Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision of and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, Horizon has evaluated the effectiveness of the design and operation of its disclosure controls (as defined in Rule 13a–15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the evaluation date, due to the material weaknesses in the Company's internal control over financial reporting described below, the Company's disclosure controls and procedures were not effective as of December 31, 2022 .
However, after giving full consideration to the material weaknesses described herein, and based on a number of other factors, including the completion of the Audit Committee’s review of the underlying errors, management’s internal review that identified revisions to Horizon’s previously issued financial statements, efforts to remediate the material weaknesses in internal control over financial reporting described below, and the performance of additional procedures by management designed to ensure the reliability of Horizon’s financial reporting, Horizon has concluded that the Consolidated Financial Statements included in this Annual Report on Form 10–K present fairly, in all material respects, Horizon’s financial position, the results of its operations and its cash flows for each of the periods presented in conformity with U.S. generally accepted accounting principles.
Management’s Report on Internal Control Over Financial Reporting
Management of Horizon is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a–15(f) under the Exchange Act. Horizon’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Management assessed the effectiveness of Horizon’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on management's assessment of the Company's internal control over financial reporting as of December 31, 2022, management has concluded that the Company’s internal control over financial reporting was not effective as of that date because of the material weaknesses in internal control over financial reporting described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In this regard, management identified material weaknesses with respect to insufficient controls over the reporting, classification, and disclosure of loans, investments and individual cash flow line items and lack of sufficient controls around the financial reporting process that allows for the timely release of financial statements, as further described below.
Insufficient Controls With Respect to Specific Financial Statement Reporting, Classification, and Disclosure
The Company identified a material weakness with respect to insufficient controls over the reporting, classification and disclosure of loans, investments and individual cash flow line items in its financial statements. More specifically, these material weaknesses resulted in accounting revisions of previously issued financial statements with respect to the classification of sold commercial loan participation balances, the reporting of indirect loan dealer reserve asset balances and related amortization expense and the classification of certain available for sale and held to maturity securities from private labeled mortgage-backed pools to federal agency mortgage pool, which revisions were previously disclosed in the press release in the Company’s Form 8–K filed January 25, 2023 (the “Earnings Release”) and the Company’s Form 10–Q filings during 2022, in addition to errors in previously issued financial statement disclosures relating to the transfer of available for sale to held to maturity securities and the cash flow classification of repurchases of outstanding stock from an investing activity to a financing activity. Principal factors contributing to the identification of this material weakness included lack of sufficient resources and training in our
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accounting and finance department, insufficient procedures for the preparation of financial statement disclosures and insufficient procedures for the documentation and review for financial statement disclosures.
Lack of Sufficient Controls Around the Financial Reporting Process
The Company identified a material weakness with respect to lack of sufficient controls around the financial reporting process which did not sufficiently promote the timely release of financial statements. Specifically, the Company had insufficient controls over the calculation of its public float to determine its filing deadlines with the SEC, which resulted in the late filing of this Annual Report on Form 10–K. Principal factors contributing to the identification of this material weakness included insufficient training, review process and written procedures relating to the treatment of certain shares included in the public float calculation.
No restatement of prior period financial statements and no change in previously issued financial results were required as a result of these deficiencies in internal control. The control deficiencies resulted in immaterial revisions that were corrected in the issued consolidated financial statements as of and for the fiscal year ended December 31, 2022. However, these control deficiencies create a reasonable possibility that a material misstatement of the interim or annual consolidated financial statements and disclosures would not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent material weaknesses in internal control over financial reporting and that our internal control over financial reporting was not effective as of December 31, 2022.
Plan for Remediation of Material Weaknesses
The Company and its Board of Directors are committed to maintaining a strong internal control environment. During the first quarter of 2023, management identified the above control deficiencies that constituted material weaknesses as of December 31, 2022. Management evaluated the material weaknesses described above and during the first quarter of 2023 began (and is continuing) to implement a remediation plan to update its design and implementation of controls to remediate the aforementioned deficiencies and enhance the Company's internal control environment. In connection with this remediation plan, the Company has taken or will take the following measures to appropriately enhance its controls and procedures:
• Hiring additional resources within our accounting and finance department for financial statement preparation and review and providing additional training to implement and monitor our policies and procedures;
• Enhancing controls with additional procedures for the preparation of financial statement disclosures including the design and implementation of new financial preparation tools to allow more detailed review and documentation for review and procedures relating to the reporting, classification and disclosure of loans, investments and individual cash flow line items in the Company’s financial statements and the calculation of public float for purposes of determining SEC filing deadlines; and
• Developing enhanced documentation and review procedures for financial statement preparation and disclosures, including enhancing the financial statement review process by including additional steps in the review process with respect to the reporting, classification and disclosure of loans, investments and individual cash flow line items in its financial statements and the calculation of the Company’s public float for purposes of determining SEC filing deadlines.
The material weaknesses will not be considered remediated until the controls have operated effectively, as evidenced through testing, for a sufficient amount of time.
Attestation Report of Registered Public Accounting Firm
FORVIS, LLP (formerly BKD, LLP), an independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. The report, which expresses an adverse opinion of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, is included in this Annual Report on Form 10–K in Item 8, following FORVIS, LLP’s audit report.
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Changes in Internal Control Over Financial Reporting
Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that except for the material weaknesses described above, no changes in the Company's internal control over financial reporting (as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
Certain information is omitted from this report pursuant to General Instruction G. (3) of Form 10–K as Horizon intends to file with the Commission its definitive Proxy Statement for its 2023 Annual Meeting of Shareholders (the “Proxy Statement”) pursuant to Regulation 14A of the Exchange Act, not later than 120 days after December 31, 2022.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information relating to Horizon’s directors required by this item is found in the Proxy Statement under “Proposal I — Election of Directors” and is incorporated into this report and item by reference.
The information relating to the Audit Committee of the Board of Directors required by this item is found in the Proxy Statement under “Corporate Governance — Audit Committee” and is incorporated into this report and item by reference.
The information relating to Horizon’s executive officers required by this item is included in Part I of this Form 10–K under “Special Item: Information about our Executive Officers” and is incorporated into this item by reference.
Horizon has no delinquent Section 16(a) filings to report.
Horizon’s “Code of Ethics for Executive Officers and Directors” applies to its directors, chief executive officer and chief financial officer. The code is available on Horizon’s website at http://www.horizonbank.com/ in the section headed “About Us – Investor Relations” under the caption “Corporate Information – Corporate Governance.”
ITEM 11. EXECUTIVE COMPENSATION
The information on executive and director compensation and compensation committee matters required by this item can be found in the Proxy Statement under “Corporate Governance,” “Compensation Committee Report,” “Compensation Discussion and Analysis,” “Executive Compensation Tables” and “Compensation of Directors” and is incorporated into this report and item by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table presents information regarding grants under all equity compensation plans of Horizon through December 31, 2022.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted–Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)
Equity compensation plans approved by security holders 168,013 $ 14.64 1,446,605
Equity compensation plans not approved by security holders — $ — —
168,013 $ 14.32 1,446,605
The other information required by this item can be found in the Proxy Statement under “Common Share Ownership of Management and Certain Beneficial Owners” and is incorporated by reference into this report and item.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is found in the Proxy Statement under “Corporate Governance” and “Certain Business Relationships and Transactions” and is incorporated by reference into this report and item.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference into this report and item from the Proxy Statement section captioned “Auditor Fees and Services.”
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed As Part of This Annual Report on Form 10–K:
1. Financial Statements
The following financial statements are filed as part of this document under Item 8:
Consolidated Balance Sheets at December 31, 2022 and 2021
Consolidated Statements of Income, years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income, years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders’ Equity, years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows, years ended December 31, 2022, 2021 and 2020 Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
2. Financial Statement Schedules
Financial statement schedules are omitted for the reason that they are not required or are not applicable, or the required information is included in the financial statements.
3. Exhibits
The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are as follows:
Exhibit
Number Description Incorporated by Reference/Attached
3.1 Amended and Restated Articles of Incorporation of Horizon Bancorp, Inc. effective May 16, 2018
Incorporated by reference to Exhibit 3.1 to Registrant’s Form 8–K filed on May 16, 2018
3.2 Amended and Restated Bylaws of Horizon Bancorp, Inc.
Incorporated by reference to Exhibit 3.2 to Registrant’s Form 8–K filed on December 20, 2022
4.1 Description of Common Stock
Incorporated by reference to Exhibit 4.1 to Registrant's Form 10–K for the year ended December 31, 2020
4.2 Indenture, dated as of October 21, 2004, between Horizon Bancorp and Wilmington Trust Company related to the issuance of Trust Preferred Securities
Incorporated by reference to Exhibit 4.1 to Registrant’s Form 10–K for the year ended December 31, 2009
4.3 Amended and Restated Declaration of Trust of Horizon Bancorp Capital Trust II, dated as of October 21, 2004, related to the issuance of Trust Preferred Securities
Incorporated by reference to Exhibit 4.2 to Registrant’s Form 10–K for the year ended December 31, 2009
4.4 Junior Subordinated Indenture, dated as of December 15, 2006, between Horizon Bancorp and Wilmington Trust Company
Incorporated by reference to Exhibit 4.1 to Registrant’s Form 8–K filed on December 21, 2006
4.5 Amended and Restated Trust Agreement of Horizon Bancorp Capital Trust III, dated as of December 15, 2006
Incorporated by reference to Exhibit 4.2 to Registrant’s Form 8–K filed on December 21, 2006
4.6 Indenture for Subordinated Debt, dated June 24, 2020, between Horizon Bancorp, Inc. and Wilmington Trust, National Association
Incorporated by reference to Exhibit 4.1 to Registrant's Form 8–K filed on June 24, 2020
4.7 First Supplemental Indenture, dated June 24, 2020, between Horizon Bancorp, Inc. and Wilmington Trust, National Association
Incorporated by reference to Exhibit 4.2 to Registrant's Form 8–K filed on June 24, 2020
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Exhibit
Number Description Incorporated by Reference/Attached
10.1* Horizon Bancorp Amended 2003 Omnibus Equity Incentive Plan
Incorporated by reference to Appendix A to Registrant’s definitive Proxy Statement for its 2010 Annual Meeting of Shareholders
10.2* Form of Restricted Stock Award Agreement under 2003 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.7 to Registrant’s Form 10–K for the year ended December 31, 2009
10.3* Form of Option Grant Agreement under 2003 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.8 to Registrant’s Form 10–K for the year ended December 31, 2009
10.4* Horizon Bancorp 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Appendix A to Registrant’s definitive Proxy Statement for its 2014 Annual Meeting of Shareholders
10.5* Form of Nonqualified Stock Option Agreement under 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8–K filed on June 18, 2013
10.6* Form of Nonqualified Stock Option Agreement (Restrictive Covenant) under 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.2 to Registrant’s Form 8–K filed on June 18, 2013
10.7* Form of Performance Share Award Agreement under 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8–K filed on March 27, 2017
10.8* Form of Performance Share Award Agreement (Restrictive Covenant) under 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.2 to Registrant’s Form 8–K filed on March 27, 2017
10.9* Form of Restricted Stock Award Agreement under 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.9 to Registrant’s Form10–K filed on February 28, 2018
10.10* Form of Restricted Stock Award Agreement (Restrictive Covenant) under 2013 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.10 to Registrant’s Form 10–K filed on February 28, 2018
10.11* Horizon Bancorp, Inc. 2021 Omnibus Equity Incentive Plan
Incorporated by reference to Appendix A to Registrant's definitive Proxy Statement for its 2021 Annual Meeting of Shareholders
10.12* Form of Restricted Stock Award Agreement (time–based) under 2021 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.2 to Registrant's Form 8–K filed on May 11, 2021
10.13* Form of Restricted Stock Award Agreement (performance–based) under 2021 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.13 to Registrant's Form 10–K filed on March 9, 2022
10.14* Form of Restricted Stock Unit Award Agreement (time–based) under 2021 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.4 to Registrant's Form 8–K filed on May 11, 2021
10.15* Form of Restricted Stock Unit Award Agreement (performance–based) under 2021 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.15 to Registrant's Form 10–K filed on March 9, 2022
10.16* Form of Stock Option Award Agreement (time–based) under 2021 Omnibus Equity Incentive Plan
Incorporated by reference to Exhibit 10.6 to Registrant's Form 8–K filed on May 11, 2021
10.17* 1997 Supplemental Executive Retirement Plan, as amended and restated as of January 1, 1997, with amendments through December 19, 2017
Incorporated by reference to Exhibit 4.2 to Registrant’s Registration Statement on Form S–8 filed on December 28, 2017 (Registration No. 333-222329)
10.18* 2005 Supplemental Executive Retirement Plan, effective as of January 1, 2005, with amendments through December 19, 2017
Incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S–8 filed on December 28, 2017 (Registration No. 333-222329)
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Exhibit
Number Description Incorporated by Reference/Attached
10.19* 1998 Directors Deferred Compensation Plan, with amendments through December 19, 2017
Incorporated by reference to Exhibit 4.2 to Registrant’s Registration Statement on Form S–8 filed on December 28, 2017 (Registration No. 333-222330)
10.20* Amended and Restated 2005 Directors Deferred Compensation Plan, dated December 19, 2017
Incorporated by reference to Exhibit 4.2 to Registrant’s Registration Statement on Form S–8 filed on December 28, 2017 (Registration No. 333-222330)
10.21* Description of Executive Officer Bonus Plan
Incorporated by reference to Exhibit 10.15 to Registrant's Form 10–K for the year ended December 31, 2020
10.22* Amended and Restated Employment Agreement (Craig M. Dwight), dated January 1, 2020
Incorporated by reference to Exhibit 10.7 to Registrant’s Form 8–K filed on January 7, 2020
10.23* Change in Control Agreement (Craig M. Dwight), dated January 1, 2020
Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8–K filed on January 7, 2020
10.24* Change in Control Agreement (Mark E. Secor), dated January 1, 2020
Incorporated by reference to Exhibit 10.3 to Registrant’s Form 8–K filed on January 7, 2020
10.25* Change in Control Agreement (Kathie A. DeRuiter), dated January 1, 2020
Incorporated by reference to Exhibit 10.4 to Registrant’s Form 8–K filed on January 7, 2020
10.26* Change in Control Agreement (Dennis J. Kuhn), dated January 1, 2020
Incorporated by reference to Exhibit 10.5 to Registrant’s Form 8–K filed on January 7, 2020
10.27* Change in Control Agreement (Todd A. Etzler), dated January 1, 2020
Incorporated by reference to Exhibit 10.6 to Registrant’s Form 8–K filed on January 7, 2020
10.28* Employment Agreement (Thomas M. Prame), dated August 2, 2022
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8–K filed on August 2, 2022
10.29* Change in Control Agreement (Thomas M. Prame), dated August 2, 2022
Incorporated by reference to Exhibit 10.2 to Registrant's Form 8–K filed on August 2, 2022
10.30* Second Amended and Restated Employment Agreement (Craig M. Dwight), dated September 20, 2022
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8–K filed on September 20, 2022
10.31* Amendment to Change in Control Agreement (Kathie A. DeRuiter), dated December 1, 2022
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8–K filed on December 1, 2022
10.32* Amendment to Change in Control Agreement (Todd A. Etzler), dated December 1, 2022
Incorporated by reference to Exhibit 10.2 to Registrant's Form 8–K filed on December 1, 2022
10.33* Change in Control Agreement (Lynn M. Kerber), dated October 1, 2020
Attached
10.34* Amendment to Change in Control Agreement (Lynn M. Kerber), dated December 1, 2022
Attached
14 Code of Ethics for Executive Officers and Directors
Incorporated by reference to Exhibit 14 to Registrant’s Form 8–K filed on December 21, 2017
21 Subsidiaries of Horizon
Attached
23 Consent of FORVIS, LLP
Attached
31.1 Certification of Craig M. Dwight pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Attached
31.2 Certification of Mark E. Secor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Attached
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Exhibit
Number Description Incorporated by Reference/Attached
32.1 Certification of Craig M. Dwight pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Attached
32.2 Certification of Mark E. Secor pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Attached
101 Inline Interactive Data Files Attached
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Embedded Within the Inline XBRL Document
* Indicates exhibits that describe or evidence management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10–K.
ITEM 16. FORM 10–K SUMMARY
Not included.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized
Horizon Bancorp, Inc.
Registrant
Date: March 15, 2023 By: /s/ Craig M. Dwight
Craig M. Dwight
Chairman and Chief Executive Officer (Principal Executive Officer)
Date: March 15, 2023 By: /s/ Mark E. Secor
Mark E. Secor
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date Signature and Title
March 15, 2023 /s/ Craig M. Dwight
Craig M. Dwight, Chairman of the Board Chief Executive Officer and Director
March 15, 2023 /s/ Susan D. Aaron
Susan D. Aaron, Director
March 15, 2023 /s/ Eric Blackhurst
Eric P. Blackhurst, Director
March 15, 2023 /s/ Lawrence E. Burnell
Lawrence E. Burnell, Director
March 15, 2023 /s/ James B. Dworkin
James B. Dworkin, Director
March 15, 2023 /s/ Julie Scheck Freigang
Julie Scheck Freigang, Director
March 15, 2023 /s/ Michele M. Magnuson
Michele M. Magnuson, Director
March 15, 2023 /s/ Peter L. Pairitz
Peter L. Pairitz, Director
March 15, 2023 /s/ Steven W. Reed
Steven W. Reed, Director
March 15, 2023 /s/ Spero W. Valavanis
Spero W. Valavanis, Director
March 15, 2023 /s/ Vanessa P. Williams
Vanessa P. Williams, Director
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