Horizon earnings rose to $28.7 million, or $0.56 per diluted share, in the third quarter of 2026, compared with $24.9 million, or $0.49 per share, in the preceding quarter. Higher net interest income, the absence of a second-quarter legal charge and a tax benefit supported the improvement. Results were released on October 21, followed by an October 22 earnings call at which management forecast modest fourth-quarter margin expansion.
Key Takeaways
- Net interest income increased despite an unchanged 4.37% tax-equivalent net interest margin.
- Loans grew approximately $47 million, with commercial and industrial lending continuing to expand.
- Management expects fourth-quarter net interest income of $66 million–$67 million, while mortgage fees face seasonal weakness.
Table of Contents
- Horizon earnings improve, with one-time items shaping the comparison
- Loan growth shifts the commercial mix toward C&I
- Credit measures are mixed as regulatory capital rises
- Fourth-quarter guidance balances margin gains and softer fees
- Conclusion
Horizon earnings improve, with one-time items shaping the comparison
Horizon Bancorp’s third-quarter results announcement showed net interest income rising to $65.2 million from $63.5 million in the second quarter and $58.4 million a year earlier. Its fully taxable-equivalent net interest margin held at 4.37%, meaning lending-income growth did not require a wider margin during the quarter.
Non-interest expense fell to $41.5 million from $43.8 million. However, the second quarter included a $3.1 million legal charge that did not recur. Excluding that charge from the comparison, third-quarter expenses were approximately $0.8 million higher.
A discrete $0.9 million tax benefit also helped quarterly profit. The effective tax rate fell to 16.4% from 19.0% in the second quarter; management expects it to return to 18%–19% in the fourth quarter.
| Item | Details |
|---|---|
| Annualized return on average assets | 1.73% in Q3 2026 |
| Return on average tangible common equity | 20.03%; a non-GAAP measure |
| Allowance for credit losses | 1.04% of loans held for investment |
| Non-performing assets | 0.68% of total assets, versus 0.66% in Q2 |
| Common equity tier 1 capital ratio | Preliminary 11.53%, versus 11.09% in Q2 |
Loan growth shifts the commercial mix toward C&I
Loans held for investment ended September just above $5 billion, increasing $46.9 million during the quarter, or 3.7% on an annualized basis. Residential real estate loans grew approximately $16 million, while consumer loans increased $18 million, predominantly through home lending.
Commercial and industrial loans increased approximately $22 million during the quarter and $118 million, or 12%, from a year earlier. They now account for about 31% of the commercial portfolio. Chief Commercial Banking Officer Lynn Kerber said growth reflected expanded relationships and new customers rather than increased use of existing credit lines.
Commercial real estate loans declined $9.9 million. Kerber said Horizon was managing concentrations rather than exiting real estate, with elevated repayments from customers selling properties also reducing balances. Management continues to expect mid-single-digit full-year loan growth.
Deposits increased approximately $81 million during the quarter, reaching $5.5 billion. Funding became slightly more expensive: total deposit costs rose three basis points, while interest-bearing deposit costs increased four basis points.
Credit measures are mixed as regulatory capital rises
Quarterly net charge-offs were $1.2 million, double the second quarter’s $0.6 million. The credit-loss provision increased to $1.3 million from $0.9 million, reflecting changes in the economic forecast, loan growth and higher specific reserves on commercial loans.
Other measures moved in different directions. Substandard loans declined to approximately $60 million from $65 million, while non-performing assets increased to $44.6 million from $43.7 million.
The preliminary common equity tier 1 capital ratio rose 44 basis points during the quarter. Chief Executive Thomas Prame said organic growth remained the main capital priority; buybacks, dividends and potential partnerships remained subjects for board discussion rather than newly announced transactions.
Fourth-quarter guidance balances margin gains and softer fees
Chief Financial Officer John Stewart expects modest net interest margin expansion in the fourth quarter and net interest income of $66 million–$67 million on a non-fully-taxable-equivalent basis. Management pointed to favorable loan repricing and reinvestment opportunities, while acknowledging that interest-bearing deposit costs could continue rising.
Fee income is expected to be seasonally lower, particularly in mortgage banking. Third-quarter non-interest income was $11.9 million, and management maintained its full-year expectation in the mid-$40 million range.
Stewart expects fourth-quarter expenses nearer $41 million, with full-year expenses remaining in the low-to-mid $160 million range excluding the second-quarter legal charge. Prame said major technology replacements were largely complete and did not anticipate a significant 2027 spending step-up beyond ordinary pay and cost increases, while leaving room for organic investment.
Conclusion
Horizon’s fourth-quarter results will show whether loan growth and repricing deliver the guided increase in net interest income as deposit costs rise. Seasonal mortgage weakness and a more normal tax rate remain important parts of that comparison.
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