What changed in this filing

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Item 1. Business

2022-03-09 compared with 2021-02-26 · 18 added, 239 removed, 377 unchanged (41% of the section changed)

12 unchanged sentences

The most recent material expansions through acquisitions are described below.

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 $212.0 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 $1.6 million was recorded in the transaction, which will be amortized over 10 years on a straight line basis.

Goodwill of $3.3 million was generated in the transaction.

On March 26, 2019, Horizon completed the acquisition of Salin Bancshares, Inc.

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This acquisition brought Horizon a greater presence in central Indiana, including Indianapolis and Columbus, and northeastern Indiana, including Fort Wayne.

On October 17, 2017, Horizon completed the acquisition of Wolverine Bancorp, Inc., a Maryland corporation (“Wolverine”) and Horizon Bank’s acquisition of Wolverine Bank, a federally–chartered savings bank and wholly–owned subsidiary of Wolverine, through mergers effective October 17, 2017.

Under the terms of the Merger Agreement, shareholders of Wolverine received 1.5228 shares of Horizon common stock and $14.00 in cash for each outstanding share of Wolverine common stock.

Wolverine shares outstanding at the closing to be exchanged were 2,129,331, and the shares of Horizon common stock issued to Wolverine shareholders totaled 3,241,045.

Based upon the October 16, 2017 closing price of $19.37 per share of Horizon common stock immediately prior to the effectiveness of the merger, less the consideration used to pay off Wolverine Bancorp’s ESOP loan receivable, the transaction had an implied valuation of approximately $93.8 million.

As a result of the acquisition, the Company was able to increase its loan and deposit base and reduce costs through economies of scale.

This acquisition extended Horizon's reach into Michigan, including Midland and Troy.

On September 1, 2017, Horizon completed the acquisition of Lafayette Community Bancorp, an Indiana corporation (“Lafayette”) and the Bank’s acquisition of Lafayette Community Bank, a state–chartered bank and wholly–owned subsidiary of Lafayette, through mergers effective September 1, 2017.

Under the terms of the Merger Agreement, shareholders of Lafayette received 0.8817 shares of Horizon common stock and $1.73 in cash for each outstanding share of Lafayette common stock.

Lafayette shareholders owning fewer than 100 shares of common stock received $17.25 in cash for each common share.

Lafayette shares outstanding at the closing to be exchanged were 1,856,679, and the shares of Horizon common stock issued to Lafayette shareholders totaled 1,636,888.

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HORIZON BANCORP, INC.

2020 Annual Report on Form 10–K

upon the August 31, 2017 closing price of $17.45 per share of Horizon common stock immediately prior to the effectiveness of the merger, the transaction has an implied valuation of approximately $34.5 million.

As a result of the acquisition, the Company was able to increase its loan and deposit base and reduce costs through economies of scale.

This acquisition expanded Horizon's central Indiana presence, adding Lafayette and West Lafayette.

The Bank maintains 78 full service offices.

10 unchanged sentences

Wolverine Commercial Holdings, LLC currently holds one piece of property but does not otherwise engage in significant business activities.

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

Horizon formed Horizon Bancorp Capital Trust II in 2004 (“Trust II”) and Horizon Bancorp Capital Trust III in 2006 (“Trust III”) for the purpose of participating in pooled trust preferred securities offerings.

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In addition, Financial Technology, or FinTech, start–ups are emerging in key banking areas.

To a more moderate extent, the Bank

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To a more moderate extent, the Bank competes with Chicago money center banks, mortgage banking companies, insurance companies, brokerage houses, other institutions engaged in money market financial services and certain government agencies.

Many non–financial institution competitors face fewer regulatory restrictions and have greater capital.

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

competes with Chicago money center banks, mortgage banking companies, insurance companies, brokerage houses, other institutions engaged in money market financial services and certain government agencies.

Many non–financial institution competitors face fewer regulatory restrictions and have greater capital.

The following table estimates the number of financial institution competitors in Horizon’s primary market areas, along with Horizon’s competitive position in these areas, based on the June 30, 2021 Federal Deposit Insurance Corporation (“FDIC”) Deposit Market Share Report (available at ww w.fdic.gov ):

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Elkhart 16 0.32 % Midland 7 11.68 %

Fountain 4 9.85 % Ottawa 17 0.09 %

Grant 7 7.39 % Saginaw 13 0.74 %

Hamilton 27 0.21 % St.

Fountain 4 8.58 % Oakland 29 0.21 %

Grant 7 6.76 % Ottawa 14 0.42 %

Hamilton 26 0.17 % Saginaw 12 0.81 %

Howard 9 3.23 % St.

Joseph 9 6.38 %

Howard 10 3.35 %

Johnson 20 11.74 %

9 unchanged sentences

Whitley 7 6.90 %

At the time of the FDIC report, Horizon was the largest of the 8 bank and thrift institutions in La Porte County, the largest of the 6 institutions in Carroll County, the second largest of the 21 institutions in Johnson County, the third largest of the 12 institutions in DeKalb County, the third largest of the 6 institutions in Cass County, the fifth largest of the 15 institutions in Tippecanoe County, and the fifth largest of the 11 institutions in Porter County.

In Michigan, Horizon was the second largest of the 8 bank and thrift institutions in Midland County and the fourth largest of the institutions in Berrien County.

At the time of the FDIC report, Horizon was the largest of the eight bank and thrift institutions in La Porte County, the largest of the six institutions in Carroll County, the second largest of the 20 institutions in Johnson County, the third largest of the 12 institutions in DeKalb County, the third largest of the six institutions in Cass County, the fifth largest of the 15 institutions in Tippecanoe County, and the fifth largest of the 11 institutions in Porter County.

In Michigan, Horizon was the second largest of the seven bank and thrift institutions in Midland County and the fourth largest of the institutions in Berrien County.

Regulation and Supervision

2 unchanged sentences

The Federal Reserve may also make examinations and inspections of the Company.

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HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

The Bank, as an Indiana–chartered bank, is subject to extensive regulation, supervision and examination by the Indiana Department of Financial Institutions (“DFI”) as its primary state regulator.

The Bank, as an Indiana–state chartered bank, is subject to extensive regulation, supervision and examination by the Indiana Department of Financial Institutions (“DFI”) as its primary state regulator.

Also, as to certain matters, the Bank is under the supervision of, and subject to examination by, the Federal Deposit Insurance Corporation (“FDIC”) because the FDIC provides deposit insurance to the Bank and is the Bank’s primary federal regulator.

23 unchanged sentences

banking or financial system, the applicant’s performance record under the Community Reinvestment Act and the effectiveness of the subject organizations in combating money laundering activities.

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HORIZON BANCORP, INC.

30 unchanged sentences

The new pricing system eliminates risk

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HORIZON BANCORP, INC.

28 unchanged sentences

banks and bank holding companies (“Basel III”).

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HORIZON BANCORP, INC.

14 unchanged sentences

Horizon’s management believes that, as of December 31, 2021, Horizon and the Bank met all capital adequacy requirements under the Basel III capital rules currently in effect.

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HORIZON BANCORP, INC.

35 unchanged sentences

The Federal Reserve issued a letter dated February 24, 2009, to bank holding companies informing them that it expects bank holding companies to consult with it in advance of declaring dividends that could raise safety and soundness concerns ( i.e.

, such as when the dividend is not supported by earnings or involves a material increase in the dividend rate) and in advance of repurchasing shares of common stock or preferred stock.

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, such as when the dividend is not supported by earnings or involves a material

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

the effect of this letter was revised in December 2015 to become inapplicable to certain large U.S.

increase in the dividend rate) and in advance of repurchasing shares of common stock or preferred stock.

Although the effect of this letter was revised in December 2015 to become inapplicable to certain large U.S.

bank holding companies (generally, those with at least $50 billion in average total consolidated assets), the guidance remains effective for bank holding companies like Horizon.

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Failure to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations relating thereto, could have serious legal and reputational consequences for Horizon and the Bank.

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HORIZON BANCORP, INC.

27 unchanged sentences

The Dodd–Frank Act created the Consumer Financial Protection Bureau (“CFPB”) as an independent bureau within the Federal Reserve System with broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, the Consumer Financial

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HORIZON BANCORP, INC.

28 unchanged sentences

The Federal Housing Finance Board (“FHFB”), an independent agency, controls the FHLB System, including the FHLB of Indianapolis.

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HORIZON BANCORP, INC.

26 unchanged sentences

The privacy provisions of Gramm–Leach affect how consumer information is transmitted through diversified financial services companies and conveyed to outside vendors.

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HORIZON BANCORP, INC.

24 unchanged sentences

It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

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HORIZON BANCORP, INC.

3 unchanged sentences

Horizon cannot predict with certainty whether such legislative or administrative action will be enacted or the extent to which the banking industry in general or Horizon and its affiliates in particular will be affected.

BANK HOLDING COMPANY STATISTICAL DISCLOSURES

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY;

INTEREST RATES AND INTEREST DIFFERENTIAL

Information required by this section of Securities Act Industry Guide 3 is presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as set forth in Item 7 below, herein incorporated by reference.

INVESTMENT PORTFOLIO

The following is a schedule of the amortized cost and fair value of investment securities available for sale and held to maturity.

December 31, 2020 December 31, 2019 December 31, 2018

(dollars in thousands) Amortized

Value Amortized

Available for sale

Treasury and federal agencies $ 19,750 $ 19,715 $ 1,415 $ 1,413 $ 16,815 $ 16,608

State and municipal 803,100 837,843 396,931 405,768 210,386 209,303

Federal agency collateralized mortgage obligations 144,022 147,453 267,272 269,252 187,563 185,003

Federal agency mortgage-backed pools 114,484 118,799 145,623 146,572 183,479 178,736

Corporate notes 9,007 10,215 10,848 11,771 10,666 10,698

Total available for sale 1,090,363 1,134,025 822,089 834,776 608,909 600,348

Total held to maturity 168,676 179,990 207,899 215,147 210,112 208,273

Total investment securities $ 1,259,039 $ 1,314,015 $ 1,029,988 $ 1,049,923 $ 819,021 $ 808,621

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HORIZON BANCORP, INC.

2020 Annual Report on Form 10–K

The following is a schedule of maturities of each category of available for sale and held to maturity debt securities and the related weighted–average yield of such securities as of December 31, 2020:

or Less After One Year

Through Five Years After Five Years

Through Ten Years After Ten Years

(dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield

Available for sale

Treasury and federal agencies (1)

$ — — % $ 12,232 0.55 % $ 7,483 0.86 % $ — — %

State and municipal 44,192 1.22 % 46,127 2.16 % 132,311 2.94 % 615,213 2.65 %

Federal agency collateralized mortgage obligations (2)

— — % 5,785 2.69 % 22,573 2.81 % 119,095 3.28 %

Federal agency mortgage-backed pools (2)

— — % 7,661 2.63 % 51,781 2.53 % 59,357 2.94 %

Corporate notes — — % 4,646 3.11 % 5,308 2.60 % 261 — %

Total available for sale 44,192 1.22 % 76,451 2.05 % 219,456 2.75 % 793,926 2.76 %

Total held to maturity 11,501 3.65 % 45,164 3.65 % 89,856 3.71 % 33,469 3.13 %

Total investment securities $ 55,693 1.72 % $ 121,615 2.64 % $ 309,312 3.03 % $ 827,395 2.78 %

(1) Fair value is based on contractual maturity or call date where a call option exists

(2) Maturity based upon final maturity date

The weighted–average interest rates are based on coupon rates for securities purchased at par value and on effective interest rates considering amortization or accretion if the securities were purchased at a premium or discount.

Yields are not presented on a tax–equivalent basis.

Excluding those holdings of the investment portfolio in Treasury securities and other agencies and corporations of the U.S.

Government, there were no investments in securities of any one issuer that exceeded 10% of the consolidated stockholders’ equity of Horizon at December 31, 2020.

LOAN PORTFOLIO

Types of Loans – Total loans on the balance sheet are comprised of the following classifications for the years indicated.

December 31, December 31, December 31, December 31, December 31,

(dollars in thousands) 2020 2019 2018 2017 2016

Commercial $ 2,192,271 $ 2,046,651 $ 1,721,590 $ 1,669,934 $ 1,069,956

Real estate 624,286 770,717 668,141 609,739 531,874

Mortgage warehouse 395,626 150,293 74,120 94,508 135,727

Consumer 655,200 669,180 549,481 460,999 398,429

Total loans 3,867,383 3,636,841 3,013,332 2,835,180 2,135,986

Allowance for loan losses (57,027) (17,667) (17,820) (16,394) (14,837)

Loans, net $ 3,810,356 $ 3,619,174 $ 2,995,512 $ 2,818,786 $ 2,121,149

Maturities and Sensitivities of Loans to Changes in Interest Rates – The following is a schedule of maturities and sensitivities of loans to changes in interest rates, excluding real estate mortgage, mortgage warehouse and consumer loans, as of December 31, 2020:

(dollars in thousands) One Year

or Less One Through

Five Years After

Five Years Total

Maturing or repricing commercial loans $ 1,439,494 $ 689,366 $ 63,411 $ 2,192,271

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HORIZON BANCORP, INC.

2020 Annual Report on Form 10–K

The following is a schedule of fixed–rate and variable–rate commercial loans due after one year.

(Variable–rate loans are those loans with floating or adjustable interest rates.)

(dollars in thousands) Fixed

Rate Variable

Total commercial loans due after one year $ 254,970 $ 497,807

Risk Elements

Non-accrual, Past Due and Restructured Loans – The following schedule summarizes non–accrual, past due and restructured loans.

December 31, December 31, December 31, December 31, December 31,

(dollars in thousands) 2020 2019 2018 2017 2016

Non–performing loans

More than 90 days past due $ — $ — $ 208 $ — $ 183

Non–accrual 12,714 4,782 6,094 6,902 2,249

Trouble debt restructuring – accruing 168 1,484 109 1 —

Trouble debt restructuring – non–accrual 1,466 1,081 492 451 —

More than 90 days past due 17 1 180 — —

Non–accrual 5,674 7,614 2,846 3,693 2,959

Trouble debt restructuring – accruing 1,381 1,561 1,558 1,672 1,254

Trouble debt restructuring – non–accrual 922 708 423 351 809

Mortgage warehouse

More than 90 days past due — — — — —

Non–accrual — — — — —

Trouble debt restructuring – accruing — — — — —

Trouble debt restructuring – non–accrual — — — — —

More than 90 days past due 245 145 180 167 58

Non–accrual 3,754 3,283 2,608 2,681 2,728

Trouble debt restructuring – accruing 244 309 335 285 238

Trouble debt restructuring – non–accrual 222 217 142 211 205

Total non–performing loans 26,807 21,185 15,175 16,414 10,683

Other real estate owned and repossessed collateral

Commercial 1,908 3,698 1,967 578 542

Real estate — 28 60 200 2,648

Mortgage warehouse — — — — —

Consumer — — 48 60 26

Total other real estate owned and repossessed collateral 1,908 3,726 2,075 838 3,216

Total non–performing assets $ 28,715 $ 24,911 $ 17,250 $ 17,252 $ 13,899

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HORIZON BANCORP, INC.

2020 Annual Report on Form 10–K

(dollars in thousands)

Gross interest income that would have been recorded on non–accrual loans outstanding as of December 31, 2020, in the period if the loans had been current, in accordance with their original terms and had been outstanding throughout the period or since origination if held for part of the period.

Interest income actually recorded on non–accrual loans outstanding as of December 31, 2020, and included in net income for the period.

Interest income not recognized during the period on non–accrual loans outstanding as of December 31, 2020.

Discussion of Non–Accrual Policy

From time to time, the Bank obtains information which may lead management to believe that the collection of payments may be doubtful on a particular loan.

In recognition of such, it is management’s policy to convert the loan from an “earning asset” to a non–accruing loan.

Further, it is management’s policy to place a commercial loan on a non–accrual status when delinquent in excess of 90 days or management has determined that the borrower’s ability to continue to make payments is in doubt.

The officer responsible for the loan, the Executive Vice President and Chief Commercial Banking Officer and the senior commercial loan workout officer must review all loans placed on non–accrual status.

Potential Problem Loans:

Individually evaluated and non–accrual loans for which the discounted cash flows or collateral value exceeded the carrying value of the loan totaled $26.8 million and $21.2 million at December 31, 2020 and 2019.

The allowance for individually evaluated and non–accrual loans included in the Bank’s allowance for credit losses totaled $1.9 million and $541,000 at those respective dates.

The average balance of individually evaluated loans during 2020 and 2019 was $15.3 million and $10.4 million.

Foreign Outstandings:

Loan Concentrations:

As of December 31, 2020, there are no significant concentrations of loans exceeding 10% of total loans.

See Item III A above for a listing of the types of loans by concentration.

Other Interest–Bearing Assets

There are no other interest–bearing assets as of December 31, 2020, which would be required to be disclosed under Item III C.1 or 2 if such assets were loans.

SUMMARY OF LOAN LOSS EXPERIENCE

The following is an analysis of the activity in the allowance for loan losses account:

December 31, December 31, December 31, December 31, December 31,

(dollars in thousands) 2020 2019 2018 2017 2016

Loans outstanding at the end of the period (1)

$ 3,867,383 $ 3,636,841 $ 3,013,332 $ 2,835,180 $ 2,135,986

Average loans outstanding during the period (1)

3,867,112 3,500,649 2,910,741 2,335,126 1,948,580

(1) Net of unearned income and deferred loan fees

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HORIZON BANCORP, INC.

2020 Annual Report on Form 10–K

December 31, December 31, December 31, December 31, December 31,

(dollars in thousands) 2020 2019 2018 2017 2016

Balance at beginning of the period $ 17,667 $ 17,820 $ 16,394 $ 14,837 $ 14,534

Loans, including PCD loans, charged–off:

PCD Commercial 2,105 — — — —

Commercial 653 863 473 629 758

Real estate 204 93 76 89 213

Consumer 2,169 2,312 2,003 1,535 1,689

Total loans, including PCD loans charged–off 5,131 3,268 2,552 2,253 2,660

Recoveries of loans previously charged–off:

Commercial 156 199 176 298 210

Real estate 37 46 27 44 97

Consumer 970 894 869 998 814

Total loan recoveries 1,163 1,139 1,072 1,340 1,121

Net loans, including PCD loans, charged–off 3,968 2,129 1,480 913 1,539

Impact of adopting ASC 326 22,577 — — — —

Provision for credit losses on loans 20,751 1,976 2,906 2,470 1,842

Balance at end of the period $ 57,027 $ 17,667 $ 17,820 $ 16,394 $ 14,837

Percent of net charge–offs, excluding PCD loans, to average loans outstanding for the period 0.05 % 0.06 % 0.05 % 0.04 % 0.08 %

The following schedule is a breakdown of the allowance for loan losses allocated by type of loan and the percentage of loans in each category to total loans.

December 31, 2020 December 31, 2019 December 31, 2018

(dollars in thousands) Allowance

Amount % of Loans to

Total Loans Allowance

Amount % of Loans to

Total Loans Allowance

Amount % of Loans to

Commercial $ 42,210 74 % $ 11,996 68 % $ 10,495 59 %

Real estate 4,620 8 % 923 5 % 1,676 9 %

Mortgage warehousing 1,267 2 % 1,077 6 % 1,006 6 %

Consumer 8,930 16 % 3,671 21 % 4,643 26 %

Unallocated — — — — — —

Total $ 57,027 100 % $ 17,667 100 % $ 17,820 100 %

December 31, 2017 December 31, 2016

(dollars in thousands) Allowance

Amount % of Loans to

Total Loans Allowance

Amount % of Loans to

Commercial $ 9,093 56 % $ 6,579 45 %

Real estate 2,188 13 % 2,090 14 %

Mortgage warehousing 1,030 6 % 1,254 8 %

Consumer 4,083 25 % 4,914 33 %

Unallocated — — — —

Total $ 16,394 100 % $ 14,837 100 %

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HORIZON BANCORP, INC.

2020 Annual Report on Form 10–K

In 1999, Horizon began a mortgage warehousing program.

This program is described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 below and in the Notes to the Consolidated Financial Statements in Item 8 below, which are incorporated herein by reference.

The greatest risk related to these loans is transaction and fraud risk.

During 2020, Horizon processed approximately $5.148 billion in mortgage warehouse loans.

Information required by this section is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 below and in the Consolidated Financial Statements and related Notes in Item 8 below, which are incorporated herein by reference.

RETURN ON EQUITY AND ASSETS

Information required by this section is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 below and in the Consolidated Financial Statements and related Notes in Item 8 below, which are incorporated herein by reference.

VII SHORT TERM BORROWINGS

The following is a schedule of statistical information relative to securities sold under agreements to repurchase which are secured by Treasury and U.S.

Government agency securities and mature within one year.

There were no other categories of short–term borrowings for which the average balance outstanding during the period was 30% or more of stockholders’ equity at the end of the period.

December 31, December 31,

(dollars in thousands) 2020 2019

Outstanding at year–end $ 109,462 $ 90,941

Approximate weighted–average interest rate at year–end 0.23 % 0.70 %

Highest amount outstanding as of any month–end during the year $ 109,500 $ 97,301

Approximate average outstanding during the year 100,200 81,264

Approximate weighted–average interest during the year 0.27 % 0.84 %

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-K

Item 1. Business