HORIZON BANCORP INC /IN/ - Quarter Report: 2019 June (Form 10-Q)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule of the Exchange Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).    Yes      No   

 

 

 

 

 

 

 

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		Three Months Ended
		Preferred Stock				Common Stock				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total
Balances, April 1, 2018		$	—			$	—			$	275,302			$	195,292			$	(10,178	)		$	460,416
Net income			—				—				—				14,115				—				14,115
Other comprehensive loss, net of tax			—				—				—				—				(409	)			(409	)
Amortization of unearned compensation			—				—				(140	)			—				—				(140	)
Exercise of stock options			—				—				344				—				—				344
Stock option expense			—				—				81				—				—				81
Reclassification of tax adjustment on accumulated other comprehensive loss			—				—				—				—				—				—
Cash dividends on common stock ($0.10 per share)			—				—				—				(3,872	)			—				(3,872	)
Balances, June 30, 2018		$	—			$	—			$	275,587			$	205,535			$	(10,587	)		$	470,535
Balances, April 1, 2019		$	—			$	—			$	378,963			$	230,327			$	178			$	609,468
Net income			—				—				—				16,642				—				16,642
Other comprehensive income, net of tax			—				—				—				—				4,029				4,029
Amortization of unearned compensation			—				—				210				—				—				210
Exercise of stock options			—				—				38				—				—				38
Stock option expense			—				—				58				—				—				58
Stock issued stock plans			—				—				1,466				—				—				1,466
Stock issued in Salin acquisition			—				—				—				—				—				—
Cash dividends on common stock ($0.12 per share)			—				—				—				(5,450	)			—				(5,450	)
Balances, June 30, 2019		$	—			$	—			$	380,735			$	241,519			$	4,207			$	626,461

 

 

 

 

 

 

 

 

 

 

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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 for 2018 filed with the Securities and Exchange Commission on February 28, 2019. The condensed consolidated balance sheet of Horizon as of December 31, 2018 has been derived from the audited balance sheet as of that date.

On May 15, 2018, the Board of Directors of the Company approved a stock split of the Company’s authorized common stock, par value. All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted, where necessary, to reflect this stock split. The effect of the stock split on the outstanding common shares is that shareholders of record as of the close of business on May 31, 2018, the record date, received an additional half share for each share of common stock held, with shareholders receiving cash in lieu of any fractional shares. The additional shares issued in the stock split were payable and issued on June 15, 2018, and the common shares began trading on a split-adjusted basis on June 19, 2018.

 

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There were 341,394 and shares for the three months ended June 30, 2019 and 2018, respectively, which were not included in the computation of diluted earnings per share because they were There were 341,394 and 67,575 shares for the six months ended June 30, 2019 and 2018, respectively, which were not included in the computation of diluted earnings per share because they were  

Horizon has share-based employee compensation plans, which are described in the notes to the financial statements included in the December 31, 2018 Annual Report on Form

The FASB has issued ASU No.The new guidance improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in this ASU also make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. For public entities, this new guidance became effective in fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early adoption was permitted in any interim period after issuance of the ASU. All transition requirements and elections should be applied to hedging relationships existing (that is, hedging relationships in which the hedging instrument has not expired, been sold, terminated, or exercised or the entity has not removed the designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). The Company adopted ASU on January 1, 2019 and there was no material impact to the consolidated financial statements.

 

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The FASB has issued Accounting Standards Update (ASU) No.Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The amendments in this update became effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company adopted this ASU as of January 1, 2019 using the alternative transition method. In addition, the Company utilized the practical expedients provided by the ASU allowing it to retain the classifications of existing leases, not reassess initial direct costs for any existing leases, and to use hindsight when determining the lease term and assessment of impairment of the right-of-use assets. Upon adoption, the Company capitalized $3.5 million for assets and lease liabilities, net of existing straight-line lease liabilities. See Note 8, “Leases”.

Accounting Standards Codification 606, “(ASC 606) provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance enumerates five steps that entities should follow in achieving this core principle. Revenue generated from financial instruments, including loans and investment securities, are not included in the scope of ASC 606. The adoption of ASC 606 did not result in a change to the accounting for any of the Company’s revenue streams that are within the scope of the amendments. Revenue-generating activities that are within the scope of ASC 606 and that are presented as income in the Company’s consolidated statements of income include:

 

The measurement period adjustments will be calculated as if the accounting had been completed as of the acquisition date.

As a result of updated draft valuation estimates, acquired investment securities decreased approximately $387,000, total loans decreased approximately $2.9 million, premises and equipment decreased approximately $4.2 million, goodwill increased approximately $5.4 million, core deposit intangible decreased approximately $1.3 million, other assets increased approximately $4.0 million, total deposits decreased approximately $117,000 and subordinated debentures increased approximately $816,000 compared to previously reported amounts.

126.719.831.210

 

 

 

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 and status, borrower credit scores and recent percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current assumptions, such as default rates, severity and prepayment speeds.

The following table details an estimate of the acquired loans that are accounted for in accordance with ASC as of March 26, 2019. Final valuation estimates have not yet been determined for acquired loans as of June 30, 2019. If information becomes available which would indicate adjustments to the purchase price allocation, such adjustments would be made prospectively.

 

 

 

 

 

 has occurred

 

 

 

 

The results of operations of Salin have been included in the Company’s consolidated financial statements since the acquisition date. The following schedule includes results for the three and six months ended June 30, 2019 and 2018 as if the Salin acquisition had occurred as of the beginning of the comparable prior reporting periods.