Note 2 – ~~Acquisitions~~

~~Kosciusko Financial, Inc.~~

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 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. The Company has had approximately $1.6 million in costs related to the acquisition. These expenses are classified in the~~non-interest~~ expense section of the income statement and primarily located in the salaries and employee benefits, professional services and other expense line items. As a result of the acquisition, the Company was able to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

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 Kosciusko acquisition is detailed in the following table. The final valuation numbers were received in September 2016 which changed the goodwill estimate from $6.9 million to $6.4 million.

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

~~HORIZON BANCORP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

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

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.

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 as~~past-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 (ASC310-30)~~ 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.

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 the acquired loans that are accounted for 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 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.

~~HORIZON BANCORP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~LaPorte Bancorp, Inc.~~

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 Bancorp 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, less the consideration used to pay off LaPorte’s ESOP loan receivable, the transaction has an implied valuation of approximately $98.6 million. The Company has had approximately $4.0 million in costs related to the acquisition. These expenses are classified in the~~non-interest~~ expense section of the income statement and primarily located in the salaries and employee benefits, professional services and other expense line items. As a result of the acquisition, the Company was able to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

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 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

~~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 outstanding 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. The Company has had approximately $1.5 million in costs

~~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 based 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 which is not indicative of the fair value of Horizon’s equity ownership interest immediately preceding 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 as 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

⁽¹⁾	~~This includes $955,000 of common shares previously held by Horizon.~~

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.

~~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 ASC~~310-30.~~

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 of cash flows to be collected.

The results of operations of Lafayette, CNB, LaPorte Bancorp and Kosciusko have been included in the Company’s consolidated financial statements since the acquisition dates. The following schedule includes~~pro-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 occurred as of the beginning of the comparable prior reporting periods.

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 indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended 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”) 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 immediately 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 on 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

Non–performing Loans ~~Acquired in a Transfer~~

The Company acquired loans in acquisitions and the transferred loans had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

~~The carrying amounts of those loans included in the balance sheet amounts of loans receivable are as follows:~~

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

~~Accretable yield, or income expected to be collected for the nine months ended September 30, is as follows:~~

   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

~~During the nine months ended September 30, 2017 and 2016, the Company increased the allowance for loan losses on purchased loans by a charge to the income statement of $71,000 and $0, respectively.~~

~~HORIZON BANCORP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~Note 6 – Allowance for Loan Losses~~

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior one to five years. Management believes the five-year historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed. The actual allowance for loan loss activity is provided below.

   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

~~HORIZON BANCORP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

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

Certain loans are individually evaluated for impairment, and the Company’s general practice is to proactively charge down impaired loans to the fair value, which is the appraised value less estimated selling costs, of the underlying collateral.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

~~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 uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial~~charge-off~~ ~~is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.~~

~~The Companycharges-off1-4~~ family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down or specific allocation of~~1-4~~ family first and junior lien mortgages to the net realizable value less costs to sell when the value is known but no later than when a loan is 180 days past due. Pursuant to such guidelines, the Company also~~charges-off~~ ~~unsecuredopen-end~~ loans when the loan is contractually 90 days past due, and charges down to the net realizable value other secured loans when they are contractually 90 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection in full will occur regardless of delinquency status, are not charged off.

~~HORIZON BANCORP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

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

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 and~~not-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.

•Earned net income 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.~~

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 received in the transaction, representing the deposit balances assumed at closing, net 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 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:~~

~~Net income for the third quarter of 2017 increased 23.8% to $8.2~~$20.4 million, or ~~$0.36~~$0.46 diluted earnings per share, compared to ~~$6.6~~$21.9 million, or ~~$0.30~~$0.50 diluted earnings per share, for the ~~third~~fourth quarter of ~~2016.~~

~~Net income, excluding acquisition-related expenses, gain on sale of investment securities~~2020 and ~~purchase accounting adjustments (“core net income”), for the third quarter of 2017 increased 10.3% to $9.2~~$11.7 million, or ~~$0.41 diluted earnings per share compared to $8.4 million or $0.39~~$0.26 diluted earnings per share, for the ~~same period~~first quarter of ~~2016.~~2020.

~~Net~~

•Pre–tax, pre–provision net income totaled a first–quarter record $24.2 million, compared to $26.9 million for the fourth quarter of 2020 and $21.8 million for the first ~~nine~~three months of ~~2017~~2020. This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense. (See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income” table below.)

•Non–interest expense was ~~$25.5~~$32.2 million in the quarter, or 2.20% of average assets on an annualized basis, compared to $36.5 million, or ~~$1.13 diluted earnings per share~~2.47%, in the fourth quarter of 2020 and $31.1 million, or 2.38%, in the first quarter of 2020.

•The efficiency ratio for the period was 57.03% compared to ~~$18.3 million or $0.94 diluted earnings per share~~57.54% for the ~~same~~fourth quarter of 2020 and 58.79% for the first quarter of 2020. The adjusted efficiency ratio was 57.97% compared to 56.48% for the fourth quarter of 2020 and 59.43% for the first quarter of 2020. (See the “Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below.)

•Following record residential lending last year and during what has historically been its seasonally lightest volume quarter, mortgage–related non–interest income remained strong in the first three months of 2021, with gain on mortgage loan sales of $5.3 million and net mortgage servicing income of $213,000. The bank originated $155.6 million in mortgage loans during the quarter, with 65% of volume from refinances, as Horizon continued to focus residential lending on prime borrowers in Indiana and Michigan markets.

•Net interest income was $42.5 million for the quarter, compared to $43.6 million for the fourth quarter of 2020 and $40.9 million for the first quarter of 2020. First quarter 2021 net interest income remained relatively stable in the current environment, given previously disclosed initiatives to optimize returns on earning assets, including increasing investment securities to 23.5% of assets from 22.1% in the fourth quarter of 2020 and 20.6% in the first quarter of 2020.

•Reported net interest margin (“NIM”) of 3.29% and adjusted NIM of 3.17%, with reported NIM declining by 5 basis points and adjusted NIM decreasing by 27 basis points from the fourth quarter of 2020. (See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this non–GAAP calculation.) An estimated 10 basis points attributed to Federal Paycheck Protection Program (“PPP”) lending improved the margin, offset by an estimated 16 basis point compression attributed to excess liquidity held during the quarter, for both NIM and adjusted NIM.

•Horizon’s in–market consumer and commercial deposit relationships, combined with strategic pricing moves to manage deposit growth and runoff of higher–priced time deposits, contributed to continued improvement in the cost of interest bearing liabilities, which declined to 0.50% in the quarter, compared to 0.94% in the fourth quarter of 2020 and 1.13% in the first quarter of 2020.

•Increased the allowance for credit losses (“ACL”) 0.3% year–to–date to $57.2 million at period end, representing 1.56% of total loans, reflecting implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in ~~2016.~~the Company’s general reserves.

•COVID–19 deferral levels improved to 2.5% of total loans at period end, compared to 3.3% on December 31, 2020, and the bank experienced no material specific loan losses attributable to COVID–19 closures.

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

2020

~~Core~~•Maintained solid asset quality metrics at period end, including non–performing loans declining 6.5% during the quarter to $25.1 million, or 0.68% of total loans, and substandard loans declining 12.5% to $86.5 million, or 2.4% of total loans, while net ~~income~~charge–offs remained unchanged at 0.01% of average loans for the ~~first nine months~~period.

•Loans excluding PPP lending totaled $3.42 billion on March 31, 2021, reflecting Horizon’s successful efforts to secure payoffs of ~~2017 increased 22.5%~~loans previously classified as substandard, as well as cash reserves maintained by many current and prospective commercial borrowers and retail households through the quarter. Loans excluding PPP lending totaled $3.67 billion on December 31, 2020 and $3.71 billion on March 31, 2020.

•Horizon announced an 8.3% increase in its quarterly cash dividend in March to ~~$25.4 million or $1.13 diluted earnings~~$0.13 per share, ~~compared~~paying uninterrupted dividends for over 30 years. As of March 31, 2021, in excess of $127 million in cash was maintained at the holding company, providing considerable future optionality to ~~$20.7~~build shareholder value.

•Horizon opened a new full–service branch on March 31, 2021 in Gary to improve access to financial services in this Northwest Indiana community.

Coronavirus Update/Status

The coronavirus (“COVID–19”) pandemic has placed significant health, economic and other major pressure throughout the communities we serve, in the states of Indiana and Michigan, the United States and the entire world. We have implemented a number of procedures in response to the pandemic to support the safety and well–being of our employees, customers and shareholders that continue through the date of this report:

•Employees

◦Safety and well–being of employees and families is our first priority.

◦Installed sneeze guards, customer directional signage, implemented mask requirements, and continuing with sanitizing and social distancing protocols.

◦Substantial reduction in percentage of employees working remotely.

•Consumers

◦100% of our branch locations are now open to lobby traffic.

◦Payment relief

▪Approximately $2 million ~~or $1.07 diluted earnings per share for~~consumer and mortgage loans have been modified as of March 31, 2021, down from $6 million as of December 31, 2020 and $63 million as of June 30, 2020.

▪Continued to provide new loans to qualified applicants.

▪Provided mortgage loan education programs.

▪Provided additional financial assistance in the ~~same period~~form of ~~2016.~~

~~Return~~fee waivers and a freeze on ~~average assets was 0.96% for the third quarter of 2017 compared to 0.80% for the same period~~all debt collection activities.

•Businesses

◦Preferred SBA Lender

▪Active participant in ~~2016.~~

~~Return on average assets, excluding acquisition-related expenses, gain on sale of investment securities~~all SBA loan programs (PPP, 7a, Express and ~~purchase accounting adjustments (“core return on average assets”), for the third quarter of 2017 was 1.09% compared to 1.02% for the same period of 2016.~~504).

~~Commercial loans, excluding acquired~~◦Payment Relief Programs

▪Approximately $89 million in commercial loans ~~increased by an annualized rate~~with payment extensions as of ~~12.8%, or $103.1~~March 31, 2021, down from $121 million ~~during the first nine months~~as of ~~2017.~~

~~Consumer loans, excluding acquired consumer loans, increased by an annualized rate of 27.2%, or $81.2 million, during the first nine months of 2017.~~

~~Total loans, excluding acquired loans, increased by an annualized rate of 9.2%, or $147.7 million, during the first nine months of 2017.~~

~~Net interest income for the third quarter of 2017 increased $3.5 million, or 14.2%, compared to the same period in 2016.~~

Net interest margin was 3.71% for the third quarter of 2017 compared to 3.84% for the prior quarter and 3.37% for the third quarter of 2016. The improvement in net interest margin from the prior year was due to Horizon executing a strategy to reduce expensive funding costs in the fourth quarter of 2016, an increase in average interest-earning assets and an increase in loan yields.

Net interest margin, excluding the impact of purchase accounting adjustments (“core net interest margin”), was 3.63% for the third quarter of 2017 compared to 3.71% for the prior quarter and 3.31% for the same period in 2016.

~~Horizon’s tangible book value per share rose to $12.38 at September 30, 2017, compared to $11.48 at~~ December 31, ~~2016.~~2020 and $470 million as of June 30, 2020.

~~On September 1, 2017, Horizon closed~~▪Processed and received approval for 3,807 PPP loans, funding approximately $441.8 million.

▪As of March 31, 2021, $185.7 million of PPP loans had been forgiven.

•Communities

◦Increased volunteerism in support of local not–for–profit entities.

◦Contributed over $300,000 during 2020 to COVID–19 related not–for–profit efforts (local food banks, United Way, housing).

◦Participated in community conference calls related to COVID–19.

◦Partnered with local neighborhood housing partnerships to provide funding for low to moderate income families.

◦Partnered with local Certified Development Corporations to provide capital to small businesses.

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the ~~acquisition~~Three Months ended March 31, 2021 and 2020

Financial Summary


	For the Three Months Ended
	March 31,			December 31,			March 31,
Net Interest Income and Net Interest Margin	2021			2020			2020
Net interest income	$	42,538		$	43,622		$	40,925
Net interest margin	3.29		%	3.34		%	3.56		%
Adjusted net interest margin	3.17		%	3.44		%	3.44		%


	For the Three Months Ended
	March 31,		December 31,		March 31,
Asset Yields and Funding Costs	2021		2020		2020
Interest earning assets	3.66	%	4.05	%	4.47	%
Interest bearing liabilities	0.50	%	0.94	%	1.13	%


	For the Three Months Ended
Non–interest Income and Mortgage Banking Income	March 31,		December 31,		March 31,
	2021		2020		2020
Total non–interest income	$	13,873	$	19,733	$	12,063
Gain on sale of mortgage loans	5,296		7,815		3,473
Mortgage servicing income net of impairment	213		327		25


	For the Three Months Ended
	March 31,			December 31,			March 31,
Non–interest Expense	2021			2020			2020
Total non–interest expense	$	32,172		$	36,453		$	31,149
Annualized non–interest expense to average assets	2.20		%	2.47		%	2.38		%


	At or for the Three Months Ended
Credit Quality	March 31,		December 31,		March 31,
	2021		2020		2020
Allowance for credit losses to total loans	1.56	%	1.47	%	1.30	%
Non–performing loans to total loans	0.68	%	0.69	%	0.65	%
Percent of net charge–offs to average loans outstanding for the period	0.01	%	0.01	%	0.01	%


Allowance for	December 31,			Net Reserve Build		March 31,
Credit Losses	2020			1Q20			2021
Commercial	$	42,210		$	770		$	42,980
Retail Mortgage	4,620			(391)			4,229
Warehouse	1,267			(104)			1,163
Consumer	8,930			(116)			8,814
Allowance for Credit Losses (“ACL”)	$	57,027		$	159		$	57,186
ACL/Total Loans	1.47		%				1.56		%

Table of ~~Lafayette Community Bancorp (“Lafayette”)~~Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and ~~its wholly-owned subsidiary, Lafayette Community Bank, headquartered in Lafayette, Indiana. The system integration~~Analysis of ~~Lafayette was successfully completed on September 22, 2017.~~Financial Condition

~~On October 17, 2017, Horizon closed~~And Results of Operations

For the ~~acquisition of Wolverine Bancorp, Inc. (“Wolverine”)~~Three Months ended March 31, 2021 and ~~its wholly-owned subsidiary, Wolverine Bank, headquartered in Midland, Michigan. The system integration of Wolverine is scheduled for November 2017.~~2020

Critical Accounting Policies

The notes to the consolidated financial statements included in Item 8 of the Company’s Annual Report on Form~~10-K~~ 10–K for ~~2016~~2020 contain a summary of the Company’s significant accounting policies. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management has identified as critical accounting policies the allowance for ~~loan~~credit losses, goodwill and intangible assets, mortgage servicing rights, hedge accounting and valuation measurements.

Allowance for ~~Loan~~Credit Losses

The allowance for credit losses represents management’s best estimate of current expected credit losses over the life of the portfolio of loan and leases. Estimating credit losses requires judgment in determining loan specific attributes impacting the borrower’s ability to repay contractual obligations. Other factors such as economic forecasts used to determine a reasonable and supportable forecast, prepayment assumptions, the value of underlying collateral, and changes in size composition and risks within the portfolio are also considered.

The allowance for credit losses is ~~maintained to absorb probable incurred loan losses inherent~~assessed at each balance sheet date and adjustments are recorded in the provision for credit losses. The allowance is estimated based on loan ~~portfolio. The determination~~level characteristics using historical loss rates, a reasonable and supportable economic forecast. Loan losses are estimated using the fair value of collateral for collateral–dependent loans, or when the borrower is experiencing financial difficulty such that repayment of the loan 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. Assets purchased with credit deterioration (“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 ~~is a critical accounting policy that involves management’s ongoing quarterly assessments~~on the portfolio of loans and leases as of the ~~probable~~balance sheet date. Actual losses incurred ~~losses inherent~~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 loan portfolio. The identification of loans that have probable incurred losses is subjective; therefore, a general reserve is maintained to cover all probable losses within the entire loan portfolio. Horizon utilizes a loan grading system that helps identify, monitorduration, spread and ~~address asset quality problems in an adequate and timely manner. Each quarter, various factors affecting the quality~~severity of the ~~loan portfolio are reviewed. Large credits are reviewed on~~

~~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 individual basis for~~virus will affect our loss ~~potential. Other loans are reviewed as a group based upon previous trends of loss~~ experience. Horizon also reviews the current and anticipated economic conditions of its lending market as well as transaction risk to determine the effect they may have on the loss experience of the loan portfolio.

Goodwill and Intangible Assets

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. FASB ASC~~350-10~~ 350–10 establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill. At ~~September 30, 2017,~~March 31, 2021, Horizon had core deposit intangibles of ~~$9.5~~$22.1 million subject to amortization and ~~$93.8~~$151.2 million of goodwill, which is not subject to amortization. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. Horizon’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of Horizon to provide quality, cost effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely affect earnings in future periods. FASB ASC~~350-10~~ 350–10 requires an annual evaluation of goodwill for impairment. ~~The evaluation~~

At each reporting date between annual goodwill impairment tests, Horizon considers potential indicators of impairment. Given the current economic uncertainty and volatility surrounding COVID–19, Horizon assessed whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Impairment indicators considered comprised the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit; performance of the Company's stock and other relevant events. Horizon further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and stress testing performed. At the conclusion of the most recent qualitative assessment, the Company determined that as of March 31, 2021, it was more likely than not that the fair value exceeded its carrying values. Horizon will continue to monitor developments regarding the COVID–19 pandemic and measures implemented in response to the pandemic, market capitalization, overall economic conditions and any other triggering events or circumstances that may indicate an impairment of goodwill ~~for impairment requires~~in the ~~use~~future.

Table of ~~estimates~~Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and ~~assumptions. Market price at~~Analysis of Financial Condition

And Results of Operations

For the ~~close of business on September 30, 2017 was $29.17 per share compared to a book value of $16.81 per common share.~~

~~Horizon has concluded that, based on its own internal evaluation, the recorded value of goodwill is not impaired.~~

Three Months ended March 31, 2021 and 2020

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired through purchase or through the sale of financial assets on a ~~servicing-retained~~servicing–retained basis. Capitalized servicing rights are amortized into~~non-interest~~ non–interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated regularly for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying servicing rights by predominant characteristics, such as interest rates, original loan terms and whether the loans are fixed or adjustable rate mortgages. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using ~~market-based~~market–based assumptions. When the book value of an individual stratum exceeds its fair value, an impairment reserve is recognized so that each individual stratum is carried at the lower of its amortized book value or fair value. In periods of falling market interest rates, accelerated loan prepayment can adversely affect the fair value of these ~~mortgage-servicing~~mortgage–servicing rights relative to their book value. In the event that the fair value of these assets was to increase in the future, Horizon can recognize the increased fair value to the extent of the impairment allowance but cannot recognize an asset in excess of its amortized book value. Future changes in management’s assessment of the impairment of these servicing assets, as a result of changes in observable market data relating to market interest rates, loan prepayment speeds, and other factors, could impact Horizon’s financial condition and results of operations either positively or negatively.

Generally, when market interest rates decline and other factors favorable to prepayments occur, there is a corresponding increase in prepayments as customers refinance existing mortgages under more favorable interest rate terms. When a mortgage loan is prepaid, the anticipated cash flows associated with servicing that loan are terminated, resulting in a reduction of the fair value of the capitalized mortgage servicing rights. To the extent that actual borrower prepayments do not react as anticipated by the prepayment model (i.e., the historical data observed in the model does not correspond to actual market activity), it is possible that the prepayment model could fail to accurately predict mortgage prepayments and could result in significant earnings volatility. To estimate prepayment speeds, Horizon utilizes a third-party prepayment model, which is based upon statistically derived data linked to certain key principal indicators involving historical borrower

~~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.

Derivative Instruments

As part of the Company’s asset/liability management program, Horizon utilizes, from~~time-to-time,~~ time–to–time, interest rate floors, caps or swaps to reduce the Company’s sensitivity to interest rate fluctuations. These are derivative instruments, which are recorded as assets or liabilities in the consolidated balance sheets at fair value. Changes in the fair values of derivatives are reported in the consolidated income statements or other comprehensive income (“OCI”) depending on the use of the derivative and whether the instrument qualifies for hedge accounting. The key criterion for the hedge accounting is that the hedged relationship must be highly effective in achieving offsetting changes in those cash flows that are attributable to the hedged risk, both at inception of the hedge and on an ongoing basis.

Horizon’s accounting policies related to derivatives reflect the guidance in FASB ASC~~815-10.~~ 815–10. Derivatives that qualify for the hedge accounting treatment are designated as either: a hedge of the fair value of the recognized asset or liability or of an unrecognized firm commitment (a fair value hedge) or a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (a cash flow hedge). For fair value hedges, the cumulative change in fair value of both the hedge instruments and the underlying loans is recorded in~~non-interest~~ non–interest income. For cash flow hedges, changes in the fair values of the derivative instruments are reported in OCI to the extent the hedge is effective. The gains and losses on derivative instruments that are reported in OCI are reflected in the consolidated income statement in the periods in which the results of operations are impacted by the variability of the cash flows of the hedged item. Generally, net interest income is increased or decreased by amounts receivable or payable with respect to the derivatives, which qualify for hedge accounting. At inception of the hedge, Horizon establishes the method it uses for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. The ineffective portion of the hedge, if any, is recognized currently in the consolidated statements of income. Horizon excludes the time value expiration of the hedge when measuring ineffectiveness.

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three Months ended March 31, 2021 and 2020

Valuation Measurements

Valuation methodologies often involve a significant degree of judgment, particularly when there are no observable active markets for the items being valued. Investment securities, residential mortgage loans held for sale and derivatives are carried at fair value, as defined in FASB ASC 820, which requires key judgments affecting how fair value for such assets and liabilities is determined. In addition, the outcomes of valuations have a direct bearing on the carrying amounts of goodwill, mortgage servicing rights, and pension and other ~~post-retirement~~post–retirement benefit obligations. To determine the values of these assets and liabilities, as well as the extent, to which related assets may be impaired, management makes assumptions and estimates related to discount rates, asset returns, prepayment speeds and other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect Horizon’s results of operations.

~~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~~

~~Financial Condition~~

On ~~September 30, 2017,~~March 31, 2021, Horizon’s total assets were ~~$3.5~~$6.1 billion, an increase of approximately ~~$378.3~~$168.9 million compared to December 31, ~~2016.~~2020. The increase was primarily in ~~net loans~~cash and due from banks of ~~$289.1~~$279.6 million and investment securities available for sale of ~~$70.0 million, goodwill of $16.8 million and investment securities held to maturity of $5.4 million which~~$128.2 million. These increases were offset by ~~decreases~~a decrease in ~~Federal Reserve Bank stock~~net loans of ~~$8.6~~$203.1 million and other assets of ~~$2.8 million and loans held for sale of $4.5~~$20.9 million.

Investment securities were comprised of the following as of (dollars in thousands):

   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








Total available for sale investment securities
   $ 510,445    $ 509,844    $ 445,839    $ 439,831








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








Total held to maturity investment securities
   $ 198,605    $ 202,222    $ 193,194    $ 194,086

~~Total investment~~


	March 31, 2021				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale
U.S. Treasury and federal agencies	$	40,155	$	39,602	$	19,750	$	19,715
State and municipal	992,461		1,005,051		803,100		837,843
Federal agency collateralized mortgage obligations	116,072		119,088		144,022		147,453
Federal agency mortgage–backed pools	84,609		87,351		114,484		118,799
Corporate notes	10,015		11,083		9,007		10,215
Total available for sale investment securities	$	1,243,312	$	1,262,175	$	1,090,363	$	1,134,025
Held to maturity
State and municipal	$	151,474	$	160,583	$	157,421	$	168,456
Federal agency collateralized mortgage obligations	1,959		1,979		2,661		2,697
Federal agency mortgage–backed pools	8,217		8,387		8,594		8,837
Total held to maturity investment securities	$	161,650	$	170,949	$	168,676	$	179,990

Investment securities available for sale increased by approximately $75.4 million at September 30, 2017 compared to December 31, 2016, primarily due to the investing of cash received from the Bargersville branch purchase and the CNB merger and increasing earning assets due to lower mortgage warehouse balances.

~~Total loans increased $285.4~~$128.2 million since December 31, ~~2016~~2020 to ~~$2.4~~$1.3 billion as of ~~September 30, 2017.~~March 31, 2021. This increase was ~~the result~~due to additional purchases to increase earning assets.

Gross loans decreased $208.7 million since December 31, 2020 to $3.7 billion as of ~~an increase in commercial loans of $203.8 million, consumer loans of $87.1 million and~~March 31, 2021. Mortgage warehouse, residential mortgage, ~~loans of $39.2 million, offset by a decrease in mortgage warehouse loans of $40.2 million~~consumer, commercial and ~~a decrease in~~ loans held for sale ~~of $4.5~~decreased $129.4 million, $42.4 million, $16.8 million, $14.4 million and $5.7 million. ~~Total~~PPP loans increased $134.4 million as a result of the acquisition of Lafayette during the third quarter of 2017. The growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo contributed total loan growth of $120.1 million during the first nine months of 2017 leading to the increase in commercial loans. The addition of a seasoned consumer loan portfolio manager during the fourth quarter of 2016 and an increased focus on the management of direct consumer loans are the main drivers for the increase in consumer loans.

~~Total deposits increased $137.1~~$43.4 million since December 31, ~~2016~~2020 to ~~$2.6~~$252.3 million as of March 31, 2021.

Total deposits increased $190.7 million since December 31, 2020 to $4.7 billion as of ~~September 30, 2017.Non-interest~~ ~~bearing transaction accounts, interest bearing transaction accounts~~March 31, 2021. This increase was primarily due to Federal stimulus payments to consumers and ~~time deposits increased $67.3 million, $37.0 million and $32.7 million, respectively, during~~funds from the ~~nine months ended September 30, 2017. The increase in deposits is primarily attributable to the acquisition~~origination of ~~$151.1 million in deposits from Lafayette during the third quarter of 2017.~~

~~The Company’s~~PPP loans.

Total borrowings increased ~~$190.7 million~~ from ~~December 31, 2016 to $458.2~~$475.0 million as of ~~September 30, 2017.~~December 31, 2020 to $481.5 million as of March 31, 2021. At ~~September 30, 2017,~~March 31, 2021, the Company had ~~$320.3~~$166.0 million in short-term funds borrowed compared to ~~$189.0~~$315.5 million at December 31, ~~2016. The increase in borrowings was utilized to fund loan growth~~2020.

Table of ~~$285.4 million since December 31, 2016.~~

Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

2020

Stockholders’ equity totaled ~~$392.1~~$689.4 million at ~~September 30, 2017~~March 31, 2021 compared to ~~$340.9~~$692.2 million at December 31, ~~2016.~~2020. The ~~increase~~decrease in stockholders’ equity during the period was due to a decrease in accumulated other comprehensive income during the ~~result of~~period, offset by the ~~acquisition of Lafayette,~~ generation of net ~~income, net of dividends declared. At September 30, 2017, the ratio of average stockholders’ equity to average assets was 10.74% compared to 10.59% at December 31, 2016.~~income. Book value per common share at ~~September 30, 2017 increased~~March 31, 2021 decreased to ~~$16.81~~$15.69 compared to ~~$15.37~~$15.78 at December 31, ~~2016.~~

2020 as a result of the decrease in accumulated other comprehensive income during the period.

Results of Operations

Overview

Consolidated net income for the ~~three-month~~three–month period ended ~~September 30, 2017~~March 31, 2021 was ~~$8.2~~$20.4 million, or $0.46 diluted earnings per share, compared to ~~$6.6~~$11.7 million, or $0.26 diluted earnings per share for the same period in 2016. Earnings per common share for the three months ended September 30, 2017 were $0.36 basic and diluted, compared to $0.31 basic and $0.30 diluted for the same three-month period in the previous year.2020. The increase in net income ~~and earnings per share from~~for the ~~previous~~three–month period ended March 31, 2021 when compared to the same prior year period reflects an increase in net interest income of ~~$3.5~~$1.6 million, ~~partially offset by a decrease innon-interest~~ ~~income of $1.3 million and increases in provision for loan losses of $255,000,non-interest~~ ~~expense of $431,000 and the diluted shares outstanding primarily due to the stock issued in the Kosciusko and LaPorte Bancorp acquisitions.Non-interest~~ ~~expense increased primarily due to~~ an increase in ~~salaries, employee benefits, net occupancy expenses~~non–interest income of $1.8 million and ~~other expense.~~a decrease in credit loss expense of $8.2 million, offset by increases in non–interest expense of $1.0 million and income tax expense of $1.9 million. Excluding ~~acquisition-related expenses, gain/losses~~gain on sale of investment securities and ~~purchase accounting adjustments,~~death benefit on bank owned life insurance (“adjusted net income”), adjusted net income for the ~~third~~first quarter of ~~2017~~2021 was ~~$9.2~~$19.7 million, or ~~$0.41~~$0.44 diluted earnings per share, compared to ~~$8.4~~$11.2 million, or ~~$0.39~~$0.24 diluted earnings per share ~~in the same period of 2016.~~

~~Consolidated net income~~ for the nine-month period ended September 30, 2017 was $25.5 million compared to $18.3 million for the same period in 2016. Earnings per common share for the nine months ended September 30, 2017 were $1.14 basic and $1.13 diluted, compared to $0.95 basic and $0.94 diluted for the same nine-month period in the previous year. The increase in net income and earnings per share from the previous year reflects an increase in net interest incomefirst quarter of ~~$15.6 million, partially offset by a decrease innon-interest~~ ~~income of $2.2 million and increases innon-interest~~ ~~expense of $4.2 million, income tax expense of $1.9 million and the diluted shares outstanding primarily due to the stock issued in the Kosciusko and LaPorte Bancorp acquisitions.Non-interest~~ expense increased primarily due to an increase in salaries, employee benefits, net occupancy expenses, data processing expense and other expense. Excluding acquisition-related expenses, gains/losses on sale of investment securities and purchase accounting adjustments, net income for the nine months ended September 30, 2017 was $25.4 million or $1.13 diluted earnings per share compared to $20.7 million or $1.07 diluted earnings per share in the same period of 2016.

2020.

Net Interest Income

The largest component of net income is net interest income. Net interest income is the difference between interest income, principally from loans and investment securities, and interest expense, principally on deposits and borrowings. Changes in the net interest income are the result of changes in volume and the net interest spread, which affects the net interest margin. Volume refers to the average dollar levels of ~~interest-earning~~interest earning assets and ~~interest-bearing~~interest bearing liabilities. Net interest spread refers to the difference between the average yield on ~~interest-earning~~interest earning assets and the average cost of ~~interest-bearing~~interest bearing liabilities. Net interest margin refers to net interest income divided by average ~~interest-earning~~interest earning assets and is influenced by the level and relative mix of ~~interest-earning~~interest earning assets and ~~interest-bearing~~interest bearing liabilities.

Net interest income during the three months ended ~~September 30, 2017~~March 31, 2021 was ~~$27.9~~$42.5 million, an increase of ~~$3.5~~$1.6 million from the ~~$24.4~~$40.9 million earned during the same period in ~~2016.~~2020. Yields on the Company’s ~~interest-earning~~interest earning assets ~~increased~~decreased by 3481 basis points to ~~3.71% for the three months ending September 30, 2017 from 3.37%~~3.66% for the three months ended ~~September 30, 2016.~~March 31, 2021 from 4.47% for the three months ended March 31, 2020. Interest income ~~increased $3.1~~decreased $4.1 million from ~~$29.0~~$51.7 million for the three months ended ~~September 30, 2016~~March 31, 2020 to ~~$32.1~~$47.6 million for the same period in ~~2017. This~~2021. The decrease in interest income was due to ~~an increase~~a decrease in ~~average interest-earning~~yield as interest earning assets ~~through organic and acquisition-related growth.~~reprice during the current low rate environment. Interest income from ~~acquisition-related~~acquisition–related purchase accounting adjustments was ~~$661,000~~$1.6 million for the three months ending ~~September 30, 2017~~March 31, 2021 compared to ~~$459,000~~$1.4 million for the same period of ~~2016.~~

~~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.

Rates paid on ~~interest-bearing~~interest bearing liabilities decreased by 663 basis points for the ~~three-month~~three–month period ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016 due to the continued low interest rate environment and shift in mix on interest-bearing liabilities.~~2020. Interest expense decreased ~~$361,000~~$5.7 million when compared to the ~~three-month~~three–month period ended ~~September 30, 2016~~March 31, 2020 to ~~$4.2~~$5.1 million for the same period in ~~2017.~~2021. This decrease was due to lower rates paid on deposits and borrowings. The cost on average interest bearing deposits decreased 69 basis points while the cost of average borrowings decreased 61 basis points. Average balances of interest bearing deposits increased $298.8 million and average balances of borrowings ~~in addition to lower rates paid on borrowings, partially offset by higher average balances of interest-bearing deposits. The rates paid on borrowings~~ decreased ~~as a result of Horizon executing a strategy to reduce expensive funding costs in the fourth quarter of 2016.~~

~~The net interest margin increased 34 basis points from 3.37%~~$55.9 million for the three-month period ended ~~September 30, 2016 to 3.71% for the same period in 2017. The increase in the margin for the three-month period ended September 30, 2017~~March 31, 2021 when compared to the same period in ~~2016~~2020.

The net interest margin decreased 27 basis points from 3.56% for the three–month period ended March 31, 2020 to 3.29% for the same period in 2021. The decrease in the margin for the three–month period ended March 31, 2021 compared to the same period in 2020 was due to ~~an increase~~a decrease in the yield on ~~interest-earning~~interest earning assets, ~~and~~offset by a ~~reduction~~decrease in the cost ~~on interest-bearing~~of interest bearing liabilities. Excluding the interest income recognized from the ~~acquisition-related~~acquisition–related purchase accounting adjustments (“adjusted net interest margin”), the margin would have been ~~3.63%~~3.17% for the three-month period ending ~~September 30, 2017~~March 31, 2021 compared to ~~3.31%~~3.44% for the same period in ~~2016.~~

2020.

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

2020

The following are the average balance sheets for the three months ending (dollars in thousands):

   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 %





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





   $ 3,383,662    $ 3,273,618





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 %





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





   $ 3,383,662    $ 3,273,618





Net interest income/ spread
   $ 27,879    3.58 % $ 24,410    3.24 %





Net interest income as a percent of average interest earning
assets (1)
      3.71 %    3.37 %

~~(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. Interest rate is presented on a tax equivalent basis.

~~(2)~~

~~Includes loan fees and late fees. The inclusion of these fees does not have a material effect on the average interest rate.~~

~~(3)~~

~~Non-accruing~~ ~~loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loans fees.~~

~~Net interest income during the nine months ended September 30, 2017 was $80.6 million, an increase~~


	Average Balance Sheets
	(Dollar Amount in Thousands, Unaudited)
		Three Months Ended						Three Months Ended
		March 31, 2021						March 31, 2020
		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	Assets
	Interest earning assets
	Federal funds sold	$	267,241	$	66	0.10	%	$	24,974	$	96	1.55	%
	Interest earning deposits	25,527		31		0.49	%	26,491		101		1.53	%
	Investment securities – taxable	410,063		1,451		1.44	%	501,144		2,701		2.27	%
	Investment securities – non–taxable (1)	956,464		5,223		2.80	%	588,784		3,798		3.18	%
	Loans receivable (2) (3)	3,780,339		40,818		4.39	%	3,604,809		44,958		5.03	%
	Total interest earning assets	5,439,634		47,589		3.66	%	4,746,202		51,654		4.47	%
	Non–interest earning assets
	Cash and due from banks	85,269						78,108
	Allowance for credit losses	(57,779)						(24,468)
	Other assets	469,025						457,490
	Total average assets	$	5,936,149					$	5,257,332
	Liabilities and Stockholders’ Equity
	Interest bearing liabilities
	Interest bearing deposits	$	3,524,103	$	2,343	0.27	%	$	3,225,323	$	7,716	0.96	%
	Borrowings	477,278		1,269		1.08	%	533,129		2,238		1.69	%
	Subordinated notes	58,616		880		6.09	%	—		—		—	%
	Junior subordinated debentures issued to capital trusts	56,571		559		4.01	%	56,333		775		5.53	%
	Total interest bearing liabilities	4,116,568		5,051		0.50	%	3,814,785		10,729		1.13	%
	Non–interest bearing liabilities
	Demand deposits	1,063,268						717,257
	Accrued interest payable and other liabilities	58,912						57,702
	Stockholders’ equity	697,401						667,588
	Total average liabilities and stockholders’ equity	$	5,936,149					$	5,257,332

	Net interest income/spread			$	42,538	3.16	%			$	40,925	3.34	%
	Net interest income as a percent of average interest earning assets (1)					3.29	%					3.56	%

(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.

Table of $15.6 million from the $65.1 million earned during the same period in 2016. Yields on the Company’s interest-earning assets increased by 34 basis points to 3.77% for the nine months ending September 30, 2017 from 3.43% for the nine months ended September 30, 2016. Interest income increased $14.6 million from $77.1 million for the nine months ended September 30, 2016 to $91.7 million for the same period in 2017. This was due to an increase in average interest-earning assets through organic and acquisition-related growth. Interest income from acquisition-related purchase accounting adjustments was $2.6 million for the nine months ending September 30, 2017 compared to $1.4 million for the same period of 2016.

Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

~~Rates paid on interest-bearing liabilities decreased~~2020

The net interest margin was impacted due to PPP lending and excess liquidity held during the first quarter of 2021. Horizon estimates that the PPP loans increased the net interest margin by 1210 basis points for the nine-month period ended September 30, 2017 compared to the same period in 2016 due to the continued low interest rate environment and shift in mix on interest-bearing liabilities. Interest expense decreased $1.0 million compared to the nine-month period ended September 30, 2016 to $11.1 million for the same period in 2017. This decrease was due to lower average balances of borrowings in addition to lower rates paid on borrowings, partially offset by higher average balances of interest-bearing deposits. The rates paid on borrowings decreased as a result of Horizon executing a strategy to reduce expensive funding costs in the fourthfirst quarter of ~~2016.~~

~~The~~2021. This assumes these PPP loans were not included in average interest earning assets or interest income and were primarily funded by the growth in non–interest bearing deposits. In addition, Horizon estimates that the high level of cash held on the balance sheet compressed the net interest margin ~~increased 34~~by 16 basis points ~~from 3.43%~~ for the ~~nine-month period ended September 30, 2016 to 3.77% for~~first quarter of 2021. This assumes that the ~~same period~~high level of cash was not included in ~~2017. The increase in the margin for the nine-month period ended September 30, 2017 compared to the same period in 2016 was due to an increase in the yield on interest-earning~~average interest earning assets ~~and a reduction in the cost on interest-bearing liabilities. Excluding the~~or interest income ~~recognized~~and was excluded from ~~the acquisition-related purchase accounting adjustments, the margin would have been 3.65% for the nine-month period ending September 30, 2017 compared to 3.36% for the same period in 2016.~~

~~The following are the average balance sheets for the nine months ending (dollars in thousands):~~

   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 %





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





   $ 3,247,300    $ 2,856,473





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 %





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





   $ 3,247,299    $ 2,856,473





Net interest income/spread
   $ 80,645    3.64 % $ 65,053    3.30 %





Net interest income as a percent of average interest earning
assets (1)
      3.77 %    3.43 %

non–interest bearing deposits.

~~(1)~~

~~(2)~~

~~Includes loan fees and late fees. The inclusion of these fees does not have a material effect on the average interest rate.~~

~~(3)~~

~~Non-accruing~~ ~~loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loans fees.~~

~~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~~

~~Provision for Loan Losses~~

Credit Loss Expense

Horizon assesses the adequacy of its Allowance for ~~Loan and Lease~~Credit Losses (“~~ALLL”~~ACL”) by regularly reviewing the performance of its loan portfolio. During the ~~three-month~~three–month period ended ~~September 30, 2017,~~March 31, 2021, a provision of ~~$710,000~~$367,000 was required to ~~adequately fund~~reflect the ~~ALLL~~nature of our loan portfolios and general characteristics of certain loan pools compared to ~~$455,000~~$8.6 million for the same period of ~~2016. Commercial~~2020. During the three–month period ended March 31, 2021, commercial loan net ~~charge-offs during the three-month period ended September 30, 2017~~charge–offs were ~~$169,000,~~$158,000, residential mortgage loan net ~~charge-offs~~recoveries were ~~$24,000~~$65,000 and consumer loan net ~~charge-offs~~charge–offs were ~~negative $42,000.~~$115,000.

The ACL balance at March 31, 2021 was $57.2 million, or 1.56% of total loans compared to an ACL balance of $57.0 million at December 31, 2020 or 1.47% of total loans. The increase in the ~~provision~~ACL to total loans ratio was primarily due to a decrease in loans from December 31, 2020 and was primarily driven by allocations for sectors of loans with potentially higher risk of loss due to the nature and characteristics of these portfolios.

As of March 31, 2021, non–performing loans totaled $25.1 million, which reflects a 1 basis point decrease in non–performing loans to total loans, or a $1.7 million decrease from $26.8 million in non–performing loans as of December 31, 2020. Non–performing commercial loans decreased by $1.5 million, non–performing real estate loans decreased by $78,000 and non–performing consumer loans decreased by $117,000 at March 31, 2021 compared to December 31, 2020.

The Bank has elected (i) to suspend the requirements under GAAP for loan ~~losses in~~modifications related to the ~~third quarter~~COVID–19 pandemic that would otherwise be categorized as a TDR; and (ii) to suspend any determination of ~~2017~~a loan modified as a result of the effects of COVID–19 pandemic as being a TDR, including impairment for accounting purposes. At March 31, 2021, the Bank modified loans totaling $91.6 million which qualify for treatment under the CARES Act. The following is a summary of loan modifications related to the COVID–19 pandemic by type of loan.


Type of Loan	#	Net Balance	% of Total Modifications		% of Portfolio
Commercial	36	$89.4	97.6	%	4.1	%
Mortgage (Retained Only)	13	$1.4	1.5	%	0.2	%
Indirect Auto	2	$0.0	—	%	—	%
Consumer Direct	5	$0.7	0.8	%	1.1	%
Consumer Revolving	2	$0.1	0.1	%	—	%
Total	58	$91.6	100.0	%	2.5	%

Mortgage (Serviced Only)	56

Other Real Estate Owned (“OREO”) and repossessed assets totaled $1.7 million at March 31, 2021 compared to the same period of 2016 was due to increased additional allocations to loans originated in new markets and an increase in allocation for agricultural economic factors. The ALLL balance at September 30, 2017 was $15.6 million or 0.64% of total loans. This compares to an ALLL balance of $14.8$1.9 million at December 31, ~~2016 or 0.69%~~2020.

Table of total loans. The decrease in the ratio at September 30, 2017 compared to December 31, 2016 was due to an increase in loan balances, excluding acquired loans and loans held for sale, of $187.9 million.

For the nine-month period ended September 30, 2017, the provision 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 compared 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 loans as a percentage of total loans was 1.24% as 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


ALLL+ loan discount
   15,515 917 2,365 2,944 810 4,036 206 3,356 30,149


Loans, net
   $ 1,887,807 $ 11,944 $ 42,284 $ 120,388 $ 63,640 $ 154,063 $ 7,488 $ 122,625 $ 2,410,239


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 relation to the amount reserved, or that subsequent evaluations 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.~~

~~Other Real Estate Owned (OREO) totaled $1.8 million at September 30, 2017 compared to $3.2 million on December 31, 2016 and $3.7 million on September 30, 2016.~~

Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

~~Non-interest~~2020

Non–interest Income

The following is a summary of changes in~~non-interest~~ non–interest income for the three months ending March 31, 2021 and 2020 (table dollar amounts in thousands):

   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 %







Totalnon-interest income
   $ 8,021    $ 9,318    $ (1,297 )    -13.9 %


	Three Months Ended
	March 31,				Amount		Percent
	2021		2020		Change		Change
Non–interest Income
Service charges on deposit accounts	$	2,234	$	2,446	$	(212)	(8.7)	%
Wire transfer fees	255		171		84		49.1	%
Interchange fees	2,340		1,896		444		23.4	%
Fiduciary activities	1,743		2,528		(785)		(31.1)	%
Gain on sale of investment securities	914		339		575		169.6	%
Gain on sale of mortgage loans	5,296		3,473		1,823		52.5	%
Mortgage servicing net of impairment	213		25		188		752.0	%
Increase in cash surrender value of bank owned life insurance	511		554		(43)		(7.8)	%
Death benefit on bank owned life insurance	—		233		(233)		0.0	%
Other income	367		398		(31)		(7.8)	%
Total non–interest income	$	13,873	$	12,063	$	1,810	15.0	%

Total~~non-interest~~ non–interest income was ~~$1.3~~$1.8 million ~~lower~~higher during the ~~third~~first quarter of ~~2017~~2021 compared to the same period of 2016. Service charges on deposit accounts increased $67,000, interchange fees increased by $95,000, and fiduciary activities increased $234,000 primarily due to overall company growth and increased volume.2020. Residential mortgage loan activity during the ~~third~~first quarter of ~~2017~~2021 generated ~~$1.9~~$5.3 million of income from the gain on sale of mortgage loans, ~~down $1.6~~up from $3.5 million ~~from~~for the same period in ~~2016. The decrease in the gain on sale of mortgage loans was~~2020 due to a ~~decrease~~higher volume of loans sold and an increase in the ~~volume~~percentage gain on loans sold. Mortgage servicing rights, net of ~~mortgage loans sold from $98.3 million in~~impairment, increased $188,000 during the ~~third~~first quarter of ~~2016 to $56.4 million in the same period of 2017. Wire transfer fee income decreased $117,000 during the third quarter of 2017 when~~2021 compared to the same period of ~~2016~~2020. Fiduciary income decreased $785,000 during the first quarter of 2021 compared to the same period of 2020 due to ~~a decrease in mortgage warehouse activity~~the timing of the recognition of ESOP related fee income. Service charges on deposit accounts, death benefit on bank owned life insurance and ~~related wire transfer fees.~~

other income decreased $212,000, $233,000, and $31,000, respectively, when comparing the first quarter of 2021 to the same period of 2020.

Non–interest Expense

The following is a summary of changes in~~non-interest~~ ~~income~~ non–interest expense for the three months ending March 31, 2021 and 2020 (table dollar amounts in thousands):

   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 %







Totalnon-interest income
   $ 23,792    $ 25,971    $ (2,179 )    -8.4 %

~~Totalnon-interest~~ ~~income was $2.2 million lower in the first nine months~~


	Three Months Ended
	March 31,			March 31,			Amount		Percent
Non–interest Expense	2021			2020			Change		Change


Salaries and employee benefits	$	16,871		$	16,591		$	280	1.7	%
Net occupancy expenses	3,318			3,252			66		2.0	%
Data processing	2,376			2,405			(29)		(1.2)	%
Professional fees	544			536			8		1.5	%
Outside services and consultants	1,702			1,915			(213)		(11.1)	%
Loan expense	2,822			2,099			723		34.4	%
FDIC deposit insurance	800			150			650		433.3	%
Other losses	283			120			163		135.8	%
Other expenses	3,456			4,081			(625)		(15.3)	%
Total non–interest expense	$	32,172		$	31,149		$	1,023	3.3	%
Annualized Non–interest Exp. to Avg. Assets	2.20		%	2.38		%

Table of 2017 when compared to the same period of 2016. Service charges on deposit accounts increased $328,000, interchange fees increased $744,000 and fiduciary activities increased $999,000, primarily due to overall company growth and increased volume. Gain on sale of investment securities decreased $837,000 due to gains realized in the first nine months of 2016 as a result of an analysis that determined market conditions provided the opportunity to add

Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

~~gains to capital without negatively impacting loan-term earnings. Residential mortgage loan activity during~~2020

Total non–interest expense was $1.0 million higher for the first ~~nine months~~quarter of ~~2017 generated $5.9 million from~~2021 when compared to the ~~gain on sale~~first quarter of ~~mortgage loans, down $3.3 million from the same period~~2020. Increases in ~~2016. The decrease~~loan expense, FDIC deposit insurance and salaries and employee benefits were offset in ~~the gain on sale of mortgage loans was due to~~part by a decrease in ~~the volume~~other expense and outside services and consultants expense.

Annualized non–interest expense as a percent of ~~mortgage loans sold from $236.7 million in the first nine months of 2016 to $163.9 million in the same period of 2017.~~

~~Non-interest~~ ~~Expense~~

~~The following is a summary of changes innon-interest~~ ~~expense (table dollar amounts in thousands):~~

   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 %

~~Totalnon-interest~~ ~~expense was $431,000 higher in the third quarter of 2017 compared to the same period of 2016. Excluding merger-related expenses of $2.0 million~~average assets were 2.20% and ~~$3.0 million recorded during~~2.38% for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, totalnon-interest~~2020, respectively.

Income Taxes

Income tax expense ~~increased $1.4~~totaled $3.5 million ~~or 6.5%. Salaries increased by $896,000 due to a larger employee base. Net occupancy expense increased $226,000 due to Horizon’s investment in growth markets and~~for the LaPorte Bancorp, CNB and Lafayette acquisitions. Other expense increased $274,000 primarily due to higher amortization expense related to core deposit intangibles. Outside service and consultant, professional fees and other expense decreased $182,000 in the thirdfirst quarter of ~~2017~~2021 an increase of $1.9 million when compared to the ~~same period~~first quarter of ~~2016 primarily due to lower merger-related expenses. FDIC insurance~~2020. The increase in income tax expense ~~was $195,000 lower~~ in the ~~third~~first quarter of ~~2017 when~~2021 compared to the ~~same period of 2016 as the assessment rate schedule was reduced effective for assessment payments due in the fourth~~first quarter of ~~2016 and during 2017. Loan expenses decreased $267,000~~2020 was primarily due to a ~~decrease~~increase in ~~loan collection expenses. Data processing expense decreased $114,000 in the third quarter~~income before taxes of ~~2017 when compared to the same period in 2016.~~

~~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 $2.4 million higher for the nine months ended September 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, total~~non-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 to~~one-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 to 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 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. The decrease in the effective tax rate for the third quarter of 2017 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. The decrease in the effective tax rate for the nine months ended September 30, 2017 was primarily due 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~~

$10.6 million.

Liquidity

The Bank maintains a stable base of core deposits provided by ~~long-standing~~long–standing relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the FHLB. ~~During the nine months ended September 30, 2017, cash and cash equivalents increased by approximately $1.8 million.~~ At ~~September 30, 2017,~~March 31, 2021, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately ~~$236.3~~$946.1 million in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to ~~$453.9~~$1.04 billion at December 31, 2020. The Bank had approximately $772.8 million of unpledged investment securities at March 31, 2021 compared to $632.4 million at December 31, ~~2016 and $278.2 million at September 30, 2016.~~

2020.

Capital Resources

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at ~~September 30, 2017.~~March 31, 2021. Stockholders’ equity totaled ~~$392.1~~$689.4 million as of ~~September 30, 2017,~~March 31, 2021, compared to ~~$340.9~~$692.2 million as of December 31, ~~2016.~~2020. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the ratio of average stockholders’ equity to average assets was ~~10.94%~~11.75% compared to ~~10.22%~~11.82% for the twelve months ended December 31, ~~2016.~~2020. The ~~increase~~decrease in stockholders’ equity during the period was the result of ~~the generation of~~a decrease in accumulated other comprehensive income and dividends declared, offset by net income ~~net of dividends declared, as well as~~recorded during the ~~stock issued in the Lafayette acquisition.~~

~~On February 1, 2016, the Company~~period.

Horizon 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.

~~Horizon declared~~ common stock dividends in the amount of ~~$0.37~~$0.12 per share during the first ~~nine~~three months of ~~2017~~2021 and ~~$0.30~~$0.12 per share for the same period of ~~2016.~~2020. The dividend payout ratio (dividends as a percent of basic earnings per share) was ~~32.4%~~26.1% and ~~31.6%~~46.2% for the first ~~nine~~three months of ~~2017~~2021 and ~~2016,~~2020, respectively. For additional information regarding dividends, see Horizon’s Annual Report on Form10-K for ~~2016.~~

2020.

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

2020

Use of~~Non-GAAP~~ Non–GAAP Financial Measures

Certain information set forth in this quarterly report on Form~~10-Q~~ 10–Q refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included~~non-GAAP~~ non–GAAP financial measures ~~of the~~relating to net ~~interest margin and the allowance for loan and lease losses excluding the impact of acquisition-related purchase accounting adjustments and net~~ income, ~~and~~ diluted earnings per share, ~~excluding~~net interest margin, the allowance for credit losses, tangible stockholders’ equity, tangible book value per share, the return on average assets, the return on average common equity, and pre–tax pre–provision net income. In each case, we have identified special circumstances that we consider to be adjustments and have excluded them, to show the impact of~~one-time~~ ~~costs~~ such events as acquisition–related ~~to acquisitions, acquisition-related~~ purchase accounting adjustments, ~~and other events that are considered to benon-recurring.~~among others we have identified in our reconciliations. Horizon believes that these~~non-GAAP~~ non–GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and~~one-time~~ ~~costs of acquisitions andnon-core~~ ~~items, although these~~ other adjustments. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure.

~~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 Reconciliation of Net Income
(Dollars in Thousands, Unaudited)
	Three Months Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2021		2020		2020		2020		2020
Net income as reported	$	20,422	$	21,893	$	20,312	$	14,639	$	11,655



(Gain)/loss on sale of investment securities	(914)		(2,622)		(1,088)		(248)		(339)
Tax effect	192		551		228		52		71
Net income excluding (gain)/loss on sale of investment securities	19,700		19,822		19,452		14,443		11,387
Death benefit on bank owned life insurance (“BOLI”)	—		—		(31)		—		(233)
Net income excluding death benefit on BOLI	19,700		19,822		19,421		14,443		11,154
Adjusted net income	$	19,700	$	19,822	$	19,421	$	14,443	$	11,154


Non–GAAP Reconciliation of Diluted Earnings per Share
(Unaudited)
	Three Months Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2021		2020		2020		2020		2020
Diluted earnings per share (“EPS”) as reported	$	0.46	$	0.50	$	0.46	$	0.33	$	0.26



(Gain)/loss on sale of investment securities	(0.02)		(0.06)		(0.02)		(0.01)		(0.01)
Tax effect	—		0.01		0.01		—		—
Diluted EPS excluding (gain)/loss on investment securities	0.44		0.45		0.45		0.32		0.25
Death benefit on BOLI	—		—		—		—		(0.01)
Diluted EPS excluding death benefit on BOLI	0.44		0.45		0.45		0.32		0.24
Adjusted Diluted EPS	$	0.44	$	0.45	$	0.45	$	0.32	$	0.24

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

~~Non-GAAP~~ ~~Reconciliation~~2020

Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2021 2020 2020 2020 2020
Pre–tax income $ 23,872 $ 23,860 $ 24,638 $ 16,632 $ 13,239
Credit loss expense 367 3,042 2,052 7,057 8,600
Pre–tax, pre–provision net income $ 24,239 $ 26,902 $ 26,690 $ 23,689 $ 21,839
Pre–tax, pre–provision net income $ 24,239 $ 26,902 $ 26,690 $ 23,689 $ 21,839
(Gain)/loss on sale of investment securities (914) (2,622) (1,088) (248) (339)
Death benefit on bank owned life insurance — — (31) — (233)
Adjusted pre–tax, pre–provision net income $ 23,325 $ 24,280 $ 25,571 $ 23,441 $ 21,267

Non–GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2021 2020 2020 2020 2020
Net interest income as reported $ 42,538 $ 43,622 $ 43,397 $ 42,996 $ 40,925
Average interest earning assets 5,439,634 5,365,888 5,251,611 5,112,636 4,746,202
Net interest income as a percentage of average interest earning assets
(“Net Interest Margin”) 3.29 % 3.34 % 3.39 % 3.47 % 3.56 %
Net interest income as reported $ 42,538 $ 43,622 $ 43,397 $ 42,996 $ 40,925
Acquisition–related purchase accounting adjustments
(“PAUs”) (1,579) (2,461) (1,488) (1,553) (1,434)
Prepayment penalties on borrowings — 3,804 — — —
Adjusted net interest income $ 40,959 $ 44,965 $ 41,909 $ 41,443 $ 39,491
Adjusted net interest margin 3.17 % 3.44 % 3.27 % 3.35 % 3.44 %

Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
(Dollars in Thousands Except per Share Data, Unaudited)
March 31, December 31, September 30, June 30, March 31,
2021 2020 2020 2020 2020
Total stockholders’ equity $ 689,379 $ 692,216 $ 670,293 $ 652,206 $ 630,842
Less: Intangible assets 173,296 174,193 175,107 176,020 176,961
Total tangible stockholders’ equity $ 516,083 $ 518,023 $ 495,186 $ 476,186 $ 453,881
Common shares outstanding 43,949,189 43,880,562 43,874,353 43,821,878 43,763,623
Book value per common share $ 15.69 $ 15.78 $ 15.28 $ 14.88 $ 14.41
Tangible book value per common
share $ 11.74 $ 11.81 $ 11.29 $ 10.87 $ 10.37

Table of ~~Net Income and Diluted Earnings per Share~~

~~(Dollars in Thousands Except per Share Data)~~

   Three Months Ended    Nine Months Ended
   September 30    September 30
   2017    2016    2017    2016
   (Unaudited)    (Unaudited)
Non-GAAP Reconciliation of Net Income

Net income as reported
   $ 8,171    $ 6,602    $ 25,467    $ 18,309
Merger expenses
   2,013    2,953    2,213    5,472
Tax effect
   (516 )    (886 )    (586 )    (1,582 )








Net income excluding merger expenses
   9,668    8,669    27,094    22,199
Gain on sale of investment securities
   (6 )    —      (38 )    (875 )
Tax effect
   2    —      13    306








Net income excluding gain on sale of investment securities
   9,664    8,669    27,069    21,630
Acquisition-related purchase accounting adjustments (“PAUs”)
   (661 )    (459 )    (2,616 )    (1,404 )
Tax effect
   231    161    916    491








Net income excluding PAUs
   $ 9,234    $ 8,371    $ 25,369    $ 20,717








Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported
   $ 0.36    $ 0.30    $ 1.13    $ 0.94
Merger expenses
   0.09    0.14    0.10    0.28
Tax effect
   (0.02 )    (0.04 )    (0.02 )    (0.08 )








Diluted earnings per share excluding merger expenses
   0.43    0.40    1.21    1.14
Gain on sale of investment securities
   (0.00 )    —      (0.00 )    (0.05 )
Tax effect
   0.00    —      0.00    0.02








Net income excluding gain on sale of investment securities
   0.43    0.40    1.21    1.11
Acquisition-related PAUs
   (0.03 )    (0.02 )    (0.12 )    (0.07 )
Tax effect
   0.01    0.01    0.04    0.03








Diluted earnings per share excluding PAUs
   $ 0.41    $ 0.39    $ 1.13    $ 1.07

~~Non-GAAP~~ ~~Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share~~

~~(Dollars in Thousands Except per Share Data)~~

   September 30    June 30    March 31    December 31    September 30
   2017    2017    2017    2016    2016
   (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)
Total stockholders’ equity
   $ 392,055    $ 357,259    $ 348,575    $ 340,855    $ 345,736
Less: Intangible assets
   103,244    86,726    87,094    86,307    83,891










Total tangible stockholders’ equity
   $ 288,811    $ 270,533    $ 261,481    $ 254,548    $ 261,845










Common shares outstanding
   23,325,459    22,176,465    22,176,465    22,171,596    22,143,228
Tangible book value per common share
   $ 12.38    $ 12.20    $ 11.79    $ 11.48    $ 11.83

Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

~~Non-GAAP~~ ~~Reconciliation~~2020

Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2021 2020 2020 2020 2020
Non–interest expense as reported $ 32,172 $ 36,453 $ 33,407 $ 30,432 $ 31,149
Net interest income as reported 42,538 43,622 43,397 42,996 40,925
Non–interest income as reported $ 13,873 $ 19,733 $ 16,700 $ 11,125 $ 12,063
Non–interest expense/(Net interest income + Non–interest income)
("Efficiency
Ratio") 57.03 % 57.54 % 55.59 % 56.23 % 58.79 %
Non–interest expense as reported $ 32,172 $ 36,453 $ 33,407 $ 30,432 $ 31,149
Net interest income as reported 42,538 43,622 43,397 42,996 40,925
Prepayment penalties on borrowings — 3,804 — — —
Net interest income excluding prepayment penalties on borrowings 42,538 47,426 43,397 42,996 40,925
Non–interest income as reported 13,873 19,733 16,700 11,125 12,063
(Gain)/loss on sale of investment securities (914) (2,622) (1,088) (248) (339)
Death benefit on bank owned life insurance ("BOLI") — — (31) — (233)
Non–interest income excluding (gain)/loss on sale of investment securities and death benefit on BOLI $ 12,959 $ 17,111 $ 15,581 $ 10,877 $ 11,491
Adjusted efficiency ratio 57.97 % 56.48 % 56.64 % 56.49 % 59.43 %

Non–GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2021 2020 2020 2020 2020
Average assets $ 5,936,149 $ 5,864,086 $ 5,768,691 $ 5,620,695 $ 5,257,332
Return on average assets ("ROAA") as reported 1.40 % 1.49 % 1.40 % 1.05 % 0.89 %
(Gain)/loss on sale of investment securities (0.06) (0.18) (0.08) (0.02) (0.03)
Tax effect 0.01 0.04 0.02 — 0.01
ROAA excluding (gain)/loss on sale of investment securities 1.35 1.35 1.34 1.03 0.87
Death benefit on bank owned life insurance ("BOLI") — — — — (0.02)
ROAA excluding death benefit on BOLI 1.35 1.35 1.34 1.03 0.85
Adjusted ROAA 1.35 % 1.35 % 1.34 % 1.03 % 0.85 %

Table of ~~Return on Average Assets~~

~~(Dollars in Thousands)~~

   Three Months Ended Nine Months Ended
   September 30 September 30
   2017 2016 2017 2016
   (Unaudited) (Unaudited)
Non-GAAP Reconciliation of Net Income

Average Assets
   $ 3,383,662 $ 3,273,618 $ 3,247,300 $ 2,856,473
Net income as reported
   8,171 6,602 25,467 18,309
Merger expenses
   2,013 2,953 2,213 5,472
Tax effect
   (516 ) (886 ) (586 ) (1,582 )


Net income excluding merger expenses
   9,668 8,669 27,094 22,199
Gain on sale of investment securities
   (6 ) —   (38 ) (875 )
Tax effect
   2 —   13 306


Net income excluding gain on sale of investment securities
   9,664 8,669 27,069 21,630
Acquisition-related purchase accounting adjustments (“PAUs”)
   (661 ) (459 ) (2,616 ) (1,404 )
Tax effect
   231 161 916 491


Net income excluding PAUs
   $ 9,234 $ 8,371 $ 25,369 $ 20,717


Non-GAAP Reconciliation Return on Average Assets

Return on average assets as reported
   0.96 % 0.80 % 1.05 % 0.86 %
Merger expenses
   0.24 % 0.37 % 0.09 % 0.25 %
Tax effect
   -0.06 % -0.11 % -0.03 % -0.07 %


Return on average assets excluding merger expenses
   1.14 % 1.06 % 1.11 % 1.04 %
Gain on sale of investment securities
   0.00 % 0.00 % 0.00 % -0.04 %
Tax effect
   0.00 % 0.00 % 0.00 % 0.01 %


Return on average assets excluding gain on sale of investment securities
   1.14 % 1.06 % 1.11 % 1.01 %
Acquisition-related PAUs
   -0.08 % -0.06 % -0.11 % -0.06 %
Tax effect
   0.03 % 0.02 % 0.04 % 0.02 %


Return on average assets excluding PAUs
   1.09 % 1.02 % 1.04 % 0.97 %

Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

~~Quantitative~~

Management’s Discussion and ~~Qualitative Disclosures About Market Risk~~

Analysis of Financial Condition

And Results of Operations

For the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

2020


Non–GAAP Reconciliation of Return on Average Common Equity
(Dollars in Thousands, Unaudited)
	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2021			2020			2020			2020			2020
Average common equity	$	697,401		$	680,857		$	668,797		$	649,490		$	667,588
Return on average common equity ("ROACE") as reported	11.88		%	12.79		%	12.08		%	9.07		%	7.02		%



(Gain)/loss on sale of investment securities	(0.53)			(1.53)			(0.65)			(0.15)			(0.20)
Tax effect	0.11			0.32			0.14			0.03			0.04
ROACE excluding (gain)/loss on sale of investment securities	11.46			11.58			11.57			8.95			6.86
Death benefit on bank owned life insurance ("BOLI")	—			—			(0.02)			—			(0.14)
ROACE excluding death benefit on BOLI	11.46			11.58			11.55			8.95			6.72
Adjusted ROACE	11.46		%	11.58		%	11.55		%	8.95		%	6.72		%

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We refer you to Horizon’s ~~2016~~2020 Annual Report on Form~~10-K~~ 10–K for analysis of its interest rate sensitivity. Horizon believes there have been no significant changes in its interest rate sensitivity since it was reported in its ~~2016~~2020 Annual Report on Form~~10-K.~~

10–K.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation Ofof Disclosure Controls ~~And~~and Procedures

Based on an evaluation of disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2021, Horizon’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Horizon’s disclosure controls (as defined in Exchange Act Rule~~13a-15(e)~~ 13a–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.

Changes Inin Internal Control Over Financial Reporting

Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that during the fiscal quarter ended ~~September 30, 2017,~~March 31, 2021, there have been no changes in Horizon’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Horizon’s internal control over financial reporting.

HORIZON BANCORP, INC. AND SUBSIDIARIES

Part II – Other Information

~~For the Three and Nine Months ended September 30, 2017 and 2016~~

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

Horizon and its subsidiaries are involved in various legal proceedings incidental to the conduct of their business. Management does not expect that the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

There have been no material changes from the factors previously disclosed under Item 1A of Horizon’s Annual Report on Form~~10-K~~ 10–K for ~~2016.~~

the fiscal year ended December 31, 2020.

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Unregistered Sales of Equity Securities: Not Applicable

(b)Use of Proceeds: Not Applicable

(c)Repurchase of Our Equity Securities: Not Applicable

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

~~ITEM 5.~~

~~OTHER INFORMATION~~

ITEM 5. OTHER INFORMATION

Not Applicable

Table of Contents

HORIZON BANCORP, INC. AND SUBSIDIARIES

Part II – Other Information

~~For the Three and Nine Months ended September 30, 2017 and 2016~~

ITEM 6. EXHIBITS

(a) Exhibits

~~ITEM 6.~~

~~EXHIBITS~~

~~(a) Exhibits~~


Exhibit No.		Description	~~Description~~Location
31.1			Certification of Craig M. Dwight	Attached
31.2
~~31.2~~	Certification of Mark E. Secor	Attached
32
32	Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Attached
101
~~101~~	Inline Interactive Data Files	Attached
104		The cover page from the Company’s Quarterly Report on Form 10–Q for the quarter ended March 31, 2021, has been formatted in Inline XBRL	Within the Inline XBRL document

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~HORIZON BANCORP~~

~~Dated:~~

~~November 8, 2017~~

~~/s/ Craig M. Dwight~~

~~Craig M. Dwight~~

~~Chief Executive Officer~~

HORIZON BANCORP, INC.

April 30, 2021

/s/ Craig M. Dwight

Date

Craig M. Dwight

Chief Executive Officer

~~Dated:~~April 30, 2021

~~November 8, 2017~~

/s/ Mark E. Secor

Date

Mark E. Secor

~~Mark E. Secor~~

Chief Financial Officer


PART I. FINANCIAL INFORMATION

Item 1.			Financial Statements (Unaudited)						3

	Condensed Consolidated Balance Sheets					3

	Condensed Consolidated Statements of Income					4

	Condensed Consolidated Statements of Comprehensive Income					5
		Condensed Consolidated Statements of Stockholders’ Equity			6
					~~Condensed Consolidated Statement of Stockholders’ Equity~~			6

	Condensed Consolidated Statements of Cash Flows					7

	Notes to Condensed Consolidated Financial Statements					9

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations					50	42

Item 3.			Quantitative and Qualitative Disclosures about Market Risk					69	58

Item 4.			Controls and Procedures					69	58

PART II. OTHER INFORMATION				70

Item 1.					Legal Proceedings					70	59

Item 1A.			Risk Factors					70	59

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds					70	59

Item 3.			Defaults Upon Senior Securities					70	59

Item 4.			Mine Safety Disclosures					70	59

Item 5.			Other Information					70	59
Item 6.		Exhibits			59
~~Item 6.~~ Index to Exhibits								~~Exhibits~~59			71

Signatures						72	61


	September 30			December 31
	2017			2016
	(Unaudited)
Assets
Cash and due from banks	$	72,662		$	70,832
Investment securities, available for sale		509,844			439,831
Investment securities, held to maturity (fair value of $202,222 and $194,086)		198,605			193,194
Loans held for sale		3,616			8,087
Loans, net of allowance for loan losses of $15,586 and $14,837		2,410,239			2,121,149
Premises and equipment, net		73,743			66,357
Federal Reserve and Federal Home Loan Bank stock		15,340			23,932
Goodwill		93,750			76,941
Other intangible assets		9,494			9,366
Interest receivable		14,880			12,713
Cash value of life insurance		75,480			74,134
Other assets		41,848			44,620

Total assets	$	3,519,501		$	3,141,156

Liabilities
Deposits
Non-interest bearing	$	563,536		$	496,248
Interest bearing		2,044,739			1,974,962

Total deposits		2,608,275			2,471,210
Borrowings		458,152			267,489
Subordinated debentures		37,607			37,456
Interest payable		700			472
Other liabilities		22,712			23,674

Total liabilities		3,127,446			2,800,301

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		212,436			182,326
Retained earnings		181,396			164,173
Accumulated other comprehensive loss		(1,777	)		(5,644	)

Total stockholders’ equity		392,055			340,855

Total liabilities and stockholders’ equity	$	3,519,501		$	3,141,156


	March 31, 2021		December 31, 2020
	(Unaudited)
Assets
Cash and due from banks	$	529,336	$	249,711
Interest earning time deposits	7,983		8,965
Investment securities, available for sale	1,262,175		1,134,025
Investment securities, held to maturity (fair value of $170,949 and $179,990)	161,650		168,676
Loans held for sale	7,798		13,538
Loans, net of allowance for credit losses of $57,186 and $57,027	3,607,250		3,810,356
Premises and equipment, net	92,109		92,416
Federal Home Loan Bank stock	23,023		23,023
Goodwill	151,238		151,238
Other intangible assets	22,058		22,955
Interest receivable	20,951		21,396
Cash value of life insurance	97,262		96,751
Other assets	72,695		93,564
Total assets	$	6,055,528	$	5,886,614
Liabilities
Deposits
Non–interest bearing	$	1,133,412	$	1,053,242
Interest bearing	3,588,404		3,477,891
Total deposits	4,721,816		4,531,133
Borrowings	481,488		475,000
Subordinated notes	58,640		58,603
Junior subordinated debentures issued to capital trusts	56,604		56,548
Interest payable	1,772		2,712
Other liabilities	45,829		70,402
Total liabilities	5,366,149		5,194,398
Commitments and contingent liabilities	0		0
Stockholders’ Equity
Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares	0		0
Common stock, no par value, Authorized 99,000,000 shares
Issued 43,974,258 and 43,905,631 shares, Outstanding 43,949,189 and 43,880,562 shares	0		0
Additional paid-in capital	362,613		362,945
Retained earnings	316,080		301,419
Accumulated other comprehensive income	10,686		27,852
Total stockholders’ equity	689,379		692,216
Total liabilities and stockholders’ equity	$	6,055,528	$	5,886,614


	Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net Income	$	8,171		$	6,602		$	25,467		$	18,309

Other Comprehensive Income (Loss)
Change in fair value of derivative instruments:
Change in fair value of derivative instruments for the period		297			803			743			158
Income tax effect		(104	)		(281	)		(260	)		(55	)

Changes from derivative instruments		193			522			483			103

Change in securities:
Unrealized appreciation (depreciation) for the period on AFS securities		(791	)		(1,927	)		5,444			6,712
Amortization from transfer of securities from available for sale to held to maturity securities		(54	)		(83	)		(200	)		(560	)
Reclassification adjustment for securities (gains) losses realized in income		(6	)		—			(38	)		(875	)
Income tax effect		297			704			(1,822	)		(1,848	)

Unrealized gains (losses) on securities		(554	)		(1,306	)		3,384			3,429

Other Comprehensive Income (Loss), Net of Tax		(361	)		(784	)		3,867			3,532

Comprehensive Income	$	7,810		$	5,818		$	29,334		$	21,841


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2017		2016		2017		2016
Interest Income
Loans receivable	$	28,113	$	25,313	$	79,699	$	65,854
Investment securities
Taxable		2,167		2,498		6,817		7,703
Tax exempt		1,790		1,151		5,193		3,583

Total interest income		32,070		28,962		91,709		77,140

Interest Expense
Deposits		1,841		1,875		5,315		4,923
Borrowed funds		1,753		2,128		4,028		5,608
Subordinated debentures		597		549		1,721		1,556

Total interest expense		4,191		4,552		11,064		12,087

Net Interest Income		27,879		24,410		80,645		65,053
Provision for loan losses		710		455		1,370		1,219

Net Interest Income after Provision for Loan Losses		27,169		23,955		79,275		63,834

Non-interest Income
Service charges on deposit accounts		1,672		1,605		4,638		4,310
Wire transfer fees		175		292		503		588
Interchange fees		1,251		1,156		3,809		3,065
Fiduciary activities		1,887		1,653		5,752		4,753
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)		6		—		38		875
Gain on sale of mortgage loans		1,950		3,528		5,918		9,171
Mortgage servicing income net of impairment		369		409		1,175		1,356
Increase in cash value of bank owned life insurance		474		449		1,346		1,145
Other income		237		226		613		708

Totalnon-interest income		8,021		9,318		23,792		25,971

Non-interest Expense
Salaries and employee benefits		12,911		12,210		37,086		32,592
Net occupancy expenses		2,400		2,174		7,048		6,011
Data processing		1,502		1,616		4,311		3,855
Professional fees		649		612		1,797		2,190
Outside services and consultants		2,504		2,686		4,991		5,983
Loan expense		1,215		1,482		3,572		4,086
FDIC insurance expense		270		465		776		1,279
Other losses		58		107		186		510
Other expense		3,004		2,730		8,755		7,798

Totalnon-interest expense		24,513		24,082		68,522		64,304

Income Before Income Tax		10,677		9,191		34,545		25,501
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)		2,506		2,589		9,078		7,192

Net Income		8,171		6,602		25,467		18,309
Preferred stock dividend		—		—		—		(42	)

Net Income Available to Common Shareholders	$	8,171	$	6,602	$	25,467	$	18,267

Basic Earnings Per Share	$	0.36	$	0.31	$	1.14	$	0.95
Diluted Earnings Per Share		0.36		0.30		1.13		0.94


	Three Months Ended
	March 31
	2021		2020
Net Income	$	20,422	$	11,655
Other Comprehensive Income
Change in fair value of derivative instruments:
Change in fair value of derivative instruments for the period	3,053		(3,965)
Income tax effect	(641)		833
Changes from derivative instruments	2,412		(3,132)
Change in securities:
Unrealized appreciation (depreciation) for the period on AFS securities	(23,885)		7,992
Accretion (amortization) from transfer of securities from available for sale to held to maturity securities	17		(30)
Reclassification adjustment for securities gains realized in income	(914)		(339)
Income tax effect	5,204		(1,601)
Unrealized gains (losses) on securities	(19,578)		6,022
Other Comprehensive Income (Loss), Net of Tax	(17,166)		2,890
Comprehensive Income	$	3,256	$	14,545


								Accumulated
			Additional					Other
	Preferred		Paid-in		Retained			Comprehensive
	Stock		Capital		Earnings			Income (Loss)			Total
Balances, January 1, 2017	$	—	$	182,326	$	164,173		$	(5,644	)	$	340,855
Net income						25,467						25,467
Other comprehensive income, net of tax									3,867			3,867
Amortization of unearned compensation				103								103
Exercise of stock options				616								616
Stock option expense				238								238
Stock issued in Lafayette acquisition				29,153								29,153
Cash dividends on common stock ($0.37 per share)						(8,244	)					(8,244	)

Balances, September 30, 2017	$	—	$	212,436	$	181,396		$	(1,777	)	$	392,055


	Three Months Ended
	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
Balances, January 1, 2020	$	—	$	—	$	379,853	$	269,738	$	6,432	$	656,023
Net income	—		—		—		11,655		—		11,655
Other comprehensive income, net of tax	—		—		—		—		2,890		2,890
Amortization of unearned compensation	—		—		200		—		—		200
Exercise of stock options	—		—		255		—		—		255
Stock option expense	—		—		50		—		—		50
Stock issued stock plans	—		—		297		—		—		297

Repurchase of outstanding stock	—		—		(19,636)		—		—		(19,636)
Cash dividends on common stock ($0.12 per share)	—		—		—		(5,257)		—		(5,257)
Balances, March 31, 2020	$	—	$	—	$	361,019	$	260,501	$	9,322	$	630,842

Balances, January 1, 2021	$	—	$	—	$	362,945	$	301,419	$	27,852	$	692,216
Net income	—		—		—		20,422		—		20,422
Other comprehensive loss, net of tax	—		—		—		—		(17,166)		(17,166)

Amortization of unearned compensation	—		—		335		—		—		335
Exercise of stock options	—		—		653		—		—		653
Stock option expense	—		—		27		—		—		27
Stock awards vested	—		—		(1,347)		—		—		(1,347)

Cash dividends on common stock ($0.12 per share)	—		—		—		(5,761)		—		(5,761)
Balances, March 31, 2021	$	—	$	—	$	362,613	$	316,080	$	10,686	$	689,379


Cash and Cash Equivalents, End of Period	$	529,336	$	86,458
Additional Supplemental Information
Interest paid	$	5,991	$	11,019
Income taxes paid	0		0
Transfer of loans to other real estate and repossessed assets	449		609


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


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


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


			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


	March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale
U.S. Treasury and federal agencies	$	40,155	$	0	$	(553)	$	39,602
State and municipal	992,461		22,182		(9,592)		1,005,051
Federal agency collateralized mortgage obligations	116,072		3,019		(3)		119,088
Federal agency mortgage-backed pools	84,609		2,866		(124)		87,351
Corporate notes	10,015		1,072		(4)		11,083
Total available for sale investment securities	$	1,243,312	$	29,139	$	(10,276)	$	1,262,175
Held to maturity
State and municipal	$	151,474	$	9,109	$	0	$	160,583
Federal agency collateralized mortgage obligations	1,959		22		(2)		1,979
Federal agency mortgage-backed pools	8,217		171		(1)		8,387
Total held to maturity investment securities	$	161,650	$	9,302	$	(3)	$	170,949


	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	)


	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


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


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


	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


	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


					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


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

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


	March 31, 2021
	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	$	9,945	$	0	$	603	$	0	$	10,548	$	5,441
Non–owner occupied real estate	225		0		316		0		541		541
Residential spec homes	0		0		0		0		0		0
Development & spec land	70		0		0		0		70		70
Commercial and industrial	1,585		0		58		0		1,643		1,294
Total commercial	11,825		0		977		0		12,802		7,346
Real estate
Residential mortgage	5,427		71		940		1,478		7,916		7,797
Residential construction	0		0		0		0		0		0
Mortgage warehouse	0		0		0		0		0		0
Total real estate	5,427		71		940		1,478		7,916		7,797
Consumer
Direct installment	8		26		0		0		34		34
Indirect installment	853		34		0		0		887		887
Home equity	2,587		136		354		350		3,427		3,427
Total consumer	3,448		196		354		350		4,348		4,348
Total	$	20,700	$	267	$	2,271	$	1,828	$	25,066	$	19,491


	March 31, 2021
	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	$	471,589		$	550		$	0		$	0		$	550		$	472,139
Non–owner occupied real estate	996,904			859			0			0			859			997,763
Residential spec homes	10,131			0			0			0			0			10,131
Development & spec land	25,564			750			0			0			750			26,314
Commercial and industrial	658,555			105			49			0			154			658,709
Total commercial	2,162,743			2,264			49			0			2,313			2,165,056
Real estate
Residential mortgage	550,699			431			806			71			1,308			552,007
Residential construction	23,555			0			0			0			0			23,555
Mortgage warehouse	266,246			0			0			0			0			266,246
Total real estate	840,500			431			806			71			1,308			841,808
Consumer
Direct installment	35,481			99			8			26			133			35,614
Indirect installment	350,692			547			63			34			644			351,336
Home equity	246,683			543			289			136			968			247,651
Total consumer	632,856			1,189			360			196			1,745			634,601
Total	$	3,636,099		$	3,884		$	1,215		$	267		$	5,366		$	3,641,465
Percentage of total loans	99.85		%	0.11		%	0.03		%	0.01		%	0.15		%	100.00		%


							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


							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	%


	March 31, 2021
	Real Estate		Accounts Receivable/Equipment		Other		Total		ACL Allocation
Commercial
Owner occupied real estate	$	10,404	$	145	$	0	$	10,549	$	1,600
Non–owner occupied real estate	541		0		0		541		0
Residential spec homes	0		0		0		0		0
Development & spec land	70		0		0		70		0
Commercial and industrial	0		1,643		0		1,643		195
Total commercial	11,015		1,788		0		12,803		1,795










Total collateral dependent loans	$	11,015	$	1,788	$	0	$	12,803	$	1,795


				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	%


December 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Commercial
Owner occupied real estate
Pass	$	57,726	$	65,558	$	49,455	$	49,032	$	47,480	$	127,373	$	40,027	$	436,651
Special Mention	0		1,081		5,928		10,205		4,207		12,787		325		34,533
Substandard	1,021		1,231		4,012		2,504		2,839		9,673		3,842		25,122
Doubtful	0		0		0		0		0		0		0		0
Total owner occupied real estate	$	58,747	$	67,870	$	59,395	$	61,741	$	54,526	$	149,833	$	44,194	$	496,306

Non–owner occupied real estate
Pass	$	115,667	$	120,023	$	73,669	$	133,396	$	99,674	$	208,649	$	166,986	$	918,064
Special Mention	862		1,236		28,723		1,298		2,548		13,182		4,072		51,921
Substandard	0		15,552		1,477		107		6,422		4,521		1,572		29,651
Doubtful	0		0		0		0		0		0		0		0
Total non–owner occupied real estate	$	116,529	$	136,811	$	103,869	$	134,801	$	108,644	$	226,352	$	172,630	$	999,636

Residential spec homes
Pass	$	737	$	237	$	0	$	298	$	368	$	1,177	$	7,253	$	10,070
Special Mention	0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0
Doubtful	0		0		0		0		0		0		0		0
Total residential spec homes	$	737	$	237	$	0	$	298	$	368	$	1,177	$	7,253	$	10,070

Development & spec land
Pass	$	573	$	736	$	1,522	$	2,461	$	672	$	11,971	$	6,907	$	24,842
Special Mention	0		0		0		0		0		274		0		274
Substandard	0		0		0		0		0		506		750		1,256
Doubtful	0		0		0		0		0		0		0		0
Total development & spec land	$	573	$	736	$	1,522	$	2,461	$	672	$	12,751	$	7,657	$	26,372

Commercial & industrial
Pass	$	253,953	$	63,772	$	58,978	$	88,121	$	26,044	$	70,706	$	30,845	$	592,419
Special Mention	8,779		1,164		1,088		9,306		1,835		11,870		3,040		37,082
Substandard	4,233		7,079		11,072		1,660		636		3,322		2,384		30,386
Doubtful	0		0		0		0		0		0		0		0
Total commercial & industrial	$	266,965	$	72,015	$	71,138	$	99,087	$	28,515	$	85,898	$	36,269	$	659,887
Total commercial	$	443,551	$	277,669	$	235,924	$	298,388	$	192,725	$	476,011	$	268,003	$	2,192,271


	Three Months Ended March 31, 2021
	Commercial		Real Estate		Mortgage Warehouse		Consumer		Total
Balance, beginning of period	$	42,210	$	4,620	$	1,267	$	8,930	$	57,027
Provision for credit losses on loans	928		(456)		(104)		(1)		367
Charge–offs	(196)		0		0		(235)		(431)
Recoveries	38		65		0		120		223
Balance, end of period	$	42,980	$	4,229	$	1,163	$	8,814	$	57,186


	Three Months Ended March 31, 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	13,618		4,048		0		4,911		22,577
Provision for credit losses on loans	6,916		700		(22)		1,006		8,600
Charge–offs	(69)		(26)		0		(618)		(713)
Recoveries	89		9		0		211		309
Balance, end of period	$	32,550	$	5,654	$	1,055	$	9,181	$	48,440


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

35-1562417

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~515 Franklin Square, Michigan City, Indiana~~

~~(Address of principal executive offices)~~

~~(Zip Code)~~