Horizon Bancorp

11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:19

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to Horizon Bancorp, Inc. ("Horizon" or the "Company") and Horizon Bank (the "Bank"). Horizon intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for the purposes of these safe harbor provisions. Statements in this report should be considered in conjunction with the other information available about Horizon, including the information in the other filings we make with the Securities and Exchange Commission. The forward-looking statements are based on management's expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as "anticipate," "expect," "estimate," "project," "intend," "plan," "believe," "could," "will" and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.
Actual results may differ materially, adversely or positively, from the expectations of the Company that are expressed or implied by any forward-looking statement. Risks, uncertainties, and factors that could cause the Company's actual results to vary materially from those expressed or implied by any forward-looking statement include but are not limited to:
•effects on Horizon's business resulting from new U.S. domestic or foreign governmental trade measures, including but not limited to tariffs, import and export controls, foreign exchange intervention accomplished to offset the effects of trade policy or in response to currency volatility, and other restrictions on free trade;
•uncertain conditions within the domestic and international macroeconomic environment, including trade policy, monetary and fiscal policy, and conditions in the investment, credit, interest rate, and derivatives markets, and their impact on Horizon and its customers;
•current financial conditions within the banking industry;
•changes in the level and volatility of interest rates, spreads on earning assets and interest bearing liabilities, and interest rate sensitivity;
•the aggregate effects of elevated inflation levels in recent years, and continued inflation levels remaining above the Federal Reserve's 2% target;
•loss of key Horizon personnel;
•macroeconomic conditions and their impact on Horizon and its customers;
•the increasing use of Bitcoin and other crypto currencies and/or stable coin and the possible impact these alternative currencies may have on deposit disintermediation and income derived from payment systems;
•risks related to the development and use of artificial intelligence (AI);
•the effect of interest rates on net interest rate margin and their impact on mortgage loan volumes and the outflow of deposits;
•increases in disintermediation, as new technologies allow consumers to complete financial transactions without the assistance of banks;
•potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms (e.g., Apple Pay or Bitcoin) take a greater market share of the payment systems;
•estimates of fair value of certain of Horizon's assets and liabilities;
•volatility and disruption in financial markets;
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, 2026 and 2025
•changes in prepayment speeds, loan originations, credit losses and market values, collateral securing loans and other assets;
•changes in sources of liquidity;
•potential risk of environmental liability related to lending and acquisition activities;
•changes in the competitive environment in Horizon's market areas and among other financial service providers;
•legislation and/or regulation affecting the financial services industry as a whole, and Horizon and its subsidiaries in particular;
•changes in regulatory supervision and oversight, including monetary policy and capital requirements;
•changes in accounting policies or procedures as may be adopted and required by regulatory agencies;
•litigation, regulatory enforcement, tax, and legal compliance risk and costs, as applicable generally and specifically to the financial and fiduciary (generally and as an ESOP fiduciary) environment, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same;
•the effects and costs of governmental investigations or related actions by third parties;
•rapid technological developments and changes;
•the risks presented by cyber terrorism and data security breaches;
•the rising costs of effective cybersecurity;
•containing costs and expenses;
•the ability of the U.S. federal government to manage federal debt limits;
•the risks of expansion through mergers and acquisitions, including unexpected credit quality problems with acquired loans, difficulty integrating acquired operations and material differences in the actual financial results of such transactions compared with Horizon's initial expectations, including the full realization of anticipated cost savings; and
•acts of terrorism, war and global conflicts, such as the Russia-Ukraine conflict and continued unrest in the Middle East, and the potential impact they may have on supply chains, the availability of commodities, commodity prices, and the overall U.S. and global financial markets.
The foregoing list of important factors is not exclusive, and you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document or, in the case of documents incorporated by reference, the dates of those documents. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf. For a detailed discussion of the risks and uncertainties that may cause our actual results or performance to differ materially from the results or performance expressed or implied by forward-looking statements, see "Risk Factors" in Item 1A of Part I of our 2025 Annual Report on Form 10-K, in Item 1A of Part II of this Quarterly Report on Form 10-Q, and in the subsequent reports we file with the SEC.
Critical Accounting Estimates
The Notes to the Consolidated Financial Statements included in Item 8 of the Company's 2025 Annual Report on Form 10-K contain a summary of the Company's significant accounting policies. Certain of these policies are important to the portrayal of the Company's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The Company considers these policies to be its critical accounting estimates. Management has identified as critical accounting estimates as the allowance for credit losses, income taxes, and valuation measurements.
For additional information regarding critical accounting estimates, see Note 1 - Nature of Operations and Summary of Significant Accounting Policies included in Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes in the Company's application of critical accounting estimates since December 31, 2025.
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, 2026 and 2025
Results of Operations
Net Income
Net Income increased $250.7 million, to $28.7 million, or $0.56 per diluted share, for the three months ended September 30, 2026 compared to a net loss of $222.0 million, or $(4.69) per diluted share, for the same period in 2025. The increase is primarily driven by a $307.3 million increase in non-interest income due to the loss on the sale of securities associated with the balance sheet repositioning executed during the third quarter of 2025, which did not recur in the current period. Additionally, non-interest expense decreased by $11.4 million and net interest income increased $6.8 million, which were partially offset by a $69.9 million increase in income tax expense and a $4.9 million increase in provision for credit losses.
Net income increased $257.1 million to $79.7 million, or $1.55 per diluted share, during the nine months ended September 30, 2026 when compared to a loss of $177.4 million, or $(3.94) per share, for the same period in 2025. The increase was primarily a result of a $303.1 million increase in non-interest income, due to the loss on the sale of securities associated with the balance sheet repositioning executed during the third quarter of 2025, which did not recur in the current period. Additionally, net interest income increased by $24.9 million and non-interest expense decreased by $5.6 million. The increase was partially offset by a $74.1 million increase in income tax expense and a $2.3 million increase in provision for credit losses.
Net Interest Income
Net interest income increased $6.8 million, or 11.6% during the three months ended September 30, 2026, to $65.2 million, when compared to the same period in 2025. While average earning assets decreased, owed to the balance sheet repositioning and deleveraging efforts in the third quarter of 2025, the reported net FTE interest margin1 increased by 85 basis points, to 4.37% for the three months ended September 30, 2026 compared to the prior year period, driven by the favorable mix shift toward higher-yielding average interest earning assets, and the funding mix toward lower cost deposit liabilities. Additionally, securities yields have expanded while deposit costs have declined when compared with the comparable year ago period.
Net interest income increased $24.9 million during the nine months ended September 30, 2026, to $190.9 million when compared to the same period in 2025. While average earning asset balances decreased, owed to the balance sheet repositioning and deleveraging efforts in the third quarter of 2025, the reported net FTE interest margin1 increased by 108 basis points, to 4.34% for the nine months ended September 30, 2026 when compared to the prior year period. The primary driver of the increase in net interest income compared with the prior year period is attributable to the favorable mix shift in both higher-yielding average interest earning assets, and the funding mix toward lower cost deposit liabilities. Additionally, loan and security yields have expanded while deposit costs have declined when compared with the comparable year ago period.
1Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
HORIZON BANCORP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine months ended September 30, 2026 and 2025
Following are the average balance sheets for the three months ended (dollars in thousands):
Average Balance Sheet
(Dollars in Thousands, Unaudited)
Three Months Ended
September 30, 2026 September 30, 2025
Average
Balance (6)
Interest(5)
Average
Rate
Average
Balance (6)
Interest(5)
Average
Rate
Assets
Interest earning assets
Interest earning deposits (incl. Fed Funds Sold) $ 158,544 $ 1,493 3.74 % $ 185,665 $ 2,062 4.41 %
Federal Home Loan Bank stock(1)
7,418 188 10.05 % 45,549 862 7.51 %
Investment securities - taxable (2)
583,994 7,238 4.92 % 792,829 5,769 2.89 %
Investment securities - non-taxable (2)
314,702 3,253 4.10 % 763,488 5,799 3.01 %
Total investment securities 898,696 10,491 4.63 % 1,556,317 11,568 2.95 %
Loans receivable (3) (4)
4,949,830 79,959 6.41 % 4,979,211 79,941 6.37 %
Total interest earning assets $ 6,014,488 92,131 6.08 % $ 6,766,742 94,433 5.54 %
Non-interest earning assets
Cash and due from banks 71,519 83,616
Allowance for credit losses (51,675) (54,072)
Other assets 539,582 501,590
Total average assets $ 6,573,914 $ 7,297,876
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing demand deposits $ 1,679,248 $ 5,392 1.27 % $ 1,708,446 $ 6,687 1.55 %
Saving and money market deposits 1,517,894 6,717 1.76 % 1,636,428 8,204 1.99 %
Time deposits 1,086,343 9,256 3.38 % 1,198,279 10,835 3.59 %
Total Deposits 4,283,485 21,365 1.98 % 4,543,153 25,726 2.25 %
Borrowings 150,083 1,464 3.87 % 601,889 5,535 3.65 %
Repurchase agreements 59,040 191 1.28 % 88,721 389 1.74 %
Subordinated notes 98,335 1,898 7.66 % 91,032 1,731 7.54 %
Junior subordinated debentures issued to capital trusts 57,807 992 6.81 % 57,602 1,069 7.36 %
Total interest bearing liabilities 4,648,750 25,910 2.21 % 5,382,397 34,450 2.54 %
Non-interest bearing liabilities
Demand deposits 1,131,714 1,120,719
Accrued interest payable and other liabilities 64,887 63,103
Stockholders' equity 728,563 731,657
Total average liabilities and stockholders' equity $ 6,573,914 $ 7,297,876
Net FTE interest income (Non-GAAP) (5)
$ 66,221 $ 59,983
Less FTE adjustments (5)
1,062 1,597
Net Interest Income $ 65,159 $ 58,386
Net FTE interest margin (Non-GAAP) (5)
4.37 % 3.52 %
(1) Includes dividend income on FHLB stock.
(2) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities.
(3) Includes fees on loans held for sale and held for investment. The inclusion of loan fees does not have a material effect on the average interest rate.
(4) Non-accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.
(5) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative. The Company adjusts interest income and average rates for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate
(5) Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
(6) Average balances are calculated on a daily average basis
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, 2026 and 2025
Following are the average balance sheets for the nine months ended (dollars in thousands):
Average Balance Sheet
(Dollars in Thousands, Unaudited)
Nine Months Ended
September 30, 2026 September 30, 2025
Average
Balance (6)
Interest(5)
Average
Rate
Average
Balance (6)
Interest(5)
Average
Rate
Assets
Interest earning assets
Interest earning deposits (incl. Fed Funds Sold) 141,736 3,938 3.71 % 160,465 5,380 4.48 %
Federal Home Loan Bank stock(1)
22,848 999 5.85 % 47,554 2,948 8.29 %
Investment securities - taxable (2)
583,214 21,170 4.85 % 908,061 15,663 2.31 %
Investment securities - non-taxable (2)
315,997 9,743 4.12 % 993,516 21,343 2.87 %
Total investment securities 899,211 30,913 4.60 % 1,901,577 37,006 2.60 %
Loans receivable (3) (4)
4,913,740 233,586 6.36 % 4,938,985 233,781 6.33 %
Total interest earning assets 5,977,535 269,436 6.03 % 7,048,581 279,115 5.29 %
Non-interest earning assets
Cash and due from banks 70,419 86,162
Allowance for credit losses (51,334) (52,840)
Other assets 536,275 486,091
Total average assets $ 6,532,895 $ 7,567,994
Liabilities and Stockholders' Equity
Interest bearing liabilities
Interest bearing demand deposits 1,648,307 14,989 1.22 % 1,728,715 19,982 1.55 %
Saving and money market deposits 1,492,858 18,317 1.64 % 1,654,155 24,667 1.99 %
Time deposits 1,118,409 28,483 3.40 % 1,214,697 32,730 3.60 %
Total Deposits 4,259,574 61,789 1.94 % 4,597,567 77,379 2.25 %
Borrowings 150,144 4,320 3.85 % 813,713 22,085 3.63 %
Repurchase agreements 67,902 643 1.27 % 88,417 1,198 1.81 %
Subordinated notes 98,282 5,632 7.66 % 67,652 3,389 6.70 %
Junior subordinated debentures issued to capital trusts 57,757 2,954 6.84 % 57,550 3,429 7.97 %
Total interest bearing liabilities 4,633,659 75,338 2.17 % 5,624,899 107,480 2.55 %
Non-interest bearing liabilities
Demand deposits 1,122,303 1,107,304
Accrued interest payable and other liabilities 59,785 68,813
Stockholders' equity 717,148 766,978
Total average liabilities and stockholders' equity $ 6,532,895 $ 7,567,994
Net FTE interest income (Non-GAAP) (5)
194,098 171,635
Less FTE adjustments (5)
3,209 5,626
Net Interest Income $ 190,889 $ 166,009
Net FTE interest margin (Non-GAAP) (5)
4.34 % 3.26 %
(1) Includes dividend income on FHLB stock.
(2) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities.
(3) Includes fees on loans held for sale and held for investment. The inclusion of loan fees does not have a material effect on the average interest rate.
(4) Non-accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.
(5) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative. The Company adjusts interest income and average rates for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate
(5) Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
(6) Average balances are calculated on a daily average basis
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.
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, 2026 and 2025
Three Months Ended September 30, 2026 vs.
Three Months Ended September 30, 2025 		Nine Months Ended September 30, 2026 vs.
Nine Months Ended September 30, 2025
Total
Change 		Change
Due To
Volume 		Change
Due To
Rate 		Total
Change 		Change
Due To
Volume 		Change
Due To
Rate
Interest Income
Interest-bearing deposits in banks $ (569) $ (279) $ (290) $ (1,442) $ (584) $ (858)
Federal Home Loan Bank stock (674) (896) 222 (1,949) (1,244) (705)
Investment securities - taxable 1,469 (1,812) 3,281 5,507 (7,127) 12,634
Investment securities - non-taxable (2,546) (4,168) 1,622 (11,600) (18,414) 6,814
Loans receivable 18 (473) 491 (195) (1,198) 1,003
Total interest income (2,302) (7,628) 5,326 (9,679) (28,567) 18,888
Interest Expense
Interest-bearing demand deposits (1,295) (112) (1,183) (4,993) (897) (4,096)
Savings and money market savings deposits (1,487) (568) (919) (6,349) (2,250) (4,099)
Time deposits (1,579) (976) (603) (4,247) (2,509) (1,738)
Borrowings (4,071) (4,388) 317 (17,765) (19,017) 1,252
Repurchase agreements (198) (111) (87) (555) (241) (314)
Subordinated notes 167 141 26 2,243 1,702 541
Junior subordinated debentures issued to capital trusts (77) 4 (81) (475) 12 (487)
Total interest expense (8,540) (6,010) (2,530) (32,141) (23,200) (8,941)
Net FTE interest income (Non-GAAP) 6,238 (1,618) 7,856 22,462 (5,367) 27,829
Less change in FTE adjustments (535) (2,418)
Net Interest Income $ 6,773 $ 24,880
Non-Interest Income
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
(Dollars in Thousands) 2026 2025 $ Change % Change 2026 2025 $ Change % Change
Non-interest Income
Service charges on deposit accounts $ 3,518 $ 3,474 $ 44 1.3 % $ 10,418 $ 9,890 $ 528 5.3 %
Wire transfer fees 65 71 (6) (8.5) % 195 211 (16) (7.6) %
Interchange fees 3,537 3,510 27 0.8 % 10,505 10,154 351 3.5 %
Fiduciary activities 1,465 1,363 102 7.5 % 4,522 3,940 582 14.8 %
Loss on sale of investment securities (8) (299,132) 299,124 (100.0) % (8) (299,538) 299,530 (100.0) %
Gain on sale of mortgage loans 2,125 1,208 917 75.9 % 4,791 3,503 1,288 36.8 %
Mortgage servicing income net of impairment 246 351 (105) (29.9) % 934 1,111 (177) (15.9) %
Increase in cash value of bank owned life insurance 385 379 6 1.6 % 1,063 1,060 3 0.3 %
Other income 597 (6,558) 7,155 (109.1) % 2,768 1,756 1,012 57.6 %
Total non-interest income $ 11,930 $ (295,334) $ 307,264 (104.0) % $ 35,188 $ (267,913) $ 303,101 (113.1) %
Total non-interest income increased $307.3 million, to non-interest income of $11.9 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased $303.1 million for the nine months ended September 30, 2026 compared to the same period in 2025. The primary components of the change were as follows:
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, 2026 and 2025
Other income, which includes various miscellaneous income items as well as fair market value adjustments to certain other assets, increased by $7.2 million for the three months ended September 30, 2026 compared to the same period in 2025 and increased by $1.0 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase was primarily related to the pre-tax loss of $7.7 million on the sale of the Company's Indirect Auto portfolio related to the balance sheet repositioning efforts during the third quarter of 2025, which did not recur in the current period.
Gain on sale of mortgage loans increased $0.9 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased $1.3 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily driven by the increased volume of sold loans, and by wider realized gain-on-sale margins in the current quarter when compared with the same year ago period.
Fiduciary activities increased $0.1 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased $0.6 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily related to an increase in trust fees in the current period related to increased volume in estate planning and annuity sales.
Service charges on deposit accounts remained relatively flat for the three months ended September 30, 2026 compared to the same period in 2025, and increased $0.5 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily related to higher transaction-based fee activity in the current period.
Interchange fees remained relatively flat for the three months ended September 30, 2026 compared to the same period in 2025, and increased by $0.4 million for the nine months ended September 30, 2026, as compared to the same periods in 2025. The increase was primarily driven by increases in merchant and debit card fees.
Loss on sale of investment securities decreased by $299.1 million for the three months ended September 30, 2026 compared to the same period in 2025, and decreased by $299.5 million for the nine months ended September 30, 2026 compared to the same period in 2025. The decrease was primarily due to the sale of investment securities during the third quarter of 2025 related to the Company's balance sheet repositioning efforts, which did not recur in the current period.
The remaining changes were nominal amongst the remaining individual non-interest income accounts.
Non-Interest Expense
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
(Dollars in Thousands) 2026 2025 $ Change % Change 2026 2025 $ Change % Change
Non-interest Expense
Salaries and employee benefits $ 24,233 $ 22,698 $ 1,535 6.8 % $ 71,614 $ 67,843 $ 3,771 5.6 %
Net occupancy expenses 3,701 3,321 380 11.4 % 11,596 10,149 1,447 14.3 %
Data processing 3,377 2,933 444 15.1 % 10,361 8,757 1,604 18.3 %
Professional fees 631 808 (177) (21.9) % 1,497 2,369 (872) (36.8) %
Outside services and consultants 2,619 3,844 (1,225) (31.9) % 7,920 10,387 (2,467) (23.8) %
Loan expense 1,505 1,237 268 21.7 % 4,140 3,157 983 31.1 %
FDIC insurance expense 680 1,345 (665) (49.4) % 2,706 3,849 (1,143) (29.7) %
Core deposit intangible amortization 620 706 (86) (12.2) % 1,970 2,338 (368) (15.7) %
Merger related expense - - - - % - 305 (305) (100.0) %
Prepayment penalties - 12,680 (12,680) (100.0) % - 12,680 (12,680) (100.0) %
Other losses 308 131 177 135.1 % 615 605 10 1.7 %
Other expense 3,838 3,249 589 18.1 % 13,685 9,239 4,446 48.1 %
Total non-interest expense $ 41,512 $ 52,952 $ (11,440) (21.6) % $ 126,104 $ 131,678 $ (5,574) (4.2) %
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, 2026 and 2025
Non-interest expense decreased $11.4 million for the three months ended September 30, 2026 compared to the same period in 2025, and decreased $5.6 million for the nine months ended September 30, 2026 compared to the same period in 2025. The primary components of the change were as follows:
Salaries and employee benefits expense increased by $1.5 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased $3.8 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily driven by higher employee health insurance expense and higher salaries expense related to strategic hiring and annual merit increases, partially offset by lower bonus and incentive expense.
Outside services and consultants expense decreased by $1.2 million for the three months ended September 30, 2026 compared to the same period in 2025, and decreased $2.5 million for the nine months ended September 30, 2026 compared to the same period in 2025. The decrease reflects management's ongoing efforts to reduce the reliance on third party services.
Other expenses, which includes corporate and other service expenses, increased by $0.6 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased by $4.4 million for the nine months ended September 30, 2026 compared to the same period in 2025. During the second quarter of 2026, the Company recorded a pre-tax expense accrual of $3.1 million related to a lawsuit stemming from 2018 related to a unique circumstance involving
the repossession and credit reporting of a single vehicle financed through our legacy indirect auto business, as previously announced. The accrual will remain in place until the Company has finalized the appeal process.
Net occupancy expenses increased by $0.4 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased by $1.4 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily driven by higher snow and lawn care maintenance, furniture and equipment expense, and related depreciation expense, partially offset by lower building maintenance expenses in the current period.
Data processing expense increased by $0.4 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased by $1.6 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily driven by higher software maintenance and support costs and increased data processing outside services, partially offset by a decrease in debit card and ATM processing expense.
Loan expense increased by $0.3 million for the three months ended September 30, 2026 compared to the same period in 2025, and increased by $1.0 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily related to a higher amount of production related expense in the current period and a higher amount of reimbursements in the year ago period.
Professional fees decreased by $0.2 million for the three months ended September 30, 2026 compared to the same period in 2025, and decreased by $0.9 million for the nine months ended September 30, 2026 compared to the same period in 2025. The decrease in the current quarter compared with the year ago period is primarily related to lower gross expenses from the resolution of outstanding legal items near the end of 2025. In addition, the reduction in the year-to-date period compared with the comparative period a year ago is partially owed to a reimbursement of previously incurred legal expense during the second quarter of 2026.
FDIC Insurance expense decreased by $0.7 million for the three months ended September 30, 2026 compared to the same period in 2025, and decreased by $1.1 million for the nine months ended September 30, 2026 compared to the same period in 2025. The decrease is related to a reduction in FDIC assessments in the current year related to improved profitability and higher capital levels.
Prepayment penalties decreased $12.7 million for the three and nine months ended September 30, 2026 when compared to the same period in 2025. The decrease was driven by a $12.7 million prepayment penalty related to the payoff of $700 million in FHLB advances during the third quarter of 2025 related to the Company's balance sheet repositioning efforts, which did not recur in the current period.
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, 2026 and 2025
The remaining changes were nominal amongst the remaining individual non-interest expense accounts.
Provision and Allowance for Credit Losses
Three Months Ended Nine Months Ended
September 30, 2026 September 30, 2025 September 30, 2026 September 30, 2025
Allowance for Credit Losses on Loans
Balance at beginning of period $ 51,921 $ 54,399 $ 51,299 $ 51,980
Provision for credit losses on loans 1,581 (3,390) 3,434 152
Net loan (charge-offs) recoveries:
Commercial $ (733) $ (294) $ (1,370) $ (331)
Residential Real estate (3) (20) (49) (26)
Consumer (456) (517) (1,004) (1,597)
Total net loan (charge-offs) recoveries $ (1,192) $ (831) $ (2,423) $ (1,954)
Balance at end of period $ 52,310 $ 50,178 $ 52,310 $ 50,178
Liability for Unfunded Lending Commitments
Balance at beginning of period $ 1,294 $ 2,312 $ 1,840 $ 2,149
Provision (benefit) for credit losses on unfunded lending commitments (281) (41) (827) 122
Balance at end of period $ 1,013 $ 2,271 $ 1,013 $ 2,271
Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments $ 53,323 $ 52,449 $ 53,323 $ 52,449
Horizon assesses the adequacy of its Allowance for Credit Losses ("ACL") by regularly reviewing the performance of its loan portfolio against various economic backdrops, which periodically change. During the three months ended September 30, 2026, the Company recorded a provision for credit losses on loans of $1.6 million. This compares to a benefit for credit losses on loans of $3.4 million for the same period in 2025. The increase in the provision for credit losses on loans compared to the prior-year period was primarily attributable to the release of approximately $3.1 million in total Allowance against the sold portion of the indirect auto portfolio during the third quarter of 2025, which did not recur. The total provision for credit losses, including the reduction in reserve for unfunded lending commitments is a benefit of credit losses of $0.3 million in the current period, was $1.3 million for three months ended September 30, 2026, compared to a benefit for credit losses of $3.6 million for the same period in 2025.
For the three months ended September 30, 2026, net loan charge-offs increased by $0.4 million to $1.2 million, compared to $0.8 million during the same period in 2025. The increase in charge-offs is due to modest increases in charge-offs in the commercial portfolio during the current period.
The Company's allowance for credit losses as a percentage of period-end loans HFI was 1.04% at September 30, 2026, compared to 1.04% at September 30, 2025.
As of September 30, 2026, the liability for unfunded lending commitments was $1.0 million compared to $2.3 million as of September 30, 2025.
Income Taxes
The Company's income tax expense for the three months ended September 30, 2026 was $5.6 million compared to a tax benefit of $64.3 million for the same period in 2025, resulting in effective tax rates of 16.4% and 22.5% for those periods, respectively. The Company's income tax expense for the nine months ended September 30, 2026 was $17.6 million compared to a tax benefit of $56.4 million for the same period in 2025, resulting in effective tax rates of 18.1% and 24.1%,
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, 2026 and 2025
respectively. The decrease in the effective tax rate for three months ended September 30, 2026 was primarily due to the favorable impact of a discrete benefit of $0.9 million in the third quarter of 2026.
The effective income tax rates differed from the U.S. statutory federal income tax rates of 21% during the comparable periods primarily due to the effect of tax exempt income from securities, loans, and life insurance policies, and net tax benefits from tax credit investments.
Financial Condition
Total assets increased by $154.5 million, or 2.4%, as of September 30, 2026, from $6.4 billion as of December 31, 2025. The increase in total assets is primarily due to an increase in total cash and cash equivalents of $70.8 million, or 50.8%, and an increase in other assets of $21.7 million or 10.1%. The increase was partially offset by a decrease in FHLB stock of $38.3 million, or 83.8%, a decrease in investment securities available-for-sale of $18.0 million, or 2.1% and a decrease in loans held for sale of $6.3 million, or 64.0%,
Total loans HFI, net of ACL, increased $128.4 million, to $5.0 billion, as of September 30, 2026 compared to balances as of December 31, 2025. The increase is primarily due to growth in the commercial and consumer loans, partially offset by runoff in indirect installment loans. The company continues to maintain a balanced growth profile across various geographies, products and industries, and holds a diverse lending portfolio consisting primarily of commercial real estate, consumer, residential and commercial and industrial portfolios.
Total available for sale securities decreased $18.0 million, or 2.1%, to $857.4 million as of September 30, 2026 when compared to balances as of December 31, 2025. During the first nine months of 2026, the Company purchased approximately $108.2 million of available for sale securities and sold $5.5 million, which was offset by amortization and maturities within the portfolio and changes in the fair market value of the available for sale portfolio related to the increase in interest rates.
Total deposit balances increased by $206.0 million, or 3.9%, to $5.5 billion as of September 30, 2026 when compared to balances as of December 31, 2025. The increase was driven by a $108.5 million increase in interest bearing deposits, a $89.0 million increase in savings and money market deposits, reflecting continued success in core deposit gathering efforts, and a $30.5 million increase in non-interest bearing deposits. The increase was partially offset by a decrease of $22.0 million in time deposits. The Company maintains a granular and tenured deposit base, with a continued focus on core commercial and consumer deposit gathering.
Total borrowings decreased by $74.0 million, or 29.8%, to $174.6 million as of September 30, 2026 when compared to balances as of December 31, 2025, related to a decrease in repurchase agreements.
Investment securities are comprised of the following as of (dollars in thousands):
September 30, 2026 December 31, 2025
Amortized
Cost 		Fair
Value 		Amortized
Cost 		Fair
Value
Available for sale
U.S. Treasury, federal agencies, and government sponsored agencies $ 15,431 $ 14,505 $ 16,837 $ 16,905
State and municipal 361,539 303,371 353,559 319,665
U.S. government agency mortgage-backed securities 532,651 498,691 489,683 494,174
Corporate notes 42,750 40,862 48,750 44,670
Total available for sale investment securities $ 952,371 $ 857,429 $ 908,829 $ 875,414
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, 2026 and 2025
Credit Quality
The ACL balance at September 30, 2026 was $52.3 million, or 1.04% of period-end loans HFI, compared to an ACL balance of $51.3 million at December 31, 2025, or 1.05% of loans HFI. The increase in the ACL is primarily due to net loan growth and an increase in specific reserves on select commercial loans.
As of September 30, 2026, total non-accrual loans increased by $1.2 million, or 3.74%, from December 31, 2025, to 0.67% of total loans HFI. Total non-performing assets increased $4.0 million, or 9.87%, from December 31, 2025, to 0.68% of total assets.
During the nine months ended September 30, 2026, net charge-offs were $2.4 million, or 7 basis points annualized of average loans in the period, a change from $2.0 million, or 5 basis points annualized of average loans in the year ago comparable period.
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, 2026 and 2025
Credit Quality
(Dollars in Thousands Except Ratios, Unaudited)
Quarter Ended
September 30, December 31,
2026 2025
Non-accrual loans
Commercial $ 19,557 $ 14,549
Residential Real estate 8,737 10,087
Consumer 5,377 7,821
Total non-accrual loans $ 33,671 $ 32,457
90 days and greater delinquent - accruing interest $ 2,256 $ 2,489
Total non-performing loans $ 35,927 $ 34,946
Other real estate owned
Commercial $ 846 $ 539
Residential Real estate 957 672
Consumer 2,647 480
Total other real estate owned $ 4,450 $ 1,691
Other non-performing assets (1)
$ 4,262 $ 3,991
Total non-performing assets $ 44,639 $ 40,628
Net charge-offs (recoveries)
Commercial $ 733 $ 436
Residential Real estate 3 (25)
Consumer 456 559
Total net charge-offs $ 1,192 $ 970
Allowance for credit losses
Commercial $ 35,431 $ 35,473
Residential Real estate 2,844 3,183
Consumer 14,035 12,643
Total allowance for credit losses $ 52,310 $ 51,299
Credit quality ratios
Non-accrual loans to HFI loans 0.67 % 0.67 %
Non-performing assets to total assets 0.68 % 0.63 %
Annualized net charge-offs of average total loans 0.10 % 0.08 %
Allowance for credit losses to HFI loans 1.04 % 1.05 %
Allowance for credit losses to non-performing loans 145.60 % 146.80 %
(1) Other non-performing assets consist of a single available for sale security placed on non-accrual status in the third quarter of 2025.
HORIZON BANCORP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
And Results of Operations
For the nine months ended September 30, 2026 and 2025
Liquidity
The Bank maintains a stable base of core deposits provided by long-standing relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the FHLB. At September 30, 2026, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.62 billion in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $1.68 billion at December 31, 2025.
The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash, cash equivalents and restricted cash of $70.8 million during the nine months ended September 30, 2026, as reported in the consolidated statements of cash flows. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $83.3 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $129.7 million mainly due to a net change in loans of $127.9 million and purchases of AFS securities of $108.2 million, which was partially offset by proceeds from maturities, calls and principal repayments of securities available for sale of $64.1 million and the redemption of FHLB stock of $38.3 million. Financing activities provided cash of $117.3 million, largely resulting from the proceeds from proceeds from borrowing of $159.4 million and the net growth in deposits of $206.0 million, which was partially offset by the repayment of borrowings of $159.5 million, cash used in the net reduction in repurchase agreements of $64.5 million and $24.7 million in dividends paid on common stock, during the nine months ended September 30, 2026.
Capital Resources
The capital resources of Horizon and the Bank exceeded regulatory capital ratios for "well capitalized" banks at September 30, 2026. Stockholders' equity totaled $699.3 million as of September 30, 2026, compared to $688.3 million as of December 31, 2025. The increase in stockholders' equity during the period was primarily due to an increase in retained earnings of $55.0 million for the nine months ended September 30, 2026, offset by higher losses in accumulated other comprehensive loss of $46.0 million.
As of September 30, 2026, the ratio of total stockholders' equity to total assets is 10.61%. Book value per common share was $13.68, increasing $0.18 compared to December 31, 2025.
Tangible common equity1 totaled $538.9 million at September 30, 2026, and the ratio of tangible common equity to tangible assets1 was 8.38% at September 30, 2026. Tangible book value, which excludes intangible assets from total equity, per common share1 was $10.54, increasing $0.22 compared to December 31, 2025.
Horizon declared common stock dividends in the amount of $0.16 per share during the three months ended September 30, 2026 and $0.16 per share for the same period in 2025. The dividend payout ratio (dividends as a percent of basic earnings per share) was 31% and (12)% for the nine months ended September 30, 2026 and 2025, respectively. For additional information regarding dividends, see Horizon's 2025 Annual Report on Form 10-K.
1 Non-GAAP financial metric. See Non-GAAP reconciliation included herein for the most directly comparable GAAP measure.
HORIZON BANCORP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
And Results of Operations
For the nine months ended September 30, 2026 and 2025
Use of Non-GAAP Financial Measures
In addition to financial measures presented in accordance with GAAP, this document refers to non-GAAP financial measures, which Horizon believes are helpful to investors and provide a greater understanding of our business and financial results without the impact of items or events that may obscure trends in the Company's underlying performance. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this document for reconciliations of the non-GAAP information identified herein and its most comparable GAAP measures.
Non-GAAP Reconciliation of Net Fully-Taxable Equivalent ("FTE") Interest Margin
(Dollars in Thousands, Unaudited)
Three Months Ended Nine Months Ended
September 30, 2026 September 30, 2025 September 30, 2026 September 30, 2025
Interest income (GAAP) (A) $ 91,069 $ 92,836 $ 266,227 $ 273,489
Taxable-equivalent adjustment:
Investment securities - tax exempt (1)
$ 683 $ 1,218 $ 2,046 $ 4,482
Loan receivable (2)
379 379 1,163 1,144
Total taxable-equivalent adjustment (3)
$ 1,062 $ 1,597 $ 3,209 $ 5,626
Interest income (non-GAAP) (B) $ 92,131 $ 94,433 $ 269,436 $ 279,115
Interest expense (GAAP) (C) $ 25,910 $ 34,450 $ 75,338 $ 107,480
Net interest income (GAAP) (D) =(A) - (C) $ 65,159 $ 58,386 $ 190,889 $ 166,009
Net FTE interest income (non-GAAP) (E) = (B) - (C) $ 66,221 $ 59,983 $ 194,098 $ 171,635
Average interest earning assets (F) $ 6,014,488 $ 6,766,742 $ 5,977,535 $ 7,048,581
Net FTE interest margin (non-GAAP) (G) = (E*) / (F) 4.37 % 3.52 % 4.34 % 3.26 %
(1) The following represents municipal securities interest income for investment securities classified as available-for-sale and held-to-maturity
(2) The following represents municipal loan interest income for loan receivables classified as held for sale and held for investment
(3) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative. The Company adjusts interest income for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate
*Annualized
HORIZON BANCORP, INC. AND SUBSIDIARIES
Non-GAAP Reconciliation of Tangible Common Equity to Tangible Assets
(Dollars in Thousands, Unaudited)
Three Months Ended
September 30, 2026 September 30, 2025
Total stockholders' equity (GAAP) (A) $ 699,303 $ 660,771
Intangible assets (end of period) (B) 160,421 163,097
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 538,882 $ 497,674
Total assets (GAAP) (D) 6,591,145 6,712,497
Intangible assets (end of period) (B) 160,421 163,097
Total tangible assets (non-GAAP) (E) = (D) - (B) $ 6,430,724 $ 6,549,400
Tangible common equity to tangible assets (Non-GAAP) (G) = (C) / (E) 8.38 % 7.60 %
Non-GAAP Reconciliation of Tangible Book Value Per Share
(Dollars in Thousands, Unaudited)
Three Months Ended
September 30, 2026 September 30, 2025
Total stockholders' equity (GAAP) (A) $ 699,303 $ 660,771
Intangible assets (end of period) (B) 160,421 163,097
Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 538,882 $ 497,674
Common shares outstanding (D) 51,110,798 50,970,530
Tangible book value per common share (non-GAAP) (E) = (C) / (D) $ 10.54 $ 9.76
HORIZON BANCORP, INC. AND SUBSIDIARIES
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