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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________to
Commission file number 0-10792
HORIZON BANCORP, INC.
(Exact name of registrant as specified in its charter)
Indiana35-1562417
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
515 Franklin Street, Michigan City, Indiana 46360
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (219) 879-0211
Former name, former address and former fiscal year, if changed since last report: N/A
____________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)		Name of each exchange
on which registered
Common stock, no par valueHBNCThe NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated Filer☐
Non-accelerated Filer☐Smaller Reporting Company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 44,114,049     shares of Common Stock, no par value, at November 8, 2023.

Table of Contents
HORIZON BANCORP, INC.
FORM 10–Q
INDEX


2
Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS




HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
September 30,
2023		December 31,
2022
(Unaudited)
Assets
Cash and due from banks$175,137 $123,505 
Interest earning time deposits2,207 2,812 
Investment securities, available for sale865,168 997,558 
Investment securities, held to maturity (fair value of $1,556,845 and $1,681,309)
1,966,483 2,022,748 
Loans held for sale2,828 5,807 
Loans, net of allowance for credit losses of $49,699 and $50,464
4,309,303 4,107,534 
Premises and equipment, net94,716 92,677 
Federal Home Loan Bank stock34,509 26,677 
Goodwill155,211 155,211 
Other intangible assets14,530 17,239 
Interest receivable37,850 35,294 
Cash value of life insurance149,212 146,175 
Other assets152,280 139,281 
Total assets$7,959,434 $7,872,518 
Liabilities
Deposits
Non–interest bearing$1,126,703 $1,277,768 
Interest bearing4,573,394 4,580,006 
Total deposits5,700,097 5,857,774 
Borrowings1,356,510 1,142,949 
Subordinated notes59,007 58,896 
Junior subordinated debentures issued to capital trusts57,201 57,027 
Interest payable16,281 5,380 
Other liabilities76,969 73,117 
Total liabilities7,266,065 7,195,143 
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares
— — 
Common stock, no par value, Authorized 99,000,000 shares
Issued and Outstanding 44,116,739 and 43,937,889 shares
— — 
Additional paid-in capital355,478 354,188 
Retained earnings461,325 429,385 
Accumulated other comprehensive loss(123,434)(106,198)
Total stockholders’ equity693,369 677,375 
Total liabilities and stockholders’ equity$7,959,434 $7,872,518 
See notes to condensed consolidated financial statements
3
Table of Contents
HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Dollar Amounts in Thousands, Except Per Share Data)
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Interest Income
Loans receivable$63,003 $45,517 $178,961 $122,641 
Investment securities – taxable8,788 8,436 26,253 24,500 
Investment securities – tax exempt7,002 7,478 21,617 21,482 
Other1,332 65 1,960 223 
Total interest income80,125 61,496 228,791 168,846 
Interest Expense
Deposits24,704 4,116 58,481 7,289 
Borrowed funds11,224 3,895 30,713 6,425 
Subordinated notes880 880 2,641 2,641 
Junior subordinated debentures issued to capital trusts1,227 744 3,469 1,755 
Total interest expense38,035 9,635 95,304 18,110 
Net Interest Income42,090 51,861 133,487 150,736 
Credit loss expense (recovery)263 (601)1,185 (1,747)
Net Interest Income after Credit Loss Expense (Recovery)41,827 52,462 132,302 152,483 
Non–interest Income
Service charges on deposit accounts3,086 3,023 9,135 8,651 
Wire transfer fees120 148 345 477 
Interchange fees3,186 3,089 9,637 9,451 
Fiduciary activities1,206 1,203 3,728 4,111 
Gain (loss) on sale of investment securities — — (480)— 
Gain on sale of mortgage loans1,582 1,441 3,372 5,969 
Mortgage servicing income, net631 355 1,984 4,163 
Increase in cash value of bank owned life insurance1,055 814 3,051 1,843 
Death benefit on bank owned life insurance— — — 644 
Other income964 115 1,675 1,468 
Total non–interest income11,830 10,188 32,447 36,777 
Non–interest Expense
Salaries and employee benefits20,058 20,613 58,932 60,305 
Net occupancy expenses3,283 3,293 10,095 10,044 
Data processing2,999 2,539 8,684 7,683 
Professional fees707 552 1,873 1,149 
Outside services and consultants2,316 2,855 7,548 7,865 
Loan expense1,120 1,392 3,635 4,130 
FDIC insurance expense1,300 670 2,680 2,170 
Core deposit intangible amortization903 926 2,709 2,777 
Other losses188 398 543 928 
Other expense3,294 3,578 10,255 10,439 
Total non–interest expense36,168 36,816 106,954 107,490 
Income Before Income Taxes17,489 25,834 57,795 81,770 
Income tax expense1,284 2,013 4,599 9,527 
Net Income$16,205 $23,821 $53,196 $72,243 
Basic Earnings Per Share$0.37 $0.55 $1.22 $1.66 
Diluted Earnings Per Share0.37 0.55 1.21 1.65 
See notes to condensed consolidated financial statements
4
Table of Contents
HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(Dollar Amounts in Thousands)
Three Months EndedNine Months Ended
September 30September 30
2023202220232022
Net Income$16,205 $23,821 $53,196 $72,243 
Other Comprehensive Income (Loss)
Change in fair value of derivative instruments:
Change in fair value of derivative instruments for the period— 1,952 (523)5,741 
Reclassification adjustment for swap termination gain realized in income— — (1,453)— 
Income tax effect— (410)415 (1,206)
Changes from derivative instruments— 1,542 (1,561)4,535 
Change in securities:
Unrealized gain (loss) for the period on available for sale securities(32,139)(39,856)(19,790)(169,013)
Reclassification of securities from available for sale to held to maturity— — — (794)
Amortization (accretion) from transfer of securities from available for sale to held to maturity securities(158)(143)(531)(1,081)
Reclassification adjustment for securities (gains) losses realized in income— — 480 — 
Income tax effect6,782 8,400 4,166 35,887 
Unrealized gains (losses) on securities(25,515)(31,599)(15,675)(135,001)
Other Comprehensive Income (Loss), Net of Tax(25,515)(30,057)(17,236)(130,466)
Comprehensive Income (Loss)$(9,310)$(6,236)$35,960 $(58,223)
See notes to condensed consolidated financial statements
5
Table of Contents
HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended
Preferred
Stock		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Balances, July 1, 2022$— $— $352,412 $398,517 $(93,064)$657,865 
Net income— — — 23,821 — 23,821 
Other comprehensive loss, net of tax— — — — (30,057)(30,057)
Amortization of unearned compensation— — 627 — — 627 
Exercise of stock options— — 14 — — 14 
Net settlement of share awards— — (89)— — (89)
Stock retirement plans— — (127)— — (127)
Cash dividends on common stock ($0.16 per share)
— — — (7,061)— (7,061)
Balances, September 30, 2022$— $— $352,837 $415,277 $(123,121)$644,993 
Balances, July 1, 2023$— $— $354,953 $452,209 $(97,919)$709,243 
Net income— — — 16,205 — 16,205 
Other comprehensive loss, net of tax— — — — (25,515)(25,515)
Amortization of unearned compensation— — 944 — — 944 
Net settlement of share awards— — (482)— — (482)
Stock retirement plans— — 63 — — 63 
Cash dividends on common stock ($0.16 per share)
— — — (7,089)— (7,089)
Balances, September 30, 2023$— $— $355,478 $461,325 $(123,434)$693,369 
See notes to condensed consolidated financial statements
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(Dollar Amounts in Thousands, Except Per Share Data)
Nine Months Ended
Preferred
Stock		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Balances, January 1, 2022$— $— $352,122 $363,742 $7,345 $723,209 
Net income— — — 72,243 — 72,243 
Other comprehensive loss, net of tax— — — — (130,466)(130,466)
Amortization of unearned compensation— — 1,770 — — 1,770 
Exercise of stock options— — 108 — — 108 
Stock option expense— — 13 — — 13 
Net settlement of share awards— — (1,785)— — (1,785)
Stock retirement plans— — 609 — — 609 
Cash dividends on common stock ($0.47 per share)
— — — (20,708)— (20,708)
Balances, September 30, 2022$— $— $352,837 $415,277 $(123,121)$644,993 
Balances, January 1, 2023$— $— $354,188 $429,385 $(106,198)$677,375 
Net income— — — 53,196 — 53,196 
Other comprehensive income, net of tax— — — — (17,236)(17,236)
Amortization of unearned compensation— — 2,647 — — 2,647 
Net settlement of share awards— — (1,204)— — (1,204)
Stock retirement plans— — (153)— — (153)
Cash dividends on common stock ($0.48 per share)
— — — (21,256)— (21,256)
Balances, September 30, 2023$— $— $355,478 $461,325 $(123,434)$693,369 
See notes to condensed consolidated financial statements

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollar Amounts in Thousands)
Nine Months Ended
September 30
20232022
Operating Activities
Net income$53,196 $72,243 
Items not requiring (providing) cash
Credit loss expense (recovery)1,185 (1,747)
Depreciation and amortization7,920 7,647 
Share based compensation2,647 1,783 
Amortization of mortgage servicing rights832 2,018 
Impairment (recovery) of mortgage servicing rights— (2,594)
Premium amortization on securities, net7,742 9,286 
Loss on sale of investment securities480 — 
Gain on sale of mortgage loans(3,372)(5,969)
Proceeds from sales of loans107,436 201,941 
Loans originated for sale(101,948)(188,187)
Gain on cash value life insurance(3,051)(1,843)
Gain on sale of other real estate owned(234)(618)
Net change in:
Interest receivable(2,556)(3,959)
Interest payable10,901 (274)
Other assets(1,048)(4,491)
Other liabilities(6,174)(2,277)
Net cash provided by operating activities73,956 82,959 
Investing Activities
Purchases of securities available for sale(1,435)(179,691)
Proceeds from sales of securities available for sale88,194 — 
Proceeds from maturities, calls and principal repayments of securities available for sale22,783 60,045 
Purchases of securities held to maturity(10,141)(421,682)
Proceeds from maturities, calls and principal repayments of securities held to maturity61,191 57,218 
Net change in interest earning time deposits605 1,968 
Purchase of FHLB stock(7,832)(2,435)
Redemption of FHLB stock— 198 
Purchase of loans(99,594)— 
Net change in loans(105,373)(375,651)
Proceeds on the sale of OREO and repossessed assets2,280 3,555 
Premises and equipment expenditures(6,440)(4,701)
Purchases of bank owned life insurance— (50,000)
Proceeds from bank owned life insurance14 3,554 
Net cash used in investing activities(55,748)(907,622)
Financing Activities
Net change in deposits(157,677)27,847 
Proceeds from borrowings587,853 1,005,923 
Repayment of borrowings(378,914)(687,647)
Net change in repurchase agreements4,622 17,076 
Net settlement of share awards(1,204)(1,785)
Exercise of stock options— 108 
Dividends paid on common stock(21,256)(20,708)
Net cash provided by financing activities33,424 340,814 
Net Change in Cash and Cash Equivalents51,632 (483,849)
Cash and Cash Equivalents, Beginning of Period123,505 593,508 
Cash and Cash Equivalents, End of Period$175,137 $109,659 
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollar Amounts in Thousands)
Additional Supplemental Information
Interest paid$84,403 $18,384 
Income taxes paid1,554 936 
Transfer of loans to other real estate and repossessed assets2,342 1,483 
Transfer of available for sale securities to held to maturity securities— 120,881 
See notes to condensed consolidated financial statements

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)

Note 1 - Accounting Policies
The accompanying unaudited condensed consolidated financial statements include the accounts of Horizon Bancorp, Inc. (“Horizon” or the “Company”) and its wholly-owned subsidiaries, including Horizon Bank (“Horizon Bank” or the “Bank”), which is an Indiana commercial bank. All inter–company balances and transactions have been eliminated. The results of operations for the periods ended September 30, 2023 and September 30, 2022 are not necessarily indicative of the operating results for the full year of 2023 or 2022. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of Horizon’s management, necessary to fairly present the financial position, results of operations and cash flows of Horizon for the periods presented. Those adjustments consist only of normal recurring adjustments.
Certain information and note disclosures normally included in Horizon’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Horizon’s Annual Report on Form 10–K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on March 15, 2023 (the “2022 Annual Report on Form 10–K”). The condensed consolidated balance sheet of Horizon as of December 31, 2022 has been derived from the audited balance sheet as of that date.
On July 16, 2019, the Board of Directors of the Company authorized a stock repurchase program for up to 2,250,000 shares of Horizon’s issued and outstanding common stock, no par value. As of September 30, 2023, Horizon had repurchased a total of 803,349 shares at an average price per share of $16.89.
Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted–average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The following table shows computation of basic and diluted earnings per share.
Three Months EndedNine Months Ended
September 30September 30
2023202220232022
Basic earnings per share
Net income$16,205 $23,821 $53,196 $72,243 
Weighted average common shares outstanding43,646,609 43,573,370 43,623,614 43,567,028 
Basic earnings per share$0.37 $0.55 $1.22 $1.66 
Diluted earnings per share
Net income $16,205 $23,821 $53,196 $72,243 
Weighted average common shares outstanding43,646,609 43,573,370 43,623,614 43,567,028 
Effect of dilutive securities:
Restricted stock143,673 92,405 182,559 92,718 
Stock options5,787 38,018 7,774 39,289 
Weighted average common shares outstanding43,796,069 43,703,793 43,813,947 43,699,035 
Diluted earnings per share$0.37 $0.55 $1.21 $1.65 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
There were 665,063 and 624,189 shares for the three and nine months ended September 30, 2023 which were not included in the computation of diluted earnings per share because they were non–dilutive. There were 316,760 and 316,760 shares for the three and nine months ended September 30, 2022 which were not included in the computation of diluted earnings per share because they were non–dilutive.
Reclassifications
Certain reclassifications have been made to the 2022 condensed consolidated financial statements to be comparable to 2023. These reclassifications were not material and had no effect on net income.
Revision of Previously Issued Financial Statements
We have revised amounts reported in previously issued financial statements for the periods presented in this Quarterly Report on Form 10–Q related to immaterial errors. The errors relate to the amortization expense of the indirect loan dealer reserve asset not being reported as a reduction in interest income on loans, the non–cash transfer of available for sale securities to held to maturity securities and the incorrect classification of revolving lines of credit as term loans in the vintage loan disclosure. The correction of these errors resulted in a reduction in interest income on loans receivable and a reduction in non–interest loan expense on the Company's consolidated income statement, the disclosure of the transfer of available for sale securities to held to maturity securities in the statements of cash flows and the classification of certain term loans as lines of credit in the vintage loan disclosure. These revisions do not impact the Company's net income.
We evaluated the aggregate effects of these errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10–K for the year ended December 31, 2022 and in our Quarterly Report on Form 10–Q for the three and nine months ended September 30, 2022.
The following tables present the revisions to the line items of our previously issued financial statements to reflect the correction of the errors:
Consolidated Statements of Income
Three Months Ended September 30, 2022
As ReportedIndirect Loan Dealer Reserve AdjustmentAs Revised
Interest income
Loans receivable$47,051 $(1,534)$45,517 
Total interest income63,030 (1,534)61,496 
Net interest income53,395 (1,534)51,861 
Net interest income after credit loss expense (recovery)53,996 (1,534)52,462 
Non–interest expense
Loan expense2,926 (1,534)1,392 
Total non–interest expense38,350 (1,534)36,816 
Net income23,821 — 23,821 
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Consolidated Statements of Income
Nine Months Ended September 30, 2022
As ReportedIndirect Loan Dealer Reserve AdjustmentAs Revised
Interest income
Loans receivable$126,479 $(3,838)$122,641 
Total interest income172,684 (3,838)168,846 
Net interest income154,574 (3,838)150,736 
Net interest income after credit loss expense (recovery)156,321 (3,838)152,483 
Non–interest expense
Loan expense7,968 (3,838)4,130 
Total non–interest expense111,328 (3,838)107,490 
Net income72,243 — 72,243 
Additional immaterial reclassifications made to the 2022 condensed consolidated financial statements to be comparable to 2023 are not included within the revision to the consolidated statement of cash flows noted below.
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2022
As ReportedIndirect Loan Dealer Reserve AdjustmentTransfer of AFS Securities to HTM SecuritiesAs Revised
Operating Activities
Net change in other assets$(12,865)$5,400 $— $(7,465)
Net cash provided by operating activities77,664 5,400 — 83,064 
Investing activities
Net change in loans(370,251)(5,400)— (375,651)
Net cash used in investing activities(902,327)(5,400)— (907,727)
Net Change in Cash and Cash Equivalents(483,849)— — (483,849)
Additional Supplemental Information
Transfer of available for sale securities to held to maturity securities— — 120,881 120,881 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following tables present loans by credit grades and origination year at December 31, 2022.
As ReportedAs Revised
TermRevolvingTotalTermRevolving
Term		RevolvingTotal
Commercial
Owner occupied real estate
Pass$490,056 $76,493 $566,549 $484,893 $76,493 $5,163 $566,549 
Special Mention9,413 83 9,496 9,413 83 — 9,496 
Substandard15,641 2,876 18,517 15,641 2,876 — 18,517 
Total owner occupied real estate$515,110 $79,452 $594,562 $509,947 $79,452 $5,163 $594,562 
Non–owner occupied real estate
Pass$955,956 $182,681 $1,138,637 $944,105 $182,681 $11,851 $1,138,637 
Special Mention42,419 — 42,419 42,419 — — 42,419 
Substandard6,021 — 6,021 6,021 — — 6,021 
Total non–owner occupied real estate$1,004,396 $182,681 $1,187,077 $992,545 $182,681 $11,851 $1,187,077 
Residential spec homes
Pass$6,404 $4,334 $10,738 $779 $4,333 $5,626 $10,738 
Special Mention— — — — — — — 
Substandard— 100 100 — 100 — 100 
Total residential spec homes$6,404 $4,434 $10,838 $779 $4,433 $5,626 $10,838 
Development & spec land
Pass$13,279 $13,008 $26,287 $13,257 $13,008 $22 $26,287 
Special Mention145 — 145 145 — — 145 
Substandard178 748 926 178 748 — 926 
Total development & spec land$13,602 $13,756 $27,358 $13,580 $13,756 $22 $27,358 
Commercial & industrial
Pass$574,972 $49,859 $624,831 $419,702 $49,276 $159,017 $627,995 
Special Mention4,636 — 4,636 3,427 — 1,208 4,635 
Substandard12,603 5,517 18,120 5,468 2,322 7,167 14,957 
Total commercial & industrial$592,211 $55,376 $647,587 $428,597 $51,598 $167,392 $647,587 
Total commercial$2,131,723 $335,699 $2,467,422 $1,945,448 $331,920 $190,054 $2,467,422 
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
As ReportedAs Revised
TermRevolvingTotalTermRevolving
Term		RevolvingTotal
Real estate
Residential mortgage
Performing$603,636 $792 $604,428 $604,428 $— $— $604,428 
Non–performing8,123 — 8,123 8,123 — — 8,123 
Total residential mortgage$611,759 $792 $612,551 $612,551 $— $— $612,551 
Residential construction
Performing$187 $40,554 $40,741 $— $40,741 $— $40,741 
Non–performing— — — — — — — 
Total residential construction$187 $40,554 $40,741 $— $40,741 $— $40,741 
Mortgage warehouse
Performing$— $69,529 $69,529 $— $— $69,529 $69,529 
Non–performing— — — — — — — 
Total mortgage warehouse$— $69,529 $69,529 $— $— $69,529 $69,529 
Total real estate$611,946 $110,875 $722,821 $612,551 $40,741 $69,529 $722,821 
Consumer
Direct installment
Performing$56,441 $9 $56,450 $54,290 $9 $2,151 $56,450 
Non–performing164 — 164 164 — — 164 
Total direct installment$56,605 $9 $56,614 $54,454 $9 $2,151 $56,614 
Indirect installment
Performing$499,781 $— $499,781 $499,781 $— $— $499,781 
Non–performing768 — 768 768 — — 768 
Total indirect installment$500,549 $— $500,549 $500,549 $— $— $500,549 
Home equity
Performing$400,048 $7,089 $407,137 $53,226 $7,089 $346,822 $407,137 
Non–performing1,512 1,943 3,455 1,512 1,943 — 3,455 
Total home equity$401,560 $9,032 $410,592 $54,738 $9,032 $346,822 $410,592 
Total consumer$958,714 $9,041 $967,755 $609,741 $9,041 $348,973 $967,755 
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Adoption of New Accounting Standards
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2022–02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
The FASB has issued ASU 2022–02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, in March 2022. These amendments eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, these amendments require that an entity disclose current–period gross write–offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326–20. The guidance is effective for entities that have adopted ASU 2016–13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively. If an entity elects to early adopt ASU 2022–02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company adopted this standard during the first quarter of 2023 and it did not have a material impact on the consolidated financial statements.
FASB ASU No. 2020–04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
The FASB has issued ASU 2020–04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the LIBOR or other interbank offered rates on financial reporting. To help with the transition to new reference rates, the ASU provides optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships. The main provisions include:
•A change in a contract's reference interest rate would be accounted for as a continuation of that contract rather than as the creation of a new one for contracts, including loans, debt, leases, and other arrangements, that meet specific criteria.
•When updating its hedging strategies in response to reference rate reform, an entity would be allowed to preserve its hedge accounting.
The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued. Because the guidance is meant to help entities through the transition period, it will be in effect for a limited time and will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients that are retained through the end of the hedging relationship. The amendments in this ASU are effective March 12, 2020 through December 31, 2022.
ASU 2020–04 permits relief solely for reference rate reform actions and permits different elections over the effective date for legacy and new activity. Accordingly, the Company is evaluating and reassessing the elections on a quarterly basis. For current elections in effect regarding the assertion of the probability of forecasted transactions, the Company elects the expedient to assert the probability of the hedged interest payments and receipts regardless of any expected modification in terms related to reference rate reform.
With the issuance of ASU 2022–6, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, the sunset date for the adoption of ASU 2020–04 was extended from December 31, 2022 to December 31, 2024. The Company adopted the expedients included in this ASU in the third quarter of 2023 as it transferred its loans and other financial instruments to another reference rate.


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Accounting Guidance Issued But Not Yet Adopted
FASB ASU No. 2023–02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
The FASB has issued ASU 2023–02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. This guidance allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for public business entities for fiscal years including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted in any interim period. The Company is assessing ASU 2023–02 and its impact on its accounting and disclosures.
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Table of Contents
HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Note 2 – Securities
The fair value of securities is as follows:
September 30, 2023
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Available for sale
U.S. Treasury and federal agencies$293,785 $— $(27,935)$265,850 
State and municipal425,096 — (84,784)340,312 
Federal agency collateralized mortgage obligations23,210 — (1,897)21,313 
Federal agency mortgage-backed pools200,728 — (34,839)165,889 
Corporate notes81,803 338 (10,337)71,804 
Total available for sale investment securities$1,024,622 $338 $(159,792)$865,168 
Held to maturity
U.S. Treasury and federal agencies$287,561 $— $(53,553)$234,008 
State and municipal1,101,933 15 (243,639)858,309 
Federal agency collateralized mortgage obligations52,573 — (9,896)42,677 
Federal agency mortgage-backed pools328,410 — (64,353)264,057 
Private labeled mortgage-backed pools32,992 — (5,694)27,298 
Corporate notes163,014 — (32,518)130,496 
Total held to maturity investment securities$1,966,483 $15 $(409,653)$1,556,845 
December 31, 2022
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Available for sale
U.S. Treasury and federal agencies$294,329 $— $(27,150)$267,179 
State and municipal505,006 140 (71,602)433,544 
Federal agency collateralized mortgage obligations33,011 — (1,796)31,215 
Federal agency mortgage-backed pools220,963 — (30,307)190,656 
Corporate notes84,393 195 (9,624)74,964 
Total available for sale investment securities$1,137,702 $335 $(140,479)$997,558 
Held to maturity
U.S. Treasury and federal agencies$295,250 $— $(49,237)$246,013 
State and municipal1,127,669 374 (192,458)935,585 
Federal agency collateralized mortgage obligations56,564 — (8,865)47,699 
Federal agency mortgage-backed pools343,953 — (56,714)287,239 
Private labeled mortgage-backed pools35,466 — (5,493)29,973 
Corporate notes163,846 — (29,046)134,800 
Total held to maturity investment securities$2,022,748 $374 $(341,813)$1,681,309 

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Table of Contents
HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The Company elected to transfer 793 AFS securities with an aggregate fair value of $120.9 million to a classification of HTM on March 31, 2022. In accordance with FASB ASC 320–10–55–24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer. The net unrealized holding loss of $814,000, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre–tax amount retained in the carrying value of the HTM securities. Such amounts will be accreted to comprehensive income over the remaining life of the securities. The fair value of the transferred AFS securities became the book value of the HTM securities at March 31, 2022.
The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2023 and December 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
September 30, 2023
Amortized
Cost		Fair
Value
Available for sale
Within one year$5,449 $5,329 
One to five years364,641 330,882 
Five to ten years192,161 153,784 
After ten years238,433 187,971 
800,684 677,966 
Federal agency collateralized mortgage obligations23,210 21,313 
Federal agency mortgage–backed pools200,728 165,889 
Total available for sale investment securities$1,024,622 $865,168 
Held to maturity
Within one year$35,434 $35,149 
One to five years228,119 212,226 
Five to ten years340,018 278,547 
After ten years948,937 696,891 
1,552,508 1,222,813 
Federal agency collateralized mortgage obligations52,573 42,677 
Federal agency mortgage–backed pools328,410 264,057 
Private labeled mortgage–backed pools32,992 27,298 
Total held to maturity investment securities$1,966,483 $1,556,845 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.
September 30, 2023
Less than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Investment Securities
U.S. Treasury and federal agencies$1,322 $(12)$498,536 $(81,476)$499,858 $(81,488)
State and municipal123,235 (7,558)1,066,492 (320,865)1,189,727 (328,423)
Federal agency collateralized mortgage obligations— — 63,990 (11,793)63,990 (11,793)
Federal agency mortgage–backed pools13 (1)429,933 (99,191)429,946 (99,192)
Private labeled mortgage–backed pools— — 27,298 (5,694)27,298 (5,694)
Corporate notes— — 200,899 (42,855)200,899 (42,855)
Total temporarily impaired securities$124,570 $(7,571)$2,287,148 $(561,874)$2,411,718 $(569,445)
December 31, 2022
Less than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Investment Securities
U.S. Treasury and federal agencies$217,357 $(16,692)$295,585 $(59,695)$512,942 $(76,387)
State and municipal533,871 (45,881)757,061 (218,179)1,290,932 (264,060)
Federal agency collateralized mortgage obligations40,301 (2,881)38,613 (7,780)78,914 (10,661)
Federal agency mortgage–backed pools49,633 (3,211)428,243 (83,810)477,876 (87,021)
Private labeled mortgage–backed pools— — 29,973 (5,493)29,973 (5,493)
Corporate notes38,906 (6,787)169,921 (31,883)208,827 (38,670)
Total temporarily impaired securities$880,068 $(75,452)$1,719,396 $(406,840)$2,599,464 $(482,292)
Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. As of September 30, 2023 and December 31, 2022, the Company had 2,651 and 2,828 securities, respectively, with market values below their cost basis. The total fair value of these investments at September 30, 2023 and December 31, 2022 was $2.4 billion and $2.6 billion, which is approximately 99.6% and 97.0%, respectively, of the Company's available for sale and held to maturity securities portfolio. These declines resulted primarily from fluctuations in market interest rates after purchase. Management believes the declines in fair value for these securities are temporary.
No allowance for credit losses for available for sale debt securities or held to maturity securities was recorded at September 30, 2023 or December 31, 2022. Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $16.7 million at September 30, 2023 and $17.8 million at December 31, 2022 and is excluded from the estimate of credit losses.
The U.S. government sponsored entities and agencies and mortgage–backed securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. Therefore, for those securities, we do not record expected credit losses.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Based on an evaluation of available evidence, management believes the unrealized losses on state and municipal securities, private labeled mortgage–backed pools and corporate notes were due to changes in interest rates. Due to the contractual terms, the issuers of state and municipal securities are not allowed to settle for less than the amortized cost of the security. In addition, the Company does not intend to sell these securities prior to the recovery of the amortized cost, which may not occur until maturity.
Information regarding security proceeds, gross gains and gross losses are presented below.
Three Months EndedNine Months Ended
September 30September 30
2023202220232022
Sales of securities available for sale
Proceeds$— $— $88,194 $— 
Gross gains— — 215 — 
Gross losses— — (695)— 

Note 3 – Loans
The table below identifies the Company’s loan portfolio segments and classes.
Portfolio SegmentClass of Financing Receivable
CommercialOwner occupied real estate
Non-owner occupied real estate
Residential spec homes
Development & spec land
Commercial and industrial
Real estateResidential mortgage
Residential construction
Mortgage warehouseMortgage warehouse
ConsumerDirect installment
Indirect installment
Home equity
Portfolio segment is defined as a level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Class of financing receivable is defined as a group of financing receivables determined on the basis of both of the following, 1) risk characteristics of the financing receivable, and 2) an entity’s method for monitoring and assessing credit risk. Generally, the Bank does not move loans from a revolving loan to a term loan other than construction loans. Residential construction loans are reviewed and rewritten prior to being originated as a term loan.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table presents total loans outstanding by portfolio class, as of September 30, 2023 and December 31, 2022:
September 30,
2023		December 31,
2022
Commercial
Owner occupied real estate$630,125 $594,562 
Non–owner occupied real estate1,244,371 1,187,077 
Residential spec homes12,414 10,838 
Development & spec land29,146 27,358 
Commercial and industrial673,188 647,587 
Total commercial2,589,244 2,467,422 
Real estate
Residential mortgage649,996 612,551 
Residential construction25,403 40,741 
Mortgage warehouse65,923 69,529 
Total real estate741,322 722,821 
Consumer
Direct installment54,399 56,614 
Indirect installment439,922 500,549 
Home equity534,115 410,592 
Total consumer1,028,436 967,755 
Total loans4,359,002 4,157,998 
Allowance for credit losses(49,699)(50,464)
Net loans$4,309,303 $4,107,534 
Total loans include net deferred loan costs of $23.1 million at September 30, 2023 and $22.7 million at December 31, 2022, respectively.

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

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short–term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves larger loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets, the general economy or fluctuations in interest rates. The properties securing the Company's commercial real estate portfolio are diverse in terms of property type, and are monitored for concentrations of credit. Management monitors and evaluates commercial real estate loans based on collateral, cash flow and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner–occupied commercial real estate loans versus non–owner occupied loans.


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Real Estate and Consumer

With respect to residential loans that are secured by 1–4 family residences and are generally owner occupied, the Company generally establishes a maximum loan–to–value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1–4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Mortgage Warehousing

Horizon's mortgage warehouse lending has specific mortgage companies as customers of Horizon Bank. Individual mortgage loans originated by these mortgage companies are funded as a secured borrowing with a pledge of collateral under Horizon's agreement with the mortgage company. Each mortgage loan funded by Horizon undergoes an underwriting review by Horizon to the end investor guidelines and is assigned to Horizon until the loan is sold to the secondary market by the mortgage company. In addition, Horizon takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. At the time a loan is transferred to the secondary market, the mortgage company reacquires the loan under its option within the agreement. Due to the reacquire feature contained in the agreement, the transaction does not qualify as a sale and therefore is accounted for as a secured borrowing with a pledge of collateral pursuant to the agreement with the mortgage company. When the individual loan is sold to the end investor by the mortgage company, the proceeds from the sale of the loan are received by Horizon and used to pay off the loan balance with Horizon along with any accrued interest and any related fees. The remaining balance from the sale is forwarded to the mortgage company. These individual loans typically are sold by the mortgage company within 30 days and are seldom held more than 90 days. Interest income is accrued during this period and collected at the time each loan is sold. Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.

Based on these agreements with each mortgage company, at any time a mortgage company can reacquire from Horizon its outstanding loan balance on an individual mortgage and regain possession of the original note. Horizon also has the option to request that the mortgage company reacquire an individual mortgage. Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company. Also, in the event that the end investor would not be able to honor the purchase commitment and the mortgage company would not be able to reacquire its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Non–performing Loans

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

September 30, 2023
Non–accrualLoans Past
Due Over 90
Days Still
Accruing		Total
Non–performing
Loans		Non–performing
with no Allowance for Credit Losses
Commercial
Owner occupied real estate$2,213 $— $2,213 $2,213 
Non–owner occupied real estate3,573 — 3,573 1,275 
Residential spec homes— — — — 
Development & spec land641 — 641 641 
Commercial and industrial492 50 542 243 
Total commercial6,919 50 6,969 4,372 
Real estate
Residential mortgage7,644 133 7,777 7,777 
Residential construction— — — — 
Mortgage warehouse— — — — 
Total real estate7,644 133 7,777 7,777 
Consumer
Direct installment132 — 132 132 
Indirect installment972 209 1,181 1,181 
Home equity3,389 — 3,389 3,389 
Total consumer4,493 209 4,702 4,702 
Total$19,056 $392 $19,448 $16,851 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table presents non–accrual loans, loans past due over 90 days still on accrual, and troubled debt restructurings (“TDRs”) by class of loan at December 31, 2022:

December 31, 2022
Non–accrualLoans Past
Due Over 90
Days Still
Accruing		Non–performing
TDRs		Performing
TDRs		Total
Non–performing
Loans		Non–performing
with no Allowance for Credit Losses
Commercial
Owner occupied real estate$3,423 $— $— $568 $3,991 $3,805 
Non–owner occupied real estate3,866 — — 269 4,135 2,211 
Residential spec homes101 — — — 101 101 
Development & spec land815 — — — 815 65 
Commercial and industrial288 — — — 288 288 
Total commercial8,493 — — 837 9,330 6,470 
Real estate
Residential mortgage5,479 43 1,210 1,391 8,123 8,123 
Residential construction— — — — — — 
Mortgage warehouse— — — — — — 
Total real estate5,479 43 1,210 1,391 8,123 8,123 
Consumer
Direct installment138 26 — — 164 164 
Indirect installment745 23 — — 768 768 
Home equity2,775 — 338 342 3,455 3,455 
Total consumer3,658 49 338 342 4,387 4,387 
Total$17,630 $92 $1,548 $2,570 $21,840 $18,980 
There was no interest income recognized on non–accrual loans during the nine months ended September 30, 2023 and 2022, respectively, while the loans were in non–accrual status.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table presents the payment status by class of loan, excluding non–accrual loans of $19.1 million at September 30, 2023:
September 30, 2023
Current30–59 Days
Past Due		60–89 Days
Past Due		90 Days or
Greater
Past Due		Total 
Past Due
Loans		Total
Loans
Commercial
Owner occupied real estate$631,843 $— $— $— $— $631,843 
Non–owner occupied real estate1,235,352 1,515 — — 1,515 1,236,867 
Residential spec homes12,414 — — — — 12,414 
Development & spec land28,505 — — — — 28,505 
Commercial and industrial672,131 390 125 50 565 672,696 
Total commercial2,580,245 1,905 125 50 2,080 2,582,325 
Real estate
Residential mortgage639,987 1,796 436 133 2,365 642,352 
Residential construction25,403 — — — — 25,403 
Mortgage warehouse65,923 — — — — 65,923 
Total real estate731,313 1,796 436 133 2,365 733,678 
Consumer
Direct installment53,848 418 1 — 419 54,267 
Indirect installment432,498 5,543 700 209 6,452 438,950 
Home equity528,561 2,088 77 — 2,165 530,726 
Total consumer1,014,907 8,049 778 209 9,036 1,023,943 
Total$4,326,465 $11,750 $1,339 $392 $13,481 $4,339,946 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table presents the payment status by class of loan, excluding non–accrual loans of $17.6 million and non–performing TDRs of $1.5 million at December 31, 2022:
December 31, 2022
Current30–59 Days
Past Due		60–89 Days
Past Due		90 Days or
Greater
Past Due		Total 
Past Due
Loans		Total
Commercial
Owner occupied real estate$590,870 $269 $— $— $269 $591,139 
Non–owner occupied real estate1,183,195 16 — — 16 1,183,211 
Residential spec homes10,737 — — — — 10,737 
Development & spec land26,513 — 30 — 30 26,543 
Commercial and industrial646,792 507 — — 507 647,299 
Total commercial2,458,107 792 30 — 822 2,458,929 
Real estate
Residential mortgage603,630 1,980 209 43 2,232 605,862 
Residential construction40,741 — — — — 40,741 
Mortgage warehouse69,529 — — — — 69,529 
Total real estate713,900 1,980 209 43 2,232 716,132 
Consumer
Direct installment56,266 168 16 26 210 56,476 
Indirect installment494,341 4,536 904 23 5,463 499,804 
Home equity405,405 1,413 661 — 2,074 407,479 
Total consumer956,012 6,117 1,581 49 7,747 963,759 
Total$4,128,019 $8,889 $1,820 $92 $10,801 $4,138,820 
The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.
Modified Loans
The Company adopted ASU 2022–02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, during the first quarter of 2023. These amendments eliminated the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. During the first nine months of 2023, the Company did not modify any loans.
Prior to the adoption of ASU 2022–02, loans modified as TDRs generally consisted of allowing borrowers to defer scheduled principal payments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans' contractual terms. TDRs that continued to accrue interest were individually monitored on a monthly basis and evaluated for impairment annually and transferred to non–accrual status when it was probable that any remaining principal and interest payments due on the loan would not be collected in accordance with the contractual terms of the loan. TDRs that subsequently default were individually evaluated for impairment at the time of default.


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table presents TDRs by class of loan at December 31, 2022:
December 31, 2022
Non–accrualAccruingTotal
Commercial
Owner occupied real estate$— $568 $568 
Non–owner occupied real estate— 269 269 
Residential spec homes— — — 
Development & spec land— — — 
Commercial and industrial— — — 
Total commercial— 837 837 
Real estate
Residential mortgage1,210 1,391 2,601 
Residential construction— — — 
Mortgage warehouse— — — 
Total real estate1,210 1,391 2,601 
Consumer
Direct installment— — — 
Indirect installment— — — 
Home equity338 342 680 
Total consumer338 342 680 
Total$1,548 $2,570 $4,118 
Collateral Dependent Financial Assets
A collateral dependent financial loan relies solely on the operation or sale of the collateral for repayment. In evaluating the overall risk associated with the loan, the Company considers character, overall financial condition and resources, and payment record of the borrower; the prospects for support from any financially responsible guarantors; and the nature and degree of protection provided by the cash flow and value of any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The table below presents the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC 326, which are individually evaluated to determine expected credit losses.
September 30, 2023
Real EstateAccounts Receivable/EquipmentOtherTotalACL
Allocation
Commercial
Owner occupied real estate$2,743 $— $— $2,743 $— 
Non–owner occupied real estate3,828 — — 3,828 789 
Development & spec land641 — — 641 — 
Commercial and industrial— 467 25 492 299 
Total commercial7,212 467 25 7,704 1,088 
Total collateral dependent loans$7,212 $467 $25 $7,704 $1,088 
December 31, 2022
Real EstateAccounts Receivable/EquipmentOtherTotalACL
Allocation
Commercial
Owner occupied real estate$3,905 $95 $— $4,000 $215 
Non–owner occupied real estate4,135 — — 4,135 988 
Residential spec homes101 — — 101 — 
Development & spec land815 — — 815 36 
Commercial and industrial— 248 31 279 — 
Total commercial8,956 343 31 9,330 1,239 
Total collateral dependent loans$8,956 $343 $31 $9,330 $1,239 
Credit Quality Indicators
Horizon Bank's processes for determining credit quality differ slightly depending on whether a new loan or a renewed loan is being underwritten, or whether an existing loan is being re–evaluated for credit quality. The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the loan grade.
•For new and renewed commercial loans, the Bank's Credit Department, which acts independently of the loan officer, assigns the credit quality grade of the loans. Loan grades for loans with an aggregate credit exposure that exceeds the authorities in the respective regions (ranging from $3,000,000 to $6,000,000) are validated by the Loan Committee, which is chaired by the Chief Commercial Banking Officer (“CCBO”).
•Commercial loan officers are responsible for reviewing their loan portfolios and reporting any adverse material change to the CCBO or Loan Committee. When circumstances warrant a change in the credit quality grade, loan officers are required to notify the CCBO and the Credit Department of the change in the loan grade. Downgrades are accepted immediately by the CCBO, however, lenders must present their factual information to either the Loan Committee or the CCBO when recommending an upgrade.
•The CCBO, or a designee, meets periodically with loan officers to discuss the status of past due loans and classified loans. These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
•Monthly, senior management meets as members of the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets. This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, other real estate owned and personal property repossessions. The information reviewed in this meeting acts as a precursor for developing management's analysis of the adequacy of the Allowance for Credit Losses.
For residential real estate and consumer loans, Horizon uses a grading system based on delinquency. Loans that are 90 days or more past due, on non–accrual, or are classified as modified loans are graded “Substandard.” After being 90 to 120 days delinquent a loan is charged off unless it is well secured and in the process of collection. If the latter case exists, the loan is placed on non–accrual. Occasionally a mortgage loan may be graded as “Special Mention.” When this situation arises, it is because the characteristics of the loan and the borrower fit the definition of a Risk Grade 5 described below, which is normally used for grading commercial loans. Loans not graded Substandard are considered Pass.
Horizon Bank employs a nine–grade rating system to determine the credit quality of commercial loans. The first five grades represent acceptable quality, and the last four grades mirror the criticized and classified grades used by the bank regulatory agencies (special mention, substandard, doubtful, and loss). The loan grade definitions are detailed below.
Risk Grade 1: Excellent (Pass)
Loans secured by liquid collateral, such as certificates of deposit, reputable bank letters of credit, or other cash equivalents or loans to any publicly held company with a current long–term debt rating of A or better and meeting defined key financial metric ranges.
Risk Grade 2: Good (Pass)
Loans to businesses that have strong financial statements containing an unmodified opinion from a CPA firm and at least three years consecutive years of profits; loans supported by unaudited financial statements containing strong balance sheets, five years consecutive years of profits, a five years satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive; loans secured by publicly traded marketable securities with required margins where there is no impediment to liquidation; loans to individuals backed by liquid personal assets and unblemished credit histories; or loans to publicly held companies with current long–term debt ratings of Baa or better and meeting defined key financial metric ranges.
Risk Grade 3: Satisfactory (Pass)
Loans supported by financial statements (audited or unaudited) that indicate average or slightly below average risk and having some deficiency or vulnerability to changing economic conditions; loans with some weakness but offsetting features of other support are readily available; loans that are meeting the terms of repayment, but which may be susceptible to deterioration if adverse factors are encountered and meeting defined key financial metric ranges. Loans may be graded Satisfactory when there is no recent information on which to base a current risk evaluation and the following conditions apply:
•At inception, the loan was properly underwritten, did not possess an unwanted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory.
•At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss.
•The loan has exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance.
•During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the borrower is in an industry known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk grade may be warranted.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Risk Grade 4: Satisfactory/Monitored (Pass)
Loans in this category are considered to be of acceptable credit quality, but contain greater credit risk than Satisfactory rated loans and meet defined key financial metric ranges. Borrower displays acceptable liquidity, leverage, and earnings performance within the Bank's minimum underwriting guidelines. The level of risk is acceptable but conditioned on the proper level of loan officer supervision. Loans that normally fall into this grade include acquisition, construction and development loans and income producing properties that have not reached stabilization.
Risk Grade 4W: Management Watch (Pass)
Loans in this category are considered to be of acceptable quality and meet defined key financial metric ranges, but with above normal risk. Borrower displays potential indicators of weakness in the primary source of repayment resulting in a higher reliance on secondary sources of repayment. Balance sheet may exhibit weak liquidity and/or high leverage. There is inconsistent earnings performance without the ability to sustain adverse economic conditions. Borrower may be operating in a declining industry or the property type, as for a commercial real estate loan, may be high risk or in decline. These loans require an increased level of loan officer supervision and monitoring to assure that any deterioration is addressed in a timely fashion. Commercial construction loans are graded as 4W Management Watch until the projects are completed and stabilized.
Risk Grade 5: Special Mention
Loans which possess some temporary (normally less than one year) credit deficiency or potential weakness which deserves close attention. Such loans pose an unwarranted financial risk that, if not corrected, could weaken the loan by adversely impacting the future repayment ability of the borrower. The key distinctions of a Special Mention classification are that (1) it is indicative of an unwarranted level of risk and (2) weaknesses are considered “potential,” not “defined,“ impairments to the primary source of repayment. These loans may be to borrowers with adverse trends in financial performance, collateral value and/or marketability, or balance sheet strength and must meet defined key financial metric ranges.
Risk Grade 6: Substandard
One or more of the following characteristics may be exhibited in loans classified Substandard:
•Loans which possess a defined credit weakness. The likelihood that a loan will be paid from the primary source of repayment is uncertain. Financial deterioration is under way and very close attention is warranted to ensure that the loan is collected without loss.
•Loans are inadequately protected by the current net worth and paying capacity of the obligor.
•The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees.
•Loans have a distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.
•Unusual courses of action are need to maintain a high probability of repayment.
•The borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments.
•The lender is forced into a subordinated or unsecured position due to flaws in documentation.
•Loans have been restructured so that payment schedules, terms, and collateral represent concessions to the borrower when compared to the normal loan terms.
•The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.
•There is a significant deterioration in market conditions to which the borrower is highly vulnerable.
•The borrower meets defined key financial metric ranges.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Risk Grade 7: Doubtful
One or more of the following characteristics may be present in loans classified Doubtful:
•Loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of principal highly improbable.
•The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.
•The possibility of loss is high but because of certain important pending factors which may strengthen the loan, loss classification is deferred until the exact status of repayment is known.
•The borrower meets defined key financial metric ranges.
Risk Grade 8: Loss
Loans are considered uncollectible and of such little value that continuing to carry them as assets is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all of a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following tables present loans by credit grades and origination year at September 30, 2023.
September 30, 202320232022202120202019PriorRevolving Term LoansRevolving LoansTotal
Commercial
Owner occupied real estate
Pass$53,302 $100,237 $76,376 $45,263 $43,194 $185,182 $89,316 $10,534 $603,404 
Special Mention— 494 2,300 — 1,869 4,427 — — 9,090 
Substandard— 502 6,550 968 230 8,851 530 — 17,631 
Doubtful— — — — — — — — — 
Total owner occupied real estate$53,302 $101,233 $85,226 $46,231 $45,293 $198,460 $89,846 $10,534 $630,125 
Gross charge–offs during period$— $— $— $— $— $3 $229 $— $232 
Non–owner occupied real estate
Pass$100,630 $221,897 $165,258 $105,564 $84,773 $308,926 $195,691 $9,153 $1,191,892 
Special Mention— — 1,355 257 855 43,471 — — 45,938 
Substandard— — — 200 — 6,341 — — 6,541 
Doubtful— — — — — — — — — 
Total non–owner occupied real estate$100,630 $221,897 $166,613 $106,021 $85,628 $358,738 $195,691 $9,153 $1,244,371 
Gross charge–offs during period$— $— $— $— $— $9 $— $— $9 
Residential spec homes
Pass$— $— $499 $— $— $— $5,282 $6,633 $12,414 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total residential spec homes$— $— $499 $— $— $— $5,282 $6,633 $12,414 
Gross charge–offs during period$— $— $— $— $— $— $— $— $— 
Development & spec land
Pass$2,483 $1,483 $1,029 $405 $253 $3,077 $18,001 $192 $26,923 
Special Mention— — — — — — 1,376 — 1,376 
Substandard— — — — — 107 740 — 847 
Doubtful— — — — — — — — — 
Total development & spec land$2,483 $1,483 $1,029 $405 $253 $3,184 $20,117 $192 $29,146 
Gross charge–offs during period$— $— $— $— $— $— $— $— $— 
Commercial & industrial
Pass$84,871 $160,710 $99,659 $14,961 $22,595 $63,195 $52,741 $151,850 $650,582 
Special Mention898 736 303 1,637 141 1,027 2,239 5,560 12,541 
Substandard1,585 733 249 302 35 1,517 3,811 1,833 10,065 
Doubtful— — — — — — — — — 
Total commercial & industrial$87,354 $162,179 $100,211 $16,900 $22,771 $65,739 $58,791 $159,243 $673,188 
Gross charge–offs during period$— $32 $— $47 $25 $57 $119 $— $280 
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
September 30, 202320232022202120202019PriorRevolving Term LoansRevolving LoansTotal
Real estate
Residential mortgage
Performing$28,673 $146,772 $162,167 $87,164 $31,513 $185,930 $— $— $642,219 
Non–performing— 1,386 766 263 751 4,611 — — 7,777 
Total residential mortgage$28,673 $148,158 $162,933 $87,427 $32,264 $190,541 $— $— $649,996 
Gross charge–offs during period$— $— $— $— $— $19 $— $— $19 
Residential construction
Performing$— $— $— $— $— $— $25,403 $— $25,403 
Non–performing— — — — — — — — — 
Total residential construction$— $— $— $— $— $— $25,403 $— $25,403 
Gross charge–offs during period$— $— $— $— $— $— $— $— $— 
Mortgage warehouse
Performing$— $— $— $— $— $— $— $65,923 $65,923 
Non–performing— — — — — — — — — 
Total mortgage warehouse$— $— $— $— $— $— $— $65,923 $65,923 
Gross charge–offs during period$— $— $— $— $— $— $— $— $— 
September 30, 202320232022202120202019PriorRevolving Term LoansRevolving LoansTotal
Consumer
Direct installment
Performing$12,518 $14,672 $9,177 $4,853 $5,172 $5,622 $11 $2,242 $54,267 
Non–performing— 47 41 — 9 35 — — 132 
Total direct installment$12,518 $14,719 $9,218 $4,853 $5,181 $5,657 $11 $2,242 $54,399 
Gross charge–offs during period$10 $27 $4 $10 $2 $14 $6 $— $73 
Indirect installment
Performing$68,343 $208,336 $89,229 $41,267 $20,287 $11,279 $— $— $438,741 
Non–performing39 480 260 170 115 117 — — 1,181 
Total indirect installment$68,382 $208,816 $89,489 $41,437 $20,402 $11,396 $— $— $439,922 
Gross charge–offs during period$54 $942 $518 $115 $51 $48 $— $— $1,728 
Home equity
Performing$21,750 $22,633 $3,611 $2,617 $4,127 $10,841 $11,687 $453,460 $530,726 
Non–performing— 140 — 55 134 689 2,371 — 3,389 
Total home equity$21,750 $22,773 $3,611 $2,672 $4,261 $11,530 $14,058 $453,460 $534,115 
Gross charge–offs during period$— $10 $— $103 $— $15 $12 $— $140 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following tables present loans by credit grades and origination year at December 31, 2022.
December 31, 202220222021202020192018PriorRevolving Term LoansRevolving LoansTotal
Commercial
Owner occupied real estate
Pass$101,713 $78,352 $50,363 $49,584 $38,068 $166,813 $76,493 $5,163 $566,549 
Special Mention— 6,677 — 7 — 2,729 83 — 9,496 
Substandard1,016 253 983 834 3,116 9,439 2,876 — 18,517 
Doubtful— — — — — — — — — 
Total owner occupied real estate$102,729 $85,282 $51,346 $50,425 $41,184 $178,981 $79,452 $5,163 $594,562 
Non–owner occupied real estate
Pass$183,862 $173,971 $134,394 $91,359 $57,345 $303,174 $182,681 $11,851 $1,138,637 
Special Mention— 1,415 265 883 39,239 617 — — 42,419 
Substandard— — 246 — 3,532 2,243 — — 6,021 
Doubtful— — — — — — — — — 
Total non–owner occupied real estate$183,862 $175,386 $134,905 $92,242 $100,116 $306,034 $182,681 $11,851 $1,187,077 
Residential spec homes
Pass$— $779 $— $— $— $— $4,333 $5,626 $10,738 
Special Mention— — — — — — — — — 
Substandard— — — — — — 100 — 100 
Doubtful— — — — — — — — — 
Total residential spec homes$— $779 $— $— $— $— $4,433 $5,626 $10,838 
Development & spec land
Pass$1,586 $1,230 $449 $270 $5 $9,717 $13,008 $22 $26,287 
Special Mention— — — — — 145 — — 145 
Substandard— — — — — 178 748 — 926 
Doubtful— — — — — — — — — 
Total development & spec land$1,586 $1,230 $449 $270 $5 $10,040 $13,756 $22 $27,358 
Commercial & industrial
Pass$174,482 $118,498 $20,939 $28,383 $28,061 $49,339 $49,276 $159,017 $627,995 
Special Mention718 368 31 53 706 1,551 — 1,208 4,635 
Substandard— 228 2,216 83 1,293 1,648 2,322 7,167 14,957 
Doubtful— — — — — — — — — 
Total commercial & industrial$175,200 $119,094 $23,186 $28,519 $30,060 $52,538 $51,598 $167,392 $647,587 
Total commercial$463,377 $381,771 $209,886 $171,456 $171,365 $547,593 $331,920 $190,054 $2,467,422 
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
December 31, 202220222021202020192018PriorRevolving Term LoansRevolving LoansTotal
Real estate
Residential mortgage
Performing$107,224 $157,387 $91,314 $33,768 $36,147 $178,588 $— $— $604,428 
Non–performing— 493 285 623 631 6,091 — — 8,123 
Total residential mortgage$107,224 $157,880 $91,599 $34,391 $36,778 $184,679 $— $— $612,551 
Residential construction
Performing$— $— $— $— $— $— $40,741 $— $40,741 
Non–performing— — — — — — — — — 
Total residential construction$— $— $— $— $— $— $40,741 $— $40,741 
Mortgage warehouse
Performing$— $— $— $— $— $— $— $69,529 $69,529 
Non–performing— — — — — — — — — 
Total mortgage warehouse$— $— $— $— $— $— $— $69,529 $69,529 
Total real estate$107,224 $157,880 $91,599 $34,391 $36,778 $184,679 $40,741 $69,529 $722,821 
December 31, 202220222021202020192018PriorRevolving Term LoansRevolving LoansTotal
Consumer
Direct installment
Performing$18,935 $12,233 $7,182 $7,582 $3,939 $4,419 $9 $2,151 $56,450 
Non–performing— 50 13 65 25 11 — — 164 
Total direct installment$18,935 $12,283 $7,195 $7,647 $3,964 $4,430 $9 $2,151 $56,614 
Indirect installment
Performing$259,446 $118,961 $60,062 $34,576 $19,062 $7,674 $— $— $499,781 
Non–performing27 169 210 181 101 80 — — 768 
Total indirect installment$259,473 $119,130 $60,272 $34,757 $19,163 $7,754 $— $— $500,549 
Home equity
Performing$26,232 $3,820 $3,355 $4,964 $5,392 $9,463 $7,089 $346,822 $407,137 
Non–performing108 16 19 140 152 1,077 1,943 — 3,455 
Total home equity$26,340 $3,836 $3,374 $5,104 $5,544 $10,540 $9,032 $346,822 $410,592 
Total consumer$304,748 $135,249 $70,841 $47,508 $28,671 $22,724 $9,041 $348,973 $967,755 


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Note 4 – Allowance for Credit and Loan Losses
The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, 2023
CommercialReal EstateMortgage WarehouseConsumerTotal
Balance, beginning of period$30,354 $3,648 $893 $15,081 $49,976 
Credit loss expense (recovery)(665)(893)(179)2,257 520 
PCD loan charge–offs(75)— — — (75)
Charge–offs(188)(15)— (927)(1,130)
Recoveries46 54 — 308 408 
Balance, end of period$29,472 $2,794 $714 $16,719 $49,699 
Three Months Ended September 30, 2022
CommercialReal EstateMortgage WarehouseConsumerTotal
Balance, beginning of period$34,802 $4,422 $1,067 $12,059 $52,350 
Credit loss expense (recovery)(703)640 (43)(495)(601)
PCD loan charge–offs(242)— — — (242)
Charge–offs(103)(27)— (592)(722)
Recoveries52 102 — 430 584 
Balance, end of period$33,806 $5,137 $1,024 $11,402 $51,369 
Nine Months Ended September 30, 2023
CommercialReal EstateMortgage WarehouseConsumerTotal
Balance, beginning of period$32,445 $5,577 $1,020 $11,422 $50,464 
Credit loss expense (recovery)(2,380)(2,838)(306)6,380 856 
PCD loan charge–offs(246)— — — (246)
Charge–offs(521)(19)— (1,941)(2,481)
Recoveries174 74 — 858 1,106 
Balance, end of period$29,472 $2,794 $714 $16,719 $49,699 
Nine Months Ended September 30, 2022
CommercialReal EstateMortgage WarehouseConsumerTotal
Balance, beginning of period$40,775 $3,856 $1,059 $8,596 $54,286 
Credit loss expense (recovery)(6,343)1,236 (35)3,395 (1,747)
PCD loan charge–offs(612)— — — (612)
Charge–offs(240)(85)— (1,605)(1,930)
Recoveries226 130 — 1,016 1,372 
Balance, end of period$33,806 $5,137 $1,024 $11,402 $51,369 

The Company utilized the Cumulative Loss Rate method in determining expected future credit losses. The loss rate method measures the amount of loan charge–offs, net of recoveries, (“loan losses”) recognized over the life of a pool and compares those loan losses to the outstanding loan balance of that pool as of a specific point in time (“pool date”).

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
To estimate a CECL loss rate for the pool, management first identifies the loan losses recognized between the pool date and the reporting date for the pool and determines which loan losses were related to loans outstanding at the pool date. The loss rate method then divides the loan losses recognized on loans outstanding as of the pool date by the outstanding loan balance as of the pool date.
The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data. The Company's historical look–back period includes January 2008 through the economic cycle, on a quarterly basis. When historical credit loss experience is not sufficient for a specific portfolio, the Company may supplement its own portfolio data with external models or data.
Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration other analytics performed within the organization, such as enterprise and concentration management, along with other credit–related analytics as deemed appropriate. Management attempts to quantify qualitative reserves whenever possible.
The Company’s CECL estimate applies to a forecast that incorporates macroeconomic trends and other environmental factors. Management utilized National, Regional and Local Leading econometrics, as well as management judgment, as the basis for the forecast period. The historical loss rate was utilized as the base rate, and quantitative adjustments were utilized to reflect the forecast and other relevant factors. The forecasted loss rate then reverts to the historical base rate on a straight–line methodology for the remaining life of loan for each pool.
The Company segments the loan portfolio into pools based on the following risk characteristics: financial asset type, loan purpose, collateral type, loan characteristics, credit characteristics, outstanding loan balances, contractual terms and prepayment assumptions, industry of the borrower and concentrations, and historical or expected credit loss patterns.


Note 5 – Loan Servicing

Loans serviced for others are not included in the accompanying condensed consolidated balance sheets. The unpaid principal balances of loans serviced for others totaled approximately $1.486 billion and $1.532 billion at September 30, 2023 and December 31, 2022.


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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. For purposes of measuring impairment, risk characteristics including product type, investor type and interest rates were used to stratify the originated mortgage servicing rights. Mortgage servicing rights are included in other assets on the balance sheets as of September 30, 2023 and December 31, 2022.

Three Months EndedNine Months Ended
September 30,September 30,September 30,September 30,
2023202220232022
Mortgage servicing rights
Balance, beginning of period$18,507 $18,761 $18,619 $17,780 
Servicing rights capitalized428 567 863 2,942 
Amortization of servicing rights(285)(624)(832)(2,018)
Balance, end of period18,650 18,704 18,650 18,704 
Impairment allowance
Balance, beginning of period— — — (2,594)
Additions— — — — 
Reductions— — — 2,594 
Balance, end of period— — — — 
Mortgage servicing rights, net$18,650 $18,704 $18,650 $18,704 
Fair value, beginning of period$19,659 $18,761 $18,619 $15,186 
Fair value, end of period19,571 18,704 19,571 18,704 



Note 6 – Goodwill

The carrying amount of goodwill was $155.2 million as of September 30, 2023 and December 31, 2022, respectively. There were no changes in the carrying amount of goodwill for the three and nine months ended September 30, 2023 and 2022. Goodwill is assessed for impairment annually, or more frequently if events occur or circumstances change that indicate an impairment may exist. When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

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



Note 7 – Repurchase Agreements
The Company transfers various securities to customers in exchange for cash at the end of each business day and agrees to acquire the securities at the end of the next business day for the cash exchanged plus interest. The process is repeated at the end of each business day until the agreement is terminated. The securities underlying the agreement remained under the Company’s control.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following tables show repurchase agreements accounted for as secured borrowings and the related securities, at fair value, pledged for repurchase agreements:
September 30, 2023
Remaining Contractual Maturity of the Agreements
Overnight
and
Continuous		Up to 30 Days30-90 DaysGreater Than 90 DaysTotal
Repurchase Agreements and repurchase-to-maturity transactions
Federal agency collateralized mortgage obligations$8,346 $— $— $— $8,346 
Federal agency mortgage–backed pools125,391 — — — 125,391 
Private labeled mortgage–backed pools8,757 — — — 8,757 
Total borrowings$142,494 $— $— $— $142,494 
December 31, 2022
Remaining Contractual Maturity of the Agreements
Overnight
and
Continuous		Up to 30 Days30-90 DaysGreater Than 90 DaysTotal
Repurchase Agreements and repurchase-to-maturity transactions
Federal agency collateralized mortgage obligations$12,632 $— $— $— $12,632 
Federal agency mortgage–backed pools116,041 — — — 116,041 
Private labeled mortgage–backed pools9,198 — — — 9,198 
Total borrowings$137,871 $— $— $— $137,871 

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


Note 8 – Subordinated Notes
On June 24, 2020, Horizon issued $60.0 million in aggregate principal amount of 5.625% fixed–to–floating rate subordinated notes (the “Notes”). The Notes were offered in denominations of $1,000 and integral multiples of $1,000 in excess thereof. The Notes mature on July 1, 2030 (the “Maturity Date”). From and including the date of original issuance to, but excluding, July 1, 2025 or the date of earlier redemption (the “fixed rate period”), the Notes bear interest at an initial rate of 5.625% per annum, payable semi–annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021. The last interest payment date for the fixed rate period will be July 1, 2025. From and including July 1, 2025 to, but excluding, the Maturity Date or the date of earlier redemption (the “floating rate period”), the Notes bear interest at a floating rate per annum equal to the benchmark rate, which is expected to be Three–Month Term SOFR (the “Benchmark Rate”), plus 549 basis points, payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year, commencing on October 1, 2025. Notwithstanding the foregoing, in the event that the Benchmark Rate is less than zero, the Benchmark Rate shall be deemed to be zero.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Horizon may, at its option, beginning with the interest payment date of July 1, 2025 and on any interest payment date thereafter, redeem the Notes, in whole or in part. The Notes will not otherwise be redeemable by Horizon prior to maturity, unless certain events occur. The redemption price for any redemption is 100% of the principal amount of the Notes, plus accrued and unpaid interest thereon to, but excluding, the date of redemption. Any early redemption of the Notes will be subject to the receipt of the approval of the Board of Governors of the Federal Reserve System to the extent then required under applicable laws or regulations, including capital regulations.
The Notes are unsecured subordinated obligations, and rank pari passu, or equally, with all of Horizon's future unsecured subordinated debt and are junior to all existing and future senior debt. The Notes are structurally subordinated to all existing and future liabilities of Horizon's subsidiaries, including the deposit liabilities and claims of other creditors of Horizon Bank, and are effectively subordinated to Horizon’s existing and future secured indebtedness. There is no sinking fund for the Notes. The Notes are obligations of Horizon only and are not obligations of, and are not guaranteed by, any of Horizon’s subsidiaries.

Note 9 – Derivative Financial Instruments
Cash Flow Hedges
As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into an interest rate swap agreement for a portion of its floating rate debt on July 20, 2018. The agreement provides for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a fixed rate of 2.81% on a notional amount of $50.0 million at December 31, 2022. Under the agreement, the Company pays or receives the net interest amount monthly, with the monthly settlements included in interest expense. The Company terminated this interest rate swap agreement on May 23, 2023 and recorded a related gain of $1.5 million as a reduction of interest expense.
Management has designated the interest rate swap agreement as a cash flow hedging instrument. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
Fair Value Hedges
Fair value hedges are intended to reduce the interest rate risk associated with the underlying hedged item. The Company enters into fixed rate loan agreements as part of its lending policy. To mitigate the risk of changes in fair value based on fluctuations in interest rates, the Company has entered into interest rate swap agreements on individual loans, converting the fixed rate loans to a variable rate. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current earnings. At September 30, 2023, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.
The change in fair value of both the hedge instruments and the underlying loan agreements are recorded as gains or losses in non–interest income. The fair value hedges are considered to be highly effective and any hedge ineffectiveness was deemed not material.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Other Derivative Instruments

The Company enters into non–hedging derivatives in the form of mortgage loan forward sale commitments with investors and commitments to originate mortgage loans as part of its mortgage banking business. At September 30, 2023, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.
The change in fair value of both the forward sale commitments and commitments to originate mortgage loans were recorded and the net gains or losses included in the Company’s gain on sale of loans.
The following tables summarize the fair value of derivative financial instruments utilized by Horizon:
Asset DerivativesLiability Derivatives
September 30, 2023September 30, 2023
Notional
Amount		Fair
Value		Notional
Amount		Fair
Value
Derivatives designated as hedging instruments
Interest rate contracts – cash flow hedges$— $— $— $— 
Total derivatives designated as hedging instruments— — — — 
Derivatives not designated as hedging instruments
Interest rate contracts – fair value hedges524,995 50,519 524,995 50,519 
Mortgage loan contracts— — 10,051 24 
Commitments to originate mortgage loans13,872 292 — — 
Total derivatives not designated as hedging instruments538,867 50,811 535,046 50,543 
Total derivatives$538,867 $50,811 $535,046 $50,543 
Asset DerivativesLiability Derivatives
December 31, 2022December 31, 2022
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Derivatives designated as hedging instruments
Interest rate contracts – cash flow hedges$50,000 $1,976 $— $— 
Total derivatives designated as hedging instruments50,000 1,976 — — 
Derivatives not designated as hedging instruments
Interest rate contracts – fair value hedges514,551 42,619 514,551 42,619 
Mortgage loan contracts— — 13,800 50 
Commitments to originate mortgage loans12,179 284 — — 
Total derivatives not designated as hedging instruments526,730 42,903 528,351 42,669 
Total derivatives$576,730 $44,879 $528,351 $42,669 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The effect of the derivative instruments on the condensed consolidated statements of comprehensive income for the three and nine–month periods ended September 30 is as follows:
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Three Months EndedNine Months Ended
September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Derivatives in cash flow hedging relationship
Interest rate contracts$— $1,542 $(1,561)$4,535 
The effect of the derivative designated as a hedging instrument on the condensed consolidated statements of income for the three and nine–month periods ended September 30 is as follows:
Location of gain
(loss)
recognized on derivative		Amount of Gain (Loss) Recognized on Derivative
Three Months EndedNine Months Ended
September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Derivative designated as hedging instruments
Interest rate contracts – cash flow hedgesInterest expense – Borrowings$— $(95)$1,832 $(710)
Total$— $(95)$1,832 $(710)
The effect of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three and nine–month periods ended September 30 is as follows:
Location of gain (loss)
recognized on derivative		Amount of Gain (Loss) Recognized on Derivative
Three Months EndedNine Months Ended
September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Derivatives not designated as hedging instruments
Interest rate contracts – fair value hedgeInterest income – loans receivable$340 $(5)$774 $(169)
Interest rate contracts – fair value hedgeInterest income – investment securities53 (13)163 (125)
Mortgage loan contractsNon–interest income – Gain on sale of loans(6)(178)26 (92)
Commitments to originate mortgage loansNon–interest income – Gain on sale of loans182 (141)118 (897)
Total$569 $(337)$1,081 $(1,283)




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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Note 10 – Disclosures about Fair Value of Assets and Liabilities
The Fair Value Measurements topic of the FASB ASC defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. There are three levels of inputs that may be used to measure fair value:
Level 1 –Quoted prices in active markets for identical assets or liabilities
Level 2 –Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 –Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated financial statements, as well as the general classification of such instruments pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended September 30, 2023. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.
Available for sale securities
When quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include U.S. Treasury and federal agency securities, state and municipal securities, federal agency collateralized mortgage obligations and mortgage–backed pools and corporate notes. Level 2 securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs. Observable inputs include dealer quotes, market spreads, cash flow analysis, the U.S. Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s terms and conditions. The pricing provider utilizes evaluated pricing models that vary based on asset class. These models incorporate available market information including quoted prices of securities with similar characteristics and, because many fixed–income securities do not trade on a daily basis, apply available information through processes such as benchmark curves, benchmarking of like securities, sector grouping, and matrix pricing. In addition, model processes, such as an option adjusted spread model, is used to develop prepayment and interest rate scenarios for securities with prepayment features.
Hedged loans
Certain fixed rate loans have been converted to variable rate loans by entering into interest rate swap agreements. The fair value of those fixed rate loans is based on discounting the estimated cash flows using interest rates determined by the respective interest rate swap agreement. Loans are classified within Level 2 of the valuation hierarchy based on the unobservable inputs used.
Interest rate swap agreements
The fair value of the Company’s interest rate swap agreements is estimated by a third party using inputs that are primarily unobservable including a yield curve, adjusted for liquidity and credit risk, contracted terms and discounted cash flow analysis, and therefore, are classified within Level 2 of the valuation hierarchy.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated financial statements measured at fair value on a recurring basis and the level within the FASB ASC fair value hierarchy in which the fair value measurements fall at the following:
September 30, 2023
Fair ValueQuoted Prices in Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Available for sale securities
U.S. Treasury and federal agencies$265,850 $— $265,850 $— 
State and municipal340,312 — 340,312 — 
Federal agency collateralized mortgage obligations21,313 — 21,313 — 
Federal agency mortgage–backed pools165,889 — 165,889 — 
Corporate notes71,804 — 71,804 — 
Total available for sale securities865,168 — 865,168 — 
Interest rate swap agreements asset50,519 — 50,519 — 
Commitments to originate mortgage loans292 292 — — 
Interest rate swap agreements liability(50,519)— (50,519)— 
Mortgage loan contracts(24)(24)— — 
December 31, 2022
Fair ValueQuoted Prices in Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Available for sale securities
U.S. Treasury and federal agencies$267,179 $— $267,179 $— 
State and municipal433,544 — 433,544 — 
Federal agency collateralized mortgage obligations31,215 — 31,215 — 
Federal agency mortgage–backed pools190,656 — 190,656 — 
Corporate notes74,964 — 74,964 — 
Total available for sale securities997,558 — 997,558 — 
Interest rate swap agreements asset44,595 — 44,595 — 
Commitments to originate mortgage loans284 — 284 — 
Interest rate swap agreements liability(42,619)— (42,619)— 
Mortgage loan contracts(50)— (50)— 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Certain other assets are measured at fair value on a non-recurring basis in the ordinary course of business and are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment):
Fair ValueQuoted Prices in Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
September 30, 2023
Collateral dependent loans$6,616 $— $— $6,616 
December 31, 2022
Collateral dependent loans$8,091 $— $— $8,091 
Collateral Dependent Loans: For loans identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.
Collateral dependent loans are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.
The following table presents qualitative information about unobservable inputs used in recurring and non–recurring Level 3 fair value measurements, other than goodwill.
September 30, 2023
Fair
Value		Valuation
Technique		Unobservable
Inputs		Range
(Weighted Average)
Collateral dependent loans$6,616 Collateral based measurementDiscount to reflect current market conditions and ultimate collectibility
0.0%-100.0% (7.2%)

December 31, 2022
Fair
Value		Valuation
Technique		Unobservable
Inputs		Range
(Weighted Average)
Collateral dependent loans$8,091 Collateral based measurementDiscount to reflect current market conditions and ultimate collectibility
0.0%-100.0%(13.3%)

Note 11 – Fair Value of Financial Instruments
The estimated fair value amounts of the Company’s financial instruments were determined using available market information, current pricing information applicable to Horizon and various valuation methodologies. Where market quotations were not available, considerable management judgment was involved in the determination of estimated fair values. Therefore, the estimated fair value of financial instruments shown below may not be representative of the amounts at which they could be exchanged in a current or future transaction. Due to the inherent uncertainties of expected cash flows of financial instruments, the use of alternate valuation assumptions and methods could have a significant effect on the estimated fair value amounts.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The estimated fair values of financial instruments, as shown below, are not intended to reflect the estimated liquidation or market value of Horizon taken as a whole. The disclosed fair value estimates are limited to Horizon’s significant financial instruments at September 30, 2023 and December 31, 2022. These include financial instruments recognized as assets and liabilities on the condensed consolidated balance sheets as well as certain off–balance sheet financial instruments. The estimated fair values shown below do not include any valuation of assets and liabilities, which are not financial instruments as defined by the FASB ASC fair value hierarchy.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and Due from Banks – The carrying amounts approximate fair value.
Interest-earning time deposits – The fair values of the Company’s interest–earning time deposits are estimated using discounted cash flow analyses based on current rates for similar types of interest–earning time deposits.
Held–to–Maturity Securities – For debt securities held to maturity, fair values are based on quoted market prices or dealer quotes. For those securities where a quoted market price is not available, carrying amount is a reasonable estimate of fair value based upon comparison with similar securities.
Loans Held for Sale – The carrying amounts approximate fair value.
Net Loans – The fair value of net loans are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors.
FHLB Stock – Fair value of FHLB stock is based on the price at which it may be resold to the FHLB.
Interest Receivable/Payable – The carrying amounts approximate fair value.
Deposits – The fair value of demand deposits, savings accounts, interest–bearing checking accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturity.
Borrowings – Rates currently available to Horizon for debt with similar terms and remaining maturities are used to estimate fair values of existing borrowings.
Subordinated Notes – The fair value of subordinated notes is based on discounted cash flows based on current borrowing rates for similar types of instruments.
Junior Subordinated Debentures Issued to Capital Trusts – Rates currently available for debentures with similar terms and remaining maturities are used to estimate fair values of existing debentures.
Commitments to Extend Credit and Standby Letters of Credit – The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed–rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. Due to the short–term nature of these agreements, carrying amounts approximate fair value.

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
The following tables present estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall.
September 30, 2023
Carrying
Amount		Quoted Prices in Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets
Cash and due from banks$175,137 $175,137 $— $— 
Interest–earning time deposits2,207 — 2,174 — 
Investment securities, held to maturity1,966,483 — 1,556,845 — 
Loans held for sale2,828 — — 2,828 
Loans (excluding loan level hedges), net4,309,303 — — 4,213,446 
Stock in FHLB34,509 — 34,509 — 
Interest receivable37,850 — 37,850 — 
Liabilities
Non–interest bearing deposits$1,126,703 $1,126,703 $— $— 
Interest bearing deposits4,573,394 — 4,237,120 — 
Borrowings1,356,510 — 1,345,114 — 
Subordinated notes59,007 — 53,401 — 
Junior subordinated debentures issued to capital trusts57,201 — 48,699 — 
Interest payable16,281 — 16,281 — 
December 31, 2022
Carrying
Amount		Quoted Prices in Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets
Cash and due from banks$123,505 $123,505 $— $— 
Interest–earning time deposits2,812 — 2,778 — 
Investment securities, held to maturity2,022,748 — 1,681,309 — 
Loans held for sale5,807 — — 5,807 
Loans (excluding loan level hedges), net4,107,534 — — 3,852,458 
Stock in FHLB26,677 — 26,677 — 
Interest receivable35,294 — 35,294 — 
Liabilities
Non–interest bearing deposits$1,277,768 $1,277,768 $— $— 
Interest bearing deposits4,580,006 — 4,100,154 — 
Borrowings1,142,949 — 1,139,926 — 
Subordinated notes58,896 — 56,496 — 
Junior subordinated debentures issued to capital trusts57,027 — 51,327 — 
Interest payable5,380 — 5,380 — 

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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)
Note 12 – Accumulated Other Comprehensive Income (Loss)
September 30,
2023		December 31,
2022
Unrealized gain (loss) on securities available for sale$(159,454)$(140,144)
Unamortized gain (loss) on securities held to maturity, previously transferred from AFS3,209 3,740 
Unrealized gain (loss) on derivative instruments— 1,976 
Tax effect32,811 28,230 
Total accumulated other comprehensive income (loss)$(123,434)$(106,198)

Note 13 – Regulatory Capital
Horizon and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. These capital requirements implement changes arising from the Dodd–Frank Wall Street Reform and Consumer Protection Act and the U.S. Basel Committee on Banking Supervision’s capital framework (known as “Basel III”). Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators, which if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective actions, the Company and Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off–balance–sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Company and Bank are subject to minimum regulatory capital requirements as defined and calculated in accordance with the Basel III–based regulations. As allowed under Basel III rules, the Company made the decision to opt–out of including accumulated other comprehensive income in regulatory capital. The minimum regulatory capital requirements are set forth in the table below.
In addition, to be categorized as well capitalized, the Company and Bank must maintain Total risk–based, Tier I risk–based, common equity Tier I risk–based and Tier I leverage ratios as set forth in the table below. As of September 30, 2023 and December 31, 2022, the Company and Bank met all capital adequacy requirements to be considered well capitalized. There have been no conditions or events since the end of the third quarter of 2023 that management believes have changed the Bank’s classification as well capitalized. There is no threshold for well capitalized status for bank holding companies.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)

Horizon and the Bank’s actual and required capital ratios as of September 30, 2023 and December 31, 2022 were as follows:
Actual
Required for Capital
Adequacy Purposes(1)
Required For Capital
Adequacy Purposes
with Capital Buffer(1)
Well Capitalized 
Under Prompt Corrective Action
Provisions(1)
AmountRatioAmountRatioAmountRatioAmountRatio
September 30, 2023
Total capital (to risk–weighted assets)(1)
Consolidated$819,855 14.39 %$455,931 8.00 %$598,409 10.50 %N/AN/A
Bank744,803 13.11 %454,401 8.00 %596,401 10.50 %$568,001 10.00 %
Tier 1 capital (to risk–weighted assets)(1)
Consolidated769,424 13.50 %341,948 6.00 %484,426 8.50 %N/AN/A
Bank694,372 12.22 %340,801 6.00 %482,801 8.50 %454,401 8.00 %
Common equity tier 1 capital (to risk–weighted assets)(1)
Consolidated649,071 11.39 %256,461 4.50 %398,939 7.00 %N/AN/A
Bank694,372 12.22 %255,600 4.50 %397,601 7.00 %369,201 6.50 %
Tier 1 capital (to average assets)(1)
Consolidated769,424 9.87 %311,717 4.00 %311,717 4.00 %N/AN/A
Bank694,372 8.77 %316,646 4.00 %316,646 4.00 %395,808 5.00 %
December 31, 2022
Total capital (to risk–weighted assets)(1)
Consolidated$776,390 14.37 %$432,172 8.00 %$567,226 10.50 %N/AN/A
Bank726,339 13.59 %427,456 8.00 %561,036 10.50 %$534,320 10.00 %
Tier 1 capital (to risk–weighted assets)(1)
Consolidated729,835 13.51 %324,129 6.00 %459,183 8.50 %N/AN/A
Bank679,784 12.72 %320,592 6.00 %454,172 8.50 %427,456 8.00 %
Common equity tier 1 capital (to risk–weighted assets)(1)
Consolidated609,630 11.28 %243,097 4.50 %378,151 7.00 %N/AN/A
Bank679,784 12.72 %240,444 4.50 %374,024 7.00 %347,308 6.50 %
Tier 1 capital (to average assets)(1)
Consolidated729,835 10.03 %291,122 4.00 %291,122 4.00 %N/AN/A
Bank679,784 8.89 %305,996 4.00 %305,999 4.00 %382,495 5.00 %
(1) As defined by regulatory agencies



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HORIZON BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Data)

Note 14 – General Litigation
As of April 20, 2023, a putative class action lawsuit entitled Chad Key, et al. v. Horizon Bancorp, Inc., et al., Case No. 1:23-cv-02961 (”Securities Action”) was filed against the Company and two of its officers in the U.S. District Court for the Eastern District of New York. The Securities Action asserts claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 alleging, among other things, the Company made materially false and misleading statements and failed to disclose material adverse facts which allegedly resulted in harm to a putative class of purchasers of our securities from March 9, 2022 and March 10, 2023.
As of (1) August 28, 2023, a lawsuit related to the Securities Action was filed by Sally Hundley, derivatively on behalf of the Company, against the Company, as nominal defendant, and 2 of the Company's officers and 10 of its directors and (2) August 31, 2023, a lawsuit also related to the Securities Action was filed by Aziz Chowdhury, derivatively on behalf of the Company, against the Company, as nominal defendant, and 2 of the Company's officers and 10 of its directors (the “Derivatives Actions”) in the U.S. District Court for the Eastern District of New York. The Derivative Actions allege, among other things, breach of the officers and directors' fiduciary duties. The Derivative Actions have been consolidated and stayed pending resolution of any motion to dismiss in the Securities Action.
Based on our initial review of these actions, management believes that the Company has strong defenses to the claims and intends to vigorously defend against them. As of September 30, 2023, no liabilities related to the above matters were recorded because we have concluded such liabilities are not probable and the amounts of such liabilities are not reasonably estimable.
In addition to the matters described above, from time to time, Horizon and its subsidiaries are involved in various legal proceedings incidental to the conduct of their business. Management does not expect that the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations.
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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 Nine Months ended September 30, 2023 and 2022
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:
•current financial conditions within the banking industry, including the effects of recent failures of other financial institutions, liquidity levels, and responses by the Federal Reserve, Department of the Treasury, and the Federal Deposit Insurance Corporation to address these issues;
•changes in the level and volatility of interest rates, spreads on earning assets and interest bearing liabilities, and interest rate sensitivity;
•the ability of the Company to remediate its material weaknesses in its internal control over financial reporting;
•continuing increases in inflation;
•loss of key Horizon personnel;
•economic conditions and their impact on Horizon and its customers, including local and global economic recovery from the pandemic;
•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;
•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, which may have been accelerated by the COVID–19 pandemic;
•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;
•prepayment speeds, loan originations, credit losses and market values, collateral securing loans and other assets;
•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;
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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 Nine Months ended September 30, 2023 and 2022
•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 potential influence on the U.S. financial markets and economy from the effects of climate change and social justice initiatives;
•the potential influence on the U.S. financial markets and economy from material changes outside the U.S. or in overseas relations, including changes in the U.S. trade relations related to imposition of tariffs, Brexit and the phase out of the London Interbank Offered Rate (“LIBOR”) according to regulatory guidance;
•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 and Ukraine conflict, and the potential impact they may have on supply chains, the availability of commodities, commodity prices, inflationary pressure 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 2022 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.
Overview
Horizon Bancorp, Inc. (“Horizon” or the “Company”) is a registered bank holding company incorporated in Indiana and headquartered in Michigan City, Indiana. Horizon provides a broad range of banking services in northern and central Indiana and southern and central Michigan through its bank subsidiary, Horizon Bank (“Horizon Bank” or the “Bank”), and other affiliated entities and Horizon Risk Management, Inc. Horizon operates as a single segment, which is commercial banking. Horizon’s common stock is traded on the NASDAQ Global Select Market under the symbol HBNC. Horizon Bank was founded in 1873 as a national association, and it remained a national association until its conversion to an Indiana commercial bank effective June 23, 2017. The Bank is a full–service commercial bank offering commercial and retail banking services, corporate and individual trust and agency services, and other services incident to banking. Horizon Risk Management, Inc. is a captive insurance company incorporated in Nevada and was formed as a wholly–owned subsidiary of Horizon.

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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 Nine Months ended September 30, 2023 and 2022
Over the last 20 years, Horizon has expanded its geographic reach and experienced financial growth through a combination of both organic expansion and mergers and acquisitions. Horizon's initial operations focused on northwest Indiana, but since then, the Company has developed a presence in new markets in southern and central Michigan and northeastern and central Indiana.

Third Quarter 2023 Highlights
•Net income was $16.2 million or $0.37 per diluted share. This compared to $18.8 million or $0.43 in the second quarter of 2023, which included an after–tax benefit of approximately $1.1 million, or $0.02 per share on a non–recurring swap termination fee.

•Loans totaled $4.36 billion at period end, increasing by 8.2% annualized during the quarter and 6.4% annualized since December 31, 2022. Commercial loan growth totaled $83.0 million, increasing by 13.1% annualized during the quarter and 6.6% annualized since December 31, 2022.

•Deposits remained resilient, totaling $5.7 billion at period end, compared to $5.7 billion on June 30, 2023. Brokered deposits and wholesale borrowing levels were consistent with second quarter balances.

•Net interest income was $42.1 million. This compared to $46.2 million in the linked quarter, which benefited from the aforementioned non–recurring swap termination fee by $1.5 million.

•Non–interest income expanded to $11.8 million from $11.0 million in the linked quarter, primarily due to higher mortgage–related revenue.

•Well–managed non–interest expense was $36.2 million, or 1.81% of average assets annualized. Results slightly improved from the second quarter, even with an additional $460,000 in FDIC insurance expense.

•Maintained sound asset quality, with 30 to 89 days delinquent loans representing 0.30% of total loans and non–performing loans representing 0.45% of total loans at period end, as well as net charge–offs representing 0.02% of average loans during the quarter.

•Horizon's dividend performance included a 5.99% yield as of September 30, 2023, with cash maintained at the holding company level representing approximately eight quarters of dividend payments and fixed costs.

Financial Summary
For the Three Months Ended
September 30,June 30,September 30,
Net Interest Income and Net Interest Margin202320232022
Net interest income$42,090 $46,160 $51,861 
Net interest margin2.41 %2.69 %3.04 %
Adjusted net interest margin (See “Use of Non–GAAP Financial Measures”)2.38 %2.57 %2.99 %
For the Three Months Ended
September 30,June 30,September 30,
Asset Yields and Funding Costs202320232022
Interest earning assets4.48 %4.39 %3.58 %
Interest bearing liabilities2.52 %2.10 %0.69 %
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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 Nine Months ended September 30, 2023 and 2022
For the Three Months Ended
Non–interest Income and
Mortgage Banking Income		September 30,June 30,September 30,
202320232022
Total non–interest income$11,830 $10,997 $10,188 
Gain on sale of mortgage loans1,582 1,005 1,441 
Mortgage servicing income net of impairment or recovery631 640 355 
For the Three Months Ended
September 30,June 30,September 30,
Non–interest Expense202320232022
Total non–interest expense$36,168 $36,262 $36,816 
Annualized non–interest expense to average assets1.81 %1.86 %1.91 %

At or for the Three Months Ended
Credit QualitySeptember 30,June 30,September 30,
202320232022
Allowance for credit losses to total loans1.14 %1.17 %1.27 %
Non–performing loans to total loans0.45 %0.52 %0.47 %
Percent of net charge–offs to average loans outstanding for the period0.02 %0.01 %0.00 %

Allowance forSeptember 30,Net ReserveDecember 31,
Credit Losses20233Q232Q231Q232022
Commercial$29,472 $(882)$(802)$(1,289)$32,445 
Retail Mortgage2,794 (854)(799)(1,130)5,577 
Warehouse714 (179)95 (222)1,020 
Consumer16,719 1,638 1,956 1,703 11,422 
Allowance for Credit Losses (“ACL”)
$49,699 $(277)$450 (938)$50,464 
ACL/Total Loans1.14 %1.21 %


Critical Accounting Policies
The notes to the consolidated financial statements included in Item 8 of the Company’s 2022 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. Management has identified as critical accounting policies the allowance for credit losses, goodwill and intangible assets, mortgage servicing rights, hedge accounting and valuation measurements.
Allowance for Credit Losses
The allowance for credit losses represents management’s best estimate of current expected credit losses over the life of the portfolio of loan and leases. Estimating credit losses requires judgment in determining loan specific attributes impacting the borrower’s ability to repay contractual obligations. Other factors such as economic forecasts used to determine a reasonable and supportable forecast, prepayment assumptions, the value of underlying collateral, and changes in size composition and risks within the portfolio are also considered.
The allowance for credit losses is assessed at each balance sheet date and adjustments are recorded in the provision for credit losses. The allowance is estimated based on loan level characteristics using historical loss rates, a reasonable and supportable economic forecast. Loan losses are estimated using the fair value of collateral for collateral–dependent loans, or
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
when the borrower is experiencing financial difficulty such that repayment of the loan is expected to be made through the operation or sale of the collateral. Loan balances considered uncollectible are charged–off against the ACL. Recoveries of amounts previously charged–off are credited to the ACL. Assets purchased with credit deterioration (“PCD”) assets represent assets that are acquired with evidence of more than insignificant credit quality deterioration since origination at the acquisition date. At acquisition, the allowance for credit losses on PCD assets is booked directly the ACL. Any subsequent changes in the ACL on PCD assets is recorded through the provision for credit losses. Management believes that the ACL is adequate to absorb the expected life of loan credit losses on the portfolio of loans and leases as of the balance sheet date. Actual losses incurred may differ materially from our estimates.
Goodwill and Intangible Assets
Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. FASB ASC 350–10 establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill. At September 30, 2023, Horizon had core deposit intangibles of $14.5 million subject to amortization and $155.2 million of goodwill, which is not subject to amortization. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. Horizon’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of Horizon to provide quality, cost effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely affect earnings in future periods. FASB ASC 350–10 requires an annual evaluation of goodwill for impairment.
At each reporting date between annual goodwill impairment tests, Horizon considers potential indicators of impairment. Given the current economic uncertainty and volatility surrounding the interest rate environment, Horizon assessed whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Impairment indicators considered comprised the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit; performance of the Company's stock and other relevant events. Horizon further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and stress testing performed. At the conclusion of the most recent qualitative assessment, the Company determined that as of September 30, 2023, it was more likely than not that the fair value exceeded its carrying values. Horizon will continue to monitor developments regarding the current banking environment, market capitalization, overall economic conditions and any other triggering events or circumstances that may indicate an impairment of goodwill in the future.
Mortgage Servicing Rights
Servicing assets are recognized as separate assets when rights are acquired through purchase or through the sale of financial assets on a servicing–retained basis. Capitalized servicing rights are amortized into non–interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated regularly for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying servicing rights by predominant characteristics, such as interest rates, original loan terms and whether the loans are fixed or adjustable rate mortgages. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market–based assumptions. When the book value of an individual stratum exceeds its fair value, an impairment reserve is recognized so that each individual stratum is carried at the lower of its amortized book value or fair value. In periods of falling market interest rates, accelerated loan prepayment can adversely affect the fair value of these mortgage–servicing rights relative to their book value. In the event that the fair value of these assets was to increase in the future, Horizon can recognize the increased fair value to the extent of the impairment allowance but cannot recognize an asset in excess of its amortized book value. Future changes in management’s assessment of the impairment of these servicing assets, as a result of changes in observable market data relating to market interest rates, loan prepayment speeds, and other factors, could impact Horizon’s financial condition and results of operations either positively or negatively.
Generally, when market interest rates decline and other factors favorable to prepayments occur, there is a corresponding increase in prepayments as customers refinance existing mortgages under more favorable interest rate terms. When a mortgage loan is prepaid, the anticipated cash flows associated with servicing that loan are terminated, resulting in a reduction of the fair value of the capitalized mortgage servicing rights. To the extent that actual borrower prepayments do not react as anticipated by the prepayment model (i.e., the historical data observed in the model does not correspond to actual market activity), it is possible that the prepayment model could fail to accurately predict mortgage prepayments and could
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
result in significant earnings volatility. To estimate prepayment speeds, Horizon utilizes a third-party prepayment model, which is based upon statistically derived data linked to certain key principal indicators involving historical borrower prepayment activity associated with mortgage loans in the secondary market, current market interest rates and other factors, including Horizon’s own historical prepayment experience. For purposes of model valuation, estimates are made for each product type within the mortgage servicing rights portfolio on a monthly basis. In addition, on a quarterly basis Horizon engages a third party to independently test the value of its servicing asset.
Derivative Instruments
As part of the Company’s asset/liability management program, Horizon utilizes, from time–to–time, interest rate floors, caps or swaps to reduce the Company’s sensitivity to interest rate fluctuations. These are derivative instruments, which are recorded as assets or liabilities in the consolidated balance sheets at fair value. Changes in the fair values of derivatives are reported in the consolidated income statements or other comprehensive income (“OCI”) depending on the use of the derivative and whether the instrument qualifies for hedge accounting. The key criterion for the hedge accounting is that the hedged relationship must be highly effective in achieving offsetting changes in those cash flows that are attributable to the hedged risk, both at inception of the hedge and on an ongoing basis.
Horizon’s accounting policies related to derivatives reflect the guidance in FASB ASC 815–10. Derivatives that qualify for the hedge accounting treatment are designated as either: a hedge of the fair value of the recognized asset or liability or of an unrecognized firm commitment (a fair value hedge) or a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (a cash flow hedge). For fair value hedges, the cumulative change in fair value of both the hedge instruments and the underlying loans is recorded in non–interest income. For cash flow hedges, changes in the fair values of the derivative instruments are reported in OCI to the extent the hedge is effective. The gains and losses on derivative instruments that are reported in OCI are reflected in the consolidated income statement in the periods in which the results of operations are impacted by the variability of the cash flows of the hedged item. Generally, net interest income is increased or decreased by amounts receivable or payable with respect to the derivatives, which qualify for hedge accounting. At inception of the hedge, Horizon establishes the method it uses for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. The ineffective portion of the hedge, if any, is recognized currently in the consolidated statements of income. Horizon excludes the time value expiration of the hedge when measuring ineffectiveness.
Valuation Measurements
Valuation methodologies often involve a significant degree of judgment, particularly when there are no observable active markets for the items being valued. Investment securities, residential mortgage loans held for sale and derivatives are carried at fair value, as defined in FASB ASC 820, which requires key judgments affecting how fair value for such assets and liabilities is determined. In addition, the outcomes of valuations have a direct bearing on the carrying amounts of goodwill, mortgage servicing rights, and pension and other post–retirement benefit obligations. To determine the values of these assets and liabilities, as well as the extent, to which related assets may be impaired, management makes assumptions and estimates related to discount rates, asset returns, prepayment speeds and other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect Horizon’s results of operations.
Financial Condition
On September 30, 2023, Horizon’s total assets were $8.0 billion, an increase of approximately $86.9 million compared to December 31, 2022. The increase in total assets was primarily growth in net loans of $201.8 million and an increase in cash and due from banks of $51.6 million. These increases were offset by decreases in investments available for sale of $132.4 million primarily due to principal repayments and sales during the first nine months of 2023 and a decrease in investments held to maturity of $56.3 million due to principal repayments.
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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 Nine Months ended September 30, 2023 and 2022
Investment securities were comprised of the following as of (dollars in thousands):
September 30, 2023December 31, 2022
Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Available for sale
U.S. Treasury and federal agencies$293,785 $265,850 $294,329 $267,179 
State and municipal425,096 340,312 505,006 433,544 
Federal agency collateralized mortgage obligations23,210 21,313 33,011 31,215 
Federal agency mortgage–backed pools200,728 165,889 220,963 190,656 
Corporate notes81,803 71,804 84,393 74,964 
Total available for sale investment securities$1,024,622 $865,168 $1,137,702 $997,558 
Held to maturity
U.S. Treasury and federal agencies$287,561 $234,008 $295,250 $246,013 
State and municipal1,101,933 858,309 1,127,669 935,585 
Federal agency collateralized mortgage obligations52,573 42,677 56,564 47,699 
Federal agency mortgage–backed pools328,410 264,057 343,953 287,239 
Private labeled mortgage–backed pools32,992 27,298 35,466 29,973 
Corporate notes163,014 130,496 163,846 134,800 
Total held to maturity investment securities$1,966,483 $1,556,845 $2,022,748 $1,681,309 
Investment securities available for sale decreased $132.4 million since December 31, 2022 to $865.2 million as of September 30, 2023 primarily due to principal repayments and the sale of certain securities and investment securities held to maturity decreased $56.3 million since December 31, 2022 to $2.0 billion as of September 30, 2023. This decrease in investments held to maturity was due to cash flows received during the first nine months of 2023.
Net loans increased $201.8 million since December 31, 2022 to $4.4 billion as of September 30, 2023. Commercial loans increased $121.8 million, consumer loans increased $60.7 million and residential mortgage loans increased $22.1 million, offset by a decrease in mortgage warehouse loans of $3.6 million since December 31, 2022.
Total deposits decreased $157.7 million since December 31, 2022 to $5.7 billion as of September 30, 2023, primarily due to a reduction in consumer and commercial balances of $65.5 million and a $105.3 million, respectively, offset by an increase in balances by municipal and other public depositors of approximately $13.1 million during the first nine months of 2023.
Total borrowings increased to $1.4 billion as of September 30, 2023 from $1.1 billion as of December 31, 2022, primarily due to the decrease in total deposits.
Stockholders’ equity totaled $693.4 million at September 30, 2023 compared to $677.4 million at December 31, 2022. The increase in stockholders’ equity during the period was primarily due to the generation of net income, offset by an increase in accumulated other comprehensive loss of $17.2 million as unrealized losses on available for sale securities increased to $159.5 million and the amount of dividends paid during the quarter. Book value per common share at September 30, 2023 decreased to $15.89 compared to $16.25 at December 31, 2022.

Results of Operations
Overview
Consolidated net income for the three–month period ended September 30, 2023 was $16.2 million, or $0.37 diluted earnings per share, compared to $23.8 million, or $0.55 diluted earnings per share for the same period in 2022. The decrease in net income for the three–month period ended September 30, 2023 when compared to the same prior year period reflects a
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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 Nine Months ended September 30, 2023 and 2022
decrease in net interest income of $9.8 million, an increase in credit loss expense of $864,000, offset by an increase in non–interest income of $1.6 million, a decrease in non–interest expense of $648,000 and a decrease in income tax expense of $729,000.
Consolidated net income for the nine–month period ended September 30, 2023 was $53.2 million, or $1.21 diluted earnings per share, compared to $72.2 million, or $1.65 diluted earnings per share for the same period in 2022. The decrease in net income for the nine–month period ended September 30, 2023 when compared to the same prior year period reflects a decrease in net interest income of $17.2 million, an increase in credit loss expense of $2.9 million and a decrease in non–interest income of $4.3 million, offset by a decrease in non–interest expense of $536,000 and a decrease in income tax expense of $4.9 million.

Net Interest Income
The largest component of net income is net interest income. Net interest income is the difference between interest income, principally from loans and investment securities, less interest expense, principally on deposits and borrowings. Changes in the net interest income are the result of changes in volume and the net interest spread, which affects the net interest margin. Volume refers to the average dollar levels of interest earning assets and interest bearing liabilities. Net interest spread refers to the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities. Net interest margin refers to net interest income divided by average interest earning assets and is influenced by the level and relative mix of interest earning assets and interest bearing liabilities.
Net interest income during the three months ended September 30, 2023 was $42.1 million, a decrease of $9.8 million from the $51.9 million earned during the same period in 2022. Yields on the Company’s interest earning assets increased by 90 basis points to 4.48% for the three months ended September 30, 2023 from 3.58% for the three months ended September 30, 2022. Interest income increased $18.6 million from $61.5 million for the three months ended September 30, 2022 to $80.1 million for the same period in 2023. The increase in interest income was due to higher yields earned on interest earning assets and an increase in average balances of interest earning assets of $230.4 million during the three months ended September 30, 2023. Interest income from acquisition–related purchase accounting adjustments was $435,000 for the three months ended September 30, 2023 compared to $906,000 for the same period in 2022.
Rates paid on interest bearing liabilities increased by 184 basis points for the three–month period ended September 30, 2023 compared to the same period in 2022. Interest expense increased $28.4 million when compared to the three–month period ended September 30, 2022 to $38.0 million for the same period in 2023. This increase was due to higher rates paid on interest bearing liabilities. The cost of average interest bearing deposits increased 180 basis points while the cost of average borrowings increased 167 basis points. Average balances of interest bearing deposits increased $60.0 million and average balances of borrowings increased $366.6 million for the three-month period ended September 30, 2023 when compared to the same period in 2022.
The net interest margin decreased 63 basis points from 3.04% for the three–month period ended September 30, 2022 to 2.41% for the same period in 2023. The decrease in the margin for the three–month period ended September 30, 2023 compared to the same period in 2022 was due to an increase in the cost of interest bearing liabilities, offset by an increase in the yield on interest earning assets. Excluding the interest income recognized from the acquisition–related purchase accounting adjustments (“adjusted net interest margin”), the margin would have been 2.38% for the three-month period ended September 30, 2023 compared to 2.99% for the same period in 2022. (See the “Non–GAAP Reconciliation of Net Interest Margin” table below.)

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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
The following are the average balance sheets for the three months ended (dollars in thousands):
Average Balance Sheets
(Dollar Amount in Thousands, Unaudited)
Three Months EndedThree Months Ended
September 30, 2023September 30, 2022
Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate
Assets
Interest earning assets
Federal funds sold$92,305 $1,247 5.36 %$4,201 $24 2.27 %
Interest earning deposits8,018 85 4.21 %9,994 41 1.63 %
Investment securities – taxable1,684,590 8,788 2.07 %1,728,197 8,436 1.94 %
Investment securities – non–taxable (1)
1,220,998 7,002 2.88 %1,384,249 7,478 2.71 %
Loans receivable (2) (3)
4,280,700 63,003 5.86 %3,929,567 45,517 4.61 %
Total interest earning assets7,286,611 80,125 4.48 %7,056,208 61,496 3.58 %
Non–interest earning assets
Cash and due from banks100,331 99,221 
Allowance for credit losses(49,705)(52,303)
Other assets587,514 531,976 
Total average assets$7,924,751 $7,635,102 
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits$4,538,698 $24,704 2.16 %$4,478,741 $4,116 0.36 %
Borrowings1,180,452 10,399 3.50 %813,873 3,756 1.83 %
Repurchase agreements136,784 825 2.39 %141,283 139 0.39 %
Subordinated notes58,983 880 5.92 %58,836 880 5.93 %
Junior subordinated debentures issued to capital trusts57,166 1,227 8.52 %56,928 744 5.19 %
Total interest bearing liabilities5,972,083 38,035 2.52 %5,549,661 9,635 0.69 %
Non–interest bearing liabilities
Demand deposits1,159,241 1,351,857 
Accrued interest payable and other liabilities77,942 53,208 
Stockholders’ equity715,485 680,376 
Total average liabilities and stockholders’ equity$7,924,751 $7,635,102 
Net interest income/spread$42,090 1.96 %$51,861 2.89 %
Net interest income as a percent of average interest earning assets (1)
2.41 %3.04 %
(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. The average rate is presented on a tax equivalent basis.
(2)
Includes fees on loans. 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. The average rate is presented on a tax equivalent basis.


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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
Net interest income during the nine months ended September 30, 2023 was $133.5 million, a decrease of $17.2 million from the $150.7 million earned during the same period in 2022. Yields on the Company’s interest earning assets increased by 98 basis points to 4.35% for the nine months ended September 30, 2023 from 3.37% for the nine months ended September 30, 2022. Interest income increased $59.9 million from $168.8 million for the nine months ended September 30, 2022 to $228.8 million for the same period in 2023. The increase in interest income was due to higher yields earned on interest earning assets and an increase in average balances of interest earning assets of $294.2 million during the nine months ended September 30, 2023. Interest income from acquisition–related purchase accounting adjustments was $1.5 million for the nine months ended September 30, 2023 compared to $3.0 million for the same period in 2022.
Rates paid on interest bearing liabilities increased by 171 basis points for the nine–month period ended September 30, 2023 compared to the same period in 2022. Interest expense increased $77.2 million when compared to the nine–month period ended September 30, 2022 to $95.3 million for the same period in 2023. This increase was due to higher rates paid on interest bearing liabilities. The cost of average interest bearing deposits increased 152 basis points while the cost of average borrowings increased 208 basis points. Average balances of interest bearing deposits decreased $4.6 million and average balances of borrowings increased $492.5 million for the nine–month period ended September 30, 2023 when compared to the same period in 2022.
The net interest margin decreased 34 basis points from 3.02% for the nine–month period ended September 30, 2022 to 2.59% for the same period in 2023. The decrease in the margin for the nine–month period ended September 30, 2023 compared to the same period in 2022 was due to an increase in the cost of interest bearing liabilities, offset by an increase in the yield on interest earning assets. Excluding the interest income recognized from the acquisition–related purchase accounting adjustments and the gain on swap termination recorded in interest expense (“adjusted net interest margin”), the margin would have been 2.53% for the nine–month period ended September 30, 2023 compared to 2.96% for the same period in 2022. (See the “Non–GAAP Reconciliation of Net Interest Margin” table below.)

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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
The following are the average balance sheets for the nine months ended (dollars in thousands):
Average Balance Sheets
(Dollar Amount in Thousands, Unaudited)
Nine Months EndedNine Months Ended
September 30, 2023September 30, 2022
Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate
Assets
Interest earning assets
Federal funds sold$43,976 $1,706 5.19 %$82,667 $131 0.21 %
Interest earning deposits8,597 254 3.95 %15,404 93 0.81 %
Investment securities – taxable1,706,083 26,253 2.06 %1,715,478 24,499 1.91 %
Investment securities – non–taxable (1)
1,258,345 21,617 2.91 %1,346,173 21,482 2.70 %
Loans receivable (2) (3)
4,216,817 178,961 5.70 %3,779,921 122,641 4.36 %
Total interest earning assets7,233,818 228,791 4.35 %6,939,643 168,846 3.37 %
Non–interest earning assets
Cash and due from banks102,264 100,067 
Allowance for credit losses(49,839)(53,038)
Other assets579,203 486,862 
Total average assets$7,865,446 $7,473,534 
Liabilities and Stockholders’ Equity
Interest bearing liabilities
Interest bearing deposits$4,494,821 $58,481 1.74 %$4,499,441 $7,289 0.22 %
Borrowings1,137,289 28,702 3.37 %644,803 6,209 1.29 %
Repurchase agreements138,706 2,011 1.94 %140,837 216 0.21 %
Subordinated notes58,947 2,641 5.99 %58,800 2,641 6.01 %
Junior subordinated debentures issued to capital trusts57,108 3,469 8.12 %56,869 1,755 4.13 %
Total interest bearing liabilities5,886,871 95,304 2.16 %5,400,750 18,110 0.45 %
Non–interest bearing liabilities
Demand deposits1,200,133 1,336,912 
Accrued interest payable and other liabilities71,280 44,343 
Stockholders’ equity707,162 691,529 
Total average liabilities and stockholders’ equity$7,865,446 $7,473,534 
Net interest income/spread$133,487 2.19 %$150,736 2.92 %
Net interest income as a percent of average interest earning assets (1)
2.59 %3.02 %
(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. The average rate is presented on a tax equivalent basis.
(2)
Includes fees on loans. 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. The average rate is presented on a tax equivalent 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 Nine Months ended September 30, 2023 and 2022

Rate/Volume Analysis
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, 2023 vs.
Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023 vs.
Nine Months Ended September 30, 2022
Total
Change		Change
Due to
Volume		Change
Due to
Rate		Total
Change		Change
Due to
Volume		Change
Due to
Rate
Interest Income
Federal funds sold$1,223 $4,556 $(3,333)$1,575 $(118)$1,693 
Interest earning deposits44 (38)82 161 (77)238 
Investment securities – taxable352 (862)1,214 1,754 (180)1,934 
Investment securities – non–taxable(476)(4,605)4,129 135 (2,455)2,590 
Loans receivable17,486 17,276 210 56,320 20,648 35,672 
Total interest income$18,629 $16,327 $2,302 $59,945 $17,818 $42,127 
Interest Expense
Interest bearing deposits$20,588 $219 $20,369 $51,192 $(10)$51,202 
Borrowings6,643 6,308 335 22,493 9,648 12,845 
Repurchase agreements686 (9)695 1,795 (4)1,799 
Subordinated notes— 9 (9)— 9 (9)
Junior subordinated debentures issued to capital trusts483 10 473 1,714 10 1,704 
Total interest expense28,400 6,537 21,863 77,194 9,653 67,541 
Net Interest Income$(9,771)$9,790 $(19,561)$(17,249)$8,165 $(25,414)

Credit Loss Expense

Horizon assesses the adequacy of its Allowance for Credit Losses (“ACL”) by regularly reviewing the performance of its loan portfolio. During the three–month period ended September 30, 2023, credit loss expense for loans totaled $520,000 compared to $601,000 for the same period in 2022. During the three–month period ended September 30, 2023, commercial loan net charge–offs were $142,000, residential mortgage loan net recoveries were $39,000 and consumer loan net charge–offs were $619,000.

During the nine–month period ended September 30, 2023, credit loss expense for loans totaled $856,000 compared to a credit loss recovery of $1.7 million for the same period of 2022. During the nine–month period ended September 30, 2023, commercial loan net charge–offs were $347,000, residential mortgage loan net recoveries were $55,000 and consumer loan net charge–offs were $1.1 million.

The ACL balance at September 30, 2023 was $49.7 million, or 1.14% of total loans compared to an ACL balance of $50.5 million at December 31, 2022 or 1.21% of total loans. The decrease in the ACL to total loans ratio was primarily due to favorable asset quality with non–performing loans at 0.45% of total loans at period end and net charge–offs to average loans represented 0.02% for the third quarter of 2023.

As of September 30, 2023, non–performing loans totaled $19.4 million, reflecting a $2.4 million decrease from $21.8 million in non–performing loans as of December 31, 2022. Non–performing commercial loans decreased by $2.4 million, non–performing real estate loans decreased by $346,000 and non–performing consumer loans increased by $315,000 at September 30, 2023 compared to December 31, 2022.
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
Other Real Estate Owned (“OREO”) and repossessed assets totaled $1.4 million at September 30, 2023 compared to $1.8 million at December 31, 2022.
Non–interest Income
The following is a summary of changes in non–interest income for the three months ended September 30, 2023 and 2022 (table dollar amounts in thousands):
Three Months Ended
September 30,AmountPercent
20232022ChangeChange
Non–interest Income
Service charges on deposit accounts$3,086 $3,023 $63 2.1 %
Wire transfer fees120 148 (28)(18.9)%
Interchange fees3,186 3,089 97 3.1 %
Fiduciary activities1,206 1,203 3 0.2 %
Gain on sale of mortgage loans1,582 1,441 141 9.8 %
Mortgage servicing net of impairment631 355 276 77.7 %
Increase in cash surrender value of bank owned life insurance1,055 814 241 29.6 %
Other income964 115 849 738.3 %
Total non–interest income$11,830 $10,188 $1,642 16.1 %
Total non–interest income was $1.6 million higher during the third quarter of 2023 compared to the same period in 2022. Other income was $849,000 higher during the third quarter of 2023 compared to the same period of 2022 due to the sale of other assets. Residential mortgage loan activity during the third quarter of 2023 generated $1.6 million of income from the gain on sale of mortgage loans, up from $1.4 million for the same period in 2022. The cash surrender value of bank owned life insurance increased $241,000 during the third quarter of 2023 compared to the same period in 2022, primarily due to the purchase of $50.0 million in additional life insurance during the third quarter of 2022. Mortgage servicing income, net of impairment or recovery, increased $276,000 during the third quarter of 2023 compared to the same period in 2022.
The following is a summary of changes in non–interest income for the nine months ended September 30, 2023 and 2022 (table dollar amounts in thousands):
Nine Months Ended
September 30,AmountPercent
20232022ChangeChange
Non–interest Income
Service charges on deposit accounts$9,135 $8,651 $484 5.6 %
Wire transfer fees345 477 (132)(27.7)%
Interchange fees9,637 9,451 186 2.0 %
Fiduciary activities3,728 4,111 (383)(9.3)%
Gain on sale of investment securities(480)— (480)#DIV/0!
Gain on sale of mortgage loans3,372 5,969 (2,597)(43.5)%
Mortgage servicing net of impairment1,984 4,163 (2,179)(52.3)%
Increase in cash surrender value of bank owned life insurance3,051 1,843 1,208 65.5 %
Death benefit on bank owned life insurance— 644 (644)(100.0)%
Other income1,675 1,468 207 14.1 %
Total non–interest income$32,447 $36,777 $(4,330)(11.8)%
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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 Nine Months ended September 30, 2023 and 2022
Total non–interest income was $4.3 million lower during the nine months ended September 30, 2023 compared to the same period in 2022. The sale of $88.2 million of available for sale investments generated a $480,000 net loss during the first nine months of 2023. Residential mortgage loan activity generated $3.4 million of income from the gain on sale of mortgage loans, down from $6.0 million for the same period in 2022 due to a lower volume of loans sold and a decrease in the percentage gain on loans sold. Mortgage servicing income, net of impairment or recovery, decreased $2.2 million during the first nine months of 2023 compared to the same period in 2022 due to an impairment recovery of $2.6 million recorded during the first quarter of 2022. Fiduciary activities income was $383,000 lower during the first nine months of 2023 compared to the same period in 2022. The cash surrender value of bank owned life insurance increased $1.2 million during the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to the purchase of $50.0 million in additional life insurance during the third quarter of 2022.
Non–interest Expense
The following is a summary of changes in non–interest expense for the three months ended September 30, 2023 and 2022 (table dollar amounts in thousands):
Three Months Ended
September 30,September 30,QTDQTD
20232022$ Change% Change
Non–interest Expense
Salaries and employee benefits$20,058 $20,613 $(555)(2.7)%
Net occupancy expenses3,283 3,293 (10)(0.3)%
Data processing2,999 2,539 460 18.1 %
Professional fees707 552 155 28.1 %
Outside services and consultants2,316 2,855 (539)(18.9)%
Loan expense1,120 1,392 (272)(19.5)%
FDIC deposit insurance1,300 670 630 94.0 %
Core deposit intangible amortization903 926 (23)(2.5)%
Other losses188 398 (210)(52.8)%
Other expenses3,294 3,578 (284)(7.9)%
Total non–interest expense$36,168 $36,816 $(648)(1.8)%
Annualized Non–interest Exp. to Avg. Assets1.81 %1.91 %
Total non–interest expense was $648,000 lower during the third quarter of 2023 when compared to the third quarter of 2022 primarily due to decreases in salaries and employee benefits expense of $555,000, outside services and consultants expense of $539,000, other expenses of $284,000, loan expense of $272,000 and other losses of $210,000, offset by increases in FDIC deposit insurance of $630,000 and data processing of $460,000. Annualized non–interest expense to average assets decreased to 1.81% for the three months ended September 30, 2023 compared to 1.91% for the same period in 2022 as expense reductions from branch acquisitions were realized and investments in technology are being leveraged, resulting in this improvement.

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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
The following is a summary of changes in non–interest expense for the nine months ended September 30, 2023 and 2022 (table dollar amounts in thousands):
Nine Months Ended
September 30,September 30,YTDYTD
20232022$ Change% Change
Non–interest Expense
Salaries and employee benefits$58,932 $60,305 $(1,373)(2.3)%
Net occupancy expenses10,095 10,044 51 0.5 %
Data processing8,684 7,683 1,001 13.0 %
Professional fees1,873 1,149 724 63.0 %
Outside services and consultants7,548 7,865 (317)(4.0)%
Loan expense3,635 4,130 (495)(12.0)%
FDIC deposit insurance2,680 2,170 510 23.5 %
Core deposit intangible amortization2,709 2,777 (68)(2.4)%
Other losses543 928 (385)(41.5)%
Other expenses10,255 10,439 (184)(1.8)%
Total non–interest expense$106,954 $107,490 $(536)(0.5)%
Annualized Non–interest Exp. to Avg. Assets1.82 %1.99 %
Total non–interest expense was $536,000 lower during the first nine months of 2023 when compared to the same period of 2022 primarily due to decreases in salaries and employee benefits expense of $1.4 million, loan expense of $495,000 and other losses of $385,000, offset by increases of $1.0 million in data processing expense, $724,000 in professional fees and $510,000 in FDIC deposit insurance. Annualized non–interest expense to average assets decreased to 1.82% during the first nine months of 2023 compared to 1.99% for the same period in 2022 as expense reductions from branch consolidations were realized and investments in technology are being leveraged, resulting in this improvement.
Income Taxes
Income tax expense totaled $1.3 million for the third quarter of 2023, a decrease of $729,000 when compared to the third quarter of 2022 due to a decrease in income before taxes of $8.3 million.

Income tax expense totaled $4.6 million for the first nine months of 2023, a decrease of $4.9 million when compared to the same period of 2022 due to a decrease in income before taxes of $24.0 million.

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 September 30, 2023, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.65 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $438.0 million at December 31, 2022. The Bank had approximately $622.9 million of unpledged investment securities at September 30, 2023 compared to $2.1 billion at December 31, 2022.


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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 Nine Months ended September 30, 2023 and 2022
Capital Resources
The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at September 30, 2023. Stockholders’ equity totaled $693.4 million as of September 30, 2023, compared to $677.4 million as of December 31, 2022. For the nine months ended September 30, 2023, the ratio of average stockholders’ equity to average assets was 9.03% compared to 9.07% for the twelve months ended December 31, 2022. The increase in stockholders’ equity during the period was due to net income generated during the period, offset by a decrease in accumulated other comprehensive income of $17.2 million and the amount of dividends paid.
Horizon declared common stock dividends in the amount of $0.48 per share during the first nine months of 2023 and $0.47 per share for the same period in 2022. The dividend payout ratio (dividends as a percent of basic earnings per share) was 39.3% and 28.3% for the first nine months of 2023 and 2022, respectively. For additional information regarding dividends, see Horizon’s 2022 Annual Report on Form 10–K.

Use of Non–GAAP Financial Measures
Certain information set forth in this quarterly report on Form 10–Q refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non–GAAP financial measures relating to net income, diluted earnings per share, pre–tax pre–provision net income, net interest margin, tangible stockholders’ equity, tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and the return on average tangible equity. In each case, we have identified special circumstances that we consider to be adjustments and have excluded them, to show the impact of such events as acquisition–related purchase accounting adjustments and swap termination fees, among others we have identified in our reconciliations. Horizon believes that these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and other adjustments. 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 Report on Form 10–Q for reconciliations of the non–GAAP figures identified herein and their most comparable GAAP measures.
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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 Nine Months ended September 30, 2023 and 2022
Non–GAAP Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Net income as reported$16,205 $18,763 $18,228 $21,165 $23,821 $53,196 $72,243 
Gain on swap termination— (1,453)— — — (1,453)— 
Tax effect— 305 — — — 305 — 
Net income excluding gain on swap termination16,205 17,615 18,228 21,165 23,821 52,048 72,243 
(Gain)/loss on sale of investment
securities		— (20)500 — — 480 — 
Tax effect— 4 (105)— — (101)— 
Net income excluding (gain)/loss on sale of investment securities16,205 17,599 18,623 21,165 23,821 52,427 72,243 
Death benefit on bank owned life insurance (“BOLI”)— — — — — — (644)
Net income excluding death benefit on BOLI16,205 17,599 18,623 21,165 23,821 52,427 71,599 
Adjusted net income$16,205 $17,599 $18,623 $21,165 $23,821 $52,427 $71,599 

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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
Non–GAAP Reconciliation of Diluted Earnings per Share
(Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Diluted earnings per share (“EPS”) as reported$0.37 $0.43 $0.42 $0.48 $0.55 $1.21 $1.65 
Gain on swap termination— (0.03)— — — (0.03)— 
Tax effect— 0.01 — — — 0.01 — 
Diluted EPS excluding gain on swap termination0.37 0.41 0.42 0.48 0.55 1.19 1.65 
(Gain)/loss on sale of investment securities— — 0.01 — — 0.01 — 
Tax effect— — — — — — — 
Diluted EPS excluding (gain)/loss on investment securities0.37 0.41 0.43 0.48 0.55 1.20 1.65 
Death benefit on BOLI— — — — — — (0.01)
Diluted EPS excluding death benefit on BOLI0.37 0.41 0.43 0.48 0.55 1.20 1.64 
Adjusted Diluted EPS$0.37 $0.41 $0.43 $0.48 $0.55 $1.20 $1.64 

Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Pre–tax income$17,489 $20,215 $20,091 $23,814 $25,834 $57,795 $81,770 
Credit loss expense (recovery)263 680 242 (69)(601)1,185 (1,747)
Pre–tax, pre–provision net income$17,752 $20,895 $20,333 $23,745 $25,233 $58,980 $80,023 
Pre–tax, pre–provision net income$17,752 $20,895 $20,333 $23,745 $25,233 $58,980 $80,023 
Gain on swap termination— (1,453)— — — (1,453)— 
(Gain)/loss on sale of investment securities— (20)500 — — 480 — 
Death benefit on bank owned life insurance— — — — — — (644)
Adjusted pre–tax, pre–provision net income$17,752 $19,422 $20,833 $23,745 $25,233 $58,007 $79,379 
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Net interest income as reported$42,090 $46,160 $45,237 $48,782 $51,861 $133,487 $150,736 
Average interest earning assets7,286,611 7,212,640 7,201,266 7,091,980 7,056,208 7,233,818 6,939,643 
Net interest income as a percentage of average interest earning assets
(“Net Interest Margin”)		2.41 %2.69 %2.67 %2.85 %3.04 %2.59 %3.02 %
Net interest income as reported$42,090 $46,160 $45,237 $48,782 $51,861 $133,487 $150,736 
Acquisition–related purchase accounting adjustments
(“PAUs”)		(435)(651)(367)(431)(906)(1,453)(3,045)
Gain on swap termination— (1,453)— — — (1,453)— 
Adjusted net interest income$41,655 $44,056 $44,870 $48,351 $50,955 $130,581 $147,691 
Adjusted net interest margin2.38 %2.57 %2.65 %2.83 %2.99 %2.53 %2.96 %

Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
(Dollars in Thousands Except per Share Data, Unaudited)
September 30,June 30,March 31,December 31,September 30,
20232023202320222022
Total stockholders’ equity$693,369 $709,243 $702,559 $677,375 $644,993 
Less: Intangible assets169,741 170,644 171,547 172,450 173,375 
Total tangible stockholders’ equity$523,628 $538,599 $531,012 $504,925 $471,618 
Common shares outstanding43,648,501 43,645,216 43,621,422 43,574,151 43,574,151 
Book value per common share$15.89 $16.25 $16.11 $15.55 $14.80 
Tangible book value per common share$12.00 $12.34 $12.17 $11.59 $10.82 
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Non–interest expense as reported$36,168 $36,262 $34,524 $35,711 $36,816 $106,954 $107,490 
Net interest income as reported42,090 46,160 45,237 48,782 51,861 133,487 150,736 
Non–interest income as reported$11,830 $10,997 $9,620 $10,674 $10,188 $32,447 $36,777 
Non–interest expense/(Net interest income + Non–interest income)
("Efficiency
Ratio")		67.08 %63.44 %62.93 %60.06 %59.33 %64.46 %57.32 %
Non–interest expense as reported$36,168 $36,262 $34,524 $35,711 $36,816 $106,954 $107,490 
Net interest income as reported42,090 46,160 45,237 48,782 51,861 133,487 150,736 
Gain on swap termination— (1,453)— — — (1,453)— 
Net interest income excluding gain on swap termination42,090 44,707 45,237 48,782 51,861 132,034 150,736 
Non–interest income as reported11,830 10,997 9,620 10,674 10,188 32,447 36,777 
(Gain)/loss on sale of investment securities— (20)500 — — 480 — 
Death benefit on bank owned life insurance ("BOLI")— — — — — — (644)
Non–interest income excluding (gain)/loss on sale of investment securities and death benefit on BOLI$11,830 $10,977 $10,120 $10,674 $10,188 $32,927 $36,133 
Adjusted efficiency ratio67.08 %65.12 %62.37 %60.06 %59.33 %64.84 %57.52 %
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2023 and 2022
Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Average assets$7,924,751 $7,840,026 $7,831,106 $7,718,366 $7,635,102 $7,865,446 $7,473,534 
Return on average assets ("ROAA") as reported0.81 %0.96 %0.94 %1.09 %1.24 %0.90 %1.29 %
Gain on swap termination— (0.07)— — — (0.02)— 
Tax effect— 0.02 — — — 0.01 — 
ROAA excluding gain on swap termination0.81 0.91 0.94 1.09 1.24 0.89 1.29 
(Gain)/loss on sale of investment securities— — 0.03 — — 0.01 — 
Tax effect— — (0.01)— — — — 
ROAA excluding (gain)/loss on sale of investment securities0.81 0.91 0.96 1.09 1.24 0.90 1.29 
Death benefit on bank owned life insurance ("BOLI")— — — — — — (0.01)
ROAA excluding death benefit on BOLI0.81 0.91 0.96 1.09 1.24 0.90 1.28 
Adjusted ROAA0.81 %0.91 %0.96 %1.09 %1.24 %0.90 %1.28 %
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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 Nine Months ended September 30, 2023 and 2022
Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Average common equity$715,485 $710,953 $693,472 $660,188 $680,376 $707,162 $691,529 
Return on average common equity ("ROACE") as reported8.99 %10.59 %10.66 %12.72 %13.89 %10.06 %13.97 %
Gain on swap termination— (0.82)— — — (0.27)— 
Tax effect— 0.17 — — — 0.06 — 
ROACE excluding gain on swap termination8.99 9.94 10.66 12.72 13.89 9.85 13.97 
(Gain)/loss on sale of investment securities— (0.01)0.29 — — 0.09 — 
Tax effect— — (0.06)— — (0.02)— 
ROACE excluding (gain)/loss on sale of investment securities8.99 9.93 10.89 12.72 13.89 9.92 13.97 
Death benefit on bank owned life insurance ("BOLI")— — — — — — (0.12)
ROACE excluding death benefit on BOLI8.99 9.93 10.89 12.72 13.89 9.92 13.85 
Adjusted ROACE8.99 %9.93 %10.89 %12.72 %13.89 %9.92 %13.85 %
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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 Nine Months ended September 30, 2023 and 2022
Non–GAAP Reconciliation of Return on Average Tangible Equity
(Dollars in Thousands, Unaudited)
Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,September 30,
2023202320232022202220232022
Average common equity$715,485 $710,953 $693,472 $660,188 $680,376 $707,162 $691,529 
Less: Average intangible assets170,301 171,177 172,139 173,050 173,546 171,199 174,323 
Average tangible equity$545,184 $539,776 $521,333 $487,138 $506,830 $535,963 $517,206 
Return on average common equity ("ROATE")11.79 %13.94 %14.18 %17.24 %18.65 %13.27 %18.68 %
Gain on swap termination— (1.08)— — — (0.36)— 
Tax effect— 0.23 — — — 0.08 — 
ROATE excluding gain on swap termination11.79 13.09 14.18 17.24 18.65 12.99 18.68 
(Gain)/loss on sale of investment securities— (0.01)0.39 — — 0.12 — 
Tax effect— — (0.08)— — (0.03)— 
ROATE excluding (gain)/loss on sale of investment securities11.79 13.08 14.49 17.24 18.65 13.08 18.68 
Death benefit on bank owned life insurance ("BOLI")— — — — — — (0.17)
ROATE excluding death benefit on BOLI11.79 13.08 14.49 17.24 18.65 13.08 18.51 
Adjusted ROATE11.79 %13.08 %14.49 %17.24 %18.65 %13.08 %18.51 %



ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We refer you to Horizon's 2022 Annual Report on Form 10–K for analysis of its interest rate sensitivity. Horizon believes there have been no significant changes in its interest rate sensitivity since it was reported in its 2022 Annual Report on Form 10–K.


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ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on an evaluation of disclosure controls and procedures as of September 30, 2023, Horizon’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Horizon’s disclosure controls (as defined in Exchange Act Rule 13a–15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on such evaluation, such officers have concluded that, as of the evaluation date, Horizon's disclosure controls and procedures were not effective to ensure that the information required to be disclosed by Horizon in the reports Horizon files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, including that such information is accumulated and communicated to Horizon's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. The conclusion that Horizon's disclosure controls and procedures were not effective was due to the presence of material weaknesses in Horizon's internal control over financial reporting, as that term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act, as previously disclosed in Part II, Item 9A of Horizon's Annual Report on Form 10–K for the year ended December 31, 2022 (the “2022 Annual Report on Form 10–K”). In light of the material weaknesses identified by management, Horizon has performed additional analyses and procedures in order to conclude that its condensed financial statements as of and for the three and nine months ended September 30, 2023 are fairly presented, in all material respects, in accordance with GAAP, as further described below.
Description of Material Weaknesses and Management's Remediation Initiatives
As previously disclosed in “Part II, Item 9A. Controls and Procedures” of Horizon's 2022 Annual Report on Form 10–K, management identified material weaknesses in internal control over financial reporting with respect to insufficient controls over the reporting, classification, and disclosure of loans, investments and individual cash flow line items and lack of sufficient controls around the financial reporting process that allows for the timely release of financial statements. As of the date of this report, Horizon's remediation efforts are in place related to each of the material weaknesses that Horizon has identified in its internal control over financial reporting as additional procedures and controls have been established to fully address these material weaknesses. Horizon has not been able to complete all actions necessary and test the remediated controls in a manner that would enable it to conclude that such controls are effective. Horizon is committed to implementing the necessary controls to remediate the material weaknesses described below, as and when resources permit.
As part of Horizon's efforts to remediate the material weaknesses described above, Horizon has hired additional resources within our accounting and finance department for financial statement preparation and review, Horizon has provided additional training to implement and monitor our policies and procedures, and enhanced controls and procedures have been designed and implemented. The material weaknesses will not be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We estimate that the remediation of these material weaknesses will be completed prior to the end of fiscal 2023. Therefore, Horizon's Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, Horizon's disclosure controls and procedures were not effective. Despite the foregoing, Horizon's management has concluded the financial statements fairly present in all material respects, Horizon's financial position, results of operations and cash flows as of the dates, and for the periods presented in this Form 10–Q, in conformity with GAAP.
Changes in Internal Control Over Financial Reporting
Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that during the fiscal quarter ended September 30, 2023, there have been no changes in Horizon’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Horizon’s internal control over financial reporting, other than the remediation activities described above and discussed in further detail in “Part II, Item 9A. Controls and Procedures” of Horizon's 2022 Annual Report on Form 10–K.
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HORIZON BANCORP, INC. AND SUBSIDIARIES
Part II – Other Information
ITEM 1.    LEGAL PROCEEDINGS
As of April 20, 2023, a putative class action lawsuit entitled Chad Key, et al. v. Horizon Bancorp, Inc., et al., Case No. 1:23-cv-02961 (”Securities Action”) was filed against the Company and two of its officers in the U.S. District Court for the Eastern District of New York. The Securities Action asserts claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 alleging, among other things, the Company made materially false and misleading statements and failed to disclose material adverse facts which allegedly resulted in harm to a putative class of purchasers of our securities from March 9, 2022 and March 10, 2023.
As of (1) August 28, 2023, a lawsuit related to the Securities Action was filed by Sally Hundley, derivatively on behalf of the Company, against the Company, as nominal defendant, and 2 of the Company's officers and 10 of its directors and (2) August 31, 2023, a lawsuit also related to the Securities Action was filed by Aziz Chowdhury, derivatively on behalf of the Company, against the Company, as nominal defendant, and 2 of the Company's officers and 10 of its directors (the “Derivatives Actions”) in the U.S. District Court for the Eastern District of New York. The Derivative Actions allege, among other things, breach of the officers and directors' fiduciary duties. The Derivative Actions have been consolidated and stayed pending resolution of any motion to dismiss in the Securities Action.
Based on our initial review of these actions, management believes that the Company has strong defenses to the claims and intends to vigorously defend against them. As of September 30, 2023, no liabilities related to the above matters were recorded because we have concluded such liabilities are not probable and the amounts of such liabilities are not reasonably estimable.
In addition to the matters described above, from time to time, Horizon and its subsidiaries are involved in various legal proceedings incidental to the conduct of their business. Management does not expect that the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations.
ITEM 1A.    RISK FACTORS
The disclosures below supplement the risk factors previously disclosed under Part I, Item 1A of the Company's 2022 Annual Report on Form 10–K.
Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system and could have a material effect on our operations and/or stock price.
The recent high–profile bank failures including Silicon Valley Bank, Signature Bank and First Republic Bank have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks. These market developments have negatively impacted customer confidence in the safety and soundness of financial institutions, as well as have caused significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession. These market developments have caused general uncertainty and concern regarding the liquidity adequacy of the banking industry and in particular, regional banks like Horizon. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short–term fixed income securities, all of which could materially adversely impact our liquidity, loan funding capacity, net interest margin, capital and results of operations. In connection with high–profile bank failures, uncertainty and concern has been, and may be in the future, compounded by advances in technology that increase the speed at which deposits can be moved, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including previously uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)Unregistered Sales of Equity Securities: Not Applicable
(b)Use of Proceeds: Not Applicable
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Part II – Other Information
(c)Repurchase of Our Equity Securities: Not Applicable
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4.    MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5.    OTHER INFORMATION
Rule 10b5–1 Trading Plans
During the three months ended September 30, 2023, none of the Company's directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b–5c or any “non–Rule 10b5–1 trading arrangement,” as that term is used in the Securities and Exchange Commission regulations.

ITEM 6.    EXHIBITS
(a) Exhibits
Exhibit
No.		DescriptionLocation
31.1Attached
31.2Attached
32Attached
101Inline Interactive Data FilesAttached
104
The cover page from the Company’s Quarterly Report on Form 10–Q for the quarter ended September 30, 2023, has been formatted in Inline XBRL
Within the Inline XBRL document

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HORIZON BANCORP, INC.
November 9, 2023/s/ Thomas M. Prame
DateThomas M. Prame
Chief Executive Officer
November 9, 2023/s/ Mark E. Secor
DateMark E. Secor
Chief Financial Officer

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