What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-08 compared with 2022-05-05 · 253 added, 157 removed, 1237 unchanged (25% of the section changed)

45 unchanged sentences

(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Interest Income

17 unchanged sentences

Fiduciary activities 1,405 1,961 2,908 3,704

Gains on sale of investment securities (includes $ 0 and $ 914 for the three months ended March 31, 2022 and 2021, respectively, related to accumulated other comprehensive earnings reclassifications)

Gains on sale of investment securities (includes $ 0 and $ 0 for the three months ended June 30, 2022 and 2021, respectively, and $ 0 and $ 914 for the six months ended June 30, 2022 and 2021, respectively, related to accumulated other comprehensive earnings reclassifications)

Gain on sale of mortgage loans 2,501 5,612 4,528 10,908

1 unchanged sentence

Increase in cash value of bank owned life insurance 519 502 1,029 1,013

Death benefit on bank owned life insurance 644 266 644 266

Other income 461 92 1,353 459

12 unchanged sentences

Income Before Income Taxes 28,834 25,943 55,936 49,815

Income tax expense (includes $ 0 and $ 192 for the three months ended March 31, 2022 and 2021, respectively, related to income tax expense from reclassification items)

Income tax expense (includes $ 0 and $ 0 for the three months ended June 30, 2022 and 2021, respectively, and $ 0 and $ 192 for the six months ended June 30, 2022 and 2021, respectively, related to income tax expense from reclassification items)

3,975 3,770 7,514 7,220

Net Income $ 24,859 $ 22,173 $ 48,422 $ 42,595

6 unchanged sentences

(Dollar Amounts in Thousands)

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2022 2021 2022 2021

Net Income $ 24,859 $ 22,173 $ 48,422 $ 42,595

15 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

Condensed Consolidated Statements of Stockholders’ Equity

(Dollar Amounts in Thousands, Except Per Share Data)

4 unchanged sentences

Comprehensive

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

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

Net income — — — 22,173 — 22,173

3 unchanged sentences

Stock option expense — — 15 — — 15

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

Cash dividends on common stock ($ 0.13 per share)

— — — ( 5,744 ) — ( 5,744 )

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

Balances, April 1, 2022 $ — $ — $ 351,522 $ 380,700 $ ( 54,772 ) $ 677,450

Net income — — — 24,859 — 24,859

Other comprehensive loss, net of tax — — — — ( 38,292 ) ( 38,292 )

Amortization of unearned compensation — — 627 — — 627

Net settlement of share awards — — ( 25 ) — — ( 25 )

Stock retirement plans — — 288 — — 288

Cash dividends on common stock ($ 0.16 per share)

— — — ( 7,042 ) — ( 7,042 )

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

Balances, June 30, 2022 $ — $ — $ 352,412 $ 398,517 $ ( 93,064 ) $ 657,865

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Dollar Amounts in Thousands, Except Per Share Data)

Six Months Ended

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

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

Net income — — — 42,595 — 42,595

Other comprehensive income, net of tax — — — — ( 9,214 ) ( 9,214 )

Amortization of unearned compensation — — 784 — — 784

Exercise of stock options — — 769 — — 769

Stock option expense — — 42 — — 42

Net settlement of share awards — — ( 1,347 ) — — ( 1,347 )

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

Cash dividends on common stock ($ 0.26 per share)

— — — ( 11,505 ) — ( 11,505 )

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

Balances, January 1, 2022 $ — $ — $ 352,122 $ 363,742 $ 7,345 $ 723,209

Net income — — — 48,422 — 48,422

Other comprehensive loss, net of tax — — — — ( 100,409 ) ( 100,409 )

6 unchanged sentences

— — — ( 13,647 ) — ( 13,647 )

Balances, March 31, 2022 $ — $ — $ 351,522 $ 380,700 $ ( 54,772 ) $ 677,450

See notes to condensed consolidated financial statements

Balances, June 30, 2022 $ — $ — $ 352,412 $ 398,517 $ ( 93,064 ) $ 657,865

HORIZON BANCORP, INC.

2 unchanged sentences

(Dollar Amounts in Thousands)

Three Months Ended

Six Months Ended

Operating Activities

29 unchanged sentences

Premises and equipment expenditures ( 3,224 ) 997

Proceeds from bank owned life insurance 2,910 —

Death benefit on bank owned life insurance 644 266

Net cash used in investing activities ( 809,869 ) ( 212,321 )

11 unchanged sentences

Cash and Cash Equivalents, End of Period $ 108,848 $ 304,171

Additional Supplemental Information

Interest paid $ 8,308 $ 10,121

HORIZON BANCORP, INC.

2 unchanged sentences

(Dollar Amounts in Thousands)

Additional Supplemental Information

Interest paid $ 4,726 $ 5,991

Income taxes paid 650 725

9 unchanged sentences

All inter–company balances and transactions have been eliminated.

The results of operations for the periods ended March 31, 2022 and March 31, 2021 are not necessarily indicative of the operating results for the full year of 2022 or 2021.

The results of operations for the periods ended June 30, 2022 and June 30, 2021 are not necessarily indicative of the operating results for the full year of 2022 or 2021.

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

Those adjustments consist only of normal recurring adjustments.

Certain information and note disclosures normally included in Horizon’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Horizon’s Annual Report on Form 10–K for 2021 filed with the Securities and Exchange Commission on March 9, 2022.

1 unchanged sentence

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

As of March 31, 2022, Horizon had repurchased a total of 803,349 shares at an average price per share of $ 16.89 .

As of June 30, 2022, Horizon had repurchased a total of 803,349 shares at an average price per share of $ 16.89 .

Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted–average number of common shares outstanding.

1 unchanged sentence

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

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2022 2021 2022 2021

Basic earnings per share

14 unchanged sentences

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

There were 1,000 shares for the three months ended March 31, 2022, which were not included in the computation of diluted earnings per share because they were non–dilutive.

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

There were 319,692 and 206,421 shares for the three and six months ended June 30, 2022, respectively, which were not included in the computation of diluted earnings per share because they were non–dilutive.

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

Horizon has share–based employee compensation plans, which are described in the notes to the financial statements included in the December 31, 2021 Annual Report on Form 10–K.

2 unchanged sentences

We have revised amounts reported in previously issued financial statements for the periods presented in this Quarterly Report on Form 10–Q related to immaterial errors.

The errors relate to sold commercial loan participation balances which do not qualify under accounting guidance as sales transaction under Accounting Standards Codification Topic 860 – Transfers and Servicing .

The correction of this error resulted in an increase in loans, net of allowance for credit losses and borrowings on the Company's consolidated condensed balance sheet.

The errors relate to sold commercial loan participation balances which do not qualify under accounting guidance as sales transactions under Accounting Standards Codification Topic 860 – Transfers and Servicing .

The correction of this error resulted in an increase in loans, net of allowance for credit losses and borrowings on the Company's condensed consolidated balance sheet.

We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Reports on Form 10–K for the year ended December 31, 2021, or for any quarterly periods included therein.

108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10–K for the year ended December 31, 2021, or for any quarterly periods included therein.

The following tables present the revisions to the line items of our previously issued financial statements to reflect the correction of the errors:

7 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2021 As Reported Adjustment As Revised

Six Months Ended June 30, 2021 As Reported Adjustment As Revised

Net change in loans $ 347,010 $ ( 3,312 ) $ 343,698

3 unchanged sentences

Net Change in Cash and Cash Equivalents 54,460 — 54,460

We have revised amounts reported in previously issued financial statements for the periods presented in this Quarterly Report on Form 10–Q related to immaterial errors.

The errors relate to the classification of certain available for sale (“AFS“) and held to maturity (“HTM”) securities.

The correction of this error resulted in an increase in AFS and HTM federal agency mortgage–backed pool securities and a decrease in AFS and HTM private labeled mortgage–backed pool securities in Note 3 – Securities.

HORIZON BANCORP, INC.

2 unchanged sentences

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

We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10–K for the year ended December 31, 2021, or for any quarterly periods included therein.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following tables present the revisions to the line items of our previously issued financial statements to reflect the correction of the errors:

Note 3 – Securities

As of December 31, 2021 Amortized Cost

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ 225,329 31,856 257,185

Private labeled mortgage–backed pools 31,856 ( 31,856 ) —

Total available for sale investment securities $ 257,185 — 257,185

Federal agency mortgage–backed pools $ 188,426 59,511 247,937

Private labeled mortgage–backed pools 99,958 ( 59,511 ) 40,447

Total held to maturity investment securities $ 288,384 — 288,384

Gross Unrealized Gains

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ 1,777 137 1,914

Private labeled mortgage–backed pools 137 ( 137 ) —

Total available for sale investment securities $ 1,914 — 1,914

Federal agency mortgage–backed pools $ 151 58 209

Private labeled mortgage–backed pools 58 ( 58 ) —

Total held to maturity investment securities $ 209 — 209

Gross Unrealized Losses

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ ( 1,032 ) ( 376 ) ( 1,408 )

Private labeled mortgage–backed pools ( 376 ) 376 —

Total available for sale investment securities $ ( 1,408 ) — ( 1,408 )

Federal agency mortgage–backed pools $ ( 2,612 ) ( 1,398 ) ( 4,010 )

Private labeled mortgage–backed pools ( 1,840 ) 1,398 ( 442 )

Total held to maturity investment securities $ ( 4,452 ) — ( 4,452 )

As Reported Adjustment As Revised

Federal agency mortgage–backed pools $ 226,074 31,617 257,691

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

Total available for sale investment securities $ 257,691 — 257,691

Federal agency mortgage–backed pools $ 185,965 58,171 244,136

Private labeled mortgage–backed pools 98,176 ( 58,171 ) 40,005

Total held to maturity investment securities $ 284,141 — 284,141

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Accounting Guidance Issued But Not Yet Adopted

65 unchanged sentences

The fair value of securities is as follows:

March 31, 2022

June 30, 2022

Available for sale

3 unchanged sentences

Federal agency mortgage-backed pools 235,337 8 ( 24,860 ) 210,485

Private labeled mortgage-backed pools 30,239 84 ( 1,690 ) 28,633

Corporate notes 84,389 198 ( 7,681 ) 76,906

14 unchanged sentences

Federal agency mortgage-backed pools 257,185 1,914 ( 1,408 ) 257,691

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

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

12 unchanged sentences

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

The amortized cost and fair value of securities available for sale and held to maturity at March 31, 2022 and December 31, 2021, by contractual maturity, are shown below.

The amortized cost and fair value of securities available for sale and held to maturity at June 30, 2022 and December 31, 2021, by contractual maturity, are shown below.

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Value Amortized

7 unchanged sentences

Federal agency mortgage–backed pools 235,337 210,485 257,185 257,691

Private labeled mortgage–backed pools $ 30,239 $ 28,633 $ 31,856 $ 31,617

Total available for sale investment securities $ 1,162,976 $ 1,041,020 $ 1,153,611 $ 1,160,812

10 unchanged sentences

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

March 31, 2022

June 30, 2022

Less than 12 Months 12 Months or More Total

27 unchanged sentences

Total temporarily impaired securities $ 1,500,686 $ ( 21,993 ) $ 35,281 $ ( 1,012 ) $ 1,535,967 $ ( 23,005 )

No allowance for credit losses for available for sale debt securities or held to maturity securities was needed at March 31, 2022 or December 31, 2021.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 16.7 million at March 31, 2022 and $ 14.6 million at December 31, 2021 and is excluded from the estimate of credit losses.

No allowance for credit losses for available for sale debt securities or held to maturity securities was needed at June 30, 2022 or December 31, 2021.

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 17.3 million at June 30, 2022 and $ 14.6 million at December 31, 2021 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.

1 unchanged sentence

Therefore, for those securities, we do not record expected credit losses.

Based on an evaluation of available evidence, management believes the unrealized losses on state and municipal securities were due to changes in interest rates.

Based on an evaluation of available evidence, management believes the unrealized losses on state and municipal securities, private labeled mortgage–backed pools and corporate notes were due to changes in interest rates.

Due to the contractual terms, the issuers of state and municipal securities are not allowed to settle for less than the amortized cost of the security.

1 unchanged sentence

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

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2022 2021 2022 2021

Sales of securities available for sale

21 unchanged sentences

Class of financing receivable is defined as a group of financing receivables determined on the basis of both of the following, 1) risk characteristics of the financing receivable, and 2) an entity’s method for monitoring and assessing credit risk.

Generally, the Bank does not move loans from a revolving loan to a term loan other than construction loans.

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

The following table presents total loans outstanding by portfolio class, as of March 31, 2022 and December 31, 2021:

Generally, the Bank does not move loans from a revolving loan to a term loan other than residential construction loans.

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

The following table presents total loans outstanding by portfolio class, as of June 30, 2022 and December 31, 2021:

2022 December 31,

20 unchanged sentences

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

As of March 31, 2022 and December 31, 2021, Federal Paycheck Protection Program (“PPP”) loans totaled approximately $ 6.7 million and $ 25.8 million, respectively, and are included with commercial loans.

Total loans include net deferred loan costs of $ 2.6 million at March 31, 2022 and $ 1.9 million at December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, Federal Paycheck Protection Program (“PPP”) loans totaled approximately $ 2.3 million and $ 25.8 million, respectively, and are included with commercial loans.

Total loans include net deferred loan costs of $ 2.6 million at June 30, 2022 and $ 1.9 million at December 31, 2021, respectively.

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

40 unchanged sentences

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

March 31, 2022

June 30, 2022

Non–accrual Loans Past

45 unchanged sentences

Total $ 14,962 $ 145 $ 1,521 $ 2,391 $ 19,019 $ 16,727

There was no interest income recognized on non–accrual loans during the three months ended March 31, 2022 and 2021, respectively, while the loans were in non–accrual status.

Included in the $ 16.1 million of non–accrual loans and the $ 1.5 million of non–performing TDRs at March 31, 2022 were $ 6.0 million and $ 1.5 million, respectively, of loans acquired for which there were accretable yields recognized.

There was no interest income recognized on non–accrual loans during the six months ended June 30, 2022 and 2021, respectively, while the loans were in non–accrual status.

Included in the $ 16.1 million of non–accrual loans and the $ 1.3 million of non–performing TDRs at June 30, 2022 were $ 2.0 million and $ 261,000 , respectively, of loans acquired for which there were accretable yields recognized.

HORIZON BANCORP, INC.

2 unchanged sentences

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

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 16.1 million and non–performing TDRs of $ 1.5 million at March 31, 2022:

March 31, 2022

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 16.1 million and non–performing TDRs of $ 1.3 million at June 30, 2022:

June 30, 2022

Current 30–59 Days

47 unchanged sentences

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

At March 31, 2022, the types of concessions the Company has made on restructured loans have been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances.

At June 30, 2022, the types of concessions the Company has made on restructured loans have been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances.

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

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

As of March 31, 2022, the Company had $ 3.9 million in TDRs and $ 2.4 million were performing according to the restructured terms and no TDRs were returned to accrual status during 2022.

There were no specific reserves allocated to TDRs at March 31, 2022 based on the discounted cash flows or, when appropriate, the fair value of the collateral.

As of June 30, 2022, the Company had $ 3.9 million in TDRs and $ 2.5 million were performing according to the restructured terms and two TDRs were returned to accrual status during 2022.

There were no specific reserves allocated to TDRs at June 30, 2022 based on the discounted cash flows or, when appropriate, the fair value of the collateral.

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

4 unchanged sentences

The following table presents TDRs by class of loan:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Non–accrual Accruing Total Non–accrual Accruing Total

17 unchanged sentences

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

At March 31, 2022 and December 31, 2021, the Bank modified loans totaling $ 1.2 million and $ 10.9 million, respectively, which qualify for treatment under the CARES Act.

At June 30, 2022 and December 31, 2021, the Bank modified loans totaling $ 771,000 and $ 10.9 million, respectively, which qualify for treatment under the CARES Act.

Collateral Dependent Financial Assets

9 unchanged sentences

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

March 31, 2022

June 30, 2022

Real Estate Accounts Receivable/Equipment Other Total ACL

120 unchanged sentences

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

The following tables present loans by credit grades and origination year at March 31, 2022.

March 31, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Total

The following tables present loans by credit grades and origination year at June 30, 2022.

June 30, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Total

Owner occupied real estate

33 unchanged sentences

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

March 31, 2022 2021 2020 2019 2018 2017 Prior Revolving Loans Total

June 30, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Total

Residential mortgage

11 unchanged sentences

Total real estate $ 53,523 $ 140,135 $ 99,119 $ 36,318 $ 40,640 $ 206,405 $ 148,930 $ 725,070

March 31, 2022 2021 2020 2019 2018 2017 Prior Revolving Loans Total

June 30, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Total

Direct installment

83 unchanged sentences

Note 5 – Allowance for Credit and Loan Losses

The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022

The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the six months ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022

Commercial Real Estate Mortgage Warehouse Consumer Total

5 unchanged sentences

Balance, end of period $ 34,802 $ 4,422 $ 1,067 $ 12,059 $ 52,350

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

4 unchanged sentences

Balance, end of period $ 41,772 $ 4,108 $ 1,155 $ 8,620 $ 55,655

Six Months Ended June 30, 2022

Commercial Real Estate Mortgage Warehouse Consumer Total

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

Provision for credit losses on loans ( 5,640 ) 596 8 3,890 ( 1,146 )

PCD loan charge–offs ( 370 ) — — — ( 370 )

Charge–offs ( 137 ) ( 58 ) — ( 1,013 ) ( 1,208 )

Recoveries 174 28 — 586 788

Balance, end of period $ 34,802 $ 4,422 $ 1,067 $ 12,059 $ 52,350

Six Months Ended June 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

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

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

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

Recoveries 65 88 — 335 488

Balance, end of period $ 41,772 $ 4,108 $ 1,155 $ 8,620 $ 55,655

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

2 unchanged sentences

The loss rate method then divides the loan losses recognized on loans outstanding as of the pool date by the outstanding loan balance as of the pool date.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data.

9 unchanged sentences

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.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 6 – Loan Servicing

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

The unpaid principal balances of loans serviced for others totaled approximately $ 1.6 billion and $ 1.5 billion at March 31, 2022 and December 31, 2021.

The aggregate fair value of capitalized mortgage servicing rights was approximately $ 18.6 million and $ 15.2 million at March 31, 2022 and December 31, 2021, compared to the carrying values of $ 18.6 million and $ 15.2 million at March 31, 2022 and December 31, 2021, respectively.

The unpaid principal balances of loans serviced for others totaled approximately $ 1.6 billion and $ 1.5 billion at June 30, 2022 and December 31, 2021.

The aggregate fair value of capitalized mortgage servicing rights was approximately $ 18.8 million and $ 15.2 million at June 30, 2022 and December 31, 2021, compared to the carrying values of $ 18.8 million and $ 15.2 million at June 30, 2022 and December 31, 2021, respectively.

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

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

Three Months Ended

March 31, March 31,

Three Months Ended Six Months Ended

June 30, June 30, June 30, June 30,

2022 2021 2022 2021

Mortgage servicing rights

9 unchanged sentences

Mortgage servicing rights, net $ 18,761 $ 14,462 $ 18,761 $ 14,462

The Bank reduced impairment by approximately $ 2.6 million for the three months ended March 31, 2022 and $ 235,000 for the three months ended March 31, 2021.

The Bank reduced impairment by approximately $ 1.6 million for the three months ended June 30, 2021, $ 2.6 million for the six months ended June 30, 2022 and $ 1.8 million for the six months ended June 30, 2021.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 7 – Goodwill

As of March 31, 2022 and December 31, 2021, the carrying amount of goodwill was $ 154.6 million.

There have been no changes in the carrying amount of goodwill for the three months ended March 31, 2022 or 2021.

As of June 30, 2022 and December 31, 2021, the carrying amount of goodwill was $ 154.6 million.

There have been no changes in the carrying amount of goodwill for the three and six months ended June 30, 2022 or 2021.

Goodwill is assessed for impairment annually, or more frequently if events occur or circumstances change that indicate an impairment may exist.

2 unchanged sentences

Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a qualitative analysis as of March 31, 2022 which resulted in no goodwill impairment charges for the three months ended March 31, 2022.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Goodwill was assessed for impairment using a qualitative analysis as of June 30, 2022 which resulted in no goodwill impairment charges for the six months ended June 30, 2022.

Note 8 – Repurchase Agreements

3 unchanged sentences

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

March 31, 2022

June 30, 2022

Remaining Contractual Maturity of the Agreements

16 unchanged sentences

From and including the date of original issuance to, but excluding, July 1, 2025 or the date of earlier redemption (the “fixed rate period”), the Notes bear interest at an initial rate of 5.625 % per annum, payable semi–annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

4 unchanged sentences

Any early redemption of the Notes will be subject to the receipt of the approval of the Board of Governors of the Federal Reserve System to the extent then required under applicable laws or regulations, including capital regulations.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The Notes are unsecured subordinated obligations, and rank pari passu, or equally, with all of Horizon's future unsecured subordinated debt and are junior to all existing and future senior debt.

3 unchanged sentences

Note 10 – Derivative Financial Instruments

Cash Flow Hedges – As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into interest rate swap agreements for a portion of its floating rate debt which matured on December 16, 2021.

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 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 fixed rate of 4.20 % on a notional amount of $ 12.0 million.

4 unchanged sentences

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

The agreement provides for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a fixed rate of 2.81 % on a notional amount of $ 50.0 million at March 31, 2022 and December 31, 2021.

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

3 unchanged sentences

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

At March 31, 2022, the Company’s cash flow hedge was effective and is not expected to have a significant impact on the Company’s net income over the next 12 months.

At June 30, 2022, the Company’s cash flow hedge was effective and is not expected to have a significant impact on the Company’s net income over the next 12 months.

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

The Company enters into fixed rate loan agreements as part of its lending policy.

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.

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

At March 31, 2022, 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 non–interest income.

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

The notional amounts of the loan and security agreements being hedged were $ 511.8 million at March 31, 2022 and $ 489.0 million at December 31, 2021.

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

HORIZON BANCORP, INC.

2 unchanged sentences

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

loans, converting the fixed rate loans to a variable rate.

At June 30, 2022, 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 non–interest income.

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

The notional amounts of the loan and security agreements being hedged were $ 496.8 million at June 30, 2022 and $ 489.0 million at December 31, 2021.

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

At March 31, 2022, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.

At June 30, 2022, the Company’s fair value of these derivatives were recorded and over the next 12 months are not expected to have a significant impact on the Company’s net income.

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

1 unchanged sentence

Asset Derivatives Liability Derivatives

March 31, 2022 March 31, 2022

Balance Sheet

Location Fair

Value Balance Sheet

Location Fair

June 30, 2022 June 30, 2022

Value Notional

Derivatives designated as hedging instruments

Interest rate contracts – cash flow hedges Other assets $ — Other liabilities $ 927

Interest rate contracts – cash flow hedges $ 50,000 $ 116 $ — $ —

Total derivatives designated as hedging instruments 50,000 116 — —

Derivatives not designated as hedging instruments

Interest rate contracts – fair value hedges Other assets 11,083 Other liabilities 11,083

Mortgage loan contracts Other assets — Other liabilities 586

Commitments to originate mortgage loans Other assets 361 Other liabilities —

Interest rate contracts – fair value hedges 496,820 24,281 496,820 24,281

Mortgage loan contracts — — 24,273 151

Commitments to originate mortgage loans 12,172 281 — —

Total derivatives not designated as hedging instruments 508,992 24,562 521,093 24,432

2 unchanged sentences

December 31, 2021 December 31, 2021

Balance Sheet

Value Balance Sheet

Value Notional

Derivatives designated as hedging instruments

Interest rate contracts – cash flow hedges Other assets $ — Other liabilities $ 3,673

Interest rate contracts – cash flow hedges $ — $ — $ 50,000 $ 3,673

Total derivatives designated as hedging instruments — — 50,000 3,673

Derivatives not designated as hedging instruments

Interest rate contracts – fair value hedges Other assets 14,419 Other liabilities 14,419

Mortgage loan contracts Other assets — Other liabilities 238

Commitments to originate mortgage loans Other assets 1,037 Other liabilities —

Interest rate contracts – fair value hedges 488,967 14,419 488,967 14,419

Mortgage loan contracts — — 43,630 238

Commitments to originate mortgage loans 32,584 1,037 — —

Total derivatives not designated as hedging instruments 521,551 15,456 532,597 14,657

Total derivatives $ 521,551 $ 15,456 $ 532,597 $ 18,330

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

Amount of Gain Recognized in Other Comprehensive Income on Derivative

Three Months Ended

March 31, 2022 March 31, 2021

Derivatives in cash flow hedging relationship

Interest rate contracts $ 2,169 $ 2,412

HORIZON BANCORP, INC.

2 unchanged sentences

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

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

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

Amount of Gain Recognized in Other Comprehensive Income on Derivative

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Derivatives in cash flow hedging relationship

Interest rate contracts $ 824 $ ( 14 ) $ 2,993 $ 2,398

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

Location of gain

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

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Derivative designated as hedging instruments

2 unchanged sentences

Location of loss

recognized on derivative Amount of Loss Recognized on Derivative

Three Months Ended

March 31, 2022 March 31, 2021

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

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Derivative not designated as hedging instruments

2 unchanged sentences

Total $ 353 $ 696 $ ( 669 ) $ ( 545 )

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 11 – Disclosures about Fair Value of Assets and Liabilities

7 unchanged sentences

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

There have been no significant changes in the valuation techniques during the period ended March 31, 2022.

There have been no significant changes in the valuation techniques during the period ended June 30, 2022.

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Available for sale securities

14 unchanged sentences

The fair value of the Company’s interest rate swap agreements is estimated by a third party using inputs that are primarily unobservable including a yield curve, adjusted for liquidity and credit risk, contracted terms and discounted cash flow analysis, and therefore, are classified within Level 2 of the valuation hierarchy.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

March 31, 2022

June 30, 2022

Fair Value Quoted Prices in Active Markets

7 unchanged sentences

Federal agency mortgage–backed pools 210,485 — 210,485 —

Private labeled mortgage–backed pools 28,633 — 28,633 —

Corporate notes 76,906 — 76,906 —

4 unchanged sentences

Mortgage loan contracts ( 151 ) — ( 151 ) —

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

December 31, 2021

8 unchanged sentences

Federal agency mortgage–backed pools 257,691 — 257,691 —

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

Corporate notes 84,819 — 79,787 5,032

4 unchanged sentences

Mortgage loan contracts ( 238 ) — ( 238 ) —

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Certain other assets are measured at fair value on a non-recurring 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):

3 unchanged sentences

(Level 2) Significant

March 31, 2022

June 30, 2022

Collateral dependent loans $ 9,445 $ — $ — $ 9,445

13 unchanged sentences

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

The carrying amount of the MSRs’ fair value due to impairment increased by $ 2.6 million during the first three months of 2022 and increased by $ 235,000 during the first three months of 2021.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The carrying amount of the MSRs’ fair value due to impairment increased by $ 2.6 million during the first six months of 2022 and increased by $ 1.8 million during the first six months of 2021.

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

March 31, 2022

June 30, 2022

Value Valuation

8 unchanged sentences

0.0 %- 0.6 %( 0.5 %)

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

December 31, 2021

14 unchanged sentences

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

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at March 31, 2022 and December 31, 2021.

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

The disclosed fair value estimates are limited to Horizon’s significant financial instruments at June 30, 2022 and December 31, 2021.

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

The estimated fair values shown below do not include any valuation of assets and liabilities, which are not financial instruments as defined by the FASB ASC fair value hierarchy.

5 unchanged sentences

Loans Held for Sale – The carrying amounts approximate fair value.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Net Loans – The fair value of net loans are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors.

4 unchanged sentences

Borrowings – Rates currently available to Horizon for debt with similar terms and remaining maturities are used to estimate fair values of existing borrowings.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Subordinated Notes – The fair value of subordinated notes is based on discounted cash flows based on current borrowing rates for similar types of instruments.

5 unchanged sentences

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

March 31, 2022

June 30, 2022

Amount Quoted Prices in Active Markets

16 unchanged sentences

Interest payable 2,402 — 2,402 —

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

December 31, 2021

17 unchanged sentences

Interest payable 2,235 — 2,235 —

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 13 – Accumulated Other Comprehensive Income (Loss)

12 unchanged sentences

The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The Company and Bank are subject to minimum regulatory capital requirements as defined and calculated in accordance with the Basel III–based regulations.

2 unchanged sentences

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

As of March 31, 2022 and December 31, 2021, the Company and Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the end of the first quarter of 2022 that management believes have changed the Bank’s classification as well capitalized.

As of June 30, 2022 and December 31, 2021, the Company and Bank met all capital adequacy requirements to be considered well capitalized.

There have been no conditions or events since the end of the second quarter of 2022 that management believes have changed the Bank’s classification as well capitalized.

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

In October 2019, the federal banking agencies finalized a new rule that will simplify capital requirements for qualified community banks that opt into the new community bank leverage ratio framework.

The new framework was available to use in March 31, 2020 Call Reports or Forms FRY-9C (as applicable) for depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets, among other qualifying criteria.

Horizon did not elect the new community bank leverage ratio framework.

As of March 31, 2020, the Company and Bank elected the transition option of the 2019 CECL Rule which allows banking organizations to phase in over a three–year period the day–one adverse effects of CECL on their regulatory capital ratios.

3 unchanged sentences

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

Horizon and the Bank’s actual and required capital ratios as of March 31, 2022 and December 31, 2021 were as follows:

Horizon and the Bank’s actual and required capital ratios as of June 30, 2022 and December 31, 2021 were as follows:

Actual Required for Capital

7 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

March 31, 2022

June 30, 2022

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

31 unchanged sentences

And Results of Operations

For the Three Months ended March 31, 2022 and 2021

For the Three and Six Months ended June 30, 2022 and 2021

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

What changed 10-Q

Item 1. Financial Statements