What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-04 compared with 2020-05-11 · 335 added, 171 removed, 446 unchanged (53% of the section changed)

33 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

• changes in accounting policies or procedures as may be adopted and required by regulatory agencies;

24 unchanged sentences

Salin shares outstanding at the closing to be exchanged were 275, and the shares of Horizon common stock issued to Salin shareholders totaled 6,563,697.

Based upon the March 25, 2019 closing price of $15.65 per share of Horizon common stock immediately prior to the effectiveness of the merger, the transaction has an implied valuation of approximately $126.7 million.

First Quarter 2020 Keys

• Horizon's focus on the safety and well-being of our employees, customers and community is always paramount in our decision making.

• We believe that Horizon's balance sheet was well-positioned leading up to the COVID–19 National Health Emergency.

• Horizon Bank's strong liquidity position includes approximately $1.1 billion in cash and investment securities, which is approximately 20.5% of total assets, and approximately $435.4 million in unused availability on lines of credit, at March 31, 2020.

Based upon the March 25, 2019 closing price of $15.65 per share of Horizon common stock immediately prior to the effectiveness of the merger, the transaction had an implied valuation of approximately $126.7 million.

Second Quarter 2020 Highlights

• Earned net income of $14.6 million, or $0.33 diluted earnings per share, compared to $11.7 million, or $0.26 diluted earnings per share, for the first quarter of 2020 and $16.6 million, or $0.37 diluted earnings per share, for the second quarter of 2019.

• Grew pre–tax, pre–provision net income to $23.7 million for the quarter, compared to $21.8 million for the first quarter of 2020 and $20.8 million for the second quarter of 2019.

This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense.

(See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income” table below.)

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

• Horizon began preparing staff and systems to enable customers to access funding provided by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act passed at the end of the first quarter, including the Paycheck Protection Program (“PPP”) Round One, for which Horizon Bank received SBA approval for over 1,700 loans totaling approximately $280.0 million as of April 24, 2020.

During Round One of the PPP program, 95.5% of Horizon's applicants were approved for funding.

• Horizon maintained stable asset quality metrics during the first quarter of 2020, including non–performing loans and delinquencies representing 0.65% and 0.33% of total loans, respectively, at March 31, 2020, while net charge–offs were 0.01% of average loans for the quarter.

At March 31, 2020, Horizon's outstanding balance of other real estate owned and repossessed assets remained low totaling $2.8 million.

• Credit loss expense of $8.6 million, $2.8 million of acquired non-accretable credit loan discounts on Purchased Credit Impaired loans now classified as Purchase Credit Deteriorated and a $19.8 million increase in the Allowance for Credit Losses (“ACL”) reflected the implementation of the Current Expected Credit Losses (“CECL”) accounting method, the nature of our loan portfolios and general characteristics of certain loan pools.

ACL represented 1.30% of total loans and 201.8% of non–performing loans at March 31, 2020.

• Horizon has experienced an increase in mortgage loan originations during the first quarter of 2020, with 53% refinances and 47% new purchases.

• Horizon's net income totaled $11.7 million, or $0.26 diluted earnings per share, for the first quarter of 2020 compared to $18.5 million, or $0.41 diluted earnings per share, for the fourth quarter of 2019 and $10.8 million, or $0.28 diluted earnings per share, for the first quarter of 2019.

• Horizon's pre-tax, pre-provision net income totaled $21.8 million for the first quarter of 2020, compared to $22.8 million for the fourth quarter of 2019 and $13.3 million for the first quarter of 2019.

This non-GAAP financial measure is utilized by banks to provide a greater understanding of pre-tax profitability before giving effect to credit loss expense, acquisition–related expenses, gains and losses on sale of investment securities and death benefit on bank owned life insurance.

(See the “Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Net Income” table below.)

• Horizon's net interest margin remained relatively stable for the first quarter of 2020 at 3.56% and adjusted net interest margin at 3.44%.

For the Three and Six Months ended June 30, 2020 and 2019

• Reported return on average assets (“ROAA”) of 1.05% and return on average common equity (“ROACE”) of 9.07% in the quarter, as well as adjusted ROAA of 1.03% and adjusted ROACE of 8.95%, excluding the impact of gains on sale of investment securities, net of tax.

(See the “Non–GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” tables below.)

• Increased the allowance for credit losses (“ACL”) 13.7% during the quarter and 211.8% year–to–date to $55.1 million at period end, representing 1.38% of total loans, reflecting implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in the Company’s general reserves.

ACL at period end also represented 1.49% of loans excluding Federal Paycheck Protection Program (“PPP”) loans, and 196.4% of non–performing loans excluding those which have been modified under the CARES Act.

• Maintained solid asset quality metrics, including non–performing and delinquent loans representing 0.70% and 0.10% of total loans, respectively, at June 30, 2020, while net charge–offs were unchanged at 0.01% of average loans for the period.

• Granted payment deferrals to loans representing 14.3% of the total portfolio at period end, compared to 10.4% as previously reported.

• Secured approval for 2,340 PPP loans during the quarter, providing approximately $308.1 million in funding for local employers in the communities Horizon serves, with $1.1 million in deferred salary expense associated with origination costs that will be amortized to interest income as PPP loans are forgiven or paid off.

Accreted PPP loans fees, net of amortized origination costs, of $869,000 were recognized as interest income in the second quarter, with the balance of approximately $9.1 million expected to be accreted to interest income over the life of these loans.

• Reported non–interest expense of $30.4 million, representing 2.18% of average assets on an annualized basis compared to 2.38% for the first quarter of 2020 and 2.51% for the second quarter of 2019.

• Improved the efficiency ratio in the period to 56.23% compared to 58.79% for the first quarter of 2020.

(See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” tables below.)

• Originated a record $252.8 million in mortgage loans during the quarter, up 128.1% from the first quarter of 2020 and 127.0% from the second quarter of 2019, and generated record gain on mortgage loan sales of $6.6 million, up 90.6% from the linked quarter and 218.6% from the year–ago period.

• Reported net interest margin of 3.47% and adjusted net interest margin of 3.35%, with each declining by 9 basis points from the first quarter of 2020.

(See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this Non–GAAP calculation).

• Comparisons to first quarter 2019 results reflect Horizon's acquisition of Salin Bancshares, Inc.

on March 26, 2019.

An estimated 3 basis points of compression is attributed to PPP lending in the quarter, for both net interest margin and adjusted net interest margin.

• Horizon's book value per share increased from $14.59 at December 31, 2019 to $14.88 at June 30, 2020.

Horizon’s tangible book value per share increased from $10.63 at December 31, 2019 to $10.87 at June 30, 2020, which includes the accounting adjustment for CECL as of January 1, 2020.

This represents the highest tangible book value per share in the Company’s history.

(See the “Non–GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share” tables below.)

• Maintained strong liquidity position including approximately $1.3 billion in cash and investment securities, which is approximately 22.6% of total assets, and approximately $910.7 million in unused availability on lines of credit, at June 30, 2020.

Coronavirus Update/Status

The coronavirus (“COVID-19”) pandemic has placed significant health, economic and other major pressure throughout the communities we serve, the state of Indiana, the United States and the entire world.

The coronavirus (“COVID-19”) pandemic has placed significant health, economic and other major pressure throughout the communities we serve, in the states of Indiana and Michigan, the United States and the entire world.

We have implemented a number of procedures in response to the pandemic to support the safety and well-being of our employees, customers and shareholders that continue through the date of this report:

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◦ Implemented pandemic plan in March after completing test run in February 2020.

◦ Lobby access by appointment only (all offices are open).

◦ Approximately 42% of our employees are working remotely.

◦ Social distancing measures implemented for employees reporting to an office.

◦ Increased paid time off and sick time benefits.

◦ Preparing to reopen with safety of our employees and customers top of mind (plexiglass, masks, gloves, social distancing).

◦ All offices remain open, by appointment only.

◦ Installed nine additional Interactive Teller Machines (“ITMs”) staffed by remote video tellers.

◦ Opened fourth call center location.

◦ Payment relief

▪ More than $51 million consumer and mortgage loans have been modified as of April 24, 2020.

▪ Continue to provide new loans to qualified applicants.

◦ Installed sneeze guards, customer directional signage, implemented mask requirements, and continuing with sanitizing and social distancing protocols.

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

▪ Providing mortgage loan education programs.

▪ Providing additional financial assistance in the form of fee waivers and a freeze on all debt collection activities.

▪ Processed over 22,000, or more than $41 million, in consumer stimulus payments.

◦ All offices remain open, by appointment only.

For the Three and Six Months ended June 30, 2020 and 2019

◦ Steadily reducing percentage of employees working remotely from early second quarter peak.

◦ Increased paid time off and sick time benefits.

◦ 97% of our branch locations are now open for walk-in traffic.

◦ Two locations still serving customers by appointment only and through alternative delivery channels and are scheduled to open by July 31, 2020.

◦ Installed nine additional Interactive Teller Machines (“ITMs”) staffed by remote video tellers.

◦ Opened fourth call center location.

◦ Payment relief

▪ Approximately $63 million consumer and mortgage loans have been modified as of June 30, 2020.

▪ Continued to provide new loans to qualified applicants.

▪ Provided mortgage loan education programs.

▪ Provided additional financial assistance in the form of fee waivers and a freeze on all debt collection activities.

◦ Preferred SBA Lender

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◦ Payment Relief Programs

▪ More than $350 million in loans with payment extensions as of April 24, 2020.

▪ Processed and received approval on more than 1,700 PPP loans during round one.

▪ Continue to provide new loans to qualified applicants.

▪ Approximately $470 million in commercial loans with payment extensions as of June 30, 2020.

▪ Processed and received approval for 2,340 PPP loans, funding approximately $308.1 million.

▪ Continued to provide new loans to qualified applicants.

• Communities

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◦ Contributed over $300,000 to COVID-19 related not-for-profit efforts (local food banks, United Way, housing).

◦ Participating in community conference calls related to COVID-19.

◦ Participated in community conference calls related to COVID-19.

◦ Partnered with local neighborhood housing partnerships to provide funding for low to moderate income families.

◦ Partnered with local Certified Development Corporations to provide capital to small businesses.

◦ Supported flood victims in Midland, Michigan.

Financial Summary

At or for the Three Months Ended

Credit Quality

Preceding National Emergency March 31, December 31, March 31,

2020 2019 2019

Allowance for credit losses to total loans 1.30 % 0.49 % 0.49 %

Non-performing loans to total loans 0.65 % 0.58 % 0.54 %

Percent of net charge-offs to average loans outstanding for the period 0.01 % 0.02 % 0.01 %

CECL Adoption

December 31, January 1, (Net Charge-Offs)/ Reserve March 31,

Allowance for Credit Losses 2019 Impact 2020 Recoveries Build 2020

Commercial $ 11,996 $ 13,618 $ 25,614 $ 20 $ 6,916 $ 32,550

Retail Mortgage 923 4,048 4,971 (17) 700 5,654

Warehouse 1,077 — 1,077 — (22) 1,055

Consumer 3,671 4,911 8,582 (407) 1,006 9,181

Allowance for Credit Losses ("ACL") $ 17,667 $ 22,577 $ 40,244 $ (404) $ 8,600 $ 48,440

ACL/Total Loans 0.49 % 1.10 % 1.30 %

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three Months Ended

March 31, December 31, March 31,

June 30, March 31, June 30,

Net Interest Income and Net Interest Margin 2020 2020 2019

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For the Three Months Ended

March 31, December 31, March 31,

June 30, March 31, June 30,

Asset Yields and Funding Costs 2020 2020 2019

1 unchanged sentence

Interest bearing liabilities 0.74 % 1.13 % 1.38 %

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

For the Three Months Ended

Non-interest Income and

Mortgage Banking Income March 31, December 31, March 31,

Mortgage Banking Income June 30, March 31, June 30,

2020 2020 2019

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For the Three Months Ended

March 31, December 31, March 31,

June 30, March 31, June 30,

Non-interest Expense 2020 2020 2019

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Annualized non-interest expense to average assets 2.18 % 2.38 % 2.51 %

At or for the Three Months Ended

Credit Quality June 30, March 31, June 30,

2020 2020 2019

Allowance for credit losses to total loans 1.38 % 1.30 % 0.50 %

Non-performing loans to total loans 0.70 % 0.65 % 0.52 %

Percent of net charge–offs to average loans outstanding for the period 0.01 % 0.01 % 0.01 %

CECL Adoption

December 31, January 1, Net Reserve

Build Net Reserve

Build June 30,

Allowance for Credit Losses 2019 Impact 2020 1Q20 2Q20 2020

Commercial $ 11,996 $ 13,618 $ 25,614 $ 6,936 $ 6,597 $ 39,147

Retail Mortgage 923 4,048 4,971 683 178 5,832

Warehouse 1,077 — 1,077 (22) 135 1,190

Consumer 3,671 4,911 8,582 599 (260) 8,921

Allowance for Credit Losses (“ACL”)

$ 17,667 $ 22,577 $ 40,244 $ 8,196 $ 6,650 $ 55,090

ACL/Total Loans 0.49 % 1.10 % 1.38 %

Critical Accounting Policies

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The allowance for credit losses on loans and leases replaces the allowance for loan and leases losses as a critical accounting estimate, as of January 1, 2020 with the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

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.

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Measurement of Credit Losses on Financial Instruments .

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.

The allowance for credit losses is assessed at each balance sheet date and adjustments are recorded in the provision for credit losses.

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FASB ASC 350-10 establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill.

At March 31, 2020, Horizon had core deposit intangibles of $25.7 million subject to amortization and $151.2 million of goodwill, which is not subject to amortization.

At June 30, 2020, Horizon had core deposit intangibles of $24.8 million subject to amortization and $151.2 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.

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Horizon further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and sensitivities performed.

At the conclusion of the assessment, the Company determined that as of March 31, 2020 it was more likely than not that the fair value exceeded its carrying values.

At the conclusion of the assessment, the Company determined that as of June 30, 2020 it was more likely than not that the fair value exceeded its carrying values.

Horizon will continue to monitor developments regarding the COVID-19 pandemic and measures implemented in response to the pandemic, market capitalization, overall economic conditions and any other triggering events or circumstances that may indicate an impairment of goodwill in the future.

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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.

When the book value of an individual stratum

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

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.

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.

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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 March 31, 2020, Horizon’s total assets were $5.4 billion, an increase of approximately $104.5 million compared to December 31, 2019.

The increase was primarily in investment securities available for sale of $65.7 million, net loans of $39.7 million, other assets of $18.8 million and loans held for sale of $2.2 million.

These increases were offset by a decrease in cash and due from banks of $12.4 million and investment securities held to maturity of $8.4 million.

The use of different discount rates or other valuation

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

assumptions could produce significantly different results, which could affect Horizon’s results of operations.

Financial Condition

On June 30, 2020, Horizon’s total assets were $5.7 billion, an increase of approximately $492.4 million compared to December 31, 2019.

The increase was primarily in net loans of $304.1 million, investment securities available for sale of $100.4 million, cash and due from banks of $71.3 million and other assets of $20.2 million.

These increases were offset by a decrease in investment securities held to maturity of $17.0 million.

Investment securities were comprised of the following as of (dollars in thousands):

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Available for sale

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Total held to maturity investment securities $ 190,935 $ 201,818 $ 207,899 $ 215,147

Investment securities available for sale increased $65.7 million since December 31, 2019 to $900.5 million as of March 31, 2020.

Investment securities available for sale increased $100.4 million since December 31, 2019 to $935.1 million as of June 30, 2020.

This increase was due to additional purchases to increase earning assets.

Gross loans increased $72.6 million since December 31, 2019 to $3.7 billion as of March 31, 2020.

Mortgage warehouse, consumer and commercial loans increased $73.2 million, $6.7 million and $3.8 million, respectively, offset by a decrease in residential mortgage loans of $13.2 million.

Total deposits decreased $48.7 million since December 31, 2019 to $3.9 billion as of March 31, 2020.

This decrease was primarily due to seasonality and replacing higher cost public time deposits with lower cost borrowings.

As a result of the decrease in total deposits, the Company increased total borrowings from $549.7 million as of December 31, 2019 to $704.6 million as of March 31, 2020.

At March 31, 2020, the Company had $348.0 million in short-term funds borrowed compared to $267.9 million at December 31, 2019.

Stockholders’ equity totaled $630.8 million at March 31, 2020 compared to $656.0 million at December 31, 2019.

The decrease in stockholders’ equity during the period was due to the repurchase of outstanding stock, the impact of the adoption of ASU 2016-13 and dividends declared, offset by the generation of net income during the period.

Book value per common share at March 31, 2020 decreased to $14.41 compared to $14.59 at December 31, 2019.

Results of Operations

Consolidated net income for the three-month period ended March 31, 2020 was $11.7 million, or $0.26 diluted earnings per share, compared to $10.8 million, or $0.28 diluted earnings per share for the same period in 2019.

The increase in net income for the three-month period ended March 31, 2020 when compared to the same prior year period reflects an increase in net interest income of $6.6 million, an increase in non-interest income of $3.4 million and a decrease in tax expense of $490,000, offset by an increase in credit loss expense of $8.2 million and an increase in non-interest expense of $1.4 million.

Excluding merger expenses, gain on sale of investment securities and death benefit on bank owned lief insurance (“adjusted net income”), adjusted net income for the first quarter of 2020 was $11.2 million, or $0.24 diluted earnings per share, compared to $14.2 million, or $0.37 diluted earnings per share for the first quarter of 2019.

Gross loans increased $353.4 million since December 31, 2019 to $4.0 billion as of June 30, 2020.

Commercial, mortgage warehouse and loans held for sale increased $266.1 million, $150.1 million and $11.8 million, respectively, offset by a decrease in residential mortgage and consumer loans of $66.3 million and $8.3 million, respectively.

The majority of the increase in gross loans was due to the origination of approximately $308.1 million in PPP loans which are included in the commercial loan category.

Total deposits increased $376.6 million since December 31, 2019 to $4.3 billion as of June 30, 2020.

This increase was primarily due to Federal stimulus payments to consumers and funds from the origination of PPP loans.

Total borrowings increased from $549.7 million as of December 31, 2019 to $583.1 million as of June 30, 2020.

At June 30, 2020, the Company had $179.2 million in short-term funds borrowed compared to $267.9 million at December 31, 2019 as long-term funding provided opportunities to extend borrowings at lower rates.

The Company also issued $60.0 million in subordinated notes during the second quarter of 2020.

Stockholders’ equity totaled $652.2 million at June 30, 2020 compared to $656.0 million at December 31, 2019.

Book value per common share at June 30, 2020 increased to $14.88 compared to $14.59 at December 31, 2019.

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Results of Operations

Consolidated net income for the three-month period ended June 30, 2020 was $14.6 million, or $0.33 diluted earnings per share, compared to $16.6 million, or $0.37 diluted earnings per share for the same period in 2019.

The decrease in net income for the three-month period ended June 30, 2020 when compared to the same prior year period reflects an increase in credit loss expense of $6.2 million, offset by an increase in net interest income of $1.5 million and an increase in non-interest income of $227,000, along with decreases in non-interest expense and income tax expense of $1.2 million and $1.3 million, respectively.

Excluding merger expenses, gain/loss on sale of investment securities and death benefit on bank owned life insurance (“adjusted net income”), adjusted net income for the second quarter of 2020 was $14.4 million, or $0.32 diluted earnings per share, compared to $17.6 million, or $0.39 diluted earnings per share for the second quarter of 2019.

Consolidated net income for the six-month period ended June 30, 2020 was $26.3 million, or $0.59 diluted earnings per share, compared to $27.5 million, or $0.65 diluted earnings per share for the same period in 2019.

The decrease in net income for the six-month period ended June 30, 2020 when compared to the same prior year period reflects an increase in credit loss expense and non-interest expense of $14.4 million and $259,000, respectively.

Increases in net interest income and non-interest income of $8.1 million and $3.6 million, respectively, along with a decrease in income tax expense of $1.8 million, partially offset the increase in credit loss expense and non-interest expense.

Adjusted net income for the six-month period ended June 30, 2020 was $25.6 million, or $0.57 diluted earnings per share, compared to $31.8 million, or $0.75 diluted earnings per share for the same period in 2019.

Net Interest Income

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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 March 31, 2020 was $40.9 million, an increase of $6.6 million from the $34.3 million earned during the same period in 2019.

Yields on the Company’s interest-earning assets decreased by 29 basis points to 4.47% for the three months ended March 31, 2020 from 4.76% for the three months ended March 31, 2019.

Interest income increased $6.3 million from $45.4 million for the three months ended March 31, 2019 to $51.7 million for the same period in 2020.

The increase in interest income was due to an increase in average interest-earning assets from the Salin acquisition and organic growth.

Interest income from acquisition-related purchase accounting adjustments was $1.4 million for the three months ending March 31, 2020 compared to $1.5 million for the same period of 2019.

Rates paid on interest-bearing liabilities decreased by 31 basis points for the three-month period ended March 31, 2020 compared to the same period in 2019 due to a decrease in the cost of interest-bearing deposits and borrowings.

Interest expense decreased $364,000 when compared to the three-month period ended March 31, 2019 to $10.7 million for the same period in 2020.

Net interest income during the three months ended June 30, 2020 was $43.0 million, an increase of $1.5 million from the $41.5 million earned during the same period in 2019.

Yields on the Company’s interest-earning assets decreased by 76 basis points to 4.05% for the three months ended June 30, 2020 from 4.81% for the three months ended June 30, 2019.

Interest income decreased $3.5 million from $53.8 million for the three months ended June 30, 2019 to $50.3 million for the same period in 2020.

The decrease in interest income was due to a decrease in interest rates during the second quarter of 2020.

Interest income from acquisition-related purchase accounting adjustments was $1.6 million for the three months ending June 30, 2020 compared to $1.3 million for the same period of 2019.

Rates paid on interest-bearing liabilities decreased by 64 basis points for the three-month period ended June 30, 2020 compared to the same period in 2019.

Interest expense decreased $5.0 million when compared to the three-month period ended June 30, 2019 to $7.3 million for the same period in 2020.

This decrease was due to lower rates paid on deposits and borrowings.

The cost on average interest-bearing deposits decreased 60 basis points while the cost of average borrowings decreased 116 basis points.

Average balances of interest-bearing deposits increased $699.1 million and were primarily due to the acquisition of Salin.

Average balances of borrowings decreased $44.1 million for the three-month period ended March 31, 2020 when compared to the same period in 2019.

The net interest margin decreased 6 basis points from 3.62% for the three-month period ended March 31, 2019 to 3.56% for the same period in 2020.

The decrease in the margin for the three-month period ended March 31, 2020 compared to the same period in 2019 was due to a decrease in the yield of interest-earning assets, offset by a decrease in the cost of interest-bearing liabilities.

Excluding the interest income recognized from the acquisition-related purchase accounting adjustments (“adjusted net interest margin”), the margin would have been 3.44% for the three-month period ending March 31, 2020 compared to 3.46% for the same period in 2019.

Average balances of interest-bearing deposits increased $180.8 million and average balances of borrowings increased $220.0 million for the three-month period ended June 30, 2020 when compared to the same period in 2019.

The net interest margin decreased 26 basis points from 3.73% for the three-month period ended June 30, 2019 to 3.47% for the same period in 2020.

The decrease in the margin for the three-month period ended June 30, 2020 compared to the same period in 2019 was due to a decrease in the yield of interest-earning assets, offset by a decrease in the cost of interest-bearing liabilities.

Excluding the interest income recognized from the acquisition-related purchase accounting adjustments (“adjusted net interest margin”), the margin would have been 3.35% for the three-month period ending June 30, 2020 compared to 3.61% for the same period in 2019.

HORIZON BANCORP, INC.

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And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

The following are the average balance sheets for the three months ending (dollars in thousands):

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Three Months Ended Three Months Ended

March 31, 2020 March 31, 2019

June 30, 2020 June 30, 2019

Balance Interest Average

18 unchanged sentences

Borrowings 618,274 2,074 1.35 % 398,320 2,495 2.51 %

Subordinated notes 4,527 58 5.15 % — — — %

Junior subordinated debentures issued to capital trusts 52,835 710 5.40 % 53,572 888 6.65 %

Total interest bearing liabilities 3,975,297 7,348 0.74 % 3,570,713 12,321 1.38 %

Non-interest bearing liabilities

Demand deposits 924,890 818,872

Accrued interest payable and other liabilities 71,018 35,752

Stockholders' equity 649,490 622,028

Total average liabilities and stockholders' equity $ 5,620,695 $ 5,047,365

Net interest income/spread $ 42,996 3.31 % $ 41,529 3.43 %

Net interest income as a percent of average interest earning assets (1)

3.47 % 3.73 %

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.

Includes fees on loans.

The inclusion of loan fees does not have a material effect on the average interest rate.

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.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

The net interest margin was impacted during the second quarter of 2020 due to the PPP loans that were originated.

Horizon estimates that the PPP loans compressed the net interest margin by 3 basis points for the quarter.

This assumes these PPP loans were not included in average interest earning assets or interest income and were primarily funded by the growth in non-interest bearing deposits.

The compression to the net interest margin for the first six months of 2020 using the same assumptions was estimated to be 2 basis points.

Net interest income during the six months ended June 30, 2020 was $83.9 million, an increase of $8.1 million from the $75.8 million earned during the same period in 2019.

Yields on the Company’s interest-earning assets decreased by 54 basis points to 4.25% for the six months ended June 30, 2020 from 4.79% for the six months ended June 30, 2019.

Interest income increased $2.8 million from $99.2 million for the six months ended June 30, 2019 to $102.0 million for the same period in 2020.

Average interest earning assets during the six months ended June 30, 2020 increased $679.7 million to $4.9 billion compared to $4.2 billion during the six months ended June 30, 2019.

Interest income from acquisition-related purchase accounting adjustments was $3.0 million for the six months ending June 30, 2020 compared to $2.8 million for the same period of 2019.

Rates paid on interest-bearing liabilities decreased by 48 basis points for the six-month period ended June 30, 2020 compared to the same period in 2019.

Interest expense decreased $5.3 million when compared to the six-month period ended June 30, 2019 to $18.1 million for the same period in 2020.

This decrease was due to lower rates paid on deposits and borrowings.

The cost on average interest-bearing deposits decreased 38 basis points while the cost of average borrowings decreased 102 basis points.

Average balances of interest-bearing deposits increased $444.0 million and average balances of borrowings increased $88.4 million for the six-month period ended June 30, 2020 when compared to the same period in 2019.

The net interest margin decreased 17 basis points from 3.68% for the six-month period ended June 30, 2019 to 3.51% for the same period in 2020.

The decrease in the margin for the six-month period ended June 30, 2020 compared to the same period in 2019 was due to a decrease in the yield of interest-earning assets, offset by a decrease in the cost of interest-bearing liabilities.

Excluding the interest income recognized from the acquisition-related purchase accounting adjustments (“adjusted net interest margin”), the margin would have been 3.39% for the six-month period ending June 30, 2020 compared to 3.55% for the same period in 2019.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

The following are the average balance sheets for the six months ending (dollars in thousands):

Average Balance Sheets

(Dollar Amount in Thousands, Unaudited)

Six Months Ended Six Months Ended

June 30, 2020 June 30, 2019

Balance Interest Average

Interest earning assets

Federal funds sold $ 43,903 $ 113 0.52 % $ 13,072 $ 224 3.46 %

Interest earning deposits 23,391 163 1.40 % 22,414 191 1.72 %

Investment securities - taxable 491,360 4,943 2.02 % 464,544 5,980 2.60 %

Investment securities - non-taxable (1)

618,080 7,903 3.16 % 402,883 5,421 3.43 %

Loans receivable (2) (3)

3,752,654 88,876 4.78 % 3,346,731 87,407 5.28 %

Total interest earning assets 4,929,388 101,998 4.25 % 4,249,644 99,223 4.79 %

Non-interest earning assets

Cash and due from banks 81,203 56,160

Allowance for credit losses (36,588) (17,939)

Other assets 459,184 391,558

Total average assets $ 5,433,187 $ 4,679,423

Liabilities and Stockholders' Equity

Interest bearing liabilities

Interest bearing deposits $ 3,262,492 $ 12,222 0.75 % $ 2,818,496 $ 15,814 1.13 %

Borrowings 575,702 4,312 1.51 % 487,266 6,116 2.53 %

Subordinated debentures 2,264 58 5.15 % — — — %

Junior subordinated debentures issued to capital trusts 52,801 1,485 5.66 % 45,735 1,484 6.54 %

Total interest bearing liabilities 3,893,259 18,077 0.93 % 3,351,497 23,414 1.41 %

19 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

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 March 31, 2020, a provision of $8.6 million was required to reflect the nature of our loan portfolios and general characteristics of certain loan pools compared to $364,000 for the same period of 2019.

Commercial loan net recoveries during the three-month period ended March 31, 2020 were $20,000, residential mortgage loan net charge-offs were $17,000 and consumer loan net charge-offs were $407,000.

The ACL balance at March 31, 2020 was $48.4 million, or 1.30% of total loans.

During the three-month period ended June 30, 2020, a provision of $7.1 million was required to reflect the nature of our loan portfolios and general characteristics of certain loan pools compared to $896,000 for the same period of 2019.

During the three-month period ended June 30, 2020, commercial loan net charge-offs were $6,000, residential mortgage loan net charge-offs were $24,000 and consumer loan net charge-offs were $377,000.

During the six-month period ended June 30, 2020, a provision of $15.7 million was required to reflect the nature of our loan portfolios and general characteristics of certain loan pools compared to $1.3 million for the same period of 2019.

During the six-month period ended June 30, 2020, commercial loan net recoveries were $14,000, residential mortgage loan net charge-offs were $41,000 and consumer loan net charge-offs were $784,000.

The ACL balance at June 30, 2020 was $55.1 million, or 1.38% of total loans.

This compares to an ACL balance of $17.7 million at December 31, 2019 or 0.49% of total loans.

The $8.6 million ACL provision included $7.0 million in special allocations related to the potential impact on two portfolios, hotels and restaurants, as a result of the COVID-19 measures implemented by the states in which Horizon operates (Indiana and Michigan).

The $7.1 million ACL provision included $6.4 million in special allocations related to the potential impact on three portfolios, non-owner occupied retail, leisure and hospitality, and unstabilized commercial real estate while continuing allocations for hotels and restaurants, as a result of the COVID-19 measures implemented by the states in which Horizon operates (Indiana and Michigan).

Extensive analysis and monitoring of these portfolios has been undertaken and, while no loss has been specifically identified, the risks to certain borrowers are elevated and, therefore, the special allocation was deemed prudent.

As of March 31, 2020, non-performing loans totaled $24.0 million, which reflects a seven basis point increase in non-performing loans to total loans, or a $2.8 million increase from $21.2 million in non-performing loans as of December 31, 2019.

Non-performing commercial loans increased by $2.2 million, non-performing real estate loans increased by $527,000 and non-performing consumer loans increased by $58,000 at March 31, 2020 compared to December 31, 2019.

As of June 30, 2020, non-performing loans totaled $28.1 million, which reflects a 12 basis point increase in non-performing loans to total loans, or a $6.9 million increase from $21.2 million in non-performing loans as of December 31, 2019.

Non-performing commercial loans increased by $6.9 million, non-performing real estate loans increased by $61,000 and non-performing consumer loans decreased by $81,000 at June 30, 2020 compared to December 31, 2019.

The Bank has elected (i) to suspend the requirements under GAAP for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a TDR;

and (ii) to suspend any determination of a loan modified as a result of the effects of COVID-19 pandemic as being a TDR, including impairment for accounting purposes.

At March 31, 2020, the Bank modified loans totaling $56.6 million which qualify for treatment under the CARES Act.

Other Real Estate Owned (OREO) and repossessed assets totaled $2.8 million at March 31, 2020 compared to $3.7 million at December 31, 2019.

At June 30, 2020, the Bank modified loans totaling $533.9 million which qualify for treatment under the CARES Act.

The following is a summary of loan modifications related to the COVID-19 pandemic by type of loan.

Type of Loan # Net

Balance Interest

Modifications % of

Commercial 670 $470.8 $1.4 88.2 % 20.1 %

Mortgage (Retained Only) 137 $39.1 0.6 7.3 % 5.3 %

Indirect Auto 819 $17.4 0.1 3.3 % 4.9 %

Consumer Direct 133 $3.6 0.1 0.7 % 5.1 %

Consumer Revolving 48 $3.0 0.0 0.5 % 1.3 %

Total 1,807 $533.9 $2.2 100.0 % 14.3 %

Mortgage (Serviced Only) 268

Other Real Estate Owned (OREO) and repossessed assets totaled $2.6 million at June 30, 2020 compared to $3.7 million at December 31, 2019.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

Non-interest Income

The following is a summary of changes in non-interest income for the three months ending March 31, 2020 and 2019 (table dollar amounts in thousands):

The following is a summary of changes in non-interest income for the three months ending June 30, 2020 and 2019 (table dollar amounts in thousands):

Three Months Ended

2020 March 31,

2020 June 30,

Change Percent

4 unchanged sentences

Fiduciary activities 1,765 2,063 (298) -14.4 %

Gain (loss) on sale of investment securities 248 (100) 348 -348.0 %

Gain on sale of mortgage loans 6,620 2,078 4,542 218.6 %

Mortgage servicing net of impairment (2,760) 570 (3,330) -584.2 %

Increase in cash surrender value of bank owned life insurance 557 555 2 0.4 %

Death benefit on bank owned life insurance — 367 (367) 0.0 %

Other income 250 558 (308) (55.2) %

Total non-interest income

$ 11,125 $ 10,898 $ 227 2.1 %

Total non-interest income was $227,000 higher during the second quarter of 2020 compared to the same period of 2019.

Residential mortgage loan activity during the second quarter of 2020 generated $6.6 million of income from the gain on sale of mortgage loans, up from $2.1 million for the same period in 2019 due to a higher volume of loans sold and an increase in the percentage gain on loans sold.

Mortgage servicing rights, net of impairment, decreased $3.3 million during the second quarter of 2020 compared to the same period of 2019 primarily due to an impairment charge of $2.9 million recorded during the second quarter of 2020.

Service charges on deposit accounts, death benefit on bank owned life insurance, other income and fiduciary activities decreased $592,000, $367,000, $308,000 and $298,000, respectively, when comparing the second quarter of 2020 to the same period of 2019.

The following is a summary of changes in non-interest income for the six months ending June 30, 2020 and 2019 (table dollar amounts in thousands):

Six Months Ended

2020 June 30,

Change Percent

Non-interest Income

Service charges on deposit accounts $ 4,334 $ 4,357 $ (23) (0.5) %

Wire transfer fees 401 285 116 40.7 %

Interchange fees 4,223 3,521 702 19.9 %

Fiduciary activities 4,293 4,152 141 3.4 %

Gain on sale of investment securities 587 (85) 672 -790.6 %

6 unchanged sentences

$ 23,188 $ 19,610 $ 3,578 18.2 %

Total non-interest income was $3.4 million higher during the first quarter of 2020 compared to the same period of 2019.

Service charges on deposit accounts and interchange fees increased $569,000 and $535,000, respectively, for the three-month period ended March 31, 2020 when compared to the same period of 2019 primarily due to the acquisition of Salin and organic growth.

Residential mortgage loan activity during the first quarter of 2020 generated $3.5 million of income from the gain on sale of mortgage loans, up from $1.3 million for the same period in 2019 due to a higher volume of loans sold.

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Total non-interest income was $3.6 million higher for the six-month period ended June 30, 2020 compared to the same period of 2019.

Residential mortgage loan activity during the six-month period ended June 30, 2020 generated $10.1 million of income from the gain on sale of mortgage loans, up from $3.4 million for the same period in 2019 due to a higher volume of loans sold and an increase in the percentage gain on loans sold.

Mortgage servicing rights, net of impairment, decreased $3.9 million during the six-month period ended June 30, 2020 compared to the same period of 2019 primarily due to an impairment charge of $2.9 million recorded during the second quarter of 2020.

Non-interest Expense

The following is a summary of changes in non-interest expense for the three months ending March 31, 2020 and 2019 (table dollar amounts in thousands):

The following is a summary of changes in non-interest expense for the three months ending June 30, 2020 and 2019 (table dollar amounts in thousands):

Three Months Ended

20 unchanged sentences

2.18 % 2.18 % 2.51 % 2.39 %

Total non-interest expense was $1.4 million higher in the first quarter of 2020 when compared to the first quarter of 2019.

Increases in salaries and employee benefits, net occupancy expenses, data processing and loans expense were offset in part by decreases in outside services and consultants and other expenses.

Excluding merger expenses, total non-interest expense increased by $5.5 million in the first quarter of 2020 when compared to the first quarter of 2019.

Total non-interest expense was $1.1 million lower for the second quarter of 2020 when compared to the second quarter of 2019.

Decreases in salaries and employee benefits and other expense were offset in part by increases in loan expense and data processing.

Excluding merger expenses, total non-interest expense increased by $380,000 in the second quarter of 2020 when compared to the first quarter of 2019.

Annualized non-interest expense as a percent of average assets were 2.18% and 2.51% for the three months ended June 30, 2020 and 2019, respectively.

Annualized non-interest expense, excluding merger expenses, as a percent of average assets were 2.18% and 2.39% for the three months ended June 30, 2020 and 2019, respectively.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

The following is a summary of changes in non-interest expense for the six months ending June 30, 2020 and 2019 (table dollar amounts in thousands):

Six Months Ended

Non-interest Expense

Salaries and employee benefits

$ 32,220 $ — $ 32,220 $ 31,417 $ (484) $ 30,933 $ 1,287 4.2 %

Net occupancy expenses

6,442 — 6,442 5,920 (75) 5,845 597 10.2 %

Data processing

4,837 — 4,837 4,105 (360) 3,745 1,092 29.2 %

Professional fees

1,054 — 1,054 1,091 (392) 699 355 50.8 %

Outside services and consultants

3,674 — 3,674 5,185 (2,466) 2,719 955 35.1 %

4,791 — 4,791 3,997 (2) 3,995 796 19.9 %

FDIC deposit insurance

385 — 385 525 — 525 (140) -26.7 %

313 — 313 273 (71) 202 111 55.0 %

Other expenses

7,865 — 7,865 8,809 (1,800) 7,009 856 12.2 %

Total non-interest expense

$ 61,581 $ — $ 61,581 $ 61,322 $ (5,650) $ 55,672 $ 5,909 10.6 %

Annualized Non-interest Exp.

2.28 % 2.28 % 2.64 % 2.40 %

Total non-interest expense was $259,000 higher for the six-month period ended June 30, 2020 when compared to the same period of 2019.

Increases in salaries and employee benefits, loan expense, data processing and net occupancy expenses were offset in part by decreases in outside services and consultants and other expense.

Excluding merger expenses, total non-interest expense increased by $5.9 million for the six-month period ended June 30, 2020 when compared to the same period of 2019.

This increase was primarily related to the closing of the Salin Bancshares, Inc.

merger on March 26, 2019 and the related increase in costs.

Annualized non-interest expense as a percent of average assets were 2.38% and 2.80% for the three months ended March 31, 2020 and 2019, respectively.

Annualized non-interest expense, excluding merger expenses, as a percent of average assets were 2.38% and 2.41% for the three months ended March 31, 2020 and 2019, respectively.

Income tax expense totaled $1.6 million for the first quarter of 2020 a decrease of $490,000 when compared to the first quarter of 2019.

The decrease in income tax expense in the first quarter of 2020 compared to the first quarter of 2019 was primarily due to an increase in tax-exempt municipal interest income.

Income tax expense totaled $2.0 million for the second quarter of 2020 a decrease of $1.3 million when compared to the second quarter of 2019.

The decrease in income tax expense in the second quarter of 2020 compared to the second quarter of 2019 was primarily due to a decrease in income before taxes of $3.3 million in addition to an increase in tax-exempt municipal interest income.

Income tax expense totaled $3.6 million for the six-month period ended June 30, 2020, a decrease of $1.8 million when compared to the same period of 2019.

The decrease in income tax expense was due to a decrease in income before taxes of $3.0 million in addition to an increase in tax-exempt municipal interest income.

The Bank maintains a stable base of core deposits provided by long-standing relationships with individuals and local businesses.

1 unchanged sentence

Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the FHLB.

At March 31, 2020, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $435.4 million in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $517.1 million at December 31, 2019.

The Bank had approximately $743.5 million of unpledged investment securities at March 31, 2020 compared to $807.4 million at December 31, 2019.

At June 30, 2020, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $910.7 million in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $517.1 million at December 31, 2019.

The Bank had approximately $453.6 million of

HORIZON BANCORP, INC.

2 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

unpledged investment securities at June 30, 2020 compared to $807.4 million at December 31, 2019.

Capital Resources

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2020.

Stockholders’ equity totaled $630.8 million as of March 31, 2020, compared to $656.0 million as of December 31, 2019.

For the three months ended March 31, 2020, the ratio of average stockholders’ equity to average assets was 12.70% compared to 12.28% for the twelve months ended December 31, 2019.

The decrease in stockholders’ equity during the period was the result of the repurchase of outstanding stock, the impact of the adoption of ASU 2016-13 and dividends declared, offset by net income.

Horizon declared common stock dividends in the amount of $0.12 per share during the first three months of 2020 and $0.10 per share for the same period of 2019.

The dividend payout ratio (dividends as a percent of basic earnings per share) was 46.2% and 35.7% for the first three months of 2020 and 2019, respectively.

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at June 30, 2020.

Stockholders’ equity totaled $652.2 million as of June 30, 2020, compared to $656.0 million as of December 31, 2019.

For the six months ended June 30, 2020, the ratio of average stockholders’ equity to average assets was 12.07% compared to 12.28% for the twelve months ended December 31, 2019.

The decrease in stockholders’ equity during the period was the result of the repurchase of outstanding stock, the impact of the adoption of ASU 2016-13 and dividends declared, offset by net income and the increase in accumulated other comprehensive income.

Horizon declared common stock dividends in the amount of $0.24 per share during the first six months of 2020 and $0.22 per share for the same period of 2019.

The dividend payout ratio (dividends as a percent of basic earnings per share) was 40.7% and 33.8% for the first six months of 2020 and 2019, respectively.

For additional information regarding dividends, see Horizon’s Annual Report on Form 10-K for 2019.

6 unchanged sentences

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.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

Non-GAAP Reconciliation of Net Income

(Dollars in Thousands, Unaudited)

Three Months Ended

March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

14 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Non-GAAP Reconciliation of Diluted Earnings per Share

Three Months Ended

March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

11 unchanged sentences

(Dollars in Thousands, Unaudited)

Three Months Ended

March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

11 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Non-GAAP Reconciliation of Net Interest Margin

(Dollars in Thousands, Unaudited)

Three Months Ended

March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

10 unchanged sentences

(Dollars in Thousands Except per Share Data, Unaudited)

March 31, December 31, September 30, June 30, March 31,

June 30, March 31, December 31, September 30, June 30,

2020 2020 2019 2019 2019

3 unchanged sentences

Common shares outstanding 43,821,878 43,763,623 44,975,771 44,969,021 45,061,372

Book value per common share $ 14.88 $ 14.41 $ 14.59 $ 14.29 $ 13.90

Tangible book value per common

4 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio

(Dollars in Thousands, Unaudited)

Three Months Ended

March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

19 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

For the Three and Six Months ended June 30, 2020 and 2019

Non-GAAP Reconciliation of Return on Average Assets

(Dollars in Thousands, Unaudited)

Three Months Ended

Non-GAAP Reconciliation of Return on Average Assets March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

Non-GAAP Reconciliation of Return on Average Assets June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

10 unchanged sentences

Adjusted ROAA 1.03 % 0.85 % 1.40 % 1.58 % 1.40 % 0.94 % 1.36 %

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Six Months ended June 30, 2020 and 2019

Non-GAAP Reconciliation of Return on Average Common Equity

(Dollars in Thousands, Unaudited)

Three Months Ended

Non-GAAP Reconciliation of Return on Average Common Equity March 31, December 31, September 30, June 30, March 31,

Three Months Ended Six Months Ended

Non-GAAP Reconciliation of Return on Average Common Equity June 30, March 31, December 31, September 30, June 30, June 30, June 30,

2020 2020 2019 2019 2019 2020 2019

10 unchanged sentences

Adjusted ROACE 8.95 % 6.72 % 11.25 % 12.59 % 11.34 % 7.86 % 11.38 %

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three Months ended March 31, 2020 and 2019

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis