What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-10 compared with 2023-11-09 · 218 added, 442 removed, 1100 unchanged (38% of the section changed)

4 unchanged sentences

(Dollar Amounts in Thousands)

September 30,

2024 December 31,

39 unchanged sentences

(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Interest Income

11 unchanged sentences

Net Interest Income 43,288 45,237

Credit loss expense (recovery) 263 ( 601 ) 1,185 ( 1,747 )

Net Interest Income after Credit Loss Expense (Recovery) 41,827 52,462 132,302 152,483

Credit loss expense 805 242

Net Interest Income after Credit Loss Expense 42,483 44,995

Non–interest Income

7 unchanged sentences

Increase in cash value of bank owned life insurance 298 981

Death benefit on bank owned life insurance — — — 644

Other income 827 362

20 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Income

(Dollar Amounts in Thousands)

Three Months Ended Nine Months Ended

September 30 September 30

2023 2022 2023 2022

Three Months Ended

Net Income $ 13,991 $ 18,228

2 unchanged sentences

Change in fair value of derivative instruments for the period — ( 558 )

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

Income tax effect — 116

2 unchanged sentences

Unrealized gain (loss) for the period on available for sale securities ( 5,748 ) 18,144

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

Amortization (accretion) from transfer of securities from available for sale to held to maturity securities ( 158 ) ( 143 ) ( 531 ) ( 1,081 )

Reclassification adjustment for securities (gains) losses realized in income — — 480 —

Accretion from transfer of securities from available for sale to held to maturity securities ( 160 ) ( 154 )

Reclassification adjustment for securities losses realized in income — 500

Income tax effect 1,241 ( 3,882 )

1 unchanged sentence

Other Comprehensive Income (Loss), Net of Tax ( 4,667 ) 14,166

Comprehensive Income (Loss) $ ( 9,310 ) $ ( 6,236 ) $ 35,960 $ ( 58,223 )

Comprehensive Income $ 9,324 $ 32,394

See notes to condensed consolidated financial statements

9 unchanged sentences

Income (Loss) Total

Balances, July 1, 2022 $ — $ — $ 352,412 $ 398,517 $ ( 93,064 ) $ 657,865

Net income — — — 23,821 — 23,821

Other comprehensive loss, net of tax — — — — ( 30,057 ) ( 30,057 )

Amortization of unearned compensation — — 627 — — 627

Exercise of stock options — — 14 — — 14

Net settlement of share awards — — ( 89 ) — — ( 89 )

Stock retirement plans — — ( 127 ) — — ( 127 )

Cash dividends on common stock ($ 0.16 per share)

— — — ( 7,061 ) — ( 7,061 )

Balances, September 30, 2022 $ — $ — $ 352,837 $ 415,277 $ ( 123,121 ) $ 644,993

Balances, July 1, 2023 $ — $ — $ 354,953 $ 452,209 $ ( 97,919 ) $ 709,243

Net income — — — 16,205 — 16,205

Other comprehensive loss, net of tax — — — — ( 25,515 ) ( 25,515 )

Amortization of unearned compensation — — 944 — — 944

Net settlement of share awards — — ( 482 ) — — ( 482 )

Stock retirement plans — — 63 — — 63

Cash dividends on common stock ($ 0.16 per share)

— — — ( 7,089 ) — ( 7,089 )

Balances, September 30, 2023 $ — $ — $ 355,478 $ 461,325 $ ( 123,434 ) $ 693,369

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Dollar Amounts in Thousands, Except Per Share Data)

Nine Months Ended

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Balances, January 1, 2023 $ — $ — $ 354,188 $ 429,385 $ ( 106,198 ) $ 677,375

Net income — — — 18,228 — 18,228

Other comprehensive loss, net of tax — — — — ( 130,466 ) ( 130,466 )

Other comprehensive income, net of tax — — — — 14,166 14,166

Amortization of unearned compensation — — 758 — — 758

Exercise of stock options — — 108 — — 108

Stock option expense — — 13 — — 13

Net settlement of share awards — — ( 696 ) — — ( 696 )

2 unchanged sentences

— — — ( 7,057 ) — ( 7,057 )

Balances, September 30, 2022 $ — $ — $ 352,837 $ 415,277 $ ( 123,121 ) $ 644,993

Balances, March 31, 2023 $ — $ — $ 354,035 $ 440,556 $ ( 92,032 ) $ 702,559

Balances, January 1, 2024 $ — $ — $ 356,400 $ 429,021 $ ( 66,609 ) $ 718,812

Net income — — — 13,991 — 13,991

Other comprehensive income, net of tax — — — — ( 17,236 ) ( 17,236 )

Other comprehensive loss, net of tax — — — — ( 4,667 ) ( 4,667 )

Amortization of unearned compensation — — 907 — — 907

Net settlement of share awards — — ( 708 ) — — ( 708 )

Stock retirement plans — — ( 153 ) — — ( 153 )

Cash dividends on common stock ($ 0.16 per share)

— — — ( 7,085 ) — ( 7,085 )

Balances, September 30, 2023 $ — $ — $ 355,478 $ 461,325 $ ( 123,434 ) $ 693,369

Balances, March 31, 2024 $ — $ — $ 356,599 $ 435,927 $ ( 71,276 ) $ 721,250

See notes to condensed consolidated financial statements

3 unchanged sentences

(Dollar Amounts in Thousands)

Nine Months Ended

Three Months Ended

Operating Activities

5 unchanged sentences

Amortization of mortgage servicing rights 476 247

Impairment (recovery) of mortgage servicing rights — ( 2,594 )

Premium amortization on securities, net 2,182 2,751

19 unchanged sentences

Purchase of FHLB stock ( 19,317 ) ( 5,587 )

Redemption of FHLB stock — 198

Purchase of loans ( 153,743 ) ( 62,489 )

2 unchanged sentences

Premises and equipment expenditures ( 1,178 ) ( 567 )

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

Proceeds from bank owned life insurance 22,917 —

6 unchanged sentences

Net settlement of share awards ( 708 ) ( 696 )

Exercise of stock options — 108

Dividends paid on common stock ( 7,086 ) ( 7,057 )

3 unchanged sentences

Cash and Cash Equivalents, End of Period $ 271,088 $ 134,722

Additional Supplemental Information

Interest paid $ 56,372 $ 26,019

Income taxes paid — —

HORIZON BANCORP, INC.

2 unchanged sentences

(Dollar Amounts in Thousands)

Additional Supplemental Information

Interest paid $ 84,403 $ 18,384

Income taxes paid 1,554 936

Transfer of loans to other real estate and repossessed assets 253 868

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

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

See notes to condensed consolidated financial statements

7 unchanged sentences

All inter–company balances and transactions have been eliminated.

The results of operations for the periods ended September 30, 2023 and September 30, 2022 are not necessarily indicative of the operating results for the full year of 2023 or 2022.

The results of operations for the periods ended March 31, 2024 and March 31, 2023 are not necessarily indicative of the operating results for the full year of 2024 or 2023.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of Horizon’s management, necessary to fairly present the financial position, results of operations and cash flows of Horizon for the periods presented.

4 unchanged sentences

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

As of September 30, 2023, Horizon had repurchased a total of 803,349 shares at an average price per share of $ 16.89 .

As of March 31, 2024, Horizon had repurchased a total of 803,349 shares at an average price per share of $ 16.89 .

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

1 unchanged sentence

The following table shows computation of basic and diluted earnings per share.

Three Months Ended Nine Months Ended

September 30 September 30

2023 2022 2023 2022

Three Months Ended

Basic earnings per share

14 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

There were 665,063 and 624,189 shares for the three and nine months ended September 30, 2023 which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 316,760 and 316,760 shares for the three and nine months ended September 30, 2022 which were not included in the computation of diluted earnings per share because they were non–dilutive.

Reclassifications

Certain reclassifications have been made to the 2022 condensed consolidated financial statements to be comparable to 2023.

These reclassifications were not material and had no effect on net income.

Revision of Previously Issued Financial Statements

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

The errors relate to the amortization expense of the indirect loan dealer reserve asset not being reported as a reduction in interest income on loans, the non–cash transfer of available for sale securities to held to maturity securities and the incorrect classification of revolving lines of credit as term loans in the vintage loan disclosure.

The correction of these errors resulted in a reduction in interest income on loans receivable and a reduction in non–interest loan expense on the Company's consolidated income statement, the disclosure of the transfer of available for sale securities to held to maturity securities in the statements of cash flows and the classification of certain term loans as lines of credit in the vintage loan disclosure.

These revisions do not impact the Company's net income.

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 year ended December 31, 2022 and in our Quarterly Report on Form 10–Q for the three and nine months ended September 30, 2022.

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

Consolidated Statements of Income

Three Months Ended September 30, 2022

As Reported Indirect Loan Dealer Reserve Adjustment As Revised

Interest income

Loans receivable $ 47,051 $ ( 1,534 ) $ 45,517

Total interest income 63,030 ( 1,534 ) 61,496

Net interest income 53,395 ( 1,534 ) 51,861

Net interest income after credit loss expense (recovery) 53,996 ( 1,534 ) 52,462

Non–interest expense

Loan expense 2,926 ( 1,534 ) 1,392

Total non–interest expense 38,350 ( 1,534 ) 36,816

Net income 23,821 — 23,821

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

Consolidated Statements of Income

Nine Months Ended September 30, 2022

As Reported Indirect Loan Dealer Reserve Adjustment As Revised

Interest income

Loans receivable $ 126,479 $ ( 3,838 ) $ 122,641

Total interest income 172,684 ( 3,838 ) 168,846

Net interest income 154,574 ( 3,838 ) 150,736

Net interest income after credit loss expense (recovery) 156,321 ( 3,838 ) 152,483

Non–interest expense

Loan expense 7,968 ( 3,838 ) 4,130

Total non–interest expense 111,328 ( 3,838 ) 107,490

Net income 72,243 — 72,243

Additional immaterial reclassifications made to the 2022 condensed consolidated financial statements to be comparable to 2023 are not included within the revision to the consolidated statement of cash flows noted below.

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2022

As Reported Indirect Loan Dealer Reserve Adjustment Transfer of AFS Securities to HTM Securities As Revised

Operating Activities

Net change in other assets $ ( 12,865 ) $ 5,400 $ — $ ( 7,465 )

Net cash provided by operating activities 77,664 5,400 — 83,064

Investing activities

Net change in loans ( 370,251 ) ( 5,400 ) — ( 375,651 )

Net cash used in investing activities ( 902,327 ) ( 5,400 ) — ( 907,727 )

Net Change in Cash and Cash Equivalents ( 483,849 ) — — ( 483,849 )

Additional Supplemental Information

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following tables present loans by credit grades and origination year at December 31, 2022.

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

Total commercial $ 2,131,723 $ 335,699 $ 2,467,422 $ 1,945,448 $ 331,920 $ 190,054 $ 2,467,422

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

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

Total real estate $ 611,946 $ 110,875 $ 722,821 $ 612,551 $ 40,741 $ 69,529 $ 722,821

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

Total consumer $ 958,714 $ 9,041 $ 967,755 $ 609,741 $ 9,041 $ 348,973 $ 967,755

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

There were 86,353 shares for the three months ended March 31, 2024 which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 601,685 shares for the three months ended March 31, 2023 which were not included in the computation of diluted earnings per share because they were non–dilutive.

Adoption of New Accounting Standards

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No.

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 , in March 2022.

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

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

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

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

These amendments should be applied prospectively.

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

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

The Company 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):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

The FASB has issued ASU 2020–04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the LIBOR or other interbank offered rates on financial reporting.

To help with the transition to new reference rates, the ASU provides optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships.

The main provisions include:

• A change in a contract's reference interest rate would be accounted for as a continuation of that contract rather than as the creation of a new one for contracts, including loans, debt, leases, and other arrangements, that meet specific criteria.

• When updating its hedging strategies in response to reference rate reform, an entity would be allowed to preserve its hedge accounting.

The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued.

Because the guidance is meant to help entities through the transition period, it will be in effect for a limited time and will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients that are retained through the end of the hedging relationship.

The amendments in this ASU are effective March 12, 2020 through December 31, 2022.

ASU 2020–04 permits relief solely for reference rate reform actions and permits different elections over the effective date for legacy and new activity.

Accordingly, the Company is evaluating and reassessing the elections on a quarterly basis.

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.

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 the third quarter of 2023 as it transferred its loans and other financial instruments to another reference rate.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

Accounting Guidance Issued But Not Yet Adopted

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

5 unchanged sentences

Early adoption is permitted in any interim period.

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

The Company adopted ASU 2023–02 on January 1, 2024 and it did not have a material impact on its accounting and disclosures.

Accounting Guidance Issued But Not Yet Adopted

2023–09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

The FASB has issued ASU 2023–09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

These amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate.) The amendments also require that all entities disclose on an annual basis the following information about income taxes paid:

(1) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received.) This guidance is effective for public business entities for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The amendments should be applied on a prospective basis although retrospective application is permitted.

The Company is continuing to assess ASU 2023–09 and its impact on its accounting and disclosures.

FASB ASU 2023–07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

The FASB has issued ASU 2023–07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

These amendments require, among other things, that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 208.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

A public entity should apply the amendments retrospectively to all periods presented in the financial statements.

The Company is continuing to assess ASU 2023–07 and its impact on its accounting and disclosures.

HORIZON BANCORP, INC.

4 unchanged sentences

The fair value of securities is as follows:

September 30, 2023

March 31, 2024

Available for sale

5 unchanged sentences

Total available for sale investment securities $ 628,431 $ — $ ( 93,112 ) $ 535,319

March 31, 2024

Value Allowance for Credit Losses Net

Carrying Amount

Held to maturity

14 unchanged sentences

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

December 31, 2023

Value Allowance for Credit Losses Net

Held to maturity

6 unchanged sentences

Total held to maturity investment securities $ 1,945,795 $ 1,185 $ ( 278,222 ) $ 1,668,758 $ ( 157 ) $ 1,945,638

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

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

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

The net unrealized holding 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 comprehensive income over the remaining life of the securities.

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

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2023 and December 31, 2022, by contractual maturity, are shown below.

The amortized cost and fair value of securities available for sale and held to maturity at March 31, 2024 and December 31, 2023, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2023

March 31, 2024 December 31, 2023

Value Amortized

Available for sale

21 unchanged sentences

(Table Dollar Amounts in Thousands, Except 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.

September 30, 2023

The following tables show 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.

March 31, 2024

Less than 12 Months 12 Months or More Total

7 unchanged sentences

Federal agency mortgage–backed pools — — 133,142 ( 24,670 ) 133,142 ( 24,670 )

Private labeled mortgage–backed pools — — 27,298 ( 5,694 ) 27,298 ( 5,694 )

Corporate notes — — 36,547 ( 5,573 ) 36,547 ( 5,573 )

10 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 )

1 unchanged sentence

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

As of September 30, 2023 and December 31, 2022, the Company had 2,651 and 2,828 securities, respectively, with market values below their cost basis.

The total fair value of these investments at September 30, 2023 and December 31, 2022 was $ 2.4 billion and $ 2.6 billion, which is approximately 99.6 % and 97.0 %, respectively, of the Company's available for sale and held to maturity securities portfolio.

As of March 31, 2024 and December 31, 2023, the Company had 2,320 and 2,290 securities, respectively, with market values below their cost basis.

The total fair value of these investments at March 31, 2024 and December 31, 2023 was $ 2.1 billion and $ 2.1 billion, which is approximately 86.0 % and 85.1 %, respectively, of the Company's available for sale and held to maturity securities portfolio.

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

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

No allowance for credit losses for available for sale debt securities or held to maturity securities was recorded at September 30, 2023 or December 31, 2022.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 16.7 million at September 30, 2023 and $ 17.8 million at December 31, 2022 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 recorded at March 31, 2024 or December 31, 2023.

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 consider 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 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

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

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 March 31, 2024 and December 31, 2023, there were no past due principal and interest payments associated with these securities.

An allowance for credit loss of $ 158,000 and $ 157,000 was recorded on these securities based on applying the long-term historical rating agency credit loss rate for similarly rated securities at March 31, 2024 and December 31, 2023, respectively.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 14.4 million at March 31, 2024 and $ 14.7 million at December 31, 2023 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.

Based on an evaluation of available evidence, management believes the unrealized losses on state and municipal securities, private labeled mortgage–backed pools and corporate notes were due to changes in interest rates.

2 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30 September 30

2023 2022 2023 2022

Three Months Ended

Sales of securities available for sale

13 unchanged sentences

Mortgage warehouse Mortgage warehouse

Consumer Direct installment

Indirect installment

Portfolio segment is defined as a level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses.

Class of financing receivable is defined as a group of financing receivables determined on the basis of both of the following, 1) risk characteristics of the financing receivable, and 2) an entity’s method for monitoring and assessing credit risk.

Generally, the Bank does not move loans from a revolving loan to a term loan other than construction loans.

Residential construction loans are reviewed and rewritten prior to being originated as a term loan.

Consumer Installment

Indirect auto

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following table presents total loans outstanding by portfolio class, as of September 30, 2023 and December 31, 2022:

September 30,

Portfolio segment is defined as a level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses.

Generally, the Bank does not move loans from a revolving loan to a term loan other than construction loans.

Construction loans are reviewed and rewritten prior to being originated as a term loan.

The following table presents total loans outstanding by portfolio class, as of March 31, 2024 and December 31, 2023:

2024 December 31,

9 unchanged sentences

Total real estate 838,619 726,214

Direct installment 54,399 56,614

Indirect installment 439,922 500,549

Installment 109,370 52,366

Indirect auto 360,835 399,946

Home equity 559,585 564,144

3 unchanged sentences

Net loans $ 4,567,788 $ 4,367,601

Total loans include net deferred loan costs of $ 23.1 million at September 30, 2023 and $ 22.7 million at December 31, 2022, respectively.

Total loans include net deferred loan costs of $ 22.9 million at March 31, 2024 and $ 21.9 million at December 31, 2023, respectively.

The risk characteristics of each loan portfolio segment are as follows:

9 unchanged sentences

Management monitors and evaluates commercial real estate loans based on collateral, cash flow and risk grade criteria.

As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk.

In addition, management tracks the level of owner–occupied commercial real estate loans versus non–owner occupied loans.

As a general rule, the Company avoids financing

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

single purpose projects unless other underwriting factors are present to help mitigate risk.

In addition, management tracks the level of owner occupied commercial real estate loans versus non-owner occupied loans.

Real Estate and Consumer

With respect to residential loans that are secured by 1–4 family residences and are generally owner occupied, the Company generally establishes a maximum loan–to–value ratio and requires private mortgage insurance if that ratio is exceeded.

With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and may require private mortgage insurance if that ratio is exceeded.

Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles.

15 unchanged sentences

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

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

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

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

6 unchanged sentences

Non–performing Loans

The following table presents non–accrual loans and loans past due over 90 days still on accrual by class of loans at September 30, 2023:

September 30, 2023

The following table presents non–accrual loans and loans past due over 90 days still on accrual by class of loans at March 31, 2024:

March 31, 2024

Non–accrual Loans Past

Accruing Total

Non–performing

Loans Non–performing

with no Allowance for Credit Losses

Accruing Non–accruing Loans with no Allowance for Credit Losses

Owner occupied real estate $ 3,563 $ — $ 2,728

8 unchanged sentences

Total real estate 8,725 — —

Direct installment 132 — 132 132

Indirect installment 972 209 1,181 1,181

Installment 135 3 —

Indirect auto 944 64 —

Home equity 3,756 41 —

5 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following table presents non–accrual loans, loans past due over 90 days still on accrual, and troubled debt restructurings (“TDRs”) by class of loan at December 31, 2022:

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

December 31, 2023

Non–accrual Loans Past

Accruing Non–performing

TDRs Performing

Non–performing

Loans Non–performing

with no Allowance for Credit Losses

Accruing Non–accruing Loans with no Allowance for Credit Losses

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

8 unchanged sentences

Total real estate 8,058 — —

Direct installment 138 26 — — 164 164

Indirect installment 745 23 — — 768 768

Installment 88 — —

Indirect auto 899 299 —

Home equity 3,303 260 —

1 unchanged sentence

Total $ 19,710 $ 559 $ 3,668

There was no interest income recognized on non–accrual loans during the nine months ended September 30, 2023 and 2022, respectively, while the loans were in non–accrual status.

There was no interest income recognized on non–accrual loans during the three months ended March 31, 2024 and 2023, respectively, while the loans were in non–accrual status.

HORIZON BANCORP, INC.

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(Table Dollar Amounts in Thousands, Except Per Share Data)

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 19.1 million at September 30, 2023:

September 30, 2023

The following table presents the payment status by class of loan at March 31, 2024:

March 31, 2024

Current 30–59 Days

12 unchanged sentences

Total real estate 832,056 3,261 809 2,493 6,563 838,619

Direct installment 53,848 418 1 — 419 54,267

Indirect installment 432,498 5,543 700 209 6,452 438,950

Installment 108,964 118 214 74 406 109,370

Indirect auto 356,423 3,405 615 392 4,412 360,835

Home equity 553,731 3,747 497 1,610 5,854 559,585

5 unchanged sentences

(Table Dollar Amounts in Thousands, Except 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

13 unchanged sentences

Total real estate 718,903 2,823 2,353 2,135 7,311 726,214

Direct installment 56,266 168 16 26 210 56,476

Indirect installment 494,341 4,536 904 23 5,463 499,804

Installment 52,001 304 10 51 365 52,366

Indirect auto 393,615 4,958 736 637 6,331 399,946

Home equity 558,062 3,748 1,217 1,117 6,082 564,144

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

These amendments eliminated 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.

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 first nine months of 2023, the Company did not modify any loans.

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.

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 default were individually evaluated for impairment at the time of default.

During the three months ended March 31, 2024 and March 31, 2023, the Company did not modify any troubled loans.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

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

Non–owner occupied real estate — 269 269

Residential spec homes — — —

Development & spec land — — —

Commercial and industrial — — —

Total commercial — 837 837

Residential mortgage 1,210 1,391 2,601

Residential construction — — —

Mortgage warehouse — — —

Total real estate 1,210 1,391 2,601

Direct installment — — —

Indirect installment — — —

Home equity 338 342 680

Total consumer 338 342 680

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

Collateral Dependent Financial Assets

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However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The table below presents 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.

September 30, 2023

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 March 31, 2024 and December 31, 2023.

March 31, 2024

Real Estate Accounts Receivable/Equipment Other Total ACL

10 unchanged sentences

Residential spec homes 617 — — 617 —

Development & spec land 815 — — 815 36

Commercial and industrial 563 42 20 625 604

3 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.

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

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.

• 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.

• 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

HORIZON BANCORP, INC.

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(Table Dollar Amounts in Thousands, Except Per Share Data)

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 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 Credit Losses.

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.

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Risk Grade 2:

Loans to businesses that have strong financial statements containing an unmodified opinion from a CPA firm and at least three years consecutive years of profits;

loans supported by unaudited financial statements containing strong balance sheets, five years consecutive years of profits, a five years satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive;

Loans to businesses that have strong financial statements containing an unqualified opinion from a CPA firm and at least three years consecutive years of profits;

loans supported by unaudited financial statements containing strong balance sheets, five consecutive years of profits, a five year satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive;

loans secured by publicly traded marketable securities with required margins where there is no impediment to liquidation;

7 unchanged sentences

Loans may be graded Satisfactory when there is no recent information on which to base a current risk evaluation and the following conditions apply:

• At inception, the loan was properly underwritten, did not possess an unwanted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory.

• At inception, the loan was properly underwritten, did not possess an unwarranted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory;

• At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss.

1 unchanged sentence

• During the period that the loan has been outstanding, there has been no evidence of any credit weakness.

Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the borrower is in an industry known to be experiencing problems.

If any of these credit weaknesses is observed, a lower risk grade may be warranted.

Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan

HORIZON BANCORP, INC.

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(Table Dollar Amounts in Thousands, Except Per Share Data)

covenants, or the borrower is in an industry known to be experiencing problems.

If any of these credit weaknesses is observed, a lower risk grade may be warranted.

Risk Grade 4:

27 unchanged sentences

• Loans have a distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

• Unusual courses of action are need to maintain a high probability of repayment.

• Unusual courses of action are needed to maintain a high probability of repayment.

• The borrower is not generating enough cash flow to repay loan principal;

18 unchanged sentences

Loans are considered uncollectible and of such little value that continuing to carry them as assets is not feasible.

Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all of a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following tables present loans by credit grades and origination year at September 30, 2023.

September 30, 2023 2023 2022 2021 2020 2019 Prior Revolving Term Loans Revolving Loans Total

The following tables present loans by credit grades and origination year at March 31, 2024.

March 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Term Loans Revolving Loans Total

Owner occupied real estate

37 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

September 30, 2023 2023 2022 2021 2020 2019 Prior Revolving Term Loans Revolving Loans Total

March 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Term Loans Revolving Loans Total

Residential mortgage

13 unchanged sentences

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

September 30, 2023 2023 2022 2021 2020 2019 Prior Revolving Term Loans Revolving Loans Total

Direct installment

March 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Term Loans Revolving Loans Total

Performing $ 3,533 $ 71,835 $ 12,263 $ 7,167 $ 3,845 $ 8,532 $ 16 $ 2,041 $ 109,232

Non–performing — 8 44 55 — 31 — — 138

Total direct installment $ 12,518 $ 14,719 $ 9,218 $ 4,853 $ 5,181 $ 5,657 $ 11 $ 2,242 $ 54,399

Total installment $ 3,533 $ 71,843 $ 12,307 $ 7,222 $ 3,845 $ 8,563 $ 16 $ 2,041 $ 109,370

Gross charge–offs during period $ — $ 18 $ 124 $ 1 $ 17 $ 21 $ — $ — $ 181

Indirect installment

Indirect auto

Performing $ 643 $ 60,833 $ 176,167 $ 72,595 $ 30,750 $ 18,839 $ — $ — $ 359,827

Non–performing — 74 366 227 196 145 — — 1,008

Total indirect installment $ 68,382 $ 208,816 $ 89,489 $ 41,437 $ 20,402 $ 11,396 $ — $ — $ 439,922

Total indirect auto $ 643 $ 60,907 $ 176,533 $ 72,822 $ 30,946 $ 18,984 $ — $ — $ 360,835

Gross charge–offs during period $ — $ 43 $ 222 $ 81 $ 77 $ 42 $ — $ — $ 465

15 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 $ 463,377 $ 381,771 $ 209,886 $ 171,456 $ 171,365 $ 547,593 $ 331,920 $ 190,054 $ 2,467,422

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

HORIZON BANCORP, INC.

7 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 $ 107,224 $ 157,880 $ 91,599 $ 34,391 $ 36,778 $ 184,679 $ 40,741 $ 69,529 $ 722,821

Gross charge-offs during period $ — $ — $ — $ — $ — $ — $ — $ — $ —

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

Direct installment

Performing $ 14,835 $ 13,447 $ 7,859 $ 4,246 $ 4,449 $ 5,074 $ 6 $ 2,362 $ 52,278

Non–performing — 44 10 — 27 7 — — 88

Total direct installment $ 18,935 $ 12,283 $ 7,195 $ 7,647 $ 3,964 $ 4,430 $ 9 $ 2,151 $ 56,614

Indirect installment

Total 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 auto

Performing $ 65,260 $ 191,871 $ 80,773 $ 35,995 $ 16,690 $ 8,159 $ — $ — $ 398,748

Non–performing 49 424 312 229 124 60 — — 1,198

Total indirect installment $ 259,473 $ 119,130 $ 60,272 $ 34,757 $ 19,163 $ 7,754 $ — $ — $ 500,549

Total indirect auto $ 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 $ 304,748 $ 135,249 $ 70,841 $ 47,508 $ 28,671 $ 22,724 $ 9,041 $ 348,973 $ 967,755

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

HORIZON BANCORP, INC.

3 unchanged sentences

Note 4 – Allowance for Credit and Loan Losses

The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, 2023

Commercial Real Estate Mortgage Warehouse Consumer Total

Balance, beginning of period $ 30,354 $ 3,648 $ 893 $ 15,081 $ 49,976

Credit loss expense (recovery) ( 665 ) ( 893 ) ( 179 ) 2,257 520

PCD loan charge–offs ( 75 ) — — — ( 75 )

Charge–offs ( 188 ) ( 15 ) — ( 927 ) ( 1,130 )

Recoveries 46 54 — 308 408

Balance, end of period $ 29,472 $ 2,794 $ 714 $ 16,719 $ 49,699

Three Months Ended September 30, 2022

Commercial Real Estate Mortgage Warehouse Consumer Total

Balance, beginning of period $ 34,802 $ 4,422 $ 1,067 $ 12,059 $ 52,350

Credit loss expense (recovery) ( 703 ) 640 ( 43 ) ( 495 ) ( 601 )

PCD loan charge–offs ( 242 ) — — — ( 242 )

Charge–offs ( 103 ) ( 27 ) — ( 592 ) ( 722 )

Recoveries 52 102 — 430 584

Balance, end of period $ 33,806 $ 5,137 $ 1,024 $ 11,402 $ 51,369

Nine Months Ended September 30, 2023

The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024

Commercial Real Estate Mortgage Warehouse Consumer Total

5 unchanged sentences

Balance, end of period $ 30,514 $ 2,655 $ 659 $ 16,559 $ 50,387

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Commercial Real Estate Mortgage Warehouse Consumer Total

6 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”).

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

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.

1 unchanged sentence

The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data.

The Company's historical look–back period includes January 2008 through the economic cycle, on a quarterly basis.

The Company’s historical look–back period includes January 2009 through the current period, on a monthly basis.

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 econometrics, as well as management judgment, as the basis for the forecast period.

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

The forecasted loss rate then reverts to the historical base rate on a straight–line methodology for the remaining life of loan for each pool.

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.

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

financial asset type, loan purpose, collateral type, loan characteristics, credit characteristics, outstanding loan balances, contractual terms and prepayment assumptions, industry of the borrower and concentrations, and historical or expected credit loss patterns.

Note 5 – Loan Servicing

Loans serviced for others are not included in the accompanying condensed consolidated balance sheets.

The unpaid principal balances of loans serviced for others totaled approximately $ 1.486 billion and $ 1.532 billion at September 30, 2023 and December 31, 2022.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

Note 5 – Loan Servicing

Loans serviced for others are not included in the accompanying condensed consolidated balance sheets.

The unpaid principal balances of loans serviced for others totaled approximately $ 1.460 billion and $ 1.479 billion at March 31, 2024 and December 31, 2023.

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

For purposes of measuring impairment, risk characteristics including product type, investor type and interest rates were used to stratify the originated mortgage servicing rights.

Mortgage servicing rights are included in other assets on the balance sheets as of September 30, 2023 and December 31, 2022.

Three Months Ended Nine Months Ended

September 30, September 30, September 30, September 30,

2023 2022 2023 2022

Mortgage servicing rights are included in other assets on the balance sheets as of March 31, 2024 and December 31, 2023.

Three Months Ended

March 31, March 31,

Mortgage servicing rights

12 unchanged sentences

Note 6 – Goodwill

The carrying amount of goodwill was $ 155.2 million as of September 30, 2023 and December 31, 2022, respectively.

There were no changes in the carrying amount of goodwill for the three and nine months ended September 30, 2023 and 2022.

The carrying amount of goodwill was $ 155.2 million as of March 31, 2024 and December 31, 2023, respectively.

There were no changes in the carrying amount of goodwill for the three months ended March 31, 2024 and 2023.

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

2 unchanged sentences

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

Goodwill was assessed for impairment using a quantitative analysis as of August 31, 2023 which resulted in no goodwill impairment charges for the nine months ended September 30, 2023.

Note 7 – Repurchase Agreements

The Company transfers various securities to customers in exchange for cash at the end of each business day and agrees to acquire the securities at the end of the next business day for the cash exchanged plus interest.

The process is repeated at the end of each business day until the agreement is terminated.

The securities underlying the agreement remained under the Company’s control.

No goodwill impairment charges were recorded for the three months ended March 31, 2024 and 2023.

During the first quarters of 2024 and 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 during the third quarter of 2023, 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 March 31, 2024, it was more likely than not that the fair value of goodwill exceeded its carrying value.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

Note 7 – Repurchase Agreements

The process is repeated at the end of each business day until the agreement is terminated.

The securities underlying the agreement remained under the Company’s control.

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

September 30, 2023

March 31, 2024

Remaining Contractual Maturity of the Agreements

13 unchanged sentences

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

Securities sold under agreements to repurchase are secured by securities with a carrying amount of $ 154.8 million and $ 160.5 million at September 30, 2023 and December 31, 2022, respectively.

Securities sold under agreements to repurchase are secured by securities with a carrying amount of $ 147.6 million and $ 145.2 million at March 31, 2024 and December 31, 2023, respectively.

Note 8 – Subordinated Notes

18 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 $ 55.6 million and $ 55.5 million at March 31, 2024 and December 31, 2023, respectively.

Note 9 – Derivative Financial Instruments

1 unchanged sentence

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into an interest rate swap agreement for a portion of its floating rate debt on July 20, 2018.

The agreement provides for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a fixed 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.

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

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.

Management has designated the interest rate swap agreement as a cash flow hedging instrument.

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.

5 unchanged sentences

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current earnings.

At September 30, 2023, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

At March 31, 2024, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

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

6 unchanged sentences

The Company enters into non–hedging derivatives in the form of mortgage loan forward sale commitments with investors and commitments to originate mortgage loans as part of its mortgage banking business.

At September 30, 2023, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.

At March 31, 2024, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.

The change in fair value of both the forward sale commitments and commitments to originate mortgage loans were recorded and the net gains or losses included in the Company’s gain on sale of loans.

1 unchanged sentence

Asset Derivatives Liability Derivatives

September 30, 2023 September 30, 2023

March 31, 2024 March 31, 2024

Value Notional

Derivatives designated as hedging instruments

Interest rate contracts – cash flow hedges $ — $ — $ — $ —

Total derivatives designated as hedging instruments — — — —

Derivatives not designated as hedging instruments

7 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

8 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

The effect of the derivative instruments on the condensed consolidated statements of comprehensive income for the three and nine–month periods ended September 30 is as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

The effect of the derivative instruments on the condensed consolidated statements of comprehensive income (loss) for the three–month periods ended March 31 is as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative

Three Months Ended

March 31, 2024 March 31, 2023

Derivatives in cash flow hedging relationship

Interest rate contracts $ — $ ( 442 )

The effect of the derivative designated as a hedging instrument on the condensed consolidated statements of income for the three and nine–month periods ended September 30 is as follows:

The effect of the derivative designated as a hedging instrument on the condensed consolidated statements of income for the three–month periods ended March 31 is as follows:

Location of gain

recognized on derivative Amount of Gain (Loss) Recognized on Derivative

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Derivative designated as hedging instruments

1 unchanged sentence

Total $ — $ 209

The effect of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three and nine–month periods ended September 30 is as follows:

The effect of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three–month periods ended March 31 is as follows:

Location of gain (loss)

recognized on derivative Amount of Gain (Loss) Recognized on Derivative

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Derivatives not designated as hedging instruments

17 unchanged sentences

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated financial statements, as well as the general classification of such instruments pursuant to the valuation hierarchy.

There have been no significant changes in the valuation techniques during the period ended September 30, 2023.

There have been no significant changes in the valuation techniques during the period ended March 31, 2024.

For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

20 unchanged sentences

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated 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:

September 30, 2023

March 31, 2024

Fair Value Quoted Prices in Active Markets

11 unchanged sentences

Commitments to originate mortgage loans 88 — 88 —

Interest rate swap agreements liability ( 50,519 ) — ( 50,519 ) —

Mortgage loan contracts 9 — 9 —

Interest rate swap agreements liability ( 31,244 ) — ( 31,244 ) —

December 31, 2023

12 unchanged sentences

Commitments to originate mortgage loans 125 — 125 —

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

Mortgage loan contracts 33 — 33 —

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

HORIZON BANCORP, INC.

7 unchanged sentences

(Level 2) Significant

September 30, 2023

March 31, 2024

Collateral dependent loans $ 622 $ — $ — $ 622

6 unchanged sentences

The following table presents qualitative information about unobservable inputs used in recurring and non–recurring Level 3 fair value measurements, other than goodwill.

September 30, 2023

March 31, 2024

Value Valuation

17 unchanged sentences

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 September 30, 2023 and December 31, 2022.

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at March 31, 2024 and December 31, 2023.

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

9 unchanged sentences

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.

10 unchanged sentences

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.

September 30, 2023

March 31, 2024

Amount Quoted Prices in Active Markets

6 unchanged sentences

Loans held for sale 922 — — 922

Loans (excluding loan level hedges), net 4,309,303 — — 4,213,446

Loans, net 4,567,788 — — 4,296,425

Stock in FHLB 53,826 — 53,826 —

15 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 —

11 unchanged sentences

Note 12 – Accumulated Other Comprehensive Income (Loss)

September 30,

2024 December 31,

Unrealized gain (loss) on securities available for sale $ ( 159,454 ) $ ( 140,144 )

Unamortized gain (loss) on securities held to maturity, previously transferred from AFS 3,209 3,740

Unrealized gain (loss) on derivative instruments — 1,976

Tax effect 32,811 28,230

Unrealized gain (loss) on securities available for sale, net of tax $ ( 73,559 ) $ ( 69,018 )

Unamortized gain (loss) on securities held to maturity, previously transferred from AFS, net of tax 2,283 2,409

Total accumulated other comprehensive income (loss) $ ( 71,276 ) $ ( 66,609 )

10 unchanged sentences

In addition, to be categorized as well capitalized, the Company and Bank must maintain 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 September 30, 2023 and December 31, 2022, the Company and Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the end of the third quarter of 2023 that management believes have changed the Bank’s classification as well capitalized.

As of March 31, 2024 and December 31, 2023, the Company and Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the end of the first quarter of 2024 that management believes have changed the Bank’s classification as well capitalized.

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

3 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

Horizon and the Bank’s actual and required capital ratios as of September 30, 2023 and December 31, 2022 were as follows:

Horizon and the Bank’s actual and required capital ratios as of March 31, 2024 and December 31, 2023 were as follows:

Actual Required for Capital

7 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

September 30, 2023

March 31, 2024

Total capital (to risk–weighted assets) (1)

39 unchanged sentences

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 September 30, 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.

As of March 31, 2024, 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.

4 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2023 and 2022

For the Three Months ended March 31, 2024 and 2023

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-Q

Item 1. Financial Statements