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HB

HORIZON BANCORP INC /IN/ (HBNC)·Q2 2025 Earnings Summary

Executive Summary

  • EPS of $0.47 grew 47% year over year (vs. $0.32 in Q2’24) and declined from $0.54 in Q1’25 due to a non-recurring $7.0M gain on sale of the mortgage warehouse business in Q1; net income was $20.6M (ROAA 1.08%) .
  • Net interest income rose 5.9% sequentially to $55.4M as FTE NIM expanded 19 bps to 3.23% (7 bps from recoveries); management expects further, but more modest, expansion through year-end .
  • Credit quality remained strong: annualized net charge-offs were 0.02% and non-performing assets fell to 0.36% of assets; ACL/loans edged up to 1.09% .
  • Balance sheet mix continued to improve (commercial loan growth +$117M; consumer runoff) while total deposits fell $66M and borrowings increased $68M in the quarter—important watch items for funding mix and spread management .
  • Versus S&P Global consensus, EPS beat ($0.47 vs $0.44*) while revenue missed on S&P’s revenue basis ($63.8M vs $66.4M*); management trimmed 2025 expense outlook to ~flat vs 2024 and raised expected indirect auto runoff to ~$125M (from ~$100M) . Values retrieved from S&P Global.*

What Went Well and What Went Wrong

  • What Went Well

    • Seventh consecutive quarter of NIM expansion to 3.23% driven by mix shift toward higher-yielding loans and disciplined deposit pricing; CFO noted ~7 bps came from outsized interest recoveries but underlying expansion remained solid .
    • Strong core loan growth: total HFI loans +$75.5M QoQ with commercial +$117.2M (14.8% annualized); residential stable and continued planned runoff in indirect auto .
    • Credit outperformance: net charge-offs 0.02% annualized and NPAs reduced to 0.36% of assets; CEO emphasized excellent credit quality supporting higher ROAA/ROATCE .

  • What Went Wrong

    • Non-interest income fell to $10.9M from $16.5M in Q1, primarily due to the non-recurrence of the $7.0M Q1 gain on the mortgage warehouse sale; interchange revenue remains pressured by lower spend per swipe/mix .
    • Funding mix: total deposits declined $66.0M (time deposits -$51.9M), and total borrowings increased $68.1M; while strategic, it raises scrutiny on wholesale reliance and cost trajectory .
    • Headline revenue (S&P basis) missed consensus despite NII strength; deposit competition remains intense in certain institutional/public segments, keeping pricing discipline critical . Values retrieved from S&P Global.*

Financial Results

Headline P&L and Margins

MetricQ2 2024Q1 2025Q2 2025
Net Interest Income ($M)$45.279 $52.267 $55.354
Non-Interest Income ($M)$10.485 $16.499 $10.920
Provision for Credit Losses ($M)$2.369 $1.376 $2.462
Non-Interest Expense ($M)$37.522 $39.306 $39.417
Net Income ($M)$14.140 $23.943 $20.643
Diluted EPS ($)$0.32 $0.54 $0.47
Net FTE Interest Margin (%)2.64% 3.04% 3.23%
Efficiency Ratio (%)67.29% 57.16% 59.48%
ROAA (%)0.73% 1.25% 1.08%

S&P Global Consensus vs Actuals (Q2 2025)

MetricConsensus*Actual*Surprise
EPS ($)0.4380.470+0.032
Revenue ($M)66.41463.813-2.601

Values retrieved from S&P Global.*

Balance Sheet and Mix

Loans & Deposits ($M)Q2 2024Q1 2025Q2 2025
Commercial Real Estate2,117.8 2,262.9 2,322.0
Commercial & Industrial786.8 918.5 976.7
Total Commercial2,904.6 3,181.5 3,298.7
Residential Real Estate798.0 801.7 786.0
Consumer1,051.4 926.6 900.9
Total Loans HFI4,822.8 4,909.8 4,985.6
Total Deposits5,630.2 5,765.8 5,699.8

KPIs and Credit Quality

KPIQ2 2024Q1 2025Q2 2025
Annualized Net Charge-offs (% of avg loans)0.05% 0.07% 0.02%
Non-Performing Assets / Assets0.26% 0.41% 0.36%
Non-Accrual Loans / HFI Loans0.38% 0.59% 0.49%
ACL / Loans (HFI)1.08% 1.07% 1.09%
Tangible Common Equity / Tangible Assets7.22% 8.20% 8.37%
Tangible Book Value/Share ($)12.80 13.96 14.32

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income growthFY 2025Mid-teens (unchanged) Mid-teens Maintained
Net Interest MarginFY 2025Ongoing expansion (qualitative) Further modest expansion through 2H25 Maintained/clarified
Total Reported ExpensesFY 2025Slightly higher vs 2024 (implied prior) ≈Flat vs $158.8M FY24 Reduced
Indirect Auto RunoffFY 2025~$100M ~$125M Increased runoff
Deposit GrowthFY 2025Low single-digits Low single-digits Maintained
Effective Tax RateFY 2025Mid-teens Mid-teens Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Margin trajectoryNIM up to 2.97% via securities repositioning and deposit mix 3.04% (+7 bps QoQ) on continued mix/pricing 3.23% (+19 bps QoQ; ~7 bps recoveries) with further modest expansion expected Positive, moderating
Balance sheet remixSold $332M AFS securities; redeployed to loans; exit higher-cost funding Sold mortgage warehouse; core deposit stability Commercial growth +$117M; continued indirect auto runoff; borrowings up Ongoing execution
Credit qualityNPAs 0.35%; NCOs 0.05% NCOs 0.07%; NPAs tick up to 0.41% NCOs 0.02%; NPAs down to 0.36% Improving
Expenses4Q elevated by one-time items; restructuring for 2025 efficiency Expenses down; leaner base 2Q well managed; FY25 ~flat vs 2024 Positive discipline
Funding & depositsTime deposits reduced; non-maturity steady Core deposits stable; non-IBD up Deposits -$66M; funding costs declined 2 bps; flexibility via wholesale Mixed; disciplined pricing
Outlook & macroFoundation for 2025 profitability Momentum continues Neutral to rate cuts; margin upside modest; strong Midwest markets Constructive

Management Commentary

  • “The quarter was highlighted by a seventh consecutive quarter of net interest margin expansion, low net charge offs of 2 bps annualized and enhanced momentum in key performance metrics of ROAA and ROATCE.” – CEO Thomas Prame .
  • “Included in the margin this quarter is approximately 7 basis points of outsized interest recoveries… excluding that recovery income, the margin expanded nicely in Q2… while interest-bearing funding costs declined by 2 basis points.” – CFO John Stewart .
  • “We are modestly reducing our outlook for full-year reported expenses to now be approximately flat when compared to the $158.8 million reported for the full year 2024.” – CFO John Stewart .
  • “Loan demand and pipelines remain stable… we continue to focus on quality… with expansion of our C&I portfolio.” – CCO Lynn Kerber .
  • “Longer term, the objectives remain the same, which is to reduce the reliance on wholesale funding…” – CFO John Stewart .

Q&A Highlights

  • Capital deployment optionality: Management cited ~90 bps CET1 improvement over 12 months and openness to buybacks/other uses when consistent with building predictable earnings .
  • Competitive environment: Pricing competition compressing commercial spreads; Horizon maintaining discipline; office/multifamily exposure remains well-underwritten and situational .
  • Margin sensitivity: Balance sheet positioned largely neutral to near-term Fed cuts; expects modest operating margin improvement from ~3.16% (ex-recoveries) into 2H25 and early 2026 .
  • Deposit costs: Promotional rates declining and terms shortening in consumer; strategic runoff of higher-cost CDs aided funding cost down 2 bps QoQ .
  • Provision outlook: Provision primarily driven by loan growth and economic forecasts; expect moderation as credit remains strong; unfunded commitments contributed in Q2 .
  • M&A appetite: Disciplined, in-footprint opportunities in Indiana/Michigan; historical sweet spot $500M–$1B targets, potentially larger .

Estimates Context

  • Q2 2025 EPS of $0.47 beat S&P Global consensus of ~$0.44 by ~$0.03; revenue of ~$63.8M missed ~$66.4M consensus (5 estimates). Horizon’s company-reported NII + non-interest income totaled $55.4M and $10.9M, respectively, supporting core revenue trends despite the S&P revenue miss . Values retrieved from S&P Global.*
  • Given the beat on EPS and continued NIM expansion guidance, estimate revisions may lift EPS trajectory slightly, while revenue models may be trimmed to reflect S&P revenue basis and lower non-interest income cadence absent Q1’s one-time gain . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core NIM expansion and disciplined pricing are the primary earnings drivers; expect further, but more modest, margin gains near term (neutral rate stance) .
  • Strong commercial loan growth (+$117M) alongside consumer runoff continues to remix the book toward higher-return relationships without compromising credit .
  • Funding remains a swing factor: deposits dipped $66M and borrowings rose $68M; continued vigilance on wholesale reliance and deposit pricing will be key to sustaining spread gains .
  • Expense discipline is increasingly visible; FY25 expense guidance reduced to ~flat vs 2024, supporting positive operating leverage as NII grows mid-teens .
  • Credit remains a tailwind: NCOs of 2 bps and declining NPAs provide cushion for growth and lower earnings volatility .
  • Near-term trading: EPS beat and margin commentary are positive catalysts; revenue miss on S&P basis and deposit declines could temper reaction; watch updates on funding mix and NIM trajectory. Values retrieved from S&P Global.*
  • Medium-term thesis: Continued balance sheet optimization (securities runoff, indirect auto runoff), strong Midwest markets, and optionality on capital deployment (including M&A) offer multiple levers for ROE enhancement .

Additional context and sources

  • Q2 2025 earnings press release with detailed financials and credit metrics .
  • Q2 2025 earnings call transcript with outlook and guidance commentary .
  • Prior quarters for trend analysis: Q1 2025 results and Q4 2024 results .