Horizon Bancorp, Inc. (HBNC): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Horizon Bancorp, Inc. (HBNC) right now, and the picture is one of a $\text{6.7 billion}$ asset bank fighting hard in the competitive Midwestern market, but making some serious, costly moves to get ahead. Honestly, seeing them tap capital markets for a $\text{7.00\%}$ subordinated notes offering and a $\text{98.6 million}$ common stock raise tells you the price of repositioning the balance sheet, even as their net interest margin expanded to $\text{3.52\%}$ in Q3 2025. Before you decide where this regional player stands-facing powerful commercial customers and hungry FinTech substitutes-you need to map out the battlefield. Below, we break down exactly where the power lies across all five of Porter's forces for HBNC as we head into late 2025.

Horizon Bancorp, Inc. (HBNC) - Porter's Five Forces: Bargaining power of suppliers

When looking at Horizon Bancorp, Inc. (HBNC), the suppliers aren't just vendors; they are the providers of capital-both debt and deposit funding. Their bargaining power is evident in the cost structure Horizon must accept to maintain its balance sheet strength and growth initiatives.

The recent move to secure non-deposit funding clearly signals the market's pricing power. Horizon Bancorp, Inc. completed a private placement of $100,000,000 in aggregate principal amount of Fixed-to-Floating Rate Subordinated Notes due 2035 on August 29, 2025. These new notes carry an initial fixed interest rate of 7.00% per annum until September 15, 2030. To put that cost in perspective, this offering was used, in part, to redeem approximately $56.5 million of previously outstanding subordinated notes that bore a higher interest rate of 5.625% + SOFR as of July 1, 2025. This non-deposit funding is a more expensive alternative to core deposits, showing that capital providers demand a premium.

To support its balance sheet repositioning, which included selling $1.7 billion of securities at a pre-tax loss of $299.1 million, Horizon Bancorp, Inc. also tapped the equity markets. Capital markets held enough sway to require a $98.6 million net proceeds common stock offering, which closed on August 22, 2025. This involved issuing 7,138,050 shares. The initial gross proceeds target was approximately $90,001,500 at $14.50 per share. This action demonstrates the need to bolster capital ratios following the repositioning activities, giving market participants leverage in setting terms.

Depositors, the primary source of funding, still have options, but Horizon Bancorp, Inc. managed to maintain a stable base of its most valuable funding source through the second quarter of 2025. As of June 30, 2025, total deposits were $5.7 billion, a decrease of $66.0 million (or 1.1%) from March 31, 2025. Critically, non-time deposit balances remained relatively flat for the fourth consecutive quarter ending Q2 2025. This stability is hard-won, especially when considering the prior quarter saw time deposits jump 14.3%.

The competitive deposit environment is forcing Horizon Bancorp, Inc. to be disciplined on the funding side, even as its Net Interest Margin (NIM) expands. The NIM reached 3.23% in Q2 2025 and further expanded to 3.52% in Q3 2025. This expansion was attributed, in part, to a favorable funding mix shift and disciplined pricing strategies. However, the pressure is real; in Q2 2025, the interest-bearing liability cost declined by only 2 basis points, suggesting that while they managed to keep overall funding costs down relative to earning asset yields, the cost to retain core deposits remains a significant factor in supplier bargaining power.

Here is a summary of the key capital and funding actions taken by Horizon Bancorp, Inc. in the second half of 2025:

The management of these funding sources shows a clear hierarchy of supplier power:

• Debt Capital Markets: Required a 7.00% fixed rate for new Tier 2 capital.
• Equity Capital Markets: Required issuing 7,138,050 shares to raise $98.6 million net.
• Core Depositors: Maintained relatively flat non-time balances through Q2 2025.
• Interest-Bearing Liabilities: Saw cost decline by only 2 bps in Q2 2025.

The cost of replacing the older, floating-rate debt with the new 7.00% fixed-rate notes is a direct measure of the cost of non-deposit funding.

Horizon Bancorp, Inc. (HBNC) - Porter's Five Forces: Bargaining power of customers

You're looking at the customer power dynamic for Horizon Bancorp, Inc. (HBNC), and honestly, it's a tightrope walk. On one side, you have a highly competitive market that gives customers leverage; on the other, Horizon's strong credit performance suggests they aren't resorting to desperate pricing just to keep business.

Customers have high power due to numerous alternatives from large national banks to local credit unions and FinTechs. Horizon Bank operates in Midwestern markets, which means clients can easily shop around for better rates or more specialized services. This competitive field means that if Horizon's offering isn't sharp, clients can, and will, walk. It's a constant pressure point for relationship management.

Commercial customers, which represent over half of total loans, are sophisticated and price-sensitive. These aren't casual retail depositors; these are businesses making multi-million dollar decisions. They understand the cost of capital deeply. The fact that Horizon reported strong organic commercial loan growth of 7.0% annualized in Q3 2025, even as total loans held for investment decreased, shows they are successfully winning business in this segment, but it also confirms the segment's importance and sophistication. Management noted that commercial lending represents over half of total loans as of their late 2025 announcements. These clients demand competitive terms because they have options.

Switching costs for basic retail products are low, despite the bank offering digital and virtual tools. While Horizon Bank provides convenient digital and virtual tools to serve its customers across Indiana and Michigan, the friction involved in moving a checking account or a standard personal loan remains relatively low in the current banking environment. If a competitor offers a better yield on deposits or a slightly lower rate on a mortgage, the hassle of switching is often worth the savings for the average consumer.

Strong credit quality with annualized net charge-offs of only 0.07% in Q3 2025 suggests disciplined lending, not desperate price cuts. This low number is key. If Horizon were losing customers because they were forced to offer unsustainable rates, you'd expect to see credit quality erode as they chased riskier loans to maintain volume. Instead, the data points to a bank that is maintaining underwriting standards. Here's a quick look at how clean the loan book looked at the end of Q3 2025:

This disciplined approach, evidenced by the 0.07% net charge-off rate, is a defense against customer power. It means Horizon isn't sacrificing long-term health for short-term volume, which is a good sign for sustainable pricing power, even if it doesn't eliminate the underlying competitive pressure. The bank is managing its risk profile tightly, which is what you want to see when customers are shopping around.

The strength of the commercial engine, despite the overall loan portfolio shrinking due to strategic runoff, is important. The focus on quality commercial growth suggests management is actively engaging the most sophisticated buyers with products they value, rather than just competing on the lowest-cost retail products where power is highest. You should watch the Q4 2025 guidance on deposit costs, as that will show how much pricing pressure they are feeling from the funding side, which is often a direct reflection of customer power.

Finance: draft the Q4 2025 sensitivity analysis on deposit pricing vs. commercial loan spread by Friday.

Horizon Bancorp, Inc. (HBNC) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive rivalry force for Horizon Bancorp, Inc. (HBNC), and honestly, it's intense. The Midwestern markets-Indiana, Michigan, and Ohio-are a battleground for financial services, characterized by a mix of deep-rooted community players and aggressive national giants. The industry trend, which you can see playing out across the Midwest, is a clear push for scale. Regional banks are merging because they simply need more assets on the balance sheet to fund the necessary technology investments to keep pace with the megabanks.

Horizon Bancorp, Inc. operates as a $6.71 billion asset institution as of September 30, 2025. This places HBNC firmly in the regional category, directly in the crosshairs of much larger super-regional and national banks that can deploy capital for technology and compliance infrastructure at a scale HBNC cannot match organically. To be fair, HBNC has a history of growth through acquisition, having completed its 15th acquisition since 2002 with the TCF branch deal in 2021, which expanded its Michigan footprint. Still, the current environment demands even greater size to compete effectively in digital offerings and service breadth.

What's interesting is how HBNC is fighting back on the margin front, which speaks directly to its pricing power within its core customer segments despite the rivalry. The net interest margin (NIM) expanded to 3.52% on a fully taxable equivalent (FTE) basis in Q3 2025. This marks the eighth consecutive quarter of growth, showing management is effectively repricing assets or managing funding costs better than some peers. Furthermore, management's guidance for Q4 2025 projects the FTE NIM to accelerate further, landing in the 4.15% to 4.25% range. This margin expansion is a critical defense mechanism against competitive pressures on loan pricing.

The strategic imperative for scale is confirmed by management's stated focus. Following a major balance sheet repositioning in Q3 2025, which involved significant asset sales, the focus is now on 'profitable growth and smart redeployment of our peer-leading capital generation.' This signals that while the immediate focus is on optimizing the balance sheet, the long-term strategy continues to involve growth initiatives, which, given the fragmented market reality, inherently includes seeking M&A opportunities in key markets like Michigan and Indiana. The need for scale is not just a theory; it's an active strategic driver in this fragmented, yet highly competitive, Midwestern landscape.

Here's a quick look at how HBNC's recent performance metrics stack up, which informs its competitive standing:

The competitive pressures manifest in several ways that you need to watch:

• Rival banks are merging to gain scale.
• Larger banks outspend regional competitors on technology 10-to-1.
• The Midwest saw 27 announced M&A deals through June 2025.
• Competition centers on digital offerings and transaction banking.
• Consolidation may lead to less favorable deposit rates for customers.

Finance: draft 13-week cash view by Friday.

Horizon Bancorp, Inc. (HBNC) - Porter's Five Forces: Threat of substitutes

You're looking at how outside options are pressuring Horizon Bancorp, Inc. (HBNC)'s core business lines. The threat of substitutes is real, especially where the service is easily digitized or commoditized. We need to look at what customers can use instead of an HBNC checking account, loan, or investment product.

FinTech companies offer direct substitutes for payments, consumer lending, and investment services with lower friction. In 2025, the digital shift is nearly complete for many transactions. Surveys in 2025 show that over 90% of U.S. millennials have interacted with at least one fintech platform, most commonly for payments and investing. For lending, the U.S. digital lending market reached $303 billion in 2025, and digital lending now represents about 63% of personal loan origination in the U.S. This means for many consumer credit needs, the first stop for many is no longer a traditional bank branch.

The bank sold its indirect auto portfolio, a commoditized product segment often substituted by non-bank lenders. This strategic move acknowledges the high substitution risk in that area. Horizon Bancorp signed non-binding letters of intent to sell approximately $190 million of indirect auto loans as part of its September 2025 balance sheet repositioning. Management also raised its expected indirect auto runoff for 2025 to approximately ~$125 million. In the broader market, while banks held 39.35% of the U.S. auto loan market in 2024, fintech lenders are projected to expand at the highest CAGR of 11.94% through 2030.

Money market funds and government securities are attractive substitutes for deposits in a high-rate environment. When yields are attractive elsewhere, Horizon Bancorp's deposit base-which stood at $5.70 billion as of June 30, 2025-faces direct competition. The total U.S. money market fund (MMF) assets reached $7 trillion in 2024, showing the scale of this substitute. You can see the competitive pressure in the yields:

To be fair, Horizon's own money market deposits were only $7.0 million (or 0.4% of total deposits) as of June 30, 2025, suggesting the bulk of their deposit base is less immediately flight-prone than pure cash balances.

Wealth management and commercial lending services offer higher customer stickiness and are harder to substitute. These areas rely more on established relationships and specialized service delivery than simple transaction processing. Commercial lending is a clear strength; it represented over half of Horizon's total loans. The commercial engine showed momentum, with commercial loans growing by $117.2 million (a 14.8% annualized rate) in Q2 2025. As of June 30, 2025, Horizon had gross loans held for investment of $4.99 billion against total assets of $7.65 billion. The private wealth management services, while not detailed with specific growth numbers here, are inherently relationship-driven, making direct substitution by a low-friction FinTech harder in the near term.

Here are the key areas where substitution risk is most pronounced for Horizon Bancorp, Inc.:

• Payments processing and basic consumer transactions.
• Commoditized consumer lending, like indirect auto loans.
• Low-balance, high-liquidity deposit accounts.
• Simple investment vehicles like basic brokerage cash sweeps.

Finance: draft a sensitivity analysis on deposit beta changes if MMF yields stay above 3.75% through Q1 2026 by next Tuesday.

Horizon Bancorp, Inc. (HBNC) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for a new player trying to set up shop against Horizon Bancorp, Inc. (HBNC) in the Midwestern banking market. Honestly, the hurdles for a full-service commercial bank are immense, which is why incumbents like Horizon Bancorp, Inc. have a structural advantage.

Regulatory and capital requirements for a full-service commercial bank are extremely high, creating a significant barrier. For instance, the Federal Reserve sets a minimum Common Equity Tier 1 (CET1) capital ratio requirement of 4.5 percent for large banks. On top of that, there is a Stress Capital Buffer (SCB) requirement that must be at least 2.5 percent. These mandated capital levels mean a new entrant needs a substantial, non-leveraged foundation just to operate under normal supervision, let alone withstand a stress test scenario.

Here's a quick look at what a new entrant faces versus the established position Horizon Bancorp, Inc. is defending:

New entrants, primarily FinTechs, bypass traditional barriers by focusing on niche, non-regulated services. They often avoid the full weight of bank regulation by operating in specific product lanes, like payments or specialized lending, often through partnerships. Still, even for less regulated activities, state-level compliance can be punishingly expensive. For example, securing money transfer licenses across all US states can cost a FinTech between $500k and $2 million annually. That's a significant operational drag before you even book a single deposit.

The need for an initial $98.6 million capital raise for balance sheet work shows the high cost of entry and operation. You saw Horizon Bancorp, Inc. execute a common stock offering in August 2025, securing net proceeds of $98.6 million to support its balance sheet repositioning. That kind of immediate, large-scale capital injection is a necessity for an incumbent looking to optimize, which translates directly into the massive initial funding a de novo (newly chartered) bank would need just to start, let alone compete on scale.

Large technology companies could enter the market, leveraging massive customer bases and low cost structures. These firms don't face the same legacy asset issues, but their entry would be disruptive due to their existing scale. Consider the foundational requirements that act as a moat:

• Minimum CET1 ratio of 4.5 percent.
• SCB requirement of at least 2.5 percent.
• Capital surcharges for G-SIBs, starting at 1.0 percent.
• Horizon Bancorp, Inc.'s own post-repositioning CET1 ratio of 10.2 percent.

The regulatory structure is designed to keep the system stable, which inherently makes it difficult for a new, unproven entity to gain the necessary trust and capital base to compete directly with a $7.7 billion asset holder like Horizon Bancorp, Inc..

Finance: draft a sensitivity analysis on new charter application timelines versus capital deployment efficiency by next Tuesday.