Form 10-Q
Table of Contents

 

 

HORIZON BANCORP

 

 

FORM 10-Q

 

 

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

Commission file number 0-10792

 

 

HORIZON BANCORP

(Exact name of registrant as specified in its charter)

 

 

 

Indiana   35-1562417

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

515 Franklin Square, Michigan City, Indiana   46360
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (219) 879-0211

Former name, former address and former fiscal year, if changed since last report: N/A

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

 

Large Accelerated Filer   ¨    Accelerated Filer   x
Non-accelerated Filer   ¨  (Do not check if smaller reporting company)    Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 8,693,741 shares of Common Stock, no par value, at November 8, 2012.

 

 

 


Table of Contents

HORIZON BANCORP

FORM 10-Q

INDEX

 

PART I. FINANCIAL INFORMATION

  

Item 1.

   Financial Statements   
   Condensed Consolidated Balance Sheets      3   
   Condensed Consolidated Statements of Income      4   
   Condensed Consolidated Statements of Comprehensive Income      5   
   Condensed Consolidated Statement of Stockholders’ Equity      6   
   Condensed Consolidated Statements of Cash Flows      7   
   Notes to Condensed Consolidated Financial Statements      8   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      37   

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk      51   

Item 4.

   Controls and Procedures      51   

PART II. OTHER INFORMATION

  

Item 1.

   Legal Proceedings      52   

Item 1A.

   Risk Factors      52   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      52   

Item 3.

   Defaults Upon Senior Securities      52   

Item 4.

   Mine Safety Disclosures      52   

Item 5.

   Other Information      52   

Item 6.

   Exhibits      53   

Signatures

     54   

Index To Exhibits

     55   

 

2


Table of Contents

PART 1 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

 

     September 30
2012
(Unaudited)
     December 31
2011
 

Assets

     

Cash and due from banks

   $ 41,562       $ 20,447   

Investment securities, available for sale

     497,704         431,045   

Investment securities, held to maturity

     6,100         7,100   

Loans held for sale

     18,163         14,090   

Loans, net of allowance for loan losses of $18,568 and $18,882

     1,136,480         964,311   

Premises and equipment

     40,297         34,665   

Federal Reserve and Federal Home Loan Bank stock

     13,333         12,390   

Goodwill

     19,748         5,910   

Other intangible assets

     4,295         2,292   

Interest receivable

     8,248         6,671   

Cash value life insurance

     34,929         30,190   

Other assets

     25,917         18,051   
  

 

 

    

 

 

 

Total assets

   $ 1,846,776       $ 1,547,162   
  

 

 

    

 

 

 

Liabilities

     

Deposits

     

Non-interest bearing

   $ 211,935       $ 130,673   

Interest bearing

     1,095,036         879,192   
  

 

 

    

 

 

 

Total deposits

     1,306,971         1,009,865   

Borrowings

     333,150         370,111   

Subordinated debentures

     32,282         30,676   

Interest payable

     579         596   

Other liabilities

     17,932         14,449   
  

 

 

    

 

 

 

Total liabilities

     1,690,914         1,425,697   
  

 

 

    

 

 

 

Commitments and contingent liabilities

     

Stockholders’ Equity

     

Preferred stock, $.01 par value, $1,000 liquidation value
Authorized, 1,000,000 Series B shares
Issued 12,500 and 12,500 shares

     12,500         12,500   

Common stock, no par value
Authorized, 22,500,000 shares
Issued, 8,685,490 and 7,450,794 shares
Outstanding, 8,617,735 and 7,421,544 shares

     —           —     

Additional paid-in capital

     31,894         11,736   

Retained earnings

     101,267         89,387   

Accumulated other comprehensive income

     10,201         7,842   
  

 

 

    

 

 

 

Total stockholders’ equity

     155,862         121,465   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,846,776       $ 1,547,162   
  

 

 

    

 

 

 

See notes to condensed consolidated financial statements

 

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Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

 

     Nine Months Ended September 30     Three Months Ended September 30  
     2012
(Unaudited)
    2011
(Unaudited)
    2012
(Unaudited)
    2011
(Unaudited)
 

Interest Income

        

Loans receivable

   $ 15,527      $ 12,481      $ 42,386      $ 36,260   

Investment securities

        

Taxable

     2,178        2,542        6,738        7,828   

Tax exempt

     1,014        988        2,944        3,066   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     18,719        16,011        52,068        47,154   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest Expense

        

Deposits

     1,638        1,978        4,803        6,510   

Borrowed funds

     1,597        1,583        4,635        4,760   

Subordinated debentures

     485        459        1,427        1,363   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     3,720        4,020        10,865        12,633   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

     14,999        11,991        41,203        34,521   

Provision for loan losses

     1,041        1,564        1,809        4,444   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income after Provision for Loan Losses

     13,958        10,427        39,394        30,077   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income

        

Service charges on deposit accounts

     1,002        802        2,477        2,422   

Wire transfer fees

     248        167        643        412   

Interchange fees

     885        721        2,227        1,905   

Fiduciary activities

     971        1,016        2,928        2,911   

Gain on sale of securities

     2        1,115        2        1,754   

Gain on sale of mortgage loans

     4,436        2,145        10,121        3,986   

Mortgage servicing income net of impairment

     (355     (172     (95     691   

Increase in cash value of bank owned life insurance

     300        245        760        661   

Death benefit on officer life insurance

     —          453        —          453   

Other income

     221        46        344        105   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

     7,710        6,538        19,407        15,300   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Expenses

        

Salaries and employee benefits

     7,905        6,081        20,407        16,912   

Net occupancy expenses

     1,186        1,056        3,216        3,176   

Data processing

     754        549        1,883        1,450   

Professional fees

     366        359        1,483        1,039   

Outside services and consultants

     624        454        1,621        1,221   

Loan expense

     1,311        820        2,879        2,276   

FDIC insurance expense

     291        254        798        944   

Other losses

     309        1,088        501        1,365   

Other expenses

     2,094        1,652        5,392        4,675   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expenses

     14,840        12,313        38,180        33,058   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Income Tax

     6,828        4,652        20,621        12,319   

Income tax expense

     1,978        1,235        6,248        3,044   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

     4,850        3,417        14,373        9,275   

Preferred stock dividend and discount accretion

     (63     (710     (325     (1,263
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Available to Common Shareholders

   $ 4,787      $ 2,707      $ 14,048      $ 8,012   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic Earnings Per Share

   $ 0.56      $ 0.37      $ 1.81      $ 1.08   

Diluted Earnings Per Share

     0.54        0.36        1.75        1.05   

See notes to condensed consolidated financial statements

 

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HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Dollar Amounts in Thousands)

 

     Three Months Ended September 30     Nine Months Ended September 30  
     2012
(Unaudited)
    2011
(Unaudited)
    2012
(Unaudited)
    2011
(Unaudited)
 

Net Income

   $ 4,850      $ 3,417      $ 14,373      $ 9,275   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Comprehensive Income

        

Change in fair value of derivative instruments, net of taxes of $(92) and $(317) for three and nine months ended 2012 and $(1,051) and $(1,221), for three and nine months ended 2011, respectively

     (170     (1,951     (589     (2,268

Unrealized appreciation on available-for-sale securities, net of taxes of $860 and $1,588, for three and nine months ended 2012 and $1,856 and $4,852 for the three and nine months ended 2011, respectively

     1,597        3,447        2,949        9,011   

Less: reclassification adjustment for realized gains included in net income, net of taxes of $1 for three and nine months ended 2012, and $390 and $614, for three and nine months ended 2011, respectively

     1        725        1        1,140   
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,426        771        2,359        5,603   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

   $ 6,276      $ 4,188      $ 16,732      $ 14,878   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to condensed consolidated financial statements

 

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Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

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

 

     Preferred
Stock
     Additional
Paid-in
Capital
     Retained
Earnings
    Accumulated
Other
Comprehensive
Income
     Total  

Balances, January 1, 2012

   $ 12,500       $ 11,736       $ 89,387      $ 7,842       $ 121,465   

Net income

           14,373           14,373   

Other comprehensive income, net of tax

             2,359         2,359   

Amortization of unearned compensation

        124              124   

Issuance of restricted shares

        115              115   

Exercise of stock options

        226              226   

Stock option expense

        25              25   

Stock issued from acquisition

        19,668              19,668   

Cash dividends on preferred stock

           (325        (325

Cash dividends on common stock ($.27 per share)

           (2,168        (2,168
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balances, September 30, 2012

   $ 12,500       $ 31,894       $ 101,267      $ 10,201       $ 155,862   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

See notes to condensed consolidated financial statements

 

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Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

 

     Nine Months Ended September 30  
     2012
(Unaudited)
    2011
(Unaudited)
 

Operating Activities

    

Net income

   $ 14,373      $ 9,275   

Items not requiring (providing) cash

    

Provision for loan losses

     1,809        4,444   

Depreciation and amortization

     1,988        1,868   

Share based compensation

     25        27   

Mortgage servicing rights impairment (recovery)

     369        (464

Premium amortization on securities available for sale, net

     2,387        1,612   

Gain on sale of investment securities

     (2     (1,754

Gain on sale of mortgage loans

     (10,121     (3,986

Proceeds from sales of loans

     293,909        178,239   

Loans originated for sale

     (283,788     (174,253

Change in cash value of life insurance

     (727     236   

(Gain) loss on sale of other real estate owned

     (5     126   

Net change in

    

Interest receivable

     (757     (132

Interest payable

     (107     (199

Other assets

     217        (1,590

Other liabilities

     (2,112     1,416   
  

 

 

   

 

 

 

Net cash provided by operating activities

     17,458        14,865   
  

 

 

   

 

 

 

Investing Activities

    

Purchases of securities available for sale

     (96,713     (170,689

Proceeds from sales, maturities, calls, and principal repayments of securities available for sale

     92,734        134,583   

Purchase of securities held to maturity

     —          (2,437

Proceeds from maturities of securities held to maturity

     4,177        1,400   

(Purchase) proceeds from the sale of Federal Home Loan Bank stock

     —          1,274   

Net change in loans

     (66,596     (44,766

Proceeds on the sale of OREO and repossessed assets

     2,661        2,008   

Purchases of premises and equipment

     (4,520     (1,548

Purchases of bank owned life insurance

     —          (3,000

Acquisition of Heartland

     26,283        —     
  

 

 

   

 

 

 

Net cash used in by investing activities

     (41,974     (83,175
  

 

 

   

 

 

 

Financing Activities

    

Net change in

    

Deposits

     85,861        4,251   

Borrowings

     (38,078     75,423   

Redemption of preferred stock

     —          (18,750

Issuance of preferred stock

     —          12,500   

Proceeds from issuance of stock

     341        115   

Tax benefit from issuance of stock

     —          8   

Dividends paid on common shares

     (2,168     (1,728

Dividends paid on preferred shares

     (325     (730
  

 

 

   

 

 

 

Net cash provided by financing activities

     45,631        71,089   
  

 

 

   

 

 

 

Net Change in Cash and Cash Equivalent

     21,115        2,779   

Cash and Cash Equivalents, Beginning of Period

     20,447        15,683   
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Period

   $ 41,562      $ 18,462   
  

 

 

   

 

 

 

Additional Cash Flows Information

    

Interest paid

   $ 10,882      $ 12,832   

Income taxes paid

     3,925        2,100   

Transfer of loans to other real estate owned

     3,486        4,273   

See notes to condensed consolidated financial statements

 

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 1 – Accounting Policies

The accompanying condensed consolidated financial statements include the accounts of Horizon Bancorp (“Horizon” or the “Company”) and its wholly-owned subsidiaries, including Horizon Bank, N.A. (“Bank”). All inter-company balances and transactions have been eliminated. The results of operations for the periods ended September 30, 2012 and September 30, 2011 are not necessarily indicative of the operating results for the full year of 2012 or 2011. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of Horizon’s management, necessary to fairly present the financial position, results of operations and cash flows of Horizon for the periods presented. Those adjustments consist only of normal recurring adjustments.

Certain information and note disclosures normally included in Horizon’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Horizon’s Annual Report on Form 10-K for 2011 filed with the Securities and Exchange Commission on March 12, 2012. The consolidated condensed balance sheet of Horizon as of December 31, 2011 has been derived from the audited balance sheet as of that date.

Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted-average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The following table shows computation of basic and diluted earnings per share.

 

     Three months ended
September 30
     Nine months ended
September 30
 
     2012      2011      2012      2011  
     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Basic earnings per share

           

Net income

   $ 4,850       $ 3,417       $ 14,373       $ 9,275   

Less: Preferred stock dividends and accretion of discount

     63         710         325         1,263   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income available to common shareholders

   $ 4,787       $ 2,707       $ 14,048       $ 8,012   

Weighted average common shares outstanding(1)(2)

     8,503,475         7,414,043         7,758,537         7,402,300   

Basic earnings per share

   $ 0.56       $ 0.37       $ 1.81       $ 1.08   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

           

Net income available to common shareholders

   $ 4,787       $ 2,707       $ 14,048       $ 8,012   

Weighted average common shares outstanding(1)(2)

     8,503,475         7,414,043         7,758,537         7,402,300   

Effect of dilutive securities:

           

Warrants

     269,432         163,325         231,038         167,668   

Restricted stock

     30,971         4,399         19,317         13,676   

Stock options

     34,782         14,803         26,105         15,307   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding

     8,838,659         7,596,569         8,034,996         7,598,950   

Diluted earnings per share

   $ 0.54       $ 0.36       $ 1.75       $ 1.05   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Adjusted for 3:2 stock split announced on October 16, 2012 payable November 9, 2012

(2) 

Includes average shares issued for the Heartland acquisition for the three and nine months ending September 30, 2012

 

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Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

At September 30, 2012 and 2011, there were no shares and 66,551 for the three months ended and 12,750 shares and 73,359 shares for the nine months ended, respectively that were not included in the computation of diluted earnings per share because they were non-dilutive.

Horizon has share-based employee compensation plans, which are described in the notes to the financial statements included in the December 31, 2011 Annual Report on Form 10-K.

Reclassifications

Certain reclassifications have been made to the 2011 consolidated financial statements to be comparable to 2012. These reclassifications had no effect on net income.

Note 2 – Acquisition

On July 17, 2012 Horizon closed its acquisition of Heartland Bancshares, Inc. and Horizon Bank N.A.’s acquisition of Heartland Community Bank, through mergers effective July 17, 2012. Under the final terms of the acquisition, the exchange ratio was 0.54 shares of Horizon’s common stock for each share of Heartland common stock outstanding. Heartland shares outstanding at the closing were 1,442,449, and the shares of HBNC common stock issued to Heartland shareholders totaled 778,922. Horizon’s stock price was $25.25 per share at the close of business on July 17, 2012. Based upon these numbers, the total value of the consideration, including the retirement of TARP, for the acquisition was $26.9 million. For the nine months ended September 30, 2012, the Company had approximately $1.5 million is costs related to the acquisition. These expenses are classified in the other expense section of the income statement 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.

Under the purchase method of accounting, the total estimated purchase price is allocated to Heartland’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 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 Heartland acquisition is allocated as follows (in thousands):

 

ASSETS

      LIABILITIES   

Cash and due from banks

   $ 33,531       Deposits   

Investment securities, available for sale

     63,707       Non-interest bearing    $ 59,350   
      NOW accounts      42,681   

Commercial

     70,343       Savings and money market      61,465   

Residential mortgage

     20,838       Certificates of deposits      47,749   
        

 

 

 

Consumer

     23,423      

Total deposits

     211,245   
  

 

 

       

Total loans

     114,604         
      Borrowings      1,186   

Premises and equipment

     2,647       Subordinated debentures      1,537   

FRB and FHLB stock

     943       Interest payable      90   

Goodwill

     13,838       Other liabilities      4,670   

Core deposit intangible

     2,332         

Interest receivable

     820         

Cash value life insurance

     4,012         

Other assets

     9,210         
  

 

 

       

 

 

 

Total assets purchased

   $ 245,644       Total liabilities assumed    $ 218,728   
  

 

 

       

 

 

 

Common shares issued

   $ 19,668         

Retirement of TARP preferred shares

     7,248         
  

 

 

       

Total estimated purchase price

   $ 26,916         
  

 

 

       

 

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

Prior to the end of the 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 retrospectively.

Of the total estimated purchase price of $26.9 million, $2.3 million has been allocated to core deposit intangible. Additionally, $13.8 million has been allocated to goodwill and $10.8 million of the purchase price is deductible and was assigned to the business assets. The core deposit intangible will be amortized over seven 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 nonaccrual 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.

The Company acquired the $131.1 million loan portfolio at a fair value discount of $16.5 million. The performing portion of the portfolio, $95.4 million, had an estimated fair value or $91.6 million. 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 310-20.

Preliminary estimates of certain loans, those for which specific credit-related deterioration, since origination, was identified 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. Many of the acquired loans deemed impaired and considered collateral dependent, with the timing of a sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.

The following table details the acquired loans that are accounted for in accordance with ASC 310-30 (formerly Statement of Position “SOP” 03-3) as of July 17, 2012.

 

Contractually required principal and interest at acquisition

   $ 35,574   

Contractual cash flows not expected to be collected (nonaccretable differences)

     9,747   
  

 

 

 

Expected cash flows at acquisition

     25,827   

Interest component of expected cash flows (accretable discount)

     2,886   
  

 

 

 

Fair value of acquired loans accounted for under ASC 310-30

   $ 22,941   
  

 

 

 

Pro-forma statements were determined to be impracticable due to the materiality of the transaction.

 

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Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

Note 3 – Securities

The fair value of securities is as follows:

 

September 30, 2012    Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 

Available for sale

          

U.S. Treasury and federal agencies

   $ 46,982       $ 394       $ —        $ 47,376   

State and municipal

     163,407         11,476         (62     174,821   

Federal agency collateralized mortgage obligations

     97,534         1,621         (114     99,041   

Federal agency mortgage-backed pools

     166,029         8,114         (6     174,137   

Private labeled mortgage-backed pools

     2,207         81         —          2,288   

Corporate notes

     32         9         —          41   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total available for sale investment securities

   $ 476,191       $ 21,695       $ (182   $ 497,704   
  

 

 

    

 

 

    

 

 

   

 

 

 

Held to maturity, State and Municipal

   $ 6,100       $ —         $ —        $ 6,100   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

December 31, 2011    Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 

Available for sale

          

U.S. Treasury and federal agencies

   $ 12,693       $ 329       $ —        $ 13,022   

State and municipal

     135,011         8,950         (71     143,890   

Federal agency collateralized mortgage obligations

     89,016         2,106         —          91,122   

Federal agency mortgage-backed pools

     173,797         5,669         (115     179,351   

Private labeled mortgage-backed pools

     3,518         118         —          3,636   

Corporate notes

     32         —           (8     24   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total available for sale investment securities

   $ 414,067       $ 17,172       $ (194   $ 431,045   
  

 

 

    

 

 

    

 

 

   

 

 

 

Held to maturity, State and Municipal

   $ 7,100       $ 34       $ —        $ 7,134   
  

 

 

    

 

 

    

 

 

   

 

 

 

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. While these securities are held in the available for sale portfolio, Horizon intends, and has the ability, to hold them until the earlier of a recovery in fair value or maturity.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. At September 30, 2012, no individual investment security had an unrealized loss that was determined to be other-than-temporary.

The unrealized losses on the Company’s investments in securities of state and municipal governmental agencies, and federal agency mortgage-backed pools were caused by interest rate volatility and not a decline in credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company expects to recover the amortized cost basis over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at September 30, 2012.

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2012 and December 31, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

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Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

 

     September 30, 2012      December 31, 2011  
     Amortized
Cost
     Fair
Value
     Amortized
Cost
     Fair
Value
 

Available for sale

           

Within one year

   $ 4,232       $ 4,245       $ 931       $ 940   

One to five years

     45,096         46,420         30,796         31,910   

Five to ten years

     97,217         102,990         51,476         55,053   

After ten years

     63,876         68,583         64,533         69,033   
  

 

 

    

 

 

    

 

 

    

 

 

 
     210,421         222,238         147,736         156,936   

Federal agency collateralized mortgage obligations

     97,534         99,041         89,016         91,122   

Federal agency mortgage-backed pools

     166,029         174,137         173,797         179,351   

Private labeled mortgage-backed pools

     2,207         2,288         3,518         3,636   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale investment securities

   $ 476,191       $ 497,704       $ 414,067       $ 431,045   
  

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity

           

Within one year

   $ 6,100       $ 6,100       $ 7,100       $ 7,134   

One to five years

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total held to maturity investment securities

   $ 6,100       $ 6,100       $ 7,100       $ 7,134   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

 

     Less than 12 Months     12 Months or More     Total  

September 30, 2012

   Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 

State and municipal

   $ 9,535       $ (62   $ —         $ —        $ 9,535       $ (62

Federal agency collateralized mortgage obligations

     19,284         (114     —           —          19,284         (114

Federal agency mortgage-backed pools

     4,479         (6     —           —          4,479         (6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 33,298       $ (182   $ —         $ —        $ 33,298       $ (182
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     Less than 12 Months     12 Months or More     Total  

December 31, 2011

   Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 

State and municipal

   $ 1,550       $ (44   $ 1,948       $ (27   $ 3,498       $ (71

Federal agency mortgage-backed pools

     23,442         (115     23         —          23,465         (115

Corporate notes

     24         (8     —           —          24         (8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 25,016       $ (167   $ 1,971       $ (27   $ 26,987       $ (194
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

       Three months ended September 30      Nine months ended September 30  
       2012        2011      2012        2011  

Sales of securities available for sale (Unaudited)

                 

Proceeds

     $ 14,991         $ 153,299       $ 14,991         $ 170,689   

Gross gains

       3           1,115         3           1,754   

Gross losses

       (1        —           (1        —     

 

12


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

Note 4 – Loans

 

     September 30
2012
    December 31
2011
 

Commercial

    

Working capital and equipment

   $ 193,671      $ 170,325   

Real estate, including agriculture

     242,212        172,910   

Tax exempt

     4,719        3,818   

Other

     6,812        5,323   
  

 

 

   

 

 

 

Total

     447,414        352,376   

Real estate

    

1–4 family

     172,770        153,039   

Other

     3,783        4,102   
  

 

 

   

 

 

 

Total

     176,553        157,141   

Consumer

    

Auto

     137,490        134,686   

Recreation

     5,005        4,737   

Real estate/home improvement

     30,905        27,729   

Home equity

     105,960        92,249   

Unsecured

     4,435        3,183   

Other

     3,053        2,793   
  

 

 

   

 

 

 

Total

     286,848        265,377   

Mortgage warehouse

     244,233        208,299   
  

 

 

   

 

 

 

Total loans

     1,155,048        983,193   

Allowance for loan losses

     (18,568     (18,882
  

 

 

   

 

 

 

Loans, net

   $ 1,136,480      $ 964,311   
  

 

 

   

 

 

 

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 or in the general economy. 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.

 

13


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

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 individual mortgage 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 repurchases the loan under its option within the agreement. Due to the repurchase 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 repurchase from Horizon their 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 repurchase 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 repurchase its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.

 

14


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

The following table shows the recorded investment of individual loan categories.

 

September 30, 2012    Loan
Balance
    Interest Due      Deferred
Fees / (Costs)
    Recorded
Investment
 

Owner occupied real estate

   $ 168,015      $ 614       $ 20      $ 168,649   

Non owner occupied real estate

     187,953        547         55        188,555   

Residential spec homes

     1,130        2         —          1,132   

Development & spec land loans

     6,645        19         —          6,664   

Commercial and industrial

     83,589        390         7        83,986   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total commercial

     447,332        1,572         82        448,986   

Residential mortgage

     164,720        646         91        165,457   

Residential construction

     11,742        19         —          11,761   

Mortgage warehouse

     244,233        427         —          244,660   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total real estate

     420,695        1,092         91        421,878   

Direct installment

     30,247        116         (346     30,017   

Direct installment purchased

     518        —           —          518   

Indirect installment

     128,502        373         —          128,875   

Home equity

     128,671        620         (744     128,547   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total consumer

     287,938        1,109         (1,090     287,957   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total loans

     1,155,965        3,773         (917     1,158,821   

Allowance for loan losses

     (18,568     —           —          (18,568
  

 

 

   

 

 

    

 

 

   

 

 

 

Net loans

   $ 1,137,397      $ 3,773       $ (917   $ 1,140,253   
  

 

 

   

 

 

    

 

 

   

 

 

 
December 31, 2011    Loan
Balance
    Interest Due      Deferred
Fees / (Costs)
    Recorded
Investment
 

Owner occupied real estate

   $ 131,893      $ 383       $ 30      $ 132,306   

Non owner occupied real estate

     142,269        360         94        142,723   

Residential spec homes

     3,574        6         —          3,580   

Development & spec land loans

     8,739        16         —          8,755   

Commercial and industrial

     65,774        169         3        65,946   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total commercial

     352,249        934         127        353,310   

Residential mortgage

     150,893        513         68        151,474   

Residential construction

     6,181        8         —          6,189   

Mortgage warehouse

     208,299        427         —          208,726   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total real estate

     365,373        948         68        366,389   

Direct installment

     24,252        94         (360     23,986   

Direct installment purchased

     981        —           —          981   

Indirect installment

     127,751        420         (56     128,115   

Home equity

     113,561        559         (752     113,368   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total consumer

     266,545        1,073         (1,168     266,450   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total loans

     984,167        2,955         (973     986,149   

Allowance for loan losses

     (18,882     —           —          (18,882
  

 

 

   

 

 

    

 

 

   

 

 

 

Net loans

   $ 965,285      $ 2,955       $ (973   $ 967,267   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

15


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

Note 5 – 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 two-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
 
      2012
(Unaudited)
     2011
(Unaudited)
    2012
(Unaudited)
     2011
(Unaudited)
 

Balance at beginning of the period

   $ 18,374       $ 18,586      $ 18,882       $ 19,064   

Loans charged-off:

          

Commercial

          

Owner occupied real estate

     92         65        95         189   

Non owner occupied real estate

     81         196        109         310   

Residential development

     —           —          —           —     

Development & Spec Land Loans

     —           —          —           —     

Commercial and industrial

     221         17        548         227   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     394         278        752         726   

Real estate

          

Residential mortgage

     247         86        451         837   

Residential construction

     —           —          —           —     

Mortgage warehouse

     —           —          —           —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total real estate

     247         86        451         837   

Consumer

          

Direct Installment

     90         78        261         480   

Direct Installment Purchased

     —           —          —           —     

Indirect Installment

     313         494        922         1,280   

Home Equity

     123         359        1,010         1,888   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total consumer

     526         931        2,193         3,648   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total loans charged-off

     1,167         1,295        3,396         5,211   

Recoveries of loans previously charged-off:

          

Commercial

          

Owner occupied real estate

     —           —          352         18   

Non owner occupied real estate

     —           —          7         —     

Residential development

     —           —          —           —     

Development & Spec Land Loans

     —           —          —           —     

Commercial and industrial

     61         9        114         14   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     61         9        473         32   

Real estate

          

Residential mortgage

     42         —          74         10   

Residential construction

     —           —          —           —     

Mortgage warehouse

     —           —          —           —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total real estate

     42         —          74         10   

Consumer

          

Direct Installment

     28         16        63         83   

Direct Installment Purchased

     —           —          —           —     

Indirect Installment

     173         179        563         568   

Home Equity

     16         51        100         120   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total consumer

     217         246        726         771   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total loan recoveries

     320         255        1,273         813   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net loans charged-off

     847         1,040        2,123         4,398   
  

 

 

    

 

 

   

 

 

    

 

 

 

Provision charged to operating expense

          

Commercial

     625         1,341        320         1,290   

Real estate

     254         815        900         968   

Consumer

     162         (592     589         2,186   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total provision charged to operating expense

     1,041         1,564        1,809         4,444   
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance at the end of the period

   $ 18,568       $ 19,110      $ 18,568       $ 19,110   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

16


Table of Contents

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 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 except 1-4 family residential properties and consumer, the Company promptly charges-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 Company charges-off 1-4 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 unsecured open-end loans when the loan is 90 days past due, and charges down to the net realizable value other secured loans when they are 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.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment analysis:

 

September 30, 2012    Commercial      Real Estate      Mortgage
Warehousing
     Consumer      Total  

Allowance For Loan Losses

              

Ending allowance balance attributable to loans:

              

Individually evaluated for impairment

   $ 2,403       $ —         $ —         $ —         $ 2,403   

Collectively evaluated for impairment

     5,655         2,974         1,716         5,820         16,165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 8,058       $ 2,974       $ 1,716       $ 5,820       $ 18,568   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

              

Individually evaluated for impairment

   $ 12,865       $ —         $ —         $ —         $ 12,865   

Collectively evaluated for impairment

     436,121         177,218         244,660         287,957         1,145,956   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending loans balance

   $ 448,986       $ 177,218       $ 244,660       $ 287,957       $ 1,158,821   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
December 31, 2011    Commercial      Real Estate      Mortgage
Warehousing
     Consumer      Total  

Allowance For Loan Losses

              

Ending allowance balance attributable to loans:

              

Individually evaluated for impairment

   $ 2,136       $ —         $ —         $ —         $ 2,136   

Collectively evaluated for impairment

     5,881         2,472         1,695         6,698         16,746   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 8,017       $ 2,472       $ 1,695       $ 6,698       $ 18,882   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

              

Individually evaluated for impairment

   $ 7,960       $ —         $ —         $ —         $ 7,960   

Collectively evaluated for impairment

     345,350         157,663         208,726         266,450         978,189   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending loans balance

   $ 353,310       $ 157,663       $ 208,726       $ 266,450       $ 986,149   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

Note 6 – Non-performing Loans and Impaired Loans

The following table presents the nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured (“TDRs”) by class of loans:

 

September 30, 2012    Nonaccrual      Loans Past
Due Over 90
Days Still
Accruing
     Non
Performing
TDR’s
     Performing
TDR’s
     Total Non-
Performing
Loans
 

Commercial

              

Owner occupied real estate

   $ 3,887       $ —         $ 1,472       $ —         $ 5,359   

Non owner occupied real estate

     3,754         —           375         —           4,129   

Residential development

     —           —           —           —           —     

Development & Spec Land Loans

     789         —           —           —           789   

Commercial and industrial

     492         9         801         —           1,302   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     8,922         9         2,648         —           11,579   

Real estate

              

Residential mortgage

     4,266         57         2,361         1,857         8,541   

Residential construction

     —           —           —           292         292   

Mortgage warehouse

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     4,266         57         2,361         2,149         8,833   

Consumer

              

Direct Installment

     97         1         —           —           98   

Direct Installment Purchased

     —           —           —           —           —     

Indirect Installment

     923         42         —           —           965   

Home Equity

     1,679         —           52         832         2,563   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Consumer

     2,699         43         52         832         3,626   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,887       $ 109       $ 5,061       $ 2,981       $ 24,038   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

December 31, 2011    Nonaccrual      Loans Past
Due Over 90
Days Still
Accruing
     Non
Performing
TDR’s
     Performing
TDR’s
     Total Non-
Performing
Loans
 

Commercial

              

Owner occupied real estate

   $ 2,515       $ —         $ —         $ —         $ 2,515   

Non owner occupied real estate

     3,970         —           152         —           4,122   

Residential development

     —           —           —           —           —     

Development & Spec Land Loans

     90         —           —           —           90   

Commercial and industrial

     330         —           901         —           1,231   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     6,905         —           1,053         —           7,958   

Real estate

              

Residential mortgage

     4,550         —           1,120         2,389         8,059   

Residential construction

     144         —           —           293         437   

Mortgage warehouse

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     4,694         —           1,120         2,682         8,496   

Consumer

              

Direct Installment

     256         1         —           —           257   

Direct Installment Purchased

     —           4         —           —           4   

Indirect Installment

     926         29         —           —           955   

Home Equity

     1,587         3         25         858         2,473   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Consumer

     2,769         37         25         858         3,689   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,368       $ 37       $ 2,198       $ 3,540       $ 20,143   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

From time to time, the Bank obtains information that may lead management to believe that the collection of payments may be doubtful on a particular loan. In recognition of this, it is management’s policy to convert the loan from an “earning asset” to a non-accruing loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Further, it is management’s policy to place a loan on a non-accrual status when the payment is delinquent in excess of 90 days or the loan has had the accrual of interest discontinued by management. The officer responsible for the loan and the Chief Operating Officer or the senior collection officer must review all loans placed on non-accrual status. Subsequent payments on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal in accordance with the loan terms. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

A loan becomes impaired when, based on current information, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is classified as impaired, the degree of impairment must be recognized by estimating future cash flows from the debtor. The present value of these cash flows is computed at a discount rate based on the interest rate contained in the loan agreement. However, if a particular loan has a determinable market value for its collateral, the creditor may use that value. Also, if the loan is secured and considered collateral dependent, the creditor may use the fair value of the collateral. Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

Smaller-balance, homogeneous loans are evaluated for impairment in total. Such loans include residential first mortgage loans secured by 1 – 4 family residences, residential construction loans, automobile, home equity, second mortgage loans and mortgage warehouse loans. Commercial loans and mortgage loans secured by other properties are evaluated individually for impairment. When analysis of borrower operating results and financial condition indicate that underlying cash flows of a borrower’s business are not adequate to meet its debt service requirements, the loan is evaluated for impairment. Often this is associated with a delay or shortfall in payments of 30 days or more. Loans are generally moved to non-accrual status when they are 90 days or more past due. These loans are often considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms, including TDRs, are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

The Company’s TDRs are considered impaired loans and included in the allowance methodology using the guidance for impaired loans. At September 30, 2012, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments. Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan. A restructured loan is returned to accruing status after six consecutive payments but is still reported as TDR unless the loan bears interest at a market rate. As of September 30, 2012, the Company had $8.4 million in TDRs and $3.4 million were performing according to the restructured terms. The financial statement impact of non-performing TDRs was not material for the three and nine months ending September 30, 2012. There was $1.3 million of specific reserves allocated to TDRs at September 30, 2012 based on the collateral deficiencies.

 

19


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

Loans transferred and classified as troubled debt restructuring during the nine months ended September 30, 2012 and 2011, segregated by class, are shown in the table below.

 

     September 30, 2012      September 30, 2011  
     Number
of
Defaults
     Unpaid
Principal
Balance
     Number
of
Defaults
     Unpaid
Principal
Balance
 

Commercial

     

Owner occupied real estate

     3       $ 1,472         —         $ —     

Non owner occupied real estate

     3         637         —           —     

Residential development

     —           —           —           —     

Development & Spec Land Loans

     —           —           —           —     

Commercial and industrial

     —           —           1         841   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     6         2,109         1         841   

Real estate

           

Residential mortgage

     1         582         2         174   

Residential construction

     —           —           —           —     

Mortgage warehouse

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     1         582         2         174   

Consumer

           

Direct Installment

     —           —           —           —     

Direct Installment Purchased

     —           —           —           —     

Indirect Installment

     —           —           —           —     

Home Equity

     —           —           8         724   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Consumer

     —           —           8         724   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7       $ 2,691         11       $ 1,739   
  

 

 

    

 

 

    

 

 

    

 

 

 

Troubled debt restructured loans which had payment defaults during the nine months ended September 30, 2012 and 2011, segregated by class, are shown in the table below. Default occurs when a loan is 90 days or more past due or has been transferred to nonaccrual.

 

     September 30, 2012      September 30, 2011  
     Number
of
Defaults
     Unpaid
Principal
Balance
     Number
of
Defaults
     Unpaid
Principal
Balance
 

Commercial

     

Owner occupied real estate

     3       $ 1,473         —         $ —     

Non owner occupied real estate

     2         261         —           —     

Residential development

     —           —           —           —     

Development & Spec Land Loans

     —           —           —           —     

Commercial and industrial

     —           —           2         361   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     5         1,734         2         361   

Real estate

           

Residential mortgage

     2         677         2         1,143   

Residential construction

     —           —           —           —     

Mortgage warehouse

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     2         677         2         1,143   

Consumer

           

Direct Installment

     —           —           —           —     

Direct Installment Purchased

     —           —           —           —     

Indirect Installment

     —           —           —           —     

Home Equity

     —           —           2         65   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Consumer

     —           —           2         65   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7       $ 2,411         6       $ 1,569   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

The following table presents commercial loans individually evaluated for impairment by class of loan:

 

                          Three Months Ending     Nine Months Ending  
September 30, 2012    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

   $ 4,457       $ 4,460       $ —         $ 3,810       $ —        $ 1,978       $ 3   

Non owner occupied real estate

     2,521         2,542         —           2,429         70        1,920         72   

Residential development

     —           —           —           —           —          —           —     

Development & Spec Land Loans

     131         131         —           109         (0     37         —     

Commercial and industrial

     456         471         —           382         —          129         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     7,565         7,604         —           6,730         69        4,064         75   

With an allowance recorded

                   

Commercial

                   

Owner occupied real estate

     903         903         450         910         (0     1,109         1   

Non owner occupied real estate

     2,938         2,938         1,065         2,943         —          2,843         —     

Residential development

     —           —           —           —           —          —           —     

Development & Spec Land Loans

     658         658         615         660         —          523         6   

Commercial and industrial

     801         801         273         801         —          807         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     5,300         5,300         2,403         5,314         (0     5,282         7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 12,865       $ 12,904       $ 2,403       $ 12,044       $ 69      $ 9,346       $ 82   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
                          Three Months Ending     Nine Months Ending  
September 30, 2011    Unpaid
Principal
Balance
     Recorded
Investment
     Allowance For
Loan Loss
Allocated
     Average
Balance in
Impaired
Loans
     Interest
Income
Recognized
    Average
Balance in
Impaired
Loans
     Interest
Income
Recognized
 

With no recorded allowance

                   

Commercial

                   

Owner occupied real estate

   $ 1,315       $ 1,314       $ —         $ 1,224       $ 31      $ 856       $ 32   

Non owner occupied real estate

     2,403         2,625         —           1,683         85        985         89   

Residential development

     —           —           —           —           —          9         —     

Development & Spec Land Loans

     —           111         —           —           —          69         —     

Commercial and industrial

     1,154         1,156         —           1,091         47        1,099         47   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     4,872         5,206         —           3,998         163        3,018      

 

 

 

 

 

168

 

 

  

With an allowance recorded

                   

Commercial

                   

Owner occupied real estate

     1,420         1,420         460         1,449         —          1,234         —     

Non owner occupied real estate

     5,499         5,538         996         4,943         —          4,859         —     

Residential development

     —           —           —           —           —          —           —     

Development & Spec Land Loans

     90         90         125         90         —          179         —     

Commercial and industrial

     234         308         225         284         —          393         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     7,243         7,356         1,806         6,766         —          6,665      

 

 

 

 

 

—  

 

 

  

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 12,115       $ 12,562       $ 1,806       $ 10,764       $ 163      $ 9,683      

 

 

$

 

 

168

 

 

  

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

21


Table of Contents

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

The following table presents the payment status by class of loan:

 

September 30, 2012    30 - 59 Days
Past Due
     60 - 89 Days
Past Due
     Greater than 90
Days Past Due
     Total Past Due      Loans Not Past
Due
     Total  

Commercial

                 

Owner occupied real estate

   $ 1,008       $ 110       $ —         $ 1,118       $ 166,897       $ 168,015   

Non owner occupied real estate

     —           123         —           123         187,830         187,953   

Residential development

     —           —           —           —           1,130         1,130   

Development & Spec Land Loans

     —           —           —           —           6,645         6,645   

Commercial and industrial

     433         2,373         9         2,815         80,774         83,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     1,441         2,606         9         4,056         443,276         447,332   

Real estate

                 

Residential mortgage

     1,300         197         57         1,554         163,166         164,720   

Residential construction

     —           —           —           —           11,742         11,742   

Mortgage warehouse

     —           —           —           —           244,233         244,233   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     1,300         197         57         1,554         419,141         420,695   

Consumer

                 

Direct Installment

     162         243         1         406         29,841         30,247   

Direct Installment Purchased

     —           —           —           —           518         518   

Indirect Installment

     1,124         101         42         1,267         127,235         128,502   

Home Equity

     1,038         139         —           1,177         127,494         128,671   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     2,324         483         43         2,850         285,088         287,938   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,065       $ 3,286       $ 109       $ 8,460       $ 1,147,505       $ 1,155,965   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
December 31, 2011    30 - 59 Days
Past Due
     60 - 89 Days
Past Due
     Greater than 90
Days Past Due
     Total Past Due      Loans Not Past
Due
     Total  

Commercial

                 

Owner occupied real estate

   $ 89       $ 168       $ —         $ 257       $ 131,636       $ 131,893   

Non owner occupied real estate

     228         —           —           228         142,041         142,269   

Residential development

     —           —           —           —           3,574         3,574   

Development & Spec Land Loans

     —           —           —           —           8,739         8,739   

Commercial and industrial

     34         22         —           56         65,718         65,774   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     351         190         —           541         351,708         352,249   

Real estate

                 

Residential mortgage

     411         —           —           411         150,482         150,893   

Residential construction

     —           —           —           —           6,181         6,181   

Mortgage warehouse

     —           —           —           —           208,299         208,299   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate

     411         —           —           411         364,962         365,373   

Consumer

                 

Direct Installment

     164         22         1         187         24,065         24,252   

Direct Installment Purchased

     7         14         4         25         956         981   

Indirect Installment

     1,333         335         29         1,697         126,054         127,751   

Home Equity

     363         92         3         458         113,103         113,561   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     1,867         463         37         2,367         264,178         266,545   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,629       $ 653       $ 37       $ 3,319       $ 980,848       $ 984,167   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

Horizon Bank’s processes for determining credit quality differ slightly depending on whether a new loan or a renewed loan is being underwritten, or whether an existing loan is being re-evaluated for credit quality. The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the loan grade.

 

 

For new and renewed commercial loans, the Bank’s Credit Department, which acts independently of the loan officer, assigns the credit quality grade to the loan. Loan grades for loans with an aggregate credit exposure of $500,000 or greater are validated by the Loan Committee, which is chaired by the Chief Operating Officer (COO).

 

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

   

Commercial loan officers are responsible for reviewing their loan portfolios and report any adverse material change to the COO or Loan Committee. When circumstances warrant a change in the credit quality grade, loan officers are required to notify the COO and the Credit Department of the change in the loan grade. Downgrades are accepted immediately by the COO however, lenders must present their factual information to either the Loan Committee or the COO when recommending an upgrade.

 

   

The COO meets weekly with loan officers to discuss the status of past-due loans and classified loans. These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.

 

   

Monthly, senior management meets with the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets. This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, and collateral repossessions. The information reviewed in this meeting acts as a precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.

For real estate and consumer loans, Horizon uses a grading system based on delinquency. Loans that are 90 days or more past due, on non-accrual, or are classified as a TDR are graded “Substandard.” After being 90 days delinquent a loan is charged off unless it is well secured and in the process of collection. If the latter case exists, the loan is placed on non-accrual. Occasionally a mortgage loan may be graded as “Special Mention.” When this situation arises, it is because the characteristics of the loan and the borrower fit the definition of a Risk Grade 5 described below, which is normally used for grading commercial loans. Loans not graded Substandard are considered Pass.

Horizon Bank employs an eight-grade rating system to determine the credit quality of commercial loans. The first four grades represent acceptable quality, and the last four grades mirror the criticized and classified grades used by the bank regulatory agencies (special mention, substandard, doubtful, and loss). The loan grade definitions are detailed below.

Risk Grade 1: Excellent (Pass)

Loans secured by liquid collateral, such as certificates of deposit, reputable bank letters of credit, or other cash equivalents; loans that are guaranteed or otherwise backed by the full faith and credit of the United States government or an agency thereof, such as the Small Business Administration; or loans to any publicly held company with a current long-term debt rating of A or better.

Risk Grade 2: Good (Pass)

Loans to businesses that have strong financial statements containing an unqualified opinion from a CPA firm and at least three consecutive years of profits; loans supported by unaudited financial statements containing strong balance sheets, five consecutive years of profits, a five-year satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive; loans secured by publicly traded marketable securities where there is no impediment to liquidation; loans to individuals backed by liquid personal assets and unblemished credit history; or loans to publicly held companies with current long-term debt ratings of Baa or better.

Risk Grade 3: Satisfactory (Pass)

Loans supported by financial statements (audited or unaudited) that indicate average or slightly below average risk and having some deficiency or vulnerability to changing economic conditions; loans with some weakness but offsetting features of other support are readily available; loans that are meeting the terms of repayment, but which may be susceptible to deterioration if adverse factors are encountered. Loans may be graded Satisfactory when there is no recent information on which to base a current risk evaluation and the following conditions apply:

 

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

   

At inception, the loan was properly underwritten, did not possess an unwarranted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory;

 

   

At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss.

 

   

The loan has exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance.

 

   

During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the borrower is in an industry known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk grade may be warranted.

Risk Grade 4: Satisfactory/Monitored (Pass)

Loans in this category are considered to be of acceptable credit quality, but contain greater credit risk than Satisfactory loans due to weak balance sheets, marginal earnings or cash flow, lack of financial information, weakening markets, insufficient or questionable collateral coverage or other uncertainties. These loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in a Satisfactory/Monitored loan is within acceptable underwriting guidelines so long as the loan is given the proper level of management supervision. Loans that normally fall into this grade include construction of commercial real estate buildings, land development and subdivisions, and rental properties that have not attained stabilization.

Risk Grade 5: Special Mention

Loans which possess some credit deficiency or potential weakness which deserves close attention. Such loans pose an unwarranted financial risk that, if not corrected, could weaken the loan by adversely impacting the future repayment ability of the borrower. The key distinctions of a Special Mention classification are that (1) it is indicative of an unwarranted level of risk and (2) weaknesses are considered “potential,” not “defined,” impairments to the primary source of repayment. These loans may be to borrowers with adverse trends in financial performance, collateral value and/or marketability, or balance sheet strength.

Risk Grade 6: Substandard

One or more of the following characteristics may be exhibited in loans classified Substandard:

 

   

Loans which possess a defined credit weakness. The likelihood that a loan will be paid from the primary source of repayment is uncertain. Financial deterioration is under way and very close attention is warranted to ensure that the loan is collected without loss.

 

   

Loans are inadequately protected by the current net worth and paying capacity of the obligor.

 

   

The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees.

 

   

Loans have a distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

 

   

Unusual courses of action are needed to maintain a high probability of repayment.

 

   

The borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments.

 

   

The lender is forced into a subordinated or unsecured position due to flaws in documentation.

 

   

Loans have been restructured so that payment schedules, terms, and collateral represent concessions to the borrower when compared to the normal loan terms.

 

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

   

The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

 

   

There is a significant deterioration in market conditions to which the borrower is highly vulnerable.

Risk Grade 7: Doubtful

One or more of the following characteristics may be present in loans classified Doubtful:

 

   

Loans have all of the weaknesses of those classified as Substandard. However, based on existing conditions, these weaknesses make full collection of principal highly improbable.

 

   

The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

 

   

The possibility of loss is high but because of certain important pending factors which may strengthen the loan, loss classification is deferred until the exact status of repayment is known.

Risk Grade 8: Loss

Loans are considered uncollectible and of such little value that continuing to carry them as assets is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

 

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

 

The following table presents loans by credit grades.

 

September 30, 2012    Pass      Special
Mention
     Substandard      Doubtful      Total  

Commercial

              

Owner occupied real estate

   $ 137,121       $ 8,826       $ 17,632       $ 4,436       $ 168,015   

Non owner occupied real estate

     153,131         20,694         13,008         1,120         187,953   

Residential development

     434         —           696         —           1,130   

Development & Spec Land Loans

     3,637         251         2,627         130         6,645   

Commercial and industrial

     74,279         4,339         4,715         256         83,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     368,602         34,110