hb_8k1017ex.htm

EX-99.1 2 hb_8k1017ex.htm PRESS RELEASE hb_8k1017ex.htm

Exhibit 99.1

Contact: Mark E. Secor

Chief Financial Officer

Phone: (219) 873-2611

Fax: (219) 874-9280

Date: October 17, 2013

FOR IMMEDIATE RELEASE

Horizon Bancorp Announces Record First Nine-Month Earnings

Michigan City, Indiana (NASDAQ GM: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and nine-month periods ended September 30, 2013.

SUMMARY AND HIGHLIGHTS:

	●	Third quarter 2013 net income declined 1.3% compared to the same period in 2012 to $4.8 million or $.52 diluted earnings per share, with the decline primarily reflecting lower income from residential lending, including mortgage warehousing, as demand for mortgage refinancing slowed.
	●	Net income for the first nine months of 2013 rose 9.7% compared to the same period in 2012 to $15.8 million or $1.72 diluted earnings per share, the highest first nine months of net income in the Company’s history.
	●	Net interest income, before provisions for loan losses, for the first nine months of 2013 was $47.3 million compared with $41.2 million for the same period of 2012, partially reflecting commercial loan growth that helped offset lower mortgage business revenue.
	●	Non-interest income rose 4.2% to $20.2 million for the first nine months of 2013 compared with $19.4 million for the same period of 2012, partially reflecting growth in fees from debit and credit card interchange services and income growth from fiduciary activities, partially offset by a decline in gains on sale of mortgage loans.
	●	Return on average assets was 1.09% for the third quarter of 2013 and 1.20% for the first nine months of 2013.
	●	Return on average common equity was 12.60% for the third quarter of 2013 and 13.82% for the first nine months of 2013.
	●	Purchase money mortgage originations for the third quarter of 2013 increased 7.7% to $73.3 million, representing 69.5% of total mortgage originations compared to $68.0 million or 51.4% of total mortgage originations for the same period of 2012.
	●	Kalamazoo and Indianapolis markets posted quarterly loan growth of $2.2 million and $8.9 million, respectively, and year over year loan growth of $17.9 million and $34.4 million to $106.9 million and $68.3 million, respectively.

-MORE-

Pg. 2 cont. Horizon Bancorp Announces Record First Nine-Month Earnings

	●	Tangible book value per share increased to $14.82 at September 30, 2013, compared to $14.42 and $13.85 at June 30, 2013 and September 30, 2012, respectively.
	●	Horizon Bank’s capital ratios, including Tier 1 Capital to Average Assets Ratio of 9.13% and Total Capital to Risk Weighted Assets Ratio of 14.09% as of September 30, 2013, continue to be well above the regulatory standards for well-capitalized banks.

Craig M. Dwight, Chairman and CEO, commented: “During the past several quarters, we believe results from all five of our core banking revenue sources have been nothing short of exceptional. Our strategy is to generate balanced results in a variety of economic and market conditions. While the anticipated slowdown in residential mortgage refinancings led to less income from mortgage warehousing and gains on sale of mortgage loans, the growth of business loans and commercial banking services, purchase money mortgage originations and investment management activities generated meaningful core growth.”

During the third quarter of 2013, the Company continued investing in markets with strong growth potential to complement the Company’s current growth markets of Kalamazoo, MI and Indianapolis, IN. During the third quarter of 2013, the Company made an offer to purchase land in Fishers, IN, a suburb northeast of Indianapolis and east of Carmel, IN. This location complements the planned Carmel office and existing downtown Indianapolis loan production office by continuing to build the Company’s overall presence in the Indianapolis region. A team for the previously announced Carmel location began to take shape in the third quarter of 2013 with the hiring of a senior lender, who will serve as group manager, and a second commercial lender. Additionally, the Company hired a senior lender in the third quarter of 2013 who will build a loan production team in Grand Rapids, MI, 50 miles north of Kalamazoo.

“Our growth strategy starts with identifying and hiring exceptional advisors and continuing our investment in markets with significant growth potential,” Dwight explained. “Our investment in the Carmel and Fishers markets will continue to build our presence in vibrant communities with tremendous economic prospects for the Company.”

“The Company’s entry into Grand Rapids, MI, the state’s second largest city, will be led by our recently hired market leader who is tasked with building a loan production team similar to our investments in both Indianapolis and Kalamazoo. We believe the upfront costs associated with these market entries are well worth the investment as evidenced by the significant growth we have achieved in Indianapolis and Kalamazoo.”

In addition to new market entries, the Company continues to capitalize on strategic opportunities within the existing branch footprint as evidenced by the hiring of two seasoned commercial lenders in Northwest Indiana. “These additions strengthen the Company’s presence in Lake and Porter Counties, Indiana and will enable the Company to capitalize on the business activity in these markets.” Dwight explained.

-MORE-

Pg. 3 cont. Horizon Bancorp Announces Record First Nine-Month Earnings

Non-interest bearing deposits increased 6.8% to $223.4 million at September 30, 2013 compared to $209.2 million at December 31, 2012, reflecting the growth in the number of small and mid-sized business banking relationships. Interest bearing transaction accounts increased 6.0% to $816.2 million at September 30, 2013 compared to $769.8 million at December 31, 2012.

Income Statement Highlights

Net income for the third quarter of 2013 decreased 1.3% to $4.8 million or $.52 diluted earnings per share, compared to $4.9 million or $.54 diluted earnings per share in the third quarter of 2012. The decrease in net income for the third quarter primarily reflects the decline in mortgage warehouse activity as mortgage warehouse balances decreased from $244.2 million as of September 30, 2012 to $113.6 million as of September 30, 2013 and the decrease in gain on sale of mortgage loans of $2.8 million from $4.4 million in the third quarter of 2012 to $1.7 million in the third quarter of 2013.

Net income for the first nine months of 2013 increased 9.7% to $15.8 million or $1.72 diluted earnings per share, compared to $14.4 million or $1.75 diluted earnings per share for the first nine months of 2012. The decline in earnings per share reflects the increase in weighted average diluted shares outstanding resulting from the Heartland acquisition, which occurred during the third quarter of 2012.

The Company’s net interest margin was 3.78% during the three-month period ended September 30, 2013, compared with 3.79% for the three-month period ending September 30, 2012 and down 43 basis points from the three-month period ending June 30, 2013. Interest income during the third quarter of 2013 compared to the same period in 2012 included approximately $1.0 million of interest income from Heartland loan valuation discounts recognized at the time of acquisition being accreted and discounts recognized from loans paying off. Excluding the interest income recognized from the loan discounts, the margin would have been 3.52% for the three-month period ending September 30, 2013. The decrease in net interest margin of 43 basis points from June 30, 2013 primarily reflected a decrease of $1.4 million in interest from loan discounts being accreted and discounts recognized from loans paying off and a reduction in mortgage warehouse activity in the third quarter of 2013 compared to the second quarter of 2013.

The net interest margin was 4.06% for the nine-month period ending September 30, of 2013, up from 3.80% for the same period in 2012. Excluding the interest income recognized from the loan discounts of $5.4 million for the first nine months of 2013, the margin would have been 3.61% for the nine-month period ending September 30, 2013.

Residential mortgage lending activity during the third quarter of 2013 generated $1.7 million in income from the gain on sale of mortgage loans, a decrease of $1.1 million from the second quarter of 2013 and $2.8 million from the third quarter of 2012. Total origination volume in the third quarter of 2013 decreased 10.5% from the previous quarter from $117.7 million to $105.4 million. The reduction in the gain on sale of mortgages was primarily due to the decrease in the percentage earned on the sale of these loans due to a rapid increase in interest rates against uncommitted, unfunded loans and, to a lesser extent, the decrease in overall origination volume. Purchase money mortgage originations for the third quarter of 2013 increased 7.7% to $73.3 million, representing

-MORE-

Pg. 4 cont. Horizon Bancorp Announces Record First Nine-Month Earnings

69.5% of total mortgage originations compared to $68.0 million or 51.4% of total mortgage originations for the same period of 2012.

Lending Activity

Total loans decreased from $1.2 billion at December 31, 2012 to $1.1 billion at September 30, 2013 as mortgage warehouse loans decreased by $137.9 million, residential mortgage loans decreased by $460,000 and consumer loans decreased by $10.1 million, partially offset by commercial loan growth.

Commercial loans increased from $460.5 million at December 31, 2012 to $499.6 million at September 30, 2013. Dwight noted the continued investment in the commercial lending division and growth markets such as Indianapolis and Kalamazoo has effectively supported the Company’s goal to expand business banking activity.

Total loan balances in the Kalamazoo and Indianapolis markets continued their growth during the quarter to $106.9 million and $68.3 million, respectively, as of September 30, 2013. Kalamazoo’s aggregate loan balances increased $17.9 million or 20.1% and Indianapolis’ aggregate loan balances increased $34.4 million or 101.5% compared to December 31, 2012.

The provision for loan losses declined to $104,000 in the third quarter of 2013, which was $937,000 lower than the provision for the same period of the prior year and $625,000 less than the previous quarter. The lower provision for loan losses in the third quarter of 2013 compared to the previous quarter and the third quarter of 2012 was primarily due to continued improvement of nonperforming and substandard loans. For the first nine months of 2013, the provision for loan losses was $2.9 million, which was $1.1 million more than the provision for the same period of the prior year.

The ratio of the allowance for loan losses to total loans increased to 1.64% as of September 30, 2013 from 1.52% as of December 31, 2012. The increase in the ratio was due to the decrease in total loans outstanding of $118.5 million during the first nine months of 2013. The allowance for loan losses decreased from $18.3 million as of December 31, 2012 to $17.8 million as of September 30, 2013 primarily due to loans with specific reserves charged off during the third quarter of 2013.

Non-performing loans totaled $22.4 million as of September 30, 2013, down from $23.8 million as of December 31, 2012 and $24.0 million as of September 30, 2012. Compared to December 31, 2012, non-performing commercial loans and real estate loans decreased by $2.8 million and $1.1 million, respectively, partially offset by an increase of $2.6 million in non-performing consumer loans. The increase in non-performing consumer loans from December 31, 2012 was primarily due to the addition of three large home equity lines of credit totaling $2.0 million, which have specific reserves included in the allowance for loan losses. As a percentage of total loans, non-performing loans were 2.07% at September 30, 2013, up from 1.97% at December 31, 2012 and 2.05% at September 30, 2012.

-MORE-

Pg. 5 cont. Horizon Bancorp Announces Record First Nine-Month Earnings

At September 30, 2013, loans acquired in the Heartland acquisition represented $6.2 million in non-performing, $12.2 million in substandard and $231,000 in delinquent loans, which compares to $7.3 million in non-performing, $18.1 million in substandard and $3.4 million in delinquent loans represented at December 31, 2012.

Expense Management

Total non-interest expense was $4.7 million higher in the first nine months of 2013 compared to the first nine months of 2012 and $734,000 lower in the three-month period ending September 30, 2013 compared to the previous quarter. Salaries and employee benefits increased $2.5 million in the first nine months of 2013 compared to the same period in 2012 and decreased $211,000 in the third quarter of 2013 compared to the previous quarter. The increase over the previous year was primarily the result of changes to annual merit pay, employee benefits costs, commissions earned, and Horizon’s investment in growth markets. In addition, some of the increase in the first nine months of 2013 compared to the first nine months of 2012 was also related to the Heartland acquisition.

Dwight concluded: “With clear focus on efficiency, productivity and credit quality, our Horizon team continues to identify opportunities for growth through new business and expanding relationships with clients. We intend to stay focused on our goals for growth, financial performance, and building shareholder value.”

Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern and Central Indiana and Southwest Michigan through its commercial banking subsidiary Horizon Bank, NA. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.accesshorizon.com. Its common stock is traded on the NASDAQ Global Market under the symbol HBNC.

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in “Item 1A Risk Factors” of Part I of Horizon’s Annual Report on Form 10-K for the fiscal year ended

-MORE-

Pg. 6 cont. Horizon Bancorp Announces Record First Nine-Month Earnings

December 31, 2012. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Contact:	Horizon Bancorp
	Mark E. Secor
	Chief Financial Officer
	(219) 873-2611
	Fax: (219) 874-9280

# # #

HORIZON BANCORP

Financial Highlights

(Dollars in thousands except share and per share data and ratios, Unaudited)

	September 30			June 30			March 31			December 31			September 30
	2013			2013			2013			2012			2012
Balance sheet:
Total assets	$	1,781,024		$	1,785,907		$	1,734,250		$	1,848,227		$	1,846,776
Investment securities		524,054			492,363			482,086			482,801			503,804
Commercial loans		499,583			502,230			473,102			460,471			447,414
Mortgage warehouse loans		113,591			154,962			143,609			251,448			244,233
Residential mortgage loans		189,254			182,610			191,347			189,714			176,553
Consumer loans		278,990			277,864			281,710			289,084			286,848
Earning assets		1,624,250			1,638,923			1,594,292			1,700,595			1,690,348
Non-interest bearing deposit accounts		223,354			213,700			217,197			209,200			211,935
Interest bearing transaction accounts		816,167			772,790			777,973			769,822			767,202
Time deposits		288,799			310,766			319,893			315,131			327,834
Borrowings		242,505			282,837			208,899			345,764			333,150
Subordinated debentures		32,448			32,409			32,370			32,331			32,282
Common stockholders' equity		150,959			147,665			149,777			146,468			143,362
Total stockholders’ equity		163,459			160,165			162,277			158,968			155,862

Income statement:	Three months ended
Net interest income	$	14,669		$	16,575		$	16,010		$	17,003		$	14,999
Provision for loan losses		104			729			2,084			1,715			1,041
Non-interest income		5,910			6,849			7,460			7,924			7,710
Non-interest expenses		14,061			14,795			13,979			15,844			14,840
Income tax expense		1,629			2,235			2,096			2,198			1,978
Net income		4,785			5,665			5,311			5,170			4,850
Preferred stock dividend		(66	)		(96	)		(146	)		(156	)		(63	)
Net income available to common shareholders	$	4,719		$	5,569		$	5,165		$	5,014		$	4,787

Per share data:
Basic earnings per share	$	0.55		$	0.65		$	0.60		$	0.58		$	0.56
Diluted earnings per share		0.52			0.62			0.58			0.56			0.54
Cash dividends declared per common share		0.11			0.10			0.10			0.10			0.10
Book value per common share		17.52			17.14			17.38			17.00			16.64
Tangible book value per common share		14.82			14.42			14.64			14.23			13.85
Market value - high		25.04			20.45			20.87			19.68			19.08
Market value - low	$	20.74		$	18.97		$	19.10		$	16.54		$	16.75
Weighted average shares outstanding - Basic		8,618,969			8,617,466			8,617,466			8,617,466			8,503,475
Weighted average shares outstanding - Diluted		9,019,211			8,974,103			8,980,655			8,964,315			8,838,659

Key ratios:
Return on average assets		1.09	%		1.29	%		1.23	%		1.13	%		1.09	%
Return on average common stockholders' equity		12.60			14.67			14.11			13.70			13.96
Net interest margin		3.78			4.21			4.10			4.16			3.79
Loan loss reserve to total loans		1.64			1.67			1.78			1.52			1.58
Non-performing loans to loans		2.07			2.27			2.16			1.97			2.05
Average equity to average assets		9.22			9.34			9.16			8.71			8.45
Bank only capital ratios:
Tier 1 capital to average assets		9.13			8.84			8.66			8.22			8.57
Tier 1 capital to risk weighted assets		12.84			11.97			12.52			11.17			11.58
Total capital to risk weighted assets		14.09			13.22			13.78			12.42			12.83

Loan data:
Substandard loans	$	44,392		$	50,216		$	53,203		$	52,114		$	57,079
30 to 89 days delinquent		2,692			4,083			5,717			6,742			8,351

90 days and greater delinquent - accruing interest	$	2		$	122		$	2		$	54		$	109
Trouble debt restructures - accruing interest		3,674			5,086			4,637			3,702			2,981
Trouble debt restructures - non-accrual		5,798			6,586			6,784			6,649			5,061
Non-accrual loans		12,955			13,855			12,293			13,374			15,887
Total non-performing loans	$	22,429		$	25,649		$	23,716		$	23,779		$	24,038

HORIZON BANCORP

Financial Highlights

(Dollars in thousands except share and per share data and ratios, Unaudited)

	September 30			September 30
	2013			2012
Balance sheet:
Total assets	$	1,781,024		$	1,846,776
Investment securities		524,054			503,804
Commercial loans		499,583			447,414
Mortgage warehouse loans		113,591			244,233
Residential mortgage loans		189,254			176,553
Consumer loans		278,990			286,848
Earning assets		1,624,250			1,690,348
Non-interest bearing deposit accounts		223,354			211,935
Interest bearing transaction accounts		816,167			767,202
Time deposits		288,799			327,834
Borrowings		242,505			333,150
Subordinated debentures		32,448			32,282
Common stockholders' equity		150,959			143,362
Total stockholders’ equity		163,459			155,862

Income statement:	Nine months ended
Net interest income	$	47,254		$	41,203
Provision for loan losses		2,917			1,809
Non-interest income		20,219			19,407
Non-interest expenses		42,835			38,180
Income tax expense		5,960			6,248
Net income		15,761			14,373
Preferred stock dividend		(308	)		(325	)
Net income available to common shareholders	$	15,453		$	14,048

Per share data:
Basic earnings per share	$	1.79		$	1.81
Diluted earnings per share		1.72			1.75
Cash dividends declared per common share		0.31			0.27
Book value per common share		17.52			16.64
Tangible book value per common share		14.82			13.85
Market value - high		25.04			19.08
Market value - low	$	18.97		$	11.53
Weighted average shares outstanding - Basic		8,617,972			7,758,537
Weighted average shares outstanding - Diluted		8,998,628			8,034,996

Key ratios:
Return on average assets		1.20	%		1.21	%
Return on average common stockholders' equity		13.69			15.34
Net interest margin		4.06			3.80
Loan loss reserve to total loans		1.64			1.58
Non-performing loans to loans		2.07			2.08
Average equity to average assets		9.31			8.51
Bank only capital ratios:
Tier 1 capital to average assets		9.13			8.58
Tier 1 capital to risk weighted assets		12.84			11.25
Total capital to risk weighted assets		14.09			12.50

Loan data:
Substandard loans	$	44,392		$	57,079
30 to 89 days delinquent		2,692			8,351

90 days and greater delinquent - accruing interest	$	2		$	109
Trouble debt restructures - accruing interest		3,674			2,981
Trouble debt restructures - non-accrual		5,798			5,061
Non-accrual loans		12,955			15,887
Total non-performing loans	$	22,429		$	24,038

HORIZON BANCORP

Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)

	September 30		June 30		March 31		December 31		September 30
	2013		2013		2013		2012		2012
Commercial	$	7,663	$	7,526	$	9,166	$	7,771	$	8,058
Real estate		3,238		3,734		3,477		3,204		2,974
Mortgage warehousing		1,686		1,610		1,603		1,705		1,716
Consumer		5,261		6,010		5,319		5,590		5,820
Unallocated		-		-		-		-		-
Total	$	17,848	$	18,880	$	19,565	$	18,270	$	18,568

Net Charge-offs

(Dollars in Thousands, Unaudited)

	Three months ended
	September 30		June 30		March 31		December 31		September 30
	2013		2013		2012		2012		2012
Commercial	$	604	$	700	$	347	$	1,326	$	333
Real estate		40		411		140		143		205
Mortgage warehousing		-		-		-		-		-
Consumer		493		303		302		544		309
Total	$	1,137	$	1,414	$	789	$	2,013	$	847

Total Non-performing Loans

(Dollars in Thousands, Unaudited)

	September 30		June 30		March 31		December 31		September 30
	2013		2013		2012		2012		2012
Commercial	$	7,847	$	9,465	$	10,055	$	10,693	$	11,579
Real estate		8,080		9,366		8,947		9,155		8,833
Mortgage warehousing		-		-		-		-		-
Consumer		6,502		6,818		4,714		3,931		3,626
Total	$	22,429	$	25,649	$	23,716	$	23,779	$	24,038

Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

	September 30		June 30		March 31		December 31		September 30
	2013		2013		2012		2012		2012
Commercial	$	954	$	629	$	957	$	1,337	$	1,867
Real estate		385		429		745		1,228		716
Mortgage warehousing		-		-		-		-		-
Consumer		44		37		52		11		72
Total	$	1,383	$	1,095	$	1,754	$	2,576	$	2,655

HORIZON BANCORP AND SUBSIDIARIES

Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

	Three Months Ended								Three Months Ended
	September 30, 2013								September 30, 2012
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
ASSETS
Interest-earning assets
Federal funds sold	$	10,140		$	6		0.23	%	$	13,854		$	8		0.23	%
Interest-earning deposits		6,834			2		0.12	%		6,252			2		0.13	%
Investment securities - taxable		356,275			2,076		2.31	%		383,200			2,168		2.25	%
Investment securities - non-taxable (1)		146,622			1,114		4.71	%		121,428			1,014		5.27	%
Loans receivable (2)(3)(4)		1,087,930			14,843		5.42	%		1,112,712			15,527		5.56	%
Total interest-earning assets (1)		1,607,801			18,041		4.61	%		1,637,446			18,719		4.70	%

Noninterest-earning assets
Cash and due from banks		24,619								21,385
Allowance for loan losses		(18,910	)							(18,195	)
Other assets		133,890								121,919

	$	1,747,400							$	1,762,555

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits	$	1,081,256		$	1,395		0.51	%	$	1,041,268		$	1,638		0.63	%
Borrowings		236,071			1,465		2.46	%		324,975			1,597		1.96	%
Subordinated debentures		32,425			512		6.26	%		33,353			485		5.78	%
Total interest-bearing liabilities		1,349,752			3,372		0.99	%		1,399,596			3,720		1.06	%

Noninterest-bearing liabilities
Demand deposits		224,622								196,640
Accrued interest payable and other liabilities		11,904								17,435
Shareholders' equity		161,122								148,884

	$	1,747,400							$	1,762,555

Net interest income/spread				$	14,669		3.62	%				$	14,999		3.64	%

Net interest income as a percent of average interest earning assets (1)							3.78	%							3.79	%

(1)	Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.

(2)	Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.

(3)	Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.

(4)	Loan fees and late fees included in interest on loans.

HORIZON BANCORP AND SUBSIDIARIES

Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

	Nine Months Ended								Nine Months Ended
	September 30, 2013								September 30, 2012
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
ASSETS
Interest-earning assets
Federal funds sold	$	9,480		$	11		0.16	%	$	6,870		$	13		0.25	%
Interest-earning deposits		8,186			5		0.08	%		3,533			4		0.15	%
Investment securities - taxable		365,569			6,137		2.24	%		358,935			6,721		2.50	%
Investment securities - non-taxable (1)		133,011			3,105		4.88	%		111,750			2,944		4.89	%
Loans receivable (2)(3)(4)		1,100,923			48,189		5.86	%		1,009,052			42,386		5.62	%
Total interest-earning assets (1)		1,617,169			57,447		4.90	%		1,490,140			52,068		4.77	%

Noninterest-earning assets
Cash and due from banks		24,588								17,708
Allowance for loan losses		(18,980	)							(18,970	)
Other assets		133,544								95,986

	$	1,756,321							$	1,584,864

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits	$	1,091,635		$	4,320		0.53	%	$	958,651		$	4,803		0.67	%
Borrowings		239,323			4,369		2.44	%		299,074			4,635		2.07	%
Subordinated debentures		32,386			1,504		6.21	%		31,606			1,427		6.03	%
Total interest-bearing liabilities		1,363,344			10,193		1.00	%		1,289,331			10,865		1.13	%

Noninterest-bearing liabilities
Demand deposits		215,869								154,244
Accrued interest payable and
other liabilities		13,657								13,387
Shareholders' equity		163,451								134,820

	$	1,756,321							$	1,591,782

Net interest income/spread				$	47,254		3.90	%				$	41,203		3.65	%

Net interest income as a percent of average interest earning assets (1)							4.06	%							3.80	%

(1)	Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.

(2)	Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.

(3)	Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.

(4)	Loan fees and late fees included in interest on loans.

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

	September 30		December 31
	2013		2012
	(Unaudited)
Assets
Cash and due from banks	$	40,500	$	30,735
Investment securities, available for sale		514,144		482,801
Investment securities, held to maturity		9,910		-
Loans held for sale		4,594		13,744
Loans, net of allowance for loan losses of $17,848 and $18,270		1,063,571		1,172,447
Premises and equipment		43,473		42,184
Federal Reserve and Federal Home Loan Bank stock		14,184		13,333
Goodwill		19,748		19,748
Other intangible assets		3,477		4,048
Interest receivable		7,506		7,716
Cash value life insurance		35,945		35,192
Other assets		23,972		26,279
Total assets	$	1,781,024	$	1,848,227
Liabilities
Deposits
Non-interest bearing	$	223,354	$	209,200
Interest bearing		1,104,966		1,084,953
Total deposits		1,328,320		1,294,153
Borrowings		242,505		345,764
Subordinated debentures		32,448		32,331
Interest payable		488		560
Other liabilities		13,804		16,451
Total liabilities		1,617,565		1,689,259
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, Authorized, 1,000,000 shares Series B shares $.01 par value, $1,000 liquidation value Issued 12,500 shares		12,500		12,500
Common stock, no par value Authorized, 22,500,000 shares Issued, 8,693,471 shares Outstanding, 8,617,466 shares		-		-
Additional paid-in capital		32,237		31,965
Retained earnings		118,157		105,402
Accumulated other comprehensive income		565		9,101
Total stockholders’ equity		163,459		158,968
Total liabilities and stockholders’ equity	$	1,781,024	$	1,848,227

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

	Three Months Ended September 30						Nine Months Ended September 30
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Interest Income
Loans receivable	$	14,843		$	15,527		$	48,189		$	42,386
Investment securities
Taxable		2,084			2,178			6,153			6,738
Tax exempt		1,114			1,014			3,105			2,944
Total interest income		18,041			18,719			57,447			52,068
Interest Expense
Deposits		1,395			1,638			4,320			4,803
Borrowed funds		1,465			1,597			4,369			4,635
Subordinated debentures		512			485			1,504			1,427
Total interest expense		3,372			3,720			10,193			10,865
Net Interest Income		14,669			14,999			47,254			41,203
Provision for loan losses		104			1,041			2,917			1,809
Net Interest Income after Provision for Loan Losses		14,565			13,958			44,337			39,394
Non-interest Income
Service charges on deposit accounts		1,083			1,002			2,984			2,477
Wire transfer fees		169			248			562			643
Interchange fees		1,123			885			3,049			2,227
Fiduciary activities		953			971			3,140			2,928
Gain on sale of investment securities (includes $6 and $374 for the three and nine months ended 2013 and $2 for the three and nine months ended 2012, respectively, related to accumulated other comprehensive earnings reclassifications)		6			2			374			2
Gain on sale of mortgage loans		1,667			4,436			7,580			10,121
Mortgage servicing income net of impairment		348			(355	)		813			(95	)
Increase in cash value of bank owned life insurance		278			300			787			760
Other income		283			221			930			344
Total non-interest income		5,910			7,710			20,219			19,407
Non-interest Expense
Salaries and employee benefits		7,694			7,905			22,919			20,407
Net occupancy expenses		1,172			1,186			3,778			3,216
Data processing		766			754			2,184			1,883
Professional fees		357			366			1,310			1,483
Outside services and consultants		596			624			1,794			1,621
Loan expense		1,040			1,311			3,556			2,879
FDIC insurance expense		270			291			821			798
Other losses		52			309			143			501
Other expense		2,114			2,094			6,330			5,392
Total non-interest expense		14,061			14,840			42,835			38,180
Income Before Income Tax		6,414			6,828			21,721			20,621
Income tax expense (includes $2 and $131 for the three and nine months ended 2013 and $0 for the three and nine months ended 2012, respectively, related to income tax expense from reclassification items)		1,629			1,978			5,960			6,248
Net Income		4,785			4,850			15,761			14,373
Preferred stock dividend and discount accretion		(66	)		(63	)		(308	)		(325	)
Net Income Available to Common Shareholders	$	4,719		$	4,787		$	15,453		$	14,048
Basic Earnings Per Share	$	0.55		$	0.56		$	1.79		$	1.81
Diluted Earnings Per Share		0.52			0.54			1.72			1.75