Financial Performance - As of December 31, 2025, Horizon Bank had total assets of $6.4 billion and total deposits of $5.3 billion[22]. - In 2025, revenues from loans accounted for 291.4% of total consolidated revenue, while revenues from investment securities accounted for 42.9%[24]. - As of December 31, 2025, Horizon employed 465 full-time and 26 part-time employees[29]. - Horizon is the largest bank in LaPorte County and Carroll County, and holds significant market shares in several other counties[32]. - Horizon's management believes that both Horizon and the Bank met all applicable regulatory capital requirements as of December 31, 2025[67]. Market Position and Competition - Horizon operates 71 full-service offices across northern and central Indiana and southern and central Michigan[22]. - Horizon's market share in LaPorte County is the largest among 8 bank and thrift institutions, with a market share of 58.00% in LaPorte County[32]. - The company faces competition from various financial institutions, including commercial banks, credit unions, and emerging FinTech start-ups[30]. - Horizon's primary market includes areas in Indiana and Michigan, with significant competition from both local and national financial service providers[30]. Regulatory Compliance - Horizon Bancorp is subject to extensive regulation and supervision by the Federal Reserve and the Indiana Department of Financial Institutions, ensuring compliance with the Bank Holding Company Act and other regulations[34][36]. - The company is required to act as a source of financial strength for its subsidiary bank, committing resources to support it in times of financial distress[42]. - Horizon is subject to the provisions of the USA PATRIOT Act and the Bank Secrecy Act, which require robust anti-money laundering measures[82]. - The Dodd-Frank Act has significantly changed the regulation of financial institutions, impacting capital requirements and operational practices[92]. - Horizon's compliance with the Sarbanes-Oxley Act includes a report on internal control over financial reporting[91]. Capital Adequacy - As of December 31, 2025, Horizon Bank met all applicable capital adequacy requirements, including a common equity Tier 1 capital to risk-based assets ratio of 4.5% and a total capital to risk-based assets ratio of 8%[63][57]. - As of December 31, 2025, Horizon's total capital ratio was 14.36%, significantly exceeding the required 8.00% for capital adequacy purposes[71]. - The Bank's Tier 1 capital ratio was 12.99%, above the required 8.00%[71]. - Horizon's common equity Tier 1 capital ratio was 10.42%, surpassing the minimum requirement of 4.50%[71]. - The Bank was categorized as "well capitalized," with a total risk-based capital ratio exceeding 10%[80]. Dividend Policy - The Bank could declare dividends of approximately $54.5 million to Horizon without prior regulatory approval as of December 31, 2025[76]. - Horizon is subject to regulatory restrictions on dividend payments, which are limited to the current year's net profits plus retained net profits from the previous two years[76]. - The Federal Reserve expects bank holding companies to consult with it before declaring dividends that could raise safety and soundness concerns[74]. Operational Challenges - Horizon has incurred higher operating costs due to compliance with the Dodd–Frank Act and expects these costs to continue for the foreseeable future[98]. - The company acknowledges risks related to interest rate volatility, competition, and regulatory changes that could impact its financial performance[17]. Investment and Funding - Horizon's investment in stock of the FHLB of Indianapolis was $45.7 million as of December 31, 2025, exceeding the required minimum[105]. - Dividends paid by the FHLB of Indianapolis to Horizon on the FHLB stock totaled approximately $3.6 million for the year ended December 31, 2025, resulting in an annualized rate of 7.8%[105]. - The FHLB serves as a reserve bank for its members and is funded primarily from deposits by banks and proceeds from the sale of consolidated obligations[101]. - The FHLB imposes limitations on advances, including a cap on certain real estate-related collateral to 30% of a member's capital[103]. Regulatory Changes - The Dodd-Frank Act mandates a minimum common equity Tier 1 capital to risk-based assets ratio of 4.5%[57]. - The FDIC has set a long-term goal for the designated reserve ratio of the Deposit Insurance Fund at 2% of estimated insured deposits, with a minimum reserve ratio of 1.35% mandated by the Dodd-Frank Act[50]. - Assessment rates for deposit insurance premiums for small Risk Category I banks, such as Horizon Bank, range from 5 to 9 basis points, with adjustments based on financial measures and supervisory ratings[51][53]. - The Economic Growth Act allows qualifying community banks to maintain a Community Bank Leverage Ratio (CBLR) between 8% and 10%[65]. - Regulatory changes under the Regulatory Relief Act have simplified capital calculations for community banks, although Horizon has not opted into the Community Bank Leverage Ratio framework[99][100].

Core Viewpoint - Horizon Bancorp (HBNC) has shown modest performance over the past year, with a gain of only 1% [1] Group 1: Financial Performance - The company raised capital last year to support a repositioning of its balance sheet [1] - This capital raise significantly increased its run-rate net interest income (NII) [1] - The company is now well positioned for future growth [1]

Core Viewpoint - BAE Systems' share price has shown significant movement, increasing from a low of 1,588p in December to a high of 2,160p, before settling at the current price of 1,973p [1]. Group 1 - The share price of BAE Systems has experienced a notable rise over the past few months, indicating positive market sentiment [1]. - The fluctuation in share price suggests potential investor interest and market dynamics affecting BAE Systems [1].

Core Viewpoint - Horizon Bancorp, Inc. announced the retirement of James B. Dworkin from the Board of Directors effective May 7, 2026, and the resignation of Julie S. Freigang effective January 20, 2026, both of which were accepted by the Board on the same day [1][2]. Group 1: Board Changes - James B. Dworkin has served on Horizon's Board of Directors since 2003 and has been instrumental in the bank's growth, particularly in his roles on the Audit Committee and as Chair of the Wealth Committee [3]. - Julie S. Freigang joined the Board in 2019 and served as a member of the Audit Committee and Chair of the Cyber Security Committee, contributing valuable insights on cyber security risks [4]. Group 2: Leadership Acknowledgment - The Chairman of the Board, Eric P. Blackhurst, expressed gratitude for the contributions of both Dworkin and Freigang, highlighting their independent governance and dedication to the bank's development [3]. - Thomas Prame, President and CEO of Horizon, also acknowledged the strategic direction and leadership provided by both directors during their tenure [5]. Group 3: Company Overview - Horizon Bancorp, Inc. is a commercial bank holding company with assets totaling $6.4 billion, serving customers in the Midwest through digital tools and physical branches in Indiana and Michigan [5]. - The bank offers a range of services including residential and secured consumer lending, personal banking, wealth management, business banking, treasury management, and equipment financing, with commercial lending making up over half of total loans [5].

Core Viewpoint - Horizon Bancorp, Inc. announced the retirement of James B. Dworkin from the Board of Directors effective May 7, 2026, and the resignation of Julie S. Freigang effective January 20, 2026, both of which were accepted by the Board on the same day [1][2]. Group 1: Board Changes - James B. Dworkin has been a member of Horizon's Board of Directors since 2003 and has served on the Board of Directors of Horizon Bank since 2002, contributing over two decades to the company [3]. - Julie S. Freigang joined the Board of Directors of Horizon Bank in 2019 and was appointed to the Horizon Board in January 2020, serving as the Chair of the Cyber Security Committee [4]. Group 2: Leadership Comments - Eric P. Blackhurst, Chairman of the Board, expressed gratitude for the contributions of both Dworkin and Freigang, highlighting their independent governance and critical roles in the Bank's growth [3]. - Thomas Prame, President and CEO of Horizon, acknowledged the dedicated service and strategic direction provided by both directors during their tenure [5]. Group 3: Company Overview - Horizon Bancorp, Inc. is a $6.4 billion-asset commercial bank holding company for Horizon Bank, serving customers in the Midwest through digital tools and physical branches [5]. - The bank offers a range of services including residential and secured consumer lending, personal banking, wealth management, business banking, treasury management, and equipment financing, with commercial lending making up over half of total loans [5].

Core Insights - The company has demonstrated resilience in its relationship-based deposit portfolios, with a focus on managing outflows from higher-cost non-core transactional accounts as part of its balance sheet restructuring plan [1][4] - The net interest margin has expanded for the eighth consecutive quarter, reaching an exit run rate above 4% in September, driven by solid results from the commercial loan engine and a strong core client-driven deposit franchise [2][15] - The balance sheet restructuring has exceeded initial expectations, positioning the company for top-tier financial outcomes and sustainable long-term value for shareholders [3][31] Financial Performance - The net interest margin increased by 29 basis points to 3.52% in Q3, with expectations for further expansion into the range of 4.15% to 4.25% in Q4 [15][19] - Loan balances decreased by $162 million, primarily due to the planned runoff and sale of lower-yielding indirect auto loans, but net commercial loan growth was $58 million, representing a 7% annualized increase [6][14] - Noninterest income was impacted by a $299 million loss on the sale of securities, but fee-based businesses performed well, with expectations for high single-digit year-over-year growth in Q4 [21][23] Credit Quality - Credit quality remains satisfactory, with substandard loans and nonperforming loans at 1.31% and 0.64%, respectively, consistent with historical performance [9][53] - Net charge-offs for the quarter totaled $800,000, representing an annualized charge-off rate of 5 basis points, with year-to-date charge-offs at $1.9 million [9][10] - The allowance for credit losses decreased to $50.2 million, reflecting a reduction in loss rates, particularly in the indirect auto loan portfolio [10][12] Strategic Outlook - The company is focused on maintaining steady diversified growth and disciplined pricing, with an emphasis on profitable loan growth and excellent credit quality as cornerstones of its strategy [5][7] - The outlook for 2026 includes alignment with consensus estimates for earnings per share at approximately $2, with low double-digit growth anticipated in non-FTE net interest income [29][30] - The company is positioned to explore M&A opportunities that are logical and accretive to its community banking platform, with a focus on franchises that enhance profitability [34][37]

Core Insights - The company is optimistic about its financial positioning heading into 2025, driven by positive loan growth and quality credit metrics [1][4][30] - Strategic initiatives completed in the quarter have restructured the cost base, leading to a more efficient operation moving forward [1][4][22] Financial Performance - The fourth quarter showed strong results with a net interest margin increase of 31 basis points to 2.97%, driven by strategic cash redeployment and a reduction in higher-cost deposits [14][16] - Total loans held for investment, excluding mortgage warehouse, grew by $123 million, representing a 10% annualized growth, primarily in core commercial lending segments [5][6] - The company reported a net loan growth of $408 million for the year, reflecting a 9% increase for 2024 [5] Credit Quality - Commercial credit quality metrics are performing well, with past due loans greater than 30 days at 10 basis points and a non-performing loan ratio declining to 19 basis points [7][10] - The allowance for credit losses decreased by approximately $900,000 to $52 million, resulting in an ACL-to-loan ratio of 1.07% [11] Deposit Trends - The deposit portfolio showed stability, with core deposits remaining flat and a strategic reduction in higher-cost CDs to improve profitability [2][12] - The company anticipates low single-digit growth in deposit balances, subject to typical seasonality [25] Strategic Initiatives - The company executed several key initiatives aimed at strengthening the balance sheet and improving long-term profitability, including the sale of its mortgage warehouse division [22][23] - The company plans to focus on organic growth in its core commercial lending segments, with expectations for continued loan growth in 2025 [30][66] Outlook for 2025 - The company expects loan growth to be in the mid-single-digit range for the full year, with a continued runoff of lower-yielding indirect auto loans [24][25] - Full-year 2025 net interest income is projected to grow in the mid-teens, primarily driven by net interest margin expansion [26][27] - The effective tax rate for 2025 is expected to be in the mid-teens, reflecting a stronger outlook for pre-tax income [28]

Core Insights - The company reported positive momentum in Q3, with revenue growth, improved credit metrics, and a productive balance sheet, despite slightly elevated expenses expected to normalize by 2025 [1][3][20] - Strategic actions initiated in Q4 aim to enhance long-term shareholder value and improve operating performance [1][17][25] Financial Performance - Q3 results showed a solid average loan growth of 10% annualized, driven by strong net interest income and fee income [3][5] - Commercial loans increased by $9.5 million, reflecting a 1.3% annualized growth, while consumer loan balances decreased by $43 million due to a planned reduction in indirect auto loans [5][7] - The net interest margin (NIM) improved to 2.66%, marking the fourth consecutive quarter of sequential margin improvement, with expectations for further expansion in Q4 [12][21] Deposit Trends - The deposit portfolio exhibited solid growth, with stability in core noninterest-bearing balances, benefiting from commercial and consumer deposit gathering efforts [2][11] - The company anticipates that its deposit portfolio will remain stable, focusing on core retail and commercial customers [21][25] Credit Quality - Commercial credit quality remains strong, with past dues at three basis points and a nonperforming loan ratio of 24 basis points [6][7] - The allowance for credit losses increased to $52.9 million, reflecting adjustments for economic forecasts, with a modest increase in specific reserves [9][10] Strategic Initiatives - The company plans to sell approximately $325 million in securities and intends to sell its mortgage warehouse business, aiming to improve structural profitability and simplify its business model [17][18] - Proceeds from the securities sales are expected to enhance the net interest margin and tangible book value per share [18][19] Outlook - The company expects total loan balances to remain relatively unchanged, with core commercial growth offset by the runoff of the indirect auto portfolio [20][21] - Anticipated NIM expansion of 15 to 20 basis points in Q4 is expected to drive an increase in net interest income in the upper single-digit percentage range compared to Q3 [21][22]

Financial Data and Key Metrics Changes - Horizon Bancorp reported an annualized return on average assets above 1.6% and a return on average equity approaching 16% for Q4 2025, with a net interest margin of 4.29% [4][15] - The net interest margin increased by 77 basis points from the previous quarter, marking the ninth consecutive quarter of expansion [15][16] - Total loans reached $4.9 billion, an increase of $60.7 million from the previous quarter, with commercial loans growing by $76 million, representing 9% annualized growth [7][8] Business Line Data and Key Metrics Changes - Commercial relationship lending remains the primary strategy, with modest declines in consumer loans and residential mortgages, which are primarily sold into the secondary market [7][8] - The commercial loan portfolio is well-diversified, with 28% in commercial and industrial and 72% in commercial real estate [7] - Credit quality metrics remain strong, with substandard loans decreasing to 1.22% of total loans, down from 1.31% in the previous quarter [9][10] Market Data and Key Metrics Changes - The deposit portfolio shows strength, with non-interest-bearing balances up year over year, reflecting improved cost structure [12][13] - The company is well-positioned in attractive markets in Michigan and Indiana, with a focus on organic deposit funding to support loan growth [12][14] Company Strategy and Development Direction - Horizon aims to create sustainable long-term value for shareholders through a disciplined operating model and consistent profitable growth [6][24] - The company plans to leverage its community banking model and expand its branch network selectively in key markets [60][61] - The focus remains on organic growth rather than acquisitions, although the company is open to opportunistic talent additions [41][44] Management's Comments on Operating Environment and Future Outlook - Management views the outlook for 2026 as slightly more favorable than previously estimated, with expectations for mid-single-digit growth in loans and deposits [28][21] - The company anticipates stable net interest margins and continued strong performance metrics, with a focus on maintaining a conservative credit culture [15][23] - Economic conditions and credit quality trends will influence future provision expenses [11] Other Important Information - Non-interest income for Q4 was reported at $11.5 million, with a year-over-year increase in total fee income driven by wealth management and mortgage fees [18] - Expenses for the quarter were in line with expectations at $40.6 million, reflecting seasonal increases and legal fees related to legacy items [19] Q&A Session Summary Question: Outlook for 2026 and potential risks - Management sees a more optimistic outlook for net interest income, with organic core deposit growth being a key lever for upside [28][30] Question: Loan growth and consumer loan performance - The company does not plan to push for accelerated growth in consumer loans, focusing instead on commercial lending [31][32] Question: Asset quality and substandard loans - Management indicates that increases in substandard loans are modest and not reflective of sector-wide stress, with overall metrics remaining strong [33][34] Question: Margin drivers and loan pricing - New loan originations are yielding above 6.5%, while cash flows from the portfolio are below 6%, providing a favorable margin environment [37][39] Question: Capital deployment priorities - The company will focus on organic growth opportunities while remaining disciplined in capital deployment decisions [41][42] Question: Fee income drivers for 2026 - Fee income growth is expected to be balanced across various segments, with no single area driving significant changes [50][52] Question: Commercial pipeline and seasonality - The commercial loan pipeline is strong, though seasonality may affect quarterly fluctuations in originations [72]

Financial Data and Key Metrics Changes - The fourth quarter results showed an annualized return on average assets above 1.6% and return on average equity approaching 16% [4] - The net interest margin increased to 4.29%, marking a 77 basis point increase from the previous quarter [15][16] - Net charge-offs were $1 million in the quarter, representing an annualized charge-off rate of 6 basis points, which is favorable compared to industry standards [10] Business Line Data and Key Metrics Changes - Total loans reached $4.9 billion, an increase of $60.7 million from the previous quarter, with commercial loans growing by $76 million, representing 9% annualized growth [7] - The commercial loan portfolio is diversified, with 28% in commercial and industrial and 72% in commercial real estate [7] - Residential mortgage lending volumes remained flat as they were predominantly sold into the secondary market [8] Market Data and Key Metrics Changes - The deposit portfolio showed strength with non-interest-bearing balances up year-over-year, reflecting improved cost structure [12][13] - The company is well-positioned in attractive markets in Michigan and Indiana, with a focus on organic deposit funding to support loan growth [21] Company Strategy and Development Direction - The company aims to create sustainable long-term value for shareholders through a disciplined operating model and consistent profitable growth [6] - The focus remains on commercial relationship lending while maintaining a conservative approach to consumer loans [31] - The company plans to open additional offices in key markets to enhance deposit generation and loan growth [60][61] Management's Comments on Operating Environment and Future Outlook - Management views the outlook for 2026 as slightly more favorable, with expectations for mid-single-digit growth in loans and deposits [28][21] - The company anticipates net interest income growth in the low teens year-over-year, driven by a stable net interest margin [22] - The effective tax rate is expected to remain in the range of 18%-20% [23] Other Important Information - The company completed restructuring activities, positioning itself for reliable returns without significant balance sheet changes [15] - The allowance for credit losses increased to $51.3 million, representing 1.05% of loans held for investment [10] Q&A Session Summary Question: Outlook for 2026 and potential risks - Management views the outlook as slightly more favorable, with net interest income growth expected to be higher than previously estimated [28][29] Question: Loan growth and consumer loan performance - The company maintains a commercial banking model and does not plan to push for accelerated growth in consumer loans [31] Question: Asset quality and non-performing assets - The increase in non-performing assets is seen as normalization from a low base, with overall metrics remaining strong [33][34] Question: Margin drivers and loan pricing - New origination yields are above 6.5%, while cash flows from the portfolio are below 6%, indicating a favorable margin environment [38][39] Question: Capital deployment priorities - The company will focus on organic growth opportunities while remaining disciplined in capital deployment decisions [41][42] Question: Fee income growth drivers - Fee income is expected to grow modestly, with no single segment driving significant changes [50] Question: Commercial pipeline and seasonality - The pipeline is strong but may experience seasonal fluctuations, with expectations for growth picking up in the second quarter [72]