What changed in this filing

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Item 1. Business

2023-03-15 compared with 2022-03-09 · 57 added, 74 removed, 321 unchanged (29% of the section changed)

16 unchanged sentences

Goodwill of $4.0 million was generated in the transaction.

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

(“Salin”), an Indiana corporation, and Horizon Bank’s acquisition of Salin Bank and Trust Company (“Salin Bank”), an Indiana commercial bank and wholly–owned subsidiary of Salin, through mergers effective March 26, 2019.

Under the terms of the Merger Agreement, shareholders of Salin received 23,907.5 shares of Horizon common stock and $87,417.17 in cash for each outstanding share of Salin common stock.

Salin shares outstanding at the closing to be exchanged were 275, and the shares of Horizon common stock issued to Salin shareholders totaled 6,563,697.

The Salin shareholders received cash in lieu of fractional shares.

Based upon the March 25, 2019 closing price of $15.65 per share of Horizon common stock immediately prior to the effectiveness of the merger, the transaction had an implied valuation of approximately $126.7 million.

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

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

The Bank maintains 71 full service offices.

10 unchanged sentences

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

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

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

7 unchanged sentences

See Note 14 of the Consolidated Financial Statements included at Item 8 for further discussion regarding these previously consolidated entities that are now reported separately.

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

The business of Horizon is not seasonal to any material degree.

3 unchanged sentences

The Company’s Internet address is www.horizonbank.com.

The Company makes available, free of charge through the “About Us – Investor Relations – Documents – SEC Filings” section of its Internet website, copies of the Company’s Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, Current Reports on Form 8–K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after those reports are filed with or furnished to the SEC.

The Company makes available, free of charge through the “About Us – Investor Relations – Documents – SEC Filings” section of its Internet website, copies of the Company’s Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, Current Reports on Form 8–K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after those reports are filed with or furnished to the SEC.

The contents of our website are not incorporated by reference into this Annual Report on Form 10–K or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.

Employees and Human Capital Resources

1 unchanged sentence

We encourage and support the development of our employees and, wherever possible, strive to fill positions from within the organization.

As of December 31, 2021, the Bank had 843 full–time and 69 part–time employees.

As of December 31, 2022, the Company employed 852 full–time and 71 part–time employees across all locations.

Horizon faces a high degree of competition in all of its primary markets.

4 unchanged sentences

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

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

Many non–financial institution competitors face fewer regulatory restrictions.

HORIZON BANCORP, INC.

6 unchanged sentences

Institutions Horizon

Allen 20 0.57 % Berrien 8 13.10 %

Bartholomew 9 6.09 % Cass 5 6.17 %

Carroll 6 25.56 % Ingham 19 2.11 %

Cass 6 18.17 % Kalamazoo 14 2.14 %

DeKalb 12 15.14 % Kent 24 0.48 %

Elkhart 16 0.32 % Midland 7 11.68 %

Fountain 4 8.58 % Oakland 29 0.21 %

Grant 7 6.76 % Ottawa 14 0.42 %

Hamilton 26 0.17 % Saginaw 12 0.81 %

Howard 9 3.23 % St.

Joseph 9 6.38 %

Johnson 20 11.74 %

Kosciusko 10 5.28 %

LaPorte 8 59.96 %

LaGrange 4 4.05 %

Lake 16 1.62 %

Marion 24 0.67 %

Noble 6 5.67 %

Porter 11 9.92 %

Allen 20 0.82 % Arenac 4 31.40 %

Bartholomew 9 6.37 % Berrien 8 12.01 %

Carroll 6 24.41 % Charlevoix 4 3.05 %

Cass 6 17.51 % Crawford 2 26.06 %

DeKalb 11 12.46 % Ingham 18 1.84 %

Elkhart 16 0.92 % Kalamazoo 14 1.99 %

Fountain 4 8.50 % Kent 24 0.58 %

Grant 7 5.67 % Mecosta 7 11.46 %

Hamilton 27 0.19 % Midland 7 18.96 %

Howard 9 2.96 % Missaukee 2 52.98 %

Johnson 20 11.33 % Newaygo 6 7.03 %

Kosciusko 10 5.11 % Oakland 28 0.27 %

LaGrange 4 3.49 % Ostego 5 15.99 %

Lake 16 1.91 % Ottawa 14 0.91 %

LaPorte 8 55.34 % Roscommon 4 11.47 %

Marion 26 0.80 % Saginaw 12 0.76 %

Noble 6 4.57 % Shiawassee 6 15.58 %

Porter 11 10.49 % St.

Joseph 9 5.93 %

Joseph 14 0.30 % Wexford 5 24.09 %

Tippecanoe 15 6.16 %

Whitley 7 6.18 %

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

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

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

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

Regulation and Supervision

7 unchanged sentences

The supervision, regulation and examination of Horizon and the Bank by the bank regulatory agencies are intended primarily for the protection of depositors rather than for the benefit of Horizon’s shareholders.

Horizon is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC.

Horizon is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Exchange Act, as administered by the SEC.

Horizon’s common stock is listed on the NASDAQ Global Select Market under the trading symbol “HBNC,” and Horizon is subject to the NASDAQ rules applicable to listed companies.

37 unchanged sentences

The Bank’s deposits are insured to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC.

Generally, deposits are insured up to the statutory limit of $250,000.

Generally, deposits are insured up to the statutory limit of $250,000 per account title.

Banks are subject to deposit insurance premiums and assessments to maintain the DIF.

10 unchanged sentences

Effective as of June 30, 2016, the reserve ratio reached 1.15% and a new assessment rate schedule became effective July 1, 2016, with rates ranging from 3 to 30 basis points instead of 5 to 35 basis points.

Assessment rates for all established smaller banks will be determined using financial measures and supervisory ratings derived from a statistical model estimating the probability of failure over three years.

The new pricing system eliminates risk

Assessment rates for all established smaller banks will be determined using financial measures and supervisory ratings derived from a

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

categories, but establishes minimum and maximum assessment rates for established small banks based on a bank’s CAMELS composite ratings ( i.e.

statistical model estimating the probability of failure over three years.

The new pricing system eliminates risk categories, but establishes minimum and maximum assessment rates for established small banks based on a bank’s CAMELS composite ratings ( i.e.

, capital adequacy, asset quality, management, earnings, liquidity and sensitivity).

4 unchanged sentences

The FDIC may also suspend deposit insurance temporarily during the hearing process for a permanent termination of insurance if the institution has no tangible capital.

FDIC–insured institutions have also been subject to the requirement to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation (“FICO”), an agency of the Federal government established to recapitalize the insolvent Federal Savings and Loan Insurance Corporation, an early predecessor of the DIF.

The FICO bonds were scheduled to be repaid between 2017 and 2019, and the last FICO assessment on institutions like Horizon Bank was collected on the March 29, 2019, FDIC Quarterly Certified Statement Invoice.

Transactions with Affiliates and Insiders

17 unchanged sentences

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

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

Basel III increased the minimum requirements for both the quantity and quality of capital held by Horizon and the Bank.

1 unchanged sentence

The rules also require a common equity Tier 1 capital conservation buffer of 2.5% of risk–weighted assets, which is in addition to the other minimum risk–based capital standards in the rule.

Institutions that do not maintain the required capital conservation buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of certain bonuses to senior executive management.

Institutions that do not maintain

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

the required capital conservation buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of certain bonuses to senior executive management.

The capital conservation buffer requirement was phased in over three years beginning in 2016 at 0.625% of risk-weighted assets and increased each year until fully implemented at 2.5% on January 1, 2019.

66 unchanged sentences

and (xi) ultimately, for critically undercapitalized institutions, appointing a receiver for the institution.

New prompt corrective action requirements that became effective January 1, 2015, increased the capital level requirements necessary to qualify as “well capitalized.” At December 31, 2021, the Bank was categorized as “well capitalized,” meaning that the Bank’s total risk–based capital ratio exceeded 10%, the Bank’s Tier 1 risk–based capital ratio exceeded 8%, the Bank’s common equity Tier 1 risk–based capital ratio exceeded 6.5%, the Bank’s leverage ratio exceeded 5%, and the Bank was not subject to a regulatory order, agreement or directive to meet and maintain a specific capital level for any capital measure.

At December 31, 2022, the Bank was categorized as “well capitalized,” meaning that the Bank’s total risk–based capital ratio exceeded 10%, the Bank’s Tier 1 risk–based capital ratio exceeded 8%, the Bank’s common equity Tier 1 risk–based capital ratio exceeded 6.5%, the Bank’s leverage ratio exceeded 5%, and the Bank was not subject to a regulatory order, agreement or directive to meet and maintain a specific capital level for any capital measure.

Banking regulators may change these capital requirements from time to time, depending on the economic outlook generally and the outlook for the banking industry.

4 unchanged sentences

The Bank Secrecy Act of 1970, which was amended to incorporate certain provisions of the USA PATRIOT Act of 2001, also focuses on combating money laundering and terrorist financing and requires financial institutions to develop policies, procedures and practices to prevent, detect and deter these activities, including customer identification programs and procedures for filing suspicious activity reports.

Banks had until May 2018 at the latest to update their policies with respect to new customer due diligence regulations adopted by the U.S.

Department of the Treasury under the Bank Secrecy Act.

During 2018, Horizon Bank implemented the Fifth Pillar of the Bank Secrecy Act (“BSA”) which focuses on identifying beneficial ownership.

The BSA officer and BSA analysts incorporated these enhanced due diligence requirements into the Bank’s policies, procedures and training programs in 2018.

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

Federal Securities Law and NASDAQ

The shares of common stock of Horizon have been registered with the SEC under the Exchange Act.

Horizon is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the Exchange Act and the rules of the SEC promulgated thereunder.

Shares of common stock held by persons who are affiliates of Horizon may not be resold without registration unless sold in accordance with the resale restrictions of Rule 144 under the Securities Act of 1933, as amended.

If Horizon meets the current public information requirements under Rule 144, each affiliate of Horizon who complies with the

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

Federal Securities Law and NASDAQ

The shares of common stock of Horizon have been registered with the SEC under the Securities Exchange Act (the “1934 Act”).

Horizon is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the 1934 Act and the rules of the SEC promulgated thereunder.

If Horizon meets the current public information requirements under Rule 144, each affiliate of Horizon who complies with the other conditions of Rule 144 (including those that require the affiliate’s sale to be aggregated with those of certain other persons) would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of (i) 1% of the outstanding shares of Horizon or (ii) the average weekly volume of trading in such shares during the preceding four calendar weeks.

other conditions of Rule 144 (including those that require the affiliate’s sale to be aggregated with those of certain other persons) would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of (i) 1% of the outstanding shares of Horizon or (ii) the average weekly volume of trading in such shares during the preceding four calendar weeks.

Under the Dodd–Frank Act, Horizon is required to provide its shareholders an opportunity to vote on the executive compensation payable to its named executive officers and on golden parachute payments in connection with mergers and acquisitions.

19 unchanged sentences

Among other things, these provisions eliminated the Office of Thrift Supervision and transferred its functions to the other federal banking agencies, relaxed rules regarding interstate branching, allowed financial institutions to pay interest on business checking accounts, changed the scope of federal deposit insurance coverage and imposed new capital requirements on bank and thrift holding companies.

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

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

Privacy provisions of the Gramm–Leach–Bliley Act and certain other statutes.

In July 2011, many of the consumer financial protection functions formerly assigned to the federal banking and other designated agencies were transferred to the CFBP.

1 unchanged sentence

The CFPB has examination and primary enforcement authority over depository institutions with $10 billion or more in assets.

Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by the federal banking regulators for consumer compliance purposes.

Smaller institutions (like Horizon) are subject to rules promulgated by the CFPB but continue to be examined and supervised by the federal banking regulators for consumer compliance purposes.

The CFPB also has authority to prevent unfair, deceptive or abusive practices in connection with offering consumer financial products.

Additionally, the CFPB is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data, and promote the availability of financial services to underserved consumers and communities.

Additionally,

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

the CFPB is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data, and promote the availability of financial services to underserved consumers and communities.

The CFPB has indicated that mortgage lending is an area of supervisory focus.

5 unchanged sentences

Horizon has incurred higher operating costs in complying with the Dodd–Frank Act, and expects these higher costs to continue for the foreseeable future.

In May 2018, the Regulatory Relief Act was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd–Frank Act.

While the Regulatory Relief Act maintains most of the regulatory structure established by the Dodd–Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion.

Rules promulgated in 2019 pursuant to the Regulatory Relief Act have simplified the regulatory capital calculation and have established a “Community Bank Leverage Ratio” to replace the leverage and risk–based regulatory capital ratios for those banks choosing to adopt it.

10 unchanged sentences

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

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

The FHLB imposes various limitations on advances such as limiting the amount of certain types of real estate related collateral to 30% of a member’s capital and limiting total advances to a member.

3 unchanged sentences

At December 31, 2022, the Bank’s investment in stock of the FHLB of Indianapolis was $26.7 million.

For the year ended December 31, 2021, dividends paid by the FHLB of Indianapolis to the Bank on the FHLB stock totaled approximately $657,000, for an annualized rate paid in dividends of 2.8%.

For the year ended December 31, 2022, dividends paid by the FHLB of Indianapolis to the Bank on the FHLB stock totaled approximately $1.0 million, for an annualized rate paid in dividends of 4.0%.

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

Limitations on Rates Paid for Deposits;

18 unchanged sentences

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

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

As a financial institution, the Bank handles a significant amount of sensitive data, including personal information.

2 unchanged sentences

Horizon continues to monitor existing and new privacy and data security laws for their impact on Horizon’s business operations and its customers, including the applicability and effect of laws such as the European Union’s comprehensive 2018 General Data Privacy Regulation and the California Consumer Privacy Act that went into effect on January 1, 2020.

HORIZON BANCORP, INC.

2022 Annual Report on Form 10–K

Interchange Fees for Debit Cards

7 unchanged sentences

In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update, “Financial Instruments–Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model.

Under the CECL model, Horizon will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held to maturity debt securities, at the net amount expected to be collected.

The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

On December 21, 2018, the federal banking agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a period of three years the day–one regulatory capital effects of the CECL model.

The final rule also revises the agencies' other rules to reflect the update to the accounting standards.

The final rule took effect April 1, 2019.

Under the CECL model, Horizon is required to present certain financial assets carried at amortized cost, such as loans held for investment and held to maturity debt securities, at the net amount expected to be collected.

The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

On December 21, 2018, the federal banking agencies approved a final rule implementing these changes which took effect April 1, 2019.

Horizon adopted the new CECL standard effective as of January 1, 2020, the effects of which are shown and discussed in the financial statements and related notes included in this Annual Report.

4 unchanged sentences

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

HORIZON BANCORP, INC.

2021 Annual Report on Form 10–K

Legislative Initiatives

2 unchanged sentences

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

What changed 10-K

Item 1. Business