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Loans
 6 Months Ended
Jun. 30, 2019
Receivables [Abstract]  
Loans
Note 4
–
Loans
  
June 30
   
December 31
 
  
2019
   
2018
 
Commercial
   
     
 
Working capital and equipment
 
$
917,533
    $
804,083
 
Real estate, including agriculture
   
1,017,138
     
834,037
 
Tax exempt
   
61,015
     
48,975
 
Other
   
66,937
     
34,495
 
                 
Total
   
2,062,623
     
1,721,590
 
Real estate
   
     
 
1-4
family
    
806,390
     
659,754
 
Other
   
7,675
     
8,387
 
                 
Total
   
814,065
     
668,141
 
Consumer
   
     
 
Auto
   
343,876
     
327,413
 
Recreation
   
16,257
     
13,975
 
Real estate/home improvement
   
44,988
     
39,587
 
Home equity
   
239,358
     
163,209
 
Unsecured
   
7,455
     
4,043
 
Other
   
2,618
     
1,254
 
                 
Total
   
654,552
     
549,481
 
Mortgage warehouse
   
133,428
     
74,120
 
                 
Total loans
   
3,664,668
     
3,013,332
 
Allowance for loan losses
   
(18,305
)
   
(17,820
 )
                 
Loans, net
 
$
3,646,363
    $
2,995,512
 
                 
Commercial
Commercial loans are primarily based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Commercial real estate loans are viewed primarily as cash flow loans and, secondarily, as loans secured by real estate. Commercial real estate lending typically involves larger loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets, the general economy, or fluctuations in interest rates. The properties securing the Company’s commercial real estate portfolio are diverse in terms of property type, and are monitored for concentrations of credit. Management monitors and evaluates commercial real estate loans based on collateral, cash flow, and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus
non-owner
occupied loans.
 
Real Estate and Consumer
With respect to residential loans that are secured by
1-4
family residences and are generally owner occupied, the Company generally establishes a maximum
loan-to-value
ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in
1-4
family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
Mortgage Warehousing
Horizon’s mortgage warehouse lending has specific mortgage companies as customers of Horizon Bank. Individual mortgage loans originated by these mortgage companies are funded as a secured borrowing with a pledge of collateral under Horizon’s agreement with the mortgage company. Each mortgage loan funded by Horizon undergoes an underwriting review by Horizon to the end investor guidelines and is assigned to Horizon until the loan is sold to the secondary market by the mortgage company. In addition, Horizon takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. At the time a loan is transferred to the secondary market, the mortgage company reacquires the loan under its option within the agreement. Due to the reacquire feature contained in the agreement, the transaction does not qualify as a sale and therefore is accounted for as a secured borrowing with a pledge of collateral pursuant to the agreement with the mortgage company. When the individual loan is sold to the end investor by the mortgage company, the proceeds from the sale of the loan are received by Horizon and used to pay off the loan balance with Horizon along with any accrued interest and any related fees. The remaining balance from the sale is forwarded to the mortgage company. These individual loans typically are sold by the mortgage company within 30 days and are seldom held more than 90 days. Interest income is accrued during this period and collected at the time each loan is sold. Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.
Based on the agreements with each mortgage company, at any time a mortgage company can reacquire from Horizon its outstanding loan balance on an individual mortgage and regain possession of the original note. Horizon also has the option to request that the mortgage company reacquire an individual mortgage. Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company. Also, in the event that the end investor would not be able to honor the purchase commitment and the mortgage company would not be able to reacquire its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.
 
The following table shows the recorded investment of individual loan categories.
                                 
 
June 30, 2019
 
 
Loan
Balance
   
Interest
Due
   
Deferred
Costs/(Fees)
   
Recorded
Investment
 
Owner occupied real estate
  $
709,597
    $
1,253
    $
(1,584
 )   $
709,266
 
Non-owner
occupied real estate
    
783,092
     
1,464
     
(1,701
 )    
782,855
 
Residential spec homes
   
14,862
     
36
     
(24
 )    
14,874
 
Development & spec land
   
41,102
     
179
     
71
     
41,352
 
Commercial and industrial
   
518,880
     
4,806
     
(1,672
 )    
522,014
 
                                 
Total commercial
   
2,067,533
     
7,738
     
(4,910
 )    
2,070,361
 
Residential mortgage
   
798,813
     
2,521
     
(7,151
 )    
794,183
 
Residential construction
   
22,403
     
57
     
—
     
22,460
 
Mortgage warehouse
   
133,428
     
480
     
—
     
133,908
 
                                 
Total real estate
   
954,644
     
3,058
     
(7,151
 )    
950,551
 
Direct installment
   
46,468
     
156
     
808
     
47,432
 
Indirect installment
   
329,773
     
806
     
—
     
330,579
 
Home equity
   
275,396
     
1,505
     
2,107
     
279,008
 
                                 
Total consumer
   
651,637
     
2,467
     
2,915
     
657,019
 
                                 
Total loans
   
3,673,814
     
13,263
     
(9,146
 )    
3,677,931
 
Allowance for loan losses
   
(18,305
 )    
—
     
—
     
(18,305
 )
                                 
Net loans
  $
3,655,509
    $
13,263
    $
(9,146
 )   $
3,659,626
 
                                 
       
 
December 31, 2018
 
 
Loan
Balance
   
Interest
Due
   
Deferred
Costs/(Fees)
   
Recorded
Investment
 
Owner occupied real estate
  $
561,463
    $
1,240
    $
(1,629
 )   $
561,074
 
Non-owner
occupied real estate
    
717,814
     
1,063
     
(1,839
 )    
717,038
 
Residential spec homes
   
5,199
     
13
     
(2
 )    
5,210
 
Development & spec land
   
46,547
     
131
     
(12
 )    
46,666
 
Commercial and industrial
   
394,346
     
3,149
     
(297
 )    
397,198
 
                                 
Total commercial
   
1,725,369
     
5,596
     
(3,779
 )    
1,727,186
 
Residential mortgage
   
646,136
     
1,861
     
(2,025
 )    
645,972
 
Residential construction
   
24,030
     
42
     
—  
      
24,072
 
Mortgage warehouse
   
74,120
     
480
     
—  
      
74,600
 
                                 
Total real estate
   
744,286
     
2,383
     
(2,025
 )    
744,644
 
Direct installment
   
38,173
     
103
     
566
     
38,842
 
Indirect installment
   
314,177
     
738
     
—  
      
314,915
 
Home equity
   
194,766
     
973
     
1,799
     
197,538
 
                                 
Total consumer
   
547,116
     
1,814
     
2,365
     
551,295
 
                                 
Total loans
   
3,016,771
     
9,793
     
(3,439
 )    
3,023,125
 
Allowance for loan losses
   
(17,820
 )    
—  
      
—  
      
(17,820
 )
                                 
Net loans
  $
2,998,951
    $
9,793
    $
(3,439
 )   $
3,005,305