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Acquisitions | 3 Months Ended
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Mar. 31, 2019
Business Combinations [Abstract] |
Acquisitions | Note 2 – Acquisitions Salin Bancshares, Inc. On March 26, 2019, Horizon completed the acquisition of Salin Bancshares, Inc. (“Salin”), an Indiana corporation, and Horizon Bank’s acquisition of Salin Bank and Trust Company (“Salin Bank”), an Indiana commercial bank and wholly-owned subsidiary of Salin, through mergers effective March 26, 2019. Under the terms of the Merger Agreement, shareholders of Salin received 23,907.5 shares of Horizon common stock and $ 87,417.17 in cash for each outstanding share of Salin common stock. Salin shares outstanding at the closing to be exchanged were 275, and the shares of Horizon common stock issued to Salin shareholders totaled 6,563,697. The Salin shareholders received cash in lieu of fractional shares. Based upon the March 25, 2019 closing price of $15.65 per share of Horizon common stock immediately prior to the effectiveness of the merger the transaction has an implied valuation of approximately $126.7 million. The Company incurred approximately $4.6 million in costs related to the acquisition. These expenses are classified in the non-interest expense section of the income statement and are primarily located in the data processing, professional fees, outside services and consultants 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 estimates and assumptions that are subject to change, the preliminary purchase price for the Salin acquisition is detailed in the following table. Final estimates of fair value on the date of acquisition have not been received yet. Prior to the end of the one year measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to 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 |  |  |
Cash and due from banks |  | $ | 152,745 |
Investment securities, available for sale |  |  | 54,706 |
Loans |  |  |  |
Commercial |  |  | 350,916 |
Residential mortgage |  |  | 136,089 |
Consumer |  |  | 84,814 |
Total loans |  |  | 571,819 |
Premises and equipment, net |  |  | 23,882 |
FRB and FHLB stock |  |  | 3,571 |
Goodwill |  |  | 25,810 |
Core deposit intangible |  |  | 21,111 |
Interest receivable |  |  | 2,488 |
Other assets |  |  | 107,611 |
Total assets purchased |  | $ | 963,743 |
Common shares issued |  | $ | 102,722 |
Cash paid |  |  | 24,000 |
Total purchase price |  | $ | 126,722 |
Liabilities |  |  |
Deposits |  |  |  |
Non-interest bearing |  | $ | 188,744 |
NOW accounts |  |  | 207,567 |
Savings and money market |  |  | 274,504 |
Certificates of deposit |  |  | 70,652 |
Total deposits |  |  | 741,467 |
Borrowings |  |  | 70,495 |
Subordinated debentures |  |  | 17,443 |
Interest payable |  |  | 826 |
Other liabilities |  |  | 6,790 |
Total liabilities assumed |  | $ | 837,021 |
Of the total purchase price of $126.7 million, $21.1 million has been allocated to core deposit intangible. Additionally, $25.8 million has been allocated to goodwill and none of the purchase price is deductible. The core deposit intangible is being amortized over 10 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 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 assumptions, such as default rates, severity and prepayment speeds. The following table details an estimate of the acquired loans that are accounted for in accordance with ASC 310-30 as of March 26, 2019. Final valuation estimates have not yet been determined for acquired loans as of March 31, 2019. If information becomes available which would indicate adjustment to the purchase price allocation, such adjustments would be made prospectively.
Contractually required principal and interest at acquisition |  | $ | 22,209 |
Contractual cash flows not expected to be collected (nonaccretable differences) |  |  | 8,632 |
Expected cash flows at acquisition |  |  | 13,577 |
Interest component of expected cash flows (accretable discount) |  |  | 1,333 |
Fair value of acquired loans accounted for under ASC 310-30 |  | $ | 12,244 |
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. The results of operations of Salin have been included in the Company’s consolidated financial statements since the acquisition date. The following schedule includes pro-forma results for the three months ended March 31, 2019 and 2018 as if the Salin acquisition had occurred as of the beginning of the comparable prior reporting periods.
|  | Three Months Ended |
|  | March 31 |  |  | March 31 |
|  | 2019 |  |  | 2018 |
Summary of Operations: |  |  |  |  |  |  |  |
Net Interest Income |  | $ | 42,182 |  |  | $ | 40,619 |
Provision for Loan Losses |  |  | 664 |  |  |  | 1,167 |
Net Interest Income after Provision for Loan Losses |  |  | 41,518 |  |  |  | 39,452 |
Non-interest Income |  |  | 9,126 |  |  |  | 9,999 |
Non-interest Expense |  |  | 42,152 |  |  |  | 33,169 |
Income before Income Taxes |  |  | 8,492 |  |  |  | 16,282 |
Income Tax Expense |  |  | 2,017 |  |  |  | 2,465 |
Net Income |  |  | 6,475 |  |  |  | 13,817 |
Net Income Available to Common Shareholders |  | $ | 6,475 |  |  | $ | 13,817 |
Basic Earnings per Share |  | $ | 0.17 |  |  | $ | 0.36 |
Diluted Earnings per Share |  | $ | 0.17 |  |  | $ | 0.36 |
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.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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