What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-15 compared with 2023-03-15 · 458 added, 570 removed, 1848 unchanged (36% of the section changed)

10 unchanged sentences

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Reports of Independent Registered Public Accounting Firm (PCA O B ID :

Management’s Report on Financial Statements

101 unchanged sentences

Change in fair value of derivative instruments for the period ( 523 ) 5,649 4,570

Reclassification adjustment for swap termination gain realized in income ( 1,453 ) — —

Income tax effect 415 ( 1,186 ) ( 960 )

2 unchanged sentences

Unrealized gain (loss) for the period on available for sale securities 20,728 ( 147,345 ) ( 35,547 )

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

Amortization (accretion) from transfer of securities from available for sale to held to maturity securities ( 691 ) ( 1,236 ) 66

Reclassification adjustment for securities (gains) losses realized in income 32,052 — ( 914 )

16 unchanged sentences

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

Impact of adoption of ASU No.

2016–13 — — — ( 15,635 ) — ( 15,635 )

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 common stock — — ( 7,607 ) — — ( 7,607 )

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

Cash dividends on common stock ($ 0.56 per share)

6 unchanged sentences

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

3 unchanged sentences

Net income — — — 27,981 — 27,981

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

Other comprehensive income, net of tax — — — — 39,589 39,589

Amortization of unearned compensation — — 3,586 — — 3,586

Exercise of stock options — — 145 — — 145

Stock option expense — — 13 — — 13

Net settlement of share awards — — ( 1,221 ) — — ( 1,221 )

20 unchanged sentences

Deferred income taxes ( 3,322 ) 2,177 2,311

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

(Gain) loss on sale of investment securities 32,052 — ( 914 )

Gain on sale of mortgage loans ( 4,323 ) ( 7,165 ) ( 19,163 )

11 unchanged sentences

Purchases of securities available for sale ( 1,525 ) ( 180,198 ) ( 837,684 )

Proceeds from sales, maturities, calls and principal repayments of securities available for sale 69,113 287,714 318,897

Proceeds from sales of securities available for sale 439,285 — 27,514

Proceeds from maturities, calls and principal repayments of securities available for sale 29,408 69,113 260,200

Purchases of securities held to maturity ( 10,141 ) ( 430,457 ) ( 931,029 )

10 unchanged sentences

Net cash received in branch acquisition — — 622,179

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

Net cash provided by (used in) investing activities 329,518 ( 1,019,932 ) ( 344,853 )

Financing Activities

Net change in:

Net change in deposits ( 192,881 ) 54,783 425,449

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 )

Proceeds from borrowings 866,099 1,178,746 244,554

Repayment of borrowings ( 654,157 ) ( 755,608 ) ( 76,371 )

Net change in repurchase agreements ( 1,841 ) 7,072 21,336

2 unchanged sentences

Repurchase of outstanding stock — — ( 7,607 )

Proceeds from issuance of stock — — 1,233

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

Repayment of subordinated notes ( 3,132 ) — —

Dividends paid on common stock ( 28,311 ) ( 27,765 ) ( 24,768 )

9 unchanged sentences

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

Redemption of cash value of life insurance, not settled 43,962 — —

Cash dividends declared, not paid 7,156 7,122 6,666

Qualified affordable housing investments obtained in exchange for funding commitments 14,491 — —

The cash flow statement presented above was revised to conform with the presentation of current year financial statements.

As a result, the following changes were made to the 2022 and 2021 statements:

• Proceeds from the sale of securities available for sale are being reported separately from Proceeds from maturities, calls and principal repayments of securities available for sale.

• Proceeds from long–term borrowings, Repayment of long–term borrowings and Net change in short–term borrowings are being reported as Proceeds from borrowings and Repayment of borrowings.

• Cash dividends declared, not paid are reported as Additional Supplemental Information.

See notes to consolidated financial statements

5 unchanged sentences

Nature of Business — The consolidated financial statements of Horizon Bancorp, Inc.

(“Horizon”) and its wholly owned subsidiaries, Horizon Bank (“Bank”) and Horizon Risk Management, Inc., together referred to as “Horizon,” conform to accounting principles generally accepted in the United States of America and reporting practices followed by the banking industry.

Horizon Risk Management, Inc.

is a captive insurance company incorporated in Nevada and was formed as a wholly owned subsidiary of Horizon.

(“Horizon”) and its wholly owned subsidiary, Horizon Bank (“Bank”) together referred to as “Horizon,” conform to accounting principles generally accepted in the United States of America and reporting practices followed by the banking industry.

The Bank is a full–service commercial bank offering a broad range of commercial and retail banking and other services incident to banking along with a trust department that offers corporate and individual trust and agency services and investment management services.

26 unchanged sentences

Actual results could differ from those estimates.

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.

The allowance for credit losses and the fair values of financial instruments are particularly subject to change.

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

5 unchanged sentences

Fair Value Measurements — Horizon uses fair value measurements to record fair value adjustments, to certain assets, and liabilities and to determine fair value disclosures.

Horizon has adopted Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures for all applicable financial and nonfinancial

Horizon has adopted Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures for all applicable financial and nonfinancial assets and liabilities.

This accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

This guidance applies only when other guidance requires or permits assets or liabilities to be measured at fair value;

it does not expand the use of fair value in any new circumstances.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

assets and liabilities.

This accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

This guidance applies only when other guidance requires or permits assets or liabilities to be measured at fair value;

it does not expand the use of fair value in any new circumstances.

As defined in codification, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants.

34 unchanged sentences

(Table dollars in thousands except for per share data)

Investment Securities Available for Sale — Horizon designates the majority of its investment portfolio as available for sale based on management’s plans to use such securities for asset and liability management, liquidity and not to hold such securities as long-term investments.

Investment Securities Available for Sale — Horizon designates a portion of its investment portfolio as available for sale based on management’s plans to use such securities for asset and liability management, liquidity and not to hold such securities as long-term investments.

Management repositions the portfolio to take advantage of future expected interest rate trends when Horizon’s long-term profitability can be enhanced.

23 unchanged sentences

The contractual term excludes expected extensions, renewals and modifications unless either of the following applies:

management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

management has a reasonable expectation at the reporting date that a modified loan will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Consistent with regulatory guidance, charge–offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible.

55 unchanged sentences

The qualitative adjustment is based on a combination of external econometric data and internal factors such as portfolio composition, changes in management, changes in loan policy and other factors.

The economic forecast is based in part on economic indexes and quantitative matrices with a six to twelve month forecast.

The economic forecast is based in part on economic indexes and quantitative matrices with a twenty–four month forecast.

The qualitative adjustment is calculated based on current and forecasted conditions and evaluated each quarter by management, and therefore is dynamic in nature.

As a result of the forecast being applied as a qualitative factor and adjusted quarterly, no reversion to the historical loss rate is necessary, as the historical base loss rate is preserved in the calculation of “all in” loss rate.

The qualitative economic adjustment is then reverted over a twelve month period to the historical base loss rate which is preserved in the calculation of “all in” loss rate.

Specific reserves reflect collateral shortfalls on loans identified for evaluation or individually considered non–performing, including troubled debt restructurings and receivables where the Company has determined foreclosure is probable.

6 unchanged sentences

When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Modified Loans — The Company adopted ASU 2022–02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures , during the first quarter of 2023.

These amendments eliminated the troubled debt restructurings (“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.

Prior to the adoption of ASU 2022–02, loans modified as TDRs generally consisted of allowing borrowers to defer scheduled principal payments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans' contractual terms.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

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.

The ACL on loans on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provides all banks with the option to elect either or both of the following from March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after termination of the national emergency.

Section 4013 of the CARES Act was amended on December 27, 2020 to extend this relief period until January 1, 2022.

Specific applicable provisions of the CARES Act allow:

suspension of the requirements under Generally Accepted Accounting Principles (“GAAP”) for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a TDR;

suspension of any determination of a loan modified as a result of the effects of the COVID–19 pandemic as being a TDR, including impairment for accounting purposes.

If a bank elects a suspension noted above, the suspension (i) will be effective for the term of the loan modification, but solely with respect to any modification, including a forbearance arrangement, an interest rate modification, a repayment plan, and any other similar arrangement that defers or delays the payment of principal or interest, that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019;

and (ii) will not apply to any adverse impact on the credit of a borrower that is not related to the COVID–19 pandemic.

payments due on the loan would not be collected in accordance with the contractual terms of the loan.

TDRs that subsequently default were individually evaluated for impairment at the time of default.

Allowance for Credit Losses on Off–Balance Sheet (“OBS”) Credit Exposures — The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

8 unchanged sentences

Changes in the ACL are recorded as provision for, or reversal of, credit loss expense.

Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Losses are charged against the allowance when management believes the available for sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Allowance for Credit Losses on Held to Maturity Securities — For held to maturity securities, the Company conducts an assessment of its held to maturity securities at the time of purchase and on at least an annual basis to ensure such investment securities remain within appropriate levels of risk and continue to perform satisfactorily in fulfilling its obligations.

3 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.

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.

10 unchanged sentences

The investment in the limited partnerships totaling $ 27.2 million and $ 4.5 million at December 31, 2023 and 2022, respectively is included in other assets in the consolidated balance sheets.

The Company investments in qualified affordable housing tax credits and had funding commitments of $ 14.5 million at December 31, 2023.

There has not

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

been any significant amortization or tax credits recorded related to the qualified affordable housing tax credits at December 31, 2023.

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

Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer.

Amortized mortgage servicing rights include commercial mortgage servicing rights.

Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.

17 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

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.

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

HORIZON BANCORP, INC.

2 unchanged sentences

(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.

Bank Owned Life Insurance (“BOLI”) – BOLI has been purchased on certain employees and directors of the Company.

The Company records the life insurance at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement.

As of December 31, 2023, Horizon had surrendered $ 113.9 million of its BOLI, of which, $ 69.9 million had been received and $ 44.0 million was carried as a receivable in other assets in the balance sheet.

As of December 31, 2023, $ 6.6 million of the $ 44.0 million carried as a receivable was surrendered but were still considered as active policies by the carrier.

Tax expense of $ 8.6 million was recorded through the income statement for the recognition of the gains on the policies plus the excise tax.

Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase and Other Secured Borrowings — The Company purchases certain securities, generally U.S.

6 unchanged sentences

Securities, generally U.S.

government and federal agency securities, pledged as collateral under these financing arrangements can be repledged by the secured party.

government and federal agency securities, pledged as collateral under these financing arrangements can be re–pledged by the secured party.

Additional collateral may be required based on the fair value of the underlying securities.

79 unchanged sentences

Accordingly, all of the Company's financial service operations are considered to be aggregated in one reportable operating segment.

Reclassifications — Certain reclassifications have been made to the 2021 and 2020 consolidated financial statements to be comparable to 2022.

These reclassifications had no effect on net income.

HORIZON BANCORP, INC.

3 unchanged sentences

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

We corrected an immaterial error related to amounts reported in previously issued financial statements for the periods presented in the Annual Report on Form 10–K.

The error relates to the incorrect classification of revolving lines of credit as term loans in the vintage loan disclosure.

The correction of this error resulted in the classification of certain term loans as lines of credit in the vintage loan disclosure.

The revision did not change the total amount of loans reported and did not impact the Company's net income.

We evaluated the aggregate effects of this error 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 error was not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10–K for the year ended December 31, 2022.

HORIZON BANCORP, INC.

2 unchanged sentences

(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

The following tables present the revisions to vintage loan disclosure at December 31, 2022 to reflect the correction of the errors:

As Reported As Revised

Term Revolving Total Term Revolving

Term Revolving Total

Owner occupied real estate

Pass $ 490,056 $ 76,493 $ 566,549 $ 484,893 $ 76,493 $ 5,163 $ 566,549

Special Mention 9,413 83 9,496 9,413 83 — 9,496

Substandard 15,641 2,876 18,517 15,641 2,876 — 18,517

Total owner occupied real estate $ 515,110 $ 79,452 $ 594,562 $ 509,947 $ 79,452 $ 5,163 $ 594,562

Non–owner occupied real estate

Pass $ 955,956 $ 182,681 $ 1,138,637 $ 944,105 $ 182,681 $ 11,851 $ 1,138,637

Special Mention 42,419 — 42,419 42,419 — — 42,419

Substandard 6,021 — 6,021 6,021 — — 6,021

Total non–owner occupied real estate $ 1,004,396 $ 182,681 $ 1,187,077 $ 992,545 $ 182,681 $ 11,851 $ 1,187,077

Residential spec homes

Pass $ 6,404 $ 4,334 $ 10,738 $ 779 $ 4,333 $ 5,626 $ 10,738

Special Mention — — — — — — —

Substandard — 100 100 — 100 — 100

Total residential spec homes $ 6,404 $ 4,434 $ 10,838 $ 779 $ 4,433 $ 5,626 $ 10,838

Development & spec land

Pass $ 13,279 $ 13,008 $ 26,287 $ 13,257 $ 13,008 $ 22 $ 26,287

Special Mention 145 — 145 145 — — 145

Substandard 178 748 926 178 748 — 926

Total development & spec land $ 13,602 $ 13,756 $ 27,358 $ 13,580 $ 13,756 $ 22 $ 27,358

Commercial & industrial

Pass $ 574,972 $ 49,859 $ 624,831 $ 419,702 $ 49,276 $ 159,017 $ 627,995

Special Mention 4,636 — 4,636 3,427 — 1,208 4,635

Substandard 12,603 5,517 18,120 5,468 2,322 7,167 14,957

Total commercial & industrial $ 592,211 $ 55,376 $ 647,587 $ 428,597 $ 51,598 $ 167,392 $ 647,587

HORIZON BANCORP, INC.

2 unchanged sentences

(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

As Reported As Revised

Term Revolving Total Term Revolving

Term Revolving Total

Residential mortgage

Performing $ 603,636 $ 792 $ 604,428 $ 604,428 $ — $ — $ 604,428

Non–performing 8,123 — 8,123 8,123 — — 8,123

Total residential mortgage $ 611,759 $ 792 $ 612,551 $ 612,551 $ — $ — $ 612,551

Residential construction

Performing $ 187 $ 40,554 $ 40,741 $ — $ 40,741 $ — $ 40,741

Non–performing — — — — — — —

Total residential construction $ 187 $ 40,554 $ 40,741 $ — $ 40,741 $ — $ 40,741

Mortgage warehouse

Performing $ — $ 69,529 $ 69,529 $ — $ — $ 69,529 $ 69,529

Non–performing — — — — — — —

Total mortgage warehouse $ — $ 69,529 $ 69,529 $ — $ — $ 69,529 $ 69,529

As Reported As Revised

Term Revolving Total Term Revolving

Term Revolving Total

Direct installment

Performing $ 56,441 $ 9 $ 56,450 $ 54,290 $ 9 $ 2,151 $ 56,450

Non–performing 164 — 164 164 — — 164

Total direct installment $ 56,605 $ 9 $ 56,614 $ 54,454 $ 9 $ 2,151 $ 56,614

Indirect installment

Performing $ 499,781 $ — $ 499,781 $ 499,781 $ — $ — $ 499,781

Non–performing 768 — 768 768 — — 768

Total indirect installment $ 500,549 $ — $ 500,549 $ 500,549 $ — $ — $ 500,549

Performing $ 400,048 $ 7,089 $ 407,137 $ 53,226 $ 7,089 $ 346,822 $ 407,137

Non–performing 1,512 1,943 3,455 1,512 1,943 — 3,455

Total home equity $ 401,560 $ 9,032 $ 410,592 $ 54,738 $ 9,032 $ 346,822 $ 410,592

HORIZON BANCORP, INC.

5 unchanged sentences

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

Measurement of Credit Losses on Financial Instruments

On January 1, 2020, the Company adopted ASU No.

Troubled Debt Restructurings and Vintage Disclosures

The FASB has issued ASU No.

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

Measurement of Credit Losses on Financial Instruments” (“CECL”).

The measurement of expected credit losses under CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held to maturity securities.

It also applies to off–balance sheet (“OBS”) credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar agreements).

In addition ASC 326 made changes to the accounting for available for sale debt securities.

One such change is to require credit losses to be presented as an allowance, rather than as a write–down, on available for sale debt securities management does not intend to sell or believe that it is not more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and OBS credit exposures.

Results for reporting periods beginning after December 31, 2019, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company recorded a net decrease to retained earnings of $ 15.6 million as of January 1, 2020 for the cumulative effect of adopting ASC 326.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”), previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310–30.

In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

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.

The following table illustrates the impact of ASC 326.

January 1, 2020

As Reported Under ASC 326 Pre–ASC 326 Adoption Impact of ASC 326 Adoption

Commercial $ 25,614 $ 11,996 $ 13,618

Real estate 4,971 923 4,048

Mortgage warehouse 1,077 1,077 —

Consumer 8,582 3,671 4,911

Allowance for credit losses on loans $ 40,244 $ 17,667 $ 22,577

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.

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

Simplifying the Test for Goodwill Impairment

On January 1, 2020, the Company adopted the provision of ASU No.

2017–04, which eliminates Step 2 from the goodwill impairment test.

Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value;

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

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.

This ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative test.

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

2018–13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

On January 1, 2020, the Company adopted the provision of ASU 2018–13, which modifies the disclosure requirements on fair value measurements.

The amendment removes certain disclosures required by Topic 820 related to transfers between Level 1 and Level 2 of the fair value hierarchy;

the policy for timing of transfers between levels;

and the valuation processes for Level 3 fair value measurements.

The update also adds certain disclosure requirements related to changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

For certain unobservable inputs, the Company may disclose other quantitative information in lieu of the weighted average if we determine that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

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

Accounting Guidance Issued But Not Yet Adopted

Troubled Debt Restructurings and Vintage Disclosures , in March 2022.

These amendments eliminate the troubled debt restructurings (“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 was 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 adopted this standard during the first quarter of 2023 and it did not have a material impact on the consolidated financial statements.

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

12 unchanged sentences

For current elections in effect regarding the assertion of the probability of forecasted transactions, the Company elects the expedient to assert the probability of the hedged interest payments and receipts regardless of any expected modification in terms related to reference rate reform.

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.

With the issuance of ASU 2022–6, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , the sunset date for the adoption of ASU 2020–04 was extended from December 31, 2022 to December 31, 2024.

The Company adopted the expedients included in this ASU in 2023 as it transferred its loans and other financial instruments to another reference rate.

HORIZON BANCORP, INC.

2 unchanged sentences

(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.

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.

Accounting Guidance Issued But Not Yet Adopted

2023–02, Investments Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

The FASB has issued ASU 2023–02, Investments Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.

This guidance allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

This guidance is effective for public business entities for fiscal years including interim periods within those fiscal years, beginning after December 15, 2023.

Early adoption is permitted in any interim period.

The Company is assessing ASU 2023–02 and its impact on its accounting and disclosures.

Note 2 – Acquisitions

Branch Acquisition

On September 17, 2021, Horizon Bank completed the purchase and assumption of certain assets and liabilities of 14 former TCF National Bank (“TCF”) branches in 11 Michigan counties.

Net cash of $ 618.2 million was received in the transaction, representing the deposit balances assumed at closing, net of amounts paid for loans of $ 212.0 million, fixed assets of $ 6.9 million, cash of $ 4.0 million and a 1.75 % premium on deposits.

Customer deposit balances were recorded at $ 846.4 million and a core deposit intangible of $ 1.6 million was recorded in the transaction, which will be amortized over 10 years on a straight line basis.

Goodwill of $ 4.0 million was generated in the transaction.

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 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.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Assets Liabilities

Cash and due from banks $ 4,012 Deposits

Loans Non–interest bearing $ 181,403

Commercial 101,327 NOW accounts 303,050

Residential mortgage 56,499 Savings and money market 262,488

Consumer 54,212 Certificates of deposit 99,468

Total loans 212,038 Total deposits 846,409

Premises and equipment, net 6,901 Interest payable 16

Goodwill 3,973 Other liabilities 1,278

Core deposit intangible 1,630

Interest receivable 519

Other assets 463

Total assets purchased $ 229,536 Total liabilities assumed $ 847,703

Net cash received $ ( 618,167 )

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.

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.

Note 2 – Cash Equivalents

3 unchanged sentences

Approximately $ 402.6 million of this amount was held by either the Federal Reserve Bank or the Federal Home Loan Bank of Indianapolis, which is not federally insured.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 3 – Securities

8 unchanged sentences

Total available for sale investment securities $ 634,615 $ 455 $ ( 87,819 ) $ 547,251

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

December 31, 2023

Value Allowance for Credit Losses Net

Carrying Amount

Held to maturity

25 unchanged sentences

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.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

comprehensive income over the remaining life of the securities.

Such amounts will be accreted 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 March 31, 2022.

2 unchanged sentences

The net unrealized holding gain of $ 5.9 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.

Such amounts will be amortized

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

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 December 31, 2021.

26 unchanged sentences

(Table dollars in thousands except for per share data)

The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

The following table shows the gross unrealized losses and the fair value of the Company’s available for sale investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023.

December 31, 2023

8 unchanged sentences

Federal agency mortgage–backed pools — — 137,289 ( 23,833 ) 137,289 ( 23,833 )

Private labeled mortgage–backed pools — — 29,973 ( 5,493 ) 29,973 ( 5,493 )

Corporate notes — — 36,359 ( 5,805 ) 36,359 ( 5,805 )

Total securities $ 2,387 $ ( 236 ) $ 543,248 $ ( 87,583 ) $ 545,635 $ ( 87,819 )

The following table shows the gross unrealized losses and the fair value of the Company’s available for sale and held to maturity investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2022.

December 31, 2022

16 unchanged sentences

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.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 17.8 million and $ 14.6 million at December 31, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses.

government sponsored entities and agencies and mortgage–backed securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major credit rating agencies, and have a long history of no credit losses.

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

No allowance for credit losses for available for sale debt securities was needed at December 31, 2023 and December 31, 2022.

The allowance for credit losses for held to maturity securities is a contra asset valuation account that is deducted from the carrying amount of held to maturity securities to present the net amount expected to be collected.

Held to maturity securities are charged off against the allowance for credit loss when deemed uncollectible.

Adjustments to the allowance for credit loss are reported in our Consolidated Statements of Income in credit loss expense.

We measure expected credit losses on held to maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

With regard to U.S.

Government–sponsored treasuries, agency and mortgage–backed securities, all these securities are issued by a U.S.

government–sponsored entity

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

and have an implicit or explicit government guarantee;

therefore, no allowance for credit losses has been recorded for these securities.

With regard to obligations of states and municipal, private label mortgage–backed and corporate note held to maturity securities, we consider (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities.

Historical loss rates associated with securities having similar grades as those in our portfolio have been insignificant.

As of December 31, 2023, there were no past due principal and interest payments associated with these securities.

An allowance for credit loss of $ 157,000 recorded on these securities based on applying the long–term historical rating agency credit loss rate for similarly rated securities.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 14.7 million and $ 17.8 million at December 31, 2023 and December 31, 2022, respectively, and is excluded from the estimate of credit losses.

government sponsored entities and agencies and mortgage–backed securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major credit rating agencies, and have a long history of no credit losses.

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

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

5 unchanged sentences

Gross losses ( 32,267 ) — —

The tax effect of the proceeds from the sale of securities available for sale was $ 0 , $ 192,000 and $ 902,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The tax effect of the proceeds from the sale of securities available for sale was $ 6.7 million, $ 0 and $ 192,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

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, 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.

At December 31, 2023, the Company had pledged $ 145.2 million of fair value or $ 170.3 million of amortized cost, in securities as collateral for $ 136.0 million in repurchase agreements, $ 1.4 billion of fair value or $ 1.7 billion of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with $ 430.0 million current outstanding borrowings and $ 20.2 million of fair value or $ 23.0 million of amortized cost, in securities as collateral for $ 26.6 million in settlements on the fair value of swap agreements.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 4 – Loans

25 unchanged sentences

Development & spec land 34,039 27,358

Commercial and industrial 647,587 530,208

Commercial & industrial 712,863 647,587

Total commercial 2,674,960 2,467,422

10 unchanged sentences

Net loans $ 4,367,601 $ 4,107,534

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.

Total loans include net deferred loan costs of $ 21.9 million and $ 22.7 million at December 31, 2023 and 2022, respectively.

HORIZON BANCORP, INC.

43 unchanged sentences

Non–performing Loans

The following table presents non–accrual loans, loans past due over 90 days still on accrual, and troubled debt restructured loans by class of loans:

The following table presents non–accrual loans and loans past due over 90 days still on accrual by class of loans at December 31, 2023:

December 31, 2023

Non–accrual Loans Past

Accruing Non–performing

TDRs Performing

Non–performing

Loans Non–performing Loans with no Allowance for Credit Losses

Accruing Non–accruing Loans with no Allowance for Credit Losses

Owner occupied real estate $ 2,636 $ — $ 1,789

17 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents non–accrual loans, loans past due over 90 days still on accrual, and troubled debt restructured loans by class of loans at December 31, 2022:

December 31, 2022

2 unchanged sentences

TDRs Performing

Non–performing

Loans Non–performing Loans with no Allowance for Credit Losses

TDRs Total Non–performing Loans with no Allowance for Credit Losses

Owner occupied real estate $ 3,423 $ — $ — $ 568 3,991 $ 3,805

14 unchanged sentences

There was no interest income recognized on non–accrual loans during the twelve months ended December 31, 2023, 2022 and 2021 while the loans were in non–accrual status.

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.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 17.6 million and non–performing TDRs of $ 1.5 million at December 31, 2022:

The following table presents the payment status by class of loan at December 31, 2023:

December 31, 2023

44 unchanged sentences

The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

Troubled Debt Restructurings

Loans modified as troubled debt restructurings (“TDRs”) generally consist of allowing borrowers to defer scheduled principal payments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans' contractual terms.

TDRs that continue to accrue interest are individually monitored on a monthly basis and evaluated for impairment annually and transferred to non–accrual status when it is probable that any remaining principal and interest payments due on the loan will not be collected in accordance with the contractual terms of the loan.

TDRs that subsequently default are individually evaluated for impairment at the time of default.

At December 31, 2022 and 2021, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances.

Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan.

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, 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.

These TDRs are exclusive of loans modified under the CARES Act during 2022.

Modified Loans

The Company adopted ASU 2022–02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures, during the first quarter of 2023.

These amendments eliminated the troubled debt restructured (“TDR”) recognition 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.

During the twelve months ended December 31, 2023, the Company did not modify any troubled loans.

Prior to the adoption of ASU 2022–02, loans modified as TDRs generally consisted of allowing borrowers to defer scheduled principal repayments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans' contractual terms.

TDRs that continued to accrue interest were individually monitored on a monthly basis and evaluated for impairment annually and transferred to non–accrual status when it was probable that any remaining principal and interest payments due on the loan would not be collected in accordance with the contractual terms of the loan.

TDRs that subsequently defaulted were individually evaluated for impairment at the time of default.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents TDRs by loan portfolio:

December 31, 2022 December 31, 2021

Non–accrual Accruing Total Non-accrual Accruing Total

The following table presents TDRs by class of loan at December 31, 2022:

December 31, 2022

Non-accrual Accruing Total

Owner occupied real estate $ — $ 568 $ 568

13 unchanged sentences

Total $ 1,548 $ 2,570 $ 4,118

Loans Modified under the CARES Act

The Bank has elected (i) to suspend the requirements under GAAP for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a TDR;

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, 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

8 unchanged sentences

(Table dollars in thousands except for per share data)

The tables below present the amortized cost basis and ACL allocated for collateral dependent loans in accordance with ASC326, which are individually evaluated to determine expected credit losses, at December 31, 2022 and 2021.

The tables below present the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC 326, which are individually evaluated to determine expected credit losses, at December 31, 2023 and 2022.

December 31, 2023

2 unchanged sentences

Non–owner occupied real estate 3,485 — — 3,485 699

Residential spec homes 101 — — 101 —

Development & spec land 617 — — 617 —

6 unchanged sentences

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

Residential spec homes 101 — — 101 —

Development & spec land 815 — — 815 36

4 unchanged sentences

Horizon Bank’s processes for determining credit quality differ slightly depending on whether a new loan or a renewed loan is being underwritten, or whether an existing loan is being re–evaluated for credit quality.

The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the loan grade.

The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the credit quality grade.

• For new and renewed commercial loans, the Bank’s Credit Department, which acts independently of the loan officer, assigns the credit quality grade to the loan.

Loan grades for loans with an aggregate credit exposure that exceeds the authorities in the respective regions (ranging from $ 3,000,000 to $ 6,000,000 ) are validated by the Loan Committee, which is chaired by the Chief Commercial Banking Officer (“CCBO”).

• Commercial loan officers are responsible for reviewing their loan portfolios and reporting any adverse material change to the CCBO or Loan Committee.

When circumstances warrant a change in the credit quality grade, loan officers are required to notify the CCBO and the Credit Department of the change in the loan grade.

Downgrades are accepted immediately by the CCBO, however, lenders must present their factual information to either the Loan Committee or the CCBO when recommending an upgrade.

• Commercial loan officers are responsible for reviewing their loan portfolios and promptly assessing any adverse change in credit quality and revising the risk rating appropriately.

When circumstances warrant a change in the credit quality grade, loan officers are required to notify the Credit Department of the change in the credit quality grade.

Downgrades are accepted immediately, however, lenders must present their factual information to the Credit Department when recommending an upgrade.

Downgrades to impaired status require the concurrence of the CCBO and the Senior Workout Loan Manager.

• The CCBO, or a designee, meets periodically with loan officers to discuss the status of past due loans and classified loans.

These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.

• 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

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

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.

• 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, loan modifications, 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 Credit Losses on Loans and Leases.

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

Loans that are 90 days or more past due, on non–accrual, or are classified as a TDR are graded “Substandard.” After being 90 to 120 days delinquent a loan is charged–off unless it is well secured and in the process of collection.

Loans that are 90 days or more past due, on non–accrual, or are classified as modified loans are graded “Substandard.” After being 90 to 120 days delinquent a loan is charged off unless it is well secured and in the process of collection.

If the latter case exists, the loan is placed on non–accrual.

3 unchanged sentences

The first five grades represent acceptable quality, and the last four grades mirror the criticized and classified grades used by the bank regulatory agencies (special mention, substandard, doubtful, and loss).

The most recent review and approval of the loan policy was in October 2020.

The loan grade definitions are detailed below.

24 unchanged sentences

(Table dollars in thousands except for per share data)

Risk Grade 4 Satisfactory/Monitored:

Risk Grade 4:

Satisfactory/Monitored

Loans in this category are considered to be of acceptable credit quality, but contain greater credit risk than Satisfactory rated loans and meet defined key financial metric ranges.

2 unchanged sentences

Loans that normally fall into this grade include acquisition, construction and development loans and income producing properties that have not reached stabilization.

Risk Grade 4W Management Watch:

Risk Grade 4W:

Management Watch

Loans in this category are considered to be of acceptable quality and meet defined key financial metric ranges, but with above normal risk.

46 unchanged sentences

The following tables present loans by credit grades and origination year at December 31, 2023.

December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Term

Loans Revolving

Owner occupied real estate

4 unchanged sentences

Total owner occupied real estate $ 72,110 $ 102,110 $ 83,466 $ 45,033 $ 43,992 $ 191,380 $ 93,962 $ 8,678 $ 640,731

Gross charge–offs during period $ — $ — $ — $ — $ — $ 3 $ 401 $ — $ 404

Non–owner occupied real estate

4 unchanged sentences

Total non–owner occupied real estate $ 117,397 $ 213,837 $ 150,874 $ 105,030 $ 84,239 $ 346,014 $ 246,569 $ 9,878 $ 1,273,838

Gross charge–offs during period $ — $ — $ — $ — $ — $ 9 $ — $ — $ 9

Residential spec homes

4 unchanged sentences

Total residential spec homes $ — $ — $ 498 $ — $ — $ — $ 5,852 $ 7,139 $ 13,489

Gross charge–offs during period $ — $ — $ — $ — $ — $ — $ 29 $ — $ 29

Development & spec land

4 unchanged sentences

Total development & spec land $ 5,133 $ 1,477 $ 990 $ 390 $ 247 $ 3,250 $ 22,382 $ 170 $ 34,039

Gross charge–offs during period $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial & industrial

4 unchanged sentences

Total commercial & industrial 124,998 153,276 94,197 14,502 21,384 62,750 72,777 168,979 712,863

Total commercial $ 499,976 $ 410,876 $ 222,479 $ 184,764 $ 185,160 $ 628,468 $ 335,699 $ 2,467,422

Gross charge–offs during period $ — $ 33 $ — $ 123 $ 25 $ 72 $ 344 $ — $ 597

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Term

Loans Revolving

Residential mortgage

2 unchanged sentences

Total residential mortgage $ 41,038 $ 156,394 $ 158,228 $ 85,418 $ 31,111 $ 182,106 $ — $ — $ 654,295

Gross charge–offs during period $ — $ 28 $ — $ — $ — $ 20 $ — $ — $ 48

Residential construction

2 unchanged sentences

Total residential construction $ — $ — $ — $ — $ — $ — $ 26,841 $ — $ 26,841

Gross charge–offs during period $ — $ — $ — $ — $ — $ — $ — $ — $ —

Mortgage warehouse

2 unchanged sentences

Total mortgage warehouse $ — $ — $ — $ — $ — $ — $ — $ 45,078 $ 45,078

Total real estate $ 107,411 $ 157,088 $ 91,599 $ 34,391 $ 36,778 $ 184,679 $ 110,875 $ 722,821

December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving

Gross charge–offs during period $ — $ — $ — $ — $ — $ — $ — $ — $ —

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Term

Loans Revolving

Direct installment

2 unchanged sentences

Total direct installment $ 14,835 $ 13,491 $ 7,869 $ 4,246 $ 4,476 $ 5,081 $ 6 $ 2,362 $ 52,366

Gross charge–offs during period $ 33 $ 28 $ 31 $ 10 $ 32 $ 27 $ 6 $ — $ 167

Indirect installment

2 unchanged sentences

Total indirect installment $ 65,309 $ 192,295 $ 81,085 $ 36,224 $ 16,814 $ 8,219 $ — $ — $ 399,946

Gross charge–offs during period $ 86 $ 1,388 $ 708 $ 137 $ 58 $ 74 $ — $ — $ 2,451

Performing $ 26,376 $ 21,379 $ 5,121 $ 2,447 $ 3,885 $ 9,987 12,713 $ 478,673 $ 560,581

1 unchanged sentence

Total home equity 26,376 21,591 5,121 2,501 4,062 10,247 15,573 478,673 564,144

Total consumer $ 439,556 $ 217,158 $ 108,946 $ 69,628 $ 44,898 $ 78,528 $ 9,041 $ 967,755

Gross charge–offs during period $ — $ 10 $ — $ 103 $ — $ 91 $ 13 $ — $ 217

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents loans by credit grades at December 31, 2021.

December 31, 2021 2021 2020 2019 2018 2017 Prior Revolving

The following table presents loans by credit grades and origination year at December 31, 2022.

December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving Term

Loans Revolving

Owner occupied real estate

28 unchanged sentences

Total commercial & industrial 175,200 119,094 23,186 28,519 30,060 52,538 $ 51,598 167,392 647,587

Total commercial $ 465,638 $ 221,624 $ 239,891 $ 201,914 $ 256,504 $ 541,557 $ 286,817 $ 2,213,945

HORIZON BANCORP, INC.

3 unchanged sentences

December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving

Term Loans Revolving

Residential mortgage

10 unchanged sentences

Total mortgage warehouse — — — — — — — 69,529 69,529

Total real estate $ 116,118 $ 105,129 $ 45,139 $ 51,632 $ 56,396 $ 189,397 $ 139,602 $ 703,413

December 31, 2021 2021 2020 2019 2018 2017 Prior Revolving

December 31, 2022 2022 2021 2020 2019 2018 Prior Revolving Term

Loans Revolving

Direct installment

9 unchanged sentences

Total home equity 26,340 3,836 3,374 5,104 5,544 10,540 9,032 346,822 410,592

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

HORIZON BANCORP, INC.

21 unchanged sentences

The Company utilized the Cumulative Loss Rate method in determining expected future credit losses.

The loss rate method measures the amount of loan charge–offs, net of recoveries, (“loan losses”) recognized over the life of a pool and compares those loan losses to the outstanding loan balance of that pool as of a specific point in time (“pool date”).

The loss rate method measures the amount of loan charge–offs, net of recoveries, (“loan losses”) recognized over the life of a closed pool and compares those loan losses to the outstanding loan balance of that pool as of a specific point in time (“pool date”).

To estimate a CECL loss rate for the pool, management first identifies the loan losses recognized between the pool date and the reporting date for the pool and determines which loan losses were related to loans outstanding at the pool date.

3 unchanged sentences

When historical credit loss experience is not sufficient for a specific portfolio, the Company may supplement its own portfolio data with external models or data.

The Company supplemented data for 2009 and 2010 with the use of adjusted Uniform Bank Performance Report peer group data.

Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience.

2 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 judgment, as the basis for the forecast period.

Management utilized Moody's economic forecast scenarios including both National and Regional econometrics, 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.

50 unchanged sentences

The Company tested goodwill for impairment during 2023 and 2022.

In both valuations, the fair value exceeded the Company’s carrying value, therefore, it was concluded goodwill is not impaired.

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.

During the third and fourth quarters of 2023, Horizon considered the amount by which fair value exceeded book value by performing a quantitative analysis.

The Company engaged a third–party valuation specialist in performing its quantitative impairment analysis, which included a combination of valuation approaches to determine the fair value of the Bank reporting unit.

These valuation approaches required certain assumptions such as the discount rate, economic conditions impacting interest and growth rates, the control premium, and a relative weighting given to the fair value derived by each of the valuation approaches used.

At the conclusion of the assessment, the Company determined that as of December 31, 2023, it was more likely than not that the fair value of goodwill exceeded its carrying value.

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

35 unchanged sentences

2023 December 31

Federal Home Loan Bank advances, variable and fixed rates ranging from 1.54 % to 4.90 %, due at various dates through July 29, 2032

Federal Home Loan Bank advances, variable and fixed rates ranging from 1.62 % to 4.90 %, due at various dates through November 21, 2033

$ 750,264 $ 575,376

2 unchanged sentences

Federal Reserve Bank - Discount Window — 244,000

Federal Reserve Bank - Bank Term Funding Program 430,000 —

Secured borrowings 36,756 50,956

3 unchanged sentences

At December 31, 2023, the Bank had a total of $ 500.0 million in putable advances.

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.

The call dates for these advances range from January 19, 2024 to February 21, 2024 even though maturity dates extend beyond those dates.

Prior to the issuance of the Company's 2023 financial statements, $ 400.0 million of these putable advances were called and funded by new putable advances.

At December 31, 2023, the Bank had available approximately $ 1.4 billion in credit lines with various money center banks, including the FHLB.

HORIZON BANCORP, INC.

7 unchanged sentences

Securities sold under agreements to repurchase consist of obligations of the Bank to other parties.

The obligations are secured by federal agency collateralized mortgage obligations and federal agency mortgage-backed pools and such collateral is held in safekeeping by third parties.

The obligations are secured by federal agency collateralized mortgage obligations, federal agency mortgage–backed pools and private labeled mortgage–backed pools and such collateral is held in safekeeping by third parties.

The maximum amount of outstanding agreements at any month end during 2023 and 2022 totaled $ 143.5 million and $ 148.7 million and the daily average of such agreements totaled $ 137.2 million and $ 141.0 million.

The agreements at December 31, 2022 are overnight agreements.

The agreements at December 31, 2023 and 2022 are overnight agreements.

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

1 unchanged sentence

Remaining Contractual Maturity of the Agreements

Continuous Up to one

year One to three

years Three to five

years Five to ten

years Beyond ten

Continuous Up to 30 Days 30–90 Days Greater Than 90 Days Total

Repurchase Agreements and repurchase–to–maturity transactions

Repurchase Agreements $ 137,871 $ — $ — $ — $ — $ — $ 137,871

Securities pledged for Repurchase Agreements

Federal agency collateralized mortgage obligations $ 2,245 $ — $ — $ — $ 2,245

1 unchanged sentence

Private labeled mortgage–backed pools 7,436 — — — 7,436

Total $ 160,517 $ — $ — $ — $ — $ — $ 160,517

Note 13 – Subordinated Notes

On June 24, 2020, Horizon issued $ 60.0 million in aggregate principal amount, $ 58.5 million proceeds, net of related issuance costs of $ 1.5 million, of 5.625 % fixed–to–floating rate subordinated notes (the “Notes”).

The Notes were offered in denominations of $1,000 and integral multiples of $1,000 in excess thereof.

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

Total borrowings $ 136,030 $ — $ — $ — $ 136,030

HORIZON BANCORP, INC.

2 unchanged sentences

(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.

December 31, 2022

Remaining Contractual Maturity of the Agreements

Continuous Up to 30 Days 30–90 Days Greater Than 90 Days Total

Repurchase Agreements and repurchase–to–maturity transactions

Federal agency collateralized mortgage obligations $ 12,632 $ — $ — $ — $ 12,632

Federal agency mortgage–backed pools 116,040 — — — 116,040

Private labeled mortgage–backed pools 9,199 — — — 9,199

Total borrowings $ 137,871 $ — $ — $ — $ 137,871

The prior year Repurchase Agreement note was revised to conform with current year financial statements.

As a result, the securities pledged as collateral are presented by repurchase agreement rather than in total.

Securities sold under agreements to repurchase are secured by securities with a carrying amount of $ 145.2 million and $ 160.5 million at December 31, 2023 and December 31, 2022, respectively.

Note 12 – Subordinated Notes

The Notes were offered in denominations of $1,000 and integral multiples of $1,000 in excess thereof.

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.

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.

On December 8, 2023, Horizon cancelled $ 3.5 million of the $ 60.0 million in Notes at a price of 89.5 recording a gain of $ 368,000 .

The balance net of unamortized issuance costs of the Notes was $ 55.5 million and $ 58.9 million at December 31, 2023 and December 31, 2022, respectively.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 13 – Junior Subordinated Debentures Issued to Capital Trusts

4 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 1.95 % ( 6.72 % at December 31, 2022) and mature on November 23, 2034, and securities may be called at any quarterly interest payment date at par.

Costs associated with the issuance of the securities totaling $ 17,500 were capitalized and were amortized to October 31, 2009, the first call date of the securities.

The junior subordinated debentures and the securities bear interest at a rate of 3 Month CME Term SOFR plus 2.21 % ( 7.59 % at December 31, 2023) and mature on November 23, 2034, and securities may be called at any quarterly interest payment date at par.

In December of 2006, Horizon formed Horizon Bancorp Capital Trust III (“Trust III”), a wholly owned statutory business trust.

3 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 1.65 % ( 6.42 % at December 31, 2022) and mature on January 30, 2037, and securities may be called at any quarterly interest payment date at par.

Costs associated with the issuance of the securities totaling $ 12,647 were capitalized and are being amortized to the first call date of the securities.

The junior subordinated debentures and the securities bear interest at a rate of 3 Month CME Term SOFR plus 1.91 % ( 7.30 % at December 31, 2023) and mature on January 30, 2037, and securities may be called at any quarterly interest payment date at par.

The Company assumed additional debentures as the result of the acquisition of Alliance Bank Corporation in 2005.

3 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 % ( 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 junior subordinated debentures and the securities bear interest at a rate of 3 Month CME Term SOFR plus 2.91 % ( 8.29 % at December 31, 2023) 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.

3 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 2.85 % ( 7.62 % at December 31, 2022) and mature in December 2033, and securities may be called at any quarterly interest payment date at par.

The carrying value was $ 3.5 million, net of the remaining purchase discount, at December 31, 2022.

The junior subordinated debentures and the securities bear interest at a rate of 3 Month CME Term SOFR plus 3.11 % ( 8.49 % at December 31, 2023) and mature in December 2033, and securities may be called at any quarterly interest payment date at par.

The Company assumed additional debentures as the result of the Heartland merger in July 2012.

3 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 1.67 % ( 6.44 % at December 31, 2022) and mature in December 2036, 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 3 Month CME Term SOFR plus 1.93 % ( 7.32 % at December 31, 2023) and mature in December 2036, and securities may be called at any quarterly interest payment date at par.

The carrying value was $ 2.2 million, net of the remaining purchase discount, at December 31, 2023.

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.

4 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 3.10 % ( 7.87 % at December 31, 2022) and mature in June 2033, 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 3 Month CME Term SOFR plus 3.36 % ( 8.72 % at December 31, 2023) and mature in June 2033, and securities may be called at any quarterly interest payment date at par.

The carrying value was $ 4.6 million, net of the remaining purchase discount, at December 31, 2023.

4 unchanged sentences

The junior subordinated debentures are the sole assets of Salin Trust and are fully and unconditionally guaranteed by Horizon.

The junior subordinated debentures and the securities bear interest at a rate of 90–day LIBOR plus 2.95 % ( 7.72 % at December 31, 2022) and mature in October 2033, 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 3 Month CME Term SOFR plus 3.21 % ( 8.54 % at December 31, 2023) and mature in October 2033, and securities may be called at any quarterly interest payment date at par.

The carrying value was $ 18.2 million, net of the remaining purchase discount, at December 31, 2023.

1 unchanged sentence

Dividends on the Trust Preferred Capital Securities are recorded as interest expense.

Note 15 – Employee Stock Ownership Plan

Effective January 1, 2007, Horizon converted its stock bonus plan to an employee stock ownership plan (“ESOP”).

Prior to that date, Horizon maintained an employee stock bonus plan that covered substantially all employees.

The stock bonus plan was noncontributory, and Horizon made matching contributions of amounts contributed by the employees to the Employee Thrift Plan and discretionary contributions.

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

Note 14 – Supplemental Executive Retirement Plan

The Company sponsors a supplemental retirement plan for a select group of management or highly compensated employees of the Company under the 2005 Supplemental Executive Retirement Plan (the “SERP”).

This plan was effective January 1, 2005, to replace the SERP originally effective January 1, 1993, which has been frozen.

The SERP provides participating officers with supplemental retirement income in addition to the benefits provided under the Company's Employee Thrift Plan.

The SERP is a non-qualified defined contribution type plan under which benefits are derived based on a notional account balance to be funded by the Company for each participating officer.

The account balance will be credited each year with a Company matching contribution of $ 20,000 or $ 35,000 based on the officer's plan.

Plan participants may select from two investment options which include cash or stock units of the Company's stock.

Assets of the SERP (i.e.

the participants' account balances) will not be physically invested in the investments selected by the participants;

rather, they are utilized for the purpose of debiting or crediting additional amounts to each participants' account.

The Company informally funds its obligation to plan participants in a rabbi trust, comprised of a money market fund and Company stock reported at estimated fair value based on quoted market prices.

The assets held in the rabbi trust were reported at their estimated fair value of $ 10.6 million and $ 10.1 million at December 31, 2023 and December 31, 2022, respectively, and are included in cash and stockholders' equity in the Company's consolidated balance sheets.

The related accrued benefit cost (representing the Company's benefit obligation to participants) of $ 10.6 million and $ 10.1 million at December 31, 2023 and December 31, 2022, respectively, is recorded in other liabilities in the Company's consolidated balance sheets.

The SERP is accounted for pursuant to FASB ASC section 715-70, “Compensation - Retirement Benefits - Defined Contribution Plans” (“ASC 715-70”).

SERP participants are credited with a contribution to an account and will receive, upon separation, a benefit based upon the vested amount accrued in their account, which includes both the officer's and Company's contributions plus or minus the increase or decrease in the fair market value of the SERP assets selected by the participant.

ASC 715-70 requires companies to record, on a periodic basis, that portion of a company's contribution earned during the period by the participants (the “Expense”).

The Company is accruing the Expense under the assumption that all participants in the SERP will achieve full vesting ( five years of service).

The related Company matching contribution was $ 344,000 , $ 404,000 and $ 375,000 for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, respectively.

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 15 – Employee Benefit Plans

5 unchanged sentences

The Plan owned a total of 723,596 shares of Horizon’s stock or 1.6 % of the outstanding shares as of December 31, 2023.

The Pentegra Defined Benefit Plan (“Pentegra Plan”), acquired from the Peoples acquisition, was terminated in April of 2020.

The Pentegra Plan was transferred into annuity contracts and will no longer be administered by the Company.

The termination liability was $ 3.4 million, which the Company recorded a $ 2.9 million withdrawal liability resulting in an additional termination expense in 2020 of $ 460,000 .

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 16 – Income Tax

7 unchanged sentences

State 71 ( 31 ) 255

Revaluation of deferred tax assets 5,201 — —

Total income tax expense $ 11,018 $ 12,176 $ 15,356

4 unchanged sentences

Stock compensation ( 88 ) ( 232 ) ( 250 )

Revaluation of deferred tax assets 5,201 — —

Other tax exempt income ( 371 ) ( 454 ) ( 404 )

1 unchanged sentence

Tax credit investments ( 2,976 ) ( 2,774 ) ( 981 )

BOLI redemption ordinary income 5,316 — —

BOLI redemption excise 2,532 — —

Nondeductible and other 628 156 212

Actual tax expense $ 11,018 $ 12,176 $ 15,356

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

2023 December 31

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

Allowance for credit losses $ 12,546 $ 12,762

Net operating loss and tax credits 9,592 9,313

1 unchanged sentence

Unrealized loss on AFS securities and cash flow hedge 17,706 28,230

Basis in partnership equity investments 1,322 —

Capital loss carryover 5,201 —

Other 2,856 555

5 unchanged sentences

Fair value adjustment on acquisitions ( 2,142 ) ( 2,807 )

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

Other ( 1,131 ) ( 68 )

Total liabilities ( 12,948 ) ( 12,544 )

Valuation allowance ( 5,201 ) —

Net deferred tax asset/(liability) $ 33,545 $ 40,335

During 2023, 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.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The Company has federal general business tax credits of $ 9.6 million that can be carried forward twenty years and expire beginning in 2042.

During 2023, the Company generated a capital loss of $ 32.1 million as a result of the sale of investment securities owned by Horizon Investments, Inc.

As a result of previously generated capital gains within the last three tax years, $ 7.3 million of the capital loss can be offset by those capital gains.

The remaining $ 24.8 million is allowed to be carried forward for a period of five years to offset future capital gains that are recognized.

The tax effect of this capital loss carryforward is $ 5.2 million.

Management has concluded that a valuation allowance against this deferred tax attribute was required and will be reevaluated until it is more likely than not that the capital loss carryforward can be realized.

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

7 unchanged sentences

income tax examinations by tax authorities for years before 2020.

Note 18 – Accumulated Other Comprehensive Gain (Loss)

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 17 – Accumulated Other Comprehensive Loss

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

2023 December 31

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 )

Unrealized gain (loss) on securities available for sale, net of tax $ ( 69,018 ) $ ( 110,714 )

Unamortized gain on securities held to maturity, previously transferred from AFS, net of tax 2,409 2,955

Unrealized gain on derivative instruments, net of tax — 1,561

Total accumulated other comprehensive income (loss) $ ( 66,609 ) $ ( 106,198 )

10 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 off–balance sheet exposures, the Company determined the amount not being recorded as immaterial at this time.

Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

As of December 31, 2023 and 2022, the Company held a non–material reserve, respectively, as a loss estimate for these exposures.

Note 19 – Regulatory Capital

6 unchanged sentences

Additionally, under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital.

To be categorized as well capitalized, the Company and Bank must maintain minimum Total risk-based, Tier I risk-based, common equity Tier I risk- based and Tier I leverage ratios as set forth in the table below.

As of December 31, 2022 and December 31, 2021, the Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the year ending December 31, 2022 that management believes have changed the Bank’s classification as well capitalized.

There is no threshold for well-capitalized status for bank holding companies.

As indicated in Note 1, the Company adopted ASC 326 and has elected to apply the CECL transition provisions.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

To be categorized as well capitalized, the Company and Bank must maintain minimum Total risk-based, Tier I risk-based, common equity Tier I risk-based and Tier I leverage ratios as set forth in the table below.

As of December 31, 2023 and December 31, 2022, the Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the year ending December 31, 2023 that management believes have changed the Bank’s classification as well capitalized.

There is no threshold for well-capitalized status for bank holding companies.

Horizon and the Bank’s actual and required capital ratios as of December 31, 2023 and 2022 were as follows:

34 unchanged sentences

(1) As defined by regulatory agencies

The above minimum capital requirements exclude the capital conservation buffer required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.

The capital conservation buffer was phased in by increments starting in 2016 and was fully implemented by 2019 at 2.50 %.

The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.

4 unchanged sentences

Note 20 – Share–Based Compensation

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–

Exercise Price Weighted–

Term Aggregate

Outstanding, beginning of year 4,050 $ 7.49

Exercised ( 4,050 ) 7.49

Forfeited — —

Outstanding, end of year — — 0 $ —

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.

17 unchanged sentences

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, 2023, and changes during the year then ended, is presented below:

8 unchanged sentences

There have been no options granted during the years 2023, 2022 and 2021.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

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.

18 unchanged sentences

Non–vested, end of year 630,721 15.36

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 2023, 2022 and 2021 was $ 0 , $ 13,000 and $ 68,000 .

3 unchanged sentences

The recognized tax benefit related thereto was approximately $ 753,000 , $ 517,000 , and $ 368,000 for the years ended December 31, 2023, 2022 and 2021.

Cash received from option exercise under all share–based payment arrangements for the years ended December 31, 2022, 2021 and 2020 was $ 145,000 , $ 1.1 million, and $ 255,000 .

Cash received from option exercise under all share–based payment arrangements for the years ended December 31, 2023, 2022 and 2021 was $ 0 , $ 145,000 , and $ 1.1 million.

The actual tax benefit realized for the tax deductions from option exercise of the share–based payment arrangements totaled $ 58,000 , $ 126,000 , and $ 334,000 , for the years ended December 31, 2023, 2022 and 2021.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

As of December 31, 2023, there was $ 4.5 million of total unrecognized compensation cost related to all non–vested share–based compensation arrangements granted under all of the plans.

That cost is expected to be recognized over a weighted–average period of 2.75 years.

That cost is expected to be recognized over a weighted–average period of 11 months.

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

1 unchanged sentence

Cash Flow Hedges

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.

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.

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

On July 20, 2018, the Company entered into an interest rate swap agreement for an additional portion of its floating rate debt.

The agreement provides for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counter party at a rate of 2.81 % on a notional amount of $ 50.0 million at December 31, 2022 and 2021.

The agreement provided for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counter party at a rate of 2.81 % on a notional amount of $ 50.0 million at December 31, 2022.

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

Management has designated the interest rate swap agreements as cash flow hedging instruments.

The Company terminated this interest rate swap agreement on May 23, 2023 and recorded a related gain of $ 1.5 million as a reduction of interest expense.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

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 %

Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Fair Value Hedges

5 unchanged sentences

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.

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

Other Derivative Instruments

10 unchanged sentences

Value Notional

Derivatives designated as hedging instruments

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

21 unchanged sentences

Interest rate contracts $ ( 1,561 ) $ 4,463 $ 3,610

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

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

The effect of derivatives designated as a hedging instrument 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

4 unchanged sentences

Total $ 1,832 $ ( 628 ) $ ( 1,901 )

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The effect of derivatives not designated as a hedging instrument on the consolidated statements of income for the 12–month periods ended December 31 is as follows:

Location of gain

20 unchanged sentences

There have been no significant changes in the valuation techniques during the period ended December 31, 2023.

Available for sale securities

When quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

Level 2 securities include U.S.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

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

Available for sale securities

When quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

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.

13 unchanged sentences

The fair value of the Company’s interest rate swap agreements is estimated by a third party using inputs that are primarily unobservable including a yield curve, adjusted for liquidity and credit risk, contracted terms and discounted cash flow analysis, and therefore, are classified within Level 2 of the valuation hierarchy.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying financial statements measured at fair value on a recurring basis and the level within the FASB ASC fair value hierarchy in which the fair value measurements fall at the following:

14 unchanged sentences

Commitments to originate mortgage loans 125 — 125 —

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

Mortgage loan contracts 33 — 33 —

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Interest rate swap agreements liability ( 24,024 ) — ( 24,024 ) —

December 31, 2022

15 unchanged sentences

Mortgage loan contracts ( 50 ) — ( 50 ) —

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.

Available for Sale Securities

Years Ended December 31

Beginning balance $ 125,496 $ —

Transfer to Level 2 ( 125,496 ) —

Included in other comprehensive income — ( 134 )

Purchases, issuances and settlements — 125,630

Principal payments — —

Ending balance $ — $ 125,496

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

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):

8 unchanged sentences

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

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:

2 unchanged sentences

Collateral dependent loans are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Mortgage Servicing Rights (MSRs):

MSRs do not trade in an active market with readily observable prices.

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

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 following table presents qualitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at December 31, 2023 and 2022.

8 unchanged sentences

(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 %)

Note 23 – Fair Value of Financial Instruments

3 unchanged sentences

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, 2023 and December 31, 2022.

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

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.

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Interest Receivable/Payable — The carrying amounts approximate fair value.

Deposits — The fair value of demand deposits, savings accounts, interest bearing checking accounts and money market deposits is the amount payable on demand at the reporting date.

The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturity.

Deposits — The fair value of demand deposits, savings accounts, interest bearing checking accounts and money market deposits is the amount payable on demand at the reporting date and are classified within Level 1.

The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturity and are classified within Level 2.

Borrowings — Rates currently available to Horizon for debt with similar terms and remaining maturities are used to estimate fair values of existing borrowings.

9 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall.

The following tables present estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall.

December 31, 2023

8 unchanged sentences

Loans held for sale 1,418 — — 1,418

Loans (excluding loan level hedges), net 4,107,534 — — 3,852,458

Loans, net 4,367,601 — — 4,072,568

Stock in FHLB 34,509 — 34,509 —

16 unchanged sentences

Loans held for sale 5,807 — — 5,807

Loans (excluding loan level hedges), net 3,604,248 — — 3,513,346

Loans, net 4,107,534 — — 3,852,458

Stock in FHLB 26,677 — 26,677 —

11 unchanged sentences

Note 24 – General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.

It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

As of April 20, 2023, a putative class action lawsuit entitled Chad Key, et al.

Horizon Bancorp, Inc., et al., Case No.

1:23-cv-02961 (“Securities Action”) was filed against the Company and two of its officers in the U.S.

District Court for the Eastern District of New York.

The Securities Action asserts claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 alleging, among other things, the Company made materially false and misleading statements and failed to disclose material adverse facts which allegedly resulted in harm to a putative class of purchasers of our securities from March 9, 2022 and March 10, 2023.

As of (1) August 28, 2023, a lawsuit related to the Securities Action was filed by Sally Hundley, derivatively on behalf of the Company, against the Company, as nominal defendant, and 2 of the Company's officers and 10 of its directors and (2) August 31, 2023, a lawsuit also related to the Securities Action was filed by Aziz Chowdhury, derivatively on behalf of the Company, against the Company, as nominal defendant, and 2 of the Company's officers and 10 of its directors (the “Derivatives Actions”) in the U.S.

District Court for the Eastern District of New York.

The Derivative Actions allege, among other things, breach of the officers and directors' fiduciary duties.

The Derivative Actions have been consolidated and stayed pending resolution of any motion to dismiss in the Securities Action.

Based on our initial review of these actions, management believes that the Company has strong defenses to the claims and intends to vigorously defend against them.

As of December 31, 2023, no liabilities related to the above matters were recorded because we have concluded such liabilities are not probable and the amounts of such liabilities are not reasonably estimable.

In addition to the matters described above, from time to time, Horizon and its subsidiaries are involved in various legal proceedings incidental to the conduct of their business.

Management does not expect that the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations.

Note 25 – Condensed Financial Information (Parent Company Only)

11 unchanged sentences

Total liabilities and stockholders’ equity $ 852,056 $ 813,599

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Condensed Statements of Income

3 unchanged sentences

Dividend income from subsidiaries $ 55,500 $ 34,750 $ 22,500

Other income 45 25 106

Interest expense ( 8,226 ) ( 6,258 ) ( 5,767 )

Other income 431 45 25

Salaries and employee benefits ( 3,502 ) ( 2,551 ) ( 1,890 )

Other expense ( 370 ) ( 411 ) ( 591 )

Income Before Undistributed Income of Subsidiaries 25,575 14,277 54,509

Undistributed Income of Subsidiaries 66,473 71,439 13,131

Income Before Undistributed Income (Dividends in Excess) of Subsidiaries 43,833 25,575 14,277

Undistributed income (dividends in excess) of subsidiaries ( 17,838 ) 66,473 71,439

Income Before Tax 25,995 92,048 85,716

1 unchanged sentence

Net Income Available to Common Shareholders $ 27,981 $ 93,408 $ 87,091

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Condensed Statements of Comprehensive Income (Loss)

3 unchanged sentences

Other Comprehensive Income (Loss)

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

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

Change in fair value of derivative instruments:

Change in fair value of derivative instruments for the period ( 523 ) 5,649 4,570

Reclassification adjustment for swap termination gain realized in income ( 1,453 ) — —

Income tax effect 415 ( 1,186 ) ( 960 )

Changes from derivative instruments ( 1,561 ) 4,463 3,610

Change in securities:

Unrealized gain (loss) for the period on available for sale securities 20,728 ( 147,345 ) ( 35,547 )

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

Amortization (accretion) from transfer of securities from available for sale to held to maturity securities ( 691 ) ( 1,236 ) 66

Reclassification adjustment for securities (gains) losses realized in income 32,052 — ( 914 )

Income tax effect ( 10,939 ) 31,369 6,409

Unrealized gains (losses) on securities 41,150 ( 118,006 ) ( 24,117 )

Other Comprehensive Income (Loss), Net of Tax 39,589 ( 113,543 ) ( 20,507 )

Comprehensive Income (Loss) $ 67,570 $ ( 20,135 ) $ 66,584

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Condensed Statements of Cash Flows

4 unchanged sentences

Items not requiring (providing) cash

Equity in undistributed net income of subsidiaries ( 66,473 ) ( 71,439 ) ( 13,131 )

Dividends in excess (equity in undistributed net income) of subsidiaries 17,838 ( 66,473 ) ( 71,439 )

Share based compensation 3,586 2,475 1,819

4 unchanged sentences

Capital contribution to subsidiary — — ( 60,000 )

Other investing activities 1,762 — —

Net cash used in investing activities 1,762 — ( 60,000 )

3 unchanged sentences

Dividends paid on common shares ( 28,311 ) ( 27,765 ) ( 24,768 )

Proceeds from issuance of stock — — 1,233

Net settlement of share awards ( 1,221 ) ( 1,824 ) ( 1,355 )

Stock option exercises — 145 1,062

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

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

Repayment of subordinated notes ( 3,132 ) — —

Net cash used in financing activities ( 32,286 ) ( 29,056 ) ( 32,284 )

Net Change in Cash and Cash Equivalents 25,652 190 ( 73,137 )

4 unchanged sentences

Horizon Bancorp, Inc.

Opinion on the Financial Statements

Michigan City, Indiana

Opinion on the Consolidated Financial Statements

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

1 unchanged sentence

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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, 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, 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 .

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, 2023, 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, 2024, expressed an unqualified opinion thereon .

Basis for Opinion

14 unchanged sentences

Allowance for Credit Losses (“ACL”)

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.

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.

As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL.

We identified the ACL at December 31, 2022 as a critical audit matter.

Auditing the ACL involved a high degree of subjectivity in evaluating management’s estimates, such as evaluating management’s identification of credit quality indicators, grouping of loans determined to be similar into pools, estimating the remaining life of loans in a pool, assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with individually evaluated loans and assessing the appropriateness of loan credit risk grades.

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses (“ACL”) was $50.6 million at December 31, 2023.

The Company utilized the Cumulative Loss Rate method in determining expected future credit losses.

Management utilized Moody's

economic forecast scenarios including both National and Regional econometrics, as well as management judgment, as the basis for the forecast period.

We identified the quantitative component of the ACL as a critical audit matter.

The principal considerations for our determination included the high degree of subjectivity and complexity involved in management’s determination and application of the reasonable and supportable forecasts in cumulative loss rate model, and the significant audit effort required driven by management’s use of internal historical data in the calculation of the loss rate.

This required a high degree of effort, specialized skills and knowledge, and significant judgment.

Our audit procedures related to the estimated allowance for credit losses at December 31, 2023 included:

• Testing the design and operating effectiveness of internal controls, including those related to technology, over the ACL, the establishment of qualitative adjustments for current and expected conditions, grading and risk classification of loans and establishment of specific reserves on individually evaluated loans and management’s review controls over the ACL balance as a whole including attending internal CECL committee, commercial watch, and disclosure committee meetings.

• Testing clerical and computational accuracy of the formulas within the calculation.

• Testing of completeness and accuracy of the information and reports utilized in the ACL.

• Evaluating the precision of management review of the adequacy of the ACL.

• Evaluating the current and expected qualitative adjustments, including assessing the basis for the adjustments and the reasonableness of the significant assumptions.

• Evaluating the forecast adjustment, including assessing that it is reasonable and supportable.

• Evaluating the relevance and reliability of data and assumptions.

• 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 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.

• Evaluating credit quality indicators such as trends in delinquencies, nonaccruals, charge-offs, and loan grades.

• 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)

• Obtained an understanding of the Company’s process for establishing the ACL, including:

◦ Controls over the completeness and accuracy of inputs into the model, specifically the loss rate calculations, and

◦ Controls over management’s review and approval of the ACL, including management’s determination of the reasonable and supportable forecasts.

• Testing the completeness and accuracy of key inputs and assumptions used in the model’s quantitative calculation, such as the regression model and economic forecasts and integrity of loan segments.

• Evaluated management’s reasonable and supportable economic forecast used in the model.

Goodwill Impairment Assessment

The Company has recorded goodwill of $155.2 million as of December 31, 2023.

As further described in Notes 1 and 8 to the consolidated financial statements.

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

The Company engaged a third-party valuation specialist in performing its quantitative impairment analysis, which included a combination of valuation approaches to determine the fair value of the Bank reporting unit.

We identified the Company’s quantitative goodwill impairment assessment as a critical audit matter.

The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s goodwill impairment assessment.

Specifically, the subjectivity and judgment is primarily identified within the evaluation of valuation approaches selected and key assumptions used by management in performing its assessment, including the selection of comparable publicly-traded companies and control premium utilized in the valuation approaches.

The primary procedures we performed to address this critical audit matter included the following:

• We evaluated the design and tested the operating effectiveness of controls related to management’s goodwill impairment assessment including controls over management’s review of the quantitative analysis performed on the reporting unit, including the key assumptions used to determine the fair value of the reporting unit.

• We tested key financial data used within the valuation approaches by agreeing key inputs to internal and external sources.

• We evaluated, with the assistance of our internal valuation specialists, appropriateness of valuation approaches selected by management, the selection of a control premium and of comparable publicly-traded companies, and the overall reasonableness of the estimated fair value of the reporting unit.

/s/ FORVIS, LLP

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

4 unchanged sentences

Horizon Bancorp, Inc.

Michigan City, Indiana

Opinion on the Internal Control Over Financial Reporting

1 unchanged sentence

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

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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, 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 as of December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023, and our report dated March 15, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Financial Statements .

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

13 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)

/s/ FORVIS, LLP

Indianapolis, Indiana

15 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