Horizon Bancorp(US:HBNC)2026-01-22 14:32Financial 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]