. There are some transactions that are happening in the marketplace that are giving us some opportunities. I think we also need to remember, over the course of the last 2 years, from an offensive standpoint, specifically in commercial and treasury, we've made some really good human capital decisions there and some great teams in Grand Rapids, Lansing, Detroit in those growth markets and also Southwest Michigan.
Those teams are in place and many of those individuals are now coming off their non-competes. Lynn has also done a really nice job with the treasury management franchise. We've added about 40% more salespeople. A lot of those individuals are in the Michigan market. So from an expense base, I don't think we're really looking to add a lot to our expense base in the franchise versus more take advantage of the expenses that we've already taken and really be able to open our stride on new growth.
Our next question comes from Nathan Race from Piper Sandler.
Congrats on all the progress coming out of the quarter. Just going back to the margin discussion, John, I wonder if you could just help us just in terms of with the securities portfolio repositioning, how much cash flow coming off each quarter over the next 12 months or so? And also kind of what the back book repricing tailwinds look like on the commercial real estate portfolio that's fixed.
Sure. Thanks, Nathan. I'll pass the second question over to Lynn and answer your first question first. In terms of the cash flows coming off the securities portfolio, honestly, very minimal. That was part of the repositioning efforts. As you could see on the slide, we bought a lot of discounted cash flows. So those are bonds with underlying coupons kind of in the 2s and 3s. And so that's what I was referring to when I said the optionality for the -- the prepayment optionality for the borrowers underlying those are de minimis. So as we look out over the next year, it's probably only, call it, $10 million to $15 million worth of cash flow coming off that portfolio each quarter, not much.
Yes. In regards to commercial real estate repricing, I don't have the prepared dollars for you this morning. But when we've done that analysis in the past, it's a fairly minor portion of our book. As I recall, it was less than 5% per year for 2026. So a pretty small amount.
Okay. Great. And then, John, I think you mentioned about 17% of the portfolio is floating on the loan side of things. Is there managed deposit rates that you can kind of reprice kind of in lockstep with Fed rate cuts at a similar proportion, just given some of the changes in the deposit portfolio in 3Q?
Sorry, just repeat the question again one more time. I was -- the number I quoted on the repricing on the loan side was about 25%. If you could just repeat the second question?
Yes. No, I'm just trying to understand kind of where the short-term rate-sensitive deposits stood at in terms of what you can reprice kind of lockstep with what you have repricing in terms of those floating rate loans.
Yes, sure. I mean we do still have a core public funds business within the balance sheet. So the transactional -- higher cost transactional balances that we were intentionally running off does leave us with -- we do still have some public funds exposure that will reprice lower. We've seen some of that recently. We do still have some commercial betas that we can bring down or commercial deposits with some nice betas that we can bring down. In those assumptions, we actually don't assume much repricing downside beta with the consumer balances really at all, but that should be enough to get us there. As I also mentioned, we do have some callable brokers in there that will give us some really good optionality if that market continues to cooperate.
Okay. Great. And then maybe one last one for Thomas. Just going back to your M&A commentary. Curious if you're just seeing any kind of increase in dialogue or opportunities to maybe consolidate some of those subscale institutions across your footprint or is still somewhat of a slower pace of conversations these days just relative to the increase in activity we're seeing across the industry these days?
Thanks for the question. I think starting end of last year, beginning of this year, the increased dialogue was definitely evident. I think there was a little bit of uncertainty at the time of whether or not you should transact from a seller perspective. As you've seen, there's been a couple of activities here in the marketplace on footprint, [ e-commerce ] activities we've been involved in, which is great from a brand reputation and also individuals looking for Horizon as a potential partner. But as I mentioned previously, our former balance sheet probably didn't position us as well to get us to the finish line.
We anticipate that these activities will still continue in '26. I think as you're seeing out in the overall environment as a whole, it's a good market to transact. I think folks are -- if they're looking to sell right now, it's probably a good time to have that consideration at their Board level discussions and our footprints in Michigan and Indiana. We feel like we've positioned ourselves at a higher level and a more attractive position for execution on those.
Our next question comes from Damon DelMonte from KBW.
Just had a question on credit and kind of, if you, Thomas, give a little bit of color on maybe some of the trends you guys are just seeing. NPAs were up $5 million quarter-over-quarter, not a big amount. But just wondering, are there any areas of the portfolio where maybe you're starting to see some signs of stress that are requiring a little bit more attention?
Yes, I'll pass this one over to Lynn. She can walk you through some of what we saw in NPAs and how our commercial credit is looking.
On commercial portfolio, if you turn to our slide, Page 8, where we have our asset quality metrics, first of all, you can look at our substandard loans, and those have been very consistent and actually went down just a bit this quarter. So when you see the increase in nonperforming loans, it's really just a migration in that bucket. We had 2 commercial loans that moved to nonaccrual.
One, we have payment arrangements on, and we expect that to be brought current. The second one, just a series of misfortunate events for that particular customer. We have an SBA 75% guarantee, real estate based. So really nothing that we're losing sleep over. Commercial non-accruals, I think we have 6 or 7 customers, roughly $11 million. So very modest number for our portfolio size.
Okay. Great. Just real quick follow-up on that question. From our transaction in the third quarter, what we consider the highest risk portfolio we have was indirect auto, that consistently was $2 out of every $3 of our charge-offs. And also as we go into a period where we may see more stress on the consumer side, exiting that portfolio, I think this really truly enhance our overall credit profile and will keep us in the ranges that we historically performed.
Got it. Okay. And then with the improvement of the profile, as we think about the provision in the coming quarters and kind of growth, I mean, is it fair to kind of assume that maybe the provision will kind of be more like the average of the first 2 quarters of this year? Or should we expect it to be a little bit lighter just given the removal of those indirect auto loans?
Yes. So in regards to the provision, as you see, we did have a release this quarter that was predominantly related to the indirect portfolio as well as just the overall calibration of our loss rate because of that. And so we pulled out roughly $200 million in indirect loans, which dropped the -- reduced the current allocation requirement. And then the long-term loss rate for the portfolio also goes down. And so I would expect that it's going to be more similar to an average, like you said, in the first and second quarter, but it's going to be reflective of predominantly just growth rate and credit trends and charge-offs.
Got it. Okay. Great. And then I guess just lastly, I think it was mentioned -- I think John mentioned that you guys had about $0.3 million of a gain related to the syndicated sale of equipment finance. Can you just talk a little bit about that strategy and kind of where you see that progressing over the next couple of quarters?
Sure. This quarter was really our first quarter in piloting that. It's gone extremely well. We've established relationships with 8 to 10 purchasers and with kind of identifying and formalizing the purchase agreements and identifying their credit box. For us, it's not going to be a significant portion of our business, but it is an opportunity for us to manage our outstandings and fee income and just gives us more flexibility, again, with our balance sheet strategies. [indiscernible], I don't think it's going to be significant. I think this year, so far, we've done $10 million. As we move forward to next year, it might be $20 million, $30 million at most, maybe more.
And our next question comes from Brian Martin from Janney.
I just wanted to -- one of my questions was just asked there, but the -- just on the loan growth outlook, can you just talk a little bit about just the loan growth outlook for maybe more 2026 and just kind of where you expect the growth to come from? And then just are there plans to add some additional staff? Are you good with the talent you've got in place right now? Or just kind of -- I know you've talked a little bit about M&A, just kind of more on the organic side. Do you really -- do you need to add people to kind of pick up the growth rate? Or do you have the staff now and there's not really plans to do that?
Yes. It's Thomas. Thanks for the question. I think if you look through this year, our growth rate was very solid in the core franchise. If you take out the indirect auto, our commercial growth rate was probably in the low double digits number on a consistent basis. As we move into '26, this will be the main part of our growth rate. And as John highlighted in his comments, we're anticipating that to be in the mid-single-digit level. The main difference is that Horizon isn't having an opportunity finding options to lend. We're just being very disciplined in our credit profile and also our margin management.
So from a need to add additional -- significant additional headcount, we don't see that in the marketplace. We've entrenched ourselves in the growth markets and also of our core markets and are doing very well. We'll just be very selective on a go-forward basis, but making sure that we still continue to grow, but grow in a very smart and profitable way and make sure we hold our credit profile. So very confident in our ability for '26. This isn't a need for us to do a hockey stick on growth. It's more for us to be just measured in the approach and continue what we do best and be part of our local communities.
Got you. No, that's helpful. And in terms of the -- just the full quarter impact, I mean, getting to the ROA level, kind of that 1.60 type of level, I mean is that something you can achieve with kind of the full quarter impact we should start to see that in fourth quarter here? Or is that -- I guess, is that maybe a first quarter type of event kind of getting to that run rate on the ROA target?
This is John. Thanks for the question. I think if you kind of work your way through the guidance we gave specific to Q4, I think you'll find a result that's approximating the numbers you quoted or what we had quoted in the pro formas with the announcement of the balance sheet transactions. And then it's incumbent upon us, which we think will be the case to make sure that, that's durable and sustainable and view that to be the case as we look at 2026 at this point, too.
Got you. And just last one, maybe you mentioned this, I didn't think the capital outlets and just the capital accretion here, I guess, are buybacks part of that equation? I know you talked about M&A and organic loan growth. Just remind us where -- if you already talked about it, I apologize.
No, I appreciate the follow-up question on it. As we look at buybacks here in the near term, we just -- as you know, we just raised capital. We always will keep buybacks as one of the opportunities for us to create shareholder value in the near term, or I wouldn't put that as our first option.
And ladies and gentlemen, that will conclude today's question-and-answer session. I would like to turn the conference call back over to management for any closing remarks.
Thank you, everyone, for joining us today, and I also appreciate the very thoughtful questions. We appreciate your time and interest in Horizon. And as we look forward to sharing our quarter -- our fourth quarter results, which we will do in January, I hope you have a great week, and thank you very much for your time.
The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.
Horizon Bancorp, Inc. — Q3 2025 Earnings Call
Financial data from Horizon Bancorp, Inc.
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | -13 -13 |
106%
106%
100%
|
|
| - Interest Income | 248 248 |
19%
19%
-
|
|
| - Non-Interest Income | -261 -261 |
2,711%
2,711%
-
|
|
| Interest Expense | 110 110 |
30%
30%
-
|
|
| Non-Interest Expense | -178 -178 |
9%
9%
-
|
|
| Loan Loss Provisions | -0.64 -0.64 |
111%
111%
-
|
|
| Net Profit | -144 -144 |
377%
377%
-
|
|
In millions USD.
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Horizon Bancorp, Inc. Stock News
Company Profile
Horizon Bancorp, Inc. is a bank holding company, which through its subsidiary, engages in the provision of commercial and retail banking services. It offers personal banking, business banking, investment and trust, and mortgage services. The company was founded in 1873 and is headquartered in Michigan City, IN.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Prame |
| Employees | 478 |
| Founded | 1873 |
| Website | www.horizonbank.com |
