What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-09 compared with 2022-08-08 · 183 added, 142 removed, 1348 unchanged (19% of the section changed)

4 unchanged sentences

(Dollar Amounts in Thousands)

September 30,

2022 December 31,

28 unchanged sentences

Common stock, no par value, Authorized 99,000,000 shares

Issued 43,883,415 and 43,766,931 shares, Outstanding 43,572,796 and 43,547,942 shares

Issued and Outstanding 43,932,389 and 43,766,931 shares

Additional paid-in capital 352,837 352,122

8 unchanged sentences

(Dollar Amounts in Thousands, Except Per Share Data)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

18 unchanged sentences

Fiduciary activities 1,203 2,124 4,111 5,828

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)

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

Gain on sale of mortgage loans 1,441 4,088 5,969 14,996

Mortgage servicing income net of impairment or recovery 319 1,503 3,808 1,716

Mortgage servicing income, net 355 336 4,163 2,052

Increase in cash value of bank owned life insurance 814 534 1,843 1,547

14 unchanged sentences

Income Before Income Taxes 25,834 27,127 81,770 76,942

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)

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

2,013 4,056 9,527 11,276

5 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Dollar Amounts in Thousands)

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

23 unchanged sentences

Comprehensive

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

Income (Loss) Total

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

Net income — — — 23,071 — 23,071

1 unchanged sentence

Amortization of unearned compensation — — 449 — — 449

Exercise of stock options — — 116 — — 116

Stock option expense — — 13 — — 13

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

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

1 unchanged sentence

— — — ( 6,637 ) — ( 6,637 )

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

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

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

Balances, July 1, 2022 $ — $ — $ 352,412 $ 398,517 $ ( 93,064 ) $ 657,865

Net income — — — 23,821 — 23,821

1 unchanged sentence

Amortization of unearned compensation — — 627 — — 627

Exercise of stock options — — 14 — — 14

Net settlement of share awards — — ( 89 ) — — ( 89 )

2 unchanged sentences

— — — ( 7,061 ) — ( 7,061 )

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

Balances, September 30, 2022 $ — $ — $ 352,837 $ 415,277 $ ( 123,121 ) $ 644,993

See notes to condensed consolidated financial statements

3 unchanged sentences

(Dollar Amounts in Thousands, Except Per Share Data)

Six Months Ended

Nine Months Ended

Stock Additional

2 unchanged sentences

Comprehensive

Income (Loss) Total

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

Net income — — — 65,666 — 65,666

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

Other comprehensive loss, net of tax — — — — ( 20,207 ) ( 20,207 )

Amortization of unearned compensation — — 1,233 — — 1,233

2 unchanged sentences

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

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

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

1 unchanged sentence

— — — ( 18,142 ) — ( 18,142 )

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

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

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

8 unchanged sentences

— — — ( 20,708 ) — ( 20,708 )

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

Balances, September 30, 2022 $ — $ — $ 352,837 $ 415,277 $ ( 123,121 ) $ 644,993

See notes to condensed consolidated financial statements

HORIZON BANCORP, INC.

2 unchanged sentences

(Dollar Amounts in Thousands)

Six Months Ended

Nine Months Ended

Operating Activities

11 unchanged sentences

Loans originated for sale 198,914 ( 342,281 )

Change in cash value life insurance ( 1,029 ) ( 1,013 )

Gain on cash value life insurance ( 1,843 ) ( 1,547 )

Gain on sale of other real estate owned ( 618 ) ( 76 )

11 unchanged sentences

Net change in interest earning time deposits 1,968 3,198

Change in FHLB stock ( 2,237 ) —

Purchase of FHLB stock ( 2,435 ) ( 1,417 )

Redemption of FHLB stock 198 —

Net change in loans ( 370,251 ) 410,717

1 unchanged sentence

Premises and equipment expenditures ( 4,701 ) ( 462 )

Purchases of bank owned life insurance ( 50,000 ) —

Proceeds from bank owned life insurance 2,910 —

Death benefit on bank owned life insurance 644 783

Net cash received in branch acquisition — 616,832

Net cash used in investing activities ( 902,327 ) ( 140,936 )

6 unchanged sentences

Exercise of stock options 108 769

Repurchase of outstanding stock — ( 7,607 )

Dividends paid on common stock ( 20,708 ) ( 18,142 )

2 unchanged sentences

Cash and Cash Equivalents, Beginning of Period 593,508 249,711

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)

Cash and Cash Equivalents, End of Period $ 109,659 $ 971,817

Additional Supplemental Information

Interest paid $ 18,384 $ 15,448

Income taxes paid 936 1,225

Transfer of loans to other real estate and repossessed assets 1,483 964

Transfer of premises to other real estate 1,479 1,753

See notes to condensed consolidated financial statements

7 unchanged sentences

All inter–company balances and transactions have been eliminated.

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 results of operations for the periods ended September 30, 2022 and September 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.

4 unchanged sentences

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

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

As of September 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 Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

15 unchanged sentences

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

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.

There were 316,760 shares for the three and nine months ended September 30, 2022 which were not included in the computation of diluted earnings per share because they were non–dilutive.

There were 142,705 and 153,582 shares for the three and nine months ended September 30, 2021, respectively, 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.

15 unchanged sentences

Consolidated Statements of Cash Flows

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

Nine Months Ended September 30, 2021 As Reported Adjustment As Revised

Net change in loans $ 412,873 $ ( 2,156 ) $ 410,717

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 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.

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

84 unchanged sentences

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 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.

Prior to the end of the one year measurement period Horizon Bank recorded an adjustment of $ 639,000 which increased goodwill and decreased other assets acquired in the transaction.

Assets Liabilities

14 unchanged sentences

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

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

HORIZON BANCORP, INC.

4 unchanged sentences

The fair value of securities is as follows:

June 30, 2022

September 30, 2022

Available for sale

33 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 June 30, 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 September 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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Value Amortized

19 unchanged sentences

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

June 30, 2022

September 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 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.

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

Accrued interest receivable on available for sale debt securities and held to maturity securities totaled $ 17.4 million at September 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.

5 unchanged sentences

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

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2022 2021 2022 2021

24 unchanged sentences

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:

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

September 30,

2022 December 31,

20 unchanged sentences

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

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.

As of September 30, 2022 and December 31, 2021, Federal Paycheck Protection Program (“PPP”) loans totaled approximately $ 315,000 and $ 25.8 million, respectively, and are included with commercial loans.

Total loans include net deferred loan costs of $ 2.6 million at September 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:

June 30, 2022

September 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 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.

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

Included in the $ 14.8 million of non–accrual loans and the $ 1.7 million of non–performing TDRs at September 30, 2022 were $ 1.7 million and $ 157,000 , 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 $ 1.3 million at June 30, 2022:

June 30, 2022

The following table presents the payment status by class of loan, excluding non–accrual loans of $ 14.8 million and non–performing TDRs of $ 1.7 million at September 30, 2022:

September 30, 2022

Current 30–59 Days

47 unchanged sentences

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

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.

At September 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 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.

As of September 30, 2022, the Company had $ 4.2 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 September 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:

June 30, 2022 December 31, 2021

September 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 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.

At September 30, 2022 and December 31, 2021, the Bank modified loans totaling $ 1,000 and $ 10.9 million, respectively, which qualified 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.

June 30, 2022

September 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 June 30, 2022.

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

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

September 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)

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

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

Residential mortgage

11 unchanged sentences

Total real estate $ 85,907 $ 151,369 $ 95,124 $ 34,965 $ 38,531 $ 192,362 $ 110,333 $ 708,591

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

September 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 six months ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022

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

Three Months Ended September 30, 2022

Commercial Real Estate Mortgage Warehouse Consumer Total

5 unchanged sentences

Balance, end of period $ 33,806 $ 5,137 $ 1,024 $ 11,402 $ 51,369

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

4 unchanged sentences

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Commercial Real Estate Mortgage Warehouse Consumer Total

5 unchanged sentences

Balance, end of period $ 33,806 $ 5,137 $ 1,024 $ 11,402 $ 51,369

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Commercial Real Estate Mortgage Warehouse Consumer Total

1 unchanged sentence

Provision for credit losses on loans 1,090 ( 1,000 ) ( 213 ) 110 ( 13 )

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

Charge–offs ( 273 ) — — ( 661 ) ( 934 )

3 unchanged sentences

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

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.

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.

2 unchanged sentences

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

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.

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

11 unchanged sentences

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

The unpaid principal balances of loans serviced for others totaled approximately $ 1.6 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.

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

The aggregate fair value and carrying value of capitalized mortgage servicing rights was approximately $ 18.7 million and $ 15.2 million at September 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 Six Months Ended

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Three Months Ended Nine Months Ended

September 30, September 30, September 30, September 30,

2022 2021 2022 2021

10 unchanged sentences

Mortgage servicing rights, net $ 18,704 $ 14,863 $ 18,704 $ 14,863

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)

The Bank reduced impairment by approximately $ 299,000 for the three months ended September 30, 2021, $ 2.6 million for the nine months ended September 30, 2022 and $ 2.1 million for the nine months ended September 30, 2021.

Note 7 – Goodwill

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.

The carrying amount of goodwill was $ 155.2 million as of September 30, 2022 and $ 154.6 million as of December 31, 2021.

During the three and nine months ended September 30, 2022 and prior to the end of the one year measurement period related to the purchase and assumption of certain assets and liabilities from TCF, Horizon Bank recorded an adjustment of $ 639,000 which increased goodwill and decreased other assets acquired in the transaction.

There were no changes in the carrying amount of goodwill for the three and nine months ended September 30, 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 June 30, 2022 which resulted in no goodwill impairment charges for the six months ended June 30, 2022.

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

Note 8 – Repurchase Agreements

2 unchanged sentences

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

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

June 30, 2022

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

September 30, 2022

Remaining Contractual Maturity of the Agreements

11 unchanged sentences

Total $ 157,149 $ — $ — $ — $ — $ — $ 157,149

December 31, 2021

Remaining Contractual Maturity of the Agreements

Continuous Up to one

year One to three

years Three to five

years Five to ten

years Beyond ten

Repurchase Agreements and repurchase-to-maturity transactions

Repurchase Agreements $ 130,798 $ — $ — $ — $ — $ — $ 130,798

Securities pledged for Repurchase Agreements

Federal agency collateralized mortgage obligations $ 31,372 $ — $ — $ — $ — $ — $ 31,372

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

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

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

Note 9 – Subordinated Notes

3 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.

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

HORIZON BANCORP, INC.

2 unchanged sentences

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

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

points, payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year, commencing on October 1, 2025.

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

15 unchanged sentences

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

The agreement provides for the Company to receive interest from the counterparty at one month LIBOR and to pay interest to the counterparty at a fixed rate of 2.81 % on a notional amount of $ 50.0 million at June 30, 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 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

At September 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.

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.

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 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.

At September 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.

The notional amounts of the loan and security agreements being hedged were $ 524.4 million at September 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 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.

At September 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.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

Asset Derivatives Liability Derivatives

June 30, 2022 June 30, 2022

September 30, 2022 September 30, 2022

Value Notional

20 unchanged sentences

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 nine–month periods ended September 30 is as follows:

Amount of Gain Recognized in Other Comprehensive Income on Derivative

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Derivatives in cash flow hedging relationship

Interest rate contracts $ 1,542 $ 438 $ 4,535 $ 2,836

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 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:

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

Location of gain

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Derivative designated as hedging instruments

3 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Derivative not designated as hedging instruments

2 unchanged sentences

Total $ ( 319 ) $ ( 166 ) $ ( 989 ) $ ( 712 )

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 June 30, 2022.

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

June 30, 2022

September 30, 2022

Fair Value Quoted Prices in Active Markets

13 unchanged sentences

Mortgage loan contracts ( 330 ) — ( 330 ) —

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

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

June 30, 2022

September 30, 2022

Collateral dependent loans $ 9,455 $ — $ — $ 9,455

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 six months of 2022 and increased by $ 1.8 million during the first six months of 2021.

The carrying amount of the MSRs’ fair value due to impairment increased by $ 2.6 million during the first nine months of 2022 and increased by $ 2.1 million during the first nine months of 2021.

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

June 30, 2022

September 30, 2022

Value Valuation

8 unchanged sentences

0.0 %- 0.7 %( 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 June 30, 2022 and December 31, 2021.

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

6 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.

4 unchanged sentences

Due to the short–term nature of these agreements, carrying amounts approximate fair value.

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

June 30, 2022

HORIZON BANCORP, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

September 30, 2022

Amount Quoted Prices in Active Markets

40 unchanged sentences

Note 13 – Accumulated Other Comprehensive Income (Loss)

September 30,

2022 December 31,

1 unchanged sentence

Unamortized loss on securities held to maturity, previously transferred from AFS 3,895 5,770

Unrealized loss on derivative instruments 116 ( 3,673 )

Unrealized gain (loss) on derivative instruments 2,068 ( 3,673 )

Tax effect 32,728 ( 1,953 )

15 unchanged sentences

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

As of June 30, 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.

As of September 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 third 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.

2 unchanged sentences

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months ended September 30, 2022 and 2021

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

Actual Required for Capital

7 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

June 30, 2022

September 30, 2022

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

31 unchanged sentences

And Results of Operations

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

For the Three and Nine Months ended September 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