Horizon Bancorp (IN) Q1 Earnings Call Highlights

Key Points

• Executives pointed to strong profitability and capital generation, reporting annualized return on average assets >1.60%, return on average tangible common equity >19%, a net interest margin of 4.29%, and a 40‑bp rise in CET1 to 10.82%.
• Loan growth was commercial‑led — total loans were $4.87 billion with a $34.2 million increase in commercial loans while residential/consumer balances fell ~$32 million due to disciplined pricing — and deposits grew about $147 million (11% annualized), including $61 million in non‑interest‑bearing balances.
• Management kept 2026 guidance unchanged despite a revised interest‑rate outlook: Q1 NIM held at 4.29% and full‑year targets remain mid‑single‑digit loan/deposit growth, low‑teens NII growth and a full‑year NIM of 4.25%–4.35%, while credit metrics stayed stable (NPLs 0.76%, allowance 1.05%).

Horizon Bancorp IN) (NASDAQ: HBNC executives emphasized strong profitability, deposit growth, and steady credit performance as the company reviewed final first-quarter 2026 results, while maintaining its full-year guidance despite a changed interest-rate outlook.

Management highlights profitability, margin durability, and capital generation

CEO and President Thomas M. Prame said the quarter reflected the “core strength” of Horizon’s community banking model and its focus on “durable peer-leading performance metrics.” Prame highlighted an annualized return on average assets “above 1.60%,” return on average tangible common equity “above 19%,” and a net interest margin of 4.29%.

Prame also pointed to capital improvement during the quarter, saying the results drove a “meaningful increase” in the company’s common equity tier 1 (CET1) ratio by 40 basis points to 10.82%, and improved total risk-based capital to 14.77%.

Loan growth led by commercial; mortgage refinancing activity weighed on residential balances

Lynn Kerber, Executive Vice President and Chief Commercial Banking Officer, said the quarter reflected “steady, disciplined commercial growth” in a competitive environment, with the company prioritizing “high-quality commercial lending” and “continued pricing discipline.”

Total loans held for investment ended the quarter at $4.87 billion, driven by a $34.2 million increase in commercial loans, Kerber said. Prame and Kerber both noted that residential and consumer loans declined by about $32 million in the quarter as management chose not to pursue lower-yielding mortgages amid early-quarter refinance activity. Prame said Horizon remained “steadfast on its disciplined pricing,” adding that management felt confident in the decision and had seen balances “quickly align with full-year growth estimates in early Q2.”

Commercial growth was concentrated in Grand Rapids, Indianapolis, and Northwest Indiana, Kerber said. She added that the company is continuing to diversify its portfolio mix, noting that 37% of the net quarterly increase came from commercial and industrial (C&I) loans versus C&I representing 30% of the overall commercial portfolio.

In the Q&A session, Kerber said payoff activity was “very consistent with our long-term averages,” attributing the slower pace of growth more to seasonality and selectivity in lending. She also discussed repricing opportunities in the commercial book, stating Horizon had about $380 million in commercial maturities in 2026 (about 12% of the portfolio) with a weighted average rate of “about 6%,” and about $318 million in 2027 (about 10%) with a weighted average rate “just under 6%.” With origination rates “on average in 7+,” she cited a “100–150 basis point pickup opportunity” based on current rates.

On residential and consumer appetite, Prame said Horizon still views both as “core” to its model, but described the period as “episodic pricing” tied to market rates that led competitors to offer “sub-6% on some longer duration fixed assets” that Horizon elected not to match. He said management did not expect “hockey stick growth” in mortgage and consumer this year, projecting results to be “relatively flat, maybe mildly up, mildly down.”

Deposits grew $147 million; non-interest-bearing balances increased $61 million

Prame said deposits grew approximately $147 million, or 11% annualized, describing performance as positive across growth, mix, and cost. A key feature of the quarter was $61 million in non-interest-bearing deposit growth, which he said reflected efforts to expand “sticky primary banking relationships” across Indiana and Michigan.

Despite strong growth, Prame said Horizon reduced overall interest-bearing deposit costs by seven basis points during the quarter through portfolio reviews and “an agile approach to local market pricing.” In response to an analyst question on the higher cash position created by deposit growth, CFO John R. Stewart said the elevated cash balance had a “modest impact” on net interest margin but did not impact net interest income. Looking to the second quarter, Stewart said the company expected to be a “modest net user of cash,” with loan growth possibly exceeding deposit growth, and said that maintaining cash at “between 2% and 3%” of earning assets would be within expectations.

Net interest margin held at 4.29%; fee income and expense commentary

Stewart said Horizon’s first-quarter net interest margin was unchanged from the prior quarter at 4.29%, consistent with the company’s original outlook. He described management’s objective as building a balance sheet “largely inoculated from changes in rates.” Stewart added that Horizon’s net interest margin and net interest income outlook was unchanged “despite going from the assumption of two rate cuts previously to none today.”

Stewart noted that average interest-earning cash balances exceeded internal projections by about $60 million because deposit growth was stronger than expected, which reduced the margin percentage by about four basis points. He said new loan production in the quarter exceeded 6.6%, compared with average loan yields of 6.28%, and roll-off yields “just below 6%.” For the investment portfolio, Stewart said the company anticipated $75 million to $100 million of principal cash flows over the balance of the year at about 4.7%, with reinvestment rates in the first quarter approximating 4.8%.

On non-interest income, Stewart said the company “got off to a nice start” in the first quarter. Excluding a $7 million warehouse gain and modest securities losses in the first quarter of the prior year, he said fees were up about 13% year-over-year, driven by “strong” gains in service charges and fiduciary activities. While mortgage gain-on-sale was flat year-over-year, Stewart said the team was “off to a nice start” in the second quarter and he still expected “solid progress” in the business for the full year.

Expenses were $40.7 million, Stewart said, in line with expectations despite seasonal pressure in benefits and occupancy, which were partly offset by lower outside business services spend and timing of marketing. He said Horizon expected a “modest increase” in quarterly expenses in Q2 from annual merit increases and planned marketing, but maintained its full-year expense outlook in the “mid $160 million range.”

Credit metrics described as stable; equipment finance build-out tracking ahead of plan

Kerber said credit performance remained “satisfactory and within historical ranges.” Substandard loans were $63.4 million, or 1.3% of total loans, and non-performing loans were $37 million, or 0.76% of total loans. She said non-performing loans have increased “modestly” over recent quarters but remain manageable, and she expected improvement later in 2026 as certain credits return to performing status, pay off, or complete collections efforts. Kerber said those loans are “well secured and/or appropriately reserved,” and she did not expect an impact on losses.

Net charge-offs were $626,000, or five basis points annualized, and the allowance for credit losses was $51.3 million, or 1.05% of loans held for investment. Kerber said the $391,000 provision reflected replenishment of charge-offs and a reduction in reserve for unfunded commitments.

Asked about the company’s equipment finance division, Kerber said Horizon is in year two of its plan and performance has been “a little bit between our year two and year three of the plan,” adding that the team has been built out and the effort is “going as expected.”

Looking ahead, Stewart said Horizon’s 2026 guidance remains unchanged, including expectations for mid-single-digit period-end loan and deposit growth, low-teens net interest income growth, and a full-year FTE net interest margin range of 4.25% to 4.35%. Prame said management’s focus remains on “sustainable long-term value” through disciplined execution, and reiterated that capital generation provides “optionality” for shareholder value, including potential reinvestment in growth, share repurchases, or other actions, while emphasizing the company does not have a specific M&A plan in place.

About Horizon Bancorp IN) (NASDAQ: HBNC

Horizon Bancorp NASDAQ: HBNC is a financial holding company headquartered in Columbus, Indiana, offering community banking and wealth management services through its subsidiary, Horizon Bank. As a locally focused institution, it provides a full range of retail and commercial banking products, including checking and savings accounts, consumer and mortgage lending, commercial real estate financing, and treasury management solutions.

In addition to traditional deposit and loan products, Horizon Bancorp's services encompass investment advisory and trust administration, retirement planning, and insurance products.

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