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Item 9A. Controls and Procedures

2024-03-15 compared with 2023-03-15 · 40 added, 64 removed, 180 unchanged (37% of the section changed)

2 unchanged sentences

Under the supervision of and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, Horizon has evaluated the effectiveness of the design and operation of its disclosure controls (as defined in Rule 13a–15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report.

Based on such evaluation, such officers have concluded that, as of the evaluation date, due to the material weaknesses in the Company's internal control over financial reporting described below, the Company's disclosure controls and procedures were not effective as of December 31, 2022 .

However, after giving full consideration to the material weaknesses described herein, and based on a number of other factors, including the completion of the Audit Committee’s review of the underlying errors, management’s internal review that identified revisions to Horizon’s previously issued financial statements, efforts to remediate the material weaknesses in internal control over financial reporting described below, and the performance of additional procedures by management designed to ensure the reliability of Horizon’s financial reporting, Horizon has concluded that the Consolidated Financial Statements included in this Annual Report on Form 10–K present fairly, in all material respects, Horizon’s financial position, the results of its operations and its cash flows for each of the periods presented in conformity with U.S.

generally accepted accounting principles.

Based on such evaluation, such officers have concluded that, as of December 31, 2023, Horizon’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by Horizon in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow for timely decisions regarding disclosure.

Management’s Report on Internal Control Over Financial Reporting

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In making this assessment, management used the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on management's assessment of the Company's internal control over financial reporting as of December 31, 2022, management has concluded that the Company’s internal control over financial reporting was not effective as of that date because of the material weaknesses in internal control over financial reporting described below.

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.

In this regard, management identified material weaknesses with respect to insufficient controls over the reporting, classification, and disclosure of loans, investments and individual cash flow line items and lack of sufficient controls around the financial reporting process that allows for the timely release of financial statements, as further described below.

Insufficient Controls With Respect to Specific Financial Statement Reporting, Classification, and Disclosure

The Company identified a material weakness with respect to insufficient controls over the reporting, classification and disclosure of loans, investments and individual cash flow line items in its financial statements.

More specifically, these material weaknesses resulted in accounting revisions of previously issued financial statements with respect to the classification of sold commercial loan participation balances, the reporting of indirect loan dealer reserve asset balances and related amortization expense and the classification of certain available for sale and held to maturity securities from private labeled mortgage-backed pools to federal agency mortgage pool, which revisions were previously disclosed in the press release in the Company’s Form 8–K filed January 25, 2023 (the “Earnings Release”) and the Company’s Form 10–Q filings during 2022, in addition to errors in previously issued financial statement disclosures relating to the transfer of available for sale to held to maturity securities and the cash flow classification of repurchases of outstanding stock from an investing activity to a financing activity.

Principal factors contributing to the identification of this material weakness included lack of sufficient resources and training in our

HORIZON BANCORP, INC.

accounting and finance department, insufficient procedures for the preparation of financial statement disclosures and insufficient procedures for the documentation and review for financial statement disclosures.

Lack of Sufficient Controls Around the Financial Reporting Process

The Company identified a material weakness with respect to lack of sufficient controls around the financial reporting process which did not sufficiently promote the timely release of financial statements.

Specifically, the Company had insufficient controls over the calculation of its public float to determine its filing deadlines with the SEC, which resulted in the late filing of this Annual Report on Form 10–K.

Principal factors contributing to the identification of this material weakness included insufficient training, review process and written procedures relating to the treatment of certain shares included in the public float calculation.

No restatement of prior period financial statements and no change in previously issued financial results were required as a result of these deficiencies in internal control.

The control deficiencies resulted in immaterial revisions that were corrected in the issued consolidated financial statements as of and for the fiscal year ended December 31, 2022.

However, these control deficiencies create a reasonable possibility that a material misstatement of the interim or annual consolidated financial statements and disclosures would not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent material weaknesses in internal control over financial reporting and that our internal control over financial reporting was not effective as of December 31, 2022.

Plan for Remediation of Material Weaknesses

The Company and its Board of Directors are committed to maintaining a strong internal control environment.

During the first quarter of 2023, management identified the above control deficiencies that constituted material weaknesses as of December 31, 2022.

Management evaluated the material weaknesses described above and during the first quarter of 2023 began (and is continuing) to implement a remediation plan to update its design and implementation of controls to remediate the aforementioned deficiencies and enhance the Company's internal control environment.

In connection with this remediation plan, the Company has taken or will take the following measures to appropriately enhance its controls and procedures:

Based on this assessment, management has concluded that Horizon’s internal control over financial reporting as of December 31, 2023 was effective based on the specified criteria.

As disclosed in Part II, Item 9A of the Company's Annual Report on Form 10–K for the yer ended December 31, 2022, during the first quarter of 2023 management identified material weaknesses with respect to insufficient controls over the reporting, classification, and disclosure of loans, investments and individual cash flow line items and lack of sufficient controls around the financial reporting process to allow for the timely release of financial statements.

Throughout the year ended December 31, 2023, management implemented its previously disclosed remediation plan to update its design and implementation of controls to remediate the aforementioned deficiencies and enhance the Company's internal control environment, which included:

• Hiring additional resources within our accounting and finance department for financial statement preparation and review and providing additional training to implement and monitor our policies and procedures;

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• Developing enhanced documentation and review procedures for financial statement preparation and disclosures, including enhancing the financial statement review process by including additional steps in the review process with respect to the reporting, classification and disclosure of loans, investments and individual cash flow line items in its financial statements and the calculation of the Company’s public float for purposes of determining SEC filing deadlines.

The material weaknesses will not be considered remediated until the controls have operated effectively, as evidenced through testing, for a sufficient amount of time.

Attestation Report of Registered Public Accounting Firm

FORVIS, LLP (formerly BKD, LLP), an independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

The report, which expresses an adverse opinion of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, is included in this Annual Report on Form 10–K in Item 8, following FORVIS, LLP’s audit report.

HORIZON BANCORP, INC.

Horizon’s management completed testing of the implemented controls during the quarter ended December 31, 2023, and found such controls to be operating effectively.

As a result, management has concluded that the foregoing material weaknesses in internal control over financial reporting have been remediated as of December 31, 2023.

Attestation Report of Registered Public Accounting Firm

FORVIS, LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.

The report, which expresses an unqualified opinion of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, is included in this Annual Report on Form 10–K in Item 8, following FORVIS, LLP’s audit report.

Changes in Internal Control Over Financial Reporting

Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that except for the material weaknesses described above, no changes in the Company's internal control over financial reporting (as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that, other than the remediation of the material weaknesses described above, no changes in the Company's internal control over financial reporting (as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

OTHER INFORMATION

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Number Description Incorporated by Reference/Attached

10.1* Horizon Bancorp Amended 2003 Omnibus Equity Incentive Plan

Incorporated by reference to Appendix A to Registrant’s definitive Proxy Statement for its 2010 Annual Meeting of Shareholders

10.1* Form of Restricted Stock Award Agreement under 2003 Omnibus Equity Incentive Plan

33 unchanged sentences

Incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S–8 filed on December 28, 2017 (Registration No.

HORIZON BANCORP, INC.

Number Description Incorporated by Reference/Attached

10.18* 1998 Directors Deferred Compensation Plan, with amendments through December 19, 2017

Incorporated by reference to Exhibit 4.2 to Registrant’s Registration Statement on Form S–8 filed on December 28, 2017 (Registration No.

HORIZON BANCORP, INC.

Number Description Incorporated by Reference/Attached

10.19* Amended and Restated 2005 Directors Deferred Compensation Plan, dated December 19, 2017

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Incorporated by reference to Exhibit 10.15 to Registrant's Form 10–K for the year ended December 31, 2020

10.22* Amended and Restated Employment Agreement (Craig M.

Dwight), dated January 1, 2020

Incorporated by reference to Exhibit 10.7 to Registrant’s Form 8–K filed on January 7, 2020

10.23* Change in Control Agreement (Craig M.

Dwight), dated January 1, 2020

Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8–K filed on January 7, 2020

10.21* Employment Agreement (Mark E.

Secor), dated as of November 6, 2023

Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8–K filed on November 7, 2023

10.22* Change in Control Agreement (Mark E.

4 unchanged sentences

Incorporated by reference to Exhibit 10.4 to Registrant’s Form 8–K filed on January 7, 2020

10.26* Change in Control Agreement (Dennis J.

Kuhn), dated January 1, 2020

Incorporated by reference to Exhibit 10.5 to Registrant’s Form 8–K filed on January 7, 2020

10.24* Change in Control Agreement (Todd A.

1 unchanged sentence

Incorporated by reference to Exhibit 10.6 to Registrant’s Form 8–K filed on January 7, 2020

10.28* Employment Agreement (Thomas M.

Prame), dated August 2, 2022

Incorporated by reference to Exhibit 10.1 to Registrant's Form 8–K filed on August 2, 2022

10.29* Change in Control Agreement (Thomas M.

Prame), dated August 2, 2022

Incorporated by reference to Exhibit 10.2 to Registrant's Form 8–K filed on August 2, 2022

10.25* Amended and Restated Employment Agreement (Thomas M.

Prame), dated June 1, 2023

Incorporated by reference to Exhibit 10.1 to Registrant's Form 8–K filed on May 18, 2023

10.26* Amended and Restated Change in Control Agreement (Thomas M.

Prame), dated June 1, 2023

Incorporated by reference to Exhibit 10.2 to Registrant's Form 8–K filed on May 18, 2023

10.27* Second Amended and Restated Employment Agreement (Craig M.

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Kerber), dated October 1, 2020

Incorporated by reference to Exhibit 10.33 to Registrant's Form 10–K filed on March 15, 2023

10.31* Amendment to Change in Control Agreement (Lynn M.

Kerber), dated December 1, 2022

Incorporated by reference to Exhibit 10.34 to Registrant's Form 10–K filed on March 15, 2023

14 Code of Ethics for Executive Officers and Directors

2 unchanged sentences

23 Consent of FORVIS, LLP

31.1 Certification of Craig M.

Dwight pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.1 Certification of Thomas M.

Prame pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Mark E.

Secor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

HORIZON BANCORP, INC.

Number Description Incorporated by Reference/Attached

32.1 Certification of Craig M.

Dwight pursuant to 18 U.S.C.

32.1 Certification of Thomas M.

Prame pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

HORIZON BANCORP, INC.

Number Description Incorporated by Reference/Attached

97 Horizon Bancorp, Inc.

Compensation Recovery Policy

101 Inline Interactive Data Files Attached

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March 15, 2024 By:

Chairman and Chief Executive Officer (Principal Executive Officer)

/s/ Thomas M.

Chief Executive Officer (Principal Executive Officer)

March 15, 2024 By:

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March 15, 2024 /s/ Craig M.

Dwight, Chairman of the Board Chief Executive Officer and Director

March 15, 2023 /s/ Susan D.

Aaron, Director

March 15, 2023 /s/ Eric Blackhurst

Dwight, Chairman of the Board and Director

March 15, 2024 /s/ Kevin W.

Ahern, Director

March 15, 2024 /s/ Eric P.

Blackhurst, Director

March 15, 2023 /s/ Lawrence E.

March 15, 2024 /s/ Lawernce E.

Burnell, Director

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Julie Scheck Freigang, Director

March 15, 2024 /s/ Brian W.

Maass, Director

March 15, 2024 /s/ Michele M.

Magnuson, Director

March 15, 2023 /s/ Peter L.

Pairitz, Director

March 15, 2024 /s/ Steven W.

Reed, Director

March 15, 2023 /s/ Spero W.

Valavanis, Director

March 15, 2024 /s/ Vanessa P.

1 unchanged sentence

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 9A. Controls and Procedures