Q4 2025 Horizon Bancorp Inc Earnings Call

January 22, 2026

Operator: Good morning, everyone, and welcome to the Horizon Bancorp, Inc. Conference Call to discuss financial results for Q4 2025. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Now, I will turn the call over to Mark Secor, Executive Vice President, Chief Administration Officer, for the opening introduction.

Speaker #3: the HORIZON BANCORP Inc. conference call to discuss financial results for the fourth quarter of 2025. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker #3: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two.

Speaker #3: Now, I will turn the call over to Mark Secor, Executive Vice President, Chief Administration Officer, for the opening introduction.

Speaker #4: 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.

John Stewart: Good morning. 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.

Q4 2025 Horizon Bancorp Inc Earnings Call

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Horizon Bank

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Q4 2025 Horizon Bancorp Inc Earnings Call

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Thursday, January 22nd, 2026 at 1:30 PM

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Mark Secor: Good morning. 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.

Speaker #4: These statements are subject to risks and uncertainties, and other factors that could cause actual results to differ materially from those discussed, including those factors noted in the slide presentation.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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.

John Stewart: 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, Kathy DeRider; 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?

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, Kathy DeRider; 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?

Speaker #4: Representing Horizon today are Executive Vice President and Senior Operations Officer Kathy DeRyder, Executive Vice President and 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.

Speaker #4: At this time, I will turn the call over to Thomas Prame. Thomas?

Speaker #5: Thank you, Mark. Good morning. We appreciate you joining us. HORIZON's fourth quarter results demonstrate the core strength of our community banking model and the excellent execution of the balance sheet repositioning.

Thomas Prame: Thank you, Mark. Good morning. We appreciate you joining us. Horizon's fourth quarter results demonstrate 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, peer-leading 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 4.29%. 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.

Speaker #5: We have delivered on our shareholder commitment to create a top-performing community bank with durable, peer-leading 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 4.29%.

Speaker #5: 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.

Speaker #5: 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 the quarter provided to highlight the strength of HORIZON's core community banking model, which truly remains the cornerstone of our value proposition.

Thomas Prame: We are very pleased with the fourth quarter results for our shareholders and the transparency 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 continue 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, to share highlights for the quarter on our loan growth and our continued excellent credit performance. Lynn?

We are very pleased with the fourth quarter results for our shareholders and the transparency 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 continue 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, to share highlights for the quarter on our loan growth and our continued excellent credit performance. Lynn?

Speaker #5: Additionally, the company is kicking off the new year from a position of strength, with a franchise well-positioned to deliver durable earnings and continue top-tier performance metrics.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: Lynn?

Lynn Kerber: Good morning. Total loans were $4.9 billion at 31 December 2023 and an increase of $60.7 million from 30 September 2023. Commercial relationship 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, Kalamazoo, Michigan, Lake County, Indiana, Metro Indianapolis, and Johnson County in Central Indiana. As noted on slide five, our commercial portfolio is well-diversified by geography and remains consistent with the overall mix.

Speaker #6: Total loans were $4.9 billion at December 31st, an increase of $60.7 million from September 30th. Commercial relationship lending continues to be our lead strategy, with modest declines in consumer loans and residential mortgage loans predominantly being sold into the secondary market.

Speaker #6: 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.

Speaker #6: 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.

Speaker #6: As noted on slide five, our commercial portfolio is well diversified by geography and remains consistent with the overall mix. As referenced in slide 15 of the appendix, our portfolio remains very granular, with our largest segment representing 6.3% of total loans.

Lynn Kerber: As referenced in 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 the strategy.

As referenced in 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 the strategy.

Speaker #6: 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.

Speaker #6: 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.

Speaker #6: Balances for the fourth quarter were essentially flat, in alignment with the strategy. Turning to credit quality and the allowance, our credit quality metrics remain within expected range and are summarized on slide seven of the presentation deck.

Lynn Kerber: Turning to credit quality and the allowance, our credit quality metrics remain within expected ranges and are summarized on slide seven 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, an increase 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 fourth quarter is an increase of $2.2 million in commercial non-accrual loans, $831,000 in residential non-accrual loans, and approximately $800,000 increase in consumer loans over 90 days past due.

Turning to credit quality and the allowance, our credit quality metrics remain within expected ranges and are summarized on slide seven 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, an increase 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 fourth quarter is an increase of $2.2 million in commercial non-accrual loans, $831,000 in residential non-accrual loans, and approximately $800,000 increase in consumer loans over 90 days past due.

Speaker #6: 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.

Speaker #6: 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.

Speaker #6: The increase of 3.9 million dollars in the fourth quarter is an increase of 2.2 million dollars in commercial non-accrual loans, 831,000 in residential non-accrual loans, and approximately 800,000 increase in consumer loans over 90 days past due.

Speaker #6: While there is a modest increase in this metric, our overall substandard loans have decreased by $5.2 million, or 8%, from a year-ago period, and our net charge-offs remain within historical loan ranges and continue to compare favorably to the industry.

Lynn Kerber: 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 loan 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 $1,127,000 was predominantly related to economic forecast assumptions.

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 loan 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 $1,127,000 was predominantly related to economic forecast assumptions.

Speaker #6: Net charge-offs were 1 million dollars 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 dollars representing an annualized charge-off rate of 6 basis points.

Speaker #6: This is reflective of our conservative and consistent approach to 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.

Speaker #6: The net increase of 1 million 127,000 was predominantly related to economic forecast assumptions. The related provision for credit losses of 1.6 million dollars consists of the 1.1 million dollar 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.

Lynn Kerber: 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.

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.

Speaker #6: 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.

Speaker #6: Now, I'd like to turn things back to Thomas, who will provide an overview of our deposit trend.

Speaker #7: Thank you, Lynn. Moving on to our deposit portfolio displayed on slide eight. HORIZON's core relationship balances continue to show the strength of the franchise's community banking model.

Thomas Prame: Thank you, Lynn. Moving on to our deposit portfolio displayed on slide eight, Horizon's core relationship balances continue to show the strength of the franchise's 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 of 2024 provides good insight into the stability of the non-interest-bearing balances, which are up year over year, and the improved cost structure of the core relationships within the interest-bearing segments.

Speaker #7: 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.

Speaker #7: 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.

Speaker #7: Comparing the current portfolio to the fourth quarter of 2024 provides good insight into the stability of the non-interest-bearing balances which are up year over year, and the improved cost structure of the core relationships within the interest-bearing segments.

Speaker #7: 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.

Thomas Prame: 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 with its granular composition and long-standing relationships in our local markets. The team is well-positioned to fund our go-forward loans growth 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 over 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 a very successful 2026.

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 with its granular composition and long-standing relationships in our local markets. The team is well-positioned to fund our go-forward loans growth 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 over 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 a very successful 2026.

Speaker #7: Additionally, we believe our deposit portfolio continues to have opportunity to benefit the organization moving forward. With its granular composition and long-standing relationships in our local markets, the team is well-positioned to fund our go-forward loan scroll 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.

Speaker #7: Let me hand the presentation over 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 a very successful year.

Speaker #7: 2026. Thank you,

John Stewart: Thank you, Thomas. Turning to slide nine, 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.

Speaker #8: Thomas, turning to slide nine, Q4 marks the ninth consecutive quarter of net interest margin expansion, totaling 188 basis points from the low in Q3 of 2023.

Speaker #8: 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.

Speaker #8: 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.

Speaker #8: 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.

Speaker #8: 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 late 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.

John Stewart: 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 late 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.

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 late 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.

Speaker #8: 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.

Speaker #8: However, on an organic basis, we continued to see notable stability in our loan yields, as origination spreads held up well and reductions in our core deposit costs exceeded prior expectations, as realized deposit betas approached 40% for the rate cuts during the quarter.

John Stewart: However, on an organic basis, we continued 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% continue to exceed cash flows rolling off the book.

However, on an organic basis, we continued 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% continue to exceed cash flows rolling off the book.

Speaker #8: 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%.

Speaker #8: 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% continue to exceed cash flows rolling off the book.

Speaker #8: 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%.

John Stewart: 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%. Replacement yields in January thus far have modestly exceeded that rate. As you can see on slide 10, reported non-interest 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.

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%. Replacement yields in January thus far have modestly exceeded that rate. As you can see on slide 10, reported non-interest 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.

Speaker #8: Replacement yields in January, thus far, have modestly exceeded that rate. As you can see on slide 10, reported non-interest income results were broadly in line with expectations at $11.5 million for the quarter.

Speaker #8: 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.

Speaker #8: Results in Q4 did include a bully 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 1st.

John Stewart: 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 1 October. 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 2025 levels as average assets caught up with the mid-Q3 balance sheet activities, and the prior subordinated debt issuance was repaid in early Q4.

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 1 October. 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 2025 levels as average assets caught up with the mid-Q3 balance sheet activities, and the prior subordinated debt issuance was repaid in early Q4.

Speaker #8: Absent this item, expenses were up modestly from the late 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.

Speaker #8: 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.

Speaker #8: 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.

Speaker #8: 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.

John Stewart: 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.

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.

Speaker #8: Additionally, as our 2026 outlook suggests, our peer-leading levels of profitability will accrete capital very quickly. That is what you will see over the course of the coming year.

Speaker #8: 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.

Speaker #8: 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.

Speaker #8: 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%.

John Stewart: 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. Q1 average earning assets are likely to be down from Q4 averages, but should represent the low point for 2026. This outlook includes the assumption for two 25 basis points rate cuts, one 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 represent standard inflationary expense growth, modestly higher expenses in medical benefits compared with 2025, and the continuation of ongoing growth and marketing efforts.

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. Q1 average earning assets are likely to be down from Q4 averages, but should represent the low point for 2026. This outlook includes the assumption for two 25 basis points rate cuts, one 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 represent standard inflationary expense growth, modestly higher expenses in medical benefits compared with 2025, and the continuation of ongoing growth and marketing efforts.

Speaker #8: 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.

Speaker #8: This outlook includes the assumption for two 25-basis-point rate cuts, one in April and one in October, but neither moves the needle much on the outlook as intended.

Speaker #8: 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 represent standard inflationary expense growth, modestly higher expenses in medical benefits compared with 2025, and the continuation of ongoing growth and marketing efforts.

Speaker #8: 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.

John Stewart: 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.

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.

Speaker #8: 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

Speaker #8: Thomas. Thank you, John.

Lynn Kerber: 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 a premier community banking franchise located in some of the best markets in the Midwest. As a leadership team, we'll 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 lines for questions for the management team.

Thomas Prame: 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 a premier community banking franchise located in some of the best markets in the Midwest. As a leadership team, we'll 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 lines for questions for the management team.

Speaker #2: 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 a premier community banking franchise located in some of the best markets in the Midwest.

Speaker #2: As a leadership team, we'll 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.

Speaker #2: 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 lines for questions for the management.

Speaker #2: team. We

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brendan Nosal with Hovde Group. Please go ahead.

Speaker #1: To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brendan Nosalt with Hovde Group.

Speaker #1: Please go

Speaker #1: ahead. Hey, good

Brendan Nosal: Hey, good morning, everybody. Hope you're doing well.

Speaker #3: Hope you're doing well.

Speaker #4: Good morning, morning, everybody.

Thomas Prame: Good morning, Brendan. Let me just kind of start here at a top level. If you guys look at your outlook for 2026, pretty similar to what you guys offered last quarter, as you look at kind of the opportunities and risks, what in that outlook could end up going better for you guys? And conversely, where are some downside risks as you look at the year ahead?

Thomas Prame: Good morning, Brendan.

Speaker #3: Maybe just to kind of start here at a top level, Brendan, if you guys look at your outlook for 2026, it's pretty similar to what you offered last quarter. As you look at the opportunities and risks, what in that outlook could end up going better for you guys, and conversely, where are some downside risks as you look at the year?

Brendan Nosal: Let me just kind of start here at a top level. If you guys look at your outlook for 2026, pretty similar to what you guys offered last quarter, as you look at kind of the opportunities and risks, what in that outlook could end up going better for you guys? And conversely, where are some downside risks as you look at the year ahead?

Speaker #3: ahead? Yeah, good morning,

John Stewart: Yeah, good morning, Brendan. This is John. Yeah, 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 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 a $1 million delta or something from what we had initially put out there.

Speaker #4: Brendan, this is John. Yeah, 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.

Speaker #4: 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.

Speaker #4: I think 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.

Speaker #4: Maybe the very modest offset to some of that NII upside would be on the expenses, but really nothing material there—just maybe a $1 million delta or something from what we had initially put out there.

Speaker #4: 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.

John Stewart: 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 on the liability side, I think, most notably.

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 on the liability side, I think, most notably.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: And it's going to come down to the liability side, I think, most notably.

Speaker #3: Okay, all right. That's helpful, John, thank you. Maybe pivoting here to that topic of loan growth. Is there a point at which the modest declines in the consumer categories of loans ease, which would allow the high single-digit commercial loan growth to shine through more visibly in that net growth?

Brendan Nosal: Okay. All right. That's helpful, John. Thank you. Maybe pivoting here to that topic of loan growth, is there a point at which 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?

Speaker #3: Number? Thomas, thanks for the question.

Lynn Kerber: Thanks, Thomas. Thanks for the question again. As we look at the portfolio of our loans, our business model is truly a commercial banking model. That has been our lead strategy, and Lynn and her team have just done a fantastic job on that. Our consumer loan portfolio right now is primarily made up of HELOCs 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 with 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.

Thomas Prame: Thanks, Thomas. Thanks for the question again. As we look at the portfolio of our loans, our business model is truly a commercial banking model. That has been our lead strategy, and Lynn and her team have just done a fantastic job on that. Our consumer loan portfolio right now is primarily made up of HELOCs 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 with 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.

Speaker #4: Again, as we look at the portfolio of our loans, our business model is truly a commercial banking model. That has been our lead strategy, and Lynn and her team have just done a fantastic job on that.

Speaker #4: Our consumer loan portfolio right now is primarily made up of HELOCs and consumer closed-end mortgages that deal with real estate. We feel as though we are well positioned there.

Speaker #4: 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 with taking on extra risk.

Speaker #4: 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.

Speaker #4: We really found great value not only on the lending side and commercial, but truly getting the full relationships with the—

Lynn Kerber: We've really found great value not only on the lending side and commercial, but truly getting the full relationships with the deposits.

We've really found great value not only on the lending side and commercial, but truly getting the full relationships with the deposits.

Speaker #4: deposits. Great.

Brendan Nosal: Thanks, Thomas. Let me sneak one more in here. Just on asset quality, can you unpack the rise in NPAs over the past couple of quarters? Each quarter's increase is relatively small, but I think they've been up in five in the past six. Is this normalization from a low base, or is there perhaps pockets of stress that you're seeing at this point?

Speaker #3: Thanks, Thomas. Let me speak one more in here. Just on asset quality, can you unpack the Horizon MPAs over the past couple of quarters?

Speaker #3: Each quarter's increase is relatively small, but I think they've been up in five of the past six. Is this normalization from a low base, or is there perhaps pockets of stress that you're seeing at this point?

Speaker #5: Yeah, good morning, and thanks for the question. I appreciate your observation. We had a very low base that we're starting from, and our overall metrics continue to be very strong.

David Brown: Yeah, good morning, and thanks for the question. 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 non-performings, 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.

Lynn Kerber: Yeah, good morning, and thanks for the question. 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 non-performings, 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.

Speaker #5: 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.

Speaker #5: As I noted in my comments, substandard loans did increase this quarter. Roughly $2.2 million of it was commercial, $800,000 mortgage, non-coral, and over 90 days, $800,000 consumer.

Speaker #5: These are all relatively modest numbers. I don't see it as reflective of any one sector or any particular product. When I look at our commercial non-performings, it's really more episodic with a customer.

Speaker #5: 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.

David Brown: It just caused some delays. Sometimes we use non-accrual 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, substandard loans have decreased for the last three quarters and roughly 8% for 2025. And if you look at commercial specifically, our criticized loans have actually decreased 17% since December 2023 and 7% since December 2024. So I think our overall metrics are good. I look at this just really as migration through the buckets.

It just caused some delays. Sometimes we use non-accrual 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, substandard loans have decreased for the last three quarters and roughly 8% for 2025. And if you look at commercial specifically, our criticized loans have actually decreased 17% since December 2023 and 7% since December 2024. So I think our overall metrics are good. I look at this just really as migration through the buckets.

Speaker #5: Sometimes we use non-accrual 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.

Speaker #5: 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, substandard loans have decreased for the last three quarters.

Speaker #5: And roughly 8% for 2025. And if you look at commercial specifically, our criticized loans have actually decreased 17% since December 2023, and 7% since December 2024.

Speaker #5: So, I think our overall metrics are good. I look at this just really as migration through the—

Speaker #5: buckets. Okay.

Brendan Nosal: Okay. That's fantastic color, Lynn. I appreciate it, and thanks for taking the questions.

Speaker #3: That's fantastic, Lynn. I appreciate it, and thanks for taking the questions.

Speaker #1: The next question comes from Nathan Race with Piper Sandler. Please go ahead.

Operator: The next question comes from Nathan Race with Piper Sandler. Please go ahead.

Speaker #1: ahead. Hey,

Speaker #6: Everyone, good morning. Thanks for taking the questions. 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.

Nathan Race: Hey, everyone. Good morning. Thanks for taking the questions. 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 I'm 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.

Speaker #6: 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.

Speaker #4: Yeah, sure. Thanks for the question. Yeah, as I said in my prepared remarks, new origination spreads continue to be really good. We see that continuing here in January.

John Stewart: Yeah, sure. Thanks for the question. Yeah, 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 the loan side that are still below 6%. So you do have some front-book, back-book repricing that will help as we just kind of grow through the year. On the other side, 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.

Speaker #4: New origination yields continue to sit on a coupon basis. Above 6.5%, we've got cash flows coming off the portfolio on the loan side that are still below 6%.

Speaker #4: So, you do have some front book, back book repricing that will help as we just kind of grow through the year. On the other side, it's going to come down to just core deposit generation.

Speaker #4: 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.

Speaker #4: 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 for deposit growth versus loan growth—the assumption there is that the excess is just flowing back into cash for the time being for liquidity purposes and nothing else.

John Stewart: 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 excess is just flowing back into cash for the time being, for liquidity purposes, and nothing else. And, of course, that's NII accretive, but maybe at the margin, on a NIM 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.

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 excess is just flowing back into cash for the time being, for liquidity purposes, and nothing else. And, of course, that's NII accretive, but maybe at the margin, on a NIM 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.

Speaker #4: And of course, that's not NII accretive, but maybe at the margin on a NIM percentage, modestly dilutive. So, wherever caps kind of lands is going to be whether or not it's up a bit, flat—whatever the outcome ends up being.

Speaker #4: But I think those are the big ones.

Speaker #4: drivers. Okay.

Nathan Race: Okay. That's really helpful. Thank you for that. And changing gears a bit, as you guys alluded to in your comments, capital levels just with the profitability profile are going to build up pretty strong clips. I could see most capital ratios increasing by 100 basis points year over year by the end of this year. So just curious, maybe, Thomas, if you can update us on some of your capital deployment priorities. I imagine supporting growth is still number one, but would be curious to get your thoughts on the opportunity to play excess capital via acquisitions and kind of what you're seeing across that landscape these days.

Speaker #6: That's really helpful. Thank you for that. And changing gears a bit, as you guys alluded to in your comments, capital levels—just with the profitability profile—are going to build at a pretty strong clip.

Speaker #6: I could see most capital ratios increasing by 100 basis points, year over year, by the end of this year. So just curious—maybe, Thomas, if you can update us on some of your capital deployment priorities.

Speaker #6: I imagine supporting growth is 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.

Speaker #6: days.

Speaker #4: And thanks for the question. And also, thanks for...

Thomas Prame: And 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 from the results coming from the fourth quarter. 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. 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 runway to build capital to align with some of our industry peers.

Speaker #4: 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 from the results coming from the fourth quarter.

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Q4 2025 Horizon Bancorp Inc Earnings Call

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Q4 2025 Horizon Bancorp Inc Earnings Call

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Horizon Bank

Q4 2025 Horizon Bancorp Inc Earnings Call

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