KBRA Affirms Ratings for Horizon Bancorp, Inc.
5 Jun 2026 | New York
KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Michigan City, Indiana-based Horizon Bancorp, Inc. (NASDAQ: HBNC) (“the company”). KBRA also affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for the subsidiary, Horizon Bank. The Outlook for all long-term ratings is Stable.
Key Credit Considerations
The ratings are supported by historically solid core profitability, notably on a risk-adjusted basis, primarily driven by strong credit quality. While reported earnings have been more volatile in recent periods, this has been driven by multiple separate securities repositioning transactions (4Q23, 4Q24, 3Q25) which resulted in episodic realized losses. After solid ROAA generation in 4Q25 and 1Q26 supported by a more loan-centric earning asset mix, we expect profitability to demonstrate stability near current, stronger than peer levels due to net interest margin (NIM) durability, modest credit costs, and good expense control.
HBNC’s asset quality has been solid, including very low charge-offs, though non-performing assets have begun to normalize off of historically benign levels over the last few years, in line with broader industry trends. Even with the headwinds facing the industry including ongoing uncertainties related to monetary policy and lingering inflation, KBRA believes Horizon is well positioned due to management’s conservative credit risk appetite and its well-balanced, granular loan portfolio mix, which has been further derisked post-restructuring on substantial indirect auto exposure reduction.
KBRA also acknowledges HBNC’s tenured and granular core deposit base, supported by franchise strength in core markets. Core deposits at the company have exhibited stability over recent periods with noninterest bearing deposits steady around 20% of total deposits. Management continues to de-emphasize higher-cost deposits and wholesale funding, allowing transactional deposit runoff and paying down FHLB advances over the last year to remix and reprice the funding base – looking forward, HBNC remains focused on core deposit gathering supported by whole-relationship banking.
Regulatory capital ratios in recent periods have been impacted by realized losses on several restructuring actions, but we note enhanced internal capital generation capacity on a stronger earnings profile, as demonstrated by 39 bps QoQ CET1 ratio accretion in 1Q26. KBRA expects capital to continue to build over the course of 2026 and converge towards rated-peer levels over the near-to-medium term.
Rating Sensitivities
Positive rating momentum is possible over the longer term if regulatory capital ratios converge towards higher rated peers and earnings exhibit durability at post-restructuring levels. We would also expect asset quality to remain strong through a potential credit cycle. Conversely, negative rating pressure is possible if there is material deterioration in earnings or credit quality, a prolonged reduction in regulatory capital ratios to levels that trend below peers, or in the event of substantial erosion to core funding.
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