What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-15 compared with 2022-03-09 · 440 added, 527 removed, 1978 unchanged (33% of the section changed)

6 unchanged sentences

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

1 unchanged sentence

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Fir m ( PCAOB ID:

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Management’s Report on Financial Statements

33 unchanged sentences

Common stock, no par value, Authorized 99,000,000 shares

Issued 43,811,421 and 43,905,631 shares,

Outstanding 43,547,942 and 43,880,562 shares

Issued and Outstanding 43,937,889 and 43,811,421 shares

Additional paid-in capital 354,188 352,122

Retained earnings 429,385 363,742

Accumulated other comprehensive income 7,345 27,852

Accumulated other comprehensive income (loss) ( 106,198 ) 7,345

Total stockholders’ equity 677,375 723,209

11 unchanged sentences

Investment securities – tax exempt 29,025 23,246 17,213

Other 306 695 422

Total interest income 236,033 194,110 199,968

7 unchanged sentences

Credit loss expense (recovery) ( 1,816 ) ( 2,084 ) 20,751

Net Interest Income after Credit Loss Expense 183,774 150,189 158,815

Net Interest Income after Credit Loss Expense (Recovery) 201,334 177,889 144,779

Non–interest Income

3 unchanged sentences

Fiduciary activities 5,381 7,419 9,145

Gains (losses) on sale of investment securities (includes $ 914 , $ 4,297 and $( 75 ) for the years ended December 31, 2021, 2020 and 2019, respectively, related to accumulated other comprehensive earnings reclassifications)

914 4,297 ( 75 )

Gains (losses) on sale of investment securities — 914 4,297

Gain on sale of mortgage loans 7,165 19,163 26,721

12 unchanged sentences

FDIC insurance expense 2,558 2,377 1,855

Core deposit intangible amortization 3,702 3,644 3,723

Other losses 1,046 2,283 1,162

2 unchanged sentences

Income Before Income Taxes 105,584 102,447 78,369

Income tax expense (includes $ 192 , $ 902 and $( 16 ) for the years ended December 31, 2021, 2020 and 2019, respectively, related to income tax expense (benefit) from reclassification items)

15,356 9,870 13,303

Income tax expense 12,176 15,356 9,870

Net Income Available to Common Shareholders $ 93,408 $ 87,091 $ 68,499

4 unchanged sentences

and Subsidiaries

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

(Dollar Amounts in Thousands)

8 unchanged sentences

Change in securities:

Unrealized appreciation (depreciation) for the period on AFS securities ( 35,547 ) 35,272 21,173

Amortization from transfer of securities from available for sale to held to maturity securities 5,935 ( 58 ) ( 117 )

Unrealized gain (loss) for the period on available for sale securities ( 147,345 ) ( 35,547 ) 35,272

Reclassification of securities from available for sale to held to maturity ( 794 ) 5,869 —

Accretion (amortization) from transfer of securities from available for sale to held to maturity securities ( 1,236 ) 66 ( 58 )

Reclassification adjustment for securities (gains) losses realized in income — ( 914 ) ( 4,297 )

2 unchanged sentences

Other Comprehensive Income (Loss), Net of Tax ( 113,543 ) ( 20,507 ) 21,420

Comprehensive Income $ 66,584 $ 89,919 $ 81,114

Comprehensive Income (Loss) $ ( 20,135 ) $ 66,584 $ 89,919

See notes to consolidated financial statements

10 unchanged sentences

Net income — — — 68,499 — 68,499

Other comprehensive loss, net of tax — — — — 14,576 14,576

Other comprehensive income, net of tax — — — — 21,420 21,420

Impact of adoption of ASU No.

2016–13 — — — ( 15,635 ) — ( 15,635 )

Amortization of unearned compensation — — 1,206 — — 1,206

2 unchanged sentences

Stock issued stock plans — — 1,233 — — 1,233

Stock issued in Salin acquisition — — 102,722 — — 102,722

Repurchase of outstanding common stock — — ( 19,636 ) — — ( 19,636 )

3 unchanged sentences

Net income — — — 87,091 — 87,091

Other comprehensive income, net of tax — — — — 21,420 21,420

Impact of adoption of ASU No.

2016–13 — — — ( 15,635 ) — ( 15,635 )

Other comprehensive loss, net of tax — — — — ( 20,507 ) ( 20,507 )

Amortization of unearned compensation — — 1,751 — — 1,751

1 unchanged sentence

Stock option expense — — 68 — — 68

Stock issued stock plans — — 1,233 — — 1,233

Stock awards vested — — ( 1,355 ) — — ( 1,355 )

Repurchase of outstanding stock — — ( 7,607 ) — — ( 7,607 )

Stock retirement plans — — ( 4,742 ) — — ( 4,742 )

Cash dividends on common stock ($ 0.56 per share)

2 unchanged sentences

Net income — — — 93,408 — 93,408

Other comprehensive income, net of tax — — — — ( 20,507 ) ( 20,507 )

Other comprehensive loss, net of tax — — — — ( 113,543 ) ( 113,543 )

Amortization of unearned compensation — — 2,462 — — 2,462

1 unchanged sentence

Stock option expense — — 13 — — 13

Stock awards vested — — ( 1,355 ) — — ( 1,355 )

Repurchase of outstanding stock — — ( 7,607 ) — — ( 7,607 )

Net settlement of share awards — — ( 1,824 ) — — ( 1,824 )

Stock retirement plans — — 1,270 — — 1,270

12 unchanged sentences

Items not requiring (providing) cash

Credit loss expense (recovery) ( 2,084 ) 20,751 1,976

Provision for (recovery of) credit losses ( 1,816 ) ( 2,084 ) 20,751

Depreciation and amortization 10,754 9,802 9,399

Share based compensation 2,475 1,819 1,338

Mortgage servicing rights income 226 ( 737 ) ( 2,106 )

Mortgage servicing rights, net impairment ( 2,578 ) 4,453 192

Amortization of mortgage servicing rights 2,345 4,073 2,932

Impairment (recovery) of mortgage servicing rights ( 2,594 ) ( 2,578 ) 4,453

Premium amortization on securities, net 12,148 10,289 9,067

Loss (gain) on sale of investment securities ( 914 ) ( 4,297 ) 75

Deferred income taxes 2,177 2,311 ( 9,421 )

Gain on sale of investment securities — ( 914 ) ( 4,297 )

Gain on sale of mortgage loans ( 7,165 ) ( 19,163 ) ( 26,721 )

1 unchanged sentence

Loans originated for sale ( 215,174 ) ( 437,174 ) ( 593,515 )

Change in cash value life insurance ( 2,094 ) ( 2,243 ) ( 2,190 )

Loss (gain) on other real estate owned ( 85 ) ( 197 ) ( 126 )

Gain on cash value life insurance ( 2,594 ) ( 2,094 ) ( 2,243 )

Gain on other real estate owned ( 722 ) ( 85 ) ( 197 )

Net change in:

10 unchanged sentences

Net change in interest earning time deposits 1,970 4,183 ( 510 )

Change in Federal Reserve and FHLB stock ( 1,417 ) ( 576 ) ( 803 )

Purchase of FHLB stock ( 2,435 ) ( 1,417 ) ( 1,161 )

Redemption of FHLB stock 198 — 585

Purchase of loans ( 55,195 ) — —

Net change in loans ( 448,284 ) 480,028 ( 239,938 )

Proceeds on the sale of OREO and repossessed assets 5,263 1,286 2,047

Change in premises and equipment, net ( 1,440 ) ( 5,866 ) ( 4,612 )

Death benefit on bank owned life insurance 783 264 580

Net cash received in acquisition of branch 622,179 — —

Net cash received in acquisition, Salin — — 128,745

Repurchase of outstanding stock ( 7,607 ) ( 19,636 ) ( 1,595 )

Premises and equipment expenditures ( 6,429 ) ( 1,440 ) ( 5,866 )

Purchases of bank owned life insurance ( 50,000 ) — —

Proceeds from bank owned life insurance 3,554 783 264

Net cash received in branch acquisition — 622,179 —

Net cash used in investing activities ( 1,019,932 ) ( 344,853 ) ( 478,458 )

Financing Activities

Net change in:

Deposits 425,449 600,131 50,282

Borrowings 201,137 ( 74,725 ) ( 71,040 )

Net change in deposits 54,783 425,449 600,131

Proceeds from long–term borrowings 675,000 244,554 133,810

Repayment of long–term borrowings ( 755,608 ) ( 76,371 ) ( 123,377 )

Net change in short–term borrowings 503,746 — ( 98,000 )

Net change in repurchase agreements 7,072 21,336 18,521

Net settlement of share awards ( 1,824 ) ( 1,355 ) —

Exercise of stock options 145 1,062 157

Repurchase of outstanding stock — ( 7,607 ) ( 19,636 )

Proceeds from issuance of stock — — 1,233

10 unchanged sentences

Transfer of premises to other real estate 1,479 1,753 —

Right-of-use assets exchanged for lease obligations — — 3,411

Sale of securities available for sale not yet settled — — 6,303

Transfer of available for sale securities to held to maturity securities 120,881 490,200 —

See notes to consolidated financial statements

36 unchanged sentences

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of other real estate owned, goodwill and intangible assets, mortgage servicing rights, other than temporary impairments and fair values of financial instruments.

Estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of other real estate owned, goodwill and intangible assets, mortgage servicing rights and fair values of financial instruments.

Business Combinations — Business combinations are accounted for using the acquisition method of accounting.

102 unchanged sentences

Subsequent changes to the ACL on loans are recorded through credit loss expense.

As discussed in Adoption of New Accounting Standards later in Note 1, the Company adopted ASU 326 using the prospective transition approach for PCD loans previously accounted for under ASC 310–30.

In accordance with the standard, we did not assess whether Purchase Credit Impaired (“PCI”) loans met the criteria of PCD as of the date of adoption and all loans previously classified as PCI were updated to the PCD classification.

Pools utilized for PCI accounting under ASC 310–30 were not considered since the Company did not have PCI pools at the time of adoption.

PCD loans were assessed using prior specific loan reviews for the initial PCD loan ACL.

Loans Held for Sale — Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate.

11 unchanged sentences

Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

Management estimates the ACL balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for differences in current loan–specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, changes in economic conditions, or other relevant factors.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

Management estimates the ACL balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

The Company considers the following when estimating credit losses:

25 unchanged sentences

(Table dollars in thousands except for per share data)

Allowance for Loan Losses (Prior to January 1, 2020) — An allowance for loan losses was maintained to absorb probable incurred losses inherent in the loan portfolio.

The allowance was based on ongoing quarterly assessments of the probable incurred losses inherent in the loan portfolio.

The allowance was increased by the provision for credit losses, which is charged against current period operating results and decreased by the amount of charge offs, net of recoveries.

Horizon's methodology for assessing the appropriateness of the allowance consisted of several key elements, which included the general allowance, specific allowances for identified problem loans and the qualitative allowance.

The general allowance was calculated by applying loss factors to pools of outstanding loans.

Loss factors were based on historical loss experience and may have been adjusted for significant factors that, in management's judgment, affected the collectibility of the portfolio as of the evaluation date.

Specific allowances were established in cases where management had identified conditions or circumstances related to a credit that management believed indicated the probability that a loss would have been incurred in excess of the amount determined by the application of the formula allowance.

The qualitative allowance was based upon management's evaluation of various conditions, the effects of which were not directly measured in the determination of the general and specific allowances.

The evaluation of the inherent loss with respect to these conditions was subject to a higher degree of uncertainty because they are not identified with specific credits.

The conditions evaluated in connection with the qualitative allowance may have included factors such as local, regional and national economic conditions and forecasts, concentrations of credit and changes in the composition of the portfolio.

Troubled Debt Restructurings (“TDR”) — A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR.

9 unchanged sentences

The Company determines the estimated amount of expected credit extensions based on historical usage to calculate the amount of exposure for a loss estimate.

After review of the expected credit losses on OBS, the Company determined the amount not being recorded as immaterial at this time.

Allowance for Credit Losses on Available for Sale Securities — For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For debt securities available for sale that do not meet the aforementioned criteria, the Company evaluates whether the

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

decline in fair value has resulted from credit losses or other factors.

For debt securities available for sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

9 unchanged sentences

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss.

After completing this assessment, management determined any credit losses as of December 31, 2021 and 2020 were not material to the consolidated financial statements.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Premises and Equipment — Buildings and major improvements are capitalized and depreciated using primarily the straight-line method with useful lives ranging from 3 to 40 years.

4 unchanged sentences

The required investment in the common stock is based on a predetermined formula.

Partnership Investments — The partnerships have elected to account for certain partnership investments in qualified affordable housing and solar tax credits using the proportional amortization method.

Partnership Investments — The Company invests in partnerships that generate qualified affordable housing and solar tax credits.

The Company has elected to account for partnership investments in qualified affordable housing using the proportional amortization method.

Under the proportional amortization method, the initial cost of the investment is amortized to income tax expense in proportion to the tax credits and other tax benefits received.

This net investment performance is recognized in the income statement as a component of income tax expense.

The Company accounts for partnership investments that generate solar tax credits under the deferral method.

The investment in the limited partnerships totaling $ 4.5 million and $ 2.3 million at December 31, 2022 and 2021, respectively is included in other assets in the consolidated balance sheets.

in which the Company has investments account for their investments at fair value.

Mortgage Servicing Rights —Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets.

5 unchanged sentences

The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.

These variables change from quarter to quarter as market

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to non–interest income.

These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to non–interest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment.

12 unchanged sentences

The goodwill value is supported by revenue that is in part driven by the volume of business transacted.

If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value.

If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

indicated and goodwill is written down to its implied fair value.

A large majority of the goodwill relates to the acquisitions of Heartland, Summit, Peoples, Kosciusko, LaPorte, Lafayette, Wolverine and Salin.

19 unchanged sentences

Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination.

8 unchanged sentences

Control over transferred assets is deemed to be surrendered when (1)the assets have been isolated from the Company and put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2)the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3)the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Earnings per Common Share — Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted–average number of common shares outstanding.

16 unchanged sentences

There were 319,760 , 140,955 and 278,776 shares for the twelve months ended December 31, 2022, 2021 and 2020, respectively, which were not included in the computation of diluted earnings per share because they were non-dilutive.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

On July 16, 2019, the Board of Directors of the Company authorized a stock repurchase program for up to 2,250,000 shares of Horizon’s issued and outstanding common stock, no par value.

8 unchanged sentences

Horizon reports net cash flows for customer loan transactions, deposit transactions, short–term investments and borrowings.

Comprehensive Income — Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes.

Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available for sale securities, unrealized and realized gains and losses in cash flow derivative financial instruments and amortization of available for sale securities transferred to held to maturity.

Comprehensive Income (Loss) — Comprehensive income (loss) consists of net income and other comprehensive income (loss), net of applicable income taxes.

Other comprehensive income (loss) includes unrealized gain (loss) on available for sale securities, unrealized and realized gains and losses in cash flow derivative financial instruments and accretion (amortization) of available for sale securities transferred to held to maturity.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Share–Based Compensation — At December 31, 2022, Horizon had share–based compensation plans, which are described more fully in Note 22.

All share–based payments are to be recognized as expense, based upon their fair values, in the financial statements over the vesting period of the awards.

Horizon has recorded approximately $ 1.8 million, $ 1.3 million, and $ 920,000 in compensation expense relating to vesting of stock options less estimated forfeitures for the 12–month periods ended December 31, 2021, 2020 and 2019, respectively.

Horizon has recorded approximately $ 2.5 million, $ 1.8 million, and $ 1.3 million in compensation expense relating to vesting of stock options and restricted stock awards less estimated forfeitures for the 12–month periods ended December 31, 2022, 2021 and 2020, respectively.

Derivative Financial Instruments — The Company occasionally enters into derivative financial instruments as part of its interest rate risk management strategies.

These derivative financial instruments consist primarily of interest rate swaps.

All derivative instruments are recorded on the Statements of Financial Condition, as either an asset or liability, at their fair value.

All derivative instruments are recorded on the Consolidated Balance Sheets, as either an asset or liability, at their fair value.

The accounting for the gain or loss resulting from the change in fair value depends on the intended use of the derivative.

2 unchanged sentences

If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting is discontinued and the adjustment to fair value of the derivative instrument is recorded in earnings.

For a derivative used to hedge changes in cash flows associated with forecasted transactions, the gain or loss of the effective portion of the derivative will be deferred, and reported as accumulated other comprehensive income, a component of shareholders’ equity, until such time the hedged transaction affects earnings.

For a derivative used to hedge changes in cash flows associated with forecasted transactions, the gain or loss of the effective portion of the derivative will be deferred, and reported as accumulated other comprehensive income, a component of stockholders’ equity, until such time the hedged transaction affects earnings.

For derivative instruments not accounted for as hedges, changes in fair value are recognized in non–interest income or non–interest expense.

Deferred gains and losses from derivatives that are terminated and were in a cash flow hedge are amortized over the shorter of the original remaining term of the derivative or the remaining life of the underlying asset or liability.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Revenue Recognition — Accounting Standards Codification 606, “Revenue from Contracts with Customers” (ASC 606) provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

12 unchanged sentences

These reclassifications had no effect on net income.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Revision of Previously Issued Financial Statements

We have revised amounts reported in previously issued financial statements for the periods presented in the Annual Report on Form 10–K related to the following immaterial errors.

• Sold commercial loan participation balances which do not qualify under accounting guidance as sales transactions under Accounting Standards Codification Topic 860 – Transfers and Servicing were not recorded as an outstanding loan balance by the Company.

The correction of this error resulted in an increase in loans, net of allowance for credit losses and borrowings on the Company's consolidated balance sheet.

• Indirect loan dealer reserve asset balances and related amortization expense were not reported as part of the outstanding loan balances or a reduction in interest income on loans, respectively.

The correction of this error resulted in an increase in loans, net of allowance for credit losses and a decrease in other assets on the Company's consolidated balance sheet and a reduction in interest income on loans receivable and a reduction in non–interest loan expense on the Company's consolidated income statement.

This revision does not impact the Company's net income.

• Repurchases of outstanding stock were disclosed as an investing activity rather than a financing activity in the Company's consolidated statement of cash flows.

• The classification of certain available for sale (“AFS”) and held to maturity (“HTM”) securities were incorrectly disclosed.

The correction of this error resulted in an increase in AFS and HTM federal agency mortgage–backed pool securities and a decrease in AFS and HTM private labeled mortgage–backed pool securities in Note 4 – Securities.

We evaluated the aggregate effects of these errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10–K for the years ended December 31, 2021 and 2020, or for any quarterly periods included therein.

The following tables present the revisions to the line items of our previously issued financial statements to reflect the correction of the errors:

Consolidated Balance Sheets

December 31, 2021

As Reported Sold Commercial Loan Participation Adjustment Indirect Loan Dealer Reserve Adjustment As Revised

Loans, net of allowance for credit losses $ 3,553,345 $ 36,986 $ 13,917 $ 3,604,248

Other assets 80,753 — ( 13,917 ) 66,836

Total assets 7,374,903 36,986 — 7,411,889

Borrowings 675,753 36,986 — 712,739

Total liabilities 6,651,694 36,986 — 6,688,680

Total liabilities and stockholders' equity 7,374,903 36,986 — 7,411,889

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Consolidated Statements of Income

Year Ended December 31, 2021

As Reported Indirect Loan Dealer Reserve Adjustment As Revised

Interest Income

Loans receivable $ 161,617 $ ( 5,885 ) $ 155,732

Total interest income 199,995 ( 5,885 ) 194,110

Net Interest Income 181,690 ( 5,885 ) 175,805

Net Interest Income after Credit Loss Expense 183,774 ( 5,885 ) 177,889

Non–interest Expense

Loan expense 11,377 ( 5,885 ) 5,492

Total non–interest expense 139,279 ( 5,885 ) 133,394

Net Income Available to Common Shareholders 87,091 — 87,091

Consolidated Statements of Income

Year Ended December 31, 2020

As Reported Indirect Loan Dealer Reserve Adjustment As Revised

Interest Income

Loans receivable $ 179,672 $ ( 5,410 ) $ 174,262

Total interest income 205,378 ( 5,410 ) 199,968

Net Interest Income 170,940 ( 5,410 ) 165,530

Net Interest Income after Credit Loss Expense 150,189 ( 5,410 ) 144,779

Non–interest Expense

Loan expense 10,628 ( 5,410 ) 5,218

Total non–interest expense 131,441 ( 5,410 ) 126,031

Net Income Available to Common Shareholders 68,499 — 68,499

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Consolidated Statements of Cash Flows

Year Ended December 31, 2021

As Reported Sold Commercial Loan Participation Adjustment Indirect Loan Dealer Reserve Adjustment Repurchase of Outstanding Stock Adjustment As Revised

Operating Activities

Net change in other assets $ 10,964 $ — $ 618 $ — $ 11,582

Net cash provided by operating activities 105,348 — 618 — 105,966

Investing Activities

Net change in loans 469,412 11,234 ( 618 ) — 480,028

Repurchase of outstanding stock ( 7,607 ) — — 7,607 —

Net cash used in investing activities ( 363,076 ) 11,234 ( 618 ) 7,607 ( 344,853 )

Financing Activities

Proceeds from borrowings 201,137 ( 11,234 ) — — 189,903

Repurchase of outstanding stock — — — ( 7,607 ) ( 7,607 )

Net cash provided by (used in) financing activities 601,525 ( 11,234 ) — ( 7,607 ) 582,684

Net Change in Cash and Cash Equivalents 343,797 — — — 343,797

Consolidated Statements of Cash Flows

Year Ended December 31, 2020

As Reported Sold Commercial Loan Participation Adjustment Indirect Loan Dealer Reserve Adjustment Repurchase of Outstanding Stock Adjustment As Revised

Operating Activities

Net change in other assets $ ( 13,987 ) $ — $ 77 $ — $ ( 13,910 )

Net cash provided by operating activities 78,765 — 77 — 78,842

Investing Activities

Net change in loans ( 234,166 ) ( 5,695 ) ( 77 ) — ( 239,938 )

Repurchase of outstanding stock ( 19,636 ) — — 19,636 —

Net cash used in investing activities ( 492,322 ) ( 5,695 ) ( 77 ) 19,636 ( 478,458 )

Financing Activities

Proceeds from borrowings ( 74,725 ) 5,695 — — ( 69,030 )

Repurchase of outstanding stock — — — ( 19,636 ) ( 19,636 )

Net cash provided by (used in) financing activities 564,437 5,695 — ( 19,636 ) 550,496

Net Change in Cash and Cash Equivalents 150,880 — — — 150,880

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 4 – Securities

As of December 31, 2021 Amortized Cost

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ 225,329 $ 31,856 $ 257,185

Private labeled mortgage–backed pools 31,856 ( 31,856 ) —

Total available for sale investment securities $ 257,185 $ — $ 257,185

Federal agency mortgage–backed pools $ 188,426 $ 59,511 $ 247,937

Private labeled mortgage–backed pools 99,958 ( 59,511 ) 40,447

Total held to maturity investment securities $ 288,384 $ — $ 288,384

Gross Unrealized Gains

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ 1,777 $ 137 $ 1,914

Private labeled mortgage–backed pools 137 ( 137 ) —

Total available for sale investment securities $ 1,914 $ — $ 1,914

Federal agency mortgage–backed pools $ 151 $ 58 $ 209

Private labeled mortgage–backed pools 58 ( 58 ) —

Total held to maturity investment securities $ 209 $ — $ 209

Gross Unrealized Losses

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ ( 1,032 ) $ ( 376 ) $ ( 1,408 )

Private labeled mortgage–backed pools ( 376 ) 376 —

Total available for sale investment securities $ ( 1,408 ) $ — $ ( 1,408 )

Federal agency mortgage–backed pools $ ( 2,612 ) $ ( 1,398 ) $ ( 4,010 )

Private labeled mortgage–backed pools ( 1,840 ) 1,398 ( 442 )

Total held to maturity investment securities $ ( 4,452 ) $ — $ ( 4,452 )

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ 226,074 $ 31,617 $ 257,691

Private labeled mortgage–backed pools 31,617 ( 31,617 ) —

Total available for sale investment securities $ 257,691 $ — $ 257,691

Federal agency mortgage–backed pools $ 185,965 $ 58,171 $ 244,136

Private labeled mortgage–backed pools 98,176 ( 58,171 ) 40,005

Total held to maturity investment securities $ 284,141 $ — $ 284,141

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Adoption of New Accounting Standards

15 unchanged sentences

On January 1, 2020, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $ 2.8 million of allowance for credit losses (“ACL”) on loans.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following table illustrates the impact of ASC 326.

7 unchanged sentences

Accounting policies stated in Note 1 reflect the adoption of Topic 326 as it relates to investment securities, loans and off–balance sheet credit exposures as of January 1, 2020.

Disclosures related to the accounting guidance prior to the adoption of Topic 326 can be found in Form 10–K for the year ended December 31, 2019.

2017–04, Intangibles – Goodwill and Other (Topic 350):

6 unchanged sentences

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

the reporting unit when measuring the goodwill impairment loss, if applicable.

An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

10 unchanged sentences

The adoption of this new guidance did not have a material impact on our consolidated financial statements.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Accounting Guidance Issued But Not Yet Adopted

2019–12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

The FASB has issued ASU 2019–12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The new guidance is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of ASC 740.

The guidance also improves consistent application by clarifying and amending existing guidance from ASC 740.

This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein and is to be applied on a retrospective, modified retrospective or prospective approach, depending on the specific amendment.

Early adoption is permitted.

We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

2020–04, Reference Rate Reform (Topic 848):

13 unchanged sentences

The Company believes the adoption of this guidance on activities subsequent to December 31, 2020 through December 31, 2022 will not have a material impact on the consolidated financial statements.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

2022–02, Financial Instruments–Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures

The FASB has issued ASU 2022–02, Financial Instruments–Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures, which eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan.

The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

Additionally, these amendments require that an entity disclose current–period gross write–offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326–20.

The guidance is effective for entities that have adopted ASU 2016–13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

These amendments should be applied prospectively.

If an entity elects to early adopt ASU 2022–02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period.

An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

The Company is assessing ASU 2022–02 and its impact on its accounting and disclosures.

Note 2 – Acquisitions

5 unchanged sentences

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition.

Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and

Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the purchase price for the TCF branches is detailed in the following table.

Prior to the end of the one year measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation prospectively.

HORIZON BANCORP, INC.

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(Table dollars in thousands except for per share data)

assumptions that are subject to change, the purchase price for the TCF branches is detailed in the following table.

Assets Liabilities

14 unchanged sentences

Evidence of credit quality deterioration as of the purchase date may include information such as past due and non–accrual status, borrower credit scores and recent loan–to–value percentages.

Management continues to complete its evaluation to determine if any loans were purchased with credit deterioration.

Salin Bancshares, Inc.

On March 26, 2019, Horizon completed the acquisition of Salin Bancshares, Inc.

(“Salin”), an Indiana corporation, and Horizon Bank’s acquisition of Salin Bank and Trust Company (“Salin Bank”), an Indiana commercial bank and wholly–owned subsidiary of Salin, through mergers effective March 26, 2019.

Under the terms of the Merger Agreement, shareholders of Salin received 23,907.5 shares of Horizon common stock and $ 87,417.17 in cash for each outstanding share of Salin common stock.

Salin shares outstanding at the closing to be exchanged were 275 , and the shares of Horizon common stock issued to Salin shareholders totaled 6,563,697 .

The Salin shareholders received cash in lieu of fractional shares.

Based upon the March 25, 2019 closing price of $ 15.65 per share of Horizon common stock immediately prior to the effectiveness of the merger the transaction has an implied valuation of approximately $ 126.7 million.

The Company incurred approximately $ 5.6 million in costs related to the acquisition.

These expenses are classified in the non–interest expense section of the income statement and are primarily located in the data processing, professional fees, outside services and consultants and other expense line items.

As a result of the acquisition, the Company was able to increase its loan and deposit base and expects to reduce costs through economies of scale.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition.

Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the final purchase price for the Salin acquisition is detailed in the following table.

Prior to the end of the one-year measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

adjustments will be included in the purchase price allocation prospectively.

The measurement period adjustments will be calculated as if the accounting had been completed as of the acquisition date.

Assets Liabilities

Cash and due from banks $ 152,745 Deposits

Investment securities, available for sale 54,319 Non–interest bearing $ 188,744

NOW accounts 207,567

Loans Savings and money market 274,504

Commercial 352,798 Certificates of deposit 70,529

Residential mortgage 131,008 Total deposits 741,344

Consumer 85,112

Total loans 568,918

Borrowings 70,495

Premises and equipment, net 20,425 Subordinated debentures 18,376

FRB and FHLB stock 3,571 Interest payable 826

Goodwill 31,358 Other liabilities 8,759

Core deposit intangible 19,818

Interest receivable 2,488

Other assets 112,880

Total liabilities assumed $ 839,800

Total assets purchased $ 966,522

Common shares issued $ 102,722

Cash paid 24,000

Total purchase price $ 126,722

Of the total purchase price of $ 126.7 million, $ 19.8 million has been allocated to core deposit intangible.

Additionally, $ 31.4 million has been allocated to goodwill and none of the purchase price is deductible.

The core deposit intangible is being amortized over 10 years on straight line basis.

The Company acquired various loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired.

Evidence of credit quality deterioration as of the purchase date may include information such as past-due and non-accrual status, borrower credit scores and recent loan–to–value percentages.

Purchased credit–impaired loans are accounted for the under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310–30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan.

Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date.

Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current assumptions, such as a default rates, severity and prepayment speeds.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following table details an estimate of the acquired loans that are accounted for in accordance with ASC 310–30 as of March 26, 2019.

Contractually required principal and interest at acquisition $ 22,672

Contractual cash flows not expected to be collected (nonaccretable differences) 6,694

Expected cash flows at acquisition 15,978

Interest component of expected cash flows (accretable discount) 735

Fair value of acquired loans accounted for under ASC310–30 $ 15,243

Estimates of certain loans, those for which specific credit–related deterioration has occurred since origination, are recorded at fair value, reflecting the present value of the amounts expected to be collected.

Loans purchased with evidence of credit–related deterioration were recorded at fair value, reflecting the present value of the amounts expected to be collected.

Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected.

The results of operations of Salin have been included in the Company’s consolidated financial statements since the acquisition dates.

The following schedule includes pro–forma results for the periods ended December 31, 2020 and 2019 as if the Salin acquisition had occurred as of the beginning of the comparable prior reporting periods.

For the Year Ended

Summary of Operations:

Net Interest Income $ 168,693

Provision for Loan Losses 2,276

Net Interest Income after Provision for Loan Losses 166,417

Non-interest Income 43,472

Non-interest Expense 134,446

Income before Income Taxes 75,443

Income Tax Expense 13,246

Net Income $ 62,197

Basic Earnings per Share $ 1.43

Diluted Earnings per Share $ 1.43

The pro–forma information includes adjustments for interest income on loans, amortization of intangibles arising from the transaction, interest expense on deposits acquired, premises expense for the banking centers acquired and the related income tax effects.

The pro–forma financial information is presented for information purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.

Note 3 – Cash Equivalents

15 unchanged sentences

Federal agency mortgage–backed pools 220,963 — ( 30,307 ) 190,656

Private labeled mortgage–backed pools 31,856 137 ( 376 ) 31,617

Corporate notes 84,393 195 ( 9,624 ) 74,964

17 unchanged sentences

Held to maturity

Treasury and federal agencies $ 195,429 $ 12 $ ( 1,215 ) $ 194,226

State and municipal 862,461 20,719 ( 4,263 ) 878,917

1 unchanged sentence

Federal agency mortgage–backed pools 247,937 209 ( 4,010 ) 244,136

Private labeled mortgage–backed pools 40,447 — ( 442 ) 40,005

Corporate notes 157,687 11 ( 2,456 ) 155,242

Total held to maturity investment securities $ 1,552,443 $ 20,954 $ ( 13,406 ) $ 1,559,991

The Company elected to transfer 475 AFS securities with an aggregate fair value of $ 490.2 million to a classification of HTM on December 31, 2021.

The Company elected to transfer 793 AFS securities with an aggregate fair value of $ 120.9 million to a classification of HTM on March 31, 2022.

In accordance with FASB ASC 320–10–55–24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer.

The net unrealized holding gain of $ 6.0 million, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre–tax amount retained in the carrying value of the HTM securities.

Such amounts will be amortized to comprehensive income over the remaining life of the securities.

The fair value of the transferred AFS securities

The net unrealized holding loss of $ 814,000 , net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre–tax amount retained in the carrying value of the HTM securities.

Such amounts will be accreted to

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

became the book value of the HTM securities at December 31, 2021, with no securities, would likely record an unrealized gain or loss for disclosure purposes.

The Company elected to transfer 319 available for sale (“AFS”) securities with an aggregate fair value of $ 167.1 million to a classification of held to maturity (“HTM”) on April 1, 2014.

comprehensive income over the remaining life of the securities.

The fair value of the transferred AFS securities became the book value of the HTM securities at March 31, 2022.

The Company elected to transfer 475 AFS securities with an aggregate fair value of $ 490.2 million to a classification of HTM on December 31, 2021.

In accordance with FASB ASC 320–10–55–24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer.

1 unchanged sentence

Such amounts will be amortized to comprehensive income over the remaining life of the securities.

The fair value of the transferred AFS securities became the book value of the HTM securities at April 1, 2014, with no unrealized gain or loss at this date.

Future reporting periods, with potential changes in market value for these securities, would likely record an unrealized gain or loss for disclosure purposes.

The fair value of the transferred AFS securities became the book value of the HTM securities at December 31, 2021.

The amortized cost and fair value of securities available for sale and held to maturity at December 31, 2022 and December 31, 2021, by contractual maturity, are shown below.

10 unchanged sentences

Federal agency mortgage–backed pools 220,963 190,656 257,185 257,691

Private labeled mortgage–backed pools 31,856 31,617 — —

Total available for sale investment securities $ 1,137,702 $ 997,558 $ 1,153,611 $ 1,160,812

36 unchanged sentences

Federal agency collateralized mortgage obligations 56,027 ( 1,032 ) — — 56,027 ( 1,032 )

Federal agency mortgage–backed pools 406,540 ( 5,418 ) — — 406,540 ( 5,418 )

Private labeled mortgage–backed pools 40,005 ( 442 ) — — 40,005 ( 442 )

Corporate notes 189,500 ( 3,229 ) — — 189,500 ( 3,229 )

Total securities $ 1,500,686 $ ( 21,993 ) $ 35,281 $ ( 1,012 ) $ 1,535,967 $ ( 23,005 )

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost.

As of December 31, 2022 and 2021, the Company had 2,828 and 1,129 securities, respectively, with market values below their cost basis.

The total fair value of these investments at December 31, 2022 and 2021 was $ 2.6 billion and $ 1.5 billion, which is approximately 86 % and 57 %, respectively, of the Company's available for sale and held to maturity securities portfolio.

These declines resulted primarily from fluctuations in market interest rates after purchase.

Management believes the declines in fair value for these securities are temporary.

No allowance for credit losses for available for sale debt securities or held to maturity securities was needed at December 31, 2022 and December 31, 2021.

3 unchanged sentences

Therefore, for those securities, we do not record expected credit losses.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Information regarding security proceeds, gross gains and gross losses are presented below.

7 unchanged sentences

The Company pledges securities to secure retail and corporate repurchase agreements to the Federal Reserve for borrowing availability and as settlements for the fair value of swap agreements.

At December 31, 2021, the Company had pledged $ 146.5 million of fair value or $ 145.0 million of amortized cost, in securities as collateral for

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

$ 130.8 million in repurchase agreements, $ 479.5 million of fair value or $ 453.6 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with no current outstanding borrowings and $ 37.2 million of fair value or $ 36.6 million of amortized cost, in securities as collateral for $ 7.2 million in settlements on the fair value of swap agreements.

Other than Temporary Impairment (“OTTI”) (Prior to January 1, 2020)

Prior to the adoption of ASC 326 as of January 1, 2020, the Company used OTTI guidance in ASC 320 for impairment analysis and recognition.

Under the OTTI model, impairment losses were recognized as a reduction of the cost basis of the investment with recovery of impairment losses recognized prospectively over time as interest income.

At December 31, 2022, the Company had pledged $ 160.5 million of fair value or $ 186.4 million of amortized cost, in securities as collateral for $ 137.9 million in repurchase agreements, $ 405.2 million of fair value or $ 439.2 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with $ 244.0 million current outstanding borrowings and $ 24.8 million of fair value or $ 27.1 million of amortized cost, in securities as collateral for $ 43.8 million in settlements on the fair value of swap agreements.

Note 5 – Loans

38 unchanged sentences

Net loans $ 4,107,534 $ 3,604,248

As of December 31, 2021 and 2020, loans originated under the Federal Paycheck Protection Program (“PPP”) totaled approximately $ 25.8 million and $ 208.9 million, respectively.

Total loans include net deferred loan costs of $ 1.9 million at December 31, 2021 and net deferred loan fees of $ 1.7 million at December 31, 2020, respectively.

As of December 31, 2022 and 2021, loans originated under the Federal Paycheck Protection Program (“PPP”) totaled approximately $ 217,000 and $ 25.8 million, respectively.

Total loans include net deferred loan costs of $ 22.7 million at December 31, 2022 and $ 15.8 million at December 31, 2021, respectively.

HORIZON BANCORP, INC.

34 unchanged sentences

Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.

Based on the agreements with each mortgage company, at any time a mortgage company can reacquire from Horizon its outstanding loan balance on an individual mortgage and regain possession of the original note.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

also has the option to request that the mortgage company reacquire an individual mortgage.

Horizon also has the option to request that the mortgage company reacquire an individual mortgage.

Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company.

50 unchanged sentences

Included in the $ 17.6 million of non–accrual loans and the $ 1.5 million of non–performing TDRs at December 31, 2022 were $ 1.5 million and $ 105,000 , respectively, of loans acquired for which there were accretable yields recognized.

Included in the $ 15.0 million of non–accrual loans and the $ 1.5 million of non–performing TDRs at December 31, 2021 were $ 2.2 million and $ 290,000 , respectively, of loans acquired for which there were accretable yields recognized.

HORIZON BANCORP, INC.

56 unchanged sentences

A restructured loan is returned to accruing status after six consecutive payments but is still reported as a TDR unless the loan bears interest at a market rate.

As of December 31, 2021, the Company had $ 3.9 million in TDRs and $ 2.4 million were performing according to the restructured terms and five TDRs were returned to accrual status during 2021.

As of December 31, 2020, the Company had $ 4.4 million in TDRs and $ 1.8 million were performing according to the restructured terms and one TDR was returned to accrual status during 2020.

As of December 31, 2022, the Company had $ 4.1 million in TDRs and $ 2.6 million were performing according to the restructured terms and four TDRs were returned to accrual status during 2022.

As of December 31, 2021, the Company had $ 3.9 million in TDRs and $ 2.4 million were performing according to the restructured terms and five TDRs was returned to accrual status during 2021.

There were no specific reserves allocated to TDRs at December 31, 2022 or 2021 based on the discounted cash flows or, when appropriate, the fair value of the collateral.

25 unchanged sentences

and (ii) to suspend any determination of a loan modified as a result of the effects of COVID–19 pandemic as being a TDR, including impairment for accounting purposes.

At December 31, 2021 and 2020, the Bank modified loans totaling $ 10.9 million and $ 126.7 million, respectively, which qualify for treatment under the CARES Act.

At December 31, 2022 and 2021, the Bank modified loans totaling $ 34,000 and $ 10.9 million, respectively, which qualify for treatment under the CARES Act.

Collateral Dependent Financial Assets

13 unchanged sentences

Non–owner occupied real estate 4,135 — — 4,135 988

Residential spec homes 101 — — 101 —

Development & spec land 815 — — 815 36

21 unchanged sentences

• Monthly, senior management meets as members of the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets.

This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, other real estate owned and personal property repossessions.

The information reviewed in this meeting acts as a

This committee also reviews the actions

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.

taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, other real estate owned and personal property repossessions.

The information reviewed in this meeting acts as a precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.

For residential real estate and consumer loans, Horizon uses a grading system based on delinquency.

217 unchanged sentences

Total consumer $ 265,458 $ 159,654 $ 109,302 $ 75,584 $ 46,436 $ 76,740 $ 8,002 $ 741,176

Accounting for Certain Loans Acquired in a Transfer (Prior to January 1, 2020)

As indicated in Note 1, the Company adopted ASC 326 using the prospective transition approach for PCD loans previously classified as PCI and accounted for under ASC 310–30.

Accordingly, upon reassessment at January 1, 2020, the disclosures as previously required under ASC 310–30 are no longer applicable for the year ended December 31, 2020.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The Company acquired loans in acquisitions with evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Prior to January 1, 2020, the Company purchased loans with evidence of credit deterioration since origination and for which it was probable that all contractually required payments will not be collected were considered to be credit impaired.

Evidence of credit quality deterioration as of the purchase date may include information such as past–due and non–accrual status, borrower credit scores and recent loan–to–value percentages.

Purchase credit–impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310–30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan.

Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date.

Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

Interest marks are accreted to income over the remaining life of the loan.

Credit marks are evaluated using the practical expedient method.

Accretable yield, or income expected to be collected for the year ended December 31, 2019 are as follows:

Twelve Months Ended December 31, 2019

balance Additions Accretion Reclassification

nonaccretable

difference Disposals Ending

Heartland $ 174 — $ ( 32 ) — $ — $ 142

Summit 42 — ( 9 ) — ( 11 ) 22

Kosciusko 300 — ( 63 ) — ( 2 ) 235

LaPorte 829 — ( 111 ) — 4 722

Lafayette 609 — ( 126 ) — ( 193 ) 290

Wolverine 698 — ( 272 ) — ( 306 ) 120

Salin — 2,002 ( 590 ) — ( 37 ) 1,375

Total $ 2,652 $ 2,002 $ ( 1,203 ) $ — $ ( 545 ) $ 2,906

During the year ended December 31, 2019, the Company increased the allowance for loan losses by a charge to the income statement of $ 133,000 .

No allowance for loan losses were reversed for the year ended December 31, 2019.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 6 – Allowance for Credit and Loan Losses

11 unchanged sentences

Balance, beginning of period $ 42,210 $ 4,620 $ 1,267 $ 8,930 $ 57,027

Impact of adopting ASC 326 10,832 4,048 — 4,911 19,791

Initial PCD allowance 2,786 — — — 2,786

Credit loss expense (recovery) ( 1,320 ) ( 755 ) ( 208 ) 199 ( 2,084 )

14 unchanged sentences

The Company’s CECL estimate applies to a forecast that incorporates macroeconomic trends and other environmental factors.

Management utilized National, Regional and Local Leading Economic Indexes, as well as

Management utilized National, Regional and Local Leading Economic Indexes, as well as management judgment, as the basis for the forecast period.

The historical loss rate was utilized as the base rate, and qualitative adjustments were utilized to reflect the forecast and other relevant factors.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

management judgment, as the basis for the forecast period.

The historical loss rate was utilized as the base rate, and qualitative adjustments were utilized to reflect the forecast and other relevant factors.

The Company segments the loan portfolio into pools based on the following risk characteristics:

11 unchanged sentences

The unpaid principal balances of loans serviced for others totaled approximately $ 1.532 billion and $ 1.540 billion at December 31, 2022 and 2021.

The aggregate fair value of capitalized mortgage servicing rights was approximately $ 15.2 million, $ 12.4 million and $ 14.4 million at December 31, 2021, 2020 and 2019, compared to the carrying values of $ 15.2 million, $ 12.5 million and $ 14.3 million, respectively.

The fair value of capitalized mortgage servicing rights was approximately $ 13.9 million on January 1, 2019.

Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value.

14 unchanged sentences

Mortgage servicing rights, net $ 18,619 $ 15,186 $ 12,472

During 2021 the Bank recorded a recovery of impairment of approximately $ 2.6 million.

During 2020 and 2019 the Bank recorded additional impairment of approximately $ 4.5 million and $ 192,000 , respectively.

Fair value, beginning of period $ 15,236 $ 12,356 $ 14,405

Fair value, end of period $ 19,992 $ 15,236 $ 12,356

HORIZON BANCORP, INC.

6 unchanged sentences

Goodwill acquired — 3,334

Measurement period adjustment 639 —

Balances, December 31 $ 155,211 $ 154,572

At each reporting date between annual goodwill impairment tests, Horizon considers potential indicators of impairment.

Given the current economic uncertainty and volatility surrounding COVID–19, Horizon assessed whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value.

Impairment indicators considered comprised of the condition of the economy and banking industry;

government intervention and regulatory updates;

the impact of recent events to financial performance and cost factors of the reporting unit;

performance of the Company's stock and other relevant events.

Horizon further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and sensitivities performed.

At the conclusion of the assessment, the Company determined that as of December 31, 2020 it was more likely than not that the fair value exceeded its carrying values.

Horizon will continue to monitor developments regarding the COVID–19 pandemic and measures implemented in response to the pandemic, market capitalization, overall economic conditions and any other triggering events or circumstances that may indicate an impairment of goodwill in the future.

Goodwill is assessed for impairment annually, or more frequently if events occur or circumstances change that indicate an impairment may exist.

When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value.

If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed.

Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

No impairment loss was recorded in 2022 or 2021.

2 unchanged sentences

For additional details related to impairment testing, see the “Goodwill and Intangible Assets” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Item 7 of this Annual Report on Form 10–K.

On September 17, 2021, the TCF branch acquisition resulted in goodwill of $ 3.3 million.

As a result of the acquisition of American Trust & Savings Bank in 2010;

Heartland in 2012;

Summit in 2014;

Peoples in 2015;

Kosciusko, LaPorte and CNB in 2016;

Lafayette and Wolverine in 2017;

Salin in 2019;

and TCF in 2021;

the Company has recorded certain amortizable intangible assets related to core deposit intangibles.

As a result of acquisitions, the Company has recorded certain amortizable intangible assets related to core deposit intangibles.

These core deposit intangibles are being amortized over seven years to ten years using an accelerated method.

7 unchanged sentences

Core deposit intangible $ 42,220 $ ( 24,981 ) $ 40,590 $ ( 17,635 )

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Amortization expense for intangible assets totaled $ 3.6 million, $ 3.9 million , and $ 3.8 million for the years ended December 31, 2022, 2021 and 2020.

1 unchanged sentence

Thereafter 2,495

Note 10 – Leases

As of January 1, 2019, when the Company adopted ASU 2016–02 prospectively, the Company began recording operating leases as a right–of–use (“ROU”) asset in other assets and operating lease liability in other liabilities on the consolidated balance sheet.

Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the lease commencement date.

Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating liability, is recognized on a straight–line basis over the lease term, and is recorded primarily in net occupancy expense in the consolidated statements of income.

When the Company adopted the guidance on January 1, 2019, it elected the optional alternative transition method permitted by ASU 2018–11 allowing for recognition of applicable leases as of January 1, 2019.

Additionally, the Company elected the following accounting policies:

• The practical expedient package that forgoes:

• Reassessment of any expired or existing contracts for a lease

• Reassessment of lease classification for expired or existing leases

• Reassessment of initial direct costs for existing leases

• The hindsight practical expedient to determine lease term and impairment of ROU assets

• Other practical expedients regarding combination of lease and non–lease components and the exclusion of short–term leases

• The Company did not elect to follow the practical expedients for land easements and the portfolio approach

Operating leases relate primarily to bank branches and office space with remaining average lease terms of seven years .

The weighted average discount rate utilized to calculate the ROU asset and operating lease liability was approximately 2.57 %, which represents the incremental borrowing rate.

At inception, the Company recorded a ROU asset and operating lease liability of $ 3.5 million.

At December 31, 2021, a ROU asset of $ 2.0 million is included in other assets and an operating lease liability of $ 2.0 million is included in other liabilities .

Options to extend a lease were considered in the remaining lease term determination.

The lease expense for operating leases was $ 484,000 for the year ended December 31, 2021.

The weighted average remaining life of leases was 4.5 years at December 31, 2021.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

Future minimum operating lease payments under non-cancellable leases with initial or remaining lease terms at December 31, 2021 were as follows:

2026 and thereafter 323

Total lease payments $ 2,113

Interest ( 365 )

Present value of lease liabilities $ 1,748

Note 10 – Deposits

16 unchanged sentences

$ 828,535 $ 168,580 $ 997,115

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 11 – Borrowings

3 unchanged sentences

Securities sold under agreements to repurchase 137,871 130,798

Federal funds purchased 134,746 —

Federal Reserve Bank discount window 244,000 —

Secured borrowings 50,956 56,457

Total borrowings $ 1,142,949 $ 712,739

The Federal Home Loan Bank advances are secured by first and second mortgage loans, commercial real estate loans and mortgage warehouse loans totaling approximately $ 830.8 million.

The Federal Home Loan Bank advances are secured by first and second mortgage loans, commercial real estate loans and mortgage warehouse loans totaling approximately $ 1.6 billion.

Advances are subject to restrictions or penalties in the event of prepayment.

At December 31, 2022, the Bank had a total of $ 350.0 million in putable advances.

The call dates for these advances range from January 24, 2022 to October 24, 2022 even though maturity dates extend beyond those dates.

The call dates for these advances range from January 19, 2023 to January 30, 2023 even though maturity dates extend beyond those dates.

At December 31, 2022, the Bank had available approximately $ 438.0 million in credit lines with various money center banks, including the FHLB.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Contractual maturities in years ending December 31 are as follows:

6 unchanged sentences

The agreements at December 31, 2022 are overnight agreements.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following table shows repurchase agreements accounted for as secured borrowings and the related securities, at fair value, pledged for repurchase agreements:

17 unchanged sentences

The Notes mature on July 1, 2030 (the “Maturity Date”).

From and including the date of original issuance to, but excluding, July 1, 2025 or the date of earlier redemption (the “fixed rate period”), the Notes bear interest at an initial rate of 5.625 % per annum, payable semi–annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

annum, payable semi–annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.

The last interest payment date for the fixed rate period will be July 1, 2025.

9 unchanged sentences

The Notes are obligations of Horizon only and are not obligations of, and are not guaranteed by, any of Horizon's subsidiaries.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 14 – Junior Subordinated Debentures Issued to Capital Trusts

18 unchanged sentences

The junior subordinated debentures and the trust preferred securities pay interest and dividends on a quarterly basis.

The junior subordinated debentures and the securities bear interest at a rate of 90–day LIBOR plus 2.65 % ( 2.86 % at December 31, 2021) and mature in June 2034, and securities may be called at any quarterly interest payment date at par.

The junior subordinated debentures and the securities bear interest at a rate of 90–day LIBOR plus 2.65 % ( 7.42 % at

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

December 31, 2022) and mature in June 2034, and securities may be called at any quarterly interest payment date at par.

The Company assumed additional debentures as the result of the American Trust & Savings Bank purchase and assumption in 2010.

12 unchanged sentences

The carrying value was $ 2.1 million, net of the remaining purchase discount, at December 31, 2022.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The Company assumed additional debentures as the result of the LaPorte merger in July 2016.

20 unchanged sentences

Prior to the establishment of the employee stock bonus plan, Horizon maintained an ESOP that was terminated in 1999.

The prior ESOP accounts of active employees and the discretionary accounts of active employees remain in the new ESOP.

The Matching contribution accounts under the stock bonus plan were transferred to the Employee Thrift Plan.

The ESOP exists for the benefit of substantially all employees.

Contributions to the ESOP are by Horizon and are determined by the Board of Directors at its discretion.

The contributions may be made in the form of cash or common stock.

Shares are allocated among participants each December 31 on the basis of each participant’s eligible compensation to total eligible compensation.

Eligible compensation is limited to $ 290,000 for each participant.

Dividends on shares held by the plan, at the discretion of each participant, may be distributed to an individual participant or left in the plan to purchase additional shares.

Total cash contributions and expense recorded for the ESOP was $ 0 in 2021, $ 591,000 in 2020 and $ 719,000 in 2019.

The ESOP, which is not leveraged, owned a total of 740,113 shares of Horizon’s stock or 1.7 % of the outstanding shares as of December 31, 2021.

Horizon's ESOP was terminated on July 1, 2021.

The Internal Revenue Service issued a favorable determination letter on October 29, 2021, and the Plan is in the process of distributing the assets to participants which is expected to be completed by the second quarter of 2022.

The prior ESOP accounts of active

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

employees and the discretionary accounts of active employees remain in the new ESOP.

The Matching contribution accounts under the stock bonus plan were transferred to the Employee Thrift Plan.

Horizon's ESOP was terminated on July 1, 2021.

The Internal Revenue Service issued a favorable determination letter on October 29, 2021, and the Plan distributed all assets to participants in 2022.

Total cash contributions and expense recorded for the ESOP was $ 0 in 2022, $ 0 in 2021 and $ 591,000 in 2020.

The ESOP, which was not leveraged, owned no shares of Horizon’s stock as of December 31, 2022.

Note 16 – Employee Benefit Plans

3 unchanged sentences

Employee voluntary contributions are vested at all times.

The Bank’s expense related to the Plan totaled approximately $ 1.5 million in 2021, $ 1.4 million in 2020 and $ 1,200,000 in 2019.

The Bank’s expense related to the Plan totaled approximately $ 1.9 million in 2022, $ 1.5 million in 2021 and $ 1.4 million in 2020.

The Plan owned a total of 799,956 shares of Horizon’s stock or 1.8 % of the outstanding shares as of December 31, 2022.

19 unchanged sentences

Tax exempt interest ( 6,623 ) ( 5,362 ) ( 4,090 )

Tax exempt income ( 604 ) ( 531 ) ( 587 )

Tax exempt BOLI income ( 746 ) ( 604 ) ( 531 )

Stock compensation ( 232 ) ( 250 ) ( 160 )

6 unchanged sentences

Allowance for loan losses $ 12,762 $ 13,707

Net operating loss and tax credits (from acquisitions) — 3

Net operating loss and tax credits 9,313 —

Director and employee benefits 2,019 2,094

Unrealized loss on AFS securities and cash flow hedge 28,230 —

Other 555 1,785

5 unchanged sentences

Fair value adjustment on acquisitions ( 2,807 ) ( 3,435 )

Unrealized gain on AFS securities and fair value hedge ( 1,953 ) ( 7,404 )

Unrealized gain on AFS securities and cash flow hedge — ( 1,953 )

Other ( 68 ) ( 222 )

1 unchanged sentence

Net deferred tax asset/(liability) $ 40,335 $ 3,328

Retained earnings of the Bank include approximately $ 12.8 million for which no deferred income tax liability has been recognized.

This amount represents an allocation of previously acquired institutions income to bad debt deductions as of December 31, 1987 for tax purposes only.

Reductions of amounts so allocated for purposes other than tax bad debt losses including redemption of bank stock or excess dividends, or loss of “bank” status would create income for tax purposes only, which would be subject to the then-current corporate income tax rate.

During 2022, the Company generated a state net operating loss of $ 6.2 million that may be carried forward for 15 years.

Additionally, the Company generated tax credits resulting in a carryforward of $ 9.0 million.

These credits may be carried forward for 20 years.

The Company expects to generate sufficient taxable income in the future to utilize the losses and credit carryforwards.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

unrecorded deferred income tax liability on the above amount for the Company was approximately $ 2.7 million at December 31, 2021.

Retained earnings of the Bank include approximately $ 12.8 million for which no deferred income tax liability has been recognized.

This amount represents an allocation of previously acquired institutions income to bad debt deductions as of December 31, 1987 for tax purposes only.

The unrecorded deferred income tax liability on the above amount for the Company was approximately $ 2.7 million at December 31, 2022.

The Company files income tax returns in the U.S.

3 unchanged sentences

income tax examinations by tax authorities for years before 2019.

Note 19 – Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss included in capital are as follows:

Note 18 – Accumulated Other Comprehensive Gain (Loss)

The components of accumulated other comprehensive gain (loss) included in capital are as follows:

2022 December 31

Unrealized gain on securities available for sale $ 7,201 $ 43,662

Unamortized loss on securities held to maturity, previously transferred from AFS 5,770 ( 165 )

Unrealized loss on derivative instruments ( 3,673 ) ( 8,243 )

Unrealized gain (loss) on securities available for sale $ ( 140,144 ) $ 7,201

Unamortized gain on securities held to maturity, previously transferred from AFS 3,740 5,770

Unrealized gain (loss) on derivative instruments 1,976 ( 3,673 )

Tax effect 28,230 ( 1,953 )

Total accumulated other comprehensive income $ 7,345 $ 27,852

Total accumulated other comprehensive income (loss) $ ( 106,198 ) $ 7,345

Note 19 – Commitments, Off–Balance Sheet Risk and Contingencies

5 unchanged sentences

The Bank follows the same credit policy to make such commitments as is followed for those loans recorded in the financial statements.

At December 31, 2021 and 2020, commitments to make loans amounted to approximately $ 1.3 billion and $ 917.4 million and commitments under outstanding standby letters of credit amounted to approximately $ 12.7 million and $ 12.4 million.

At December 31, 2022 and 2021, commitments to make loans amounted to approximately $ 1.5 billion and $ 1.3 billion and commitments under outstanding standby letters of credit amounted to approximately $ 17.8 million and $ 12.7 million.

Since many commitments to make loans and standby letters of credit expire without being used, the amount does not necessarily represent future cash advances.

68 unchanged sentences

Note 21 – Share–Based Compensation

On January 21, 2003, the Board of Directors adopted the Horizon Bancorp 2003 Omnibus Equity Incentive Plan (“2003 Plan”), which was approved by stockholders on May 8, 2003.

Under the 2003 Plan, Horizon could issue up to 759,375 common shares, plus the number of shares that are tendered to or withheld by Horizon in connection with the exercise of options plus that number of shares that are purchased by Horizon with the cash proceeds received upon option exercises.

The 2003 Plan limited the number of shares available to 759,375 for incentive stock options and to 379,687 for the grant of non-option awards.

The shares available for issuance under the 2003 Plan could be divided among the various types of awards and among the participants as the Compensation Committee (“Committee”) determined.

The Committee was authorized to grant any type of award to a participant that was consistent with the provisions of the 2003 Plan.

Awards could consist of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, performance units, performance shares or any combination of these awards.

The Committee determined the provisions, terms and conditions of each award.

The restricted shares vest over a period of time established by the Committee at the time of each grant.

Holders of restricted shares receive dividends and may vote the shares.

The restricted shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity.

The cost of these shares is being amortized against earnings using the straight-line method over the vesting period.

The options shares granted under the 2003 Plan vest at a rate designated per the individual agreements.

The restricted shares granted under the 2003 Plan vest at the end of each grant’s vesting period.

On March 8, 2010, the Board of Directors adopted, and on May 6, 2010, the stockholders approved, an amendment to the 2003 Plan making an additional 885,937 common shares available for issuance.

All share data has been adjusted for the 3:2 stock split on June 15, 2018 (and for four additional stock splits in 2003, 2011, 2012 and 2016 after the 2003 Plan was adopted).

A summary of option activity under the 2003 Plan as of December 31, 2021, and changes during the year then ended, is presented below:

A summary of option activity under the Horizon Bancorp 2003 Omnibus Equity Incentive Plan (“2003 Plan”) as of December 31, 2022, and changes during the year then ended, is presented below:

Shares Weighted–

6 unchanged sentences

Exercisable, end of year — — 0 —

As of December 31, 2022, there are no outstanding awards issued under the 2003 Plan

On June 18, 2013, the Board of Directors adopted the Horizon Bancorp 2013 Omnibus Equity Incentive Plan (“2013 Plan”), which was approved by the Company’s shareholders on May 8, 2014.

7 unchanged sentences

All share data has been adjusted for the 3:2 stock split on June 15, 2018 and November 14, 2016.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The restricted shares can vest over a period of time established by the Committee at the time of each grant, but the restricted shares already granted under the 2013 Plan generally vest at the end of three, four or five years of continuous employment.

6 unchanged sentences

The options shares granted under the 2013 Plan vest at a rate designated per the individual agreements.

The fair value of options granted is estimated on the date of the grant using an option–pricing model with the following weighted–average assumptions:

For the Year Ended

Dividend yields 2.39 %

Volatility factors of expected market price of common stock 28.67 %

Risk-free interest rates 2.61 %

Expected life of options 8 years

The fair value of options granted is estimated on the date of the grant using an option–pricing model.

There have been no options granted since 2019.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

A summary of option activity under the 2013 Plan as of December 31, 2022, and changes during the year then ended, is presented below:

7 unchanged sentences

Exercisable, end of year 168,013 14.64 3.92 339,389

The weighted average grant–date fair value of options granted during the years 2021, 2020 and 2019 was $ 0.00 , $ 0.00 and $ 4.44 .

There have been no options granted during the years 2022, 2021 and 2020.

On January 19, 2021, the Board of Directors adopted the Horizon Bancorp 2021 Omnibus Equity Incentive Plan (“2021 Plan”), which was approved by the Company’s shareholders on May 6, 2021.

3 unchanged sentences

The Committee determines the provisions, terms and conditions of each award.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The restricted shares can vest over a period of time established by the Committee at the time of each grant, but the restricted shares already granted under the 2021 Plan generally vest at the end of three, four or five years of continuous employment.

13 unchanged sentences

Non–vested, end of year 520,459 16.45

Total compensation cost recognized in the income statement for option–based payment arrangements during 2021 and was $ 68,000 and the related tax benefit recognized was approximately $ 14,000 .

Total compensation cost recognized in the income statement for option–based payment arrangements during 2020 and 2019 was $ 132,000 and $ 215,000 and the related tax benefit recognized was $ 28,000 and $ 45,000 , respectively.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Compensation expense recognized in the income statement for option–based payment arrangements during 2022, 2021 and 2020 was $ 13,000 , $ 68,000 and $ 132,000 .

The recognized tax benefit related thereto was approximately $ 3,000 , $ 14,000 and $ 28,000 for the years ended December 31, 2022, 2021 and 2020.

No stock options were granted during 2022 or 2021.

Total compensation cost recognized in the income statement for restricted share and performance share based payment arrangements during 2021, 2020 and 2019 was $ 1.8 million, $ 1.2 million, and $ 705,000 .

Compensation expense recognized in the income statement for restricted share and performance share based payment arrangements during 2022, 2021 and 2020 was $ 2.5 million, $ 1.8 million, and $ 1.2 million.

The recognized tax benefit related thereto was approximately $ 517,000 , $ 368,000 , and $ 253,000 for the years ended December 31, 2022, 2021 and 2020.

4 unchanged sentences

Under all plans, forfeitures of share–based compensation grants are recognized as they occur.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 22 – Derivative Financial Instruments

1 unchanged sentence

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into an interest rate swap agreement for a portion of its floating rate debt which matured on December 16, 2021.

The agreement provided for the Company to receive interest from the counterparty at three months LIBOR and to pay interest to the counterparty at a weighted average fixed rate of 4.20 % on a notional amount of $ 12.0 million at December 31, 2020.

Under the agreement, the Company paid or received the net interest amount monthly, with the monthly settlements included in interest expense.

The Company assumed an additional interest rate swap agreement as the result of the LaPorte acquisition in July 2016 which matured on March 15, 2021.

The agreement provided for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a weighted average rate of 2.62 % on a notional amount of $ 10.0 million at December 31, 2020.

Under the agreement, the Company paid or received the net interest amount monthly, with the monthly settlements included in interest expense.

5 unchanged sentences

At December 31, 2022, the Company’s cash flow hedge was effective and is not expected to have a significant impact on the Company’s net income over the next 12 months.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable rate liabilities used in the Company's asset/liability management activities at December 31, 2022 and 2021.

December 31, 2022

Weighted Average Rate

Cash Flow Hedges Notional

Amount Weighted Average Remaining Maturity (years) Fair Value Receive Pay

Interest rate swaps $ 50,000 3.6 years $ 1,976 1 month LIBOR 2.81 %

December 31, 2021

Weighted Average Rate

Cash Flow Hedges Notional

Amount Weighted Average Remaining Maturity (years) Fair Value Receive Pay

Interest rate swaps $ 50,000 4.6 years $ ( 3,673 ) 1 month LIBOR 2.81 %

Fair Value Hedges

2 unchanged sentences

To mitigate the risk of changes in fair value based on fluctuations in interest rates, the Company has entered into interest rate swap agreements on individual loans, converting the fixed rate loans to a variable rate.

The Company has also entered into interest rate swap agreements on individual security agreements, converting the fixed rate security to a variable rate.

At December 31, 2022, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

The change in fair value of both the hedge instruments and the underlying loan agreements are recorded as gains or losses in interest income.

The fair value hedges are considered to be highly effective and any hedge ineffectiveness was deemed not material.

The change in fair value of both the hedge instruments and the underlying loan and security agreements are recorded as gains or losses in non–interest income.

The fair value hedges are considered to be highly effective.

The notional amounts of the loan and security agreements being hedged were $ 514.6 million at December 31, 2022 and $ 489.0 million at December 31, 2021.

10 unchanged sentences

December 31, 2022 December 31, 2022

Balance Sheet

Location Fair

Value Balance Sheet

Location Fair

Value Notional

Derivatives designated as hedging instruments

Interest rate contracts Other assets $ 14,419 Other liabilities $ 18,092

Interest rate contracts – cash flow hedges $ 50,000 $ 1,976 $ — $ —

Total derivatives designated as hedging instruments 50,000 1,976 — —

Derivatives not designated as hedging instruments

Mortgage loan contracts Other assets 1,037 Other liabilities 238

Interest rate contracts – fair value hedges 514,551 42,619 514,551 42,619

Mortgage loan contracts — — 13,800 50

Commitments to originate mortgage loans 12,179 284 — —

Total derivatives not designated as hedging instruments 526,730 42,903 528,351 42,669

2 unchanged sentences

December 31, 2021 December 31, 2021

Balance Sheet

Location Fair

Value Balance Sheet

Location Fair

Value Notional

Derivatives designated as hedging instruments

Interest rate contracts Other assets $ 35,388 Other liabilities $ 43,631

Interest rate contracts – cash flow hedges $ — $ — $ 50,000 $ 3,673

Total derivatives designated as hedging instruments — — 50,000 3,673

Derivatives not designated as hedging instruments

Mortgage loan contracts Other assets 1,045 Other liabilities —

Interest rate contracts – fair value hedge 488,967 14,419 488,967 14,419

Mortgage loan contracts — — 43,630 238

Commitments to originate mortgage loans 32,584 1,037 — —

Total derivatives not designated as hedging instruments 521,551 15,456 532,597 14,657

Total derivatives $ 521,551 $ 15,456 $ 582,597 $ 18,330

The effect of the derivative instruments on the consolidated statement of income for the 12–month periods ended December 31 is as follows:

Amount of (Gain) Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Years Ended December 31

The effect of the derivative instruments on the consolidated statement of comprehensive income (loss) for the 12–month periods ended December 31 is as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative Years Ended December 31

2022 2021 2020

5 unchanged sentences

(Table dollars in thousands except for per share data)

FASB ASC 820–10–20 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820–10–55 establishes a fair value hierarchy that emphasizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

Location of gain

recognized on

derivative Amount of Gain (Loss) Recognized on Derivative Years Ended December 31

The effect of the derivative instruments on the consolidated statements of income for the 12–month periods ended December 31 is as follows:

Location of gain (loss) recognized on derivative Amount of Gain (Loss) Recognized on Derivative Years Ended December 31

2022 2021 2020

Derivative in fair value hedging relationship

Interest rate contracts Interest income–loans $ ( 19,588 ) $ ( 20,962 ) $ ( 11,380 )

Interest rate contracts Interest income–loans 19,588 20,962 11,380

Derivative designated as hedging instruments

Interest rate contracts – cash flow hedges Interest expense –

Borrowings $ ( 628 ) $ ( 1,901 ) $ ( 1,838 )

Total $ ( 628 ) $ ( 1,901 ) $ ( 1,838 )

3 unchanged sentences

2022 2021 2020

Derivative not designated as hedging relationship

Mortgage contracts Other income – gain on sale of loans $ ( 246 ) $ 819 $ 91

Derivative not designated as hedging instruments

Interest rate contracts – fair value hedge Interest income – loans receivable $ ( 39 ) $ ( 372 ) $ ( 223 )

Interest rate contracts – fair value hedge Interest income – investment securities ( 99 ) ( 267 ) ( 183 )

Mortgage loan contracts Non–interest income

– Gain on sale of loans 188 ( 238 ) 38

Commitments to originate mortgage loans Non–interest income

– Gain on sale of loans ( 753 ) ( 8 ) 781

Total $ ( 703 ) $ ( 885 ) $ 413

Note 23 – Disclosures about fair value of assets and liabilities

12 unchanged sentences

Level 2 securities include U.S.

Treasury and federal agency securities, state and municipal securities, federal agency mortgage obligations and mortgage–backed pools, private–label mortgage–backed pools and corporate notes.

Level 2 securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs.

Observable inputs include dealer quotes, market spreads, cash flow analysis, the U.S.

Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s terms and conditions.

The pricing provider utilizes evaluated pricing models that vary based on asset class.

These models incorporate available

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

market information including quoted prices of securities with similar characteristics and, because many fixed–income securities do not trade on a daily basis, apply available information through processes such as benchmark curves, benchmarking of like securities, sector grouping, and matrix pricing.

and federal agency securities, state and municipal securities, federal agency mortgage obligations and mortgage–backed pools, private–label mortgage–backed pools and corporate notes.

Level 2 securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs.

Observable inputs include dealer quotes, market spreads, cash flow analysis, the U.S.

Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s terms and conditions.

The pricing provider utilizes evaluated pricing models that vary based on asset class.

These models incorporate available market information including quoted prices of securities with similar characteristics and, because many fixed–income securities do not trade on a daily basis, apply available information through processes such as benchmark curves, benchmarking of like securities, sector grouping, and matrix pricing.

In addition, model processes, such as an option adjusted spread model is used to develop prepayment and interest rate scenarios for securities with prepayment features.

20 unchanged sentences

Federal agency mortgage–backed pools 190,656 — 190,656 —

Private labeled mortgage–backed pools 31,617 — 31,617 —

Corporate notes 74,964 — 74,964 —

1 unchanged sentence

Interest rate swap agreements asset 44,595 — 44,595 —

Forward sale commitments 1,037 — 1,037 —

Commitments to originate mortgage loans 284 — 284 —

Interest rate swap agreements liability ( 42,619 ) — ( 42,619 ) —

Commitments to originate loans ( 238 ) — ( 238 ) —

Mortgage loan contracts ( 50 ) — ( 50 ) —

HORIZON BANCORP, INC.

16 unchanged sentences

Interest rate swap agreements asset 14,419 — 14,419 —

Forward sale commitments 1,045 — 1,045 —

Commitments to originate mortgage loans 1,037 — 1,037 —

Interest rate swap agreements liability ( 18,092 ) — ( 18,092 ) —

Mortgage loan contracts ( 238 ) — ( 238 ) —

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable Level 3 inputs for the year ended December 31, 2022.

2 unchanged sentences

Beginning balance $ 125,496 $ —

Transfer to Level 2 ( 125,496 ) —

Included in other comprehensive income — ( 134 )

2 unchanged sentences

Ending balance $ — $ 125,496

Realized gains and losses included in net income for the periods are reported in the consolidated statements of income as follows:

Years Ended December 31

Non–interest Income 2021 2020 2019

Total gains and losses from:

Hedged loans $ ( 19,588 ) $ ( 20,962 ) $ ( 11,380 )

Fair value interest rate swap agreements 19,588 20,962 11,380

Derivative loan commitments ( 246 ) 819 91

$ ( 246 ) $ 819 $ 91

Certain other assets are measured at fair value on a nonrecurring basis in the ordinary course of business and are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment):

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Value Quoted Prices in

5 unchanged sentences

Collateral dependent loans $ 8,091 $ — $ — $ 8,091

Mortgage servicing rights 15,186 — — 15,186

December 31, 2021

1 unchanged sentence

Mortgage servicing rights 15,186 — — 15,186

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Collateral Dependent Loans:

5 unchanged sentences

Accordingly, the fair value of these assets is classified as Level 3.

The Company determines the fair value of MSRs using an income approach model based upon the Company’s month–end interest rate curve and prepayment assumptions.

The model utilizes assumptions to estimate future net servicing income cash flows, including estimates of time decay, payoffs and changes in valuation inputs and assumptions.

The Company's fair value of MSRs is calculated by pooling loans into buckets of homogeneous characteristics and performing a present value analysis of the future cash flows.

The buckets are created based on individual loans characteristics such as loan age, note rate, product type, and the investor remittance schedule.

For each individual buckets the Company models the unique expected future cash flow.

The model utilizes assumptions to estimate future cash flow, including estimates of prepayment, discount rates, servicing costs, ancillary income, escrow calculations and delinquencies.

The Company reviews the valuation assumptions against this market data for reasonableness and adjusts the assumptions if deemed appropriate.

The carrying amount of the MSRs were reduced by $ 2.6 million in 2021 and $ 5.2 million in 2020 for the fair value.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following table presents qualitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at December 31, 2022 and 2021.

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(Weighted Average)

State and municipal securities $ 120,464 Grid pricing Maturity date,

Weighted average coupon 1 month– 16 years,

Corporate securities 5,032 Grid pricing Maturity date,

Weighted average coupon 9 years– 17 years,

Collateral dependent loans $ 8,091 Collateral based measurement Discount to reflect current market conditions and ultimate collectability 0.0 %– 100.0 % ( 13.3 %)

Mortgage servicing rights 15,186 Discounted cash flows Discount rate,

Constant prepayment rate, Probability of default 8.0 %– 8.0 % ( 8.0 %),

8.4 %– 14.6 % ( 11.6 %),

0.0 %– 2.0 %( 0.4 %)

December 31, 2021

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(Weighted Average)

State and municipal securities $ 120,464 Grid pricing Maturity date,

Weighted average coupon 1 month– 16 years,

Corporate securities 5,032 Grid pricing Maturity date,

Weighted average coupon 9 years– 17 years,

Collateral dependent loans $ 15,176 Collateral based measurement Discount to reflect current market conditions and ultimate collectability 0.0 %– 54.0 % ( 4.8 %)

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Due to the inherent uncertainties of expected cash flows of financial instruments, the use of alternate valuation assumptions and methods could have a significant effect on the estimated fair value amounts.

The estimated fair values of financial instruments, as shown below, are not intended to reflect the estimated liquidation or market value of Horizon taken as a whole.

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at December 31, 2021 and December 31, 2020.

These include financial instruments recognized as assets and liabilities on the consolidated balance sheet as well as certain off-balance sheet financial instruments.

The estimated fair values shown below do not include any valuation of assets and liabilities which are not financial instruments as defined by the FASB ASC fair value hierarchy.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The estimated fair values of financial instruments, as shown below, are not intended to reflect the estimated liquidation or market value of Horizon taken as a whole.

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at December 31, 2022 and December 31, 2021.

These include financial instruments recognized as assets and liabilities on the consolidated balance sheet as well as certain off-balance sheet financial instruments.

The estimated fair values shown below do not include any valuation of assets and liabilities which are not financial instruments as defined by the FASB ASC fair value hierarchy.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

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Interest expense ( 6,258 ) ( 5,767 ) ( 4,483 )

Employee benefit expense ( 1,890 ) ( 1,997 ) ( 1,687 )

Salaries and employee benefits ( 2,551 ) ( 1,890 ) ( 1,997 )

Other expense ( 411 ) ( 591 ) ( 517 )

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(Table dollars in thousands except for per share data)

Condensed Statements of Comprehensive Income

Condensed Statements of Comprehensive Income (Loss)

Years Ended December 31

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Change in fair value of derivative instruments, net of taxes 4,463 3,610 ( 3,004 )

Unrealized appreciation for the period on held to maturity securities, net of taxes 4,687 ( 46 ) ( 92 )

Unrealized appreciation (depreciation) on available for sale securities, net of taxes ( 28,082 ) 27,865 16,726

reclassification adjustment for realized (gains) losses included in net income, net of taxes ( 722 ) ( 3,395 ) 59

Unrealized gain (loss) for the period on held to maturity securities, net of taxes ( 1,603 ) 4,687 ( 46 )

Unrealized gain (loss) on available for sale securities, net of taxes ( 116,403 ) ( 28,082 ) 27,865

reclassification adjustment for realized gains included in net income, net of taxes — ( 722 ) ( 3,395 )

( 113,543 ) ( 20,507 ) 21,420

Comprehensive Income $ 66,584 $ 89,919 $ 81,114

Comprehensive Income (Loss) $ ( 20,135 ) $ 66,584 $ 89,919

Condensed Statements of Cash Flows

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Share based compensation 2,475 1,819 1,338

Amortization of unearned compensation 1,751 1,206 705

Other assets ( 284 ) 730 ( 20 )

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Investing Activities

Repurchase of outstanding stock ( 7,607 ) ( 19,636 ) ( 1,595 )

Capital contribution to subsidiary — ( 60,000 ) —

Acquisition of Salin — — 2,350

Net cash (used in) provided by investing activities ( 67,607 ) ( 19,636 ) 755

Net cash used in investing activities — ( 60,000 ) —

Financing Activities

Net change in borrowings 384 16 98

Other change in borrowings 388 384 16

Repurchase of outstanding stock — ( 7,607 ) ( 19,636 )

Dividends paid on common shares ( 27,765 ) ( 24,768 ) ( 21,183 )

Proceeds from issuance of stock — — 1,233

Net settlement of share awards ( 1,824 ) ( 1,355 ) —

Stock option exercises 145 1,062 157

Net proceeds from issuance of subordinated notes — — 58,824

Net cash used in financing activities ( 24,677 ) 39,047 ( 19,032 )

Net cash (used in) provided by financing activities ( 29,056 ) ( 32,284 ) 19,411

Net Change in Cash and Cash Equivalents 190 ( 73,137 ) 76,083

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Cash and Cash Equivalents at End of Year $ 54,097 $ 53,907 $ 127,044

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 28 – Quarterly Results of Operations (Unaudited)

The following is a summary of the quarterly consolidated results of operations:

Three Months Ended

March 31, June 30, September 30, December 31,

2021 2021 2021 2021

Interest income $ 47,589 $ 47,420 $ 50,868 $ 54,118

Interest expense 5,051 4,788 4,324 4,142

Net interest income 42,538 42,632 46,544 49,976

Provision for loan losses 367 ( 1,492 ) 1,112 ( 2,071 )

Gain (loss) on sale of securities 914 — — —

Net income $ 20,422 $ 22,173 $ 23,071 $ 21,425

Earnings per share:

Basic $ 0.46 $ 0.50 $ 0.53 $ 0.49

Diluted 0.46 0.50 0.52 0.49

Average shares outstanding:

Basic 43,919,549 43,950,501 43,810,729 43,534,298

Diluted 44,072,581 44,111,103 43,958,870 43,733,416

Three Months Ended

March 31, June 30, September 30, December 31,

2020 2020 2020 2020

Interest income $ 51,654 $ 50,344 $ 50,146 $ 53,234

Interest expense 10,729 7,348 6,749 9,612

Net interest income 40,925 42,996 43,397 43,622

Provision for loan losses 8,600 7,057 2,052 3,042

Gain (loss) on sale of securities 339 248 1,088 2,622

Net income $ 11,655 $ 14,639 $ 20,312 $ 21,893

Earnings per share:

Basic $ 0.26 $ 0.33 $ 0.46 $ 0.50

Diluted 0.26 0.33 0.46 0.50

Average shares outstanding:

Basic 44,658,512 43,781,249 43,862,435 43,862,435

Diluted 44,756,716 43,802,794 43,903,881 43,903,881

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Audit Committee, Board of Directors and Shareholders

Horizon Bancorp, Inc.

Michigan City, Indiana

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Horizon Bancorp, Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2021 and the related notes (collectively referred to as the “financial statements”).

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 9, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2023, expressed an adverse opinion thereon .

Basis for Opinion

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The Company’s loan portfolio totaled $4.2 billion as of December 31, 2022 and the allowance for credit losses on loans was $50.5 million.

As more fully described in Notes 1, 5 and 6 to the Company’s consolidated financial statements, the Company estimates its exposure to expected credit losses as of the balance sheet date, for existing financial instruments held at amortized cost, securities classified as available for sale and off-balance sheet exposures, such as unfunded loan commitments, letters of credit and other financial guarantees that are not unconditionally cancellable by the Company.

exposures, such as unfunded loan commitments, letters of credit and other financial guarantees that are not unconditionally cancellable by the Company.

The determination of the ACL requires management to exercise significant judgment and consider numerous subjective factors, including determining qualitative factors utilized to adjust historical loss rates, loan credit risk grading and identifying loans requiring individual evaluation among others.

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• Testing of the loan review function and the accuracy of loan grades determined.

Specifically, utilizing internal professionals to assist us in evaluating the appropriateness of loan grades and to assess the reasonableness of specific impairments on loans.

Specifically, utilizing internal professionals to assist us in evaluating the appropriateness of loan grades and to assess the reasonableness of allowance on specific loans.

• Evaluating the overall reasonableness of qualitative factors and the appropriateness of their direction and magnitude and the Company’s support for the direction and magnitude compared to previous years.

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• Identifying fields in the various loan systems that defined the loan pools and tested the design and operating effectiveness of internal controls surrounding the input and maintenance of those fields.

/s/ FORVIS, LLP (Formerly, BKD, LLP)

We have served as the Company’s auditor since 1998.

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Audit Committee, Board of Directors and Shareholders

Horizon Bancorp, Inc.

Michigan City, Indiana

Opinion on the Internal Control over Financial Reporting

We have audited Horizon Bancorp’s (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework:

We have audited Horizon Bancorp, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company and our report dated March 9, 2022, expressed an unqualified opinion.

In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated March 15, 2023 , expressed an unqualified opinion on those consolidated financial statements .

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses has been identified and included in management’s assessment:

• Insufficient controls over the reporting, classification and disclosure of loans, investments and individual cash flows line items.

• Lack of sufficient controls around the financial reporting process that allowed for the timely release of financial statements.

These material weaknesses were considered in determining the nature, timi ng, and extent of auditing procedures applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report dated March 15, 2023, on those consolidated financial statements.

Basis for Opinion

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Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

3 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

/s/ FORVIS, LLP (Formerly, BKD, LLP)

Indianapolis, Indiana

10 unchanged sentences

The independent accountants have full and free access to the Audit Committee and meet with it to discuss auditing and financial reporting matters.

The consolidated financial statements in the Annual Report have been audited by BKD, LLP, an independent registered public accounting firm, for 2021, 2020 and 2019.

The consolidated financial statements in the Annual Report have been audited by FORVIS, LLP, an independent registered public accounting firm, for 2022, 2021 and 2020.

Their audits were conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and included consideration of internal accounting controls, tests of accounting records and other audit procedures to the extent necessary to allow them to express their opinion on the fairness of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data