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Acquisitions | 3 Months Ended
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Mar. 31, 2017
Business Combinations [Abstract] |
Acquisitions | 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 |  |  |  |
Cash and due from banks |  | $ | 38,950 |
Investment securities, available for sale |  |  | 1,191 |
Commercial |  |  | 70,006 |
Residential mortgage |  |  | 26,244 |
Consumer |  |  | 6,319 |
Total loans |  |  | 102,569 |
Premises and equipment, net |  |  | 1,466 |
FRB and FHLB stock |  |  | 582 |
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 |
Common shares issued |  | $ | 14,470 |
Cash paid |  |  | 8,513 |
Total estimated purchase price |  | $ | 22,983 |
LIABILITIES |  |  |  |
Deposits |  |  |  |
Non-interest bearing |  | $ | 27,871 |
NOW accounts |  |  | 35,213 |
Savings and money market |  |  | 26,953 |
Certificates of deposits |  |  | 32,771 |
Total deposits |  |  | 122,808 |
Borrowings |  |  | 9,038 |
Interest payable |  |  | 55 |
Other liabilities |  |  | 989 |
Total liabilities assumed |  | $ | 132,890 |
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 loans in the acquisition 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. 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 and non-accrual status, borrower credit scores and recent loan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 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. 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 ASC 310-30 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 ASC 310-30 |  | $ | 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. 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 |  |  |  |
Cash and due from banks |  | $ | 154,849 |
Investment securities, available for sale |  |  | 23,779 |
Commercial |  |  | 153,750 |
Residential mortgage |  |  | 42,603 |
Consumer |  |  | 16,801 |
Mortgage Warehousing |  |  | 99,752 |
Total loans |  |  | 312,906 |
Premises and equipment, net |  |  | 6,022 |
FHLB stock |  |  | 4,029 |
Goodwill |  |  | 20,993 |
Core deposit intangible |  |  | 2,514 |
Interest receivable |  |  | 844 |
Cash value of life insurance |  |  | 15,267 |
Other assets |  |  | 8,334 |
Total assets purchased |  | $ | 549,537 |
Common shares issued |  | $ | 60,306 |
Cash paid |  |  | 38,328 |
Total estimated purchase price |  | $ | 98,634 |
LIABILITIES |  |  |  |
Deposits |  |  |  |
Non-interest bearing |  | $ | 66,733 |
NOW accounts |  |  | 99,346 |
Savings and money market |  |  | 117,688 |
Certificates of deposits |  |  | 87,605 |
Total deposits |  |  | 371,372 |
Borrowings |  |  | 64,793 |
Interest payable |  |  | 178 |
Subordinated debt |  |  | 4,504 |
Other liabilities |  |  | 10,056 |
Total liabilities assumed |  | $ | 450,903 |
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. The Company acquired loans in the acquisition 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. 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 and non-accrual status, borrower credit scores and recent loan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 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. Loans with specific credit-related deterioration, since origination, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected. The following table details an estimate of the acquired loans that are accounted for in accordance with ASC 310-30 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 ASC 310-30 |  | $ | 6,795 |
Final estimates of certain loans, those for which specific credit-related deterioration, since origination, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected. Goodwill was increased by $703,000 as of March 31, 2017 due to measurement period adjustments. CNB Bancorp On November 7, 2016, Horizon completed the acquisition of CNB Bancorp, an Indiana corporation headquartered in Attica, Indiana (“CNB”) and the Bank’s acquisition of The Central National Bank and Trust Company (“Central National Bank & Trust”), through mergers effective November 7, 2016. Under terms of the acquisition, shareholders of CNB received merger consideration in the form of cash. The total value of the consideration for the acquisition was $5.3 million. Under the acquisition method of accounting, the total estimated purchase price is allocated to CNB’s net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on management’s preliminary valuation of the fair value of the tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the final purchase price for the CNB acquisition is allocated as follows:
ASSETS |  |  |  |
Cash and due from banks |  | $ | 27,860 |
Investment securities, available for sale |  |  | 16,393 |
Commercial |  |  | 2,267 |
Residential mortgage |  |  | 6,624 |
Consumer |  |  | 1,579 |
Total loans |  |  | 10,470 |
Premises and equipment, net |  |  | 444 |
FHLB stock |  |  | 50 |
Goodwill |  |  | 609 |
Core deposit intangible |  |  | 190 |
Interest receivable |  |  | 154 |
Other assets |  |  | 49 |
Total assets purchased |  | $ | 56,219 |
Cash paid |  |  | 5,311 |
Total estimated purchase price |  | $ | 5,311 |
LIABILITIES |  |  |  |
Deposits |  |  |  |
Non-interest bearing |  | $ | 24,079 |
NOW accounts |  |  | 9,038 |
Savings and money market |  |  | 13,829 |
Certificates of deposits |  |  | 3,342 |
Total deposits |  |  | 50,288 |
Borrowings |  |  | 459 |
Interest payable |  |  | 7 |
Other liabilities |  |  | 154 |
Total liabilities assumed |  | $ | 50,908 |
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 are considered to be credit impaired. The results of operations of 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 months ended March 31, 2017 and 2016 as if the CNB, LaPorte Bancorp and Kosciusko acquisitions had occurred as of the beginning of the comparable prior reporting periods.
|  | Three Months Ended |
|  | March 31 |  |  | March 31 |
|  | 2017 |  |  | 2016 |
Summary of Operations: |  |  |  |  |  |  |  |
Net Interest Income |  | $ | 25,568 |  |  | $ | 25,497 |
Provision for Loan Losses |  |  | 330 |  |  |  | 532 |
Net Interest Income after Provision for Loan Losses |  |  | 25,238 |  |  | $ | 24,965 |
Non-interest Income |  |  | 7,559 |  |  |  | 8,473 |
Non-Interest Expense |  |  | 21,521 |  |  |  | 24,908 |
Income before Income Taxes |  |  | 11,276 |  |  |  | 8,530 |
Income Tax Expense |  |  | 3,052 |  |  |  | 2,385 |
Net Income |  |  | 8,224 |  |  |  | 6,145 |
Net Income Available to Common Shareholders |  | $ | 8,224 |  |  | $ | 6,103 |
Basic Earnings Per Share |  | $ | 0.37 |  |  | $ | 0.34 |
Diluted Earnings Per Share |  | $ | 0.37 |  |  | $ | 0.34 |
The pro-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. The pro-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. 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 $10.9 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.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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