QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2020
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
INC.
| Indiana | 35-1562417 | |||||
(State or other jurisdiction of
| (I.R.S. Employer
| |||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||||||||
| Common stock, no par value | HBNC | The NASDAQ Stock Market, LLC | ||||||||||||||||||
| Large Accelerated Filer | x | Accelerated Filer | |||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ | ||||||||||||
| Emerging growth company | ☐ | ||||||||||||||
August 3, 2020.
INC.
| |||||||||||||||
Assets Cash and due from banks Investment securities, available for sale Investment securities, held to maturity (fair value of $202,222 and $194,086) Loans held for sale Loans, net of allowance for loan losses of $15,586 and $14,837 Premises and equipment, net Federal Reserve and Federal Home Loan Bank stock Goodwill Other intangible assets Interest receivable Cash value of life insurance Other assets Total assets Liabilities Deposits Non-interest bearing Interest bearing Total deposits Borrowings Subordinated debentures Interest payable Other liabilities Total liabilities Commitments and contingent liabilities Stockholders’ Equity Preferred stock, Authorized, 1,000,000 shares Issued 0 and 0 shares Common stock, no par value Authorized 66,000,000 shares(1) Issued, 23,344,709 and 22,192,530 shares(1) Outstanding, 23,325,459 and 22,171,596 shares(1) Additionalpaid-in capital Retained earnings Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity Interest Income Loans receivable Investment securities Taxable Tax exempt Total interest income Interest Expense Deposits Borrowed funds Subordinated debentures Total interest expense Net Interest Income Provision for loan losses Net Interest Income after Provision for Loan Losses Non-interest Income Service charges on deposit accounts Wire transfer fees Interchange fees Fiduciary activities Gains (losses) on sale of investment securities (includes $6 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $38 and $875 for the nine months ended September 30, 2017 and 2016, respectively, related to accumulated other comprehensive earnings reclassifications) Gain on sale of mortgage loans Mortgage servicing income net of impairment Increase in cash value of bank owned life insurance Other income Totalnon-interest income Non-interest Expense Salaries and employee benefits Net occupancy expenses Data processing Professional fees Outside services and consultants Loan expense FDIC insurance expense Other losses Other expense Totalnon-interest expense Income Before Income Tax Income tax expense (includes $2 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $13 and $306 for the nine months ended September 30, 2017 and 2016, respectively, related to income tax expense from reclassification items) Net Income Preferred stock dividend Net Income Available to Common Shareholders Basic Earnings Per Share Diluted Earnings Per Share Net Income Other Comprehensive Income (Loss) Change in fair value of derivative instruments: Change in fair value of derivative instruments for the period Income tax effect Changes from derivative instruments Change in securities: Unrealized appreciation (depreciation) for the period on AFS securities Amortization from transfer of securities from available for sale to held to maturity securities Reclassification adjustment for securities (gains) losses realized in income Income tax effect Unrealized gains (losses) on securities Other Comprehensive Income (Loss), Net of Tax Comprehensive Income Balances, January 1, 2017 Net income Other comprehensive income, net of tax Amortization of unearned compensation Exercise of stock options Stock option expense Stock issued in Lafayette acquisition Cash dividends on common stock ($0.37 per share) Balances, September 30, 2017 Operating Activities Net income Items not requiring (providing) cash Provision for loan losses Depreciation and amortization Share based compensation Mortgage servicing rights net impairment Premium amortization on securities available for sale, net Gain on sale of investment securities Gain on sale of mortgage loans Proceeds from sales of loans Loans originated for sale Change in cash value of life insurance Gain on sale of other real estate owned Net change in Interest receivable Interest payable Other assets Other liabilities Net cash provided by operating activities Investing Activities Purchases of securities available for sale Proceeds from sales, maturities, calls, and principal repayments of securities available for sale Purchases of securities held to maturity Proceeds from maturities of securities held to maturity Change in Federal Reserve and FHLB stock Net change in loans Proceeds on the sale of OREO and repossessed assets Change in premises and equipment, net Acquisition of Kosciusko, net of cash received Acquisition of LaPorte, net of cash received Acquisition of branch, net of cash received Acquisition of Lafayette, net of cash received Net cash provided by (used in) investing activities Financing Activities Net change in Deposits Borrowings Redemption of preferred stock Proceeds from issuance of stock Dividends paid on common shares Dividends paid on preferred shares Net cash provided by financing activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Period Cash and Cash Equivalents, End of Period Contents September 30 December 31 2017 2016 (Unaudited) $ 72,662 $ 70,832 509,844 439,831 198,605 193,194 3,616 8,087 2,410,239 2,121,149 73,743 66,357 15,340 23,932 93,750 76,941 9,494 9,366 14,880 12,713 75,480 74,134 41,848 44,620 $ 3,519,501 $ 3,141,156 $ 563,536 $ 496,248 2,044,739 1,974,962 2,608,275 2,471,210 458,152 267,489 37,607 37,456 700 472 22,712 23,674 3,127,446 2,800,301 — — — — 212,436 182,326 181,396 164,173 (1,777 ) (5,644 ) 392,055 340,855 $ 3,519,501 $ 3,141,156 (1)Adjusted for 3:2 stock split on November 14, 2016June 30,
2020December 31,
2019(Unaudited) Assets Cash and due from banks $ 170,135 $ 98,831 Interest-earning time deposits 9,247 8,455 Investment securities, available for sale 935,140 834,776 Investment securities, held to maturity (fair value of $201,818 and $215,147) 190,935 207,899 Loans held for sale 15,913 4,088 Loans, net of allowance for loan losses of $55,090 and $17,667 3,923,292 3,619,174 Premises and equipment, net 92,232 92,209 Federal Home Loan Bank stock 23,608 22,447 Goodwill 151,238 151,238 Other intangible assets 24,782 26,679 Interest receivable 20,185 18,828 Cash value of life insurance 95,709 95,577 Other assets 86,846 66,628 Total assets $ 5,739,262 $ 5,246,829 Liabilities Deposits Non-interest bearing $ 981,868 $ 709,760 Interest bearing 3,325,731 3,221,242 Total deposits 4,307,599 3,931,002 Borrowings 583,073 549,741 Subordinated debentures 58,824 — Junior subordinated debentures issued to capital trusts 56,437 56,311 Interest payable 2,353 3,062 Other liabilities 78,770 50,690 Total liabilities 5,087,056 4,590,806 Commitments and contingent liabilities Stockholders’ Equity Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares — — Common stock, no par value, Authorized 99,000,000 shares Issued 43,846,947 and 45,000,840 shares, Outstanding 43,821,878 and 44,975,771 shares — — Additional paid-in capital 361,087 379,853 Retained earnings 269,849 269,738 Accumulated other comprehensive income 21,270 6,432 Total stockholders’ equity 652,206 656,023 Total liabilities and stockholders’ equity $ 5,739,262 $ 5,246,829 Three Months Ended Nine Months Ended September 30 September 30 2017 2016 2017 2016 $ 28,113 $ 25,313 $ 79,699 $ 65,854 2,167 2,498 6,817 7,703 1,790 1,151 5,193 3,583 32,070 28,962 91,709 77,140 1,841 1,875 5,315 4,923 1,753 2,128 4,028 5,608 597 549 1,721 1,556 4,191 4,552 11,064 12,087 27,879 24,410 80,645 65,053 710 455 1,370 1,219 27,169 23,955 79,275 63,834 1,672 1,605 4,638 4,310 175 292 503 588 1,251 1,156 3,809 3,065 1,887 1,653 5,752 4,753 6 — 38 875 1,950 3,528 5,918 9,171 369 409 1,175 1,356 474 449 1,346 1,145 237 226 613 708 8,021 9,318 23,792 25,971 12,911 12,210 37,086 32,592 2,400 2,174 7,048 6,011 1,502 1,616 4,311 3,855 649 612 1,797 2,190 2,504 2,686 4,991 5,983 1,215 1,482 3,572 4,086 270 465 776 1,279 58 107 186 510 3,004 2,730 8,755 7,798 24,513 24,082 68,522 64,304 10,677 9,191 34,545 25,501 2,506 2,589 9,078 7,192 8,171 6,602 25,467 18,309 — — — (42 ) $ 8,171 $ 6,602 $ 25,467 $ 18,267 $ 0.36 $ 0.31 $ 1.14 $ 0.95 0.36 0.30 1.13 0.94 Three Months Ended June 30 Six Months Ended June 30 2020 2019 2020 2019 Interest Income Loans receivable $ 43,918 $ 47,784 $ 88,876 $ 87,407 Investment securities - taxable 2,321 3,273 5,219 6,395 Investment securities - tax exempt 4,105 2,793 7,903 5,421 Total interest income 50,344 53,850 101,998 99,223 Interest Expense Deposits 4,506 8,938 12,222 15,814 Borrowed funds 2,074 2,495 4,312 6,116 Subordinated debentures 58 — 58 — Junior subordinated debentures issued to capital trusts 710 888 1,485 1,484 Total interest expense 7,348 12,321 18,077 23,414 Net Interest Income 42,996 41,529 83,921 75,809 Credit loss expense 7,057 896 15,657 1,260 Net Interest Income after Credit Loss Expense 35,939 40,633 68,264 74,549 Non-interest Income Service charges on deposit accounts 1,888 2,480 4,334 4,357 Wire transfer fees 230 167 401 285 Interchange fees 2,327 2,160 4,223 3,521 Fiduciary activities 1,765 2,063 4,293 4,152 Gains on sale of investment securities (includes $248 and $(100) for the three months ended June 30, 2020 and 2019, respectively, and $587 and $(85) for the six months ended June 30, 2020 and 2019, respectively, related to accumulated other comprehensive earnings reclassifications) 248 (100) 587 (85) Gain on sale of mortgage loans 6,620 2,078 10,093 3,387 Mortgage servicing income net of impairment (2,760) 570 (2,735) 1,176 Increase in cash value of bank owned life insurance 557 555 1,111 1,068 Death benefit on bank owned life insurance — 367 233 367 Other income 250 558 648 1,382 Total non-interest income 11,125 10,898 23,188 19,610 Non-interest Expense Salaries and employee benefits 15,629 16,951 32,220 31,417 Net occupancy expenses 3,190 3,148 6,442 5,920 Data processing 2,432 2,139 4,837 4,105 Professional fees 518 598 1,054 1,091 Outside services and consultants 1,759 1,655 3,674 5,185 Loan expense 2,692 2,048 4,791 3,997 FDIC insurance expense 235 365 385 525 Other losses 193 169 313 273 Other expense 3,784 4,511 7,865 8,809 Total non-interest expense 30,432 31,584 61,581 61,322 Income Before Income Taxes 16,632 19,947 29,871 32,837 Income tax expense (includes $52 and $(21) for the three months ended June 30, 2020 and 2019, respectively, and $123 and $(18) for the six months ended June 30, 2020 and 2019, respectively, related to income tax expense from reclassification items) 1,993 3,305 3,577 5,379 Net Income $ 14,639 $ 16,642 $ 26,294 $ 27,458 Basic Earnings Per Share $ 0.33 $ 0.37 $ 0.59 $ 0.65 Diluted Earnings Per Share 0.33 0.37 0.59 0.65 Three Months Ended September 30 Nine Months Ended September 30 2017 2016 2017 2016 (Unaudited) (Unaudited) (Unaudited) (Unaudited) $ 8,171 $ 6,602 $ 25,467 $ 18,309 297 803 743 158 (104 ) (281 ) (260 ) (55 ) 193 522 483 103 (791 ) (1,927 ) 5,444 6,712 (54 ) (83 ) (200 ) (560 ) (6 ) — (38 ) (875 ) 297 704 (1,822 ) (1,848 ) (554 ) (1,306 ) 3,384 3,429 (361 ) (784 ) 3,867 3,532 $ 7,810 $ 5,818 $ 29,334 $ 21,841 Three Months Ended June 30 Six Months Ended June 30 2020 2019 2020 2019 Net Income $ 14,639 $ 16,642 $ 26,294 $ 27,458 Other Comprehensive Income Change in fair value of derivative instruments: Change in fair value of derivative instruments for the period (135) (1,901) (4,100) (3,007) Income tax effect 28 399 861 631 Changes from derivative instruments (107) (1,502) (3,239) (2,376) Change in securities: Unrealized appreciation for the period on AFS securities 15,507 6,933 23,499 18,627 Amortization from transfer of securities from available for sale to held to maturity securities 1 (30) (29) (68) Reclassification adjustment for securities gains realized in income (248) 100 (587) 85 Income tax effect (3,205) (1,472) (4,806) (3,917) Unrealized gains on securities 12,055 5,531 18,077 14,727 Other Comprehensive Income, Net of Tax 11,948 4,029 14,838 12,351 Comprehensive Income $ 26,587 $ 20,671 $ 41,132 $ 39,809 HORIZON BANCORP Accumulated Additional Other Preferred Paid-in Retained Comprehensive Stock Capital Earnings Income (Loss) Total $ — $ 182,326 $ 164,173 $ (5,644 ) $ 340,855 25,467 25,467 3,867 3,867 103 103 616 616 238 238 29,153 29,153 (8,244 ) (8,244 ) $ — $ 212,436 $ 181,396 $ (1,777 ) $ 392,055 Three Months Ended Preferred
StockCommon
StockAdditional
Paid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
IncomeTotal Balances, April 1, 2019 $ — $ — $ 378,963 $ 230,327 $ 178 $ 609,468 Net income — — — 16,642 — 16,642 Other comprehensive income, net of tax — — — — 4,029 4,029 Amortization of unearned compensation — — 210 — — 210 Exercise of stock options — — 38 — — 38 Stock option expense — — 58 — — 58 Stock issued stock plans — — 1,466 — — 1,466 Cash dividends on common stock ($0.12 per share) — — — (5,450) — (5,450) Balances, June 30, 2019 $ — $ — $ 380,735 $ 241,519 $ 4,207 $ 626,461 Balances, April 1, 2020 $ — $ — $ 361,019 $ 260,501 $ 9,322 $ 630,842 Net income — — — 14,639 — 14,639 Other comprehensive income, net of tax — — — — 11,948 11,948 Amortization of unearned compensation — — (79) — — (79) Exercise of stock options — — (98) — — (98) Stock option expense — — 27 — — 27 Stock issued stock plans — — 218 — — 218 Cash dividends on common stock ($0.12 per share) — — — (5,291) — (5,291) Balances, June 30, 2020 $ — $ — $ 361,087 $ 269,849 $ 21,270 $ 652,206 HORIZON BANCORP AND SUBSIDIARIESCondensed Consolidated StatementsTable of Cash Flows(Dollar Amounts in Thousands) Nine Months Ended September 30 2017 2016 (Unaudited) (Unaudited) $ 25,467 $ 18,309 1,370 1,219 4,303 3,790 238 247 75 840 4,476 4,389 (38 ) (875 ) (5,918 ) (9,171 ) 174,271 246,435 (163,882 ) (236,719 ) (1,346 ) (1,145 ) 12 118 (1,811 ) (687 ) 180 275 2,215 (16,641 ) (2,335 ) 1,015 37,277 11,399 (127,752 ) (152,283 ) 67,416 88,330 (20,152 ) (35,598 ) 4,883 14,654 8,987 (2,443 ) (154,038 ) (26,920 ) 2,125 1,524 (2,667 ) (1,719 ) — 30,437 — 116,521 11,000 — 20,425 — (189,773 ) 32,503 (28,860 ) (37,495 ) 190,814 46,846 — (12,500 ) 616 286 (8,244 ) (5,926 ) — (42 ) 154,326 (8,831 ) 1,830 35,071 70,832 48,650 $ 72,662 $ 83,721 (continued)Six Months Ended Preferred
StockCommon
StockAdditional
Paid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
Income (Loss)Total Balances, January 1, 2019 $ — $ — $ 276,101 $ 224,035 $ (8,144) $ 491,992 Net income — — — 27,458 — 27,458 Other comprehensive income, net of tax — — — — 12,351 12,351 Amortization of unearned compensation — — 301 — — 301 Exercise of stock options — — 155 — — 155 Stock option expense — — 115 — — 115 Stock issued stock plans — — 1,341 — — 514 Stock issued in Salin acquisition — — 102,722 — — — Cash dividends on common stock ($0.22 per share) — — — (9,974) — (9,974) Balances, June 30, 2019 $ — $ — $ 380,735 $ 241,519 $ 4,207 $ 626,461 Balances, January 1, 2020 $ — $ — $ 379,853 $ 269,738 $ 6,432 $ 656,023 Net income — — — 26,294 — 26,294 Other comprehensive income, net of tax — — — — 14,838 14,838 Impact of adoption of ASU No. 2016-13 — — — (15,635) — (15,635) Amortization of unearned compensation — — 122 — — 122 Exercise of stock options — — 157 — — 157 Stock option expense — — 77 — — 77 Stock issued stock plans — — 514 — — 514 Repurchase of outstanding stock — — (19,636) — — (19,636) Cash dividends on common stock($0.24 per share) — — — (10,548) — (10,548) Balances, June 30, 2020 $ — $ — $ 361,087 $ 269,849 $ 21,270 $ 652,206
Additional Supplemental Information | ||||||||
Interest paid | $ | 10,836 | $ | 11,579 | ||||
Income taxes paid | 10,350 | 7,310 | ||||||
Transfer of loans to other real estate owned | 1,717 | 3,035 | ||||||
The Company purchased all of the capital stock of Lafayette for $34,529 on September 1, 2017. In conjunction with the acquisition, liabilities were assumed as follows: | ||||||||
Fair value of assets acquired | 186,659 | — | ||||||
Less: common stock issued | 30,108 | — | ||||||
Cash paid for the capital stock | 4,421 | — | ||||||
Liabilities assumed | 152,130 | — | ||||||
Acquisition of LaPorte, measurement period adjustments | 703 | |||||||
The Company purchased all of the capital stock of LaPorte Bancorp for $98,634 on July 18, 2016. In conjunction with the acquisition, liabilities were assumed as follows: | ||||||||
Fair value of assets acquired | — | 546,770 | ||||||
Less: common stock issued | — | 60,306 | ||||||
Cash paid for the capital stock | — | 38,328 | ||||||
Liabilities assumed | — | 448,136 | ||||||
The Company purchased all of the capital stock of Kosciusko for $22,983 on June 1, 2016. In conjunction with the acquisition, liabilities were assumed as follows: | ||||||||
Fair value of assets acquired | — | 155,873 | ||||||
Less: common stock issued | — | 14,470 | ||||||
Cash paid for the capital stock | — | 8,513 | ||||||
Liabilities assumed | — | 132,890 |
| Six Months Ended June 30 | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Operating Activities | |||||||||||||||||
| Net income | $ | 26,294 | $ | 27,458 | |||||||||||||
| Items not requiring (providing) cash | |||||||||||||||||
| Provision for credit losses | 15,657 | 1,260 | |||||||||||||||
| Depreciation and amortization | 4,909 | 4,380 | |||||||||||||||
| Share based compensation | 77 | 115 | |||||||||||||||
| Mortgage servicing rights income | (466) | (1,165) | |||||||||||||||
| Mortgage servicing rights net impairment | 3,201 | (11) | |||||||||||||||
| Premium amortization on securities, net | 4,266 | 2,589 | |||||||||||||||
| (Gain) loss on sale of investment securities | (587) | 85 | |||||||||||||||
| Gain on sale of mortgage loans | (10,093) | (3,387) | |||||||||||||||
| Proceeds from sales of loans | 258,207 | 92,314 | |||||||||||||||
| Loans originated for sale | (259,939) | (91,074) | |||||||||||||||
| Change in cash value life insurance | (1,111) | (1,068) | |||||||||||||||
| Gain on sale of other real estate owned | 7 | (11) | |||||||||||||||
| Net change in: | |||||||||||||||||
| Interest receivable | (1,357) | (2,288) | |||||||||||||||
| Interest payable | (709) | 148 | |||||||||||||||
| Other assets | 1,811 | 97,207 | |||||||||||||||
| Other liabilities | 661 | 7,780 | |||||||||||||||
| Net cash provided by operating activities | 40,828 | 134,332 | |||||||||||||||
| Investing Activities | |||||||||||||||||
| Purchases of securities available for sale | (207,160) | (176,629) | |||||||||||||||
| Proceeds from sales, maturities, calls and principal repayments of securities available for sale | 126,826 | 165,638 | |||||||||||||||
| Proceeds from maturities of securities held to maturity | 16,138 | 4,551 | |||||||||||||||
| Net change in interest-earning time deposits | (792) | 7,654 | |||||||||||||||
| Change in FHLB stock | (1,161) | (803) | |||||||||||||||
| Net change in loans | (340,505) | (84,406) | |||||||||||||||
| Proceeds on the sale of OREO and repossessed assets | 444 | 1,260 | |||||||||||||||
| Change in premises and equipment, net | (2,913) | (1,538) | |||||||||||||||
| Death benefit on bank owned life insurance | 233 | 367 | |||||||||||||||
| Repurchase of outstanding stock | (19,636) | — | |||||||||||||||
| Net cash received in acquisition, Salin | — | 128,745 | |||||||||||||||
| Net cash provided by (used in) investing activities | (428,526) | 44,839 | |||||||||||||||
| Financing Activities | |||||||||||||||||
| Net change in: | |||||||||||||||||
| Deposits | 376,597 | 50,049 | |||||||||||||||
| Borrowings | 33,458 | (184,548) | |||||||||||||||
| Proceeds from issuance of stock | 671 | 1,496 | |||||||||||||||
| Net proceeds from issuance of subordinated notes | 58,824 | — | |||||||||||||||
| Dividends paid on common stock | (10,548) | (9,974) | |||||||||||||||
| Net cash provided by (used in) financing activities | 459,002 | (142,977) | |||||||||||||||
| Net Change in Cash and Cash Equivalents | 71,304 | 36,194 | |||||||||||||||
| Cash and Cash Equivalents, Beginning of Period | 98,831 | 58,492 | |||||||||||||||
| Cash and Cash Equivalents, End of Period | $ | 170,135 | $ | 94,686 | |||||||
| Additional Supplemental Information | |||||||||||
| Interest paid | $ | 18,786 | $ | 22,440 | |||||||
| Income taxes paid | — | 1,300 | |||||||||
| Transfer of loans to other real estate and repossessed assets | 939 | 1,213 | |||||||||
| Transfer of premises to other real estate | — | 1,564 | |||||||||
| Right-of-use assets exchanged for lease obligations | — | 3,411 | |||||||||
March 6, 2020.
HORIZON BANCORP 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 | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Basic earnings per share | ||||||||||||||||
Net income | $ | 8,171 | $ | 6,602 | $ | 25,467 | $ | 18,309 | ||||||||
Less: Preferred stock dividends | — | — | — | 42 | ||||||||||||
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Net income available to common shareholders | $ | 8,171 | $ | 6,602 | $ | 25,467 | $ | 18,267 | ||||||||
Weighted average common shares outstanding(1) | 22,580,160 | 21,538,752 | 22,326,454 | 19,252,295 | ||||||||||||
Basic earnings per share | $ | 0.36 | $ | 0.31 | $ | 1.14 | $ | 0.95 | ||||||||
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Diluted earnings per share | ||||||||||||||||
Net income available to common shareholders | $ | 8,171 | $ | 6,602 | $ | 25,467 | $ | 18,267 | ||||||||
Weighted average common shares outstanding(1) | 22,580,160 | 21,538,752 | 22,326,454 | 19,252,295 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Restricted stock | 36,749 | 33,650 | 33,791 | 27,590 | ||||||||||||
Stock options | 98,364 | 79,551 | 95,553 | 66,491 | ||||||||||||
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Weighted average shares outstanding | 22,715,273 | 21,651,953 | 22,455,798 | 19,346,376 | ||||||||||||
Diluted earnings per share | $ | 0.36 | $ | 0.30 | $ | 1.13 | $ | 0.94 | ||||||||
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| Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Basic earnings per share | |||||||||||||||||||||||||||||||||||
| Net income | $ | 14,639 | $ | 16,642 | $ | 26,294 | $ | 27,458 | |||||||||||||||||||||||||||
| Weighted average common shares outstanding | 43,781,249 | 45,055,117 | 44,219,880 | 41,956,047 | |||||||||||||||||||||||||||||||
| Basic earnings per share | $ | 0.33 | $ | 0.37 | $ | 0.59 | $ | 0.65 | |||||||||||||||||||||||||||
| Diluted earnings per share | |||||||||||||||||||||||||||||||||||
| Net income | $ | 14,639 | $ | 16,642 | $ | 26,294 | $ | 27,458 | |||||||||||||||||||||||||||
| Weighted average common shares outstanding | 43,781,249 | 45,055,117 | 44,219,880 | 41,956,047 | |||||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
| Restricted stock | 7,614 | — | 40,017 | — | |||||||||||||||||||||||||||||||
| Stock options | 13,931 | 75,291 | 26,967 | 76,924 | |||||||||||||||||||||||||||||||
| Weighted average common shares outstanding | 43,802,794 | 45,130,408 | 44,286,864 | 42,032,971 | |||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 0.33 | $ | 0.37 | $ | 0.59 | $ | 0.65 | |||||||||||||||||||||||||||
There were 341,394 and 341,394 shares for the three and six months ended June 30, 2019, which were not included in the computation of diluted earnings per share because they were non-dilutive.
Reclassifications
Certain reclassifications have been
| January 1, 2020 | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | As Reported Under ASC 326 | Pre-ASC 326 Adoption | Impact of ASC 326 Adoption | |||||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||
| Commercial | $ | 25,614 | $ | 11,996 | $ | 13,618 | ||||||||||||||||||||||||||
| Real estate | 4,971 | 923 | 4,048 | |||||||||||||||||||||||||||||
| Mortgage warehouse | 1,077 | 1,077 | — | |||||||||||||||||||||||||||||
| Consumer | 8,582 | 3,671 | 4,911 | |||||||||||||||||||||||||||||
| Allowance for credit losses on loans | $ | 40,244 | $ | 17,667 | $ | 22,577 | ||||||||||||||||||||||||||
of purchase premiums and discounts, and deferred loan fees and costs. Accrued interest receivable totaling $12.8 million at June 30, 2020 was excluded from the ACL calculation and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income
Note 2 – Acquisitions
Kosciusko Financial, Inc.
On June 1, 2016, Horizon completed
Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on preliminary valuations ofcreditor may use the fair value of tangiblethe collateral. Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and intangible assets acquiredcurrent principal payments have been made.
ASSETS | LIABILITIES | |||||||||
Cash and due from banks | $ | 38,950 | Deposits | |||||||
Investment securities, available for sale | 1,191 | Non-interest bearing | $ | 27,871 | ||||||
| NOW accounts | 35,213 | |||||||||
Commercial | 70,006 | Savings and money market | 26,953 | |||||||
Residential mortgage | 26,244 | Certificates of deposits | 32,771 | |||||||
|
| |||||||||
Consumer | 6,319 | Total deposits | 122,808 | |||||||
|
| |||||||||
Total loans | 102,569 | |||||||||
| Borrowings | 9,038 | |||||||||
Premises and equipment, net | 1,466 | Interest payable | 55 | |||||||
FRB and FHLB stock | 582 | Other liabilities | 989 | |||||||
Goodwill | 6,443 | |||||||||
Core deposit intangible | 526 | |||||||||
Interest receivable | 636 | |||||||||
Cash value of life insurance | 2,745 | |||||||||
Other assets | 765 | |||||||||
|
|
|
| |||||||
Total assets purchased | $ | 155,873 | Total liabilities assumed | $ | 132,890 | |||||
|
|
|
| |||||||
Common shares issued | $ | 14,470 | ||||||||
Cash paid | 8,513 | |||||||||
|
| |||||||||
Total estimated purchase price | $ | 22,983 | ||||||||
|
| |||||||||
three methods described above.
Of the total estimated purchase price of $23.0 million, $526,000 has been allocated to core deposit intangible. Additionally, $6.4 million has been allocated to goodwill and none of the purchase price is deductible. The core deposit intangible will be amortized over ten years on a straight line basis.
Loans purchased with evidence ofwhich have experienced more than insignificant credit deterioration since origination andorigination. PCD loans are recorded at the amount paid. An ACL on loans is determined using the same methodology as other loans held for which itinvestment. The initial ACL on loans determined on a collective basis is probable that all contractually required payments will not be collected are consideredallocated to be credit impaired. Evidence of credit quality deterioration asindividual loans. The sum of the loan's purchase date may include information such aspast-dueprice andnon-accrual status, borrower credit scores ACL on loans becomes its initial amortized cost basis. The difference between the initial amortized cost basis and recentloan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC310-30) and initially measured at fairpar value of the loan is a noncredit discount or premium, which includes estimated future credit losses expected to be incurredis amortized into interest income over the life of the loan. Accordingly, an allowanceSubsequent changes to the ACL on loans are recorded through credit loss expense.
Loans with specific credit-related deterioration, since origination, are recorded at fair value, reflectingforecasted conditions to differ from the present valueperiods utilized for the historical loss rate calculation. Management has incorporated an adjustment of the amounts expectedhistorical loss rate calculated within the model to be collected. Income recognition of these loansreflect current and forecasted condition and has applied this adjustment on a qualitative factor basis to the aggregate pool loss rate.
twelve month forecast. The following table details the acquired loans that are accounted forqualitative adjustment is calculated based on current and forecasted conditions and evaluated each quarter by management, and therefore is dynamic in accordance with ASC310-30 as of June 1, 2016.
Contractually required principal and interest at acquisition | $ | 2,682 | ||
Contractual cash flows not expected to be collected (nonaccretable differences) | 25 | |||
|
| |||
Expected cash flows at acquisition | 2,657 | |||
Interest component of expected cash flows (accretable discount) | 634 | |||
|
| |||
Fair value of acquired loans accounted for under ASC310-30 | $ | 2,023 | ||
|
|
Final estimates of certain loans, those for which specific credit-related deterioration, since origination, are recorded at fair value, reflecting the present valuenature. As a result of the amounts expectedforecast being applied as a qualitative factor and adjusted quarterly, no reversion to be collected. Income recognitionthe historical loss rate is necessary, as
LaPorte Bancorp, Inc.
On July 18, 2016, Horizon completed
Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the LaPorte Bancorp acquisition is detailed in the following table.
ASSETS | LIABILITIES | |||||||||
Cash and due from banks | $ | 154,849 | Deposits | |||||||
Investment securities, available for sale | 23,779 | Non-interest bearing | $ | 66,733 | ||||||
| NOW accounts | 99,346 | |||||||||
Commercial | 153,750 | Savings and money market | 117,688 | |||||||
Residential mortgage | 42,603 | Certificates of deposits | 87,605 | |||||||
|
| |||||||||
Consumer | 16,801 | Total deposits | 371,372 | |||||||
Mortgage Warehousing | 99,752 | |||||||||
|
| |||||||||
Total loans | 312,906 | |||||||||
| Borrowings | 64,793 | |||||||||
Premises and equipment, net | 6,022 | Interest payable | 178 | |||||||
FHLB stock | 4,029 | Subordinated debt | 4,504 | |||||||
Goodwill | 20,993 | Other liabilities | 10,056 | |||||||
Core deposit intangible | 2,514 | |||||||||
Interest receivable | 844 | |||||||||
Cash value of life insurance | 15,267 | |||||||||
Other assets | 8,334 | |||||||||
|
|
|
| |||||||
Total assets purchased | $ | 549,537 | Total liabilities assumed | $ | 450,903 | |||||
|
|
|
| |||||||
Common shares issued | $ | 60,306 | ||||||||
Cash paid | 38,328 | |||||||||
|
| |||||||||
Total estimated purchase price | $ | 98,634 | ||||||||
|
| |||||||||
Of the total estimated purchase price of $98.6 million, $2.5 million has been allocated to core deposit intangible. Additionally, $21.0 million has been allocated to goodwill and none of the purchase price is deductible. The core deposit intangible will be amortized over ten years on a straight line basis.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
The Company acquired various loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.
Loans purchased with evidence of credit deterioration since origination and for whichleases where it is probable thatwe will be unable to collect all contractually required payments will not be collected are consideredamounts due, according to be credit impaired. Evidence of credit quality deteriorationthe original contractual terms. These include commercial impaired loans, jumbo residential mortgages (as defined), and jumbo home equity loans with a balance exceeding $250,000, and other loans as of the purchase date may include information such aspast-duedetermined by management. ACL for residential andnon-accrual status, borrower credit scores and recentloan-to-value percentages. Purchased credit-impaired consumer loans are, accounted for under the accounting guidance forprimarily, determined by meaningful pools of similar loans and debt securities acquired with deteriorated credit quality (ASC310-30) and initially measured at fair value, which includes estimated futureare evaluated on a quarterly basis.
Loans with specific credit-related deterioration, since origination, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected.
The following table details an estimate of the acquired loans that are accounted for in accordance with ASC310-30 as of July 18, 2016.
Contractually required principal and interest at acquisition | $ | 12,545 | ||
Contractual cash flows not expected to be collected (nonaccretable differences) | 4,492 | |||
|
| |||
Expected cash flows at acquisition | 8,053 | |||
Interest component of expected cash flows (accretable discount) | 1,258 | |||
|
| |||
Fair value of acquired loans accounted for under ASC310-30 | $ | 6,795 | ||
|
|
Final estimates of certain loans, those for which specific credit-related deterioration, since origination, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected. Goodwill was increased by $703,000 during the nine months ended September 30, 2017 due to measurement period adjustments.
CNB Bancorp
On November 7, 2016, Horizon completed the acquisition of CNB Bancorp, an Indiana corporation headquartered in Attica, Indiana (“CNB”) and the Bank’s acquisition of The Central National Bank and Trust Company (“Central National Bank & Trust”), through mergers effective November 7, 2016. Under terms of the acquisition, shareholders of CNB received merger consideration in the form of cash. The total value of the consideration for the acquisition was $5.3 million.
Under the acquisition method of accounting, the total estimated purchase price is allocated to CNB’s net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on management’s preliminary valuation of the fair value of the tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the final purchase price for the CNB acquisition is allocated as follows:
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
ASSETS | LIABILITIES | |||||||||
Cash and due from banks | $ | 27,860 | Deposits | |||||||
Investment securities, available for sale | 16,393 | Non-interest bearing | $ | 24,079 | ||||||
| NOW accounts | 9,038 | |||||||||
Commercial | 2,267 | Savings and money market | 13,829 | |||||||
|
| |||||||||
Residential mortgage | 6,624 | Certificates of deposits | 3,342 | |||||||
Consumer | 1,579 | Total deposits | 50,288 | |||||||
|
| |||||||||
Total loans | 10,470 | |||||||||
| Borrowings | 459 | |||||||||
Premises and equipment, net | 444 | Interest payable | 7 | |||||||
FHLB stock | 50 | Other liabilities | 154 | |||||||
Goodwill | 609 | |||||||||
Core deposit intangible | 190 | |||||||||
Interest receivable | 154 | |||||||||
Other assets | 49 | |||||||||
|
|
|
| |||||||
Total assets purchased | $ | 56,219 | Total liabilities assumed | $ | 50,908 | |||||
|
|
|
| |||||||
Cash paid | 5,311 | |||||||||
|
| |||||||||
Total estimated purchase price | $ | 5,311 | ||||||||
|
| |||||||||
Of the total purchase price of $5.3 million, $190,000 has been allocated to core deposit intangible. Additionally, $609,000 has been allocated to goodwill and none of the purchase price is deductible. The core deposit intangible will be amortized over 10 years on a straight line basis.
The Company acquired the $10.8 million performing loan portfolio with an estimated fair value of $10.5 million. No loans were purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected or which are considered to be credit impaired.
Bargersville Branch Purchase
On February 3, 2017, Horizon completed the purchase and assumption of certain assets and liabilities of a single branch of First Farmers Bank & Trust Company, in Bargersville, Indiana. Net cash of $11.0 million was received in the transaction, representing the deposit balances assumed at closing, net of amounts paid for loans acquired in the transaction of $3.4 million and a 3.0% premium on deposits. Customer deposit balances were recorded at $14.8 million and a core deposit intangible of $463,000 was recorded in the transaction, which will be amortized over ten years on a straight line basis. There was no goodwill generated in the transaction.
Lafayette Community Bancorp
On September 1, 2017, Horizon completed the acquisition of Lafayette Community Bancorp, an Indiana corporation (“Lafayette”) and Horizon Bank’s acquisition of Lafayette Community Bank, a state-chartered bank and wholly-owned subsidiary of Lafayette, through mergers effective September 1, 2017. Under the terms of the Merger Agreement, shareholders of Lafayette received 0.5878 shares of Horizon common stock and $1.73 in cash for each outstanding share of Lafayette common stock. Lafayette shareholders owning fewer than 100 shares of common stock received $17.25 in cash for each common share. Lafayette shares outstandingcollateral at the closing to be exchanged were 1,856,679, and the shares of Horizon common stock issued to Lafayette shareholders totaled 1,091,259. Based upon the August 31, 2017 closing price of $26.17 per share of Horizon common stock immediately prior to the effectiveness of the merger, the transaction has an implied valuation of approximately $34.5 million. reporting date, adjusted for selling costs as appropriate.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
related to the acquisition. These expenses are classified in thenon-interest expense section of the income statement and are primarily located in the salaries and employee benefits, professional services and other expense line items. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce cost through economies of scale.
Horizon held a 5% ownership in Lafayette immediately preceding the merger date. In accordance with ASC 805-10 – Business Combinations, Horizon was required to remeasure the equity interest in Lafayette’s common stock and recognize the resulting gain or loss, if any, in earnings. Since Lafayette was traded in the OTC market, the remeasurement was basedprovision for credit losses on the closing price of Lafayette’s common stock immediately prior to the acquisition announcement and immediately prior to Horizon taking control of Lafayette. A control premium was calculated whichloans on individually evaluated loans is not indicative ofrecognized on the fair value of Horizon’s equity ownership interest immediately precedingcollateral adjusted for estimated costs to sell, the acquisition announcement. The control premium was immaterial to the financial statements taken as a whole.
The purchase price allocated to net tangible and intangible assets was made based upon provisional amounts as the initial accounting was not complete asbasis of September 30, 2017. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the Lafayette acquisition is detailed in the following table. Prior to the end of the one year measurement period for finalizing the purchase price allocation, such adjustments will be included in the purchase price allocation prospectively. If any adjustments are made to the preliminary assumptions (provisional amounts), disclosures will be made in the notes to the financial statements of the amounts recorded in the current period earnings by line item that have been recorded in previous reporting periods if the adjustments to the provisional amounts had been recognized as of the acquisition date.
ASSETS | LIABILITIES | |||||||||
Cash and due from banks | $ | 24,846 | Deposits | |||||||
Investment securities, available for sale | 6 | Non-interest bearing | $ | 34,990 | ||||||
| NOW accounts | 30,174 | |||||||||
Commercial | 98,011 | Savings and money market | 53,663 | |||||||
Residential mortgage | 30,997 | Certificates of deposits | 32,271 | |||||||
|
| |||||||||
Consumer | 5,345 | Total deposits | 151,098 | |||||||
|
| |||||||||
Total loans | 134,353 | |||||||||
| Borrowings | — | |||||||||
Premises and equipment, net | 7,818 | Interest payable | 42 | |||||||
FHLB stock | 395 | Other liabilities | 990 | |||||||
Goodwill | 16,106 | |||||||||
Core deposit intangible | 777 | |||||||||
Interest receivable | 338 | |||||||||
Other assets | 2,020 | |||||||||
|
|
|
| |||||||
Total assets purchased | $ | 186,659 | Total liabilities assumed | $ | 152,130 | |||||
|
|
|
| |||||||
Common shares issued | $ | 30,108 | (1) | |||||||
Cash paid | 4,421 | |||||||||
|
| |||||||||
Total estimated purchase price | $ | 34,529 | ||||||||
|
| |||||||||
Of the total estimated purchase price of $34.5 million, $777,000 has been allocated to core deposit intangible. Additionally, $16.1 million has been allocated to goodwill and none of the purchase price is deductible. The core deposit intangible will be amortized over ten years on a straight-line basis.
The Company acquired various loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such aspast-due andnon-accrual status, borrower credit scores and recentloan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.
The Company acquired the $134.4 million loan portfolio at an estimated fair value discount of $3.4 million. The accounting for the business combination is not yet complete and therefore all required disclosures for a business combination have not been provided. When completed, the excess of expected cash flows above the fair value of the performing portion of loans will be accreted to interest income over the remaining lives of the loans in accordance with ASC310-30.
Final estimates of certain loans, those for which specific credit-related deterioration, since origination, will be recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans will be based on reasonable expectation about the timing and amount offuture cash flows to be collected.
The results of operations of Lafayette, CNB, LaPorte Bancorp and Kosciusko have been included indiscounted at the Company’s consolidated financial statements sinceeffective interest rate or the acquisition dates. The following schedule includespro-forma results for the three and nine months ended September 30, 2017 and 2016 as if the Lafayette, CNB, LaPorte Bancorp and Kosciusko acquisitions had occurredobservable market price as of the beginningrelevant date.
| Portfolio Segment | Class of Financing Receivable | |||||||
| Commercial | Owner occupied real estate | |||||||
| Non-owner occupied real estate | ||||||||
| Residential spec homes | ||||||||
| Development & spec land | ||||||||
| Commercial and industrial | ||||||||
| Real estate | Residential mortgage | |||||||
| Residential construction | ||||||||
| Mortgage warehouse | Mortgage warehouse | |||||||
| Consumer | Direct installment | |||||||
| Indirect installment | ||||||||
| Home equity | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Summary of Operations: | ||||||||||||||||
Net Interest Income | $ | 28,856 | $ | 26,628 | $ | 84,471 | $ | 80,515 | ||||||||
Provision for Loan Losses | 725 | 455 | 1,438 | 1,219 | ||||||||||||
Net Interest Income after Provision for Loan Losses | 28,131 | $ | 26,173 | 83,033 | 79,296 | |||||||||||
Non-interest Income | 8,077 | 10,534 | 24,175 | 32,547 | ||||||||||||
Non-Interest Expense | 26,523 | 32,400 | 73,003 | 86,781 | ||||||||||||
Income before Income Taxes | 9,685 | 4,307 | 34,205 | 25,062 | ||||||||||||
Income Tax Expense | 2,394 | 1,997 | 9,260 | 8,328 | ||||||||||||
Net Income | 7,291 | 2,310 | 24,945 | 16,734 | ||||||||||||
Net Income Available to Common Shareholders | $ | 7,291 | $ | 2,310 | $ | 24,945 | $ | 16,692 | ||||||||
Basic Earnings Per Share | $ | 0.32 | $ | 0.11 | $ | 1.12 | $ | 0.87 | ||||||||
Diluted Earnings Per Share | $ | 0.32 | $ | 0.11 | $ | 1.11 | $ | 0.86 | ||||||||
| 22,580,160 | 21,538,752 | 22,326,454 | 19,252,295 | |||||||||||||
| 22,715,273 | 21,651,953 | 22,455,798 | 19,346,376 | |||||||||||||
Thepro-forma information includes adjustments for interest income on loans, amortization of intangibles arising from the transaction, interest expense on deposits acquired, premises expense for the banking centers acquired and the related income tax effects.
Thepro-forma financial information is presented for information purposes only and is not indicativefollowing, 1) risk characteristics of the results of operations that actually would have been achieved hadfinancing receivable, and 2) an entity's method for monitoring and assessing credit risk. Generally, the acquisition been consummated as of that time, nor is it intendedBank does not move loans from a revolving loan to be a projection of future results.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
Wolverine Bancorp, Inc.
On October 17, 2017, Horizon completed the acquisition of Wolverine Bancorp, Inc., a Maryland corporation (“Wolverine”)term loan other than construction loans. Construction loans are reviewed and Horizon Bank’s acquisition of Wolverine Bank, a federally-chartered savings bank and wholly-owned subsidiary of Wolverine, through mergers effective October 17, 2017. Under the terms of the Merger Agreement, shareholders of Wolverine received 1.0152 shares of Horizon common stock and $14.00 in cash for each outstanding share of Wolverine common stock. Wolverine shares outstanding at the closing to be exchanged were 2,129,331, and the shares of Horizon common stock issued to Wolverine shareholders totaled 2,161,610. Based upon the October 16, 2017 closing price of $29.06 per share of Horizon common stock immediatelyrewritten prior to the effectiveness of the merger, the transaction has an implied valuation of approximately $95.1 million.
As of October 17, 2017, Wolverine had total assets of approximately $363.2 million, total deposits of approximately $256.5 million and total net loans of approximately $308.1 million.
Utilizing September 30, 2017 financials for both Horizon and Wolverine and an estimate of the fair market value adjustments associated with the merger, Horizon would have total assets of approximately $3.9 billion, total deposits of approximately $2.9 billion and total net loans of approximately $2.7 billion onbeing originated as a pro forma basis. The accounting for the business combination is not yet complete and therefore all required disclosures for a business combination have not been provided.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
Note 3 – Securities
The fair value of securities is as follows:
| Gross | Gross | |||||||||||||||
| September 30, 2017 | Amortized | Unrealized | Unrealized | Fair | ||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. Treasury and federal agencies | $ | 17,996 | $ | 3 | $ | (114 | ) | $ | 17,885 | |||||||
State and municipal | 141,751 | 2,288 | (556 | ) | 143,483 | |||||||||||
Federal agency collateralized mortgage obligations | 135,511 | 131 | (1,440 | ) | 134,202 | |||||||||||
Federal agency mortgage-backed pools | 213,071 | 496 | (1,516 | ) | 212,051 | |||||||||||
Private labeled mortgage-backed pools | 1,841 | — | (11 | ) | 1,830 | |||||||||||
Corporate notes | 275 | 118 | — | 393 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total available for sale investment securities | $ | 510,445 | $ | 3,036 | $ | (3,637 | ) | $ | 509,844 | |||||||
|
|
|
|
|
|
|
| |||||||||
Held to maturity | ||||||||||||||||
State and municipal | $ | 177,473 | $ | 4,249 | $ | (862 | ) | $ | 180,860 | |||||||
Federal agency collateralized mortgage obligations | 5,902 | 25 | (31 | ) | 5,896 | |||||||||||
Federal agency mortgage-backed pools | 15,230 | 307 | (71 | ) | 15,466 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total held to maturity investment securities | $ | 198,605 | $ | 4,581 | $ | (964 | ) | $ | 202,222 | |||||||
|
|
|
|
|
|
|
| |||||||||
| Gross | Gross | |||||||||||||||
| December 31, 2016 | Amortized | Unrealized | Unrealized | Fair | ||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. Treasury and federal agencies | $ | 8,051 | $ | 2 | $ | (64 | ) | $ | 7,989 | |||||||
State and municipal | 117,327 | 324 | (1,059 | ) | 116,592 | |||||||||||
Federal agency collateralized mortgage obligations | 139,040 | 254 | (2,099 | ) | 137,195 | |||||||||||
Federal agency mortgage-backed pools | 180,183 | 251 | (3,707 | ) | 176,726 | |||||||||||
Corporate notes | 1,238 | 91 | — | 1,329 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total available for sale investment securities | $ | 445,839 | $ | 922 | $ | (6,929 | ) | $ | 439,831 | |||||||
|
|
|
|
|
|
|
| |||||||||
Held to maturity | ||||||||||||||||
State and municipal | $ | 165,607 | $ | 2,700 | $ | (2,485 | ) | $ | 165,822 | |||||||
Federal agency collateralized mortgage obligations | 6,530 | 31 | (71 | ) | 6,490 | |||||||||||
Federal agency mortgage-backed pools | 21,057 | 897 | (180 | ) | 21,774 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total held to maturity investment securities | $ | 193,194 | $ | 3,628 | $ | (2,736 | ) | $ | 194,086 | |||||||
|
|
|
|
|
|
|
| |||||||||
Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. While these securities are held in the available for sale portfolio andheld-to-maturity, Horizon intends, and has the ability, to hold them until the earlier of a recovery in fair value or maturity.
Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. At September 30, 2017, no individual investment security had an unrealized loss that was determined to be other-than-temporary.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
The unrealized losses on the Company’s investments in securities of state and municipal governmental agencies, U.S. Treasury and federal agencies, federal agency collateralized mortgage obligations, and federal agency mortgage-backed pools were caused by interest rate volatility and not a decline in credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company expects to recover the amortized cost basis over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at September 30, 2017.
The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2017 and December 31, 2016, 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.
| September 30, 2017 | December 31, 2016 | |||||||||||||||
| Amortized | Fair | Amortized | Fair | |||||||||||||
| Cost | Value | Cost | Value | |||||||||||||
Available for sale | ||||||||||||||||
Within one year | $ | 9,772 | $ | 9,784 | $ | 7,455 | $ | 7,480 | ||||||||
One to five years | 44,771 | 44,811 | 37,483 | 37,479 | ||||||||||||
Five to ten years | 44,163 | 44,851 | 21,112 | 20,984 | ||||||||||||
After ten years | 61,316 | 62,315 | 60,566 | 59,967 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 160,022 | 161,761 | 126,616 | 125,910 | |||||||||||||
Federal agency collateralized mortgage obligations | 135,511 | 134,202 | 139,040 | 137,195 | ||||||||||||
Federal agency mortgage-backed pools | 213,071 | 212,051 | 180,183 | 176,726 | ||||||||||||
Private labeled mortgage-backed pools | 1,841 | 1,830 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total available for sale investment securities | $ | 510,445 | $ | 509,844 | $ | 445,839 | $ | 439,831 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Held to maturity | ||||||||||||||||
Within one year | $ | 7,383 | $ | 7,373 | $ | — | $ | — | ||||||||
One to five years | 37,402 | 38,645 | 24,594 | 25,271 | ||||||||||||
Five to ten years | 88,399 | 90,371 | 87,645 | 88,805 | ||||||||||||
After ten years | 44,289 | 44,471 | 53,368 | 51,746 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 177,473 | 180,860 | 165,607 | 165,822 | |||||||||||||
Federal agency collateralized mortgage obligations | 5,902 | 5,896 | 6,530 | 6,490 | ||||||||||||
Federal agency mortgage-backed pools | 15,230 | 15,466 | 21,057 | 21,774 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total held to maturity investment securities | $ | 198,605 | $ | 202,222 | $ | 193,194 | $ | 194,086 | ||||||||
|
|
|
|
|
|
|
| |||||||||
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.
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| September 30, 2017 | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
U.S. Treasury and federal agencies | $ | 15,233 | $ | (71 | ) | $ | 1,372 | $ | (43 | ) | $ | 16,605 | $ | (114 | ) | |||||||||
State and municipal | 41,995 | (483 | ) | 28,127 | (935 | ) | 70,122 | (1,418 | ) | |||||||||||||||
Federal agency collateralized mortgage obligations | 61,135 | (480 | ) | 47,213 | (991 | ) | 108,348 | (1,471 | ) | |||||||||||||||
Federal agency mortgage-backed pools | 81,397 | (567 | ) | 61,624 | (1,020 | ) | 143,021 | (1,587 | ) | |||||||||||||||
Private labeled mortgage-backed pools | 1,830 | (11 | ) | — | — | 1,830 | (11 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total temporarily impaired securities | $ | 201,590 | $ | (1,612 | ) | $ | 138,336 | $ | (2,989 | ) | $ | 339,926 | $ | (4,601 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| December 31, 2016 | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
U.S. Treasury and federal agencies | $ | 6,987 | $ | (64 | ) | $ | — | $ | — | $ | 6,987 | $ | (64 | ) | ||||||||||
State and municipal | 142,466 | (3,544 | ) | — | — | 142,466 | (3,544 | ) | ||||||||||||||||
Federal agency collateralized mortgage obligations | 112,414 | (1,918 | ) | 10,199 | (252 | ) | 122,613 | (2,170 | ) | |||||||||||||||
Federal agency mortgage-backed pools | 163,768 | (3,887 | ) | — | — | 163,768 | (3,887 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total temporarily impaired securities | $ | 425,635 | $ | (9,413 | ) | $ | 10,199 | $ | (252 | ) | $ | 435,834 | $ | (9,665 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
Information regarding security proceeds, gross gains and gross losses are presented below.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Sales of securities available for sale (Unaudited) | ||||||||||||||||
Proceeds | $ | 387 | $ | — | $ | 5,490 | $ | 25,077 | ||||||||
Gross gains | 6 | — | 151 | 1,060 | ||||||||||||
Gross losses | — | — | (113 | ) | (185 | ) | ||||||||||
Note 4 – Loans
| September 30 2017 | December 31 2016 | |||||||
Commercial | ||||||||
Working capital and equipment | $ | 599,427 | $ | 539,403 | ||||
Real estate, including agriculture | 624,009 | 485,620 | ||||||
Tax exempt | 20,987 | 15,486 | ||||||
Other | 29,367 | 29,447 | ||||||
|
|
|
| |||||
Total | 1,273,790 | 1,069,956 | ||||||
Real estate | ||||||||
1–4 family | 563,993 | 526,024 | ||||||
Other | 7,069 | 5,850 | ||||||
|
|
|
| |||||
Total | 571,062 | 531,874 | ||||||
Consumer | ||||||||
Auto | 230,976 | 174,773 | ||||||
Recreation | 8,969 | 5,669 | ||||||
Real estate/home improvement | 59,641 | 53,898 | ||||||
Home equity | 163,205 | 144,508 | ||||||
Unsecured | 3,614 | 3,875 | ||||||
Other | 19,085 | 15,706 | ||||||
|
|
|
| |||||
Total | 485,490 | 398,429 | ||||||
Mortgage warehouse | 95,483 | 135,727 | ||||||
|
|
|
| |||||
Total loans | 2,425,825 | 2,135,986 | ||||||
Allowance for loan losses | (15,586 | ) | (14,837 | ) | ||||
|
|
|
| |||||
Loans, net | $ | 2,410,239 | $ | 2,121,149 | ||||
|
|
|
| |||||
loan.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
properties securing the Company’s commercial real estate portfolio are diverse in terms of property type, and are monitored for concentrations of credit. Management monitors and evaluates commercial real estate loans based on collateral, cash flow, and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versusnon-owner occupied loans.
| September 30, 2017 | Loan Balance | Interest Due | Deferred Fees / (Costs) | Recorded Investment | ||||||||||||
Owner occupied real estate | $ | 403,184 | $ | 1,371 | $ | 880 | $ | 405,435 | ||||||||
Non owner occupied real estate | 531,560 | 656 | 2,202 | 534,418 | ||||||||||||
Residential spec homes | 4,031 | 11 | — | 4,042 | ||||||||||||
Development & spec land loans | 43,299 | 100 | 84 | 43,483 | ||||||||||||
Commercial and industrial | 288,086 | 2,475 | 464 | 291,025 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total commercial | 1,270,160 | 4,613 | 3,630 | 1,278,403 | ||||||||||||
Residential mortgage | 553,451 | 1,814 | 2,786 | 558,051 | ||||||||||||
Residential construction | 14,825 | 29 | — | 14,854 | ||||||||||||
Mortgage warehouse | 95,483 | 480 | — | 95,963 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total real estate | 663,759 | 2,323 | 2,786 | 668,868 | ||||||||||||
Direct installment | 85,726 | 249 | (566 | ) | 85,409 | |||||||||||
Direct installment purchased | 88 | — | — | 88 | ||||||||||||
Indirect installment | 207,293 | 437 | 173 | 207,903 | ||||||||||||
Home equity | 194,050 | 795 | (1,274 | ) | 193,571 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total consumer | 487,157 | 1,481 | (1,667 | ) | 486,971 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loans | 2,421,076 | 8,417 | 4,749 | 2,434,242 | ||||||||||||
Allowance for loan losses | (15,586 | ) | — | — | (15,586 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loans | $ | 2,405,490 | $ | 8,417 | $ | 4,749 | $ | 2,418,656 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| December 31, 2016 | Loan Balance | Interest Due | Deferred Fees / (Costs) | Recorded Investment | ||||||||||||
Owner occupied real estate | $ | 337,548 | $ | 899 | $ | 1,022 | $ | 339,469 | ||||||||
Non owner occupied real estate | 461,897 | 624 | 2,176 | 464,697 | ||||||||||||
Residential spec homes | 5,006 | 8 | (2 | ) | 5,012 | |||||||||||
Development & spec land loans | 31,228 | 56 | 119 | 31,403 | ||||||||||||
Commercial and industrial | 230,520 | 1,906 | 442 | 232,868 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total commercial | 1,066,199 | 3,493 | 3,757 | 1,073,449 | ||||||||||||
Residential mortgage | 508,233 | 1,492 | 3,030 | 512,755 | ||||||||||||
Residential construction | 20,611 | 33 | — | 20,644 | ||||||||||||
Mortgage warehouse | 135,727 | 480 | — | 136,207 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total real estate | 664,571 | 2,005 | 3,030 | 669,606 | ||||||||||||
Direct installment | 71,150 | 199 | (385 | ) | 70,964 | |||||||||||
Direct installment purchased | 119 | — | — | 119 | ||||||||||||
Indirect installment | 153,204 | 345 | — | 153,549 | ||||||||||||
Home equity | 175,126 | 703 | (785 | ) | 175,044 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total consumer | 399,599 | 1,247 | (1,170 | ) | 399,676 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loans | 2,130,369 | 6,745 | 5,617 | 2,142,731 | ||||||||||||
Allowance for loan losses | (14,837 | ) | — | — | (14,837 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loans | $ | 2,115,532 | $ | 6,745 | $ | 5,617 | $ | 2,127,894 | ||||||||
|
|
|
|
|
|
|
| |||||||||
risk and continue to
| Assets | Liabilities | |||||||||||||
| Cash and due from banks | $ | 152,745 | Deposits | |||||||||||
| Investment securities, available for sale | 54,319 | Non-interest bearing | $ | 188,744 | ||||||||||
| Loans | NOW accounts | 207,567 | ||||||||||||
| Commercial | 352,798 | Savings and money market | 274,504 | |||||||||||
| Residential mortgage | 131,008 | Certificates of deposit | 70,529 | |||||||||||
| Consumer | 85,112 | Total deposits | 741,344 | |||||||||||
| Total loans | 568,918 | Borrowings | 70,495 | |||||||||||
| Premises and equipment, net | 20,425 | Subordinated debentures | 18,376 | |||||||||||
| FRB and FHLB stock | 3,571 | Interest payable | 826 | |||||||||||
| Goodwill | 31,358 | Other liabilities | 8,759 | |||||||||||
| Core deposit intangible | 19,818 | Total liabilities assumed | $ | 839,800 | ||||||||||
| Interest receivable | 2,488 | |||||||||||||
| Other assets | 112,880 | |||||||||||||
| Total assets purchased | $ | 966,522 | ||||||||||||
| Common shares issued | $ | 102,722 | ||||||||||||
| Cash paid | 24,000 | |||||||||||||
| Total purchase price | $ | 126,722 | ||||||||||||
| Contractually required principal and interest at acquisition | $ | 22,672 | |||
| Contractual cash flows not expected to be collected (nonaccretable differences) | 6,694 | ||||
| Expected cash flows at acquisition | 15,978 | ||||
| Interest component of expected cash flows (accretable discount) | 735 | ||||
| Fair value of acquired loans accounted for under ASC310-30 | $ | 15,243 | |||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||||||||
| 2019 | 2019 | |||||||||||||||||||||||||
| Summary of Operations: | ||||||||||||||||||||||||||
| Net Interest Income | $ | 41,529 | $ | 83,711 | ||||||||||||||||||||||
| Provision for Loan Losses | 896 | 1,560 | ||||||||||||||||||||||||
| Net Interest Income after Provision for Loan Losses | 40,633 | 82,151 | ||||||||||||||||||||||||
| Non-interest Income | 10,898 | 20,024 | ||||||||||||||||||||||||
| Non-interest Expense | 31,584 | 73,736 | ||||||||||||||||||||||||
| Income before Income Taxes | 19,947 | 28,439 | ||||||||||||||||||||||||
| Income Tax Expense | 3,305 | 5,322 | ||||||||||||||||||||||||
| Net Income | 16,642�� | 23,117 | ||||||||||||||||||||||||
| Net Income Available to Common Shareholders | $ | 16,642 | $ | 23,117 | ||||||||||||||||||||||
| Basic Earnings per Share | $ | 0.37 | $ | 0.51 | ||||||||||||||||||||||
| Diluted Earnings per Share | $ | 0.37 | $ | 0.51 | ||||||||||||||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||
| Available for sale | |||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 525,488 | $ | 23,503 | $ | (759) | $ | 548,232 | |||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 219,431 | 6,380 | (6) | 225,805 | |||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 143,755 | 5,031 | — | 148,786 | |||||||||||||||||||||||||||||||||||||
| Corporate notes | 10,867 | 1,450 | — | 12,317 | |||||||||||||||||||||||||||||||||||||
| Total available for sale investment securities | $ | 899,541 | $ | 36,364 | $ | (765) | $ | 935,140 | |||||||||||||||||||||||||||||||||
| Held to maturity | |||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 175,953 | $ | 10,408 | $ | — | $ | 186,361 | |||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 3,006 | 89 | — | 3,095 | |||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 11,976 | 386 | — | 12,362 | |||||||||||||||||||||||||||||||||||||
| Total held to maturity investment securities | $ | 190,935 | $ | 10,883 | $ | — | $ | 201,818 | |||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||
| Available for sale | |||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and federal agencies | $ | 1,415 | $ | — | $ | (2) | $ | 1,413 | |||||||||||||||||||||||||||||||||
| State and municipal | 396,931 | 11,288 | (2,451) | 405,768 | |||||||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 267,272 | 2,543 | (563) | 269,252 | |||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 145,623 | 1,207 | (258) | 146,572 | |||||||||||||||||||||||||||||||||||||
| Corporate notes | 10,848 | 923 | — | 11,771 | |||||||||||||||||||||||||||||||||||||
| Total available for sale investment securities | $ | 822,089 | $ | 15,961 | $ | (3,274) | $ | 834,776 | |||||||||||||||||||||||||||||||||
| Held to maturity | |||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 190,767 | $ | 7,129 | $ | (54) | $ | 197,842 | |||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 4,560 | 13 | (5) | 4,568 | |||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 12,572 | 194 | (29) | 12,737 | |||||||||||||||||||||||||||||||||||||
| Total held to maturity investment securities | $ | 207,899 | $ | 7,336 | $ | (88) | $ | 215,147 | |||||||||||||||||||||||||||||||||
| June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||||||||||
| Available for sale | |||||||||||||||||||||||||||||||||||
| Within one year | $ | 40,750 | $ | 40,838 | $ | 37,386 | $ | 37,321 | |||||||||||||||||||||||||||
| One to five years | 41,840 | 43,156 | 41,230 | 41,293 | |||||||||||||||||||||||||||||||
| Five to ten years | 116,279 | 125,049 | 117,004 | 122,145 | |||||||||||||||||||||||||||||||
| After ten years | 337,486 | 351,506 | 213,574 | 218,193 | |||||||||||||||||||||||||||||||
| 536,355 | 560,549 | 409,194 | 418,952 | ||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 219,431 | 225,805 | 267,272 | 269,252 | |||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 143,755 | 148,786 | 145,623 | 146,572 | |||||||||||||||||||||||||||||||
| Total available for sale investment securities | $ | 899,541 | $ | 935,140 | $ | 822,089 | $ | 834,776 | |||||||||||||||||||||||||||
| Held to maturity | |||||||||||||||||||||||||||||||||||
| Within one year | $ | 11,255 | $ | 11,308 | $ | 7,811 | $ | 7,874 | |||||||||||||||||||||||||||
| One to five years | 48,178 | 49,597 | 56,037 | 57,048 | |||||||||||||||||||||||||||||||
| Five to ten years | 89,212 | 95,232 | 94,756 | 98,480 | |||||||||||||||||||||||||||||||
| After ten years | 27,308 | 30,224 | 32,163 | 34,440 | |||||||||||||||||||||||||||||||
| 175,953 | 186,361 | 190,767 | 197,842 | ||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 3,006 | 3,095 | 4,560 | 4,568 | |||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 11,976 | 12,362 | 12,572 | 12,737 | |||||||||||||||||||||||||||||||
| Total held to maturity investment securities | $ | 190,935 | $ | 201,818 | $ | 207,899 | $ | 215,147 | |||||||||||||||||||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment Securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 66,448 | $ | (651) | $ | 4,885 | $ | (108) | $ | 71,333 | $ | (759) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 3,438 | (6) | — | — | 3,438 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total temporarily impaired securities | $ | 69,886 | $ | (657) | $ | 4,885 | $ | (108) | $ | 74,771 | $ | (765) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment Securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and federal agencies | $ | 1,413 | $ | (2) | $ | — | $ | — | $ | 1,413 | $ | (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| State and municipal | 129,942 | (2,374) | 6,279 | (131) | 136,221 | (2,505) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 68,043 | (308) | 23,301 | (260) | 91,344 | (568) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 24,740 | (104) | 37,822 | (183) | 62,562 | (287) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate notes | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total temporarily impaired securities | $ | 224,138 | $ | (2,788) | $ | 67,402 | $ | (574) | $ | 291,540 | $ | (3,362) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Sales of securities available for sale | |||||||||||||||||||||||||||||||||||
| Proceeds | $ | 5,146 | $ | 74,048 | $ | 37,182 | $ | 91,635 | |||||||||||||||||||||||||||
| Gross gains | 248 | 99 | 637 | 158 | |||||||||||||||||||||||||||||||
| Gross losses | — | (199) | (50) | (243) | |||||||||||||||||||||||||||||||
| June 30, 2020 | |||||
| Commercial | |||||
| Owner occupied real estate | $ | 501,198 | |||
| Non-owner occupied real estate | 1,009,116 | ||||
| Residential spec homes | 12,036 | ||||
| Development & spec land | 28,987 | ||||
| Commercial and industrial | 761,378 | ||||
| Total commercial | 2,312,715 | ||||
| Real estate | |||||
| Residential mortgage | 682,695 | ||||
| Residential construction | 21,715 | ||||
| Mortgage warehouse | 300,386 | ||||
| Total real estate | 1,004,796 | ||||
| Consumer | |||||
| Direct installment | 39,515 | ||||
| Indirect installment | 360,641 | ||||
| Home equity | 260,715 | ||||
| Total consumer | 660,871 | ||||
| Total loans | 3,978,382 | ||||
| Allowance for loan losses | (55,090) | ||||
| Net loans | $ | 3,923,292 | |||
| December 31, 2019 | |||||||||||
| Commercial | |||||||||||
| Working capital and equipment | $ | 938,317 | |||||||||
| Real estate, including agriculture | 978,891 | ||||||||||
| Tax exempt | 63,571 | ||||||||||
| Other | 65,872 | ||||||||||
| Total | 2,046,651 | ||||||||||
| Real estate | |||||||||||
| 1-4 family | 762,571 | ||||||||||
| Other | 8,146 | ||||||||||
| Total | 770,717 | ||||||||||
| Consumer | |||||||||||
| Auto | 362,729 | ||||||||||
| Recreation | 16,262 | ||||||||||
| Real estate/home improvement | 43,585 | ||||||||||
| Home equity | 237,979 | ||||||||||
| Unsecured | 7,286 | ||||||||||
| Other | 1,339 | ||||||||||
| Total | 669,180 | ||||||||||
| Mortgage warehouse | 150,293 | ||||||||||
| Total loans | 3,636,841 | ||||||||||
| Allowance for loan losses | (17,667) | ||||||||||
| Loans, net | $ | 3,619,174 | |||||||||
| September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | |||||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||||||
| Heartland | Summit | Peoples | Kosciusko | LaPorte | Total | |||||||||||||||||||
Commercial | $ | 521 | $ | 4,657 | $ | 398 | $ | 962 | $ | 1,086 | $ | 7,624 | ||||||||||||
Real estate | 241 | 895 | 139 | 411 | 1,017 | 2,703 | ||||||||||||||||||
Consumer | — | — | — | — | 35 | 35 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Outstanding balance | $ | 762 | $ | 5,552 | $ | 537 | $ | 1,373 | $ | 2,138 | $ | 10,362 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Carrying amount, net of allowance of $71 | $ | 10,291 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
| December 31 | December 31 | December 31 | December 31 | December 31 | December 31 | |||||||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||||||
| Heartland | Summit | Peoples | Kosciusko | LaPorte | Total | |||||||||||||||||||
Commercial | $ | 774 | $ | 5,245 | $ | 692 | $ | 1,652 | $ | 3,200 | $ | 11,563 | ||||||||||||
Real estate | 534 | 967 | 165 | 457 | 1,114 | 3,237 | ||||||||||||||||||
Consumer | 2 | — | — | — | 41 | 43 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Outstanding balance | $ | 1,310 | $ | 6,213 | $ | 856 | $ | 2,109 | $ | 4,355 | $ | 14,843 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Carrying amount, net of allowance of $0 | $ | 14,843 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Real Estate | Consumer | Outstanding Balance | Allowance for Loan Losses | Carrying Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Heartland | $ | 197 | $ | 99 | $ | — | $ | 296 | $ | — | $ | 296 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summit | 88 | 473 | — | 561 | — | 561 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Peoples | 229 | 35 | — | 264 | — | 264 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kosciusko | 244 | 131 | — | 375 | — | 375 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LaPorte | 353 | 793 | 20 | 1,166 | — | 1,166 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lafayette | 1,867 | — | — | 1,867 | — | 1,867 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wolverine | 2,289 | — | — | 2,289 | — | 2,289 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salin | 4,938 | 1,912 | 962 | 7,812 | 133 | 7,679 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 10,205 | $ | 3,443 | $ | 982 | $ | 14,630 | $ | 133 | $ | 14,497 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||
| Heartland | Summit | Peoples | Kosciusko | LaPorte | Total | |||||||||||||||||||
Balance at January 1 | $ | 557 | $ | 502 | $ | 389 | $ | 530 | $ | 1,479 | $ | 3,457 | ||||||||||||
Additions | — | — | — | — | — | — | ||||||||||||||||||
Accretion | (99 | ) | (268 | ) | (388 | ) | (80 | ) | (194 | ) | (1,029 | ) | ||||||||||||
Reclassification from nonaccretable difference | — | — | — | — | — | — | ||||||||||||||||||
Disposals | (6 | ) | (2 | ) | (1 | ) | (42 | ) | (264 | ) | (315 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at September 30 | $ | 452 | $ | 232 | $ | — | $ | 408 | $ | 1,021 | $ | 2,113 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||
| Heartland | Summit | Peoples | Kosciusko | LaPorte | Total | |||||||||||||||||||
Balance at January 1 | $ | 795 | $ | 708 | $ | 555 | $ | — | $ | — | $ | 2,058 | ||||||||||||
Additions | — | — | — | 634 | 1,736 | 2,370 | ||||||||||||||||||
Accretion | (127 | ) | (139 | ) | (92 | ) | (38 | ) | — | (396 | ) | |||||||||||||
Reclassification from nonaccretable difference | — | — | — | — | — | — | ||||||||||||||||||
Disposals | (74 | ) | (35 | ) | (59 | ) | (23 | ) | — | (191 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at September 30 | $ | 594 | $ | 534 | $ | 404 | $ | 573 | $ | — | $ | 3,841 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | Additions | Accretion | Reclassification from nonaccretable difference | Disposals | Ending balance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Heartland | $ | 174 | $ | — | $ | (16) | $ | — | $ | — | $ | 158 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summit | 42 | — | (5) | — | (11) | 26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kosciusko | 300 | — | (33) | — | (1) | 266 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LaPorte | 829 | — | (59) | — | — | 770 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lafayette | 609 | — | (67) | — | (180) | 362 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wolverine | 698 | — | (212) | — | (120) | 366 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salin | — | 735 | — | — | — | 735 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 2,652 | $ | 735 | $ | (392) | $ | — | $ | (312) | $ | 2,683 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
$154,000.
| Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Real Estate | Mortgage Warehouse | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 32,550 | $ | 5,654 | $ | 1,055 | $ | 9,181 | $ | 48,440 | ||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses on loans | 6,603 | 202 | 135 | 117 | 7,057 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | (15) | (34) | — | (526) | (575) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | 9 | 10 | — | 149 | 168 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 39,147 | $ | 5,832 | $ | 1,190 | $ | 8,921 | $ | 55,090 | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Real Estate | Mortgage Warehouse | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 11,556 | $ | 1,588 | $ | 1,014 | $ | 3,663 | $ | 17,821 | ||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses on loans | 590 | 185 | 26 | 95 | 896 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | (339) | (48) | — | (327) | (714) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | 74 | 7 | — | 221 | 302 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 11,881 | $ | 1,732 | $ | 1,040 | $ | 3,652 | $ | 18,305 | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Balance at beginning of the period | $ | 15,027 | $ | 14,226 | $ | 14,837 | $ | 14,534 | ||||||||
Loanscharged-off: | ||||||||||||||||
Commercial | ||||||||||||||||
Owner occupied real estate | 12 | 4 | 12 | 182 | ||||||||||||
Non owner occupied real estate | 20 | (1 | ) | 20 | 471 | |||||||||||
Residential development | — | — | — | — | ||||||||||||
Development & Spec Land Loans | — | — | 1 | — | ||||||||||||
Commercial and industrial | 232 | 8 | 273 | 47 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total commercial | 264 | 11 | 306 | 700 | ||||||||||||
Real estate | ||||||||||||||||
Residential mortgage | 37 | 12 | 89 | 127 | ||||||||||||
Residential construction | — | — | — | — | ||||||||||||
Mortgage warehouse | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total real estate | 37 | 12 | 89 | 127 | ||||||||||||
Consumer | ||||||||||||||||
Direct Installment | 84 | 55 | 331 | 159 | ||||||||||||
Direct Installment Purchased | — | — | — | — | ||||||||||||
Indirect Installment | 254 | 296 | 862 | 851 | ||||||||||||
Home Equity | 24 | 32 | 95 | 271 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total consumer | 362 | 383 | 1,288 | 1,281 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loanscharged-off | 663 | 406 | 1,683 | 2,108 | ||||||||||||
Recoveries of loans previouslycharged-off: | ||||||||||||||||
Commercial | ||||||||||||||||
Owner occupied real estate | 7 | 2 | 8 | 31 | ||||||||||||
Non owner occupied real estate | 4 | 1 | 29 | 55 | ||||||||||||
Residential development | 2 | 2 | 6 | 6 | ||||||||||||
Development & Spec Land Loans | — | — | — | — | ||||||||||||
Commercial and industrial | 82 | 12 | 204 | 107 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total commercial | 95 | 17 | 247 | 199 | ||||||||||||
Real estate | ||||||||||||||||
Residential mortgage | 13 | 12 | 35 | 75 | ||||||||||||
Residential construction | — | — | — | — | ||||||||||||
Mortgage warehouse | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total real estate | 13 | 12 | 35 | 75 | ||||||||||||
Consumer | ||||||||||||||||
Direct Installment | 260 | 26 | 311 | 70 | ||||||||||||
Direct Installment Purchased | — | — | — | — | ||||||||||||
Indirect Installment | 119 | 160 | 384 | 400 | ||||||||||||
Home Equity | 25 | 34 | 85 | 135 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total consumer | 404 | 220 | 780 | 605 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loan recoveries | 512 | 249 | 1,062 | 879 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loanscharged-off (recovered) | 151 | 157 | 621 | 1,229 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Provision charged to operating expense | ||||||||||||||||
Commercial | 429 | 165 | 1,357 | (471 | ) | |||||||||||
Real estate | 361 | 102 | (113 | ) | (147 | ) | ||||||||||
Consumer | (80 | ) | 188 | 126 | 1,837 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total provision charged to operating expense | 710 | 455 | 1,370 | 1,219 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at the end of the period | $ | 15,586 | $ | 14,524 | $ | 15,586 | $ | 14,524 | ||||||||
|
|
|
|
|
|
|
| |||||||||
the six months ended June 30, 2020 and 2019:
| Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Real Estate | Mortgage Warehouse | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 11,996 | $ | 923 | $ | 1,077 | $ | 3,671 | $ | 17,667 | ||||||||||||||||||||||||||||||||||||||||||||||
| Impact of adopting ASC 326 | 10,832 | 4,048 | — | 4,911 | 19,791 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Initial PCD Allowance | 2,786 | — | — | — | 2,786 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses on loans | 13,519 | 902 | 113 | 1,123 | 15,657 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | (84) | (60) | — | (1,144) | (1,288) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | 98 | 19 | — | 360 | 477 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 39,147 | $ | 5,832 | $ | 1,190 | $ | 8,921 | $ | 55,090 | ||||||||||||||||||||||||||||||||||||||||||||||
Certain loans are individually evaluated
| Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Real Estate | Mortgage Warehouse | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 10,495 | $ | 1,676 | $ | 1,006 | $ | 4,643 | $ | 17,820 | ||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses on loans | 1,712 | 70 | 34 | (556) | 1,260 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | (416) | (48) | — | (911) | (1,375) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | 90 | 34 | — | 476 | 600 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 11,881 | $ | 1,732 | $ | 1,040 | $ | 3,652 | $ | 18,305 | ||||||||||||||||||||||||||||||||||||||||||||||
Consistentpool date by the outstanding loan balance as of the pool date.
For all loan portfolio segments except1-4 family residential properties and consumer, the Company promptlycharges-off loans, or portions thereof, when available information confirms that specific loans are uncollectibleinto pools based on information that includes, but is not limited to, (1) the deterioratingfollowing risk characteristics: financial conditionasset type, loan purpose, collateral type, loan characteristics, credit characteristics, outstanding loan balances, contractual terms and prepayment assumptions, industry of the borrower (2) declining collateral values, and/and concentrations, and historical or (3) legal action, including bankruptcy, that impairsexpected credit loss patterns.
| Mortgage | ||||||||||||||||||||
| September 30, 2017 | Commercial | Real Estate | Warehousing | Consumer | Total | |||||||||||||||
Allowance For Loan Losses | ||||||||||||||||||||
Ending allowance balance attributable to loans: | ||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Collectively evaluated for impairment | 7,877 | 2,129 | 1,048 | 4,532 | 15,586 | |||||||||||||||
Loans acquired with deteriorated credit quality | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total ending allowance balance | $ | 7,877 | $ | 2,129 | $ | 1,048 | $ | 4,532 | $ | 15,586 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans: | ||||||||||||||||||||
Individually evaluated for impairment | $ | 3,451 | $ | — | $ | — | $ | — | $ | 3,451 | ||||||||||
Collectively evaluated for impairment | 1,274,952 | 572,905 | 95,963 | 486,971 | 2,430,791 | |||||||||||||||
Loans acquired with deteriorated credit quality | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total ending loans balance | $ | 1,278,403 | $ | 572,905 | $ | 95,963 | $ | 486,971 | $ | 2,434,242 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| Mortgage | ||||||||||||||||||||
| December 31, 2016 | Commercial | Real Estate | Warehousing | Consumer | Total | |||||||||||||||
Allowance For Loan Losses | ||||||||||||||||||||
Ending allowance balance attributable to loans: | ||||||||||||||||||||
Individually evaluated for impairment | $ | 4 | $ | — | $ | — | $ | — | $ | 4 | ||||||||||
Collectively evaluated for impairment | 6,575 | 2,090 | 1,254 | 4,914 | 14,833 | |||||||||||||||
Loans acquired with deteriorated credit quality | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total ending allowance balance | $ | 6,579 | $ | 2,090 | $ | 1,254 | $ | 4,914 | $ | 14,837 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans: | ||||||||||||||||||||
Individually evaluated for impairment | $ | 2,250 | $ | — | $ | — | $ | — | $ | 2,250 | ||||||||||
Collectively evaluated for impairment | 1,071,199 | 533,399 | 136,207 | 399,676 | 2,140,481 | |||||||||||||||
Loans acquired with deteriorated credit quality | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total ending loans balance | $ | 1,073,449 | $ | 533,399 | $ | 136,207 | $ | 399,676 | $ | 2,142,731 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
analysis as of December 31, 2019:
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Real Estate | Mortgage Warehousing | Consumer | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance For Loan Losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending allowance balance attributable to loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | 541 | $ | — | $ | — | $ | — | $ | 541 | |||||||||||||||||||||||||||||||||||||||||||
| Collectively evaluated for impairment | 11,455 | 923 | 1,077 | 3,671 | 17,126 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total ending allowance balance | $ | 11,996 | $ | 923 | $ | 1,077 | $ | 3,671 | $ | 17,667 | |||||||||||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | 7,347 | $ | — | $ | — | $ | — | $ | 7,347 | |||||||||||||||||||||||||||||||||||||||||||
| Collectively evaluated for impairment | 2,040,299 | 770,705 | 150,293 | 665,952 | 3,627,249 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total ending loans balance | $ | 2,047,646 | $ | 770,705 | $ | 150,293 | $ | 665,952 | $ | 3,634,596 | |||||||||||||||||||||||||||||||||||||||||||
| September 30, 2017 | Non-accrual | Loans Past Due Over 90 Days Still Accruing | Non- Performing TDRs | Performing TDRs | Total Non- Performing Loans | |||||||||||||||
Commercial | ||||||||||||||||||||
Owner occupied real estate | $ | 894 | $ | — | $ | 29 | $ | — | $ | 923 | ||||||||||
Non owner occupied real estate | 218 | — | 483 | — | 701 | |||||||||||||||
Residential development | — | — | — | — | — | |||||||||||||||
Development & Spec Land Loans | 102 | — | — | — | 102 | |||||||||||||||
Commercial and industrial | 1,707 | — | — | — | 1,707 | |||||||||||||||
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|
|
|
|
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|
| |||||||||||
Total commercial | 2,921 | — | 512 | — | 3,433 | |||||||||||||||
Real estate | ||||||||||||||||||||
Residential mortgage | 3,269 | 119 | 460 | 1,473 | 5,321 | |||||||||||||||
Residential construction | — | — | — | 224 | 224 | |||||||||||||||
Mortgage warehouse | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total real estate | 3,269 | 119 | 460 | 1,697 | 5,545 | |||||||||||||||
Consumer | ||||||||||||||||||||
Direct Installment | 310 | — | — | — | 310 | |||||||||||||||
Direct Installment Purchased | — | — | — | — | — | |||||||||||||||
Indirect Installment | 1,019 | 15 | — | — | 1,034 | |||||||||||||||
Home Equity | 1,546 | 28 | 220 | 318 | 2,112 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Consumer | 2,875 | 43 | 220 | 318 | 3,456 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 9,065 | $ | 162 | $ | 1,192 | $ | 2,015 | $ | 12,434 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| December 31, 2016 | Non-accrual | Loans Past Due Over 90 Days Still Accruing | Non-Performing TDRs | Performing TDRs | Total Non- Performing Loans | |||||||||||||||
Commercial | ||||||||||||||||||||
Owner occupied real estate | $ | 1,532 | $ | 183 | $ | — | $ | — | $ | 1,715 | ||||||||||
Non owner occupied real estate | 440 | — | — | — | 440 | |||||||||||||||
Residential development | — | — | — | — | — | |||||||||||||||
Development & Spec Land Loans | 118 | — | — | — | 118 | |||||||||||||||
Commercial and industrial | 159 | — | — | — | 159 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total commercial | 2,249 | 183 | — | — | 2,432 | |||||||||||||||
Real estate | ||||||||||||||||||||
Residential mortgage | 2,959 | — | 576 | 1,254 | 4,789 | |||||||||||||||
Residential construction | — | — | 233 | — | 233 | |||||||||||||||
Mortgage warehouse | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total real estate | 2,959 | — | 809 | 1,254 | 5,022 | |||||||||||||||
Consumer | ||||||||||||||||||||
Direct Installment | 512 | — | — | — | 512 | |||||||||||||||
Direct Installment Purchased | — | — | — | — | — | |||||||||||||||
Indirect Installment | 659 | 49 | — | — | 708 | |||||||||||||||
Home Equity | 1,557 | 9 | 205 | 238 | 2,009 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Consumer | 2,728 | 58 | 205 | 238 | 3,229 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 7,936 | $ | 241 | $ | 1,014 | $ | 1,492 | $ | 10,683 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-accrual | Loans Past Due Over 90 Days Still Accruing | Non-performing TDRs | Performing TDRs | Total Non-performing Loans | Non-accrual with no Allowance for Credit Losses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | $ | 8,547 | $ | — | $ | 629 | $ | 167 | $ | 9,343 | $ | 6,158 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | 1,242 | — | 350 | — | 1,592 | 1,086 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development & spec land | 70 | — | — | — | 70 | 70 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 2,049 | — | 1,184 | — | 3,233 | 2,363 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 11,908 | — | 2,163 | 167 | 14,238 | 9,677 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 7,354 | — | 1,054 | 1,537 | 9,945 | 8,408 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential construction | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage warehouse | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate | 7,354 | — | 1,054 | 1,537 | 9,945 | 8,408 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | 27 | 40 | — | — | 67 | 27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indirect installment | 1,237 | 83 | — | — | 1,320 | 1,237 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 1,925 | — | 226 | 335 | 2,486 | 2,151 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 3,189 | 123 | 226 | 335 | 3,873 | 3,415 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 22,451 | $ | 123 | $ | 3,443 | $ | 2,039 | $ | 28,056 | $ | 21,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-accrual | Loans Past Due Over 90 Days Still Accruing | Non-performing TDRs | Performing TDRs | Total Non-performing Loans | Non-accrual with no Allowance for Credit Losses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | $ | 2,424 | $ | — | $ | 629 | $ | 139 | $ | 3,192 | $ | 2,563 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | 682 | — | 374 | — | 1,056 | 937 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development & spec land | 73 | — | — | — | 73 | 73 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 1,603 | — | 78 | 1,345 | 3,026 | 514 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 4,782 | — | 1,081 | 1,484 | 7,347 | 4,087 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 7,614 | 1 | 708 | 1,561 | 9,884 | 8,322 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential construction | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage warehouse | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate | 7,614 | 1 | 708 | 1,561 | 9,884 | 8,322 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | 30 | 5 | — | — | 35 | 30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indirect installment | 1,234 | 135 | — | — | 1,369 | 1,234 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 2,019 | 5 | 217 | 309 | 2,550 | 2,236 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 3,283 | 145 | 217 | 309 | 3,954 | 3,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 15,679 | $ | 146 | $ | 2,006 | $ | 3,354 | $ | 21,185 | $ | 15,909 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
From
A loan becomes impaired when, based on current information, it is probable that a creditorany remaining principal and interest payments due on the loan will not be unable to collect all amounts due according tocollected in accordance with the contractual terms of the loan agreement. When a loan is classified as impaired, the degree of impairment must be recognized by estimating future cash flows from the debtor. The present value of these cash flows is computed at a discount rate based on the interest rate contained in the loan agreement. However, if a particular loan has a determinable market value for its collateral, the creditor may useloan. TDRs that value. Also, if the loan is secured and considered collateral dependent, the creditor may use the fair value of the collateral. Interest income on loanssubsequently default are individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.
Smaller-balance, homogeneous loans are evaluated for impairment in total. Such loans include residential first mortgage loans secured by 1–4 family residences, residential construction loans, automobile, home equity, second mortgage loans and mortgage warehouse loans. Commercial loans and mortgage loans secured by other properties are evaluated individually for impairment. When analysisat the time of borrower operating results and financial condition indicate that underlying cash flows of a borrower’s business are not adequate to meet its debt service requirements, the loan is evaluated for impairment. Often this is associated with a delay or shortfall in payments ofdefault.
Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms, including TDRs, are measured for impairment. Allowable methods for determining the amount of impairment include the three methods described above.
The Company’s TDRs are considered impaired loans and included in the allowance methodology using the guidance for impaired loans. At September 30, 2017,2020, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances. Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan. A restructured loan is returned to accruing status after six6 consecutive payments but is still reported as TDR unless the loan bears interest at a market rate. As of SeptemberJune 30, 2017,2020, the Company had $3.2$5.5 million in TDRs, and $2.0 million were performing according to the restructured terms, and $298,000 in TDRs were1 TDR was returned to accrual status during the first ninesix months of 2017.2020. There were zero$435,000 of specific reserves allocated to TDRs at SeptemberJune 30, 20172020 based on the discounted cash flows or, when appropriate, the fair value of the collateral.
These TDRs are exclusive of loans modified under the CARES Act during the six months of 2020.
| June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-accrual | Accruing | Total | Non-accrual | Accruing | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | $ | 629 | $ | 167 | $ | 796 | $ | 629 | $ | 139 | $ | 768 | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | 350 | — | 350 | 374 | — | 374 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development & spec land | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 1,184 | — | 1,184 | 78 | 1,345 | 1,423 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 2,163 | 167 | 2,330 | 1,081 | 1,484 | 2,565 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 1,054 | 1,537 | 2,591 | 708 | 1,561 | 2,269 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential construction | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage warehouse | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate | 1,054 | 1,537 | 2,591 | 708 | 1,561 | 2,269 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indirect installment | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 226 | 335 | 561 | 217 | 309 | 526 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 226 | 335 | 561 | 217 | 309 | 526 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,443 | $ | 2,039 | $ | 5,482 | $ | 2,006 | $ | 3,354 | $ | 5,360 | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ending | Nine Months Ending | |||||||||||||||||||||||||||
| September 30, 2017 | Unpaid Principal Balance | Recorded Investment | Allowance For Loan Loss Allocated | Average Balance in Impaired Loans | Cash/Accrual Interest Income Recognized | Average Balance in Impaired Loans | Cash/Accrual Interest Income Recognized | |||||||||||||||||||||
With no recorded allowance | ||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Owner occupied real estate | $ | 923 | $ | 934 | $ | — | $ | 1,167 | $ | 4 | $ | 1,033 | $ | 4 | ||||||||||||||
Non owner occupied real estate | 701 | 701 | — | 468 | — | 308 | 2 | |||||||||||||||||||||
Residential development | — | — | — | — | — | — | — | |||||||||||||||||||||
Development & Spec Land Loans | 102 | 102 | — | 222 | — | 230 | — | |||||||||||||||||||||
Commercial and industrial | 1,707 | 1,714 | — | 2,066 | 3 | 1,071 | 19 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total commercial | 3,433 | 3,451 | — | 3,923 | 7 | 2,642 | 25 | |||||||||||||||||||||
With an allowance recorded | ||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Owner occupied real estate | — | — | — | — | — | — | — | |||||||||||||||||||||
Non owner occupied real estate | — | — | — | — | — | — | — | |||||||||||||||||||||
Residential development | — | — | — | — | — | — | — | |||||||||||||||||||||
Development & Spec Land Loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Commercial and industrial | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total commercial | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 3,433 | $ | 3,451 | $ | — | $ | 3,923 | $ | 7 $ | 2,642 | $ | 25 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Three Months Ending | Nine Months Ending | |||||||||||||||||||||||||||
| September 30, 2016 | Unpaid Principal Balance | Recorded Investment | Allowance For Loan Loss Allocated | Average Balance in Impaired Loans | Cash/Accrual Interest Income Recognized | Average Balance in Impaired Loans | Cash/Accrual Interest Income Recognized | |||||||||||||||||||||
With no recorded allowance | ||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Owner occupied real estate | $ | 994 | $ | 995 | $ | — | $ | 1,029 | $ | — | $ | 1,062 | $ | — | ||||||||||||||
Non owner occupied real estate | 3,106 | 3,120 | — | 3,150 | 1 | 3,776 | 3 | |||||||||||||||||||||
Residential development | — | — | — | — | — | — | — | |||||||||||||||||||||
Development & Spec Land Loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Commercial and industrial | 1,740 | 1,740 | — | 1,984 | — | 878 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total commercial | 5,840 | 5,855 | — | 6,163 | 1 | 5,716 | 3 | |||||||||||||||||||||
With an allowance recorded | ||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Owner occupied real estate | — | — | — | — | — | — | — | |||||||||||||||||||||
Non owner occupied real estate | — | — | — | — | — | — | — | |||||||||||||||||||||
Residential development | — | — | — | — | — | — | — | |||||||||||||||||||||
Development & Spec Land Loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Commercial and industrial | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total commercial | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 5,840 | $ | 5,855 | $ | — | $ | 6,163 | $ | 1 | $ | 5,716 | $ | 3 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.
| June 30, 2020 | ||||||||
| Commercial | ||||||||
| Owner occupied real estate | $ | 3,018 | ||||||
| Non-owner occupied real estate | 506 | |||||||
| Commercial and industrial | 870 | |||||||
| Total commercial | 4,394 | |||||||
| Total collateral dependent loans | $ | 4,394 | ||||||
| 90 Days or | ||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | Greater Past | Total Past | Loans Not | ||||||||||||||||||||
| September 30, 2017 | Past Due | Past Due | Due | Due | Past Due | Total | ||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Owner occupied real estate | $ | 2,282 | $ | — | $ | — | $ | 2,282 | $ | 400,902 | $ | 403,184 | ||||||||||||
Non owner occupied real estate | 132 | — | — | 132 | 531,428 | 531,560 | ||||||||||||||||||
Residential development | 135 | — | — | 135 | 3,896 | 4,031 | ||||||||||||||||||
Development & Spec Land Loans | — | — | — | — | 43,299 | 43,299 | ||||||||||||||||||
Commercial and industrial | 255 | 166 | — | 421 | 287,665 | 288,086 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total commercial | 2,804 | 166 | — | 2,970 | 1,267,190 | 1,270,160 | ||||||||||||||||||
Real estate | ||||||||||||||||||||||||
Residential mortgage | 1,012 | 167 | 119 | 1,298 | 552,153 | 553,451 | ||||||||||||||||||
Residential construction | — | — | — | — | 14,825 | 14,825 | ||||||||||||||||||
Mortgage warehouse | — | — | — | — | 95,483 | 95,483 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total real estate | 1,012 | 167 | 119 | 1,298 | 662,461 | 663,759 | ||||||||||||||||||
Consumer | ||||||||||||||||||||||||
Direct Installment | 67 | — | — | 67 | 85,659 | 85,726 | ||||||||||||||||||
Direct Installment Purchased | — | — | — | — | 88 | 88 | ||||||||||||||||||
Indirect Installment | 1,192 | 181 | 15 | 1,388 | 205,905 | 207,293 | ||||||||||||||||||
Home Equity | 611 | 84 | 28 | 723 | 193,327 | 194,050 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total consumer | 1,870 | 265 | 43 | 2,178 | 484,979 | 487,157 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 5,686 | $ | 598 | $ | 162 | $ | 6,446 | $ | 2,414,630 | $ | 2,421,076 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Percentage of total loans | 0.23 | % | 0.02 | % | 0.01 | % | 0.27 | % | 99.73 | % | ||||||||||||||
| 90 Days or | ||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | Greater Past | Total Past | Loans Not | ||||||||||||||||||||
| December 31, 2016 | Past Due | Past Due | Due | Due | Past Due | Total | ||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Owner occupied real estate | $ | 1,068 | $ | — | $ | 183 | $ | 1,251 | $ | 336,297 | $ | 337,548 | ||||||||||||
Non owner occupied real estate | 357 | — | — | 357 | 461,540 | 461,897 | ||||||||||||||||||
Residential development | — | — | — | — | 5,006 | 5,006 | ||||||||||||||||||
Development & Spec Land Loans | 1 | — | — | 1 | 31,227 | 31,228 | ||||||||||||||||||
Commercial and industrial | 982 | — | — | 982 | 229,538 | 230,520 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total commercial | 2,408 | — | 183 | 2,591 | 1,063,608 | 1,066,199 | ||||||||||||||||||
Real estate | ||||||||||||||||||||||||
Residential mortgage | 886 | 123 | — | 1,009 | 507,224 | 508,233 | ||||||||||||||||||
Residential construction | — | — | — | — | 20,611 | 20,611 | ||||||||||||||||||
Mortgage warehouse | — | — | — | — | 135,727 | 135,727 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total real estate | 886 | 123 | — | 1,009 | 663,562 | 664,571 | ||||||||||||||||||
Consumer | ||||||||||||||||||||||||
Direct Installment | 139 | 4 | — | 143 | 71,007 | 71,150 | ||||||||||||||||||
Direct Installment Purchased | — | — | — | — | 119 | 119 | ||||||||||||||||||
Indirect Installment | 1,339 | 237 | 49 | 1,625 | 151,579 | 153,204 | ||||||||||||||||||
Home Equity | 912 | 267 | 9 | 1,188 | 173,938 | 175,126 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total consumer | 2,390 | 508 | 58 | 2,956 | 396,643 | 399,599 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 5,684 | $ | 631 | $ | 241 | $ | 6,556 | $ | 2,123,813 | $ | 2,130,369 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Percentage of total loans | 0.27 | % | 0.03 | % | 0.01 | % | 0.31 | % | 99.69 | % | ||||||||||||||
loan, excluding non-accrual loans of $22.5 million and non-performing TDRs of $3.4 million at June 30, 2020:
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or Greater Past Due | Total Past Due Loans | Total Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | $ | 491,811 | $ | 116 | $ | — | $ | — | $ | 116 | $ | 491,927 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | 1,007,524 | — | — | — | — | 1,007,524 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | 12,036 | — | — | — | — | 12,036 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development & spec land | 28,917 | — | — | — | — | 28,917 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 757,964 | 100 | — | — | 100 | 758,064 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 2,298,252 | 216 | — | — | 216 | 2,298,468 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 672,729 | 1,295 | 263 | — | 1,558 | 674,287 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential construction | 21,715 | — | — | — | — | 21,715 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage warehouse | 300,386 | — | — | — | — | 300,386 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate | 994,830 | 1,295 | 263 | — | 1,558 | 996,388 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | 39,413 | 30 | 5 | 40 | 75 | 39,488 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indirect installment | 355,305 | 1,097 | 259 | 83 | 1,439 | 356,744 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 260,536 | 434 | 254 | — | 688 | 261,224 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 655,254 | 1,561 | 518 | 123 | 2,202 | 657,456 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,948,336 | $ | 3,072 | $ | 781 | $ | 123 | $ | 3,976 | $ | 3,952,312 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Percentage of total loans | 99.90 | % | 0.08 | % | 0.02 | % | 0.00 | % | 0.10 | % | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or Greater Past Due | Total Past Due Loans | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | $ | 515,604 | $ | 920 | $ | — | $ | — | $ | 920 | $ | 516,524 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | 972,195 | 80 | — | — | 80 | 972,275 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | 12,925 | — | — | — | — | 12,925 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development & spec land | 35,881 | — | — | — | — | 35,881 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 503,348 | 819 | 11 | — | 830 | 504,178 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 2,039,953 | 1,819 | 11 | — | 1,830 | 2,041,783 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 740,712 | 1,984 | — | 1 | 1,985 | 742,697 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential construction | 19,686 | — | — | — | — | 19,686 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage warehouse | 150,293 | — | — | — | — | 150,293 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate | 910,691 | 1,984 | — | 1 | 1,985 | 912,676 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | 40,864 | 175 | 5 | 5 | 185 | 41,049 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indirect installment | 344,478 | 2,407 | 404 | 135 | 2,946 | 347,424 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 273,050 | 904 | 20 | 5 | 929 | 273,979 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 658,392 | 3,486 | 429 | 145 | 4,060 | 662,452 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,609,036 | $ | 7,289 | $ | 440 | $ | 146 | $ | 7,875 | $ | 3,616,911 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Percentage of total loans | 99.78 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.22 | % | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
better and meeting defined key financial metric ranges.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
better and meeting defined key financial metric ranges.
Commercial construction loans are graded as 4W Management Watch until the projects are completed and stabilized.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
strength and must meet defined key financial metric ranges.
| Special | ||||||||||||||||||||
| September 30, 2017 | Pass | Mention | Substandard | Doubtful | Total | |||||||||||||||
Commercial | ||||||||||||||||||||
Owner occupied real estate | $ | 386,856 | $ | 5,776 | $ | 10,552 | $ | — | $ | 403,184 | ||||||||||
Non owner occupied real estate | 523,831 | 1,008 | 6,721 | — | 531,560 | |||||||||||||||
Residential development | 4,031 | — | — | — | 4,031 | |||||||||||||||
Development & Spec Land Loans | 43,066 | — | 233 | — | 43,299 | |||||||||||||||
Commercial and industrial | 272,622 | 4,969 | 10,495 | — | 288,086 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total commercial | 1,230,406 | 11,753 | 28,001 | — | 1,270,160 | |||||||||||||||
Real estate | ||||||||||||||||||||
Residential mortgage | 548,249 | — | 5,202 | — | 553,451 | |||||||||||||||
Residential construction | 14,601 | — | 224 | — | 14,825 | |||||||||||||||
Mortgage warehouse | 95,483 | — | — | — | 95,483 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total real estate | 658,333 | — | 5,426 | — | 663,759 | |||||||||||||||
Consumer | ||||||||||||||||||||
Direct Installment | 85,416 | — | 310 | — | 85,726 | |||||||||||||||
Direct Installment Purchased | 88 | — | — | — | 88 | |||||||||||||||
Indirect Installment | 206,259 | — | 1,034 | — | 207,293 | |||||||||||||||
Home Equity | 191,938 | — | 2,112 | — | 194,050 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Consumer | 483,701 | — | 3,456 | — | 487,157 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,372,439 | $ | 11,753 | $ | 36,883 | $ | — | $ | 2,421,076 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Percentage of total loans | 97.99 | % | 0.49 | % | 1.52 | % | 0.00 | % | ||||||||||||
| Special | ||||||||||||||||||||
| December 31, 2016 | Pass | Mention | Substandard | Doubtful | Total | |||||||||||||||
Commercial | ||||||||||||||||||||
Owner occupied real estate | $ | 322,924 | $ | 4,960 | $ | 9,664 | $ | — | $ | 337,548 | ||||||||||
Non owner occupied real estate | 455,648 | 341 | 5,908 | — | 461,897 | |||||||||||||||
Residential development | 5,006 | — | — | — | 5,006 | |||||||||||||||
Development & Spec Land Loans | 31,057 | — | 171 | — | 31,228 | |||||||||||||||
Commercial and industrial | 220,424 | 3,728 | 6,368 | — | 230,520 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total commercial | 1,035,059 | 9,029 | 22,111 | — | 1,066,199 | |||||||||||||||
Real estate | ||||||||||||||||||||
Residential mortgage | 503,444 | — | 4,789 | — | 508,233 | |||||||||||||||
Residential construction | 20,378 | — | 233 | — | 20,611 | |||||||||||||||
Mortgage warehouse | 135,727 | — | — | — | 135,727 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total real estate | 659,549 | — | 5,022 | — | 664,571 | |||||||||||||||
Consumer | ||||||||||||||||||||
Direct Installment | 70,638 | — | 512 | — | 71,150 | |||||||||||||||
Direct Installment Purchased | 119 | — | — | — | 119 | |||||||||||||||
Indirect Installment | 152,496 | — | 708 | — | 153,204 | |||||||||||||||
Home Equity | 173,117 | — | 2,009 | — | 175,126 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Consumer | 396,370 | — | 3,229 | — | 399,599 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,090,978 | $ | 9,029 | $ | 30,362 | $ | — | $ | 2,130,369 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Percentage of total loans | 98.15 | % | 0.42 | % | 1.43 | % | 0.00 | % | ||||||||||||
grades and origination year.
| June 30, 2020 | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 27,165 | $ | 65,335 | $ | 55,867 | $ | 54,371 | $ | 56,131 | $ | 161,463 | $ | 38,697 | $ | 459,029 | ||||||||||||||||||||||||||||||||||||||||
| Special Mention | 173 | 291 | 4,983 | 4,393 | 2,394 | 11,132 | — | 23,366 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | — | 1,231 | 3,915 | 1,146 | 497 | 8,135 | 3,879 | 18,803 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total owner occupied real estate | $ | 27,338 | $ | 66,857 | $ | 64,765 | $ | 59,910 | $ | 59,022 | $ | 180,730 | $ | 42,576 | $ | 501,198 | ||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 68,736 | $ | 129,273 | $ | 83,742 | $ | 143,870 | $ | 114,786 | $ | 231,098 | $ | 159,787 | $ | 931,292 | ||||||||||||||||||||||||||||||||||||||||
| Special Mention | 2,477 | 10,727 | 27,479 | 9,421 | 2,959 | 15,174 | 1,075 | 69,312 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | — | — | 2,438 | 631 | 453 | 4,990 | — | 8,512 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-owner occupied real estate | $ | 71,213 | $ | 140,000 | $ | 113,659 | $ | 153,922 | $ | 118,198 | $ | 251,262 | $ | 160,862 | $ | 1,009,116 | ||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | — | $ | — | $ | — | $ | 318 | $ | 679 | $ | 1,905 | $ | 7,889 | $ | 10,791 | ||||||||||||||||||||||||||||||||||||||||
| Special Mention | — | — | — | — | — | — | 1,245 | 1,245 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential spec homes | $ | — | $ | — | $ | — | $ | 318 | $ | 679 | $ | 1,905 | $ | 9,134 | $ | 12,036 | ||||||||||||||||||||||||||||||||||||||||
| Development & spec land | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 30 | $ | 912 | $ | 2,449 | $ | 4,815 | $ | 804 | $ | 13,356 | $ | 6,488 | $ | 28,854 | ||||||||||||||||||||||||||||||||||||||||
| Special Mention | — | — | — | — | — | 133 | — | 133 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total development & spec land | $ | 30 | $ | 912 | $ | 2,449 | $ | 4,815 | $ | 804 | $ | 13,489 | $ | 6,488 | $ | 28,987 | ||||||||||||||||||||||||||||||||||||||||
| Commercial & industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 321,761 | $ | 66,704 | $ | 66,203 | $ | 96,404 | $ | 30,716 | $ | 83,437 | $ | 33,185 | $ | 698,410 | ||||||||||||||||||||||||||||||||||||||||
| Special Mention | 8,027 | 4,012 | 8,027 | 6,321 | 2,363 | 12,088 | 1,914 | 42,752 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | 2,651 | 5,751 | 3,553 | 1,699 | 834 | 3,656 | 2,072 | 20,216 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial & industrial | $ | 332,439 | $ | 76,467 | $ | 77,783 | $ | 104,424 | $ | 33,913 | $ | 99,181 | $ | 37,171 | $ | 761,378 | ||||||||||||||||||||||||||||||||||||||||
| Total commercial | $ | 431,020 | $ | 284,236 | $ | 258,656 | $ | 323,389 | $ | 212,616 | $ | 546,567 | $ | 256,231 | $ | 2,312,715 | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||||
| Real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 59,698 | $ | 68,882 | $ | 119,632 | $ | 115,321 | $ | 85,206 | $ | 223,362 | $ | 649 | $ | 672,750 | ||||||||||||||||||||||||||||||||||
| Non-performing | — | 181 | 147 | 369 | 1,310 | 7,938 | — | 9,945 | ||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgage | $ | 59,698 | $ | 69,063 | $ | 119,779 | $ | 115,690 | $ | 86,516 | $ | 231,300 | $ | 649 | $ | 682,695 | ||||||||||||||||||||||||||||||||||
| Residential construction | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 21,715 | $ | 21,715 | ||||||||||||||||||||||||||||||||||
| Non-performing | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total residential construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 21,715 | $ | 21,715 | ||||||||||||||||||||||||||||||||||
| Mortgage warehouse | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 300,386 | $ | 300,386 | ||||||||||||||||||||||||||||||||||
| Non-performing | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total mortgage warehouse | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 300,386 | $ | 300,386 | ||||||||||||||||||||||||||||||||||
| Total real estate | $ | 59,698 | $ | 69,063 | $ | 119,779 | $ | 115,690 | $ | 86,516 | $ | 231,300 | $ | 322,750 | $ | 1,004,796 | ||||||||||||||||||||||||||||||||||
| June 30, 2020 | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 6,706 | $ | 12,336 | $ | 7,486 | $ | 7,381 | $ | 3,002 | $ | 2,523 | $ | 14 | $ | 39,448 | ||||||||||||||||||||||||||||||||||
| Non-performing | — | 4 | 30 | 20 | 6 | 7 | — | 67 | ||||||||||||||||||||||||||||||||||||||||||
| Total direct installment | $ | 6,706 | $ | 12,340 | $ | 7,516 | $ | 7,401 | $ | 3,008 | $ | 2,530 | $ | 14 | $ | 39,515 | ||||||||||||||||||||||||||||||||||
| Indirect installment | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 72,828 | $ | 119,252 | $ | 96,562 | $ | 50,133 | $ | 12,502 | $ | 8,044 | $ | — | $ | 359,321 | ||||||||||||||||||||||||||||||||||
| Non-performing | — | 166 | 272 | 531 | 141 | 210 | — | 1,320 | ||||||||||||||||||||||||||||||||||||||||||
| Total indirect installment | $ | 72,828 | $ | 119,418 | $ | 96,834 | $ | 50,664 | $ | 12,643 | $ | 8,254 | $ | — | $ | 360,641 | ||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 28,281 | $ | 50,367 | $ | 43,076 | $ | 33,139 | $ | 26,902 | $ | 71,516 | $ | 4,948 | $ | 258,229 | ||||||||||||||||||||||||||||||||||
| Non-performing | — | 9 | 55 | 79 | 52 | 1,123 | 1,168 | 2,486 | ||||||||||||||||||||||||||||||||||||||||||
| Total home equity | $ | 28,281 | $ | 50,376 | $ | 43,131 | $ | 33,218 | $ | 26,954 | $ | 72,639 | $ | 6,116 | $ | 260,715 | ||||||||||||||||||||||||||||||||||
| Total consumer | $ | 107,815 | $ | 182,134 | $ | 147,481 | $ | 91,283 | $ | 42,605 | $ | 83,423 | $ | 6,130 | $ | 660,871 | ||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied real estate | $ | 492,386 | $ | 8,328 | $ | 18,863 | $ | — | $ | 519,577 | |||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied real estate | 957,990 | 7,824 | 7,517 | — | 973,331 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Residential spec homes | 12,925 | — | — | — | 12,925 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Development & spec land | 35,815 | — | 139 | — | 35,954 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 468,893 | 18,652 | 18,314 | — | 505,859 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 1,968,009 | 34,804 | 44,833 | — | 2,047,646 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 741,136 | — | 9,883 | — | 751,019 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Residential construction | 19,686 | — | — | — | 19,686 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage warehouse | 150,293 | — | — | — | 150,293 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate | 911,115 | — | 9,883 | — | 920,998 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct installment | 41,044 | — | 35 | — | 41,079 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Indirect installment | 347,289 | — | 1,369 | — | 348,658 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 273,665 | — | 2,550 | — | 276,215 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 661,998 | — | 3,954 | — | 665,952 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,541,122 | $ | 34,804 | $ | 58,670 | $ | — | $ | 3,634,596 | |||||||||||||||||||||||||||||||||||||||||||
| Percentage of total loans | 97.43 | % | 0.96 | % | 1.61 | % | 0.00 | % | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||
| June 30, | December 31, | |||||||||||||
| 2020 | 2019 | |||||||||||||
| Mortgage servicing rights | ||||||||||||||
| Balance, beginning of period | $ | 15,046 | $ | 12,876 | ||||||||||
| Servicing rights capitalized | 2,573 | 3,547 | ||||||||||||
| Amortization of servicing rights | (1,310) | (1,377) | ||||||||||||
| Balance, end of period | 16,309 | 15,046 | ||||||||||||
| Impairment allowance | ||||||||||||||
| Balance, beginning of period | (719) | (527) | ||||||||||||
| Additions | (3,201) | (234) | ||||||||||||
| Reductions | — | 42 | ||||||||||||
| Balance, end of period | (3,920) | (719) | ||||||||||||
| Mortgage servicing rights, net | $ | 12,389 | $ | 14,327 | ||||||||||
| June 30, | December 31, | |||||||||||||
| 2020 | 2019 | |||||||||||||
| Balance, beginning of period | $ | 151,238 | $ | 119,880 | ||||||||||
| Goodwill acquired during the period | — | 31,358 | ||||||||||||
| Balance, end of period | $ | 151,238 | $ | 151,238 | ||||||||||
September 30, 2017 | Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||||||
| Overnight and Continuous | Up to one year | One to three years | Three to five years | Five to ten years | Beyond ten years | Total | ||||||||||||||||||||||
Repurchase Agreements andrepurchase-to-maturity transactions | ||||||||||||||||||||||||||||
Repurchase Agreements | $ | 63,081 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 63,081 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Securities pledged for Repurchase Agreements | ||||||||||||||||||||||||||||
U.S. Treasury and federal agencies | — | — | — | — | — | — | — | |||||||||||||||||||||
Federal agency collateralized mortgage obligations | 40,740 | — | — | — | — | — | 40,740 | |||||||||||||||||||||
Federal agency mortgage-backed pools | 38,476 | — | — | — | — | — | 38,476 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 79,216 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 79,216 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Overnight and Continuous | Up to one year | One to three years | Three to five years | Five to ten years | Beyond ten years | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase Agreements and repurchase-to-maturity transactions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase Agreements | $ | 109,160 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 109,160 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities pledged for Repurchase Agreements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | $ | 46,073 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 46,073 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 65,039 | — | — | — | — | — | 65,039 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 111,112 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 111,112 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
-
As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into interest rate swap agreements for a portion of its floating rate debt. The agreements provide for the Company to receive interest from the counterparty at threeHORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
2019.
| Asset Derivatives | Liability Derivatives | |||||||||||||||
| September 30, 2017 | September 30, 2017 | |||||||||||||||
| Derivatives designated as hedging instruments (Unaudited) | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||
Interest rate contracts | Loans | $ | — | Other liabilities | $ | 429 | ||||||||||
Interest rate contracts | Other Assets | 429 | Other liabilities | 2,390 | ||||||||||||
|
|
|
| |||||||||||||
Total derivatives designated as hedging instruments | 429 | 2,819 | ||||||||||||||
|
|
|
| |||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||
Mortgage loan contracts | Other assets | 286 | Other liabilities | 31 | ||||||||||||
|
|
|
| |||||||||||||
Total derivatives not designated as hedging instruments | 286 | 31 | ||||||||||||||
|
|
|
| |||||||||||||
Total derivatives | $ | 715 | $ | 2,850 | ||||||||||||
|
|
|
| |||||||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||||||
| December 31, 2016 | December 31, 2016 | |||||||||||||||
| Derivatives designated as hedging instruments | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||
Interest rate contracts | Loans | $ | — | Other liabilities | $ | 6 | ||||||||||
Interest rate contracts | Other Assets | 6 | Other liabilities | 3,132 | ||||||||||||
|
|
|
| |||||||||||||
Total derivatives designated as hedging instruments | 6 | 3,138 | ||||||||||||||
|
|
|
| |||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||
Mortgage loan contracts | Other assets | 602 | Other liabilities | 22 | ||||||||||||
|
|
|
| |||||||||||||
Total derivatives not designated as hedging instruments | 602 | 22 | ||||||||||||||
|
|
|
| |||||||||||||
Total derivatives | $ | 608 | $ | 3,160 | ||||||||||||
|
|
|
| |||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
| Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2020 | ||||||||||||||||||||||||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate contracts | Other assets | $ | 42,378 | Other liabilities | $ | 50,917 | |||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments | 42,378 | 50,917 | |||||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Mortgage loan contracts | Other assets | 590 | Other liabilities | — | |||||||||||||||||||||||||||||||
| Total derivatives not designated as hedging instruments | 590 | — | |||||||||||||||||||||||||||||||||
| Total derivatives | $ | 42,968 | $ | 50,917 | |||||||||||||||||||||||||||||||
| Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||||||||
| December 31, 2019 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate contracts | Other assets | $ | 11,422 | Other liabilities | $ | 15,861 | |||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments | 11,422 | 15,861 | |||||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Mortgage loan contracts | Other assets | 264 | Other liabilities | 38 | |||||||||||||||||||||||||||||||
| Total derivatives not designated as hedging instruments | 264 | 38 | |||||||||||||||||||||||||||||||||
| Total derivatives | $ | 11,686 | $ | 15,899 | |||||||||||||||||||||||||||||||
| Comprehensive Income on Derivative | Comprehensive Income on Derivative | |||||||||||||||
| (Effective Portion) | (Effective Portion) | |||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| Derivative in cash flow | 2017 | 2016 | 2017 | 2016 | ||||||||||||
hedging relationship | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
Interest rate contracts | $ | 193 | $ | 522 | $ | 483 | $ | 103 | ||||||||
Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationship | |||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | $ | (107) | $ | (1,502) | $ | (3,239) | $ | (2,376) | |||||||||||||||||||||||||||||||||
| Amount of Gain (Loss) Recognized on Derivative | ||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||
| Derivative in fair value | Location of gain (loss) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
hedging relationship | recognized on derivative | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Interest rate contracts | Interest income-loans | $ | (4 | ) | $ | (830 | ) | $ | 423 | $ | 2,781 | |||||||
Interest rate contracts | Interest income-loans | 4 | 830 | (423 | ) | (2,781 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total | $ | — | $ | — | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
| Amount of Gain (Loss) Recognized on Derivative | ||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||
| Derivative not designated | Location of gain (loss) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
as hedging relationship | recognized on derivative | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Mortgage contracts | Other income-gain on sale of loans | $ | (112 | ) | $ | (324 | ) | $ | (324 | ) | $ | 145 | ||||||
| Location of gain (loss) recognized on derivative | Amount of Gain (Loss) Recognized on Derivative | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||
| Derivative in fair value hedging relationship | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | Interest income - loans | $ | (3,162) | $ | (7,529) | $ | (29,492) | $ | (11,580) | ||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | Interest income - loans | 3,162 | 7,529 | 29,492 | 11,580 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Location of gain (loss) recognized on derivative | Amount of Gain (Loss) Recognized on Derivative | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||
| Derivative not designated as hedging relationship | |||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage contracts | Other income - gain on sale of loans | $ | (679) | $ | 75 | $ | 364 | $ | 332 | ||||||||||||||||||||||||||||||||||||||
Level 1 Quoted prices in active markets for identical assets or liabilities Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Level 3 Unobservable inputs that are supported by little or no market activity and that are significant | ||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
the fair value of the assets or liabilities
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
| Quoted Prices in | Significant | |||||||||||||||
| Active Markets | Other | Significant | ||||||||||||||
| for Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
September 30, 2017 | ||||||||||||||||
Available-for-sale securities | ||||||||||||||||
U.S. Treasury and federal agencies | $ | 17,885 | $ | — | $ | 17,885 | $ | — | ||||||||
State and municipal | 143,483 | — | 143,483 | — | ||||||||||||
Federal agency collateralized mortgage obligations | 134,202 | — | 134,202 | — | ||||||||||||
Federal agency mortgage-backed pools | 212,051 | — | 212,051 | — | ||||||||||||
Private labeled mortgage-backed pools | 1,830 | — | 1,830 | — | ||||||||||||
Corporate notes | 393 | — | 393 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalavailable-for-sale securities | 509,844 | — | 509,844 | — | ||||||||||||
Hedged loans | 152,216 | — | 152,216 | — | ||||||||||||
Forward sale commitments | 286 | — | 286 | — | ||||||||||||
Interest rate swap agreements | (2,819 | ) | — | (2,819 | ) | — | ||||||||||
Commitments to originate loans | (31 | ) | — | (31 | ) | — | ||||||||||
December 31, 2016 | ||||||||||||||||
Available-for-sale securities | ||||||||||||||||
U.S. Treasury and federal agencies | $ | 7,989 | $ | — | $ | 7,989 | $ | — | ||||||||
State and municipal | 116,592 | — | 116,592 | — | ||||||||||||
Federal agency collateralized mortgage obligations | 137,195 | — | 137,195 | — | ||||||||||||
Federal agency mortgage-backed pools | 176,726 | — | 176,726 | — | ||||||||||||
Corporate notes | 1,329 | — | 1,329 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalavailable-for-sale securities | 439,831 | — | 439,831 | — | ||||||||||||
Hedged loans | 122,345 | — | 122,345 | — | ||||||||||||
Forward sale commitments | 602 | — | 602 | — | ||||||||||||
Interest rate swap agreements | (3,138 | ) | — | (3,138 | ) | — | ||||||||||
Commitments to originate loans | (22 | ) | — | (22 | ) | — | ||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||
| Available for sale securities | |||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 548,232 | $ | — | $ | 548,232 | $ | — | |||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 225,805 | — | 225,805 | — | |||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 148,786 | — | 148,786 | — | |||||||||||||||||||||||||||||||||||||
| Corporate notes | 12,317 | — | 12,317 | — | |||||||||||||||||||||||||||||||||||||
| Total available for sale securities | 935,140 | — | 935,140 | — | |||||||||||||||||||||||||||||||||||||
| Interest rate swap agreements asset | 39,216 | — | 39,216 | — | |||||||||||||||||||||||||||||||||||||
| Forward sale commitments | 590 | — | 590 | — | |||||||||||||||||||||||||||||||||||||
| Interest rate swap agreements liability | (47,620) | — | (47,620) | — | |||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||
| Available for sale securities | |||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and federal agencies | $ | 1,413 | $ | — | $ | 1,413 | $ | — | |||||||||||||||||||||||||||||||||
| State and municipal | 405,768 | — | 405,768 | — | |||||||||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 269,252 | — | 269,252 | — | |||||||||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 146,572 | — | 146,572 | — | |||||||||||||||||||||||||||||||||||||
| Corporate notes | 11,771 | — | 11,771 | — | |||||||||||||||||||||||||||||||||||||
| Total available for sale securities | 834,776 | — | 834,776 | — | |||||||||||||||||||||||||||||||||||||
| Interest rate swap agreements asset | 11,422 | — | 11,422 | — | |||||||||||||||||||||||||||||||||||||
| Forward sale commitments | 264 | — | 264 | — | |||||||||||||||||||||||||||||||||||||
| Interest rate swap agreements liability | (15,861) | — | (15,861) | — | |||||||||||||||||||||||||||||||||||||
| Commitments to originate loans | (38) | — | (38) | — | |||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| Non Interest Income | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Total gains and losses from: | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
Hedged loans | $ | (4 | ) | $ | (830 | ) | $ | 423 | $ | 2,781 | ||||||
Fair value interest rate swap agreements | 4 | 830 | (423 | ) | (2,781 | ) | ||||||||||
Derivative loan commitments | (112 | ) | (324 | ) | (324 | ) | 145 | |||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | (112 | ) | $ | (324 | ) | $ | (324 | ) | $ | 145 | ||||||
|
|
|
|
|
|
|
| |||||||||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||||
| Non-interest Income | |||||||||||||||||||||||||||||||||||
| Total gains and losses from: | |||||||||||||||||||||||||||||||||||
| Hedged loans | $ | (3,162) | $ | (7,529) | $ | (29,492) | $ | (11,580) | |||||||||||||||||||||||||||
| Fair value interest rate swap agreements | 3,162 | 7,529 | 29,492 | 11,580 | |||||||||||||||||||||||||||||||
| Derivative loan commitments | (679) | 75 | 364 | 332 | |||||||||||||||||||||||||||||||
| $ | (679) | $ | 75 | $ | 364 | $ | 332 | ||||||||||||||||||||||||||||
| Quoted Prices in | Significant | |||||||||||||||
| Active Markets | Other | Significant | ||||||||||||||
| for Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
September 30, 2017 | ||||||||||||||||
Impaired loans | $ | 3,433 | $ | — | $ | — | $ | 3,433 | ||||||||
Mortgage servicing rights | 11,485 | — | — | 11,485 | ||||||||||||
December 31, 2016 | ||||||||||||||||
Impaired loans | $ | 2,246 | $ | — | $ | — | $ | 2,246 | ||||||||
Mortgage servicing rights | 11,174 | — | — | 11,174 | ||||||||||||
Impaired (collateral dependent):
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| June 30, 2020 | |||||||||||||||||||||||
| Collateral dependent loans | $ | 12,389 | $ | — | $ | — | $ | 12,389 | |||||||||||||||
| Mortgage servicing rights | 12,389 | — | — | 12,389 | |||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||
| Impaired loans | $ | 6,806 | $ | — | $ | — | $ | 6,806 | |||||||||||||||
| Mortgage servicing rights | 14,327 | — | — | 14,327 | |||||||||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
2019.
| Fair Value at | Valuation | Range (Weighted | ||||||||||
| September 30, 2017 | Technique | Unobservable Inputs | Average) | |||||||||
Discount to reflect current market conditions and ultimate | ||||||||||||
Impaired loans | $ | 3,433 | Collateral based measurement | collectability | 11% - 17% (14% | ) | ||||||
| Discount rate, Constant | 11% - 17% (14% | ), | ||||||||||
| prepayment rate, Probability of | 4% - 8% (5.1% | ), | ||||||||||
Mortgage servicing rights | $ | 11,485 | Discounted cashflows | default | 1% - 11% (5.0% | ) | ||||||
| Fair Value at | Valuation | Range (Weighted | ||||||||||
| December 31, 2016 | Technique | Unobservable Inputs | Average) | |||||||||
| Discount to reflect current | ||||||||||||
| market conditions and ultimate | ||||||||||||
Impaired loans | $ | 2,246 | Collateral based measurement | collectability | 10% - 16% (13% | ) | ||||||
| Discount rate, Constant | 10% - 16% (13% | ), | ||||||||||
| prepayment rate, Probability of | 4% - 7% (4.6% | ), | ||||||||||
Mortgage servicing rights | $ | 11,174 | Discounted cashflows | default | 1% - 10% (4.5% | ) | ||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||||||||||||||||||||
| Collateral dependent loans | $ | 12,389 | Collateral based measurement | Discount to reflect current market conditions and ultimate collectibility | 0.0%-100.0% (13.0%) | ||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights | 12,389 | Discounted cash flows | Discount rate, Constant prepayment rate, Probability of default | 7.8%-7.8% (7.8%), 12.3%-18.3% (16.8%), 0.4%-8.2%(1.4%) | |||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
| Fair Value | Valuation Technique | Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||||||||||||||||||||
| Impaired loans | $ | 6,806 | Collateral based measurement | Discount to reflect current market conditions and ultimate collectibility | 0.0%-100.0%(7.4%) | ||||||||||||||||||||||||||||||||||||
| Mortgage servicing rights | 14,327 | Discounted cash flows | Discount rate, Constant prepayment rate, Probability of default | 8.7%-9.0% (8.7%), 10.2%-19.8%(12.2%), 0.1%-2.9%(0.7%) | |||||||||||||||||||||||||||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
marketability factors.
FHLB.
| September 30, 2017 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Carrying | Assets | Inputs | Inputs | |||||||||||||
| Amount | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | 72,662 | $ | 72,662 | $ | — | $ | — | ||||||||
Investment securities, held to maturity | 198,605 | — | 202,222 | — | ||||||||||||
Loans held for sale | 3,616 | — | — | 3,616 | ||||||||||||
Loans excluding loan level hedges, net | 2,258,023 | — | — | 2,205,681 | ||||||||||||
Stock in FHLB and FRB | 15,340 | — | 15,340 | — | ||||||||||||
Interest receivable | 14,880 | — | 14,880 | — | ||||||||||||
Liabilities | ||||||||||||||||
Non-interest bearing deposits | $ | 563,536 | $ | 563,536 | $ | — | $ | — | ||||||||
Interest-bearing deposits | 2,044,739 | — | 1,948,765 | — | ||||||||||||
Borrowings | 458,152 | — | 453,303 | — | ||||||||||||
Subordinated debentures | 37,607 | — | 36,241 | — | ||||||||||||
Interest payable | 700 | — | 700 | — | ||||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 170,135 | $ | 170,135 | $ | — | $ | — | |||||||||||||||||||||||||||||||||
| Interest-earning time deposits | 9,247 | — | 9,462 | — | |||||||||||||||||||||||||||||||||||||
| Investment securities, held to maturity | 190,935 | — | 201,818 | — | |||||||||||||||||||||||||||||||||||||
| Loans held for sale | 15,913 | — | — | 15,913 | |||||||||||||||||||||||||||||||||||||
| Loans (excluding loan level hedges), net | 3,923,292 | — | — | 3,912,434 | |||||||||||||||||||||||||||||||||||||
| Stock in FHLB | 23,608 | — | 23,608 | — | |||||||||||||||||||||||||||||||||||||
| Interest receivable | 20,185 | — | 20,185 | — | |||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 981,868 | $ | 981,868 | $ | — | $ | — | |||||||||||||||||||||||||||||||||
| Interest bearing deposits | — | — | 3,328,498 | — | |||||||||||||||||||||||||||||||||||||
| Borrowings | — | — | 595,893 | — | |||||||||||||||||||||||||||||||||||||
| Subordinated notes | 58,824 | — | 58,824 | — | |||||||||||||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 56,437 | — | 52,603 | — | |||||||||||||||||||||||||||||||||||||
| Interest payable | 2,353 | — | 2,353 | — | |||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 98,831 | $ | 98,831 | $ | — | $ | — | |||||||||||||||||||||||||||||||||
| Interest-earning time deposits | 8,455 | — | 8,537 | — | |||||||||||||||||||||||||||||||||||||
| Investment securities, held to maturity | 207,899 | — | 215,147 | — | |||||||||||||||||||||||||||||||||||||
| Loans held for sale | 4,088 | — | — | 4,088 | |||||||||||||||||||||||||||||||||||||
| Loans (excluding loan level hedges), net | 3,619,174 | — | — | 3,554,951 | |||||||||||||||||||||||||||||||||||||
| Stock in FHLB | 22,447 | — | 22,447 | — | |||||||||||||||||||||||||||||||||||||
| Interest receivable | 18,828 | — | 18,828 | — | |||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 709,760 | $ | 709,760 | $ | — | $ | — | |||||||||||||||||||||||||||||||||
| Interest bearing deposits | 3,221,242 | — | 3,180,768 | — | |||||||||||||||||||||||||||||||||||||
| Borrowings | 549,741 | — | 546,995 | — | |||||||||||||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 56,311 | — | 51,809 | — | |||||||||||||||||||||||||||||||||||||
| Interest payable | 3,062 | — | 3,062 | — | |||||||||||||||||||||||||||||||||||||
| December 31, 2016 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Carrying | Assets | Inputs | Inputs | |||||||||||||
| Amount | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | 70,832 | $ | 70,832 | $ | — | $ | — | ||||||||
Investment securities, held to maturity | 193,194 | — | 194,086 | — | ||||||||||||
Loans held for sale | 8,087 | — | — | 8,087 | ||||||||||||
Loans excluding loan level hedges, net | 1,998,804 | — | — | 1,965,928 | ||||||||||||
Stock in FHLB and FRB | 23,932 | — | 23,932 | — | ||||||||||||
Interest receivable | 12,713 | — | 12,713 | — | ||||||||||||
Liabilities | ||||||||||||||||
Non-interest bearing deposits | $ | 496,248 | $ | 496,248 | $ | — | $ | — | ||||||||
Interest-bearing deposits | 1,974,962 | — | 1,839,167 | — | ||||||||||||
Borrowings | 267,489 | — | 261,141 | — | ||||||||||||
Subordinated debentures | 37,456 | — | 36,371 | — | ||||||||||||
Interest payable | 472 | — | 472 | — | ||||||||||||
| September 30 | December 31 | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | ||||||||
Unrealized gain (loss) on securities available for sale | $ | (601 | ) | $ | (6,007 | ) | ||
Unamortized gain on securities held to maturity, previously transferred from AFS | 256 | 456 | ||||||
Unrealized loss on derivative instruments | (2,390 | ) | (3,132 | ) | ||||
Tax effect | 958 | 3,039 | ||||||
|
|
|
| |||||
Total accumulated other comprehensive income (loss) | $ | (1,777 | ) | $ | (5,644 | ) | ||
|
|
|
| |||||
| June 30, 2020 | December 31, 2019 | ||||||||||
| Unrealized gain on securities available for sale | $ | 35,599 | $ | 12,687 | |||||||
| Unamortized loss on securities held to maturity, previously transferred from AFS | (136) | (107) | |||||||||
| Unrealized loss on derivative instruments | (8,540) | (4,440) | |||||||||
| Tax effect | (5,653) | (1,708) | |||||||||
| Total accumulated other comprehensive income | $ | 21,270 | $ | 6,432 | |||||||
Quantitative measures established by regulation
HORIZON BANCORP AND SUBSIDIARIES
Notes The minimum regulatory capital requirements are set forth in the table below.
(Table Dollar Amounts in Thousands, Except Per Share Data)
To be categorized as well capitalized, the Company and Bank must maintain minimum Total risk-based, Tier I risk-based, common equity Tier I risk-based (September 30, 2017)risk- based and Tier I leverage ratios as set forth in the table below. As of SeptemberJune 30, 20172020 and December 31, 2016,2019, 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 thirdsecond quarter of 20172020 that management believes have changed the Bank’s classification as well capitalized. There is no threshold for well-capitalized status for bank holding companies.
| Actual | Required For Capital1 Adequacy Purposes | Required For Capital1 Adequacy Purposes with Capital Buffer | Well Capitalized Under Prompt1 Corrective Action Provisions | |||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||
As of September 30, 2017 | ||||||||||||||||||||||||||||||||
Total capital1(to risk-weighted assets) | ||||||||||||||||||||||||||||||||
Consolidated | $ | 347,601 | 13.22 | % | 210,274 | 8.00 | % | 226,833 | 8.63 | % | N/ A | N/ A | ||||||||||||||||||||
Bank | 339,596 | 12.93 | % | 210,162 | 8.00 | % | 226,713 | 8.63 | % | $ | 262,703 | 10.00 | % | |||||||||||||||||||
Tier 1 capital1(to risk-weighted assets) | ||||||||||||||||||||||||||||||||
Consolidated | 331,962 | 12.63 | % | 157,705 | 6.00 | % | 174,264 | 6.63 | % | N/ A | N/ A | |||||||||||||||||||||
Bank | 323,957 | 12.33 | % | 157,622 | 6.00 | % | 174,172 | 6.63 | % | 210,162 | 8.00 | % | ||||||||||||||||||||
Common equity tier 1 capital1(to risk-weighted assets) | ||||||||||||||||||||||||||||||||
Consolidated | 293,499 | 11.17 | % | 118,279 | 4.50 | % | 134,838 | 5.13 | % | N/ A | N/ A | |||||||||||||||||||||
Bank | 323,957 | 12.33 | % | 118,216 | 4.50 | % | 134,766 | 5.13 | % | 170,757 | 6.50 | % | ||||||||||||||||||||
Tier 1 capital1(to average assets) | ||||||||||||||||||||||||||||||||
Consolidated | 331,962 | 10.11 | % | 131,319 | 4.00 | % | 131,319 | 4.00 | % | N/ A | N/ A | |||||||||||||||||||||
Bank | 323,957 | 9.90 | % | 130,877 | 4.00 | % | 130,877 | 4.00 | % | 163,596 | 5.00 | % | ||||||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||||||||||||||
Total capital1(to risk-weighted assets) | ||||||||||||||||||||||||||||||||
Consolidated | $ | 316,576 | 13.87 | % | $ | 182,596 | 8.00 | % | $ | 196,976 | 8.63 | % | N/ A | N/ A | ||||||||||||||||||
Bank | 319,013 | 13.98 | % | 182,541 | 8.00 | % | 196,916 | 8.63 | % | $ | 228,176 | 10.00 | % | |||||||||||||||||||
Tier 1 capital1(to risk-weighted assets) | ||||||||||||||||||||||||||||||||
Consolidated | 301,739 | 13.22 | % | 136,947 | 6.00 | % | 151,326 | 6.63 | % | N/ A | N/ A | |||||||||||||||||||||
Bank | 304,176 | 13.33 | % | 136,905 | 6.00 | % | 151,280 | 6.63 | % | 182,540 | 8.00 | % | ||||||||||||||||||||
Common equity tier 1 capital1(to risk-weighted assets) | ||||||||||||||||||||||||||||||||
Consolidated | 263,313 | 11.50 | % | 103,036 | 4.50 | % | 117,460 | 5.13 | % | N/ A | N/ A | |||||||||||||||||||||
Bank | 304,176 | 13.33 | % | 102,679 | 4.50 | % | 117,054 | 5.13 | % | 148,314 | 6.50 | % | ||||||||||||||||||||
Tier 1 capital1(to average assets) | ||||||||||||||||||||||||||||||||
Consolidated | 301,739 | 10.44 | % | 115,609 | 4.00 | % | 115,609 | 4.00 | % | N/ A | N/ A | |||||||||||||||||||||
Bank | 304,176 | 9.93 | % | 122,521 | 4.00 | % | 122,521 | 4.00 | % | 153,151 | 5.00 | % | ||||||||||||||||||||
Note 14 – Preferred Stock Redemption
On February 1, 2016, Horizon completed the redemption (the “Redemption”)
| Actual | Required for Capital1 Adequacy Purposes | Required For Capital1 Adequacy Purposes with Capital Buffer | Well Capitalized Under Prompt1 Corrective Action Provisions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total capital1 (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 628,750 | 14.37 | % | $ | 350,035 | 8.00 | % | $ | 459,421 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 514,371 | 11.74 | % | 350,508 | 8.00 | % | 460,042 | 10.50 | % | $ | 438,135 | 10.00 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 capital1 (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 585,386 | 13.38 | % | 262,505 | 6.00 | % | 371,882 | 8.50 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 459,621 | 10.49 | % | 262,891 | 6.00 | % | 372,429 | 8.50 | % | 350,521 | 8.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common equity tier 1 capital1 (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 469,069 | 10.72 | % | 196,904 | 4.50 | % | 306,295 | 7.00 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 459,621 | 10.49 | % | 197,168 | 4.50 | % | 306,706 | 7.00 | % | 284,799 | 6.50 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 capital1 (to average assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 585,386 | 10.75 | % | 217,818 | 4.00 | % | 217,818 | 4.00 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 459,621 | 8.48 | % | 216,802 | 4.00 | % | 216,802 | 4.00 | % | 271,003 | 5.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total capital1 (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 548,364 | 13.95 | % | $ | 314,395 | 8.00 | % | $ | 412,644 | 10.500 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 497,227 | 12.65 | % | 314,452 | 8.00 | % | 412,718 | 10.500 | % | $ | 393,065 | 10.00 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 capital1 (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 530,643 | 13.50 | % | 235,796 | 6.00 | % | 334,044 | 8.500 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 479,506 | 12.20 | % | 235,823 | 6.00 | % | 334,082 | 8.500 | % | 314,430 | 8.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common equity tier 1 capital1 (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 473,150 | 12.04 | % | 176,846 | 4.50 | % | 275,094 | 7.000 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 479,506 | 12.20 | % | 176,867 | 4.50 | % | 275,126 | 7.000 | % | 255,475 | 6.50 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 capital1 (to average assets) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 530,643 | 10.50 | % | 202,111 | 4.00 | % | 202,111 | 4.000 | % | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 479,506 | 9.49 | % | 202,110 | 4.00 | % | 202,110 | 4.000 | % | 252,638 | 5.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) As defined by regulatory agencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU)
Income Taxes
FASB Accounting Standards UpdateNo. 2017-08,Receivables – Nonrefundable Fees and Other Costs (Subtopic310-20), Premium Amortization on Purchased Callable Debt Securities
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)No. 2017-08,Receivables – Nonrefundable Fees and Other Costs (Subtopic310-20), Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a retrospective, modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The amendments in this update were adopted on January 1, 2017 and did not have a material impactor prospective approach, depending on the consolidated financial statements.
FASB Accounting Standards UpdatesNo. 2017-04,Intangibles – Goodwill and Other(Topic 350):Simplifying the Test for Goodwill Impairment
The FASB has issued Accounting Standards Update (ASU)No. 2017-04,Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance is intended to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition. The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.specific amendment. Early adoption is permitted on testing dates after January 1, 2017.permitted. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
FASB Accounting Standards UpdatesNo. 2017-01,Business Combinations(Topic 805):Clarifying the Definition of a Business
The FASB has issued Accounting Standards Update (ASU)No. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The amendments in this update became effective on January 1, 2017 and did not have a material impact on the consolidated financial statements.
FASB Accounting Standards UpdatesNo. 2016-13,Financial Instruments – Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments
The FASB has issued Accounting Standards Update (ASU)No. 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this amendment is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendment requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to enhance their credit loss estimates. The amendment requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, the ASU amends the accounting for credit losses onavailable-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. Early adoption will be permitted beginning after December 15, 2018. We have formed a cross functional committee that is assessing our data and system needs and are evaluating the impact of adopting the new guidance. We expect to recognize aone-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any suchone-time adjustment or the overall impact of the new guidance on the consolidated financial statements.
FASB Accounting Standards UpdatesNo. 2016-09,Compensation – Stock Compensation(Topic 718):Improvements to Employee Share-Based Payment Acounting
The FASB has issued Accounting Standards Update (ASU)No. 2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.The amendments are intended to improve the accounting for employee share-based payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including the income tax consequences, the classification of awards as either equity or liabilities and the classification on the statement of cash flows. The amendments in this update became effective on January 1, 2017 and resulted in a tax benefit of $208,000 and $227,000 for the three and nine months ended September 30, 2017, respectively.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
FASB Accounting Standards UpdatesNo. 2016-02,Leases(Topic 842)
The FASB has issued Accounting Standards Update (ASU)No. 2016-02,Leases.Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) aright-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. Based on leases outstanding as of December 31, 2016, we do not expect the new standard to have a material impact on our balance sheet or income statement.
FASB Accounting Standards UpdatesNo. 2016-01,Financial Instruments – Overall (Subtopic825-10):Recognition and Measurement of Financial Assets and Financial Liabilities
The FASB has issued Accounting Standards Update (ASU)No. 2016-01,Financial Instruments – Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies,not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.
The new guidance makes targeted improvements to existing U.S. GAAP by:
The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies andnot-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.
FASB Accounting Standards Updates No. 2014-09,Revenue from Contracts with Customers (Topic 606)
The FASB has issued Accounting Standards Update (ASU) No. 2014-09 creating, Revenue from Contracts with Customers (Topic 606). The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. We do not expect the new standard, or any of the amendments detailed below, to result in a material change from our current accounting for revenue, as recognition of interest income and the larger sources of non-interest income from Horizon’s current financial instruments would not be impacted by the guidance. Additional disclosures regarding the composition of Horizon’s revenue sources will be required.
In May 2016, the FASB issued ASU No. 2016-12,Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and some practical expedients.
In December 2016, the FASB issued ASU No. 2016-20,Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements. The FASB board decided to issue a separate update for technical corrections and improvements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness of the proposals and to expedite improvements to ASU No. 2014-09. The amendment affects narrow aspects of the guidance issued in ASU No. 2014-09.
HORIZON BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Table Dollar Amounts in Thousands, Except Per Share Data)
N.A. (the “Bank”). Horizon intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for the purposes of these safe harbor provisions. Statements in this report should be considered in conjunction with the other information available about Horizon, including the information in the other filings we make with the Securities and Exchange Commission. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “expect,” “estimate,” “project,” “intend,” “plan,” “believe,” “could,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
Upon approval of a name change by Horizon’s shareholders at the annual meeting on May 3, 2018, Horizon’s full corporate name became “Horizon Bancorp, Inc.”
On September 1, 2017, Horizon completed
fewer than 100 shares2019
On February 3, 2017, Horizon completed the purchase and assumption of certain assets and liabilities of a single branch of First Farmers Bank & Trust Company, located in Bargersville, Indiana. Net cash of $11.0 million was received9.07% in the transaction, representingquarter, as well as adjusted ROAA of 1.03% and adjusted ROACE of 8.95%, excluding the deposit balances assumed at closing, netimpact of amounts paid for loans acquired in the transaction and a premium on deposits assumed in the transaction.
On November 7, 2016, Horizon completed the acquisition of CNB Bancorp, an Indiana corporation headquartered in Attica, Indiana (“CNB”) and the Bank’s acquisition of The Central National Bank and Trust Company (“Central National Bank & Trust”), through mergers effective November 7, 2016. Under the terms of the acquisition, shareholders of CNB received merger consideration in the form of cash. The total value of the consideration for the acquisition was $5.3 million.
On July 18, 2016, Horizon completed the acquisition of LaPorte Bancorp, Inc., a Maryland corporation (“LaPorte Bancorp”) and Horizon Bank’s acquisition of The LaPorte Savings Bank, a state-chartered savings bank and wholly-owned subsidiary of LaPorte Bancorp, through mergers effective July 18, 2016. Under the terms of the Merger Agreement, shareholders of LaPorte Bancorp had the option to receive $17.50 per share in cash or 0.9435 shares of Horizon common stock for each share of LaPorte Bancorp’s common stock, subject to allocation provisions to assure that in aggregate, LaPorte Bancorp shareholders received total consideration that consisted of 65% stock and 35% cash. As a result of LaPorte stockholder stock and cash elections and the related proration provisions of the Merger Agreement, Horizon issued 3,421,488 shares of its common stock in the merger. Based upon the July 18, 2016 closing price of $18.36 per share of Horizon common stock, the transaction has an implied valuation of approximately $98.6 million.
On June 1, 2016, Horizon completed the acquisition of Kosciusko Financial, Inc., an Indiana corporation (“Kosciusko”) and Horizon Bank’s acquisition of Farmers State Bank, a state-chartered bank and wholly owned subsidiary of Kosciusko, through mergers effective June 1, 2016. Under the terms of the Merger Agreement, shareholders of Kosciusko had the option to receive $81.75 per share in cash or 4.5183 shares of Horizon common stock, or a combination of both, for each share of Kosciusko’s common stock, subject to allocation provisions to assure that in aggregate, Kosciusko shareholders received total consideration that consisted of 65% stock and 35% cash. Kosciusko shareholders owning fewer than 100 shares of common stock received $81.75 in cash for each common share. As a result of Kosciusko stockholder stock and cash elections and the related proration provisions of the Merger Agreement, Horizon issued 873,430 shares of its common stock in the merger. Based upon the June 1, 2016 closing price of $16.57 per share of Horizon common stock, the transaction has an implied valuation of approximately $23.0 million.
Following are some highlights of Horizon’s financial performance through the third quarter of 2017:
| For the Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||||||||||||||||||||
| Net Interest Income and Net Interest Margin | 2020 | 2020 | 2019 | |||||||||||||||||||||||||||||
| Net interest income | $ | 42,996 | $ | 40,925 | $ | 41,529 | ||||||||||||||||||||||||||
| Net interest margin | 3.47 | % | 3.56 | % | 3.73 | % | ||||||||||||||||||||||||||
| Adjusted net interest margin | 3.35 | % | 3.44 | % | 3.61 | % | ||||||||||||||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||||||||||||||||||||
| Asset Yields and Funding Costs | 2020 | 2020 | 2019 | |||||||||||||||||||||||||||||
| Interest earning assets | 4.05 | % | 4.47 | % | 4.81 | % | ||||||||||||||||||||||||||
| Interest bearing liabilities | 0.74 | % | 1.13 | % | 1.38 | % | ||||||||||||||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||||||||||||||
| Non-interest Income and Mortgage Banking Income | June 30, | March 31, | June 30, | |||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | ||||||||||||||||||||||||||||||
| Total non-interest income | $ | 11,125 | $ | 12,063 | $ | 10,898 | ||||||||||||||||||||||||||
| Gain on sale of mortgage loans | 6,620 | 3,473 | 2,078 | |||||||||||||||||||||||||||||
| Mortgage servicing income net of impairment | (2,760) | 25 | 570 | |||||||||||||||||||||||||||||
| For the Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||||||||||||||||||||
| Non-interest Expense | 2020 | 2020 | 2019 | |||||||||||||||||||||||||||||
| Total non-interest expense | $ | 30,432 | $ | 31,149 | $ | 31,584 | ||||||||||||||||||||||||||
| Annualized non-interest expense to average assets | 2.18 | % | 2.38 | % | 2.51 | % | ||||||||||||||||||||||||||
| At or for the Three Months Ended | ||||||||||||||||||||||||||||||||
| Credit Quality | June 30, | March 31, | June 30, | |||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | ||||||||||||||||||||||||||||||
| Allowance for credit losses to total loans | 1.38 | % | 1.30 | % | 0.50 | % | ||||||||||||||||||||||||||
| Non-performing loans to total loans | 0.70 | % | 0.65 | % | 0.52 | % | ||||||||||||||||||||||||||
| Percent of net charge–offs to average loans outstanding for the period | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||||||||||||
| CECL Adoption | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, | January 1, | Net Reserve Build | Net Reserve Build | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses | 2019 | Impact | 2020 | 1Q20 | 2Q20 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | 11,996 | $ | 13,618 | $ | 25,614 | $ | 6,936 | $ | 6,597 | $ | 39,147 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail Mortgage | 923 | 4,048 | 4,971 | 683 | 178 | 5,832 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warehouse | 1,077 | — | 1,077 | (22) | 135 | 1,190 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 3,671 | 4,911 | 8,582 | 599 | (260) | 8,921 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses (“ACL”) | $ | 17,667 | $ | 22,577 | $ | 40,244 | $ | 8,196 | $ | 6,650 | $ | 55,090 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| ACL/Total Loans | 0.49 | % | 1.10 | % | 1.38 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
An
an individual basis2019
is expected to be made through the operation or sale of the collateral. Loan balances considered uncollectible are charged-off against the ACL. Recoveries of amounts previously charged-off are credited to the ACL. PCD assets represent assets that are acquired with evidence of more than insignificant credit quality deterioration since origination at the acquisition date. At acquisition, the allowance for credit losses on PCD assets is booked directly the ACL. Any subsequent changes in the ACL on PCD assets is recorded through the provision for credit losses. Management believes that the ACL is adequate to absorb the expected life of loan credit losses on the portfolio of loans and leases as of the balance sheet date. Actual losses incurred may differ materially from our estimates. Particularly, the impact of COVID-19 on both borrower credit and the greater macroeconomic environment is uncertain and changes in the duration, spread and severity of the virus will affect our loss experience.
Horizon has concluded that, based on its own internal evaluation, the recorded value of goodwill is not impaired.
future.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
prepayment activity associated with mortgage loans in the secondary market, current market interest rates and other factors, including Horizon’s own historical prepayment experience. For purposes of model valuation, estimates are made for each product type within the mortgage servicing rights portfolio on a monthly basis. In addition, on a quarterly basis Horizon engages a third party to independently test the value of its servicing asset.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of
And Results of Operations
For the Three and Nine Months ended September
Financial Condition
On September 30, 2017,2020, Horizon’s total assets were $3.5$5.7 billion, an increase of approximately $378.3$492.4 million compared to December 31, 2016.2019. The increase was primarily in net loans of $289.1$304.1 million, investment securities available for sale of $70.0$100.4 million, goodwillcash and due from banks of $16.8$71.3 million and other assets of $20.2 million. These increases were offset by a decrease in investment securities held to maturity of $5.4 million which were offset by decreases in Federal Reserve Bank stock of $8.6 million, other assets of $2.8 million and loans held for sale of $4.5$17.0 million.
| September 30, 2017 | December 31, 2016 | |||||||||||||||
| Amortized | Fair | Amortized | Fair | |||||||||||||
| Cost | Value | Cost | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. Treasury and federal agencies | $ | 17,996 | $ | 17,885 | $ | 8,051 | $ | 7,989 | ||||||||
State and municipal | 141,751 | 143,483 | 117,327 | 116,592 | ||||||||||||
Federal agency collateralized mortgage obligations | 135,511 | 134,202 | 139,040 | 137,195 | ||||||||||||
Federal agency mortgage-backed pools | 213,071 | 212,051 | 180,183 | 176,726 | ||||||||||||
Private labeled mortgage-backed pools | 1,841 | 1,830 | — | — | ||||||||||||
Corporate notes | 275 | 393 | 1,238 | 1,329 | ||||||||||||
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Total available for sale investment securities | $ | 510,445 | $ | 509,844 | $ | 445,839 | $ | 439,831 | ||||||||
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Held to maturity | ||||||||||||||||
State and municipal | $ | 177,473 | $ | 180,860 | $ | 165,607 | $ | 165,822 | ||||||||
Federal agency collateralized mortgage obligations | 5,902 | 5,896 | 6,530 | 6,490 | ||||||||||||
Federal agency mortgage-backed pools | 15,230 | 15,466 | 21,057 | 21,774 | ||||||||||||
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Total held to maturity investment securities | $ | 198,605 | $ | 202,222 | $ | 193,194 | $ | 194,086 | ||||||||
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| |||||||||
Total investment
| June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||||||||||
| Available for sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury and federal agencies | $ | — | $ | — | $ | 1,415 | $ | 1,413 | |||||||||||||||||||||||||||
| State and municipal | 525,488 | 548,232 | 396,931 | 405,768 | |||||||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 219,431 | 225,805 | 267,272 | 269,252 | |||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 143,755 | 148,786 | 145,623 | 146,572 | |||||||||||||||||||||||||||||||
| Corporate notes | 10,867 | 12,317 | 10,848 | 11,771 | |||||||||||||||||||||||||||||||
| Total available for sale investment securities | $ | 899,541 | $ | 935,140 | $ | 822,089 | $ | 834,776 | |||||||||||||||||||||||||||
| Held to maturity | |||||||||||||||||||||||||||||||||||
| State and municipal | $ | 175,953 | $ | 186,361 | $ | 190,767 | $ | 197,842 | |||||||||||||||||||||||||||
| Federal agency collateralized mortgage obligations | 3,006 | 3,095 | 4,560 | 4,568 | |||||||||||||||||||||||||||||||
| Federal agency mortgage-backed pools | 11,976 | 12,362 | 12,572 | 12,737 | |||||||||||||||||||||||||||||||
| Total held to maturity investment securities | $ | 190,935 | $ | 201,818 | $ | 207,899 | $ | 215,147 | |||||||||||||||||||||||||||
Total loans increased $285.4$100.4 million since December 31, 20162019 to $2.4$935.1 million as of June 30, 2020. This increase was due to additional purchases to increase earning assets.
category.
The Company’sPPP loans.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
2020.
2019.
2019.
$14.4 million and $259,000, respectively. Increases in net interest income and non-interest income of $8.1 million and $3.6 million, respectively, along with a decrease in income tax expense of $1.8 million, partially offset the increase in credit loss expense and non-interest expense. Adjusted net income for the six-month period ended June 30, 2020 was $25.6 million, or $0.57 diluted earnings per share, compared to $31.8 million, or $0.75 diluted earnings per share for the same period in 2019.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
2019.
The net interest margin increased 34 basis points from 3.37%$220.0 million for the three-month period ended SeptemberJune 30, 20162020 when compared to 3.71%the same period in 2019.
2019.
2019
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||
| September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||||
Federal funds sold | $ | 6,770 | $ | 24 | 1.41 | % | $ | 35,492 | $ | 20 | 0.22 | % | ||||||||||||
Interest-earning deposits | 20,157 | 49 | 0.96 | % | 55,047 | 32 | 0.23 | % | ||||||||||||||||
Investment securities - taxable | 426,145 | 2,094 | 1.95 | % | 530,228 | 2,446 | 1.84 | % | ||||||||||||||||
Investment securities -non-taxable (1) | 296,716 | 1,790 | 3.36 | % | 186,074 | 1,151 | 3.73 | % | ||||||||||||||||
Loans receivable (2)(3) | 2,328,823 | 28,113 | 4.82 | % | 2,151,103 | 25,313 | 4.69 | % | ||||||||||||||||
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| |||||||||||||||||
Total interest-earning assets (1) | 3,078,611 | 32,070 | 4.25 | % | 2,957,944 | 28,962 | 3.98 | % | ||||||||||||||||
Non-interest-earning assets | ||||||||||||||||||||||||
Cash and due from banks | 41,465 | 39,875 | ||||||||||||||||||||||
Allowance for loan losses | (15,135 | ) | (14,301 | ) | ||||||||||||||||||||
Other assets | 278,721 | 290,100 | ||||||||||||||||||||||
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| $ | 3,383,662 | $ | 3,273,618 | |||||||||||||||||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Interest-bearing deposits | $ | 1,961,998 | $ | 1,841 | 0.37 | % | $ | 1,896,156 | $ | 1,875 | 0.39 | % | ||||||||||||
Borrowings | 460,878 | 1,753 | 1.51 | % | 510,738 | 2,128 | 1.66 | % | ||||||||||||||||
Subordinated debentures | 36,386 | 597 | 6.51 | % | 37,092 | 549 | 5.89 | % | ||||||||||||||||
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| |||||||||||||||||
Total interest-bearing liabilities | 2,459,262 | 4,191 | 0.68 | % | 2,443,986 | 4,552 | 0.74 | % | ||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||
Demand deposits | 540,109 | 462,253 | ||||||||||||||||||||||
Accrued interest payable and other liabilities | 20,915 | 34,144 | ||||||||||||||||||||||
Stockholders’ equity | 363,376 | 333,235 | ||||||||||||||||||||||
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| $ | 3,383,662 | $ | 3,273,618 | |||||||||||||||||||||
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Net interest income/ spread | $ | 27,879 | 3.58 | % | $ | 24,410 | 3.24 | % | ||||||||||||||||
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| |||||||||||||||||||||
Net interest income as a percent of average interest earning | 3.71 | % | 3.37 | % | ||||||||||||||||||||
| Average Balance Sheets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar Amount in Thousands, Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest earning assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal funds sold | $ | 62,832 | $ | 17 | 0.11 | % | $ | 18,251 | $ | 120 | 2.64 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest earning deposits | 20,278 | 61 | 1.21 | % | 18,516 | 83 | 1.80 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities - taxable | 481,552 | 2,243 | 1.87 | % | 480,036 | 3,070 | 2.57 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment securities - non-taxable (1) | 647,375 | 4,105 | 3.15 | % | 411,944 | 2,793 | 3.44 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans receivable (2) (3) | 3,900,599 | 43,918 | 4.54 | % | 3,637,927 | 47,784 | 5.29 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest earning assets | 5,112,636 | 50,344 | 4.05 | % | 4,566,674 | 53,850 | 4.81 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest earning assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 84,297 | 67,537 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (48,611) | (18,036) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 472,373 | 431,190 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total average assets | $ | 5,620,695 | $ | 5,047,365 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | $ | 3,299,661 | $ | 4,506 | 0.55 | % | $ | 3,118,821 | $ | 8,938 | 1.15 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings | 618,274 | 2,074 | 1.35 | % | 398,320 | 2,495 | 2.51 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated notes | 4,527 | 58 | 5.15 | % | — | — | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 52,835 | 710 | 5.40 | % | 53,572 | 888 | 6.65 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | 3,975,297 | 7,348 | 0.74 | % | 3,570,713 | 12,321 | 1.38 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 924,890 | 818,872 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued interest payable and other liabilities | 71,018 | 35,752 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 649,490 | 622,028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total average liabilities and stockholders' equity | $ | 5,620,695 | $ | 5,047,365 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income/spread | $ | 42,996 | 3.31 | % | $ | 41,529 | 3.43 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income as a percent of average interest earning assets (1) | 3.47 | % | 3.73 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) | Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) | Non-accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
2019.
The net interest margin increased 34 basis points from 3.43%$88.4 million for the nine-monthsix-month period ended SeptemberJune 30, 2016 to 3.77% for the same period in 2017. The increase in the margin for the nine-month period ended September 30, 20172020 when compared to the same period in 20162019.
2019.
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||||
Federal funds sold | $ | 3,857 | $ | 35 | 1.21 | % | $ | 13,812 | $ | 23 | 0.22 | % | ||||||||||||
Interest-earning deposits | 24,177 | 201 | 1.11 | % | 34,624 | 59 | 0.23 | % | ||||||||||||||||
Investment securities - taxable | 416,323 | 6,581 | 2.11 | % | 486,374 | 7,621 | 2.09 | % | ||||||||||||||||
Investment securities -non-taxable (1) | 286,007 | 5,193 | 3.39 | % | 183,142 | 3,583 | 3.63 | % | ||||||||||||||||
Loans receivable (2)(3) | 2,210,295 | 79,699 | 4.83 | % | 1,873,614 | 65,854 | 4.70 | % | ||||||||||||||||
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Total interest-earning assets (1) | 2,940,659 | 91,709 | 4.27 | % | 2,591,566 | 77,140 | 4.05 | % | ||||||||||||||||
Non-interest-earning assets | ||||||||||||||||||||||||
Cash and due from banks | 42,004 | 36,220 | ||||||||||||||||||||||
Allowance for loan losses | (15,069 | ) | (14,334 | ) | ||||||||||||||||||||
Other assets | 279,706 | 243,021 | ||||||||||||||||||||||
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| |||||||||||||||||||||
| $ | 3,247,300 | $ | 2,856,473 | |||||||||||||||||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Interest-bearing deposits | $ | 1,967,457 | $ | 5,315 | 0.36 | % | $ | 1,680,560 | $ | 4,923 | 0.39 | % | ||||||||||||
Borrowings | 357,932 | 4,028 | 1.50 | % | 438,324 | 5,608 | 1.71 | % | ||||||||||||||||
Subordinated debentures | 36,339 | 1,721 | 6.33 | % | 34,144 | 1,556 | 6.09 | % | ||||||||||||||||
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Total interest-bearing liabilities | 2,361,728 | 11,064 | 0.63 | % | 2,153,028 | 12,087 | 0.75 | % | ||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||
Demand deposits | 510,230 | 387,768 | ||||||||||||||||||||||
Accrued interest payable and other liabilities | 20,220 | 26,397 | ||||||||||||||||||||||
Stockholders’ equity | 355,121 | 289,280 | ||||||||||||||||||||||
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| |||||||||||||||||||||
| $ | 3,247,299 | $ | 2,856,473 | |||||||||||||||||||||
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| |||||||||||||||||||||
Net interest income/spread | $ | 80,645 | 3.64 | % | $ | 65,053 | 3.30 | % | ||||||||||||||||
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| |||||||||||||||||||||
Net interest income as a percent of average interest earning | 3.77 | % | 3.43 | % | ||||||||||||||||||||
| Average Balance Sheets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar Amount in Thousands, Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest earning assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal funds sold | $ | 43,903 | $ | 113 | 0.52 | % | $ | 13,072 | $ | 224 | 3.46 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest earning deposits | 23,391 | 163 | 1.40 | % | 22,414 | 191 | 1.72 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities - taxable | 491,360 | 4,943 | 2.02 | % | 464,544 | 5,980 | 2.60 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment securities - non-taxable (1) | 618,080 | 7,903 | 3.16 | % | 402,883 | 5,421 | 3.43 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans receivable (2) (3) | 3,752,654 | 88,876 | 4.78 | % | 3,346,731 | 87,407 | 5.28 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest earning assets | 4,929,388 | 101,998 | 4.25 | % | 4,249,644 | 99,223 | 4.79 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest earning assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 81,203 | 56,160 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (36,588) | (17,939) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 459,184 | 391,558 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total average assets | $ | 5,433,187 | $ | 4,679,423 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | $ | 3,262,492 | $ | 12,222 | 0.75 | % | $ | 2,818,496 | $ | 15,814 | 1.13 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings | 575,702 | 4,312 | 1.51 | % | 487,266 | 6,116 | 2.53 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debentures | 2,264 | 58 | 5.15 | % | — | — | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Junior subordinated debentures issued to capital trusts | 52,801 | 1,485 | 5.66 | % | 45,735 | 1,484 | 6.54 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | 3,893,259 | 18,077 | 0.93 | % | 3,351,497 | 23,414 | 1.41 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 820,997 | 731,556 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued interest payable and other liabilities | 63,393 | 32,508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 655,538 | 563,862 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total average liabilities and stockholders' equity | $ | 5,433,187 | $ | 4,679,423 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income/spread | $ | 83,921 | 3.32 | % | $ | 75,809 | 3.38 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income as a percent of average interest earning assets (1) | 3.51 | % | 3.68 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) | Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) | Non-accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for Loan Losses
2019
Forsuspend the nine-month period ended September 30, 2017, the provisionrequirements under GAAP for loan losses totaled $1.4 million compared to $1.2 million in the same period of 2016. The higher provision for loan losses for the nine months ended September 30, 2017 comparedmodifications related to the same period of 2016 was due to an increase in loan balances, along with additional allocations to loans originated in new markets and an increase in allocation for agricultural economic factors.
Horizon’s loan loss reserve ratio, excluding loans with credit-related purchase accounting adjustments, stood at 0.82% as of September 30, 2017. Loan loss reserves and credit-related loan discounts on acquired loansCOVID-19 pandemic that would otherwise be categorized as a percentageTDR; and (ii) to suspend any determination of totala loan modified as a result of the effects of COVID-19 pandemic as being a TDR, including impairment for accounting purposes. At June 30, 2020, the Bank modified loans was 1.24% astotaling $533.9 million which qualify for treatment under the CARES Act. The following is a summary of September 30, 2017. The table below illustrates Horizon’s loan loss reserve ratio composition as of September 30, 2017.
Non-GAAP Allowance for Loan and Lease Loss Detail
As of September 30, 2017
(Dollars in Thousands, Unaudited)
| Horizon | ||||||||||||||||||||||||||||||||||||
| Legacy | Heartland | Summit | Peoples | Kosciusko | LaPorte | CNB | Lafayette | Total | ||||||||||||||||||||||||||||
Pre-discount loan balance | $ | 1,903,322 | $ | 12,861 | $ | 44,649 | $ | 123,332 | $ | 64,450 | $ | 158,099 | $ | 7,694 | $ | 125,981 | $ | 2,440,388 | ||||||||||||||||||
Allowance for loan losses (ALLL) | 15,515 | 71 | — | — | — | — | — | — | 15,586 | |||||||||||||||||||||||||||
Loan discount | N/A | 846 | 2,365 | 2,944 | 810 | 4,036 | 206 | 3,356 | 14,563 | |||||||||||||||||||||||||||
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ALLL+ loan discount | 15,515 | 917 | 2,365 | 2,944 | 810 | 4,036 | 206 | 3,356 | 30,149 | |||||||||||||||||||||||||||
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Loans, net | $ | 1,887,807 | $ | 11,944 | $ | 42,284 | $ | 120,388 | $ | 63,640 | $ | 154,063 | $ | 7,488 | $ | 122,625 | $ | 2,410,239 | ||||||||||||||||||
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ALLL/pre-discount loan balance | 0.82 | % | 0.55 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.64 | % | ||||||||||||||||||
Loan discount/pre-discount loan balance | N/A | 6.58 | % | 5.30 | % | 2.39 | % | 1.26 | % | 2.55 | % | 2.68 | % | 2.66 | % | 0.60 | % | |||||||||||||||||||
ALLL+ loan discount/pre-discount loan balance | 0.82 | % | 7.13 | % | 5.30 | % | 2.39 | % | 1.26 | % | 2.55 | % | 2.68 | % | 2.66 | % | 1.24 | % | ||||||||||||||||||
No assurance can be given that Horizon will not, in any particular period, sustain loan losses that are significant in relationmodifications related to the amount reserved, or that subsequent evaluationsCOVID-19 pandemic by type of the loan portfolio, in light of factors then prevailing, including economic conditions and management’s ongoing quarterly assessments of the portfolio, will not require increases in the allowance for loan losses. Horizon considers the allowance for loan losses to be appropriate to cover probable incurred losses in the loan portfolio as of September 30, 2017.
Non-performing loans totaled $12.4 million as of September 30, 2017, up from $10.7 million as of December 31, 2016.Non-performing commercial, real estate and consumer loans increased by $1.0 million, $523,000 and $227,000, respectively, at September 30, 2017 compared to December 31, 2016.
loan.
| Type of Loan | # | Net Balance | Interest Accrued to Date | % of Total Modifications | % of Portfolio | |||||||||||||||||||||||||||
| Commercial | 670 | $470.8 | $1.4 | 88.2 | % | 20.1 | % | |||||||||||||||||||||||||
| Mortgage (Retained Only) | 137 | $39.1 | 0.6 | 7.3 | % | 5.3 | % | |||||||||||||||||||||||||
| Indirect Auto | 819 | $17.4 | 0.1 | 3.3 | % | 4.9 | % | |||||||||||||||||||||||||
| Consumer Direct | 133 | $3.6 | 0.1 | 0.7 | % | 5.1 | % | |||||||||||||||||||||||||
| Consumer Revolving | 48 | $3.0 | 0.0 | 0.5 | % | 1.3 | % | |||||||||||||||||||||||||
| Total | 1,807 | $533.9 | $2.2 | 100.0 | % | 14.3 | % | |||||||||||||||||||||||||
| Mortgage (Serviced Only) | 268 | |||||||||||||||||||||||||||||||
2019.
2019
| Three Months Ended | ||||||||||||||||
| September 30 | September 30 | Amount | Percent | |||||||||||||
| 2017 | 2016 | Change | Change | |||||||||||||
Non-interest Income | ||||||||||||||||
Service charges on deposit accounts | $ | 1,672 | $ | 1,605 | $ | 67 | 4.2 | % | ||||||||
Wire transfer fees | 175 | 292 | (117 | ) | -40.1 | % | ||||||||||
Interchange fees | 1,251 | 1,156 | 95 | 8.2 | % | |||||||||||
Fiduciary activities | 1,887 | 1,653 | 234 | 14.2 | % | |||||||||||
Gain on sale of investment securities | 6 | — | 6 | NM | ||||||||||||
Gain on sale of mortgage loans | 1,950 | 3,528 | (1,578 | ) | -44.7 | % | ||||||||||
Mortgage servicing net of impairment | 369 | 409 | (40 | ) | -9.8 | % | ||||||||||
Increase in cash surrender value of bank owned life insurance | 474 | 449 | 25 | 5.6 | % | |||||||||||
Other income | 237 | 226 | 11 | 4.9 | % | |||||||||||
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| |||||||||||
Totalnon-interest income | $ | 8,021 | $ | 9,318 | $ | (1,297 | ) | -13.9 | % | |||||||
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| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | Amount Change | Percent Change | ||||||||||||||||||||||||||||||||
| Non-interest Income | |||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | $ | 1,888 | $ | 2,480 | $ | (592) | (23.9) | % | |||||||||||||||||||||||||||
| Wire transfer fees | 230 | 167 | 63 | 37.7 | % | ||||||||||||||||||||||||||||||
| Interchange fees | 2,327 | 2,160 | 167 | 7.7 | % | ||||||||||||||||||||||||||||||
| Fiduciary activities | 1,765 | 2,063 | (298) | -14.4 | % | ||||||||||||||||||||||||||||||
| Gain (loss) on sale of investment securities | 248 | (100) | 348 | -348.0 | % | ||||||||||||||||||||||||||||||
| Gain on sale of mortgage loans | 6,620 | 2,078 | 4,542 | 218.6 | % | ||||||||||||||||||||||||||||||
| Mortgage servicing net of impairment | (2,760) | 570 | (3,330) | -584.2 | % | ||||||||||||||||||||||||||||||
| Increase in cash surrender value of bank owned life insurance | 557 | 555 | 2 | 0.4 | % | ||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance | — | 367 | (367) | 0.0 | % | ||||||||||||||||||||||||||||||
| Other income | 250 | 558 | (308) | (55.2) | % | ||||||||||||||||||||||||||||||
| Total non-interest income | $ | 11,125 | $ | 10,898 | $ | 227 | 2.1 | % | |||||||||||||||||||||||||||
fiduciary activities decreased $592,000, $367,000, $308,000 and $298,000, respectively, when comparing the second quarter of 2020 to the same period of 2019.
| Nine Months Ended | ||||||||||||||||
| September 30 | September 30 | Amount | Percent | |||||||||||||
| 2017 | 2016 | Change | Change | |||||||||||||
Non-interest Income | ||||||||||||||||
Service charges on deposit accounts | $ | 4,638 | $ | 4,310 | $ | 328 | 7.6 | % | ||||||||
Wire transfer fees | 503 | 588 | (85 | ) | -14.5 | % | ||||||||||
Interchange fees | 3,809 | 3,065 | 744 | 24.3 | % | |||||||||||
Fiduciary activities | 5,752 | 4,753 | 999 | 21.0 | % | |||||||||||
Gain on sale of investment securities | 38 | 875 | (837 | ) | -95.7 | % | ||||||||||
Gain on sale of mortgage loans | 5,918 | 9,171 | (3,253 | ) | -35.5 | % | ||||||||||
Mortgage servicing net of impairment | 1,175 | 1,356 | (181 | ) | -13.3 | % | ||||||||||
Increase in cash surrender value of bank owned life insurance | 1,346 | 1,145 | 201 | 17.6 | % | |||||||||||
Other income | 613 | 708 | (95 | ) | -13.4 | % | ||||||||||
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Totalnon-interest income | $ | 23,792 | $ | 25,971 | $ | (2,179 | ) | -8.4 | % | |||||||
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| |||||||||||
| Six Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2020 | June 30, 2019 | Amount Change | Percent Change | ||||||||||||||||||||||||||||||||
| Non-interest Income | |||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | $ | 4,334 | $ | 4,357 | $ | (23) | (0.5) | % | |||||||||||||||||||||||||||
| Wire transfer fees | 401 | 285 | 116 | 40.7 | % | ||||||||||||||||||||||||||||||
| Interchange fees | 4,223 | 3,521 | 702 | 19.9 | % | ||||||||||||||||||||||||||||||
| Fiduciary activities | 4,293 | 4,152 | 141 | 3.4 | % | ||||||||||||||||||||||||||||||
| Gain on sale of investment securities | 587 | (85) | 672 | -790.6 | % | ||||||||||||||||||||||||||||||
| Gain on sale of mortgage loans | 10,093 | 3,387 | 6,706 | 198.0 | % | ||||||||||||||||||||||||||||||
| Mortgage servicing net of impairment | (2,735) | 1,176 | (3,911) | -332.6 | % | ||||||||||||||||||||||||||||||
| Increase in cash surrender value of bank owned life insurance | 1,111 | 1,068 | 43 | 4.0 | % | ||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance | 233 | 367 | (134) | (36.5) | % | ||||||||||||||||||||||||||||||
| Other income | 648 | 1,382 | (734) | (53.1) | % | ||||||||||||||||||||||||||||||
| Total non-interest income | $ | 23,188 | $ | 19,610 | $ | 3,578 | 18.2 | % | |||||||||||||||||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
gains to capital without negatively impacting loan-term earnings.2019. Residential mortgage loan activity during the first nine monthssix-month period ended June 30, 2020 generated $10.1 million of 2017 generated $5.9 millionincome from the gain on sale of mortgage loans, down $3.3up from $3.4 million fromfor the same period in 2016. The decrease in the gain on sale of mortgage loans was2019 due to a decreasehigher volume of loans sold and an increase in the volumepercentage gain on loans sold. Mortgage servicing rights, net of mortgage loans sold from $236.7impairment, decreased $3.9 million induring the first nine months of 2016six-month period ended June 30, 2020 compared to $163.9 million in the same period of 2017.
2019 primarily due to an impairment charge of $2.9 million recorded during the second quarter of 2020.
| Three Months Ended | ||||||||||||||||
| September 30 | September 30 | Amount | Percent | |||||||||||||
| 2017 | 2016 | Change | Change | |||||||||||||
Non-interest expense | ||||||||||||||||
Salaries | $ | 9,245 | $ | 8,349 | $ | 896 | 10.7 | % | ||||||||
Commission and bonuses | 1,413 | 1,799 | (386 | ) | -21.5 | % | ||||||||||
Employee benefits | 2,253 | 2,062 | 191 | 9.3 | % | |||||||||||
Net occupancy expenses | 2,400 | 2,174 | 226 | 10.4 | % | |||||||||||
Data processing | 1,502 | 1,616 | (114 | ) | -7.1 | % | ||||||||||
Professional fees | 649 | 612 | 37 | 6.0 | % | |||||||||||
Outside services and consultants | 2,504 | 2,686 | (182 | ) | -6.8 | % | ||||||||||
Loan expense | 1,215 | 1,482 | (267 | ) | -18.0 | % | ||||||||||
FDIC deposit insurance | 270 | 465 | (195 | ) | -41.9 | % | ||||||||||
Other losses | 58 | 107 | (49 | ) | -45.8 | % | ||||||||||
Other expense | 3,004 | 2,730 | 274 | 10.0 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Totalnon-interest expense | $ | 24,513 | $ | 24,082 | $ | 431 | 1.8 | % | ||||||||
|
|
|
|
|
| |||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2020 | June 30, 2019 | Adjusted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | Merger Expenses | Adjusted | Actual | Merger Expenses | Adjusted | Amount Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest Expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 15,629 | $ | — | $ | 15,629 | $ | 16,951 | $ | (482) | $ | 16,469 | $ | (840) | (5.1) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net occupancy expenses | 3,190 | — | 3,190 | 3,148 | (75) | 3,073 | 117 | 3.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Data processing | 2,432 | — | 2,432 | 2,139 | (68) | 2,071 | 361 | 17.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | 518 | — | 518 | 598 | (153) | 445 | 73 | 16.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outside services and consultants | 1,759 | — | 1,759 | 1,655 | (176) | 1,479 | 280 | 18.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan expense | 2,692 | — | 2,692 | 2,048 | (2) | 2,046 | 646 | 31.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FDIC deposit insurance | 235 | — | 235 | 365 | — | 365 | (130) | -35.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other losses | 193 | — | 193 | 169 | (69) | 100 | 93 | 93.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expenses | 3,784 | — | 3,784 | 4,511 | (507) | 4,004 | (220) | (5.5) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | $ | 30,432 | $ | — | $ | 30,432 | $ | 31,584 | $ | (1,532) | $ | 30,052 | $ | 380 | 1.3 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annualized Non-interest Exp. to Avg. Assets | 2.18 | % | 2.18 | % | 2.51 | % | 2.39 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2020 | June 30, 2019 | Adjusted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | Merger Expenses | Adjusted | Actual | Merger Expenses | Adjusted | Amount Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest Expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 32,220 | $ | — | $ | 32,220 | $ | 31,417 | $ | (484) | $ | 30,933 | $ | 1,287 | 4.2 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net occupancy expenses | 6,442 | — | 6,442 | 5,920 | (75) | 5,845 | 597 | 10.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Data processing | 4,837 | — | 4,837 | 4,105 | (360) | 3,745 | 1,092 | 29.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | 1,054 | — | 1,054 | 1,091 | (392) | 699 | 355 | 50.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outside services and consultants | 3,674 | — | 3,674 | 5,185 | (2,466) | 2,719 | 955 | 35.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan expense | 4,791 | — | 4,791 | 3,997 | (2) | 3,995 | 796 | 19.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FDIC deposit insurance | 385 | — | 385 | 525 | — | 525 | (140) | -26.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other losses | 313 | — | 313 | 273 | (71) | 202 | 111 | 55.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expenses | 7,865 | — | 7,865 | 8,809 | (1,800) | 7,009 | 856 | 12.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | $ | 61,581 | $ | — | $ | 61,581 | $ | 61,322 | $ | (5,650) | $ | 55,672 | $ | 5,909 | 10.6 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annualized Non-interest Exp. to Avg. Assets | 2.28 | % | 2.28 | % | 2.64 | % | 2.40 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
The following is a summary of changes innon-interest expense (table dollar amounts in thousands):
| Nine Months Ended | ||||||||||||||||
| September 30 | September 30 | Amount | Percent | |||||||||||||
| 2017 | 2016 | Change | Change | |||||||||||||
Non-interest Expense | ||||||||||||||||
Salaries | $ | 26,867 | $ | 22,485 | $ | 4,382 | 19.5 | % | ||||||||
Commission and bonuses | 3,863 | 4,064 | (201 | ) | -4.9 | % | ||||||||||
Employee benefits | 6,356 | 6,043 | 313 | 5.2 | % | |||||||||||
Net occupancy expenses | 7,048 | 6,011 | 1,037 | 17.3 | % | |||||||||||
Data processing | 4,311 | 3,855 | 456 | 11.8 | % | |||||||||||
Professional fees | 1,797 | 2,190 | (393 | ) | -17.9 | % | ||||||||||
Outside services and consultants | 4,991 | 5,983 | (992 | ) | -16.6 | % | ||||||||||
Loan expense | 3,572 | 4,086 | (514 | ) | -12.6 | % | ||||||||||
FDIC deposit insurance | 776 | 1,279 | (503 | ) | -39.3 | % | ||||||||||
Other losses | 186 | 510 | (324 | ) | -63.5 | % | ||||||||||
Other expense | 8,755 | 9,616 | (861 | ) | -9.0 | % | ||||||||||
|
|
|
|
|
| |||||||||||
Totalnon-interest expense | $ | 68,522 | $ | 66,122 | $ | 2,400 | 3.6 | % | ||||||||
|
|
|
|
|
| |||||||||||
Totalnon-interest expense was $2.4totaled $3.6 million higher for the nine monthssix-month period ended SeptemberJune 30, 2017 compared to the same period of 2016. Excluding merger-related expenses of $2.2 million and $5.5 million recorded during the nine months of September 30, 2017 and 2016, respectively, totalnon-interest expense increased $5.7 million, or 9.3%. Salaries increased by $4.4 million due to a larger employee base. Net occupancy expenses increased $1.0 million due to Horizon’s investment in growth markets and the Kosciusko, LaPorte Bancorp, CNB and Lafayette acquisitions. Data processing expenses increased $456,000 primarily due to company growth. Outside services and consultants, professional fees and other expenses decreased $992,000, $393,000 and $861,000, respectively, for the nine months ended September 30, 2017 compared to the same period of 2016 primarily due toone-time expenses related to the Kosciusko and LaPorte Bancorp acquisitions. FDIC deposit insurance expense was $503,000 lower for the first nine months of 2017 when compared to the same period in 2016 as the assessment rate schedule was reduced effective for assessment payments due in the fourth quarter of 2016 and in 2017. Other losses decreased $324,000 for the nine months ended September 30, 2017 when compared to the same period in 2016, primarily due to2020, a decrease in debit card related expense. Loan expense decreased $514,000 as loan collection expenses were lower during the first nine months of 2017$1.8 million when compared to the same period of 2016.
Income Taxes
Income tax expense for the third quarter of 2017 was $2.5 million compared to $2.6 million for the same period of 2016. The effective tax rate for the third quarter of 2017 was 23.5% compared to 28.2% in the same period of 2016.2019. The decrease in the effectiveincome tax rate for the third quarter of 2017expense was primarily due to tax benefits related to the exercise of stock options.
Income tax expense for the nine months ended September 30, 2017 was $9.1 million compared to $7.2 million for the same period of 2016. The effective tax rate for the first nine months of 2017 was 26.3% compared to 28.2% in the same period of 2016. Thea decrease in the effective tax rate for the nine months ended September 30, 2017 was primarily dueincome before taxes of $3.0 million in addition to tax benefits related to the exercise of stock options.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
an increase in tax-exempt municipal interest income.
December 31, 2019.
On February 1, 2016, the Company paid off the $12.5 million in funds received through the Small Business Lending Fund with cash from the holding company, thereby ending its participation in the program, pursuant to which it issued preferred stock to the US Treasury. The funds were paid off due to an increase in the dividend cost that would have gone in effect at the end of February 2016.
accumulated other comprehensive income.
HORIZON BANCORP AND SUBSIDIARIES
Management’s Discussion and Analysis2019.
And Results of Operations
For the Three and Nine Months ended September 30, 2017 and 2016
Use ofNon-GAAP Financial Measures
Non-GAAP Reconciliation See the tables and other information below and contained elsewhere in this Report on Form 10-Q for reconciliations of Net Interest Margin
(Dollars in Thousands, Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30 | June 30 | September 30 | September 30 | |||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Net Interest Margin As Reported | ||||||||||||||||||||
Net interest income | $ | 27,879 | $ | 27,198 | $ | 24,410 | $ | 80,645 | $ | 65,053 | ||||||||||
Average interest-earning assets | 3,078,611 | 2,943,627 | 2,957,944 | 2,940,659 | 2,591,566 | |||||||||||||||
Net interest income as a percent of average interest-earning assets (“Net Interest Margin”) | 3.71 | % | 3.84 | % | 3.37 | % | 3.77 | % | 3.43 | % | ||||||||||
Impact of Acquisitions | ||||||||||||||||||||
Interest income from acquisition-related purchase accounting adjustments | $ | (661 | ) | $ | (939 | ) | $ | (459 | ) | $ | (2,616 | ) | $ | (1,404 | ) | |||||
Excluding Impact of Prepayment Penalties and Acquisitions | ||||||||||||||||||||
Net interest income | $ | 27,218 | $ | 26,259 | $ | 23,951 | $ | 78,029 | $ | 63,649 | ||||||||||
Average interest-earning assets | 3,078,611 | 2,943,627 | 2,957,944 | 2,940,659 | 2,591,566 | |||||||||||||||
Core Net Interest Margin | 3.63 | % | 3.71 | % | 3.31 | % | 3.65 | % | 3.36 | % | ||||||||||
the non-GAAP figures identified herein and their most comparable GAAP measures.
Non-GAAP Reconciliation2019
| Non-GAAP Reconciliation of Net Income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income as reported | $ | 14,639 | $ | 11,655 | $ | 18,543 | $ | 20,537 | $ | 16,642 | $ | 26,294 | $ | 27,458 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | — | — | — | — | 1,532 | — | 5,650 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | — | — | — | — | (295) | — | (987) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income excluding merger expenses | 14,639 | 11,655 | 18,543 | 20,537 | 17,879 | 26,294 | 32,121 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain)/loss on sale of investment securities | (248) | (339) | (10) | — | 100 | (587) | 85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | 52 | 71 | 2 | — | (21) | 123 | (18) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income excluding (gain)/loss on sale of investment securities | 14,443 | 11,387 | 18,535 | 20,537 | 17,958 | 25,830 | 32,188 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance (“BOLI”) | — | (233) | — | (213) | (367) | (233) | (367) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income excluding death benefit on BOLI | 14,443 | 11,154 | 18,535 | 20,324 | 17,591 | 25,597 | 31,821 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income | $ | 14,443 | $ | 11,154 | $ | 18,535 | $ | 20,324 | $ | 17,591 | $ | 25,597 | $ | 31,821 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP Reconciliation2019
| Non-GAAP Reconciliation of Diluted Earnings per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted earnings per share (“EPS”) as reported | $ | 0.33 | $ | 0.26 | $ | 0.41 | $ | 0.46 | $ | 0.37 | $ | 0.59 | $ | 0.65 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | — | — | — | — | 0.03 | — | 0.13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | — | — | — | — | — | — | (0.02) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS excluding merger expenses | 0.33 | 0.26 | 0.41 | 0.46 | 0.40 | 0.59 | 0.76 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain)/loss on sale of investment securities | (0.01) | (0.01) | — | — | — | (0.01) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS excluding (gain)/loss on investment securities | 0.32 | 0.25 | 0.41 | 0.46 | 0.40 | 0.58 | 0.76 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Death benefit on BOLI | — | (0.01) | — | (0.01) | (0.01) | (0.01) | (0.01) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS excluding death benefit on BOLI | 0.32 | 0.24 | 0.41 | 0.45 | 0.39 | 0.57 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Diluted EPS | $ | 0.32 | $ | 0.24 | $ | 0.41 | $ | 0.45 | $ | 0.39 | $ | 0.57 | $ | 0.75 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Pre-Tax, Pre-Provision Net Income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax income | $ | 16,632 | $ | 13,239 | $ | 22,463 | $ | 24,541 | $ | 19,947 | $ | 29,871 | $ | 32,837 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit loss expense | 7,057 | 8,600 | 340 | 376 | 896 | 15,657 | 1,260 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax, pre-provision net income | $ | 23,689 | $ | 21,839 | $ | 22,803 | $ | 24,917 | $ | 20,843 | $ | 45,528 | $ | 34,097 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax, pre-provision net income | $ | 23,689 | $ | 21,839 | $ | 22,803 | $ | 24,917 | $ | 20,843 | $ | 45,528 | $ | 34,097 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | — | — | — | — | 1,532 | — | 5,650 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain)/loss on sale of investment securities | (248) | (339) | (10) | — | 100 | (587) | 85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance | — | (233) | — | (213) | (367) | (233) | (367) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted pre-tax, pre-provision net income | $ | 23,441 | $ | 21,267 | $ | 22,793 | $ | 24,704 | $ | 22,108 | $ | 44,708 | $ | 39,465 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quantitative
Analysis of Financial Condition
| Non-GAAP Reconciliation of Net Interest Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income as reported | $ | 42,996 | $ | 40,925 | $ | 41,519 | $ | 43,463 | $ | 41,529 | $ | 83,921 | $ | 75,809 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average interest earning assets | 5,112,636 | 4,746,202 | 4,748,217 | 4,623,985 | 4,566,674 | 4,929,388 | 4,249,644 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) | 3.47 | % | 3.56 | % | 3.58 | % | 3.82 | % | 3.73 | % | 3.51 | % | 3.68 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income as reported | $ | 42,996 | $ | 40,925 | $ | 41,519 | $ | 43,463 | $ | 41,529 | $ | 83,921 | $ | 75,809 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related purchase accounting adjustments (“PAUs”) | (1,553) | (1,434) | (1,042) | (1,739) | (1,299) | (2,987) | (2,809) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted net interest income | $ | 41,443 | $ | 39,491 | $ | 40,477 | $ | 41,724 | $ | 40,230 | $ | 80,934 | $ | 73,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted net interest margin | 3.35 | % | 3.44 | % | 3.49 | % | 3.67 | % | 3.61 | % | 3.39 | % | 3.55 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands Except per Share Data, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total stockholders' equity | $ | 652,206 | $ | 630,842 | $ | 656,023 | $ | 642,711 | $ | 626,461 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Intangible assets | 176,020 | 176,961 | 177,917 | 178,896 | 179,776 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total tangible stockholders' equity | $ | 476,186 | $ | 453,881 | $ | 478,106 | $ | 463,815 | $ | 446,685 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares outstanding | 43,821,878 | 43,763,623 | 44,975,771 | 44,969,021 | 45,061,372 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Book value per common share | $ | 14.88 | $ | 14.41 | $ | 14.59 | $ | 14.29 | $ | 13.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tangible book value per common share | $ | 10.87 | $ | 10.37 | $ | 10.63 | $ | 10.31 | $ | 9.91 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Calculation of Efficiency Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense as reported | $ | 30,432 | $ | 31,149 | $ | 30,650 | $ | 30,060 | $ | 31,584 | $ | 61,581 | $ | 61,322 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income as reported | 42,996 | 40,925 | 41,519 | 43,463 | 41,529 | 83,921 | 75,809 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income as reported | $ | 11,125 | $ | 12,063 | $ | 11,934 | $ | 11,514 | $ | 10,898 | $ | 23,188 | $ | 19,610 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense/(Net interest income + Non-interest income) ("Efficiency Ratio") | 56.23 | % | 58.79 | % | 57.34 | % | 54.68 | % | 60.24 | % | 57.49 | % | 64.27 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Adjusted Efficiency Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense as reported | $ | 30,432 | $ | 31,149 | $ | 30,650 | $ | 30,060 | $ | 31,584 | $ | 61,581 | $ | 61,322 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | — | — | — | — | (1,532) | — | (5,650) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense excluding merger expenses | 30,432 | 31,149 | 30,650 | 30,060 | 30,052 | 61,581 | 55,672 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income as reported | 42,996 | 40,925 | 41,519 | 43,463 | 41,529 | 83,921 | 75,809 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income as reported | 11,125 | 12,063 | 11,934 | 11,514 | 10,898 | 23,188 | 19,610 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain)/loss on sale of investment securities | (248) | (339) | (10) | — | 100 | (587) | 85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | — | (233) | — | (213) | (367) | (233) | (367) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income excluding (gain)/loss on sale of investment securities and death benefit on BOLI | $ | 10,877 | $ | 11,491 | $ | 11,924 | $ | 11,301 | $ | 10,631 | $ | 22,368 | $ | 19,328 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted efficiency ratio | 56.49 | % | 59.43 | % | 57.35 | % | 54.89 | % | 57.62 | % | 57.94 | % | 58.52 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Return on Average Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Return on Average Assets | June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average assets | $ | 5,620,695 | $ | 5,257,332 | $ | 5,250,574 | $ | 5,107,259 | $ | 5,047,365 | $ | 5,433,187 | $ | 4,679,423 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Return on average assets ("ROAA") as reported | 1.05 | % | 0.89 | % | 1.40 | % | 1.60 | % | 1.32 | % | 0.97 | % | 1.18 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | — | — | — | — | 0.12 | — | 0.24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | — | — | — | — | (0.02) | — | (0.04) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ROAA excluding merger expenses | 1.05 | 0.89 | 1.40 | 1.60 | 1.42 | 0.97 | 1.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain)/loss on sale of investment securities | (0.02) | (0.03) | — | — | 0.01 | (0.02) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | — | 0.01 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ROAA excluding (gain)/loss on sale of investment securities | 1.03 | 0.87 | 1.40 | 1.60 | 1.43 | 0.95 | 1.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | — | (0.02) | — | (0.02) | (0.03) | (0.01) | (0.02) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ROAA excluding death benefit on BOLI | 1.03 | 0.85 | 1.40 | 1.58 | 1.40 | 0.94 | 1.36 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted ROAA | 1.03 | % | 0.85 | % | 1.40 | % | 1.58 | % | 1.40 | % | 0.94 | % | 1.36 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Return on Average Common Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Reconciliation of Return on Average Common Equity | June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average common equity | $ | 649,490 | $ | 667,588 | $ | 653,071 | $ | 640,770 | $ | 622,028 | $ | 655,538 | $ | 563,862 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Return on average common equity ("ROACE") as reported | 9.07 | % | 7.02 | % | 11.26 | % | 12.72 | % | 10.73 | % | 8.07 | % | 9.82 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | — | — | — | — | 0.99 | — | 2.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | — | — | — | — | (0.19) | — | (0.35) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ROACE excluding merger expenses | 9.07 | 7.02 | 11.26 | 12.72 | 11.53 | 8.07 | 11.49 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain)/loss on sale of investment securities | (0.15) | (0.20) | (0.01) | — | 0.06 | (0.18) | 0.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax effect | 0.03 | 0.04 | — | — | (0.01) | 0.04 | (0.01) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ROACE excluding (gain)/loss on sale of investment securities | 8.95 | 6.86 | 11.25 | 12.72 | 11.58 | 7.93 | 11.51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | — | (0.14) | — | (0.13) | (0.24) | (0.07) | (0.13) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ROACE excluding death benefit on BOLI | 8.95 | 6.72 | 11.25 | 12.59 | 11.34 | 7.86 | 11.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted ROACE | 8.95 | % | 6.72 | % | 11.25 | % | 12.59 | % | 11.34 | % | 7.86 | % | 11.38 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ofof Disclosure Controls Andand ProceduresSeptemberJune 30, 2017,2020, Horizon’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Horizon’s disclosure controls (as defined in Exchange Act Rule13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on such evaluation, such officers have concluded that, as of the evaluation date, Horizon’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by Horizon in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time specified in Securities and Exchange Commission rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure.Inin Internal Control Over Financial ReportingHorizon’s management, including its Chief Executive OfficerChief Financial Officer, also have concluded that duringcontrols over the fiscal quarter ended September 30, 2017,estimation of the allowance for credit losses to support the adoption of ASU 2016-13. Many controls under this new standard mirror controls under the prior GAAP methodology. New controls were established over the review of economic forecasting projections obtained from independent third parties. Except as related to the adoption of ASU 2016-13, there have beenwere no changes in Horizon’sour internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, Horizon’sour internal control over financial reporting.For the Three and Nine Months ended September 30, 2017 and 2016ITEM 1.LEGAL PROCEEDINGS
There have been no material changes from
For the Three and Nine Months ended September 30, 2017 and 2016
(a) Exhibits
| Exhibit No. | Description | |||||||
| Incorporated by reference to Exhibit 1.1 to Registrant's Form 8-K filed on June 18, 2020 | ||||||||
| 4.1 | Incorporated by reference to Exhibit 4.1 to Registrant's Form 8-K filed on June 24, 2020 | |||||||
| 4.2 | Incorporated by reference to Exhibit 4.2 to Registrant's Form 8-K filed on June 24, 2020 | |||||||
| 31.1 | Attached | |||||||
| 31.2 | ||||||||
| Attached | ||||||||
| 32 | ||||||||
| Attached | ||||||||
| 101 | ||||||||
| Inline Interactive Data Files | Attached | |||||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, has been formatted in Inline XBRL | Within the Inline XBRL document | ||||||
HORIZON BANCORP
| ||||||||||||
| HORIZON BANCORP, INC. | ||||||||||||
| August 4, 2020 | /s/ Craig M. Dwight | |||||||||||
| Date | Craig M. Dwight | |||||||||||
| Chief Executive Officer | ||||||||||||
/s/ Mark E. Secor | ||||||||||||
| Date | Mark E. Secor | |||||||||||
| Chief Financial Officer | ||||||||||||
72