Item 2. Management’s Discussion and Analysis
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward–Looking Statements
This report contains certain forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to Horizon Bancorp, Inc. (“Horizon” or the “Company”) and Horizon Bank (the “Bank”). Horizon intends such forward–looking statements to be covered by the safe harbor provisions for forward–looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for the purposes of these safe harbor provisions. Statements in this report should be considered in conjunction with the other information available about Horizon, including the information in the other filings we make with the Securities and Exchange Commission. The forward–looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “expect,” “estimate,” “project,” “intend,” “plan,” “believe,” “could,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward–looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.
Actual results may differ materially, adversely or positively, from the expectations of the Company that are expressed or implied by any forward–looking statement. 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;
• changes in the level and volatility of interest rates, spreads on earning assets and interest bearing liabilities, and interest rate sensitivity;
• the aggregate effects of elevated inflation levels in recent years;
• loss of key Horizon personnel;
• macroeconomic conditions and their impact on Horizon and its customers;
• the increasing use of Bitcoin and other crypto currencies and/or stable coin and the possible impact these alternative currencies may have on deposit disintermediation and income derived from payment systems;
• risks related to the development and use of artificial intelligence (AI);
• the effect of interest rates on net interest rate margin and their impact on mortgage loan volumes and the outflow of deposits;
• increases in disintermediation, as new technologies allow consumers to complete financial transactions without the assistance of banks;
• potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms (e.g., Apple Pay or Bitcoin) take a greater market share of the payment systems;
• estimates of fair value of certain of Horizon’s assets and liabilities;
• volatility and disruption in financial markets;
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
• changes in prepayment speeds, loan originations, credit losses and market values, collateral securing loans and other assets;
• changes in sources of liquidity;
• potential risk of environmental liability related to lending and acquisition activities;
• changes in the competitive environment in Horizon’s market areas and among other financial service providers;
• legislation and/or regulation affecting the financial services industry as a whole, and Horizon and its subsidiaries in particular;
• changes in regulatory supervision and oversight, including monetary policy and capital requirements;
• changes in accounting policies or procedures as may be adopted and required by regulatory agencies;
• 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;
• the effects and costs of governmental investigations or related actions by third parties;
• rapid technological developments and changes;
• the risks presented by cyber terrorism and data security breaches;
• the rising costs of effective cybersecurity;
• containing costs and expenses;
• the ability of the U.S. federal government to manage federal debt limits;
• the risks of expansion through mergers and acquisitions, including unexpected credit quality problems with acquired loans, difficulty integrating acquired operations and material differences in the actual financial results of such transactions compared with Horizon’s initial expectations, including the full realization of anticipated cost savings; and
• acts of terrorism, war and global conflicts, such as the Russia-Ukraine conflict and continued unrest in the Middle East, and the potential impact they may have on supply chains, the availability of commodities, commodity prices, and the overall U.S. and global financial markets.
The foregoing list of important factors is not exclusive, and you are cautioned not to place undue reliance on these forward–looking statements, which speak only as of the date of this document or, in the case of documents incorporated by reference, the dates of those documents. We do not undertake to update any forward–looking statements, whether written or oral, that may be made from time to time by us or on our behalf. For a detailed discussion of the risks and uncertainties that may cause our actual results or performance to differ materially from the results or performance expressed or implied by forward–looking statements, see “Risk Factors” in Item 1A of Part I of our 2024 Annual Report on Form 10–K, in Item 1A of Part II of this Quarterly Report on Form 10–Q, and in the subsequent reports we file with the SEC.
Critical Accounting Estimates
The notes to the consolidated financial statements included in Item 8 of the Company’s 2024 Annual Report on Form 10–K contain a summary of the Company’s significant accounting policies. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The Company considers these policies to be its critical accounting estimates. Management has identified as critical accounting policies the allowance for credit losses, goodwill and intangible assets, mortgage servicing rights, hedge accounting and valuation measurements.
For additional information regarding critical accounting estimates, see Note 1 – Nature of Operations and Summary of Significant Accounting Policies included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 2024.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Results of Operations
Net Income
Net income increased $6.5 million to $20.6 million, or $0.47 per diluted share, during the three months ended June 30, 2025 when compared to $14.1 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 $4.5 million, a decrease of in interest expense of $5.6 million and an increase in non-interest income of $0.4 million. The increase was partially offset by an increase in non-interest expense of $1.9 million and an increase in tax expense of $2.0 million.
Net income increased $16.5 million to $44.6 million, or $1.01 per diluted share, during the six months ended June 30, 2025 when compared to $28.1 million, or $0.64 per share, for the same period in 2024 . The increase from the year ago period was primarily a result of a decrease in interest expense of $10.6 million, an increase in interest income of $8.4 million and an increase in non-interest income of $7.0 million. The increase was partially offset by an increase in non-interest expense of $4.1 million.
Net Interest Income
Net interest income increased $10.1 million, or 22.3% during the three months ended June 30, 2025 , to $55.4 million, when compared to the same period in 2024. While average earning assets decreased, the reported net FTE interest margin 1 increased by 59 basis points, to 3.23% for the three months ended June 30, 2025 compared to the prior year 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. Additionally, loan yields have expanded while deposit costs have declined when compared with the comparable year ago period. 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 .
Net interest income increased $19.1 million during the six months ended June 30, 2025, to $107.6 million when compared to the same period in 2024. While average earning asset balances declined slightly, the reported net FTE interest margin 1 increased by 57 basis points, to 3.14% for the six months ended June 30, 2025 when compared to the prior year period. The primary driver of the increase in net interest income compared with the prior year period is 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. Additionally, loan yields have expanded while deposit costs have declined when compared with the comparable year ago period.
1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Following are the average balance sheets for the three months ended (dollars in thousands):
Average Balance Sheet
(Dollars in Thousands, Unaudited)
Three Months Ended
June 30, 2025 June 30, 2024
Average
Balance (6)
Interest (5)
Average
Rate Average
Balance (6)
Interest (5)
Average
Rate
Assets
Interest earning assets
Interest earning deposits (incl. Fed Funds Sold) $ 72,993 $ 830 4.56 % $ 55,467 $ 738 5.35 %
Federal Home Loan Bank stock (1)
45,412 1,075 9.49 % 53,827 1,521 11.36 %
Investment securities - taxable (2)
959,238 4,866 2.03 % 1,309,305 6,465 1.99 %
Investment securities - non-taxable (2)
1,100,731 7,707 2.81 % 1,132,065 8,072 2.87 %
Total investment securities 2,059,969 12,573 2.45 % 2,441,370 14,537 2.39 %
Loans receivable (3) (4)
4,947,093 79,000 6.41 % 4,662,124 72,208 6.23 %
Total interest earning assets $ 7,125,467 93,478 5.26 % $ 7,212,788 89,004 4.96 %
Non-interest earning assets
Cash and due from banks 86,316 108,319
Allowance for credit losses (52,560) (50,334)
Other assets 472,175 508,555
Total average assets $ 7,631,398 $ 7,779,328
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing demand deposits $ 1,727,713 $ 6,803 1.58 % $ 1,656,523 $ 7,081 1.72 %
Saving and money market deposits 1,651,866 8,200 1.99 % 1,677,967 9,733 2.33 %
Time deposits 1,233,582 11,049 3.59 % 1,134,590 11,633 4.12 %
Total Deposits 4,613,161 26,052 2.27 % 4,469,080 28,447 2.56 %
Borrowings 847,862 7,777 3.68 % 1,184,172 10,278 3.49 %
Repurchase agreements 88,058 394 1.79 % 125,144 935 3.00 %
Subordinated notes 55,785 829 5.96 % 55,647 829 5.99 %
Junior subordinated debentures issued to capital trusts 57,550 1,070 7.46 % 57,335 1,213 8.51 %
Total interest bearing liabilities 5,662,416 36,122 2.56 % 5,891,378 41,702 2.85 %
Non-interest bearing liabilities
Demand deposits 1,114,982 1,080,676
Accrued interest payable and other liabilities 64,465 80,942
Stockholders' equity 789,535 726,332
Total average liabilities and stockholders' equity $ 7,631,398 $ 7,779,328
Net FTE interest income (Non-GAAP) (5)
$ 57,356 $ 47,302
Less FTE adjustments (5)
2,001 2,023
Net Interest Income $ 55,355 $ 45,279
Net FTE interest margin (Non-GAAP) (5)
3.23 % 2.64 %
(1) Includes dividend income on FHLB stock.
(2) 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.
(3) 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.
(4) 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.
(5) 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) Average balances are calculated on a daily average basis
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Following are the average balance sheets for the six months ended (dollars in thousands):
Average Balance Sheet
(Dollars in Thousands, Unaudited)
Six Months Ended
June 30, 2025 June 30, 2024
Average
Balance (6)
Interest (5)
Average
Rate Average
Balance (6)
Interest (5)
Average
Rate
Assets
Interest earning assets
Interest earning deposits (incl. Fed Funds Sold) 147,656 3,317 4.53 % 193,444 5,235 5.47 %
Federal Home Loan Bank stock (1)
48,573 2,086 8.66 % 45,888 2,304 10.10 %
Investment securities - taxable (2)
966,632 9,894 2.06 % 1,317,775 13,044 1.99 %
Investment securities - non-taxable (2)
1,110,436 15,544 2.82 % 1,141,011 16,238 2.86 %
Total investment securities 2,077,068 25,438 2.47 % 2,458,786 29,282 2.39 %
Loans receivable (3) (4)
4,906,496 153,840 6.32 % 4,555,224 139,515 6.16 %
Total interest earning assets 7,179,793 184,681 5.19 % 7,253,342 176,336 4.89 %
Non-interest earning assets
Cash and due from banks 87,460 107,057
Allowance for credit losses (52,214) (50,147)
Other assets 477,949 497,602
Total average assets $ 7,692,988 $ 7,807,854
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing demand deposits 1,739,017 13,295 1.54 % 1,657,616 13,708 1.67 %
Saving and money market deposits 1,663,165 16,463 2.00 % 1,671,242 18,995 2.30 %
Time deposits 1,223,043 21,895 3.61 % 1,155,756 23,734 4.13 %
Total Deposits 4,625,225 51,653 2.25 % 4,484,614 56,437 2.54 %
Borrowings 909,338 16,550 3.67 % 1,192,450 21,182 3.57 %
Repurchase agreements 88,262 809 1.85 % 131,598 1,961 3.00 %
Subordinated notes 55,768 1,658 6.00 % 55,602 1,660 6.00 %
Junior subordinated debentures issued to capital trusts 57,524 2,360 8.27 % 57,307 2,438 8.56 %
Total interest bearing liabilities 5,736,117 73,030 2.57 % 5,921,571 83,678 2.84 %
Non-interest bearing liabilities
Demand deposits 1,100,485 1,078,929
Accrued interest payable and other liabilities 71,463 81,478
Stockholders' equity 784,923 725,876
Total average liabilities and stockholders' equity $ 7,692,988 $ 7,807,854
Net FTE interest income (Non-GAAP) (5)
111,651 92,658
Less FTE adjustments (5)
4,029 4,091
Net Interest Income $ 107,622 $ 88,567
Net FTE interest margin (Non-GAAP) (5)
3.14 % 2.57 %
(1) Includes dividend income on FHLB stock.
(2) 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.
(3) 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.
(4) 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.
(5) 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) Average balances are calculated on a daily average basis
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 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 June 30, 2025 vs.
Three Months Ended June 30, 2024 Six Months Ended June 30, 2025 vs.
Six Months Ended June 30, 2024
Total
Change Change
Due To
Volume Change
Due To
Rate Total
Change Change
Due To
Volume Change
Due To
Rate
Interest Income
Interest-bearing deposits in banks $ 92 $ 210 $ (118) $ (1,918) $ (1,118) $ (800)
Federal Home Loan Bank stock (446) (219) (227) (218) 129 (347)
Investment securities - taxable (1,599) (1,773) 174 (3,150) (3,578) 428
Investment securities - non-taxable (365) (221) (144) (694) (430) (264)
Loans receivable 6,792 4,511 2,281 14,325 10,941 3,384
Total interest income 4,474 2,508 1,966 8,345 5,944 2,401
Interest Expense
Interest-bearing demand deposits (278) 296 (574) (413) 654 (1,067)
Savings and money market savings deposits (1,533) (149) (1,384) (2,532) (92) (2,440)
Time deposits (584) 964 (1,548) (1,839) 1,323 (3,162)
Borrowings (2,501) (3,059) 558 (4,632) (5,138) 506
Repurchase agreements (541) (230) (311) (1,152) (530) (622)
Subordinated notes — 2 (2) (2) 5 (7)
Junior subordinated debentures issued to capital trusts (143) 5 (148) (78) 9 (87)
Total interest expense (5,580) (2,171) (3,409) (10,648) (3,769) (6,879)
Net FTE interest income (Non-GAAP) 10,054 4,679 5,375 18,993 9,713 9,280
Less change in FTE adjustments (22) (62)
Net Interest Income $ 10,076 $ 19,055
Non-Interest Income
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(Dollars in Thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change
Non-interest Income
Service charges on deposit accounts $ 3,208 $ 3,130 $ 78 3 % $ 6,416 $ 6,344 $ 72 1 %
Wire transfer fees 69 113 (44) (39) % 140 214 (74) (35) %
Interchange fees 3,403 3,826 (423) (11) % 6,644 6,935 (291) (4) %
Fiduciary activities 1,251 1,372 (121) (9) % 2,577 2,687 (110) (4) %
Loss on sale of investment securities — — — — % (407) — (407) — %
Gain on sale of mortgage loans 1,219 896 323 36 % 2,295 1,522 773 51 %
Mortgage servicing income net of impairment 375 450 (75) (17) % 760 889 (129) (15) %
Increase in cash value of bank owned life insurance 346 318 28 9 % 681 616 65 11 %
Other income 1,049 380 669 176 % 8,313 1,207 7,106 589 %
Total non-interest income $ 10,920 $ 10,485 $ 435 4 % $ 27,419 $ 20,414 $ 7,005 34 %
Total non-interest income increased $0.4 million for the three months ended June 30, 2025 compared to the same period in 2024 and increased $7.0 million for the six months ended June 30, 2025 compared to the same period in 2024. The primary components of the change were as follows:
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Interchange fees decreased $0.4 million, or 11.1%, for the three months ended June 30, 2025 compared to the same period in 2024, and decreased by $0.3 million, or 4.2%, for the six months ended June 30, 2025, as compared to the same periods in 2024. The decrease was primarily driven by decreases in merchant and debit card fees.
Gain on sale of mortgage loans increased by $0.3 million, or 36.1%, for the three months ended June 30, 2025 compared to the same period in 2024, and increased by $0.8 million for the six months ended June 30, 2025, as compared to the same periods in 2024. The increase was primarily driven by higher volumes of sold loans.
Mortgage servicing income net of impairment decreased by $0.1 million, or 14.5%, for the six months ended June 30, 2025, as compared to the same periods in 2024. The decrease was primarily driven by a decrease in servicing fees due lower balances of loans services for others, and modestly higher levels of amortization expense on the asset balance of mortgage servicing rights.
Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, increased by $7.1 million during the six months ended June 30, 2025 primarily due to the gain on sale of the Company's mortgage warehouse business to an unrelated third party in the first quarter of 2025, which resulted in a pre-tax gain of $7.0 million .
Non-Interest Expense
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(Dollars in Thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change
Non-interest Expense
Salaries and employee benefits $ 22,731 $ 20,583 $ 2,148 10 % $ 45,145 $ 40,851 $ 4,294 11 %
Net occupancy expenses 3,127 3,192 (65) (2) % 6,829 6,738 91 1 %
Data processing 2,951 2,579 372 14 % 5,823 5,043 780 16 %
Professional fees 735 714 21 3 % 1,561 1,321 240 18 %
Outside services and consultants 3,278 3,058 220 7 % 6,543 6,417 126 2 %
Loan expense 1,231 1,038 193 19 % 1,920 1,757 163 9 %
FDIC insurance expense 1,216 1,315 (99) (8) % 2,504 2,635 (131) (5) %
Core deposit intangible amortization 816 844 (28) (3) % 1,632 1,716 (84) (5) %
Merger related expense — — — — % 305 — 305 100 %
Other losses 245 515 (270) (52) % 473 531 (58) (11) %
Other expense 3,087 3,684 (597) (16) % 5,988 7,620 (1,632) (21) %
Total non-interest expense $ 39,417 $ 37,522 $ 1,895 5 % $ 78,723 $ 74,629 $ 4,094 6 %
Non-interest expense increased $1.9 million for the three months ended June 30, 2025 compared to the same period in 2024. Non-interest expense increased $4.1 million for the six months ended June 30, 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 June 30, 2025 when compared to the same period a year ago. Salaries and employee benefits expense increased by $4.3 million for the six months ended June 30, 2025 compared to the same period in 2024. T he 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 a favorable expense adjustment on a legacy compensation program that was terminated in the fourth quarter of 2024.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Other expenses, which includes corporate and other service expenses, decreased by $0.6 million for the three months ended June 30, 2025 when compared to the same period a year ago and $1.6 million for the six months ended June 30, 2025 compared to the same period in 2024. This decrease was partially due to decreases in marketing and advertising expenses.
Provision and Allowance for Credit Losses
Three Months Ended Six Months Ended
June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024
Allowance for Credit Losses on Loans
Balance at beginning of period $ 52,654 $ 50,387 $ 51,980 $ 50,029
Provision for credit losses on loans 1,999 2,415 3,542 3,084
Net loan (charge-offs) recoveries:
Commercial $ (84) $ (57) $ (37) $ 115
Residential Real estate (52) 4 (5) 9
Mortgage warehouse — — — —
Consumer (118) (534) (1,081) (1,022)
Total net loan (charge-offs) recoveries $ (254) $ (587) $ (1,123) $ (898)
Balance at end of period $ 54,399 $ 52,215 $ 54,399 $ 52,215
Liability for Unfunded Lending Commitments
Balance at beginning of period $ 2,000 $ 750 $ 2,149 $ 615
Provision (reversal) for credit losses on unfunded lending commitments 311 (45) 750 90
Balance at end of period $ 2,311 $ 705 $ 2,899 $ 705
Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments $ 56,710 $ 52,920 $ 57,298 $ 52,920
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 three months ended June 30, 2025, the Company recorded a provision for credit losses on loans of $2.0 million. This compares to a provision for credit losses on loans of $2.4 million compared to the same period in 2024. The decrease in the provision for credit losses on loans when compared to the year ago period was primarily attributable to a decrease in specific reserves related to the sale of the mortgage warehouse portfolio and payoffs of specific loans. The provision for credit losses in total was $2.5 million for three months ended June 30, 2025 compared to $2.4 million for the same period in 2024. The increase to the total provision is driven by an increase in provision for credit losses on unfunded lending commitments of $0.4 million and an increase in provision for credit losses on AFS securities of $0.2 million for three months ended June 30, 2025 compared to the same period in 2024, respectively.
For the three months ended June 30, 2025, net loan charge-offs decreased by $0.3 million to $0.3 million, compared to $0.6 million during the same period in 2024. The decrease in charge-offs was primarily due to decreases in the consumer portfolio, and partially 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 1.09% at June 30, 2025, compared to 1.08% at June 30, 2024.
As of June 30, 2025, the liability for unfunded lending commitments was $2.3 million compared to $0.7 million as of June 30, 2024.
Income Taxes
The Company’s income tax expense for the three months ended June 30, 2025 was $3.8 million compared to $1.7 million for the same period in 2024, resulting in effective tax rates of 15.4% and 10.9%, respectively. The Company’s income tax
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
expense for the six months ended June 30, 2025 was $7.9 million compared to $3.0 million for the same period in 2024, resulting in effective tax rates of 15.0% and 9.8%, respectively. The increase in the effective tax rate for the comparative periods was primarily due to expectations of higher pre-tax income in 2025 as compared to 2024 , causing tax preferential items to have a less favorable impact, and the Company's decision to discontinue further investment in certain tax credit structures.
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.
Financial Condition
Total assets decreased by $149.1 million, or 1.9%, as of June 30, 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 $155.5 million, or 53.0%, to $137.9 million as of June 30, 2025, and a decrease in loans held for sale of $64.6 million, to $3.0 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 $136.1 million or 2.8% to $4.9 billion.
Total investment securities decreased $50.3 million, or 2.4%, to $2.1 billion as of June 30, 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 in the first quarter. There were no purchases of investment securities during the six months ended June 30, 2025.
Total loans HFI increased to $4.9 billion as of June 30, 2025 compared to $4.8 billion as of December 31, 2024, led by organic commercial loan growth of $220.5 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 $99.1 million, or 1.8%, to $5.7 billion as of June 30, 2025 when compared to balances as of December 31, 2024, driven by growth in non-interest-bearing and time deposit balances, partially offset by declines in other interest-bearing balances. The Company maintains a granular and tenured deposit base, with a continued focus on core commercial and consumer deposit gathering.
Total borrowings decreased by $256.8 million, or 20.8%, to $975.4 million as of June 30, 2025 when compared to balances as of December 31, 2024, primarily related to repayment of a portion of Federal Home Loan Bank advances.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Investment securities are comprised of the following as of (dollars in thousands):
June 30, 2025 December 31, 2024
Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Available for sale
U.S. Treasury, federal agencies, and government sponsored agencies $ 2,143 $ 1,752 $ 2,258 $ 1,801
State and municipal 242,682 201,741 243,521 201,834
U.S. government agency mortgage-backed securities 16,967 14,095 17,984 14,543
Private labeled mortgage-backed pools — — — —
Corporate notes 18,257 14,411 18,259 15,499
Total available for sale investment securities $ 280,049 $ 231,999 $ 282,022 $ 233,677
Held to maturity
U.S. Treasury, federal agencies, and government sponsored agencies $ 275,720 $ 243,085 $ 278,383 $ 239,130
State and municipal 1,023,861 837,762 1,048,862 866,706
U.S. government agency mortgage-backed securities 335,333 291,852 349,726 294,822
Private labeled mortgage–backed pools 27,816 24,444 29,278 25,320
Corporate notes 156,499 139,837 161,599 140,290
Total held to maturity investment securities $ 1,819,229 $ 1,536,980 $ 1,867,848 $ 1,566,268
Investment securities available for sale decreased $1.7 million since December 31, 2024 to $232.0 million and securities held to maturity, net of the allowance for credit losses, decreased $48.6 million since December 31, 2024 to $1.8 billion as of June 30, 2025. The decrease in total investments was primarily due to normal maturities and amortization of investment securities. There were no purchases of investment securities during the six months ended June 30, 2025.
Credit Quality
The ACL balance at June 30, 2025 was $54.4 million, or 1.09% 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 and a modestly less favorable baseline economic outlook.
As of June 30, 2025, total non-accrual loans decreased by $1.5 million, or 5.8%, from December 31, 2024, to 0.49% of total loans HFI. Total non-performing assets increased $3.1 million, or 11%, from December 31, 2024, to 0.40% of total asset s.
During the six months ended June 30, 2025, net charge-offs were $1.1 million , or 5 basis points annualized of average loans in the period, a change from $0.9 million , or 4 basis point annualized of average loans in the year ago comparable period.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
Credit Quality
(Dollars in Thousands Except Ratios, Unaudited)
Quarter Ended
June 30, December 31,
2025 2024
Non-accrual loans
Commercial $ 7,547 $ 5,658
Residential Real estate 9,525 11,215
Consumer 7,222 8,919
Total non-accrual loans $ 24,294 $ 25,792
90 days and greater delinquent - accruing interest $ 2,113 $ 1,166
Total non-performing loans $ 26,407 $ 26,958
Other real estate owned
Commercial $ 176 $ 407
Residential Real estate 463 —
Consumer 480 17
Total other real estate owned $ 1,119 $ 424
Other non-performing assets (1)
$ 2,937 $ —
Total non-performing assets $ 30,463 $ 27,382
Net charge-offs (recoveries)
Commercial $ 84 $ (32)
Residential Real estate 52 (10)
Consumer 118 668
Total net charge-offs $ 254 $ 626
Allowance for credit losses
Commercial $ 34,413 $ 30,953
Residential Real estate 3,229 2,715
Consumer 16,757 18,312
Total allowance for credit losses $ 54,399 $ 51,980
Credit quality ratios
Non-accrual loans to HFI loans 0.49 % 0.53 %
Non-performing assets to total assets 0.40 % 0.35 %
Annualized net charge-offs of average total loans 0.02 % 0.05 %
Allowance for credit losses to HFI loans 1.09 % 1.07 %
Allowance for credit losses to non-performing loans 206.00 % 192.82 %
(1) Other non-performing assets consist of available for sale debt security placed on non-accrual status
Liquidity
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Six months ended June 30, 2025 and 2024
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. At June 30, 2025, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.75 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 $155.5 million during the six months ended June 30, 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 $34.7 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 $14.5 million mainly due to growth in the loan portfolio, which used cash of $122.9 million. Financing activities used cash of $175.8 million, largely resulting from the repayment of long-term borrowings of $632.0 million and $14.2 million in dividends paid on common stock during the first six months of 2025.
Capital Resources
The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at June 30, 2025. Stockholders’ equity totaled $790.9 million as of June 30, 2025, compared to $763.6 million as of December 31, 2024. The increase in stockholders’ equity during the period was due to an increase in retained earnings, driven by higher net income during the period, which is primarily offset by cash dividend payments on outstanding common stock.
As of June 30, 2025, the ratio of total stockholders’ equity to total assets is 10.34%. Book value per common share was $18.06, increasing $0.59 compared to December 31, 2024.
Tangible common equity 1 totaled $627.0 million at June 30, 2025, and the ratio of tangible common equity to tangible assets 1 was 8.37% at June 30, 2025. Tangible book value, which excludes intangible assets from total equity, per common share 1 was $14.32, increasing $0.64 compared to December 31, 2024.
Horizon declared common stock dividends in the amount of $0.16 per share during the three months ended June 30, 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 31.37% and 50.00% for the six months ended June 30, 2025 and 2024, respectively. For additional information regarding dividends, see Horizon’s 2024 Annual Report on Form 10–K.
1 N on-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the six months ended June 30, 2025 and 2024
Use of Non-GAAP Financial Measures
In addition to financial measures presented in accordance with GAAP, this document refers to non-GAAP financial measures, which Horizon believes are helpful to investors and provide a greater understanding of our business and financial results without the impact of items or events that may obscure trends in the Company’s underlying performance. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this document for reconciliations of the non-GAAP information identified herein and its most comparable GAAP measures.
Non–GAAP Reconciliation of Net Fully-Taxable Equivalent ("FTE") Interest Margin
(Dollars in Thousands, Unaudited)
Three Months Ended Six Months Ended
June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024
Interest income (GAAP) (A) $ 91,477 $ 86,981 $ 180,652 $ 172,246
Taxable-equivalent adjustment:
Investment securities - tax exempt (1)
$ 1,619 $ 1,695 $ 3,264 $ 3,410
Loan receivable (2)
382 328 765 681
Total taxable-equivalent adjustment (3)
$ 2,001 $ 2,023 $ 4,029 $ 4,091
Interest income (non-GAAP) (B) $ 93,478 $ 89,004 $ 184,681 $ 176,337
Interest expense (GAAP) (C) $ 36,122 $ 41,702 $ 73,030 $ 83,678
Net interest income (GAAP) (D) =(A) - (C) $ 55,355 $ 45,279 $ 107,622 $ 88,568
Net FTE interest income (non-GAAP) (E) = (B) - (C) $ 57,356 $ 47,302 $ 111,651 $ 92,659
Average interest earning assets (F) $ 7,125,467 $ 7,212,788 $ 7,179,793 $ 7,253,342
Net FTE interest margin (non-GAAP) (G) = (E*) / (F) 3.23 % 2.64 % 3.14 % 2.57 %
(1) The following represents municipal securities interest income for investment securities classified as available-for-sale and held-to-maturity
(2) The following represents municipal loan interest income for loan receivables classified as held for sale and held for investment
(3) 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 for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate
*Annualized
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the six months ended June 30, 2025 and 2024
Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets
(Dollars in Thousands, Unaudited)
Three Months Ended
June 30, 2025 June 30, 2024
Total stockholders' equity (GAAP) (A) $ 790,852 $ 726,665
Intangible assets (end of period) (B) 163,803 167,121
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 627,049 $ 559,544
Total assets (GAAP) (D) 7,652,051 7,912,527
Intangible assets (end of period) (B) 163,803 167,121
Total tangible assets (non-GAAP) (E) = (D) - (B) $ 7,488,248 $ 7,745,406
Tangible common equity to tangible assets (Non-GAAP) (G) = (C) / (E) 8.37 % 7.22 %
Non–GAAP Reconciliation of Tangible Book Value Per Share
(Dollars in Thousands, Unaudited)
Three Months Ended
June 30, 2025 June 30, 2024
Total stockholders' equity (GAAP) (A) $ 790,852 $ 726,665
Intangible assets (end of period) (B) 163,803 167,121
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 627,049 $ 559,544
Common shares outstanding (D) 43,801,507 43,712,059
Tangible book value per common share (non-GAAP) (E) = (C) / (D) $ 14.32 $ 12.80
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.