HORIZON BANCORP INC /IN/HBNC

HORIZON BANCORP INC /IN/ Income Taxes Disclosure

10-KFiled Mar 13, 20263 min read
Income Tax
Income tax expense (benefit) was as follows:
December 31
2025		December 31
2024		December 31
2023
Income tax expense (benefit)
Currently payable
Federal$21,195 $8,558 $14,980 
State13,606 363 (640)
Deferred
Federal(72,848)(15,528)(3,393)
State(12,624)(1,472)71 
Total income tax expense (benefit)$(50,671)$(8,079)$11,018 
A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 21% to income before income taxes is presented in the following table. There were no activities or transactions that had foreign income taxes or cross-border tax effects during the reported periods. State income/franchise taxes are primarily related to the State of Indiana, while amounts related to other jurisdictions were not significant, in the aggregate, during the reported periods.
202520242023
Reconciliation of federal statutory to actual tax expense (benefit)AmountPercentAmountPercentAmountPercent
Tax expense (benefit) calculated at the statutory federal income tax rate$(42,242)21 %$5,743 21 %$8,190 21 %
State and local income tax, net of federal income tax effect (a)(1,844)1 %(1,185)(4)%142 — %
Tax credit investments, net of amortization(1,105)1 %(1,290)(5)%(2,976)(8)%
Income not subject to tax
     Tax Exempt Interest(5,277)3 %(6,427)(24)%(6,777)(17)%
     Tax exempt BOLI income(417)— %(273)(1)%(779)(2)%
Nondeductible Expenses227 — %404 1 %628 2 %
Other, net(13)— %150 1 %(459)(1)%
Revaluation of deferred tax assets— — %(5,201)(19)%5,201 13 %
BOLI redemption ordinary income— — %— — %5,316 14 %
BOLI redemption excise— — %— — %2,532 7 %
Actual tax expense (benefit)$(50,671)25.2 %$(8,079)(29.5)%$11,018 28.2 %
(a) State taxes in Indiana make up the majority (greater than 50 percent) of the tax effect in this category
Year-end deferred taxes are presented in the table below.
December 31
2025		December 31
2024
Assets
Allowance for credit losses$12,578 $12,590 
Net operating loss and tax credits461 10,805 
Director and employee benefits5,342 3,334 
Unrealized loss on AFS securities and fair value hedge20,482 29,355 
Net capitalized expenses96,561 — 
Basis in partnership equity investments2,649 1,940 
Fair value adjustment on acquisitions789 883 
Other2,613 2,938 
Total assets141,475 61,845 
Liabilities
Depreciation(4,213)(4,061)
Federal Home Loan Bank stock dividends(297)(353)
Difference in basis of intangible assets(5,821)(6,553)
Other(1,291)(1,003)
Total liabilities(11,622)(11,970)
Valuation allowance— — 
Net deferred tax asset/(liability)$129,853 $49,875 

Cash paid for income taxes was as follows:
December 31
2025		December 31
2024		December 31
2023
Cash paid for income taxes
Federal$10,536 $10,710 $2,137 
State
Indiana15,869 — — 
All others1,002 — — 
Total$27,407 $10,710 $2,137 

The Company has federal general business tax credits of $0.4 million that can be carried forward twenty years and expire beginning in 2044.

The Company accounts for qualifying investment tax credits using the proportional amortization method and all others under the deferral method. Investment tax credits totaled $5.1 million and $7.5 million for 2025 and 2024, respectively.

The Company recorded no valuation allowance for the year December 31, 2025 and 2024. The Company believes all of its deferred tax assets as of December 31, 2025 will be realized.

Retained earnings of the Bank include approximately $12.8 million for which no deferred income tax liability has been recognized. This amount represents an allocation of previously acquired institutions income to bad debt deductions as of December 31, 1987 for tax purposes only. Reductions of amounts so allocated for purposes other than tax bad debt losses including redemption of bank stock or excess dividends, or loss of “bank” status would
create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount for the Company was approximately $2.7 million at December 31, 2025.

The Company files income tax returns in U.S. federal, state and local jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2021.
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Historical Timeline

Fiscal YearFiled
2025Mar 13, 2026Showing above
2024Mar 14, 2025
2023Mar 15, 2024
2022Mar 15, 2023
2021Mar 9, 2022
2020Feb 26, 2021
2019Feb 28, 2020
2018Feb 28, 2019
2017Feb 28, 2018
2016Feb 28, 2017
2015Feb 29, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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