Horizon Bancorp(US:HBNC)2026-01-22 14:30Financial 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] - Total loans increased to $4.9 billion, up $60.7 million from Q3 2025, with commercial loans growing by $76 million, representing 9% annualized growth [6][10] - The net charge-offs for Q4 were $1 million, representing an annualized charge-off rate of 6 basis points, with full-year net charge-offs totaling approximately $2.9 million [10][19] Business Line Data and Key Metrics Changes - Commercial relationship lending remains the lead strategy, with modest declines in consumer loans and residential mortgage loans primarily sold into the secondary market [6][8] - The commercial loan portfolio is diversified, with 28% in commercial and industrial and 72% in commercial real estate [6][7] - Residential mortgage lending volumes were flat, aligning with the strategy to create capacity for commercial lending activities [8] Market Data and Key Metrics Changes - Loan growth was primarily driven by markets in Michigan and Indiana, particularly in Troy, Kalamazoo, Lake County, and Metro Indianapolis [7][8] - The deposit portfolio showed strength, with non-interest-bearing balances up year-over-year, reflecting improved cost structure within interest-bearing segments [12][13] 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 [5][20] - Horizon plans to leverage its community banking model and expand its branch network in attractive markets, with a focus on organic growth [41][60] Management's Comments on Operating Environment and Future Outlook - Management views the outlook for 2026 as slightly more favorable, with expectations for net interest income growth in the low teens [27][40] - The company anticipates mid-single-digit growth in loans and deposits, with a focus on organic deposit funding to support loan growth [20][21] Other Important Information - The net interest margin increased by 77 basis points to 4.29%, marking the ninth consecutive quarter of expansion [15][16] - The allowance for credit losses increased from $50.2 million to $51.3 million, representing 1.05% of loans held for investment [10][11] 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 [27] 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 [30] Question: Asset quality and substandard loans - Substandard loans increased modestly, but overall metrics remain strong, with a decrease in substandard loans over the past year [32] Question: Margin drivers and loan pricing - New origination yields are above 6.5%, with cash flows from the portfolio 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 drivers for 2026 - Fee income growth is expected to be balanced across various segments, with no single area driving significant changes [50]