Safe and Sound

Horizon Bank

Michigan City, IN
4
Star Rating
Horizon Bank is a Michigan City, IN-based, FDIC-insured bank dating back to 1873. As of December 31, 2017, the bank had equity of $493.7 million on assets of $3.96 billion.

With 701 full-time employees in 70 offices in multiple states, the bank has amassed loans and leases worth $2.82 billion, including real estate loans of $2.13 billion. U.S. bank customers currently have $2.89 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Horizon Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for depositors during times of financial trouble for the bank. It follows then that a bank's level of capital is a useful measurement of a bank's financial resilience. From a safety and soundness perspective, more capital is preferred.

Horizon Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 10 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Horizon Bank's Tier 1 capital ratio was 12.29 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Horizon Bank held equity amounting to 12.47 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

Having lots of these kinds of assets suggests a bank may eventually have to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Horizon Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.51 percent of Horizon Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Horizon Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses diminish a bank's ability to do those things.

Horizon Bank exceeded the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. Horizon Bank's most recent annualized quarterly return on equity was 8.35 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $34.8 million on total equity of $493.7 million. The bank reported an annualized return on average assets, or ROA, of 1.02 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.