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;
• the impact of continued partial shutdown of the U.S. government;
• 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 months ended March 31, 2026 and 2025
• 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 2025 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 2025 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 estimates as the allowance for credit losses, income taxes, 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, 2025. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 2025.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three months ended March 31, 2026 and 2025
Results of Operations
Net Income
Net Income increased $2.2 million, to $26.2 million, or $0.51 per diluted share, during the three months ended March 31, 2026 when compared to net income of $23.9 million, or $0.54 per diluted share, for the s ame period in 2025. The increase in net income when compared with the prior year period reflects an increase in net interest income of $10.0 million and a decrease in provision expense of $1.0 million. The increase was partially offset by a decrease of non-interest income of $5.3 million, an increase in tax expense of $2.0 million and an increase in non-interest expense of $1.4 million.
Net Interest Income
Net interest income increased $10.0 million, or 19.1% during the three months ended March 31, 2026 , to $62.2 million, when compared to the same period in 2025. While average earning assets decreased, owed to the balance sheet repositioning and deleveraging efforts in the third quarter of 2025, the reported net FTE interest margin 1 increased by 125 basis points, to 4.29% for the three months ended March 31, 2026 compared to the prior year period, driven by 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 and securities 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 months ended March 31, 2026 and 2025
Following are the average balance sheets for the three months ended (dollars in thousands):
Average Balance Sheet
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2026 March 31, 2025
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) $ 165,084 $ 1,509 3.71 % $ 223,148 $ 2,487 4.52 %
Federal Home Loan Bank stock (1)
45,713 551 4.89 % 51,769 1,012 7.93 %
Investment securities - taxable (2)
581,146 6,944 4.85 % 974,109 5,027 2.09 %
Investment securities - non-taxable (2)
319,276 3,220 4.09 % 1,120,249 7,838 2.84 %
Total investment securities 900,422 10,164 4.58 % 2,094,358 12,865 2.49 %
Loans receivable (3) (4)
4,873,753 75,485 6.28 % 4,865,449 74,840 6.24 %
Total interest earning assets $ 5,984,972 87,709 5.94 % $ 7,234,724 91,204 5.11 %
Non-interest earning assets
Cash and due from banks 68,007 88,624
Allowance for credit losses (51,217) (51,863)
Other assets 533,989 483,765
Total average assets $ 6,535,751 $ 7,755,250
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing demand deposits $ 1,638,208 $ 4,586 1.14 % $ 1,750,446 $ 6,491 1.50 %
Saving and money market deposits 1,475,444 5,619 1.54 % 1,674,590 8,263 2.00 %
Time deposits 1,153,484 9,739 3.42 % 1,212,386 10,847 3.63 %
Total Deposits 4,267,136 19,944 1.90 % 4,637,422 25,601 2.24 %
Borrowings 150,229 1,421 3.84 % 971,496 8,772 3.66 %
Repurchase agreements 77,376 233 1.22 % 88,469 416 1.91 %
Subordinated notes 98,231 1,830 7.56 % 55,750 829 6.03 %
Junior subordinated debentures issued to capital trusts 57,706 983 6.91 % 57,497 1,290 9.10 %
Total interest bearing liabilities 4,650,678 24,411 2.13 % 5,810,634 36,908 2.58 %
Non-interest bearing liabilities
Demand deposits 1,117,930 1,085,826
Accrued interest payable and other liabilities 59,227 78,521
Stockholders' equity 707,916 780,269
Total average liabilities and stockholders' equity $ 6,535,751 $ 7,755,250
Net FTE interest income (Non-GAAP) (5)
$ 63,298 $ 54,296
Less FTE adjustments (5)
1,058 2,029
Net Interest Income $ 62,240 $ 52,267
Net FTE interest margin (Non-GAAP) (5)
4.29 % 3.04 %
(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 months ended March 31, 2026 and 2025
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 March 31, 2026 vs.
Three Months Ended March 31, 2025
Total
Change Change
Due To
Volume Change
Due To
Rate
Interest Income
Interest-bearing deposits in banks $ (978) $ (578) $ (400)
Federal Home Loan Bank stock (461) (108) (353)
Investment securities - taxable 1,917 (2,654) 4,571
Investment securities - non-taxable (4,618) (7,134) 2,516
Loans receivable 645 128 517
Total interest income (3,495) (10,346) 6,851
Interest Expense
Interest-bearing demand deposits (1,905) (394) (1,511)
Savings and money market savings deposits (2,644) (905) (1,739)
Time deposits (1,108) (513) (595)
Borrowings (7,351) (7,749) 398
Repurchase agreements (183) (47) (136)
Subordinated notes 1,001 752 249
Junior subordinated debentures issued to capital trusts (307) 5 (312)
Total interest expense (12,497) (8,851) (3,646)
Net FTE interest income (Non-GAAP) 9,002 (1,495) 10,497
Less change in FTE adjustments (971)
Net Interest Income $ 9,973
Non-Interest Income
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 2026 2025 $ Change % Change
Non-interest Income
Service charges on deposit accounts $ 3,524 $ 3,208 $ 316 10 %
Wire transfer fees 63 71 (8) (11) %
Interchange fees 3,373 3,241 132 4 %
Fiduciary activities 1,556 1,326 230 17 %
Loss on sale of investment securities — (407) 407 (100) %
Gain on sale of mortgage loans 1,090 1,076 14 1 %
Mortgage servicing income net of impairment 337 385 (48) (12) %
Increase in cash value of bank owned life insurance 333 335 (2) (1) %
Other income 967 7,264 (6,297) (87) %
Total non-interest income $ 11,243 $ 16,499 $ (5,256) (32) %
Total non-interest income decreased $5.3 million, to net income of $11.2 million for the three months ended March 31, 2026 compared to the same period in 2025. 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 months ended March 31, 2026 and 2025
Service charges on deposit accounts increased by $0.3 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase is primarily related to higher transaction-based fee activity in the current period.
Fiduciary activities increased $0.2 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase is primarily related to an increase in trust fees in the current period related to increased volume in estate planning and annuity sales.
Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, decreased by $6.3 million, to $1.0 million for the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily related to the pre-tax gain of $7.0 million on the sale of the Company's mortgage warehouse business in the first quarter of 2025, which did not recur.
The remaining changes were nominal amongst the remaining individual non-interest income accounts.
Non-Interest Expense
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 2026 2025 $ Change % Change
Non-interest Expense
Salaries and employee benefits $ 23,187 $ 22,414 $ 773 3 %
Net occupancy expenses 4,197 3,702 495 13 %
Data processing 3,353 2,872 481 17 %
Professional fees 929 826 103 13 %
Outside services and consultants 2,764 3,265 (501) (15) %
Loan expense 1,219 689 530 77 %
FDIC insurance expense 1,023 1,288 (265) (21) %
Core deposit intangible amortization 675 816 (141) (17) %
Merger related expense — 305 (305) (100) %
Other losses 192 228 (36) (16) %
Other expense 3,208 2,901 307 11 %
Total non-interest expense $ 40,747 $ 39,306 $ 1,441 4 %
Non-interest expense increased $1.4 million for the three months ended March 31, 2026 compared to the same period in 2025. The primary components of the change were as follows:
Salaries and employee benefits expense increased by $0.8 million for the three months ended March 31, 2026 compared to the same period in 2025. T he increase is partially attributable to increased salary expense related to strategic hiring and annual merit increases, partially offset by a lower level of benefit expense compared with the year ago period.
Loan expense increased by $0.5 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase is primarily related to a higher amount of production related expense in the current period and a higher amount of reimbursements in the year ago period.
Net occupancy expenses increased by $0.5 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase is primarily driven by increases in building maintenance expenses in the current period.
Data processing expense increased by $0.5 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase is primarily driven by increases in debit card processing activity and software maintenance.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three months ended March 31, 2026 and 2025
Outside services and consultants expense decreased by $0.5 million for the three months ended March 31, 2026 compared to the same period in 2025. The decrease reflects management's ongoing efforts to reduce the reliance on third party services.
The remaining changes were nominal amongst the remaining individual non-interest expense accounts.
Provision and Allowance for Credit Losses
Three Months Ended
March 31, 2026 March 31, 2025
Allowance for Credit Losses on Loans
Balance at beginning of period $ 51,299 $ 51,980
Provision for credit losses on loans 624 1,543
Net loan (charge-offs) recoveries:
Commercial $ (339) $ 47
Residential Real estate (1) 47
Consumer (286) (963)
Total net loan (charge-offs) recoveries $ (626) $ (869)
Balance at end of period $ 51,297 $ 52,654
Liability for Unfunded Lending Commitments
Balance at beginning of period $ 1,840 $ 2,149
Provision (benefit) for credit losses on unfunded lending commitments (233) (149)
Balance at end of period $ 1,607 $ 2,000
Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments $ 52,904 $ 54,654
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 March 31, 2026, the Company recorded a provision for credit losses on loans of $0.6 million. This compares to a provision for credit losses on loans of $1.5 million compared to the same period in 2025. The decrease in the provision for credit losses on loans when compared to the year ago period was primarily attributable to modest net loan growth and slight changes in the baseline economic outlook. The total provision for credit losses, including the benefit for credit losses on unfunded lending commitments of $0.2 million, was $0.4 million for three months ended March 31, 2026 compared to a provision for credit losses of $1.4 million for the same period in 2025.
For the three months ended March 31, 2026, net loan charge-offs decreased by $0.2 million to $0.6 million, compared to $0.9 million during the same period in 2025. The decrease in charge-offs is due to decreases in charge-offs in the consumer portfolio, as a result of the sale of the indirect auto portfolio, which occurred in 2025.
The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.05% at March 31, 2026, compared to 1.07% at March 31, 2025.
As of March 31, 2026, the liability for unfunded lending commitments was $1.6 million compared to $2.0 million as of March 31, 2025.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three months ended March 31, 2026 and 2025
Income Taxes
The Company’s income tax expense for the three months ended March 31, 2026 was $6.2 million compared to $4.1 million for the same period in 2025, resulting in effective tax rates of 19.1% and 14.7% for those periods, respectively. The increase in the effective tax rate for three months ended March 31, 2026 was primarily due to expectations of higher pre-tax income in the first quarter of 2026 as compared to 2025, and less exposure to tax preferential assets in the investment portfolio.
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 increased by $127.6 million, or 2.0%, as of March 31, 2026, from $6.4 billion as of December 31, 2025. The increase in total assets is primarily due to an increase in total cash and cash equivalents of $119.6 million, or 85.8%, and an increase in investment securities available-for-sale of $6.8 million, or 0.8%, and an increase in other assets of $2.2 million, or 1.0%. The increase was partially offset by a decrease in premises and equipment of $2.0 million, or 2.2%.
Total loans HFI, net of ACL, increased $2.0 million, to $4.8 billion, as of March 31, 2026 compared to balances as of December 31, 2025, due to growth in commercial loans that was mostly offset by runoff within the consumer and residential loan portfolios. 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 $146.9 million, or 2.8%, to $5.4 billion as of March 31, 2026 when compared to balances as of December 31, 2025. The increase was driven by a $61.3 million increase in time deposits, a $60.8 million increase in non-interest-bearing demand deposits, and a $52.9 million increase in savings and money market balances, reflecting continued success in core deposit gathering efforts. These increases were partially offset by a $28.1 million decrease in interest-bearing deposits. The Company maintains a granular and tenured deposit base, with a continued focus on core commercial and consumer deposit gathering.
Total borrowings decreased by $22.8 million, or 9.2%, to $225.8 million as of March 31, 2026 when compared to balances as of December 31, 2025, related to a decrease in repurchase agreements.
Total investment securities increased $6.8 million, or 0.8%, to $882.2 million as of March 31, 2026 when compared to balances as of December 31, 2025. During the quarter, the Company purchased approximately $33.4 million of available for sale securities, which was offset by amortization and maturities within the portfolio and changes in market value.
Investment securities are comprised of the following as of (dollars in thousands):
March 31, 2026 December 31, 2025
Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Available for sale
U.S. Treasury, federal agencies, and government sponsored agencies $ 15,704 $ 15,870 $ 16,837 $ 16,905
State and municipal 356,413 316,033 353,559 319,665
U.S. government agency mortgage-backed securities 505,173 505,656 489,683 494,174
Corporate notes 48,750 44,609 48,750 44,670
Total available for sale investment securities $ 926,040 $ 882,168 $ 908,829 $ 875,414
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three months ended March 31, 2026 and 2025
Credit Quality
The ACL balance at March 31, 2026 was $51.3 million, or 1.05% of period-end loans HFI, compared to an ACL balance of $51.3 million at December 31, 2025, or 1.05% of loans HFI. The ACL was essentially unchanged, due to modest net loan growth and immaterial changes in the baseline economic outlook.
As of March 31, 2026, total non-accrual loans increased by $2.3 million, or 7.2%, from December 31, 2025 , to 0.71% of total loans HFI. Total non-performing assets increased $3.4 million, or 8.4%, from December 31, 2025 , to 0.67% of total asset s.
During the three months ended March 31, 2026, net charge-offs were $0.6 million , or 5 basis points annualized of average loans in the period, a change from $0.9 million , or 7 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 months ended March 31, 2026 and 2025
Credit Quality
(Dollars in Thousands Except Ratios, Unaudited)
Quarter Ended
March 31, December 31,
2026 2025
Non-accrual loans
Commercial $ 15,761 $ 14,549
Residential Real estate 10,607 10,087
Consumer 8,416 7,821
Total non-accrual loans $ 34,784 $ 32,457
90 days and greater delinquent - accruing interest $ 2,211 $ 2,489
Total non-performing loans $ 36,995 $ 34,946
Other real estate owned
Commercial $ 594 $ 539
Residential Real estate 631 672
Consumer 1,875 480
Total other real estate owned $ 3,100 $ 1,691
Other non-performing assets (1)
$ 3,935 $ 3,991
Total non-performing assets $ 44,030 $ 40,628
Net charge-offs (recoveries)
Commercial $ 339 $ 436
Residential Real estate 1 (25)
Consumer 286 559
Total net charge-offs $ 626 $ 970
Allowance for credit losses
Commercial $ 34,997 $ 35,473
Residential Real estate 3,183 3,183
Consumer 13,117 12,643
Total allowance for credit losses $ 51,297 $ 51,299
Credit quality ratios
Non-accrual loans to HFI loans 0.71 % 0.67 %
Non-performing assets to total assets 0.67 % 0.63 %
Annualized net charge-offs of average total loans 0.05 % 0.08 %
Allowance for credit losses to HFI loans 1.05 % 1.05 %
Allowance for credit losses to non-performing loans 138.66 % 146.80 %
(1) Other non-performing assets consist of a single available for sale security placed on non-accrual status in the third quarter of 2025.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three months ended March 31, 2026 and 2025
Liquidity
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 March 31, 2026, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.70 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $1.68 billion at December 31, 2025.
The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash, cash equivalents and restricted cash of $119.6 million during the three months ended March 31, 2026, as reported in the consolidated statements of cash flows. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $20.8 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 $17.2 million mainly due to purchases of AFS securities of $33.4 million, which was partially offset by proceeds from maturities, calls and principal repayments of securities available for sale of $17.9 million. Financing activities provided cash of $116.0 million, largely resulting from the proceeds from the net change in deposits of $146.9 million, which was partially offset by cash used in the net change in repurchase agreements of $22.5 million and $8.2 million in dividends paid on common stock, during the three months ended March 31, 2026.
Capital Resources
The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2026. Stockholders’ equity totaled $699.0 million as of March 31, 2026, compared to $688.3 million as of December 31, 2025. The increase in stockholders’ equity during the period was due to an increase in retained earnings related to net income for the quarter of $26.2 million, less cash dividend payments on outstanding common stock of $8.2 million, partially offset by an increase in accumulated other comprehensive loss of $7.7 million.
As of March 31, 2026, the ratio of total stockholders’ equity to total assets is 10.65%. Book value per common share was $13.69, increasing $0.19 compared to December 31, 2025 .
Tangible common equity 1 totaled $537.3 million at March 31, 2026, and the ratio of tangible common equity to tangible assets 1 was 8.39% at March 31, 2026. Tangible book value, which excludes intangible assets from total equity, per common share 1 was $10.52, increasing $0.20 compared to December 31, 2025 .
Horizon declared common stock dividends in the amount of $0.16 per share during the three months ended March 31, 2026 and $0.16 per share for the same period in 2025. The dividend payout ratio (dividends as a percent of basic earnings per share) was 31.37% and 29.09% for the three months ended March 31, 2026 and 2025, respectively. For additional information regarding dividends, see Horizon’s 2025 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 three months ended March 31, 2026 and 2025
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
March 31, 2026 March 31, 2025
Interest income (GAAP) (A) $ 86,651 $ 89,175
Taxable-equivalent adjustment:
Investment securities - tax exempt (1)
$ 677 $ 1,646
Loan receivable (2)
381 383
Total taxable-equivalent adjustment (3)
$ 1,058 $ 2,029
Interest income (non-GAAP) (B) $ 87,709 $ 91,204
Interest expense (GAAP) (C) $ 24,411 $ 36,908
Net interest income (GAAP) (D) =(A) - (C) $ 62,240 $ 52,267
Net FTE interest income (non-GAAP) (E) = (B) - (C) $ 63,298 $ 54,296
Average interest earning assets (F) $ 5,984,972 $ 7,234,724
Net FTE interest margin (non-GAAP) (G) = (E*) / (F) 4.29 % 3.04 %
(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 three months ended March 31, 2026 and 2025
Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2026 December 31, 2025
Total stockholders' equity (GAAP) (A) $ 699,027 $ 688,251
Intangible assets (end of period) (B) 161,716 162,391
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 537,311 $ 525,860
Total assets (GAAP) (D) 6,564,216 6,436,611
Intangible assets (end of period) (B) 161,716 162,391
Total tangible assets (non-GAAP) (E) = (D) - (B) $ 6,402,500 $ 6,274,220
Tangible common equity to tangible assets (Non-GAAP) (G) = (C) / (E) 8.39 % 8.38 %
Non–GAAP Reconciliation of Tangible Book Value Per Share
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, 2026 December 31, 2025
Total stockholders' equity (GAAP) (A) $ 699,027 $ 688,251
Intangible assets (end of period) (B) 161,716 162,391
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 537,311 $ 525,860
Common shares outstanding (D) 51,056,888 50,978,030
Tangible book value per common share (non-GAAP) (E) = (C) / (D) $ 10.52 $ 10.32
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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.