What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-08 compared with 2021-08-03 · 207 added, 132 removed, 1230 unchanged (22% of the section changed)

4 unchanged sentences

(Dollar Amounts in Thousands)

September 30,

2021 December 31,

35 unchanged sentences

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

18 unchanged sentences

Fiduciary activities 2,124 2,105 5,828 6,398

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)

Gains on sale of investment securities (includes $ 0 and $ 1,088 for the three months ended September 30, 2021 and 2020, respectively, and $ 914 and $ 1,675 for the nine months ended September 30, 2021 and 2020, respectively, related to accumulated other comprehensive earnings reclassifications)

— 1,088 914 1,675

17 unchanged sentences

Income Before Income Taxes 27,127 24,638 76,942 54,509

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)

Income tax expense (includes $ 0 and $ 228 for the three months ended September 30, 2021 and 2020, respectively, and $ 192 and $ 352 for the nine months ended September 30, 2021 and 2020, respectively, related to income tax expense from reclassification items)

4,056 4,326 11,276 7,903

Net Income $ 23,071 $ 20,312 $ 65,666 $ 46,606

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

Basic Earnings Per Share $ 0.53 $ 0.46 $ 1.50 $ 1.06

1 unchanged sentence

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Dollar Amounts in Thousands)

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2021 2020 2021 2020

14 unchanged sentences

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

5 unchanged sentences

Comprehensive

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

Balances, July 1, 2020 $ — $ — $ 361,087 $ 269,849 $ 21,270 $ 652,206

Net income — — — 20,312 — 20,312

6 unchanged sentences

— — — ( 5,326 ) — ( 5,326 )

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

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

Balances, September 30, 2020 $ — $ — $ 362,180 $ 284,835 $ 23,278 $ 670,293

Balances, July 1, 2021 $ — $ — $ 359,227 $ 332,509 $ 18,638 $ 710,374

Net income — — — 23,071 — 23,071

3 unchanged sentences

Stock option expense — — 13 — — 13

Repurchase of outstanding stock — — ( 7,607 ) — — ( 7,607 )

Stock retirement plans — — ( 128 ) — — ( 128 )

1 unchanged sentence

— — — ( 6,637 ) — ( 6,637 )

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

HORIZON BANCORP, INC AND SUBSIDIARIES

Balances, September 30, 2021 $ — $ — $ 351,954 $ 348,943 $ 7,645 $ 708,542

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

(Dollar Amounts in Thousands, Except Per Share Data)

Six Months Ended

Nine Months Ended

Stock Additional

14 unchanged sentences

— — — ( 15,874 ) — ( 15,874 )

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

Balances, September 30, 2020 $ — $ — $ 362,180 $ 284,835 $ 23,278 $ 670,293

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

5 unchanged sentences

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

Repurchase of outstanding stock — — ( 7,607 ) — — ( 7,607 )

Stock retirement plans — — ( 4,094 ) — — ( 4,094 )

1 unchanged sentence

— — — ( 18,142 ) — ( 18,142 )

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

Balances, September 30, 2021 $ — $ — $ 351,954 $ 348,943 $ 7,645 $ 708,542

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

Six Months Ended

Nine Months Ended

Operating Activities

22 unchanged sentences

Proceeds from sales, maturities, calls and principal repayments of securities available for sale 250,808 237,645

Purchases of securities held to maturity ( 625,397 ) —

Proceeds from maturities of securities held to maturity 23,368 26,359

6 unchanged sentences

Repurchase of outstanding stock ( 7,607 ) ( 19,636 )

Net cash received in branch acquisition 616,832 —

Net cash used in investing activities ( 146,387 ) ( 549,828 )

7 unchanged sentences

Net cash provided by financing activities 779,674 487,292

Net Change in Cash and Cash Equivalents 54,460 71,304

Cash and Cash Equivalents, Beginning of Period 249,711 98,831

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

Net Change in Cash and Cash Equivalents 722,106 295

Cash and Cash Equivalents, Beginning of Period 249,711 98,831

Cash and Cash Equivalents, End of Period $ 971,817 $ 99,126

3 unchanged sentences

Transfer of loans to other real estate and repossessed assets 964 1,795

Transfer of premises to other real estate 1,753 —

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

The accompanying unaudited condensed consolidated financial statements include the accounts of Horizon Bancorp, Inc.

(“Horizon” or the “Company”) and its wholly-owned subsidiaries, including Horizon Bank (“Horizon Bank” or the “Bank”).

Horizon Bank (formerly known as “Horizon Bank, N.A.”) was a national association until its conversion to an Indiana commercial bank effective June 23, 2017.

(“Horizon” or the “Company”) and its wholly-owned subsidiaries, including Horizon Bank (“Horizon Bank” or the “Bank”), which is an Indiana commercial bank.

All inter–company balances and transactions have been eliminated.

The results of operations for the periods ended June 30, 2021 and June 30, 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 September 30, 2021 and September 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 June 30, 2021, Horizon had repurchased a total of 373,323 shares at an average price per share of $ 15.86 .

As of September 30, 2021, Horizon had repurchased a total of 803,349 shares at an average price per share of $ 16.89 .

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 Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2021 2020 2021 2020

11 unchanged sentences

Diluted earnings per share $ 0.52 $ 0.46 $ 1.49 $ 1.06

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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.

There were 142,705 and 153,582 shares for the three and nine months ended September 30, 2021, which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 492,273 and 273,776 shares for the three and nine months ended September 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.

19 unchanged sentences

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.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

On September 17, 2021, Horizon Bank completed the purchase and assumption of certain assets and liabilities of 14 former TCF National Bank (“TCF”) branches in 11 Michigan counties.

Net cash of $ 618.2 million was received in the transaction, representing the deposit balances assumed at closing, net of amounts paid for loans of $ 206.3 million, fixed assets of $ 6.9 million, cash of $ 4.0 million and a 1.75 % premium on deposits.

Customer deposit balances were recorded at $ 846.4 million and a core deposit intangible of $ 887,000 was recorded in the transaction, which will be amortized over 10 years on a straight line basis.

Goodwill of $ 11.5 million was generated in the transaction.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition.

Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the preliminary purchase price for the TCF branches is detailed in the following table.

Final estimates of fair value on the date of acquisition have not been received yet.

Prior to the end of the one year measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation prospectively.

If any adjustments are made to the preliminary assumptions (provisional amounts), disclosures will be made in the notes to the financial statements of the amounts recorded in the current period earnings by line item that have been recorded in previous reporting periods if the adjustments to the provisional amounts had been recognized as of the acquisition date.

Assets Liabilities

Cash and due from banks $ 4,012 Deposits

Loans Non-interest bearing $ 181,403

Commercial 99,893 NOW accounts 303,050

Residential mortgage 54,218 Savings and money market 262,488

Consumer 52,224 Certificates of deposit 99,468

Total loans 206,335 Total deposits 846,409

Premises and equipment, net 6,901 Interest payable 16

Goodwill 11,550 Other liabilities 2,206

Core deposit intangible 887

Interest receivable 519

Other assets 260

Total assets purchased $ 230,204 Total liabilities assumed $ 848,631

Net cash received $ ( 618,167 )

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired.

Evidence of credit quality deterioration as of the purchase date may include information such as past due and non–accrual status, borrower credit scores and recent loan–to–value percentages.

Management continues to complete its evaluation to determine if any loans were purchased with credit deterioration.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

The fair value of securities is as follows:

June 30, 2021

September 30, 2021

Available for sale

11 unchanged sentences

Private labeled mortgage-backed pools 66,298 7 ( 753 ) 65,552

Corporate notes 133,674 — ( 1,498 ) 132,176

Total held to maturity investment securities $ 769,240 $ 8,354 $ ( 9,495 ) $ 768,099

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 June 30, 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 September 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.

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Value Amortized

20 unchanged sentences

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.

June 30, 2021

September 30, 2021

Less than 12 Months 12 Months or More Total

10 unchanged sentences

Total temporarily impaired securities $ 1,430,764 $ ( 22,640 ) $ 8,047 $ ( 246 ) $ 1,438,811 $ ( 22,886 )

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

10 unchanged sentences

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 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.

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

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 13.1 million at September 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 Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2021 2020 2021 2020

3 unchanged sentences

Gross losses — ( 6 ) — ( 56 )

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

17 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 June 30, 2021 and December 31, 2020:

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

September 30,

2021 December 31,

16 unchanged sentences

Net loans $ 3,603,302 $ 3,810,356

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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.

As of September 30, 2021 and December 31, 2020, Federal Paycheck Protection Program (“PPP”) loans totaled approximately $ 92.3 million and $ 208.9 million, respectively, and are included with commercial loans.

Total loans include net deferred loan costs of $ 316,000 at September 30, 2021 and net deferred loan fees of $ 1.7 million at December 31, 2020, respectively.

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

29 unchanged sentences

Interest income is accrued during this period and collected at the time each loan is sold.

Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.

HORIZON BANCORP, INC AND SUBSIDIARIES

Fee income for each loan

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.

Based on these agreements with each mortgage company, at any time a mortgage company can reacquire from Horizon its outstanding loan balance on an individual mortgage and regain possession of the original note.

4 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:

June 30, 2021

September 30, 2021

Non–accrual Loans Past

19 unchanged sentences

Total $ 25,137 $ 200 $ 1,604 $ 2,433 $ 29,374 $ 23,457

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

22 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 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

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

Included in the $ 25.1 million of non–accrual loans and the $ 1.6 million of non–performing TDRs at September 30, 2021 were $ 2.2 million and $ 295,000 , respectively, of loans acquired for which there were accretable yields recognized.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(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 $ 18.2 million and non–performing TDRs of $ 2.3 million at June 30, 2021:

June 30, 2021

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 25.1 million and non–performing TDRs of $ 1.6 million at September 30, 2021:

September 30, 2021

Current 30–59 Days

18 unchanged sentences

Percentage of total loans 99.88 % 0.09 % 0.02 % 0.01 % 0.12 % 100.00 %

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

27 unchanged sentences

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

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.

At September 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 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.

As of September 30, 2021, the Company had $ 4.0 million in TDRs and $ 2.4 million were performing according to the restructured terms and $ 603,000 TDRs were returned to accrual status during 2021.

There were no specific reserves allocated to TDRs at September 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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

The following table presents TDRs by class of loan:

June 30, 2021 December 31, 2020

September 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 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.

At September 30, 2021 and December 31, 2020, the Bank modified loans totaling $ 29.2 million and $ 126.7 million, respectively, which qualify for treatment under the CARES Act.

Collateral Dependent Financial Assets

4 unchanged sentences

However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

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.

June 30, 2021

September 30, 2021

Real Estate Accounts Receivable/Equipment Other Total ACL

25 unchanged sentences

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.

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

32 unchanged sentences

If any of these credit weaknesses is observed, a lower risk grade may be warranted.

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

37 unchanged sentences

• The borrower meets defined key financial metric ranges.

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

10 unchanged sentences

Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all of a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

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

Owner occupied real estate

29 unchanged sentences

Total commercial $ 383,286 $ 233,111 $ 247,085 $ 209,409 $ 278,997 $ 552,547 $ 268,765 $ 2,173,200

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

Residential mortgage

11 unchanged sentences

Total real estate $ 79,466 $ 111,732 $ 50,563 $ 59,306 $ 68,812 $ 210,485 $ 193,085 $ 773,449

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

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

Direct installment

10 unchanged sentences

Total consumer $ 188,781 $ 172,875 $ 120,198 $ 83,809 $ 52,829 $ 85,827 $ 9,113 $ 713,432

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

33 unchanged sentences

Total commercial $ 443,551 $ 277,669 $ 235,924 $ 298,388 $ 192,725 $ 476,011 $ 268,003 $ 2,192,271

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

27 unchanged sentences

Total consumer $ 210,976 $ 149,954 $ 115,353 $ 70,702 $ 33,414 $ 67,719 $ 7,082 $ 655,200

HORIZON BANCORP, INC AND SUBSIDIARIES

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

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 and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

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

Three Months Ended September 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

5 unchanged sentences

Balance, end of period $ 43,121 $ 3,737 $ 1,054 $ 8,867 $ 56,779

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Commercial Real Estate Mortgage Warehouse Consumer Total

4 unchanged sentences

Balance, end of period $ 39,795 $ 5,464 $ 1,250 $ 9,810 $ 56,319

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

5 unchanged sentences

Balance, end of period $ 43,121 $ 3,737 $ 1,054 $ 8,867 $ 56,779

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Commercial Real Estate Mortgage Warehouse Consumer Total

1 unchanged sentence

Impact of adopting ASC 326 10,832 4,048 — 4,911 19,791

Initial PCD allowance 2,786 — — — 2,786

Provision for credit losses on loans 14,655 670 173 2,211 17,709

4 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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

15 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 $ 1.5 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.

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

The aggregate fair value of capitalized mortgage servicing rights was approximately $ 14.9 million and $ 12.5 million at September 30, 2021 and December 31, 2020, compared to the carrying values of $ 14.9 million and $ 12.5 million at September 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.

June 30, December 31,

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

September 30, December 31,

Mortgage servicing rights

9 unchanged sentences

Mortgage servicing rights, net $ 14,863 $ 12,472

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 reduced impairment by approximately $ 2.1 million for the nine months ended September 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 June 30, 2021 and December 31, 2020.

June 30, December 31,

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

September 30, December 31,

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

5 unchanged sentences

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

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

The goodwill acquired during the period was calculated based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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:

June 30, 2021

September 30, 2021

Remaining Contractual Maturity of the Agreements

16 unchanged sentences

The last interest payment date for the fixed rate period will be July 1, 2025.

From and including July 1, 2025 to, but excluding, the Maturity Date or the date of earlier redemption (the “floating rate period”), the Notes bear interest at a floating rate per annum equal to the Benchmark rate (which is expected to be Three–Month Term SOFR), plus 549 basis points, payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year, commencing on October 1, 2025.

From and including July 1, 2025 to, but excluding, the Maturity Date or the date of earlier redemption (the “floating rate period”), the Notes bear interest at a floating rate per annum equal to the benchmark rate, which is expected to be Three–Month Term SOFR (the “Benchmark Rate”), plus 549 basis points, payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year, commencing on October 1, 2025.

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

7 unchanged sentences

The Notes are obligations of Horizon only and are not obligations of, and are not guaranteed by, any of Horizon’s subsidiaries.

Note 10 – Derivative Financial Instruments

Cash Flow Hedges – As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into 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 June 30, 2021 and December 31,

HORIZON BANCORP, INC.

2 unchanged sentences

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

2020, respectively.

Note 10 – Derivative Financial Instruments

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 June 30, 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 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.

At September 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 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.

At September 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 $ 459.6 million at June 30, 2021 and $ 442.7 million at December 31, 2020.

The notional amounts of the loan and security agreements being hedged were $ 478.2 million at September 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 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.

At September 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.

5 unchanged sentences

Asset Derivatives Liability Derivatives

June 30, 2021 June 30, 2021

September 30, 2021 September 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 and six–month periods ending June 30 is as follows:

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

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

(Effective Portion)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Derivatives in cash flow hedging relationship

8 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Derivative in fair value hedging relationship

4 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 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 June 30, 2021.

There have been no significant changes in the valuation techniques during the period ended September 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.

21 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:

June 30, 2021

September 30, 2021

Fair Value Quoted Prices in Active Markets

13 unchanged sentences

Interest rate swap agreements liability ( 24,044 ) — ( 24,044 ) —

Commitments to originate loans ( 333 ) — ( 333 ) —

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 Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Non-interest Income

9 unchanged sentences

(Level 2) Significant

June 30, 2021

September 30, 2021

Collateral dependent loans $ 18,848 $ — $ — $ 18,848

17 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 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 carrying amount of the MSRs’ fair value due to impairment increased by $ 2.1 million during the first nine months of 2021 and decreased by $ 3.2 million during the first nine 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.

June 30, 2021

September 30, 2021

Value Valuation

28 unchanged sentences

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 June 30, 2021 and December 31, 2020.

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at September 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.

23 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.

June 30, 2021

September 30, 2021

Amount Quoted Prices in Active Markets

38 unchanged sentences

Note 13 – Accumulated Other Comprehensive Income

September 30,

2021 December 31,

15 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 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.

As of September 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 third 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 June 30, 2021 and December 31, 2020 were as follows:

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

Actual Required for Capital

7 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

June 30, 2021

September 30, 2021

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

31 unchanged sentences

And Results of Operations

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

For the Three and Nine Months ended September 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