What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-09 compared with 2021-02-26 · 318 added, 358 removed, 2187 unchanged (24% of the section changed)

10 unchanged sentences

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Fir m ( PCAOB ID:

Management’s Report on Financial Statements

59 unchanged sentences

Net Interest Income 181,690 170,940 160,791

Credit loss expense 20,751 1,976 2,906

Credit loss expense (recovery) ( 2,084 ) 20,751 1,976

Net Interest Income after Credit Loss Expense 183,774 150,189 158,815

67 unchanged sentences

Stock issued stock plans — — 1,469 — — 1,469

Reclassification of tax adjustment on accumulated other comprehensive loss — — — 766 ( 766 ) —

Cash dividends on common stock ($ 0.40 per share) (Restated – See Note 1)

Stock issued in Salin acquisition — — 102,722 — — 102,722

Repurchase of outstanding common stock — — ( 1,595 ) — — ( 1,595 )

Cash dividends on common stock ($ 0.46 per share)

— — — ( 20,835 ) — ( 20,835 )

2 unchanged sentences

Other comprehensive income, net of tax — — — — 21,420 21,420

Impact of adoption of ASU No.

2016–13 — — — ( 15,635 ) — ( 15,635 )

Amortization of unearned compensation — — 1,206 — — 1,206

2 unchanged sentences

Stock issued stock plans — — 1,233 — — 1,233

Stock issued in Salin acquisition — — 102,722 — — 102,722

Repurchase of outstanding stock — — ( 19,636 ) — — ( 19,636 )

4 unchanged sentences

Other comprehensive income, net of tax — — — — ( 20,507 ) ( 20,507 )

Impact of adoption of ASU No.

2016–13 — — — ( 15,635 ) — ( 15,635 )

Amortization of unearned compensation — — 1,751 — — 1,751

1 unchanged sentence

Stock option expense — — 68 — — 68

Stock issued stock plans — — 1,233 — — 1,233

Stock awards vested — — ( 1,355 ) — — ( 1,355 )

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

Stock retirement plans — — ( 4,742 ) — — ( 4,742 )

Cash dividends on common stock ($ 0.56 per share)

11 unchanged sentences

Items not requiring (providing) cash

Provision for loan losses 20,751 1,976 2,906

Credit loss expense (recovery) ( 2,084 ) 20,751 1,976

Depreciation and amortization 11,169 10,589 9,688

26 unchanged sentences

Death benefit on bank owned life insurance 783 264 580

Purchases of bank owned life insurance — — ( 10,450 )

Net cash received in acquisition of branch 622,179 — —

Net cash received in acquisition, Salin — — 128,745

119 unchanged sentences

Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs.

Accrued interest receivable totaling $ 13.3 million at December 31, 2020 was excluded from the Allowance for Credit Losses (“ACL”) calculation and was reported in accrued interest receivable on the consolidated balance sheet.

Accrued interest receivable totaling $ 11.5 million and $ 13.3 million at December 31, 2021 and 2020 was excluded from the Allowance for Credit Losses (“ACL”) calculation and was reported in accrued interest receivable on the consolidated balance sheet.

Interest income is accrued on the unpaid principal balance.

54 unchanged sentences

Mortgage warehouse loans make up approximately 3 % of the loan portfolio and are secured by residential real estate.

Allowance for Credit Losses on Loans — The ACL on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

Loans are charged off against the allowance when management believes the loan balance is confirmed to be no longer collectible.

Allowance for Credit Losses (“ACL”) on Loans — The ACL on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

Loans are charged off against the ACL when management believes the loan balance is confirmed to be no longer collectible.

Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

74 unchanged sentences

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss.

After completing this assessment, management determined any credit losses as of December 31, 2020 were not material to the consolidated financial statements.

After completing this assessment, management determined any credit losses as of December 31, 2021 and 2020 were not material to the consolidated financial statements.

Premises and Equipment — Buildings and major improvements are capitalized and depreciated using primarily the straight-line method with useful lives ranging from 3 to 40 years.

40 unchanged sentences

The Company records the life insurance at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement.

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase — The Company purchases certain securities, generally U.S.

Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase and Other Secured Borrowings — The Company purchases certain securities, generally U.S.

government–sponsored entity and agency securities, under agreements to resell.

2 unchanged sentences

These agreements are treated as collateralized financing transactions.

These secured borrowings are reflected as liabilities in the accompanying consolidated balance sheets and are recorded at the amount of cash received in connection with the transaction.

These and other secured borrowings such as loans sold not qualifying for sale accounting treatment, are reflected as liabilities in the accompanying consolidated balance sheets and are recorded at the amount of cash received in connection with the transaction.

Short–term securities sold under agreements to repurchase generally mature within one to four days from the transaction date.

32 unchanged sentences

Weighted average common shares outstanding 43,802,733 44,044,737 43,493,316

44,044,737 43,493,316 38,347,059

Basic earnings per share $ 1.99 $ 1.56 $ 1.53

2 unchanged sentences

Weighted average common shares outstanding 43,802,733 44,044,737 43,493,316

44,044,737 43,493,316 38,347,059

Effect of dilutive securities:

3 unchanged sentences

Diluted earnings per share $ 1.98 $ 1.55 $ 1.53

(1) Adjusted for 3:2 stock split on June 15, 2018

There were 140,955 , 278,776 and 120,341 shares for the twelve months ended December 31, 2021, 2020 and 2019, respectively, which were not included in the computation of diluted earnings per share because they were non-dilutive.

On May 15, 2018, the Board of Directors of the Company approved a three–for–two stock split of the Company’s authorized common stock, no par value.

All share and per share amounts in the consolidated financial statements and notes thereto have been retroactively adjusted, where necessary, to reflect this three–for–two stock split.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

effect of the three–for–two stock split on the outstanding common shares is that shareholders of record as of the close of business on May 31, 2018, the record date, received an additional half share for each share of common stock held, with shareholders receiving cash in lieu of any fractional shares.

The additional shares issued in the stock split were payable and issued on June 15, 2018, and the common shares began trading on a split–adjusted basis on June 19, 2018.

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.

12 unchanged sentences

All share–based payments are to be recognized as expense, based upon their fair values, in the financial statements over the vesting period of the awards.

Horizon has recorded approximately $ 1.3 million, $ 920,000 , and $ 626,000 in compensation expense relating to vesting of stock options less estimated forfeitures for the 12–month periods ended December 31, 2020, 2019 and 2018, respectively.

Horizon has recorded approximately $ 1.8 million, $ 1.3 million, and $ 920,000 in compensation expense relating to vesting of stock options less estimated forfeitures for the 12–month periods ended December 31, 2021, 2020 and 2019, respectively.

Derivative Financial Instruments — The Company occasionally enters into derivative financial instruments as part of its interest rate risk management strategies.

108 unchanged sentences

Note 2 – Acquisitions

Branch Acquisition

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.

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

assumptions that are subject to change, the purchase price for the TCF branches is detailed in the following table.

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.

Assets Liabilities

Cash and due from banks $ 4,012 Deposits

Loans Non–interest bearing $ 181,403

Commercial 101,327 NOW accounts 303,050

Residential mortgage 56,499 Savings and money market 262,488

Consumer 54,212 Certificates of deposit 99,468

Total loans 212,038 Total deposits 846,409

Premises and equipment, net 6,901 Interest payable 16

Goodwill 3,334 Other liabilities 1,278

Core deposit intangible 1,630

Interest receivable 519

Other assets 1,102

Total assets purchased $ 229,536 Total liabilities assumed $ 847,703

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.

Salin Bancshares, Inc.

6 unchanged sentences

The Company incurred approximately $ 5.6 million in costs related to the acquisition.

These expenses are classified in the non–interest expense section of the income statement and are primarily located in the data processing, professional fees, outside services and consultants and other expense line

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

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 final purchase price for the Salin acquisition is detailed in the following table.

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

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

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

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.

adjustments will be included in the purchase price allocation prospectively.

The measurement period adjustments will be calculated as if the accounting had been completed as of the acquisition date.

43 unchanged sentences

The following schedule includes pro–forma results for the periods ended December 31, 2020 and 2019 as if the Salin acquisition had occurred as of the beginning of the comparable prior reporting periods.

Years Ended December 31

For the Year Ended

Summary of Operations:

28 unchanged sentences

Federal agency mortgage–backed pools 225,329 1,777 ( 1,032 ) 226,074

Private labeled mortgage–backed pools 31,856 137 ( 376 ) 31,617

Corporate notes 84,579 1,013 ( 773 ) 84,819

1 unchanged sentence

Held to maturity

Treasury and federal agencies $ 195,429 $ 12 $ ( 1,215 ) $ 194,226

State and municipal 862,461 20,719 ( 4,263 ) 878,917

1 unchanged sentence

Federal agency mortgage–backed pools 188,426 151 ( 2,612 ) 185,965

Private labeled mortgage–backed pools 99,958 58 ( 1,840 ) 98,176

Corporate notes 157,687 11 ( 2,456 ) 155,242

Total held to maturity investment securities $ 1,552,443 $ 20,954 $ ( 13,406 ) $ 1,559,991

12 unchanged sentences

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

The Company elected to transfer 319 available for sale (“AFS”) securities with an aggregate fair value of $ 167.1 million to a classification of held to maturity (“HTM”) on April 1, 2014.

The Company elected to transfer 475 AFS securities with an aggregate fair value of $ 490.2 million to a classification of HTM on December 31, 2021.

IN accordance with FASB ASC 320–10–55–24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer.

1 unchanged sentence

Such amounts will be amortized to comprehensive income over the remaining life of the securities.

The fair value of the transferred AFS securities became the book value of the HTM securities at April 1, 2014, with no unrealized gain or loss at this date.

Future reporting periods, with potential changes in market value for these securities, would likely record an unrealized gain or loss for disclosure purposes.

The fair value of the transferred AFS securities

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

became the book value of the HTM securities at December 31, 2021, with no securities, would likely record an unrealized gain or loss for disclosure purposes.

The Company elected to transfer 319 available for sale (“AFS”) securities with an aggregate fair value of $ 167.1 million to a classification of held to maturity (“HTM”) on April 1, 2014.

In accordance with FASB ASC 320–10–55–24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer.

The net unrealized holding gain of $ 1.3 million, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre–tax amount retained in the carrying value of the HTM securities.

Such amounts will be amortized to comprehensive income over the remaining life of the securities.

The fair value of the transferred AFS securities became the book value of the HTM securities at April 1, 2014, with no unrealized gain or loss at this date.

Future reporting periods, with potential changes in market value for these securities, would likely record an unrealized gain or loss for disclosure purposes.

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

10 unchanged sentences

Federal agency mortgage–backed pools 225,329 226,074 114,484 118,799

Private labeled mortgage–backed pools 31,856 31,617 — —

Total available for sale investment securities $ 1,153,611 $ 1,160,812 $ 1,090,363 $ 1,134,025

7 unchanged sentences

Federal agency mortgage–backed pools 188,426 185,965 8,594 8,837

Private labeled mortgage–backed pools 99,958 98,176 — —

Total held to maturity investment securities $ 1,552,443 $ 1,559,991 $ 168,676 $ 179,990

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

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.

8 unchanged sentences

Federal agency collateralized mortgage obligations 56,027 ( 1,032 ) — — 56,027 ( 1,032 )

Federal agency mortgage–backed pools 333,489 ( 3,644 ) — — 333,489 ( 3,644 )

Private labeled mortgage–backed pools 113,057 ( 2,216 ) — — 113,057 ( 2,216 )

Corporate notes 189,500 ( 3,229 ) — — 189,500 ( 3,229 )

Total securities $ 1,500,687 $ ( 21,993 ) $ 35,281 $ ( 1,012 ) $ 1,535,968 $ ( 23,005 )

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

December 31, 2020

7 unchanged sentences

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

Federal agency mortgage–backed pools 24,740 ( 104 ) 37,822 ( 183 ) 62,562 ( 287 )

Total 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 December 31, 2020.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 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 December 31, 2021 and December 31, 2020.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 14.6 million and $ 8.1 million at December 31, 2021 and December 31, 2020, respectively, 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.

10 unchanged sentences

The Company pledges securities to secure retail and corporate repurchase agreements to the Federal Reserve for borrowing availability and as settlements for the fair value of swap agreements.

At December 31, 2020, the Company had pledged $ 115.6 million of fair value or $ 112.2 million of amortized cost, in securities as collateral for $ 109.5 million in repurchase agreements, $ 505.9 million of fair value or $ 471.2 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with no current outstanding borrowings and $ 49.7 million of fair value or $ 48.2 million of amortized cost, in securities as collateral for $ 40.6 million in settlements on the fair value of swap agreements.

Other than Temporary Impairment (“OTTI”) (Prior to January 1, 2020)

Prior to the adoption of ASC 326 as of January 1, 2020, the Company used OTTI guidance in ASC 320 for impairment analysis and recognition.

Under the OTTI model, impairment losses were recognized as a reduction of the cost basis of the investment with recovery of impairment losses recognized prospectively over time as interest income.

At December 31, 2021, the Company had pledged $ 146.5 million of fair value or $ 145.0 million of amortized cost, in securities as collateral for

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

$ 130.8 million in repurchase agreements, $ 479.5 million of fair value or $ 453.6 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with no current outstanding borrowings and $ 37.2 million of fair value or $ 36.6 million of amortized cost, in securities as collateral for $ 7.2 million in settlements on the fair value of swap agreements.

Other than Temporary Impairment (“OTTI”) (Prior to January 1, 2020)

Prior to the adoption of ASC 326 as of January 1, 2020, the Company used OTTI guidance in ASC 320 for impairment analysis and recognition.

Under the OTTI model, impairment losses were recognized as a reduction of the cost basis of the investment with recovery of impairment losses recognized prospectively over time as interest income.

Note 5 – Loans

19 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents total loans outstanding by portfolio class, as of December 31, 2020.

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

2021 December 31,

Owner occupied real estate $ 549,014 $ 496,306

15 unchanged sentences

Net loans $ 3,553,345 $ 3,810,356

As of December 31, 2020, loans originated under the Federal Paycheck Protection Program (“PPP”) totaled approximately $ 208.9 million.

Total loans include net deferred loan fees of $ 1.7 million at December 31, 2020.

As of December 31, 2021 and 2020, loans originated under the Federal Paycheck Protection Program (“PPP”) totaled approximately $ 25.8 million and $ 208.9 million, respectively.

Total loans include net deferred loan costs of $ 1.9 million at December 31, 2021 and net deferred loan fees of $ 1.7 million at December 31, 2020, respectively.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents total loans outstanding, as of December 31, 2019.

Working capital and equipment $ 938,317

Real estate, including agriculture 978,891

Tax exempt 63,571

Total commercial 2,046,651

1-4 family 762,571

Total real estate 770,717

Recreation 16,262

Real estate/home improvement 43,585

Home equity 237,979

Unsecured 7,286

Total consumer 669,180

Mortgage warehouse 150,293

Total loans 3,636,841

Allowance for loan losses ( 17,667 )

Loans, net $ 3,619,174

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

11 unchanged sentences

In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Real Estate and Consumer

18 unchanged sentences

Based on the 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.

Horizon also has the option to request that the mortgage company reacquire an individual mortgage.

Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company.

Also, in the event that the end investor would not be able to honor the purchase commitment and the mortgage company would not be able to reacquire its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

also has the option to request that the mortgage company reacquire an individual mortgage.

Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company.

Non–performing Loans

73 unchanged sentences

Total $ 3,582,467 $ 7,892 $ 644 $ 145 $ 8,681 $ 3,591,148

Percentage of total loans 99.81 % 0.11 % 0.07 % 0.01 % 0.19 % 100.00 %

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents the payment status by class of loans at December 31, 2019:

The following table presents the payment status by class of loans, excluding non–accrual loans of $ 22.1 million and non–performing TDRs $ 2.6 million of at December 31, 2020:

December 31, 2020

2 unchanged sentences

Past Due 90 Days or

Past Due Non–accrual

Non–performing

TDRs Total Past Due

Past Due Total Past Due Total

Owner occupied real estate $ 484,282 $ 683 $ 130 $ — $ 813 $ 485,095

13 unchanged sentences

Total $ 3,835,431 $ 4,415 $ 2,523 $ 262 $ 7,200 $ 3,842,631

Percentage of total loans 99.30 % 0.20 % 0.01 % — % 0.49 % 0.70 % 100.00 %

The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

3 unchanged sentences

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

At December 31, 2020, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances.

At December 31, 2021 and 2020, the type of concessions the Company has made on restructured loans has 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 December 31, 2021, the Company had $ 3.9 million in TDRs and $ 2.4 million were performing according to the restructured terms and five TDRs were returned to accrual status during 2021.

As of December 31, 2020, the Company had $ 4.4 million in TDRs and $ 1.8 million were performing according to the restructured terms and one TDR was returned to accrual status during 2020.

There were no specific reserves allocated to TDRs at December 31, 2020

There were no specific reserves allocated to TDRs at December 31, 2021 or 2020 based on the discounted cash flows or, when appropriate, the fair value of the collateral.

These TDRs are exclusive of loans modified under the CARES Act during 2021.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

based on the discounted cash flows or, when appropriate, the fair value of the collateral.

These TDRs are exclusive of loans modified under the CARES Act during 2020.

The following table presents TDRs by loan portfolio:

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

At December 31, 2021 and 2020, the Bank modified loans totaling $ 10.9 million and $ 126.7 million, respectively, which qualify for treatment under the CARES Act.

Collateral Dependent Financial Assets

8 unchanged sentences

(Table dollars in thousands except for per share data)

The table below presents the amortized cost basis and ACL allocated for collateral dependent loans in accordance with ASC326, which are individually evaluated to determine expected credit losses as of December 31, 2020.

The tables below present the amortized cost basis and ACL allocated for collateral dependent loans in accordance with ASC326, which are individually evaluated to determine expected credit losses, at December 31, 2021 and 2020.

December 31, 2021

Real Estate Accounts Receivable/Equipment Other Total ACL Allocation

5 unchanged sentences

Total collateral dependent loans $ 14,615 $ 1,321 $ — $ 15,936 $ 760

December 31, 2020

Real Estate Accounts Receivable/Equipment Other Total ACL Allocation

Owner occupied real estate $ 11,309 $ 114 $ — $ 11,423 $ 1,605

Non–owner occupied real estate 1,032 — — 1,032 —

Development & spec land 70 — — 70 —

Commercial and industrial 2,245 210 — 2,455 252

Total commercial 14,656 324 — 14,980 1,857

Total collateral dependent loans $ 14,656 $ 324 $ — $ 14,980 $ 1,857

Credit Quality Indicators

10 unchanged sentences

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 Loan and Lease Losses.

The information reviewed in this meeting acts as a

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.

For residential real estate and consumer loans, Horizon uses a grading system based on delinquency.

3 unchanged sentences

Loans not graded Substandard are considered Pass.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Horizon Bank employs a nine–grade rating system to determine the credit quality of commercial loans.

23 unchanged sentences

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Risk Grade 4 Satisfactory/Monitored:

10 unchanged sentences

These loans require an increased level of loan officer supervision and monitoring to assure that any deterioration is addressed in a timely fashion.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Commercial construction loans are graded as 4W Management Watch until the projects are completed and stabilized.

21 unchanged sentences

• The borrower meets defined key financial metric ranges.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Risk Grade 7:

8 unchanged sentences

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

Commercial loans modified due to the impact of the COVID–19 pandemic were immediately downgraded one level resulting in the increase of Special Mention commercial loans from December 31, 2019 to December 31, 2020.

HORIZON BANCORP, INC.

71 unchanged sentences

The following table presents loans by credit grades at December 31, 2020.

December 31, 2019

Mention Substandard Doubtful Total

December 31, 2020 2020 2019 2018 2017 2016 Prior Revolving

Owner occupied real estate

Pass $ 57,726 $ 65,558 $ 49,455 $ 49,032 $ 47,480 $ 127,373 $ 40,027 $ 436,651

Special Mention — 1,081 5,928 10,205 4,207 12,787 325 34,533

Substandard 1,021 1,231 4,012 2,504 2,839 9,673 3,842 25,122

Doubtful — — — — — — — —

Total owner occupied real estate $ 58,747 $ 67,870 $ 59,395 $ 61,741 $ 54,526 $ 149,833 $ 44,194 $ 496,306

Non–owner occupied real estate

Pass $ 115,667 $ 120,023 $ 73,669 $ 133,396 $ 99,674 $ 208,649 $ 166,986 $ 918,064

Special Mention 862 1,236 28,723 1,298 2,548 13,182 4,072 51,921

Substandard — 15,552 1,477 107 6,422 4,521 1,572 29,651

Doubtful — — — — — — — —

Total non–owner occupied real estate $ 116,529 $ 136,811 $ 103,869 $ 134,801 $ 108,644 $ 226,352 $ 172,630 $ 999,636

Residential spec homes

Pass $ 737 $ 237 $ — $ 298 $ 368 $ 1,177 $ 7,253 $ 10,070

Special Mention — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total residential spec homes $ 737 $ 237 $ — $ 298 $ 368 $ 1,177 $ 7,253 $ 10,070

Development & spec land

Commercial and industrial 468,893 18,652 18,314 — 505,859

Pass $ 573 $ 736 $ 1,522 $ 2,461 $ 672 $ 11,971 $ 6,907 $ 24,842

Special Mention — — — — — 274 — 274

Substandard — — — — — 506 750 1,256

Doubtful — — — — — — — —

Total development & spec land $ 573 $ 736 $ 1,522 $ 2,461 $ 672 $ 12,751 $ 7,657 $ 26,372

Commercial & industrial

Pass $ 253,953 $ 63,772 $ 58,978 $ 88,121 $ 26,044 $ 70,706 $ 30,845 $ 592,419

Special Mention 8,779 1,164 1,088 9,306 1,835 11,870 3,040 37,082

Substandard 4,233 7,079 11,072 1,660 636 3,322 2,384 30,386

Doubtful — — — — — — — —

Total commercial & industrial 266,965 72,015 71,138 99,087 28,515 85,898 36,269 659,887

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

December 31, 2020 2020 2019 2018 2017 2016 Prior Revolving

Residential mortgage

Performing $ 109,487 $ 68,556 $ 86,572 $ 89,051 $ 65,718 $ 171,322 $ — $ 590,706

Non–performing — 296 636 39 300 6,723 — 7,994

Total residential mortgage $ 109,487 $ 68,852 $ 87,208 $ 89,090 $ 66,018 $ 178,045 $ — $ 598,700

Residential construction

Performing $ — $ — $ — $ — $ — $ — $ 25,586 $ 25,586

Non–performing — — — — — — — —

Total residential construction $ — $ — $ — $ — $ — $ — $ 25,586 $ 25,586

Mortgage warehouse

Performing $ — $ — $ — $ — $ — $ — $ 395,626 $ 395,626

Non–performing — — — — — — — —

Total mortgage warehouse — — — — — — 395,626 395,626

Total real estate $ 109,487 $ 68,852 $ 87,208 $ 89,090 $ 66,018 $ 178,045 $ 421,212 $ 1,019,912

December 31, 2020 2020 2019 2018 2017 2016 Prior Revolving

Direct installment

Performing $ 12,552 $ 9,552 $ 5,828 $ 5,946 $ 2,124 $ 2,019 $ 12 $ 38,033

Non–performing — — — 5 3 5 — 13

Total direct installment $ 12,552 $ 9,552 $ 5,828 $ 5,951 $ 2,127 $ 2,024 $ 12 $ 38,046

Indirect installment

Home equity 273,665 — 2,550 — 276,215

Performing $ 134,394 $ 97,408 $ 74,215 $ 36,763 $ 8,636 $ 4,801 $ — $ 356,217

Non–performing 84 223 392 361 80 154 — 1,294

Total indirect installment $ 134,478 $ 97,631 $ 74,607 $ 37,124 $ 8,716 $ 4,955 $ — $ 357,511

Performing $ 63,946 $ 42,762 $ 34,807 $ 27,553 $ 22,450 $ 59,503 $ 5,464 $ 256,485

Non–performing — 9 111 74 121 1,237 1,606 3,158

Total home equity 63,946 42,771 34,918 27,627 22,571 60,740 7,070 259,643

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

Total $ 3,541,122 $ 34,804 $ 58,670 $ — $ 3,634,596

Percentage of total loans 97.43 % 0.96 % 1.61 % 0.00 % 100.00 %

Accounting for Certain Loans Acquired in a Transfer (Prior to January 1, 2020)

1 unchanged sentence

Accordingly, upon reassessment at January 1, 2020, the disclosures as previously required under ASC 310–30 are no longer applicable for the year ended December 31, 2020.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The Company acquired loans in acquisitions with evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

6 unchanged sentences

Credit marks are evaluated using the practical expedient method.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The carrying amounts of those loans included in the balance sheet amounts of loans receivable as of December 31, 2019 are as follows:

December 31, 2019

Commercial Real

Estate Consumer Outstanding

Balance Allowance

Losses Carrying

Heartland $ 197 $ 99 $ — $ 296 $ — $ 296

Summit 88 473 — 561 — 561

Peoples 229 35 — 264 — 264

Kosciusko 244 131 — 375 — 375

LaPorte 353 793 20 1,166 — 1,166

Lafayette 1,867 — — 1,867 — 1,867

Wolverine 2,289 — — $ 2,289 — 2,289

Salin 4,938 1,912 962 7,812 133 7,679

Total $ 10,205 $ 3,443 $ 982 $ 14,630 $ 133 $ 14,497

Accretable yield, or income expected to be collected for the year ended December 31, 2019 are as follows:

11 unchanged sentences

Total $ 2,652 $ 2,002 $ ( 1,203 ) $ — $ ( 545 ) $ 2,906

During the year ended December 31, 2019, the Company increased the allowance for loan losses by a charge to the income statement of $ 133,000 , respectively.

During the year ended December 31, 2019, the Company increased the allowance for loan losses by a charge to the income statement of $ 133,000 .

No allowance for loan losses were reversed for the year ended December 31, 2019.

3 unchanged sentences

(Table dollars in thousands except for per share data)

Impaired Loans (Prior to January 1, 2020)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, and based on impairment analysis as of December 31, 2019 :

December 31, 2019

Commercial Real

Estate Mortgage

Warehousing Consumer Total

Allowance For Loan Losses

Ending allowance balance attributable to loans:

Individually evaluated for impairment $ 541 $ — $ — $ — $ 541

Collectively evaluated for impairment 11,455 923 1,077 3,671 17,126

Loans acquired with deteriorated credit quality — — — — —

Total ending allowance balance $ 11,996 $ 923 $ 1,077 $ 3,671 $ 17,667

Individually evaluated for impairment $ 7,347 $ — $ — $ — $ 7,347

Collectively evaluated for impairment 2,040,299 770,705 150,293 665,952 3,627,249

Loans acquired with deteriorated credit quality — — — — —

Total ending loans balance $ 2,047,646 $ 770,705 $ 150,293 $ 665,952 $ 3,634,596

The following table presents commercial loans individually evaluated for impairment by class of loans:

December 31, 2019

Twelve Months Ended

Balance Recorded

Investment Allowance for

Allocated Average

Loans Cash/Accrual

With no recorded allowance

Owner occupied real estate $ 3,192 $ 3,193 $ — $ 3,608 $ 246

Non-owner occupied real estate 937 937 — 2,810 98

Residential spec homes — — — — —

Development & spec land 73 73 — 158 —

Commercial and industrial 1,859 1,861 — 2,464 100

Total commercial 6,061 6,064 — 9,040 444

With an allowance recorded

Owner occupied real estate — — — — —

Non-owner occupied real estate 119 119 25 130 —

Residential spec homes — — — — —

Development & spec land — — — — —

Commercial and industrial 1,167 1,168 516 1,225 46

Total commercial 1,286 1,287 541 1,355 46

Total $ 7,347 $ 7,351 $ 541 $ 10,395 $ 490

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

December 31, 2018

Twelve Months Ended

Loans Cash/Accrual

With no recorded allowance

Owner occupied real estate $ 3,168 $ 77

Non–owner occupied real estate 1,096 12

Residential spec homes — —

Development & spec land 71 —

Commercial and industrial 1,119 21

Total commercial 5,454 110

With an allowance recorded

Owner occupied real estate 864 —

Non–owner occupied real estate 180 4

Residential spec homes — —

Development & spec land — —

Commercial and industrial 870 14

Total commercial 1,914 18

Total $ 7,368 $ 128

Note 6 – 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 twelve months ended December 31, 2020.

The following table represents, by loan portfolio segment, a summary of changes in the ACL on loans for the twelve months ended December 31, 2021 and 2020.

Twelve Months Ended December 31, 2021

1 unchanged sentence

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

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

Provision for credit losses on loans 19,198 ( 184 ) 190 1,547 20,751

Credit loss expense (recovery) ( 1,320 ) ( 755 ) ( 208 ) 199 ( 2,084 )

PCD loans charge–offs 984 — — — 984

2 unchanged sentences

Balance, end of period $ 40,775 $ 3,856 $ 1,059 $ 8,596 $ 54,286

Twelve Months Ended December 31, 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 10,832 4,048 — 4,911 19,791

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

Credit loss expense (recovery) 19,198 ( 184 ) 190 1,547 20,751

PCD loan charge–offs ( 2,105 ) — — — ( 2,105 )

Charge–offs ( 653 ) ( 204 ) — ( 2,169 ) ( 3,026 )

Recoveries 156 37 — 970 1,163

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

The Company utilized the Cumulative Loss Rate method in determining expected future credit losses.

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 Consolidated Financial Statements

(Table dollars in thousands except for 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.

7 unchanged sentences

The Company’s CECL estimate applies to a forecast that incorporates macroeconomic trends and other environmental factors.

Management utilized National, Regional and Local Leading Economic Indexes, as well as management judgment, as the basis for the forecast period.

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

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

financial asset type, loan purpose, collateral type, loan characteristics, credit characteristics, outstanding loan balances, contractual terms and prepayment assumptions, industry of the borrower and concentrations, and historical or expected credit loss patterns.

The $20.8 million ACL provision included special allocations related to the potential impact due to the nature and characteristics on certain loan types including, non–owner occupied retail, leisure and hospitality, and unstabilized commercial real estate while continuing allocations for hotels and restaurants, as a result of the COVID–19 business restrictions implemented by the Federal Government and the states in which Horizon operates (Indiana and Michigan).

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

Allowance for Loan Losses (Prior to January 1, 2020)

Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using the incurred loss methodology.

The following tables are disclosures relating to the allowance for loan losses in prior periods.

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior one to five years.

Management believes using the highest of the one, two or five–year historical loss experience is an appropriate methodology in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed.

The actual allowance for loan loss activity is provided below.

Years Ended December 31

Balance at beginning of the period $ 17,820 $ 16,394

Loans charged–off:

Owner occupied real estate 41 109

Non–owner occupied real estate 64 —

Residential spec homes 3 —

Development & spec land — —

Commercial and industrial 755 364

Total commercial 863 473

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Residential mortgage 93 76

Residential construction — —

Mortgage warehouse — —

Total real estate 93 76

Direct installment 208 154

Indirect installment 1,785 1,673

Home equity 319 176

Total consumer 2,312 2,003

Total loans charged–off 3,268 2,552

Recoveries of loans previously charged–off:

Owner occupied real estate — 55

Non–owner occupied real estate 15 33

Residential spec homes 5 8

Development & spec land — —

Commercial and industrial 179 80

Total commercial 199 176

Residential mortgage 46 27

Residential construction — —

Mortgage warehouse — —

Total real estate 46 27

Direct installment 97 53

Indirect installment 661 505

Home equity 136 311

Total consumer 894 869

Total loan recoveries 1,139 1,072

Net loans charged–off 2,129 1,480

Provision charged to operating expense

Commercial 2,165 1,699

Real estate ( 635 ) ( 487 )

Consumer 446 1,694

Total provision charged to operating expense 1,976 2,906

Balance at the end of the period $ 17,667 17,820

Management utilized National, Regional and Local Leading Economic Indexes, as well as

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, and based on impairment analysis as of December 31, 2019 :

December 31, 2019

Commercial Real

Estate Mortgage

Warehousing Consumer Total

Allowance For Loan Losses

Ending allowance balance attributable to loans:

Individually evaluated for impairment $ 541 $ — $ — $ — $ 541

Collectively evaluated for impairment 11,455 923 1,077 3,671 17,126

Loans acquired with deteriorated credit quality — — — — —

Total ending allowance balance $ 11,996 $ 923 $ 1,077 $ 3,671 $ 17,667

Individually evaluated for impairment $ 7,347 $ — $ — $ — $ 7,347

Collectively evaluated for impairment 2,040,299 770,705 150,293 665,952 3,627,249

Loans acquired with deteriorated credit quality — — — — —

Total ending loans balance $ 2,047,646 $ 770,705 $ 150,293 $ 665,952 $ 3,634,596

management judgment, as the basis for the forecast period.

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

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

Note 7 – Premises and Equipment

14 unchanged sentences

Mortgage servicing rights are included in other assets on the balance sheets as of December 31, 2021 and 2020.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

2021 December 31

11 unchanged sentences

Mortgage servicing rights, net $ 15,186 $ 12,472 $ 14,327

During 2021 the Bank recorded a recovery of impairment of approximately $ 2.6 million.

During 2020 and 2019 the Bank recorded additional impairment of approximately $ 4.5 million and $ 192,000 , respectively.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 9 – Goodwill and Intangible Assets

16 unchanged sentences

For additional details related to impairment testing, see the “Goodwill and Intangible Assets” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Item 7 of this Annual Report on Form 10–K.

On March 26, 2019, the Salin acquisition resulted in goodwill of $ 31.2 million.

On September 17, 2021, the TCF branch acquisition resulted in goodwill of $ 3.3 million.

As a result of the acquisition of American Trust & Savings Bank in 2010;

4 unchanged sentences

Lafayette and Wolverine in 2017;

and Salin in 2019;

Salin in 2019;

and TCF in 2021;

the Company has recorded certain amortizable intangible assets related to core deposit intangibles.

1 unchanged sentence

Amortizable intangible assets are summarized as follows:

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

December 31, 2021 December 31, 2020

5 unchanged sentences

Core deposit intangible $ 42,220 $ ( 21,279 ) $ 40,590 $ ( 17,635 )

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Amortization expense for intangible assets totaled $ 3.9 million, $ 3.8 million, and $ 3.5 million for the years ended December 31, 2021, 2020 and 2019.

20 unchanged sentences

Options to extend a lease were considered in the remaining lease term determination.

The lease expense for operating leases was $ 540,000

The lease expense for operating leases was $ 484,000 for the year ended December 31, 2021.

The weighted average remaining life of leases was 4.5 years at December 31, 2021.

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

for the year ended December 31, 2020.

The weighted average remaining life of leases was 5.4 years at December 31, 2020.

Future minimum operating lease payments under non-cancellable leases with initial or remaining lease terms at December 31, 2021 were as follows:

27 unchanged sentences

2021 December 31

Federal Home Loan Bank advances, variable and fixed rates ranging from 0.24 % to 4.90 %, due at various dates through March 4, 2030

Federal Home Loan Bank advances, variable and fixed rates ranging from 0.01 % to 4.90 %, due at various dates through July 23, 2031

$ 525,484 $ 365,538

Securities sold under agreements to repurchase 130,798 109,462

Federal funds purchased — 68,000

Secured borrowings 19,471 —

Total borrowings $ 675,753 $ 475,000

The Federal Home Loan Bank advances are secured by first and second mortgage loans and mortgage warehouse loans totaling approximately $ 1.0 billion.

The Federal Home Loan Bank advances are secured by first and second mortgage loans, commercial real estate loans and mortgage warehouse loans totaling approximately $ 830.8 million.

Advances are subject to restrictions or penalties in the event of prepayment.

At December 31, 2021, the Bank had a total of $ 425.0 million in putable advances.

The call dates for these advances range from February 1, 2021 to October 24, 2022 even though maturity dates extend beyond those dates.

At December 31, 2020, the Bank had available approximately $ 1.0 billion in credit lines with various money center banks, including the FHLB.

The call dates for these advances range from January 24, 2022 to October 24, 2022 even though maturity dates extend beyond those dates.

At December 31, 2021, the Bank had available approximately $ 672.7 million in credit lines with various money center banks, including the FHLB.

Contractual maturities in years ending December 31 are as follows:

23 unchanged sentences

Federal agency mortgage–backed pools 98,474 — — — — — 98,474

Private labeled mortgage–backed pools 16,639 — — — — — 16,639

Total $ 146,485 $ — $ — $ — $ — $ — $ 146,485

89 unchanged sentences

Total cash contributions and expense recorded for the ESOP was $ 0 in 2021, $ 591,000 in 2020 and $ 719,000 in 2019.

The ESOP, which is not leveraged, owns a total of 1,399,383 shares of Horizon’s stock or 3.2 % of the outstanding shares as of December 31, 2020.

The ESOP, which is not leveraged, owned a total of 740,113 shares of Horizon’s stock or 1.7 % of the outstanding shares as of December 31, 2021.

Horizon's ESOP was terminated on July 1, 2021.

The Internal Revenue Service issued a favorable determination letter on October 29, 2021, and the Plan is in the process of distributing the assets to participants which is expected to be completed by the second quarter of 2022.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 17 – Employee Benefit Plans

4 unchanged sentences

The Bank’s expense related to the Plan totaled approximately $ 1.5 million in 2021, $ 1.4 million in 2020 and $ 1,200,000 in 2019.

The Plan owned a total of 842,396 shares of Horizon’s stock or 1.9 % of the outstanding shares as of December 31, 2021.

The Pentegra Defined Benefit Plan (“Pentegra Plan”), acquired from the Peoples acquisition, was terminated in April of 2020.

The Pentegra Plan was transferred into annuity contracts and will no longer be administered by the Company.

The termination liability was $ 3.4 million, which the Company recorded a $ 2.9 million withdrawal liability resulting in an additional termination expense in 2020 of $ 460,000 .

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

The Plan owns a total of 851,388 shares of Horizon’s stock or 1.9 % of the outstanding shares as of December 31, 2020.

The Pentegra Defined Benefit Plan (“Pentegra Plan”), acquired from the Peoples acquisition, was terminated in April of 2020.

The Pentegra Plan was transferred into annuity contracts and will no longer be administered by the Company.

The termination liability was $ 3.4 million, which the Company recorded a $ 2.9 million withdrawal liability resulting in an additional termination expense in 2020 of $ 460,000 .

Note 18 – Income Tax

18 unchanged sentences

Actual tax expense $ 15,356 $ 9,870 $ 13,303

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

2021 December 31

2 unchanged sentences

Director and employee benefits 2,094 2,035

Accrued pension — 775

Other 1,785 3,139

9 unchanged sentences

Net deferred tax asset/(liability) $ 3,328 $ 188

As of December 31, 2020, the Company had approximately $ 50,000 of state tax loss available to offset future franchise taxable income.

The state loss carryforward begins to expire in 2023 .

Due to these losses being incurred by acquired institutions, prior to the acquisitions by Horizon, the annual losses which can be used are subject to an annual limitation.

Management believes that the Company will be able to fully utilize the state loss carryforwards within the allotted time periods, and reversed the valuation allowance in 2019 previously recorded for the possible inability to use a portion of the carryforwards.

Retained earnings of the Bank include approximately $ 12.8 million for which no deferred income tax liability has been recognized.

1 unchanged sentence

Reductions of amounts so allocated for purposes other than tax bad debt losses including redemption of bank stock or excess dividends, or loss of “bank” status would create income for tax purposes only, which would be subject to the then-current corporate income tax rate.

The unrecorded deferred income tax liability on the above amount for the Company was approximately $ 2.7 million at December 31, 2020.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

unrecorded deferred income tax liability on the above amount for the Company was approximately $ 2.7 million at December 31, 2021.

The Company files income tax returns in the U.S.

11 unchanged sentences

Total accumulated other comprehensive income $ 7,345 $ 27,852

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 20 – Commitments, Off–Balance Sheet Risk and Contingencies

5 unchanged sentences

The Bank follows the same credit policy to make such commitments as is followed for those loans recorded in the financial statements.

At December 31, 2020 and 2019, commitments to make loans amounted to approximately $ 917.4 million and $ 958.7 million and commitments under outstanding standby letters of credit amounted to approximately $ 12.4 million and $ 17.3 million.

At December 31, 2021 and 2020, commitments to make loans amounted to approximately $ 1.3 billion and $ 917.4 million and commitments under outstanding standby letters of credit amounted to approximately $ 12.7 million and $ 12.4 million.

Since many commitments to make loans and standby letters of credit expire without being used, the amount does not necessarily represent future cash advances.

3 unchanged sentences

Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 21 – Regulatory Capital

92 unchanged sentences

All share data has been adjusted for the 3:2 stock split on June 15, 2018 and November 14, 2016.

The restricted shares can vest over a period of time established by the Committee at the time of each grant, but the restricted shares already granted under the 2013 Plan generally vest at the end of three, four or five years of continuous employment.

Holders of restricted shares receive dividends and may vote the shares.

The restricted

HORIZON BANCORP, INC.

2 unchanged sentences

(Table dollars in thousands except for per share data)

shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity.

Holders of restricted shares receive dividends and may vote the shares.

The restricted shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity.

The cost of these shares is being amortized against earnings using the straight–line method over the vesting period.

4 unchanged sentences

The fair value of options granted is estimated on the date of the grant using an option–pricing model with the following weighted–average assumptions:

Years Ended December 31

For the Year Ended

Dividend yields 2.39 %

1 unchanged sentence

Risk-free interest rates 2.61 %

Expected life of options 8 years 8 years

Expected life of options 8 years

A summary of option activity under the 2013 Plan as of December 31, 2021, and changes during the year then ended, is presented below:

8 unchanged sentences

The weighted average grant–date fair value of options granted during the years 2021, 2020 and 2019 was $ 0.00 , $ 0.00 and $ 4.44 .

On January 19, 2021, the Board of Directors adopted the Horizon Bancorp 2021 Omnibus Equity Incentive Plan (“2021 Plan”), which was approved by the Company’s shareholders on May 6, 2021.

Under the 2021 Plan, Horizon may issue up to 1,787,548 common shares, plus the number of shares that are tendered to or withheld by Horizon in connection with the exercise of options plus that number of shares that are purchased by Horizon with the cash proceeds received upon option exercises.

The Committee is authorized to grant any type of award to a participant that is consistent with the provisions of the 2021 Plan.

Awards may consist of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, performance units, performance shares or any combination of these awards.

The Committee determines the provisions, terms and conditions of each award.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The restricted shares can vest over a period of time established by the Committee at the time of each grant, but the restricted shares already granted under the 2021 Plan generally vest at the end of three, four or five years of continuous employment.

Holders of restricted shares receive dividends and may vote the shares.

The restricted shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity.

The cost of these shares is being amortized against earnings using the straight–line method over the vesting period.

The performance shares that are awarded become earned and vested based on the achievement of certain performance goals during a performance period as established by the Committee at the time of each grant.

The performance goals under the presently–awarded grant agreements are based on a comparison of the Company’s average performance over the performance period for the return on common equity, compounded annual growth rate of total assets, and return on average assets, all as relative to the average performance for publicly traded banks with total assets between $ 3 billion and $ 7 billion on the SNL Bank Index.

Holders of performance awards receive pass–through dividends but do not have any voting rights before the performance shares are earned and vested.

The option shares granted under the 2021 Plan vest at a rate designated per the individual agreements.

A summary of the status of Horizon’s non–vested restricted and performance shares as of December 31, 2021 are presented below:

5 unchanged sentences

Non–vested,end of year 423,309 14.78

Total compensation cost recognized in the income statement for option–based payment arrangements during 2020 was $ 0 and the related tax benefit recognized was approximately $ 0 as no stock options were granted.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

compensation cost recognized in the income statement for option–based payment arrangements during 2019 and 2018 was $ 215,000 and $ 251,000 and the related tax benefit recognized was $ 45,000 and $ 53,000 , respectively.

Total compensation cost recognized in the income statement for restricted share and performance share based payment arrangements during 2020, 2019 and 2018 was $ 1.2 million, $ 705,000 , and $ 376,000 .

Total compensation cost recognized in the income statement for option–based payment arrangements during 2021 and was $ 68,000 and the related tax benefit recognized was approximately $ 14,000 .

Total compensation cost recognized in the income statement for option–based payment arrangements during 2020 and 2019 was $ 132,000 and $ 215,000 and the related tax benefit recognized was $ 28,000 and $ 45,000 , respectively.

No stock options were granted during 2021 or 2020.

Total compensation cost recognized in the income statement for restricted share and performance share based payment arrangements during 2021, 2020 and 2019 was $ 1.8 million, $ 1.2 million, and $ 705,000 .

The recognized tax benefit related thereto was approximately $ 368,000 , $ 253,000 , and $ 148,000 for the years ended December 31, 2021, 2020 and 2019.

Cash received from option exercise under all share–based payment arrangements for the years ended December 31, 2020, 2019 and 2018 was $ 255,000 , $ 236,000 , and $ 493,000 .

Cash received from option exercise under all share–based payment arrangements for the years ended December 31, 2021, 2020 and 2019 was $ 1.1 million, $ 255,000 , and $ 236,000 .

The actual tax benefit realized for the tax deductions from option exercise of the share–based payment arrangements totaled $ 334,000 , $ 59,000 , and $ 104,000 , for the years ended December 31, 2021, 2020 and 2019.

2 unchanged sentences

Under all plans, forfeitures of share–based compensation grants are recognized as they occur.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Note 23 – 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 weighted average fixed rate of 4.20 % on a notional amount of $ 12.0 million at December 31, 2020 and at a weighted average fixed rate of 4.03 % on a notional amount of $ 15.5 million at December 31, 2019.

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

The Company assumed additional interest rate swap agreements as the result of the LaPorte acquisition in July 2016.

The agreements provide for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a weighted average fixed rate of 2.62 % on a notional amount of $ 10.0 million at December 31, 2020 and at a weighted average rate of 2.31 % on a notional amount of $ 30.0 million at December 31, 2019.

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

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 an interest rate swap agreement for a portion of its floating rate debt which matured on December 16, 2021.

The agreement provided for the Company to receive interest from the counterparty at three months LIBOR and to pay interest to the counterparty at a weighted average fixed rate of 4.20 % on a notional amount of $ 12.0 million at December 31, 2020.

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

The Company assumed an additional interest rate swap agreement as the result of the LaPorte acquisition in July 2016 which matured on March 15, 2021.

The agreement provided for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a weighted average rate of 2.62 % on a notional amount of $ 10.0 million at December 31, 2020.

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

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

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To mitigate the risk of changes in fair value based on fluctuations in interest rates, the Company has entered into interest rate swap agreements on individual loans, converting the fixed rate loans to a variable rate.

At December 31, 2020, the Company’s fair value

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

At December 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.

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

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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 Consolidated Financial Statements

(Table dollars in thousands except for per share data)

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

76 unchanged sentences

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.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include state and municipal securities, U.S.

Government–sponsored mortgage–backed securities and corporate securities.

Level 3 fair value for securities was determined using grid pricing that incorporates market estimates based on interest rates, maturity dates, coupon rates and ratings.

Level 3 fair value for securities that have little to no market activity can also be priced at book value for lack of another reasonable pricing source or methodology.

Certain fixed rate loans have been converted to variable rate loans by entering into interest rate swap agreements.

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Federal agency mortgage–backed pools 226,074 — 226,074 —

Private labeled mortgage–backed pools 31,617 — 31,617 —

Corporate notes 84,819 — 79,787 5,032

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Interest rate swap agreements liability ( 18,092 ) — ( 18,092 ) —

Commitments to originate loans ( 238 ) — ( 238 ) —

HORIZON BANCORP, INC.

18 unchanged sentences

Interest rate swap agreements liability ( 43,631 ) — ( 43,631 ) —

Commitments to originate loans ( 38 ) — ( 38 ) —

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable Level 3 inputs for the year ended December 31, 2021.

Available for Sale Securities

Years Ended December 31

Beginning balance $ —

Included in other comprehensive income ( 134 )

Purchases, issuances and settlements 125,630

Principal payments —

Ending balance $ 125,496

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

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Certain other assets are measured at fair value on a nonrecurring basis in the ordinary course of business and are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment):

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Value Quoted Prices in

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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.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

Mortgage Servicing Rights (MSRs):

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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 were reduced by $ 5.2 million in 2020 and $ 719,000 in 2019 for the fair value.

The carrying amount of the MSRs were reduced by $ 2.6 million in 2021 and $ 5.2 million in 2020 for the fair value.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Table dollars in thousands except for per share data)

The following table presents qualitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at December 31, 2021 and 2020.

3 unchanged sentences

(Weighted Average)

State and municipal securities $ 120,464 Grid pricing Maturity date,

Weighted average coupon 1 month– 16 years,

Corporate securities 5,032 Grid pricing Maturity date,

Weighted average coupon 9 years– 17 years,

Collateral dependent loans 15,176 Collateral based measurement Discount to reflect current market conditions and ultimate collectability 0.0 %– 54.0 % ( 4.8 %)

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Borrowings 475,000 — 483,245 —

Subordinated notes 58,603 — 57,626 —

Junior subordinated debentures issued to capital trusts 56,548 — 52,676 —

63 unchanged sentences

Repurchase of outstanding stock ( 7,607 ) ( 19,636 ) ( 1,595 )

Capital contribution to subsidiary ( 60,000 ) — —

Acquisition of Salin — — 2,350

4 unchanged sentences

Proceeds from issuance of stock ( 1,355 ) 1,390 1,705

Stock option exercises 1,062 — —

Net proceeds from issuance of subordinated notes — 58,824 —

45 unchanged sentences

We have audited the accompanying consolidated balance sheets of Horizon Bancorp, Inc.

(“Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2021 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 26, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting .

Adoption of New Accounting Standard

As discussed in Notes 1, 5 and 6 to the consolidated financial statements, the Company has changed its method of accounting for the allowance for credit losses in 2020 due to the adoption of ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

As discussed below, the allowance for credit losses is considered a critical audit matter.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 9, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting .

Basis for Opinion

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The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective or complex judgments.

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL.

We identified the ACL at December 31, 2020, as well as at the January 1, 2020 adoption date of Topic 326, as a critical audit matter.

We identified the ACL at December 31, 2021 as a critical audit matter.

Auditing the ACL involved a high degree of subjectivity in evaluating management’s estimates, such as evaluating management’s identification of credit quality indicators, grouping of loans determined to be similar into pools, estimating the remaining life of loans in a pool, assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with individually evaluated loans and assessing the appropriateness of loan credit risk grades.

Our audit procedures related to the estimated allowance for loan losses, both at initial adoption of Topic 326 and at December 31, 2020, included:

Our audit procedures related to the estimated allowance for credit losses at December 31, 2021 included:

• Testing the design and operating effectiveness of internal controls, including those related to technology, over the ACL, the establishment of qualitative adjustments for current and expected conditions, grading and risk classification of loans and establishment of specific reserves on individually evaluated loans and management’s review controls over the ACL balance as a whole including attending internal CECL committee, commercial watch, and disclosure committee meetings.

9 unchanged sentences

• Evaluating credit quality indicators such as trends in delinquencies, nonaccruals, charge-offs, and loan grades.

• Identifying fields in the various loan systems that defined the loan pools and testing the design and operating effectiveness of internal controls surrounding the input and maintenance of those fields.

Goodwill Impairment Analysis

The Company’s goodwill totaled $151.2 million at December 31, 2020.

As discussed in Notes 1 and 9 to the consolidated financial statements, goodwill is tested for impairment at on an annual basis, or more often if events or circumstances indicate that there may be impairment.

Because of the volatile market conditions, the Company’s market value fell below book value during the second quarter of 2020.

The Company utilized a third-party valuation specialist and performed a quantitative assessment as of May 31, 2020.

Additionally, the Company performed qualitative assessments as of June 30, 2020, September 30, 2020 and December 31, 2020.

Based on these assessments, the Company’s reporting segment’s fair value exceeded the carrying value and no goodwill impairment was recorded.

We identified the valuation of goodwill as a critical audit matter due to the subjective nature of the assumptions used to estimate the reporting unit’s fair value.

The Company’s estimate of future cash flows is based on multiple assumptions, such as revenue growth projections and the ability to adhere to anticipated expense levels, as well as the selected discount rate and terminal value, which are sensitive to changes in expectations about future market or economic conditions, including uncertainty resulting from the COVID-19 pandemic.

To test the estimated fair value of the Company's reporting unit, with the support of our valuation personnel, we performed audit procedures that included, among others:

• Assessing methodologies selected by management and testing the significant assumptions discussed above.

• Testing the accuracy of the underlying data used by the Company in its analysis.

• Comparing the significant assumptions used by management to current industry and economic trends.

• Performing sensitivity analyses of significant assumptions to evaluate changes in the fair value estimate of the reporting unit resulting from changes in the assumptions.

• Testing management's reconciliation of the fair value of the reporting unit to the market capitalization of the Company.

• Identifying fields in the various loan systems that defined the loan pools and tested the design and operating effectiveness of internal controls surrounding the input and maintenance of those fields.

We have served as the Company’s auditor since 1998.

Indianapolis, Indiana

February 26, 2021

March 9, 2022

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

Opinion on the Internal Control over Financial Reporting

We have audited Horizon Bancorp’s (“Company”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework:

We have audited Horizon Bancorp’s (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

1 unchanged sentence

(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company and our report dated February 26, 2021, expressed an unqualified opinion.

Basis for Opinion

16 unchanged sentences

Indianapolis, Indiana

February 26, 2021

March 9, 2022

HORIZON BANCORP, INC.

13 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data