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Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Branch Acquisition On September 17, 2021, Horizon Bank completed the purchase and assumption of certain assets and liabilities of 14 former TCF National Bank (“TCF”) branches in 11 Michigan counties. Net cash of $618.2 million was received in the transaction, representing the deposit balances assumed at closing, net of amounts paid for loans of $212.0 million, fixed assets of $6.9 million, cash of $4.0 million and a 1.75% premium on deposits. Customer deposit balances were recorded at $846.4 million and a core deposit intangible of $1.6 million was recorded in the transaction, which will be amortized over 10 years on a straight line basis. Goodwill of $3.3 million was generated in the transaction. 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 purchase price for the TCF branches is detailed in the following table. 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.
Assets |  |  | Liabilities |
Cash and due from banks | $ | 4,012 |  |  | Deposits |
Loans |  |  | Non–interest bearing | $ | 181,403 |
Commercial | 101,327 |  |  | NOW accounts | 303,050 |
Residential mortgage | 56,499 |  |  | Savings and money market | 262,488 |
Consumer | 54,212 |  |  | Certificates of deposit | 99,468 |
Total loans | 212,038 |  |  | Total deposits | 846,409 |
Premises and equipment, net | 6,901 |  |  | Interest payable | 16 |
Goodwill | 3,334 |  |  | Other liabilities | 1,278 |
Core deposit intangible | 1,630 |  |  |  |
Interest receivable | 519 |  |  |  |
Other assets | 1,102 |  |  |  |
Total assets purchased | $ | 229,536 |  |  | Total liabilities assumed | $ | 847,703 |
Net cash received | $ | (618,167) |  |  |  |
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. Management continues to complete its evaluation to determine if any loans were purchased with credit deterioration. 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 $5.6 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 loan and deposit base and 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 final purchase price for the Salin acquisition is detailed in the following table. 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. The measurement period adjustments will be calculated as if the accounting had been completed as of the acquisition date.
Assets |  |  | Liabilities |
Cash and due from banks | $ | 152,745 |  |  | Deposits |
Investment securities, available for sale | 54,319 |  |  | Non–interest bearing | $ | 188,744 |
|  |  | NOW accounts | 207,567 |
Loans |  |  | Savings and money market | 274,504 |
Commercial | 352,798 |  |  | Certificates of deposit | 70,529 |
Residential mortgage | 131,008 |  |  | Total deposits | 741,344 |
Consumer | 85,112 |  |  |  |
Total loans | 568,918 |  |  |  |
|  |  | Borrowings | 70,495 |
Premises and equipment, net | 20,425 |  |  | Subordinated debentures | 18,376 |
FRB and FHLB stock | 3,571 |  |  | Interest payable | 826 |
Goodwill | 31,358 |  |  | Other liabilities | 8,759 |
Core deposit intangible | 19,818 |  |  |  |
Interest receivable | 2,488 |  |  |  |
Other assets | 112,880 |  |  |  |
|  |  | Total liabilities assumed | $ | 839,800 |
Total assets purchased | $ | 966,522 |  |  |  |
Common shares issued | $ | 102,722 |  |  |  |
Cash paid | 24,000 |  |  |  |
Total purchase price | $ | 126,722 |  |  |  |
Of the total purchase price of $126.7 million, $19.8 million has been allocated to core deposit intangible. Additionally, $31.4 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 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 the 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 a 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.
Contractually required principal and interest at acquisition | $ | 22,672 |
Contractual cash flows not expected to be collected (nonaccretable differences) | 6,694 |
Expected cash flows at acquisition | 15,978 |
Interest component of expected cash flows (accretable discount) | 735 |
Fair value of acquired loans accounted for under ASC310–30 | $ | 15,243 |
Estimates of certain loans, those for which specific credit–related deterioration has occurred 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 dates. The following schedule includes pro–forma results for the periods ended December 31, 2020 and 2019 as if the Salin acquisition had occurred as of the beginning of the comparable prior reporting periods.
|  |  |  |  | For the Year Ended
|  |  |  |  | December 31
|  |  |  |  | 2019
Summary of Operations: |  |  |  |  |
Net Interest Income |  |  |  |  | $ | 168,693 |
Provision for Loan Losses |  |  |  |  | 2,276 |
Net Interest Income after Provision for Loan Losses |  |  |  |  | 166,417 |
Non-interest Income |  |  |  |  | 43,472 |
Non-interest Expense |  |  |  |  | 134,446 |
Income before Income Taxes |  |  |  |  | 75,443 |
Income Tax Expense |  |  |  |  | 13,246 |
Net Income |  |  |  |  | $ | 62,197 |
Basic Earnings per Share |  |  |  |  | $ | 1.43 |
Diluted Earnings per Share |  |  |  |  | $ | 1.43 |
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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