What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-12 · 118 added, 216 removed, 304 unchanged (52% of the section changed)

10 unchanged sentences

Risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward–looking statement include but are not limited to:

• effects on Horizon’s business resulting from new U.S.

domestic or foreign governmental trade measures, including but not limited to tariffs, import and export controls, foreign exchange intervention accomplished to offset the effects of trade policy or in response to currency volatility, and other restrictions on free trade;

• uncertain conditions within the domestic and international macroeconomic environment, including trade policy, monetary and fiscal policy, and conditions in the investment, credit, interest rate, and derivatives markets, and their impact on Horizon and its customers;

• current financial conditions within the banking industry;

10 unchanged sentences

• changes in prepayment speeds, loan originations, credit losses and market values, collateral securing loans and other assets;

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the three months ended March 31, 2025 and 2024

• changes in sources of liquidity;

4 unchanged sentences

• changes in accounting policies or procedures as may be adopted and required by regulatory agencies;

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

• litigation, regulatory enforcement, tax, and legal compliance risk and costs, as applicable generally and specifically to the financial and fiduciary (generally and as an ESOP fiduciary) environment, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same;

21 unchanged sentences

There have been no material changes in the Company’s application of critical accounting estimates since December 31, 2024.

Results of Operations

Net income increased $2.0 million to $18.2 million, or $0.42 per share, during the three months ended September 30, 2024 when compared to $16.2 million, or $0.37 per share, for the same period in 2023.

The increase from the year ago period was primarily driven by an increase in net interest income and a reduction in the effective tax rate in the current period, partially offset by an increase in non-interest expense when compared to the year ago period.

Net interest income

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

increased by $4.8 million, or 11.5% when compared with the year ago period, driven by a modest increase in average earning assets and a 25 basis point increase in the net FTE interest margin 1 , to 2.66% in the current period.

Net income declined $6.9 million to $46.3 million, or $1.06 per share, during the nine months ended September 30, 2024 when compared to $53.2 million, or $1.22 per share, for the same period in 2023.

The decrease from the year ago period was primarily a result of growth in non-interest expense, a decline in non-interest income and increased provision for loan loss related to loan growth in the current period.

For the three months ended March 31, 2025 and 2024

Results of Operations

Net income increased $9.9 million to $23.9 million, or $0.54 per diluted share, during the three months ended March 31, 2025 when compared to $14.0 million, or $0.32 per diluted share, for the s ame period in 2024.

The increase in net income from the prior year period reflects an increase in interest income of $3.9 million, a decrease of in interest expense of $5.1 million and an increase in non-interest income of $6.6 million.

The increase was partially offset by an increase in non-interest expense of $2.2 million and an increase in tax expense of $2.8 million.

Net Interest Income

Net interest income increased $4.8 million during the three months ended September 30, 2024, to $46.9 million, when compared to the same period in 2023.

While average earning asset growth was modest, the reported net FTE interest margin 1 increased by 25 basis points, to 2.66% for the three months ended September 30, 2024 compared to the year ago period, attributable to the favorable mix shift in both average interest earning assets toward higher-yielding loans and the funding mix toward lower cost deposit liabilities, in addition to a higher contribution to the net FTE interest margin 1 from interest-free funds.

Interest accretion from the fair value of acquired loans did not contribute significantly to the third quarter net interest income, or net FTE interest margin 1 .

Net interest income increased $9.0 million, or 20.7% during the three months ended March 31, 2025, to $52.3 million, when compared to the same period in 2024.

While average earning assets decreased, the reported net FTE interest margin 1 increased by 54 basis points, to 3.04% for the three months ended March 31, 2025 compared to the year ago period, attributable to the favorable mix shift in both average interest earning assets toward higher-yielding loans and the funding mix toward lower cost deposit liabilities.

Interest accretion from the fair value of acquired loans did not contribute significantly to the first quarter net interest income, or net FTE interest margin 1 .

1 Non-GAAP financial metric.

4 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

For the three months ended March 31, 2025 and 2024

Following are the average balance sheets for the three months ended (dollars in thousands):

2 unchanged sentences

Three Months Ended

September 30, 2024 September 30, 2023

Interest earning assets

Federal funds sold $ 64,743 $ 860 5.28 % $ 92,305 $ 1,247 5.36 %

Interest earning deposits (7)

8,781 97 4.39 % 8,018 85 4.21 %

Federal Home Loan Bank stock (6)

53,826 1,607 11.88 % 34,509 618 7.10 %

Investment securities - taxable (1)

1,301,830 6,526 1.99 % 1,650,081 8,170 1.96 %

Investment securities - non-taxable (1)

1,125,295 7,987 2.82 % 1,220,998 8,863 2.88 %

Total investment securities 2,427,125 14,513 2.38 % 2,871,079 17,033 2.35 %

Loans receivable (2) (3)

4,775,788 75,828 6.32 % 4,280,700 63,254 5.86 %

Total interest earning assets 7,330,263 92,905 5.04 % 7,286,611 82,237 4.48 %

Non-interest earning assets

Cash and due from banks 108,609 100,331

Allowance for credit losses (52,111) (49,705)

Other assets 471,259 587,514

Total average assets $ 7,858,020 $ 7,924,751

Liabilities and Stockholders' Equity

Interest bearing liabilities

Interest bearing deposits $ 3,386,177 $ 18,185 2.14 % $ 3,267,594 $ 12,661 1.54 %

Time deposits 1,189,148 12,602 4.22 % 1,271,104 12,043 3.76 %

Borrowings 1,149,952 10,221 3.54 % 1,180,452 10,399 3.50 %

Repurchase agreements 123,524 910 2.93 % 136,784 825 2.39 %

Subordinated notes 55,681 830 5.93 % 58,983 880 5.92 %

Junior subordinated debentures issued to capital trusts 57,389 1,230 8.53 % 57,166 1,227 8.52 %

Total interest bearing liabilities 5,961,871 43,978 2.93 % 5,972,083 38,035 2.53 %

Non-interest bearing liabilities

Demand deposits 1,083,214 1,159,241

Accrued interest payable and other liabilities 74,563 77,942

Stockholders' equity 738,372 715,485

Total average liabilities and stockholders' equity $ 7,858,020 $ 7,924,751

Net FTE interest income (non-GAAP) (5)

$ 48,927 $ 44,202

Less FTE adjustments (4)

Net Interest Income $ 46,910 $ 42,090

Net FTE interest margin (Non-GAAP) (4)(5)

2.66 % 2.41 %

(1) Securities balances represent daily average balances for the fair value of securities.

The average rate is calculated based on the daily average balance for the amortized cost of securities.

(2) Includes fees on loans held for sale and held for investment.

The inclusion of loan fees does not have a material effect on the average interest rate.

(3) Non-accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding.

Loan totals are shown net of unearned income and deferred loan fees.

(4) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative.

The Company adjusts interest income and average rates for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate

(5) Non-GAAP financial metric.

See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.

(6) Dividends on FHLB stock.

(7) Includes interest earning deposits and interest earning time deposits.

(8) Average balances are calculated on a daily average basis

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

Net interest income increased $2.0 million during the nine months ended September 30, 2024, to $135.5 million, when compared to the same period in 2023.

Growth in average earning asset balances and a 1 basis point increase in the reported net FTE interest margin 2 , to 2.60% for the nine months ended September 30, 2024 compared to the year ago period drove the net interest income growth versus the year ago comparable period.

The net FTE interest margin expansion over the nine months ended September 30, 2024 was modest, as the increased contribution from interest-free funds was largely offset by the contraction in the net spread between the yield on earning assets and interest-bearing liabilities.

2 Non-GAAP financial metric.

See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

The following are the average balance sheets for the nine months ended (dollars in thousands):

Average Balance Sheet

(Dollars in Thousands, Unaudited)

Nine months ended

September 30, 2024 September 30, 2023

March 31, 2025 March 31, 2024

Interest Average

Interest earning assets

Federal funds sold $ 144,576 $ 5,892 5.44 % $ 43,976 $ 1,706 5.19 %

Interest earning deposits (7)

8,602 300 4.66 % 8,597 254 3.95 %

Interest earning deposits (incl.

Fed Funds Sold) $ 223,148 $ 2,487 4.52 % $ 331,083 $ 4,497 5.46 %

Federal Home Loan Bank stock (1)

15 unchanged sentences

Interest bearing liabilities

Interest bearing deposits $ 3,348,104 $ 50,889 2.03 % $ 3,362,006 $ 31,197 1.24 %

Interest bearing demand deposits $ 1,750,446 $ 6,491 1.50 % $ 1,658,709 $ 6,516 1.58 %

Saving and money market deposits 1,674,590 8,263 2.00 % 1,664,518 9,373 2.26 %

Time deposits 1,212,386 10,847 3.63 % 1,176,921 12,101 4.14 %

Total Deposits 4,637,422 25,601 2.24 % 4,500,148 27,990 2.50 %

Borrowings 971,496 8,772 3.66 % 1,200,728 10,904 3.65 %

14 unchanged sentences

3.04 % 2.50 %

(1) Includes dividend income on FHLB stock.

(2) Securities balances represent daily average balances for the fair value of securities.

8 unchanged sentences

See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.

(6) Dividends on FHLB stock.

(7) Includes interest earning deposits and interest earning time deposits.

(6) Includes dividend income on FHLB stock.

(7) Average balances are calculated on a daily average basis

3 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

For the three months ended March 31, 2025 and 2024

The following table illustrates the impact of changes in the volume of interest earning assets and interest bearing liabilities and interest rates on net interest income for the periods indicated.

Three Months Ended September 30, 2024 vs.

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 vs.

Nine Months Ended September 30, 2023

Change Change

Due to Volume Change

Three Months Ended March 31, 2025 vs.

Three Months Ended March 31, 2024

Change Change

Due to Volume Change

Volume Change

Interest Income

Federal funds sold $ (387) $ (366) $ (21) $ 4,186 $ 4,096 $ 90

Interest earning deposits 12 8 4 46 — $ 46

Interest-bearing deposits in banks $ (2,010) $ (1,289) $ (721)

Federal Home Loan Bank stock 228 272 (44)

4 unchanged sentences

Interest Expense

Interest bearing deposits 5,524 474 $ 5,050 $ 19,692 $ (130) $ 19,822

Interest-bearing demand deposits (25) 350 (375)

Savings and money market savings deposits (1,110) 57 (1,167)

Time deposits (1,254) 353 (1,607)

4 unchanged sentences

Total interest expense (5,068) (1,600) (3,468)

Net FTE interest income (Non-GAAP) 8,940 4,956 3,984

Less change in FTE adjustments (39)

Net Interest Income $ 8,979

Non-Interest Income

Three Months Ended Nine Months Ended

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

(Dollars in Thousands) 2024 2023 2024 2023

Three Months Ended

March 31, March 31,

(Dollars in Thousands) 2025 2024 $ Change % Change

Non-interest Income

3 unchanged sentences

Fiduciary activities 1,326 1,315 11 1 %

Gains (losses) on sale of investment securities — — — (480)

Loss on sale of investment securities (407) — (407) — %

Gain on sale of mortgage loans 1,076 626 450 72 %

3 unchanged sentences

Total non-interest income $ 16,499 $ 9,929 $ 6,570 66 %

Total non-interest income increased $6.6 million for the three months ended March 31, 2025 compared to the same period in 2024.

The primary components of the change were as follows:

Gain on sale of mortgage loans increased by $0.4 million, or 71.9%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by higher volumes of sold loans.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

Total non-interest income declined $0.3 million for the three months ended September 30, 2024 compared to the same period in 2023, and declined $0.5 million for the nine months ended September 30, 2024 compared to the same period in 2023.

Primary drivers of the periodic changes are noted below.

Service charges on deposit accounts increased $0.2 million for the three months ended September 30, 2024 and $0.5 million for the nine months ended September 30, 2024, as compared to the same periods in 2023.

The increases compared to the year ago periods were primarily a result of higher transaction-based fee activity in the current period.

Interchange fees, which include fees earned on qualified debit card volume and merchant processing fees, increased $0.3 million for the three months ended September 30, 2024 and $0.8 million for the nine months ended September 30, 2024, as compared to the same periods in 2023.

The increases were primarily driven by growth in qualified debit card volume for both periods.

Mortgage servicing income decreased $0.2 million for the three months ended September 30, 2024 and $0.7 million for the nine months ended September 30, 2024, as compared to the same periods in 2023.

The decrease was primarily driven by higher levels of amortization expense of mortgage servicing rights in the current period.

Cash value of bank owned life insurance decreased $0.7 million for the three months ended September 30, 2024 and $2.1 million for the nine months ended September 30, 2024, as compared to the same periods in 2023.

The declines were due to the surrender of several policies during the fourth quarter of 2023.

Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, increased by $0.3 million during the nine months ended September 30, 2024 primarily related to positive fair market value adjustments on certain marketable securities.

For the three months ended March 31, 2025 and 2024

Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, increased by $6.4 million during the three months ended March 31, 2025 primarily due to the gain on sale of the Company's mortgage warehouse business to an unrelated third party, which resulted in a pre-tax gain of $7.0 million.

Non-Interest Expense

Three Months Ended Nine Months Ended

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

(Dollars in Thousands) 2024 2023 2024 2023

Three Months Ended

March 31, March 31,

(Dollars in Thousands) 2025 2024 $ Change % Change

Non-interest Expense

7 unchanged sentences

Core deposit intangible amortization 816 872 (56) (6) %

Merger related expense 305 — 305 — %

Other losses 228 16 212 1325 %

1 unchanged sentence

Total non-interest expense $ 39,306 $ 37,107 $ 2,199 6 %

Non-interest expense increased $3.1 million for the three months ended September 30, 2024 compared to the same period in 2023, primarily the result of higher expenses related to outside services and consultants, salaries and employee benefits, and other expenses, which was partially mitigated by lower expenses related to FDIC insurance expense and net occupancy expense.

Non-interest expense increased $6.9 million for the nine months ended September 30, 2024 compared to the same period in 2023, primarily the result of higher expenses related to salaries and employee benefits, outside services and consultants, FDIC insurance, and other expense.

Salaries and employee benefits expense increased by $1.8 million for the three months ended September 30, 2024 , and $3.7 million for the nine months ended September 30, 2024 , when compared to the same periods a year ago.

Non-interest expense increased $2.2 million for the three months ended March 31, 2025 compared to the same period in 2024.

The primary components of the change were as follows:

Salaries and employee benefits expense increased by $2.1 million for the three months ended March 31, 2025 when compared to the same period a year ago.

The increase is partially attributable to growth in salary expense related to ongoing hiring efforts in revenue generating roles in commercial lending, equipment finance and treasury management.

Additionally, the prior comparable period benefited from from a favorable expense adjustment on a legacy compensation program that was terminated in the fourth quarter of 2024.

Other expenses, which includes corporate and other service expenses, decreased by $1.0 million for the three months ended March 31, 2025 when compared to the same period in 2024 partially due to decreases in marketing and advertising expenses.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

in both periods is partially attributable to growth in salary expense related to ongoing hiring efforts in revenue generating roles in commercial lending, equipment finance and treasury management.

In addition, the current period was unfavorably impacted by an expense related to a legacy benefits program and additional compensation-related accrual relative to the prior periods.

Outside services and consultant expense increased by $1.4 million for the three months ended September 30, 2024 , and $2.5 million for the nine months ended September 30, 2024 , when compared to the same periods a year ago.

The increase in both periods is related to ongoing strategic initiatives .

FDIC insurance expense increased by $1.2 million in the nine months ended September 30, 2024 compared to the year ago period.

The increase in the period related to higher incurred assessment rates.

Other expenses, which includes corporate and other service expenses, increased by $0.2 million for the three months ended September 30, 2024 when compared to the same period in 2023, and increased by $0.9 million for the nine months ended September 30, 2024 when compared to the same period in 2023.

For the three months ended March 31, 2025 and 2024

Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Three Months Ended

March 31, 2025 March 31, 2024

Allowance for Credit Losses on Loans

14 unchanged sentences

Horizon assesses the adequacy of its Allowance for Credit Losses (“ACL”) by regularly reviewing the performance of its loan portfolio against various economic backdrops, which periodically change.

During the third quarter of 2024, the Company recorded a provision for credit losses on loans of $1.0 million.

This compares to a provision for credit losses on loans of $0.3 million during the third quarter of 2023.

The increase in the provision for credit losses when compared to the year ago period was primarily attributable to changes in loan mix and in the economic forecast.

For the three months ended September 30, 2024, net loan charge-offs decreased by $0.4 million to $0.4 million, compared to $0.8 million in the third quarter of last year.

The provision for credit losses on loans of $4.2 million for the nine months ended September 30, 2024 increased by $3.0 million when compared to the prior year period, which is primarily attributable to loan growth and the change in loan mix.

During the three months ended March 31, 2025, the Company recorded a provision for credit losses on loans of $1.5 million.

This compares to a provision for credit losses on loans of $0.7 million compared to the same period in 2024.

The increase in the provision for credit losses when compared to the year ago period was primarily attributable to loan growth experienced during the quarter.

For the three months ended March 31, 2025, net loan charge-offs increased by $0.6 million to $0.9 million, compared to $0.3 million to the same period in 2024.

The increase in charge-offs was primarily due to increases in the consumer portfolio as a result of the run-off of the indirect auto portfolio.

The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.07% at March 31, 2025, compared to 1.09% at March 31, 2024.

As of March 31, 2025, the liability for unfunded lending commitments was $2.0 million compared to $0.8 million as of March 31, 2024.

The increase in liability for unfunded lending commitments was due to increases in unfunded lending commitments outstanding when compared to the prior period.

The Company’s income tax expense for the three months ended March 31, 2025 was $4.1 million c ompared to $1.3 million for the same period in 2024 , resulting in effective tax rates of 14.7% and 8.6%, respectively.

The increase in the effective tax rate for the for the three months ended March 31, 2025 was primarily due to expectations of higher pre-tax income in first quarter of 2025 as compared to 2024 , causing tax preferential items to have a less favorable impact.

The effective income tax rates differed from the U.S.

statutory federal income tax rates of 21% during the comparable periods primarily due to the effect of tax exempt income from securities, loans, and life insurance policies, and net tax benefits from tax credit investments.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

For the nine months ended September 30, 2024, net loan charge-offs decreased by $0.3 million to $1.3 million compared to $1.6 million in the prior year period.

The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.10% at September 30, 2024, compared to 1.14% at September 30, 2023.

As of September 30, 2024, the liability for unfunded lending commitments was relatively unchanged at $0.7 million when compared to the third quarter of last year.

The Company’s income tax expense for the third quarter of 2024 was $0.1 million c ompared to $1.3 million for the third quarter of 2023, resulting in effective tax rates of 0.4% and 7.3%, respectively.

The decrease in the effective tax rate for the third quarter 2024 is primarily due to the increase in the net realizable tax credits for the current year .

The Company’s income tax expense for the first nine months of 2024 was $3.0 million compared to $4.6 million for the same period in 2023, resulting in effective tax rates of 6.0% and 8.0%, respectively.

The decrease in the effective tax rate for the first nine months 2024 is primarily due to the increase in net realizable tax credits in the current period.

The effective income tax rates differed from the U.S.

For the three months ended March 31, 2025 and 2024

Financial Condition

Total assets decreased by $13.0 million, or 0.2%, as of September 30, 2024, from $7.9 billion as of December 31, 2023.

The decrease in total assets is primarily due to decreases in cash and cash equivalents of $291.7 million over the period, or 55.4%, to $234.8 million as of September 30, 2024, and a decrease in total securities balances of $63.3 million, to $2.4 billion, partially offset by growth in loans HFI of $383.5 million, or 8.8%, to $4.8 billion as of September 30, 2024.

Total investment securities decreased $63.3 million, or 2.5%, to $2.4 billion as of September 30, 2024 from $2.5 billion as of December 31, 2023, primarily as a result of amortization and maturities.

There were no purchases of investment securities during the first nine months of 2024.

Total loans HFI increased to $4.8 billion as of September 30, 2024 compared to $4.4 billion as of December 31, 2023, led by organic commercial loan growth of $239.1 million.

Total assets decreased by $172.5 million, or 2.2%, as of March 31, 2025, from $7.8 billion as of December 31, 2024.

The decrease in total assets is primarily due to decreases in cash and cash equivalents of $123.8 million, or 42.2%, to $169.7 million as of March 31, 2025, and a decrease in loans held for sale of $64.3 million, to $3.3 million as a result of the Company's sale of its mortgage warehouse business.

The decrease was partially offset by increase in loans HFI of $62.1 million or 1.3% to $4.9 billion.

Total investment securities decreased $26.1 million, or 1.2%, to $2.1 billion as of March 31, 2025 when compared to balances as of December 31, 2024.

The decrease is primarily a result of amortization and maturities, as well as the sale of one corporate debt security.

There were no purchases of investment securities during the three months ended March 31, 2025.

Total loans HFI increased to $4.9 billion as of March 31, 2025 compared to $4.8 billion as of December 31, 2024, led by organic commercial loan growth of $103.3 million.

The company continues to maintain a balanced growth profile across various geographies, products and industries, and holds a diverse lending portfolio consisting primarily of commercial real estate, consumer, residential and commercial and industrial portfolios.

Total deposit balances increased by $62.1 million, or 1.1%, to $5.7 billion on September 30, 2024 when compared to balances as of December 31, 2023.

Total deposit balances increased by $165.1 million, or 2.9%, to $5.8 billion on March 31, 2025 when compared to balances as of December 31, 2024.

The Company maintains a granular and tenured deposit base, with a continued focus on core commercial and consumer deposit gathering.

Total borrowings decreased by $87.9 million, or 6.5%, to $1.3 billion as of September 30, 2024 when compared to balances as of December 31, 2023, primarily related to repayment of a portion of Federal Home Loan Bank advances in August.

Total borrowings decreased by $332.2 million, or 27.0%, to $900.1 million as of March 31, 2025 when compared to balances as of December 31, 2024, primarily related to repayment of a portion of Federal Home Loan Bank advances.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

Investment securities were comprised of the following as of (dollars in thousands):

September 30, 2024 December 31, 2023

For the three months ended March 31, 2025 and 2024

Investment securities are comprised of the following as of (dollars in thousands):

March 31, 2025 December 31, 2024

Value Amortized

Available for sale

Treasury and federal agencies $ 69,421 $ 63,245 $ 72,938 $ 64,377

Treasury, federal agencies, and government sponsored agencies $ 2,258 $ 1,850 $ 2,258 $ 1,801

State and municipal 243,099 199,429 243,521 201,834

Federal agency collateralized mortgage obligations 3,413 3,152 3,931 3,580

Federal agency mortgage–backed pools 151,844 132,696 161,130 137,297

government agency mortgage-backed securities 17,394 14,462 17,984 14,543

Private labeled mortgage-backed pools — — — —

Corporate notes 18,258 15,690 18,259 15,499

1 unchanged sentence

Held to maturity

Treasury and federal agencies $ 283,851 $ 252,034 $ 287,259 $ 245,960

Treasury, federal agencies, and government sponsored agencies $ 275,854 $ 241,412 $ 278,383 $ 239,130

State and municipal 1,039,749 849,623 1,048,862 866,706

Federal agency collateralized mortgage obligations 47,232 40,791 51,325 43,479

Federal agency mortgage–backed pools 308,725 271,084 323,649 275,028

government agency mortgage-backed securities 343,057 295,642 349,726 294,822

Private labeled mortgage–backed pools 28,558 25,069 29,278 25,320

1 unchanged sentence

Total held to maturity investment securities $ 1,843,991 $ 1,550,127 $ 1,867,848 $ 1,566,268

Investment securities available for sale decreased $6.1 million since December 31, 2023 to $541.2 million as of September 30, 2024, and securities held to maturity decreased $57.3 million since December 31, 2023 to $1.9 billion as of September 30, 2024.

The decrease in total investments was due to principal amortization and maturities, and there were no purchases of investment securities through the first nine months of 2024.

Investment securities available for sale decreased $2.2 million since December 31, 2024 to $231.4 million and securities held to maturity decreased $23.8 million since December 31, 2024 to $1.8 billion as of March 31, 2025.

The decrease in total investments was due to sale of certain corporate debt securities and maturities on investment securities.

There were no purchases of investment securities through the three months ended March 31, 2025.

Credit Quality

The ACL balance at September 30, 2024 was $52.9 million, or 1.10% of period-end loans HFI compared to an ACL balance of $50.0 million at December 31, 2023 or 1.09% of loans HFI.

The ACL balance at March 31, 2025 was $52.7 million, or 1.07% of period-end loans HFI compared to an ACL balance of $52.0 million at December 31, 2024 or 1.07% of loans HFI.

The increase in the ACL was primarily due to the growth in commercial loans.

As of September 30, 2024, total non-accrual loans increased by $3.9 million, or 19.6%, from December 31, 2023, to 0.49% of total loans HFI.

As of March 31, 2025, total non-accrual loans increased by $3.0 million, or 11.7%, from December 31, 2024, to 0.59% of total loans HFI.

Total non-performing assets increased $4.0 million, or 14.8%, from December 31, 2024, to 0.41% of total assets.

During the three months ended September 30, 2024, net charge-offs were $0.4 million, or 3 basis points annualized of average loans in the period, down from $0.7 million, or 7 basis point annualized of average loans in the year ago comparable period.

During the nine months ended September 30, 2024, net charge-offs were $1.3 million, or 4 basis points annualized of average loans in the period, compared with $1.6 million, or 4 basis point annualized of average loans in the year ago comparable period.

During the three months ended March 31, 2025, net charge-offs were $0.9 million, or 7 basis points annualized of average loans in the period, an increase from $0.3 million, or 4 basis point annualized of average loans in the year ago comparable period.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

For the three months ended March 31, 2025 and 2024

Credit Quality

1 unchanged sentence

Quarter Ended

September 30, December 31,

March 31, December 31,

Non-accrual loans

1 unchanged sentence

Residential Real estate 12,763 11,215

Mortgage warehouse — —

Consumer 7,875 8,919

5 unchanged sentences

Residential Real estate 641 —

Mortgage warehouse — —

Consumer 34 17

4 unchanged sentences

Residential Real estate (47) (10)

Mortgage warehouse — —

Consumer 963 668

3 unchanged sentences

Residential Real estate 3,167 2,715

Mortgage warehouse 862 481

Consumer 16,847 18,312

5 unchanged sentences

Allowance for credit losses to HFI loans 1.07 % 1.07 %

Allowance for credit losses to nonaccrual loans 173.25 % 192.82 %

The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses.

These deposits are the principal source of liquidity for Horizon.

Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the FHLB.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses.

These deposits are the principal source of liquidity for Horizon.

At September 30, 2024, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.52 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $1.41 billion at December 31, 2023.

The cash flows from the operating, investing and financing activities of the Company resulted in a net decrease in cash, cash equivalents and restricted cash of $291.7 million during the first nine months of 2024, as reported in the consolidated statements of cash flows in this report.

For the three months ended March 31, 2025 and 2024

2025, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.78 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $1.70 billion at December 31, 2024.

The cash flows from the operating, investing and financing activities of the Company resulted in a net decrease in cash, cash equivalents and restricted cash of $123.8 million during the three months ended March 31, 2025, as reported in the consolidated statements of cash flows in this report.

Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $15.2 million and have historically been a stable source of funds.

Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $322.4 million mainly due to growth in the loan portfolio, which used cash of $413.4 million.

Investing activities, which occur mainly in the loan and investment securities portfolios, provided cash of $38.9 million mainly due to growth in the loan portfolio, which used cash of $47.2 million.

Financing activities used cash of $177.9 million, largely resulting from the repayment of long-term borrowings of $530.1 million and $7.1 million in dividends paid on common stock during the first nine months of 2024.

Capital Resources

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at September 30, 2024.

Stockholders’ equity totaled $754.8 million as of September 30, 2024, compared to $718.8 million as of December 31, 2023.

For the nine months ended September 30, 2024, the ratio of average stockholders’ equity to average assets was 9.30% compared to 8.97% for the twelve months ended December 31, 2023.

The increase in stockholders’ equity during the period was due to net income generated during the period and the improved market value of securities available for sale, offset by cash dividends paid to common shareholders.

As of September 30, 2024, the ratio of total stockholders’ equity to total assets is 9.52%.

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2025.

Stockholders’ equity totaled $776.1 million as of March 31, 2025, compared to $763.6 million as of December 31, 2024.

For the three months ended March 31, 2025, the ratio of average stockholders’ equity to average assets was 10.06% compared to 9.25% for same period in 2024.

The increase in stockholders’ equity during the period was due to changes in accumulated other comprehensive loss related to unrealized gains on available-for-sale securities and retention of earnings, which is primarily offset by cash dividend payments on outstanding common stock.

As of March 31, 2025, the ratio of total stockholders’ equity to total assets is 10.17%.

Book value per common share was $17.72, increasing $0.26 compared to December 31, 2024.

Tangible common equity 1 totaled $588.5 million at September 30, 2024, and the ratio of tangible common equity to tangible assets 1 was 7.58% at September 30, 2024.

Tangible common equity 1 totaled $611.4 million at March 31, 2025, and the ratio of tangible common equity to tangible assets 1 was 8.19% at March 31, 2025.

Tangible book value, which excludes intangible assets from total equity, per common share 1 was $13.96, increasing $0.28 compared to December 31, 2024.

Horizon declared common stock dividends in the amount of $0.48 per share during the first nine months of 2024 and $0.48 per share for the same period in 2023.

The dividend payout ratio (dividends as a percent of basic earnings per share) was 45.3% and 39.3% for the first nine months of 2024 and 2023, respectively.

Horizon declared common stock dividends in the amount of $0.16 per share during the three months ended March 31, 2025 and $0.16 per share for the same period in 2024.

The dividend payout ratio (dividends as a percent of basic earnings per share) was 29.09% and 50.00% for the three months ended March 31, 2025 and 2024, respectively.

For additional information regarding dividends, see Horizon’s 2024 Annual Report on Form 10–K.

5 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

For the three months ended March 31, 2025 and 2024

Use of Non-GAAP Financial Measures

4 unchanged sentences

(Dollars in Thousands, Unaudited)

Three Months Ended Nine Months Ended

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

2024 2024 2024 2023 2023 2024 2023

Three Months Ended

March 31, 2025 March 31, 2024

Interest income (GAAP) (A) $ 89,175 $ 85,264

3 unchanged sentences

Loan receivable (2)

340 328 353 314 251 1,021 736

Total taxable-equivalent adjustment (3)

14 unchanged sentences

And Results of Operations

For the Three and Nine Months ended September 30, 2024 and 2023

Non–GAAP Reconciliation of Return on Average Tangible Common Equity

(Dollars in Thousands, Unaudited)

Three Months Ended Nine Months Ended

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

2024 2024 2024 2023 2023 2024 2023

Net income (loss) (GAAP) (A) $ 18,180 $ 14,140 $ 13,991 $ (25,215) $ 16,205 $ 46,311 $ 53,196

Average stockholders' equity (B) $ 738,372 $ 726,332 $ 725,083 $ 702,793 $ 715,485 $ 727,091 $ 707,162

Average intangible assets (C) 166,819 167,659 168,519 169,401 170,301 $ 167,663 $ 171,199

Average tangible equity (Non-GAAP) (D) = (B) - (C) $ 571,553 $ 558,673 $ 556,564 $ 533,392 $ 545,184 $ 559,428 $ 535,963

Return on average tangible common equity ("ROACE") (non-GAAP) (E) = (A*) / (D) 12.65 % 10.18 % 10.11 % (18.76) % 11.79 % 11.06 % 13.27 %

For the three months ended March 31, 2025 and 2024

Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets

1 unchanged sentence

Three Months Ended

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

2024 2024 2024 2023 2023

March 31, 2025 December 31, 2024

Total stockholders' equity (GAAP) (A) $ 776,061 $ 763,582

8 unchanged sentences

Three Months Ended

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

2024 2024 2024 2023 2023

March 31, 2025 December 31, 2024

Total stockholders' equity (GAAP) (A) $ 776,061 $ 763,582

6 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis