Horizon Bancorp (IN) (NASDAQ:HBNC) reported what management described as a productive third quarter of 2026, supported by mid-single-digit annualized loan and deposit growth, stable net interest margin, expanding capital levels and continued strength in fee-generating businesses.
Chief Executive Officer and President Thomas Prame said annualized returns on average assets exceeded 1.7%, while returns on tangible common equity were above 20%. The company’s net interest margin remained in the mid-4.3% range, and its common equity Tier 1 capital ratio rose to 11.53% at quarter-end. Total risk-based capital stood at 15.4%.
“We continue to take a disciplined approach to growth on both sides of the balance sheet while simultaneously managing pricing and credit risk,” Prame said.
Loan Growth Led by Consumer, Mortgage and C&I Activity
Loans held for investment ended the quarter at slightly more than $5 billion, rising approximately $47 million from the prior quarter, or about 4% on an annualized basis. Executive Vice President and Chief Commercial Banking Officer Lynn Kerber said growth was broad-based, with contributions from Michigan markets including Grand Rapids, Midland and Lansing, as well as Lake County and Fort Wayne, Indiana.
Residential real estate loans increased $16 million, aided by an expanded mortgage-lending team and seasonal summer home sales. Consumer loans rose $18 million, primarily in home-lending segments. Commercial portfolio growth totaled $12.2 million, including a roughly $22 million increase in commercial and industrial, or C&I, balances during the quarter.
C&I loans were up nearly $118 million, or 12%, from a year earlier and represented approximately 31% of the commercial portfolio. During the question-and-answer session, Kerber said the growth was not primarily driven by customers drawing on existing credit lines, which remained stable. Instead, the growth reflected expansion with existing clients, new relationships and opportunities stemming from disruption among some competitors.
Commercial real estate balances declined $9.9 million during the quarter. Kerber attributed the decline to Horizon’s selective approach to certain real estate segments and elevated customer payoffs in July and August, as some borrowers sold properties. He said payoff activity moderated in September and is expected to return to more normal levels in the fourth quarter.
Management said it is managing commercial real estate concentrations and segment exposure rather than seeking to exit the category. Horizon continues to target a more diversified commercial portfolio through C&I expansion.
Credit Metrics Remained Stable
Net charge-offs totaled approximately $1.2 million, or 10 basis points annualized of average loans. While that was modestly above the prior quarter, Kerber said the result reflected timing between the second and third quarters. The year-to-date annualized loss rate was 6 basis points.
- Substandard loans declined to approximately $60 million, or 1.2% of total loans, from $65 million, or 1.3%, in the prior quarter.
- Nonperforming loans totaled about $36 million, equal to 72 basis points of loans.
- Nonperforming assets represented 68 basis points of total assets.
- The allowance for credit losses was $52.3 million, or 1.04% of loans held for investment.
Kerber said borrower performance and early-stage delinquencies remained stable, and management considers the reserve appropriate for the portfolio’s risk profile and economic assumptions.
Deposit Growth Supports Margin Durability
Deposits increased approximately $81 million during the quarter, representing 6% annualized growth. The growth was concentrated in relationship-based core deposits, while certificates of deposit declined slightly as part of a planned reduction in higher-cost balances.
Year to date, deposits were up $206 million, representing a 5.2% annualized growth rate. Prame said total deposit costs, including non-interest-bearing balances, increased only 3 basis points during the quarter, while interest-bearing deposit costs rose 4 basis points.
Executive Vice President and Chief Financial Officer John Stewart said net interest margin was unchanged from the second quarter at 4.37%. A 3-basis-point increase in loan yields offset the 3-basis-point rise in total deposit costs, while cash reinvestment dynamics in the securities portfolio also supported the margin.
The weighted average coupon on loan production was about 7% in the third quarter, Stewart said. He added that expected loan cash flows of approximately $150 million per quarter over the next four to six quarters carry rates in the 6.25% range. Horizon expects modest further net interest margin expansion in the fourth quarter, even as it pursues faster organic balance-sheet growth.
Stewart said the company views its balance sheet as relatively neutral to rate changes, assuming non-time interest-bearing deposit betas reach a 30% to 40% range over time. Horizon’s outlook assumes one additional 25-basis-point Federal Reserve rate increase in early December.
Fee Income, Expenses and 2026 Outlook
Non-interest income was nearly $12 million in the third quarter. Mortgage and fiduciary activities were notable contributors, rising 52% and 8%, respectively, from a year earlier. Management attributed the gains to newer leadership, talent investments and stronger sales-management practices.
Non-interest expense totaled $41.5 million, down from $43.8 million in the second quarter, which included a $3.1 million legal charge. Stewart said third-quarter expenses included certain idiosyncratic items and that fourth-quarter expenses should be closer to the approximately $41 million operating range seen earlier in the year.
For 2026, Horizon reaffirmed expectations for mid-single-digit growth in period-end loans and deposits. Fourth-quarter non-FTE net interest income is projected at $66 million to $67 million, while full-year fee income is expected in the mid-$40 million range. Excluding the second-quarter legal charge, expenses are expected in the low- to mid-$160 million range, and the fourth-quarter effective tax rate is anticipated at 18% to 19%.
Prame said Horizon continues to prioritize organic growth but is also reviewing capital deployment options including share repurchases, dividend strategy and potential partnerships. Management said major technology system investments made over the last three years are now incorporated into its operating run rate, with no significant spending step-up anticipated.
About Horizon Bancorp (IN) (NASDAQ:HBNC)
Horizon Bancorp, Inc is a bank holding company headquartered in Michigan City, Indiana. Through its principal subsidiary, Horizon Bank, the company provides banking and financial services to individuals, families, businesses and public-sector organizations.
Horizon Bank offers deposit accounts, consumer and commercial lending, residential mortgage services, cash-management and treasury-management solutions, online and mobile banking, and other customary banking products. Its lending activities include commercial real estate, business, residential real estate and consumer loans.
Founded in 1873, Horizon has developed as a community banking organization serving customers through branches and other delivery channels in northern and central Indiana and southwestern Michigan.
