What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-04-30 · 191 added, 119 removed, 1171 unchanged (21% of the section changed)

44 unchanged sentences

(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Interest Income

10 unchanged sentences

Net Interest Income 42,632 42,996 85,170 83,921

Credit loss expense 367 8,600

Net Interest Income after Credit Loss Expense 42,171 32,325

Credit loss expense (recovery) ( 1,492 ) 7,057 ( 1,125 ) 15,657

Net Interest Income after Credit Loss Expense (Recovery) 44,124 35,939 86,295 68,264

Non–interest Income

3 unchanged sentences

Fiduciary activities 1,961 1,765 3,704 4,293

Gains on sale of investment securities (includes $ 914 and $ 339 for the three months ended March 31, 2021 and 2020, respectively, related to accumulated other comprehensive earnings reclassifications)

Gains on sale of investment securities (includes $ 0 and $ 248 for the three months ended June 30, 2021 and 2020, respectively, and $ 914 and $ 587 for the six months ended June 30, 2021 and 2020, respectively, related to accumulated other comprehensive earnings reclassifications)

— 248 914 587

Gain on sale of mortgage loans 5,612 6,620 10,908 10,093

16 unchanged sentences

Income Before Income Taxes 25,943 16,632 49,815 29,871

Income tax expense (includes $ 192 and $ 71 for the three months ended March 31, 2021 and 2020, respectively, related to income tax expense from reclassification items)

Income tax expense (includes $ 0 and $ 52 for the three months ended June 30, 2021 and 2020, respectively, and $ 192 and $ 123 for the six months ended June 30, 2021 and 2020, respectively, related to income tax expense from reclassification items)

3,770 1,993 7,220 3,577

Net Income $ 22,173 $ 14,639 $ 42,595 $ 26,294

5 unchanged sentences

(Dollar Amounts in Thousands)

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Net Income $ 22,173 $ 14,639 $ 42,595 $ 26,294

21 unchanged sentences

Comprehensive

Balances, April 1, 2020 $ — $ — $ 361,019 $ 260,501 $ 9,322 $ 630,842

Net income — — — 14,639 — 14,639

Other comprehensive income, net of tax — — — — 11,948 11,948

Amortization of unearned compensation — — ( 79 ) — — ( 79 )

Exercise of stock options — — ( 98 ) — — ( 98 )

Stock option expense — — 27 — — 27

Stock issued stock plans — — 218 — — 218

Cash dividends on common stock ($ 0.12 per share)

— — — ( 5,291 ) — ( 5,291 )

Balances, June 30, 2020 $ — $ — $ 361,087 $ 269,849 $ 21,270 $ 652,206

Balances, April 1, 2021 $ — $ — $ 362,613 $ 316,080 $ 10,686 $ 689,379

Net income — — — 22,173 — 22,173

Other comprehensive loss, net of tax — — — — 7,952 7,952

Amortization of unearned compensation — — 449 — — 449

Exercise of stock options — — 116 — — 116

Stock option expense — — 15 — — 15

Stock retirement plans — — ( 3,966 ) — — ( 3,966 )

Cash dividends on common stock ($ 0.13 per share)

— — — ( 5,744 ) — ( 5,744 )

Balances, June 30, 2021 $ — $ — $ 359,227 $ 332,509 $ 18,638 $ 710,374

HORIZON BANCORP, INC AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

(Dollar Amounts in Thousands, Except Per Share Data)

Six Months Ended

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Balances, January 1, 2020 $ — $ — $ 379,853 $ 269,738 $ 6,432 $ 656,023

1 unchanged sentence

Other comprehensive income, net of tax — — — — 14,838 14,838

Impact of adoption of ASU No.

2016–13 — — — ( 15,635 ) — ( 15,635 )

Amortization of unearned compensation — — 122 — — 122

5 unchanged sentences

— — — ( 10,548 ) — ( 10,548 )

Balances, March 31, 2020 $ — $ — $ 361,019 $ 260,501 $ 9,322 $ 630,842

Balances, June 30, 2020 $ — $ — $ 361,087 $ 269,849 $ 21,270 $ 652,206

Balances, January 1, 2021 $ — $ — $ 362,945 $ 301,419 $ 27,852 $ 692,216

5 unchanged sentences

Stock awards vested — — ( 1,347 ) — — ( 1,347 )

Stock retirement plans — — ( 3,966 ) — — ( 3,966 )

Cash dividends on common stock($ 0.25 per share)

— — — ( 11,505 ) — ( 11,505 )

Balances, March 31, 2021 $ — $ — $ 362,613 $ 316,080 $ 10,686 $ 689,379

Balances, June 30, 2021 $ — $ — $ 359,227 $ 332,509 $ 18,638 $ 710,374

See notes to condensed consolidated financial statements

2 unchanged sentences

(Dollar Amounts in Thousands)

Three Months Ended

Six Months Ended

Operating Activities

1 unchanged sentence

Items not requiring (providing) cash

Provision for credit losses 367 8,600

Provision for (recovery of) credit losses ( 1,125 ) 15,657

Depreciation and amortization 5,394 4,909

20 unchanged sentences

Net change in interest earning time deposits 1,971 ( 792 )

Change in FHLB stock — ( 1,161 )

Net change in loans 347,010 ( 340,505 )

3 unchanged sentences

Repurchase of outstanding stock — ( 19,636 )

Net cash provided by (used in) investing activities 55,445 ( 142,049 )

Net cash used in investing activities ( 209,009 ) ( 428,526 )

Financing Activities

25 unchanged sentences

All inter–company balances and transactions have been eliminated.

The results of operations for the periods ended March 31, 2021 and March 31, 2020 are not necessarily indicative of the operating results for the full year of 2021 or 2020.

The results of operations for the periods ended June 30, 2021 and June 30, 2020 are not necessarily indicative of the operating results for the full year of 2021 or 2020.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of Horizon’s management, necessary to fairly present the financial position, results of operations and cash flows of Horizon for the periods presented.

4 unchanged sentences

On July 16, 2019, the Board of Directors of the Company authorized a stock repurchase program for up to 2,250,000 shares of Horizon’s issued and outstanding common stock, no par value.

As of March 31, 2021, Horizon had repurchased a total of 373,323 shares at an average price per share of $ 15.86 .

As of June 30, 2021, Horizon had repurchased a total of 373,323 shares at an average price per share of $ 15.86 .

In addition to the stock repurchase program, Horizon agreed to repurchase 1,000,000 shares at a price per share of $ 15.19 from an individual shareholder on March 6, 2020.

2 unchanged sentences

The following table shows computation of basic and diluted earnings per share.

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Basic earnings per share

13 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

There were 138,010 shares for the three months ended March 31, 2021, which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 293,665 shares for the three months ended March 31, 2020, which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 137,705 and 137,705 shares for the three and six months ended June 30, 2021, which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 504,085 and 285,588 shares for the three and six months ended June 30, 2020, which were not included in the computation of diluted earnings per share because they were non–dilutive.

Horizon has share–based employee compensation plans, which are described in the notes to the financial statements included in the December 31, 2020 Annual Report on Form 10–K.

Also, the Company's shareholders approved the 2021 Omnibus Equity Incentive Plan at its Annual Meeting on May 6, 2021, adding 1.4 million additional shares to the plan and with no other significant changes from the Company's previous plan.

Accounting Guidance Issued But Not Yet Adopted

13 unchanged sentences

For current elections in effect regarding the assertion of the probability of forecasted transactions, the Company elects the expedient to assert the probability of the hedged interest payments and receipts regardless of any expected modification in terms related to reference rate reform.

The Company has been conducting monthly meetings to address contracts and hedge accounting relationships that reference LIBOR.

All contracts referencing LIBOR as an interest rate have been identified and are in the process of being rewritten or refinanced by December 31, 2021, except for commercial loan interest rate swaps.

Hedge accounting relationships referencing LIBOR will be modified by the counter parties.

The Company believes the adoption of this guidance on activities subsequent to December 31, 2020 through December 31, 2022 will not have a material impact on the consolidated financial statements.

Note 2 – Acquisitions

On May, 25, 2021, Horizon Bank entered into a definitive purchase and assumption agreement to acquire 14 TCF National Bank (“TCF”) branches in 11 Michigan counties with approximately $ 976 million in deposits and $ 278 million in associated loans, which are being divested by TCF Financial Corporation in connection with its merger with Huntington Bancshares Incorporated.

The transaction, which is expected to be completed by the end of the third quarter of 2021, is subject to regulatory approval and other customary closing conditions and adjustments.

HORIZON BANCORP, INC AND SUBSIDIARIES

3 unchanged sentences

The fair value of securities is as follows:

March 31, 2021

June 30, 2021

Available for sale

3 unchanged sentences

Federal agency mortgage-backed pools 165,016 2,641 ( 147 ) 167,510

Private labeled mortgage-backed pools 33,074 508 ( 14 ) 33,568

Corporate notes 85,637 1,318 ( 63 ) 86,892

4 unchanged sentences

Federal agency mortgage-backed pools 3,733 175 — 3,908

Private labeled mortgage-backed pools 4,114 — — 4,114

Total held to maturity investment securities $ 153,284 $ 9,367 $ — $ 162,651

12 unchanged sentences

Total held to maturity investment securities $ 168,676 $ 11,314 $ — $ 179,990

The amortized cost and fair value of securities available for sale and held to maturity at March 31, 2021 and December 31, 2020, by contractual maturity, are shown below.

The amortized cost and fair value of securities available for sale and held to maturity at June 30, 2021 and December 31, 2020, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Value Amortized

7 unchanged sentences

Federal agency mortgage–backed pools 165,016 167,510 114,484 118,799

Private labeled mortgage–backed pools $ 33,074 $ 33,568 $ — $ —

Total available for sale investment securities $ 1,662,254 $ 1,691,186 $ 1,090,363 $ 1,134,025

7 unchanged sentences

Federal agency mortgage–backed pools 3,733 3,908 8,594 8,837

Private labeled mortgage–backed pools 4,114 4,114 — —

Total held to maturity investment securities $ 153,284 $ 162,651 $ 168,676 $ 179,990

The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

March 31, 2021

June 30, 2021

Less than 12 Months 12 Months or More Total

7 unchanged sentences

Federal agency mortgage–backed pools 77,091 ( 147 ) — — 77,091 ( 147 )

Private labeled mortgage–backed pools 9,510 ( 14 ) — — 9,510 ( 14 )

Corporate notes 22,169 ( 63 ) — — 22,169 ( 63 )

12 unchanged sentences

Federal agency collateralized mortgage obligations 6,358 ( 17 ) — — 6,358 ( 17 )

Federal agency mortgage–backed pools — — — — — —

Total temporarily impaired securities $ 79,860 $ ( 294 ) $ 1,245 $ ( 29 ) $ 81,105 $ ( 323 )

No allowance for credit losses for available for sale debt securities or held to maturity securities was needed at March 31, 2021 or December 31, 2020.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 8.7 million at March 31, 2021 and $ 8.1 million at December 31, 2020 and is excluded from the estimate of credit losses.

No allowance for credit losses for available for sale debt securities or held to maturity securities was needed at June 30, 2021 or December 31, 2020.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 10.3 million at June 30, 2021 and $ 8.1 million at December 31, 2020 and is excluded from the estimate of credit losses.

government sponsored entities and agencies and mortgage–backed securities are either explicitly or implicitly guaranteed by the U.S.

5 unchanged sentences

Information regarding security proceeds, gross gains and gross losses are presented below.

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Sales of securities available for sale

22 unchanged sentences

Construction loans are reviewed and rewritten prior to being originated as a term loan.

The following table presents total loans outstanding by portfolio class, as of March 31, 2021:

The following table presents total loans outstanding by portfolio class, as of June 30, 2021 and December 31, 2020:

2021 December 31,

19 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

As of March 31, 2021 and December 31, 2020, loans originated under the Federal Paycheck Protection Program (“PPP”) totaled approximately $ 252.3 million and $ 208.9 million, respectively, and are included with commercial loans.

Total loans include net deferred loan fees of $ 5.0 million and $ 1.7 million at March 31, 2021 and December 31, 2020, respectively.

As of June 30, 2021 and December 31, 2020, Federal Paycheck Protection Program (“PPP”) loans totaled approximately $ 169.4 million and $ 208.9 million, respectively, and are included with commercial loans.

Total loans include net deferred loan fees of $ 3.2 million and $ 1.7 million at June 30, 2021 and December 31, 2020, respectively.

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

39 unchanged sentences

The following table presents non–accrual loans, loans past due over 90 days still on accrual, and troubled debt restructurings (“TDRs”) by class of loans:

March 31, 2021

June 30, 2021

Non–accrual Loans Past

44 unchanged sentences

Total $ 22,142 $ 262 $ 2,610 $ 1,793 $ 26,807 $ 19,821

There was no interest income recognized on non–accrual loans during the three months ended March 31, 2021 and 2020 while the loans were in non–accrual status.

Included in the $ 20.7 million of non–accrual loans and the $ 2.3 million of non–performing TDRs at March 31, 2021 were $ 2.4 million and $ 907,000 , respectively, of loans acquired for which there were accretable yields recognized.

There was no interest income recognized on non–accrual loans during the three and six months ended June 30, 2021 and 2020, respectively, while the loans were in non–accrual status.

Included in the $ 18.2 million of non–accrual loans and the $ 2.3 million of non–performing TDRs at June 30, 2021 were $ 2.5 million and $ 902,000 , respectively, of loans acquired for which there were accretable yields recognized.

HORIZON BANCORP, INC AND SUBSIDIARIES

1 unchanged sentence

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 20.7 million and non–performing TDRs of $ 2.3 million at March 31, 2021:

March 31, 2021

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 18.2 million and non–performing TDRs of $ 2.3 million at June 30, 2021:

June 30, 2021

Current 30–59 Days

48 unchanged sentences

TDRs that subsequently default are individually evaluated for impairment at the time of default.

At March 31, 2021, the type of concessions the Company has made on restructured loans have been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances.

At June 30, 2021, the types of concessions the Company has made on restructured loans have been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances.

Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan.

A restructured loan is returned to accruing status after six consecutive payments but is still reported as a TDR unless the loan bears interest at a market rate.

As of March 31, 2021, the Company had $ 4.1 million in TDRs and $ 1.8 million were performing according to the restructured terms and no TDRs were returned to accrual status during 2021.

There were no specific reserves allocated to TDRs at March 31, 2021 based on the discounted cash flows or, when appropriate, the fair value of the collateral.

These TDRs are exclusive of loans modified under the Conronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

As of June 30, 2021, the Company had $ 4.1 million in TDRs and $ 1.9 million were performing according to the restructured terms and $ 93,000 TDRs were returned to accrual status during 2021.

There were no specific reserves allocated to TDRs at June 30, 2021 based on the discounted cash flows or, when appropriate, the fair value of the collateral.

These TDRs are exclusive of loans modified under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

HORIZON BANCORP, INC AND SUBSIDIARIES

2 unchanged sentences

The following table presents TDRs by class of loan:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Non–accrual Accruing Total Non–accrual Accruing Total

17 unchanged sentences

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, 2021 and December 31, 2020, the Bank modified loans totaling $ 91.6 million and $ 126.7 million, respectively, which qualify for treatment under the CARES Act.

At June 30, 2021 and December 31, 2020, the Bank modified loans totaling $ 52.5 million and $ 126.7 million, respectively, which qualify for treatment under the CARES Act.

Collateral Dependent Financial Assets

8 unchanged sentences

The table below presents the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC 326, which are individually evaluated to determine expected credit losses.

March 31, 2021

June 30, 2021

Real Estate Accounts Receivable/Equipment Other Total ACL

20 unchanged sentences

Loan grades for loans with an aggregate credit exposure that exceeds the authorities in the respective regions (ranging from $ 1,000,000 to $ 3,500,000 ) are validated by the Loan Committee, which is chaired by the Chief Commercial Banking Officer (“CCBO”).

• Commercial loan officers are responsible for reviewing their loan portfolios and reporting any adverse material change to the CCBO or Loan Committee.

When circumstances warrant a change in the credit quality grade, loan officers are required to notify the CCBO and the Credit Department of the change in the loan grade.

Downgrades are accepted immediately by the CCBO, however, lenders must present their factual information to either the Loan Committee or the CCBO when recommending an upgrade.

• Commercial loan officers are responsible for reviewing their loan portfolios and reporting any adverse material change to the CCBO, Senior Commercial Credit Officer (“SCCO”) or Loan Committee.

When circumstances warrant a change in the credit quality grade, loan officers are required to notify the CCBO, SCCO and the Credit Department of the change in the loan grade.

Downgrades are accepted immediately by the CCBO or SCCO, however, lenders must present their factual information to either the Loan Committee, CCBO or SCCO when recommending an upgrade.

• The CCBO, or a designee, meets periodically with loan officers to discuss the status of past due loans and classified loans.

These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.

• Monthly, senior management meets as members of the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets.

This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, other real estate

HORIZON BANCORP, INC AND SUBSIDIARIES

1 unchanged sentence

(Table Dollar Amounts in Thousands, Except Per Share Data)

owned and personal property repossessions.

• Monthly, senior management meets as members of the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets.

This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, other real estate owned and personal property repossessions.

The information reviewed in this meeting acts as a precursor for developing management's analysis of the adequacy of the Allowance for Credit Losses.

84 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following tables present loans by credit grades and origination year at March 31, 2021.

March 31, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Total

The following tables present loans by credit grades and origination year at June 30, 2021.

June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Total

Owner occupied real estate

32 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

March 31, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Total

June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Total

Residential mortgage

11 unchanged sentences

Total real estate $ 52,716 $ 103,892 $ 48,994 $ 62,250 $ 68,983 $ 200,424 $ 227,489 $ 764,748

March 31, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Total

June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Total

Direct installment

80 unchanged sentences

Note 5 – Allowance for Credit and Loan Losses

The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, 2021

The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

1 unchanged sentence

Provision for credit losses on loans ( 1,168 ) ( 144 ) ( 8 ) ( 172 ) ( 1,492 )

PCD loan charge–offs ( 6 ) — — — ( 6 )

Charge–offs ( 67 ) — — ( 237 ) ( 304 )

1 unchanged sentence

Balance, end of period $ 41,766 $ 4,108 $ 1,155 $ 8,620 $ 55,649

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Commercial Real Estate Mortgage Warehouse Consumer Total

Balance, beginning of period $ 32,550 $ 5,654 $ 1,055 $ 9,181 $ 48,440

Provision for credit losses on loans 6,603 202 135 117 7,057

Charge–offs ( 15 ) ( 34 ) — ( 526 ) ( 575 )

Recoveries 9 10 — 149 168

Balance, end of period $ 39,147 $ 5,832 $ 1,190 $ 8,921 $ 55,090

Six Months Ended June 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

Balance, beginning of period $ 42,210 $ 4,620 $ 1,267 $ 8,930 $ 57,027

Provision for credit losses on loans ( 240 ) ( 600 ) ( 112 ) ( 173 ) ( 1,125 )

PCD loan charge–offs ( 6 ) — — — ( 6 )

Charge–offs ( 263 ) — — ( 472 ) ( 735 )

Recoveries 65 88 — 335 488

Balance, end of period $ 41,766 $ 4,108 $ 1,155 $ 8,620 $ 55,649

Six Months Ended June 30, 2020

Commercial Real Estate Mortgage Warehouse Consumer Total

Balance, beginning of period $ 11,996 $ 923 $ 1,077 $ 3,671 $ 17,667

Impact of adopting ASC 326 13,618 4,048 — 4,911 22,577

5 unchanged sentences

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

HORIZON BANCORP, INC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

To estimate a CECL loss rate for the pool, management first identifies the loan losses recognized between the pool date and the reporting date for the pool and determines which loan losses were related to loans outstanding at the pool date.

9 unchanged sentences

The historical loss rate was utilized as the base rate, and qualitative adjustments were utilized to reflect the forecast and other relevant factors.

HORIZON BANCORP, INC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The Company segments the loan portfolio into pools based on the following risk characteristics:

2 unchanged sentences

Loans serviced for others are not included in the accompanying condensed consolidated balance sheets.

The unpaid principal balances of loans serviced for others totaled approximately $ 1.532 billion and $ 1.527 billion at March 31, 2021 and December 31, 2020.

The aggregate fair value of capitalized mortgage servicing rights was approximately $ 12.9 million and $ 12.5 million at March 31, 2021 and December 31, 2020, compared to the carrying values of $ 12.9 million and $ 12.5 million at March 31, 2021 and December 31, 2020, respectively.

The unpaid principal balances of loans serviced for others totaled approximately $ 1.5 billion and $ 1.5 billion at June 30, 2021 and December 31, 2020.

The aggregate fair value of capitalized mortgage servicing rights was approximately $ 14.5 million and $ 12.5 million at June 30, 2021 and December 31, 2020, compared to the carrying values of $ 14.5 million and $ 12.5 million at June 30, 2021 and December 31, 2020, respectively.

Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value.

For purposes of measuring impairment, risk characteristics including product type, investor type and interest rates, were used to stratify the originated mortgage servicing rights.

March 31, December 31,

June 30, December 31,

Mortgage servicing rights

9 unchanged sentences

Mortgage servicing rights, net $ 14,462 $ 12,472

The Bank reduced impairment by approximately $ 235,000 for the three months ended March 31, 2021.

HORIZON BANCORP, INC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The Bank reduced impairment by approximately $ 1.8 million for the six months ended June 30, 2021.

The Bank recorded additional impairment of approximately $ 4.5 million for the year ended December 31, 2020.

Note 7 – Goodwill

The following table presents the Company’s carrying amount of goodwill as of March 31, 2021 and December 31, 2020.

March 31, December 31,

The following table presents the Company’s carrying amount of goodwill as of June 30, 2021 and December 31, 2020.

June 30, December 31,

Balance, beginning of period $ 151,238 $ 151,238

2 unchanged sentences

In accordance with ASC 350–20, the Company conducts a goodwill impairment test at least annually, or more frequently as events occur or circumstances change that would more–likely–than–not reduce the fair value below its carrying amount.

In the second quarter of 2020, the onset of the COVID–19 pandemic prompted the Company to assess qualitative and

HORIZON BANCORP, INC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

quantitative factors to determine whether it was more–likely–than–not the fair value of the Company was less than the carrying amount.

In the second quarter of 2020, the onset of the COVID–19 pandemic prompted the Company to assess qualitative and quantitative factors to determine whether it was more–likely–than–not the fair value of the Company was less than the carrying amount.

The Company assessed relevant events and circumstances, including macroeconomic conditions, industry and market considerations, overall financial performance, changes in the composition or carrying amount of assets and liabilities, the market price of the Company’s common stock and other relevant facts.

The Company performed both a market capitalization approach and a discounted cash flow approach to determine the fair value of the Company during the second quarter of 2020 which resulted in no goodwill impairment.

The Company updated the analysis above during the first quarter of 2021 which resulted in no goodwill impairment charges for the three months ended March 31, 2021.

The Company updated their analysis above during the second quarter of 2021 which resulted in no goodwill impairment charges for the six months ended June 30, 2021.

Note 8 – Repurchase Agreements

2 unchanged sentences

The securities underlying the agreement remained under the Company’s control.

HORIZON BANCORP, INC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following table shows repurchase agreements accounted for as secured borrowings and the related securities, at fair value, pledged for repurchase agreements:

March 31, 2021

June 30, 2021

Remaining Contractual Maturity of the Agreements

18 unchanged sentences

Notwithstanding the foregoing, in the event that the Benchmark rate is less than zero, the Benchmark rate shall be deemed to be zero.

HORIZON BANCORP, INC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

Horizon may, at its option, beginning with the interest payment date of July 1, 2025 and on any interest payment date thereafter, redeem the Notes, in whole or in part.

8 unchanged sentences

Cash Flow Hedges – As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into interest rate swap agreements for a portion of its floating rate debt.

The agreements provide for the Company to receive interest from the counterparty at three months LIBOR and to pay interest to the counterparty at a fixed rate of 4.20 % on a notional amount of $ 12.0 million at March 31, 2021 and December 31, 2020, respectively.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

2020, respectively.

Under the agreements, the Company pays or receives the net interest amount monthly, with the monthly settlements included in interest expense.

3 unchanged sentences

On July 20, 2018, the Company entered into an interest rate swap agreement for an additional portion of its floating rate debt.

The agreement provides for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a fixed rate of 2.81 % on a notional amount of $ 50.0 million at March 31, 2021 and December 31, 2020.

Under the agreement, the Company pays or receives the net interest amount monthly, with the monthly settlements included in interest expense.

2 unchanged sentences

Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

At March 31, 2021, the Company’s cash flow hedge was effective and is not expected to have a significant impact on the Company’s net income over the next 12 months.

At June 30, 2021, the Company’s cash flow hedge was effective and is not expected to have a significant impact on the Company’s net income over the next 12 months.

Fair Value Hedges – Fair value hedges are intended to reduce the interest rate risk associated with the underlying hedged item.

2 unchanged sentences

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current earnings.

At March 31, 2021, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

At June 30, 2021, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

The change in fair value of both the hedge instruments and the underlying loan agreements are recorded as gains or losses in interest income.

The fair value hedges are considered to be highly effective and any hedge ineffectiveness was deemed not material.

The notional amounts of the loan and security agreements being hedged were $ 457.1 million at March 31, 2021 and $ 442.7 million at December 31, 2020.

The notional amounts of the loan and security agreements being hedged were $ 459.6 million at June 30, 2021 and $ 442.7 million at December 31, 2020.

Other Derivative Instruments – The Company enters into non–hedging derivatives in the form of mortgage loan forward sale commitments with investors and commitments to originate mortgage loans as part of its mortgage banking business.

At March 31, 2021, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.

At June 30, 2021, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.

The change in fair value of both the forward sale commitments and commitments to originate mortgage loans were recorded and the net gains or losses included in the Company’s gain on sale of loans.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The following tables summarize the fair value of derivative financial instruments utilized by Horizon:

Asset Derivatives Liability Derivatives

March 31, 2021 March 31, 2021

June 30, 2021 June 30, 2021

Balance Sheet

20 unchanged sentences

Total derivatives $ 36,433 $ 43,631

The effect of the derivative instruments on the condensed consolidated statements of income for the three–month periods ending March 31 is as follows:

Amount of Loss Recognized in Other Comprehensive Income on Derivative

The effect of the derivative instruments on the condensed consolidated statements of income for the three and six–month periods ending June 30 is as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative

(Effective Portion)

Three Months Ended

March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Derivatives in cash flow hedging relationship

Interest rate contracts $ ( 14 ) $ ( 107 ) $ 2,398 $ ( 3,239 )

FASB Accounting Standards Codification (“ASC”) Topic 820–10–20 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Topic 820–10–55 establishes a fair value hierarchy that emphasizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

Topic 820–10–55 establishes a fair value hierarchy that emphasizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

Location of gain

recognized on derivative Amount of Gain (Loss) Recognized on Derivative

Three Months Ended

March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Derivative in fair value hedging relationship

4 unchanged sentences

recognized on derivative Amount of Gain (Loss) Recognized on Derivative

Three Months Ended

March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Derivative not designated as hedging relationship

9 unchanged sentences

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated financial statements, as well as the general classification of such instruments pursuant to the valuation hierarchy.

There have been no significant changes in the valuation techniques during the period ended March 31, 2021.

There have been no significant changes in the valuation techniques during the period ended June 30, 2021.

For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

6 unchanged sentences

Observable inputs include dealer quotes, market spreads, cash flow analysis, the U.S.

Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s

Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s terms and conditions.

The pricing provider utilizes evaluated pricing models that vary based on asset class.

These models incorporate available market information including quoted prices of securities with similar characteristics and, because many fixed–income securities do not trade on a daily basis, apply available information through processes such as benchmark

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

terms and conditions.

The pricing provider utilizes evaluated pricing models that vary based on asset class.

curves, benchmarking of like securities, sector grouping, and matrix pricing.

In addition, model processes, such as an option adjusted spread model, is used to develop prepayment and interest rate scenarios for securities with prepayment features.

5 unchanged sentences

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated financial statements measured at fair value on a recurring basis and the level within the FASB ASC fair value hierarchy in which the fair value measurements fall at the following:

March 31, 2021

June 30, 2021

Fair Value Quoted Prices in Active Markets

7 unchanged sentences

Federal agency mortgage–backed pools 167,510 — 167,510 —

Private labeled mortgage–backed pools 33,568 — 33,568

Corporate notes 86,892 — 86,892 —

3 unchanged sentences

Interest rate swap agreements liability ( 27,901 ) — ( 27,901 ) —

Commitments to originate loans ( 701 ) — ( 701 ) —

HORIZON BANCORP, INC.

18 unchanged sentences

Realized gains and losses included in net income for the periods are reported in the condensed consolidated statements of income as follows:

Three Months Ended

March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Non-interest Income

9 unchanged sentences

(Level 2) Significant

March 31, 2021

June 30, 2021

Collateral dependent loans $ 8,918 $ — $ — $ 8,918

3 unchanged sentences

Mortgage servicing rights 12,472 — — 12,472

Collateral Dependent Loans:

For loans identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized.

This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Collateral dependent loans are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

Collateral Dependent Loans:

For loans identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized.

This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Collateral dependent loans are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Mortgage Servicing Rights (MSRs):

4 unchanged sentences

The Company reviews the valuation assumptions against this market data for reasonableness and adjusts the assumptions if deemed appropriate.

The carrying amount of the MSRs’ fair value due to impairment decreased by $ 236,000 during the first three months of 2021 and increased by $ 322,000 during the first three months of 2020.

The carrying amount of the MSRs’ fair value due to impairment increased by $ 1.8 million during the first six months of 2021 and decreased by $ 3.2 million during the first six months of 2020.

The following table presents qualitative information about unobservable inputs used in recurring and non–recurring Level 3 fair value measurements, other than goodwill.

March 31, 2021

June 30, 2021

Value Valuation

23 unchanged sentences

Due to the inherent uncertainties of expected cash flows of financial instruments, the use of alternate valuation assumptions and methods could have a significant effect on the estimated fair value amounts.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

The estimated fair values of financial instruments, as shown below, are not intended to reflect the estimated liquidation or market value of Horizon taken as a whole.

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at March 31, 2021 and December 31, 2020.

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at June 30, 2021 and December 31, 2020.

These include financial instruments recognized as assets and liabilities on the condensed consolidated balance sheet as well as certain off–balance sheet financial instruments.

2 unchanged sentences

Cash and Due from Banks – The carrying amounts approximate fair value.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands, Except Per Share Data)

Interest-earning time deposits – The fair values of the Company’s interest–earning time deposits are estimated using discounted cash flow analyses based on current rates for similar types of interest–earning time deposits.

19 unchanged sentences

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall.

March 31, 2021

June 30, 2021

Amount Quoted Prices in Active Markets

55 unchanged sentences

In addition, to be categorized as well capitalized, the Company and Bank must maintain Total risk–based, Tier I risk–based, common equity Tier I risk–based and Tier I leverage ratios as set forth in the table below.

As of March 31, 2021 and December 31, 2020, the Company and Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the end of the first quarter of 2021 that management believes have changed the Bank’s classification as well capitalized.

As of June 30, 2021 and December 31, 2020, the Company and Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the end of the second quarter of 2021 that management believes have changed the Bank’s classification as well capitalized.

There is no threshold for well capitalized status for bank holding companies.

7 unchanged sentences

(Table Dollar Amounts in Thousands, Except Per Share Data)

Horizon and the Bank’s actual and required capital ratios as of March 31, 2021 and December 31, 2020 were as follows:

Horizon and the Bank’s actual and required capital ratios as of June 30, 2021 and December 31, 2020 were as follows:

Actual Required for Capital

7 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

March 31, 2021

June 30, 2021

Total capital (to risk–weighted assets) (1)

31 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2021 and 2020

For the Three and Six Months ended June 30, 2021 and 2020

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 1. Financial Statements