EX-99.1 2 hb_8k0125ex.htm PRESS RELEASE
Exhibit 99.1
 
 


Contact: Mark E. Secor
Chief Financial Officer
Phone: (219) 873-2611
Fax: (219) 874-9280
Date: January 25, 2017

FOR IMMEDIATE RELEASE

Horizon Bancorp Announces Record 2016 Net Income

Michigan City, Indiana (NASDAQ GS: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and twelve-month periods ended December 31, 2016.  All share data has been adjusted to reflect Horizon’s three-for-two stock split announced on October 19, 2016 and issued on November 14, 2016.

SUMMARY:
·
Net income for the year ended December 31, 2016 was $23.9 million or $1.19 diluted earnings per share compared to $20.5 million or $1.26 diluted earnings per share for the year ended December 31, 2015.
·
Excluding acquisition-related expenses, gain on sale of investment securities, the death benefit on bank owned life insurance, prepayment penalties on borrowings and purchase accounting adjustments, net income for the year ended December 31, 2016 increased 34.5% to $29.2 million or $1.45 diluted earnings per share compared to $21.7 million or $1.33 diluted earnings per share for the year ended December 31, 2015.
·
Total loans increased 22.0% or $387.0 million during the year ended December 31, 2016.
·
Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased 4.3% or $69.6 million during the year ended December 31, 2016.
·
Net interest income for the year ended December 31, 2016 increased 15.1% or $11.3 million compared to the year ended December 31, 2015.
·
Net interest margin was 2.92% for the fourth quarter of 2016 compared to 3.37% for the prior quarter and 3.50% for the same period in 2015.
·
Net interest margin, excluding the impact of the prepayment penalties on borrowings and purchase accounting adjustments (“core net interest margin”), was 3.45% for the fourth quarter of 2016 compared to 3.31% for the prior quarter and 3.38% for the same period in 2015.
·
Non-interest income for the year ended December 31, 2016 increased 24.9% or $7.6 million compared to the year ended December 31, 2015.
·
Horizon’s tangible book value per share rose to $11.48 at December 31, 2016, compared to $11.02 at December 31, 2015.


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Pg. 2 cont. Horizon Bancorp Announces Record 2016 Net Income

·
Horizon opened its first loan and deposit production office in Grand Rapids, Michigan during the fourth quarter of 2016 led by David Quade, Horizon’s Grand Rapids Market President.  In February 2017, we anticipate moving into our permanent downtown location with a total of 10 professionals where we will provide provide our full array of products and services including retail, commercial, private banking, treasury management, wealth management and mortgage services to customers throughout the Grand Rapids region.
·
During the fourth quarter of 2016, Horizon began a series of balance sheet restructuring transactions to improve its overall financial position, including an increase in net interest margin, return on average assets and return on average equity.  The transactions included the prepayment of $106.0 million in high fixed-rate borrowings funded from the sale of available-for-sale investment securities totaling $168.0 million.  Horizon realized a loss of $4.8 million from the early redemption of the debt which was partially offset by net gains on the sale of the investment securities.
·
On November 7, 2016, Horizon completed the acquisition of CNB Bancorp and its wholly-owned subsidiary, The Central National Bank and Trust Company, headquartered in Attica, Indiana and executed the system conversion on December 3, 2016.
·
On December 23, 2016, the Office of the Comptroller of the Currency approved Horizon’s purchase and assumption of certain assets and liabilities of a single branch of First Farmers Bank & Trust Co. located in Bargersville, Indiana. This transaction is expected to be completed on February 3, 2017.

Craig Dwight, Chairman and CEO, commented: “I am very pleased with Horizon’s 2016 results as evidenced by our organic loan growth; our ability to complete and integrate three bank acquisitions and our expansion into two new markets.  Horizon’s results for 2016 are a true testament of the quality of the Horizon team, their work ethic and ability to move the Company forward.  As a result of all the hard work put forth in 2016, Horizon is positioned well for the coming year.  Horizon’s balanced strategy of organic growth, expansion into new markets and well-executed acquisitions contributed to record net income for the year.  Core net income was $8.5 million for the fourth quarter and $29.2 million for the year 2016, an increase of 40.7% and 34.5%, respectively, over 2015.  Core diluted earnings per share were $0.38 for the fourth quarter and $1.45 for the year 2016, an increase of 14.4% and 9.0%, respectively, over 2015.”

Mr. Dwight continued, “We continued to experience strong growth in our Kalamazoo and Indianapolis markets where total loans increased $61.6 million during 2016.  Also during 2016, Horizon opened loan and deposit production offices in Fort Wayne, Indiana and Grand Rapids, Michigan.  Consistent with our People First philosophy, Greg Haney, Fort Wayne Market President, and David Quade, Grand Rapids Market President, bring significant experience and knowledge to the table.  We look forward to providing exceptional service and sensible advice to our customers in these dynamic growth markets.”


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Pg. 3 cont. Horizon Bancorp Announces Record 2016 Net Income

Dwight added, “In addition to organic growth and expansion in 2016, we completed the acquisitions of Kosciusko Financial, Inc. (“Kosciusko”) and LaPorte Bancorp, Inc. (“LaPorte”) during the third quarter and the acquisition of CNB Bancorp during the fourth quarter.  Each of these acquisitions was consistent with our philosophy of partnering with banks that hold similar core values and are committed to serving their local communities.  Finally, we received regulatory approval for the purchase of certain assets and assumption of deposits from First Farmers Bank & Trust Co.’s Bargersville, Indiana branch which we anticipate to close on February 3, 2017, enhancing our presence in this attractive and growing central Indiana market.”

Dwight concluded, “Along with organic growth and acquisitions, we continue to review our balance sheet to improve the Bank’s overall financial position.” During the fourth quarter, Horizon began a series of balance sheet restructuring transactions with the intent of improving net interest margin, return on average assets and return on average equity.  The transactions included the prepayment of approximately $106.0 million of high fixed-rate borrowings with contractual maturities ranging from June 2017 through September 2020 and repositioning the investment securities portfolio to replace certain lower yielding short-term investments consistent with a more normalized strategy and maturity periods.  “This deleveraging strategy strengthens Horizon’s balance sheet by lowering outstanding debt and improves key financial metrics for the benefit of our shareholders,” Dwight commented.

Income Statement Highlights

Net income for the fourth quarter of 2016 was $5.6 million or $0.25 diluted earnings per share compared to $6.2 million or $0.34 diluted earnings per share for the fourth quarter of 2015.  The decrease in net income and diluted earnings per share from the same period of 2015 reflects an increase in non-interest expense of $4.0 million, partially offset by an increase in net interest income and non-interest income of $717,000 and $2.4 million, respectively, and a decrease in income tax expense of $606,000. The decrease in diluted earnings per share was due to a decrease in lower net income and an increase in dilutive shares outstanding as a result of the stock issued in the Kosciusko and LaPorte Bancorp acquisitions.  Excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings and purchase accounting adjustments, net income for the fourth quarter of 2016 was $8.5 million or $0.38 diluted earnings per share compared to $6.0 million or $0.33 diluted earnings per share in the fourth quarter of 2015.



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Pg. 4 cont. Horizon Bancorp Announces Record 2016 Net Income

Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
(Dollars in Thousands Except per Share Data)

 
   
Three Months Ended
December 31
    
Twelve Months Ended
December 31
  
Non-GAAP Reconciliation of Net Income
  
2016
    
2015
    
2016
    
2015
  
   
(Unaudited)
          
(Unaudited)
        
Net income as reported
  
$
5,603
    
$
6,175
    
$
23,912
    
$
20,549
  
Merger expenses
    
1,354
      
525
      
6,827
      
4,889
  
Tax effect
    
(416
)
    
(182
)
    
(1,998
)
    
(1,585
)
Net income excluding merger expenses
    
6,541
      
6,518
      
28,741
      
23,853
  
                                 
Gain on sale of investment securities
    
(961
)
    
(65
)
    
(1,836
)
    
(189
)
Tax effect
    
336
      
23
      
643
      
66
  
Net income excluding gain on sale of investment securities
    
5,916
      
6,476
      
27,548
      
23,730
  
                                 
Death benefit on bank owned life insurance ("BOLI")
    
-
      
-
      
-
      
(145
)
Tax effect
    
-
      
-
      
-
      
51
  
Net income excluding death benefit on BOLI
    
5,916
      
6,476
      
27,548
      
23,636
  
                                 
Prepayment penalties on borrowings
    
4,839
      
-
      
4,839
      
-
  
Tax effect
    
(1,694
)
    
-
      
(1,694
)
    
-
  
Net income excluding prepayment penalties on borrowings
    
9,061
      
6,476
      
30,693
      
23,636
  
                                 
Acquisition-related purchase accounting adjustments ("PAUs")
    
(900
)
    
(695
)
    
(2,304
)
    
(2,977
)
Tax effect
    
315
      
243
      
807
      
1,042
  
Net income excluding PAUs
  
$
8,476
    
$
6,024
    
$
29,196
    
$
21,701
  
                                 
Non-GAAP Reconciliation of Diluted Earnings per Share
                                
Diluted earnings per share as reported
  
$
0.25
    
$
0.34
    
$
1.19
    
$
1.26
  
Merger expenses
    
0.06
      
0.03
      
0.34
      
0.30
  
Tax effect
    
(0.02
)
    
(0.01
)
    
(0.10
)
    
(0.10
)
Diluted earnings per share excluding merger expenses
    
0.29
      
0.36
      
1.43
      
1.46
  
                                 
Gain on sale of investment securities
    
(0.04
)
    
(0.00
)
    
(0.09
)
    
(0.01
)
Tax effect
    
0.02
      
0.00
      
0.03
      
0.00
  
Net income excluding gain on sale of investment securities
    
0.27
      
0.36
      
1.37
      
1.46
  
                                 
Death benefit on BOLI
    
-
      
-
      
-
      
(0.01
)
Tax effect
    
-
      
-
      
-
      
0.00
  
Net income excluding death benefit on BOLI
    
0.27
      
0.36
      
1.37
      
1.45
  
                                 
Prepayment penalties on borrowings
    
0.22
      
-
      
0.24
      
-
  
Tax effect
    
(0.08
)
    
-
      
(0.08
)
    
-
  
Net income excluding prepayment penalties on borrowings
    
0.41
      
0.36
      
1.53
      
1.45
  
                                 
Acquisition-related PAUs
    
(0.04
)
    
(0.04
)
    
(0.11
)
    
(0.18
)
Tax effect
    
0.01
      
0.01
      
0.03
      
0.06
  
Diluted earnings per share excluding PAUs
  
$
0.38
    
$
0.33
    
$
1.45
    
$
1.33
  


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Pg. 5 cont. Horizon Bancorp Announces Record 2016 Net Income

Net income for the year ended December 31, 2016 was $23.9 million or $1.19 diluted earnings per share compared to $20.5 million or $1.26 diluted earnings per share for the year ended December 31, 2015.  The increase in net income from the previous year reflects an increase in net interest income and non-interest income of $11.3 million and $7.6 million, respectively, and a decrease in the provision for loan losses of $1.3 million, partially offset by increases in non-interest expense of $15.2 million and income tax expense of $1.6 million.  The decrease in diluted earnings per share from the previous year reflects an increase in diluted shares outstanding from the stock issued in the Kosciusko and LaPorte Bancorp acquisitions.  Excluding acquisition-related expenses, gain on sale of investment securities, the death benefit on bank owned life insurance, prepayment penalties on borrowings and purchase accounting adjustments, net income for the year ended December 31, 2016 was $29.2 million or $1.45 diluted earnings per share compared to $21.7 million or $1.33 diluted earnings per share for the year ended December 31, 2015.

Horizon’s net interest margin was 2.92% during the fourth quarter of 2016, down from 3.37% for the prior quarter and 3.50% for same period of 2015.  The decrease in the net interest margin compared to the prior quarter and the same period of 2015 was primarily due to prepayment penalties incurred on high fixed-rate borrowings as part of Horizon’s balance sheet restructuring transaction in the fourth quarter of 2016.  Offsetting this decrease in net interest margin was an increase in the yield on average loans and a decrease in the cost on average interest-bearing deposits when comparing the fourth quarter of 2016 to the same period of 2015.  Excluding prepayment penalties on borrowings and acquisition-related purchase accounting adjustments, the margin would have been 3.45% for the fourth quarter of 2016 compared to 3.31% for the prior quarter and 3.38% for the same period of 2015.  Interest expense from the prepayment penalties on borrowings was $4.8 million for the three months ended December 31, 2016.  Interest income from acquisition-related purchase accounting adjustments was $900,000, $459,000 and $695,000 for the three months ended December 31, 2016, September 30, 2016, and December 31, 2015, respectively.

Horizon’s net interest margin was 3.29% for the year ended December 31, 2016, down from 3.56% for year ended December 31, 2015.  Excluding prepayment penalties on borrowings and acquisition-related purchase accounting adjustments, the margin would have been 3.38% for the year ended December 31, 2016 compared to 3.42% for the year ended December 31, 2015. Interest expense from the prepayment penalties on borrowings was $4.8 million for the year ended December 31, 2016.  Interest income from acquisition-related purchase accounting adjustments was $2.3 million and $3.0 million for the years ended December 31, 2016 and 2015, respectively.


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Pg. 6 cont. Horizon Bancorp Announces Record 2016 Net Income

Non-GAAP Reconciliation of Net Interest Margin
  
(Dollars in Thousands, Unaudited)
 
  
   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
September 30
    
December 31
    
December 31
  
Net Interest Margin As Reported
  
2016
    
2016
    
2015
    
2016
    
2015
  
Net interest income
  
$
20,939
    
$
24,410
    
$
20,222
    
$
85,992
    
$
74,734
  
Average interest-earning assets
    
2,932,145
      
2,957,944
      
2,369,301
      
2,683,383
      
2,166,006
  
Net interest income as a percent of average interest-earning assets ("Net Interest Margin")
    
2.92
%
    
3.37
%
    
3.50
%
    
3.29
%
    
3.56
%
                                         
Impact of Prepayment Penalties on Borrowings
                                        
Interest expense from prepayment penalties on borrowings
  
$
4,839
    
$
-
    
$
-
    
$
4,839
    
$
-
  
                                         
Impact of Acquisitions
                                        
Interest income from acquisition-related purchase accounting adjustments
  
$
(900
)
  
$
(459
)
  
$
(695
)
  
$
(2,304
)
  
$
(2,977
)
                                         
Excluding Impact of Prepayment Penalties and Acquisitions
                                        
Net interest income
  
$
24,878
    
$
23,951
    
$
19,527
    
$
88,527
    
$
71,757
  
Average interest-earning assets
    
2,932,145
      
2,957,944
      
2,369,301
      
2,683,383
      
2,166,006
  
Core Net Interest Margin
    
3.45
%
    
3.31
%
    
3.38
%
    
3.38
%
    
3.42
%


Lending Activity

Total loans increased $387.0 million from $1.8 billion as of December 31, 2015 to $2.1 billion as of December 31, 2016 as commercial loans increased by $265.0 million, residential mortgage loans increased by $94.7 million and consumer loans increased by $36.1 million.  Offsetting these increases was a decrease in mortgage warehouse loans of $9.0 million as of December 31, 2016.  Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased 4.3% for the year ended December 31, 2016.  Excluding the mortgage warehouse relationships acquired through the LaPorte Bancorp merger, Horizon mortgage warehouse loans decreased by $41.9 million to $102.8 million at December 31, 2016 compared to $144.7 million at December 31, 2015.

Residential mortgage lending activity during the year ended December 31, 2016 generated $11.7 million in income from the gain on sale of mortgage loans, an increase of $1.6 million from the same period of 2015.  Total origination volume for the year ended December 31, 2016, including loans placed into portfolio, totaled $459.8 million, representing an increase of 8.7% from the same period of 2015.  Purchase money mortgage originations during the fourth quarter of 2016 represented 65.7% of total originations compared to 66.5% of originations during the previous quarter and 68.7% during the fourth quarter of 2015.

Loan balances in the Kalamazoo and Indianapolis markets totaled $185.9 million and $206.9 million, respectively, as of December 31, 2016. Combined, these markets contributed $61.6 million, or 18.6%, in loan growth during the year ended December 31, 2016.


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Pg. 7 cont. Horizon Bancorp Announces Record 2016 Net Income

Loan Growth by Type, Excluding Acquired Loans
  
Three Months Ended December 31, 2016
  
(Dollars in Thousands)
 
  
                           
Excluding Acquired Loans
  
                     
Acquired
              
   
December 31
    
September 30
    
Amount
    
CNB
    
Amount
    
Percent
  
 
  
2016
    
2016
    
Change
    
Loans
    
Change
    
Change
  
 
  
(Unaudited)
    
(Unaudited)
                          
Commercial loans
  
$
1,069,957
    
$
1,047,450
    
$
22,507
    
$
(2,267
)
  
$
20,240
      
1.9
%
Residential mortgage loans
    
531,874
      
530,162
      
1,712
      
(6,624
)
    
(4,912
)
    
-0.9
%
Consumer loans
    
398,428
      
386,031
      
12,397
      
(1,579
)
    
10,818
      
2.8
%
Subtotal
    
2,000,259
      
1,963,643
      
36,616
      
(10,470
)
    
26,146
      
1.3
%
Held for sale loans
    
8,087
      
7,369
      
718
      
-
      
718
      
9.7
%
Mortgage warehouse loans
    
135,727
      
226,876
      
(91,149
)
    
-
      
(91,149
)
    
-40.2
%
Total loans
  
$
2,144,073
    
$
2,197,888
    
$
(53,815
)
  
$
(10,470
)
  
$
(64,285
)
    
-2.9
%
                                                 
 
Loan Growth by Type, Excluding Acquired Loans
  
Twelve Months Ended December 31, 2016
  
(Dollars in Thousands)
  
                           
Acquired
    
Excluding Acquired Loans
  
                           
Kosciusko,
                  
   
December 31
    
December 31
    
Amount
    
LaPorte and
    
Amount
    
Percent
  
     
2016
      
2015
    
Change
    
CNB Loans
    
Change
    
Change
  
 
  
(Unaudited)
                                          
Commercial loans
  
$
1,069,957
    
$
804,995
    
$
264,962
    
$
(226,023
)
  
$
38,939
      
4.8
%
Residential mortgage loans
    
531,874
      
437,144
      
94,730
      
(75,471
)
    
19,259
      
4.4
%
Consumer loans
    
398,428
      
362,300
      
36,128
      
(24,699
)
    
11,429
      
3.2
%
Subtotal
    
2,000,259
      
1,604,439
      
395,820
      
(326,193
)
    
69,627
      
4.3
%
Held for sale loans
    
8,087
      
7,917
      
170
      
-
      
170
      
2.1
%
Mortgage warehouse loans
    
135,727
      
144,692
      
(8,965
)
    
(99,752
)
    
(108,717
)
    
-75.1
%
Total loans
  
$
2,144,073
    
$
1,757,048
    
$
387,025
    
$
(425,945
)
  
$
(38,920
)
    
-2.2
%


The provision for loan losses was $623,000 for the fourth quarter of 2016 compared to $342,000 for the same period of 2015.  The increase in the provision for loan losses during the fourth quarter of 2016 was due to continued loan growth.  The provision for loan losses for the year ended December 31, 2016 was $1.8 million compared to $3.2 million for the same period of 2015.  The decrease in the provision for loan losses for the year ended December 31, 2016 was due to lower charge-offs, stable delinquency trends and a decrease in non-performing loans.

The ratio of the allowance for loan losses to total loans decreased to 0.69% as of December 31, 2016 from 0.83% as of December 31, 2015 due to an increase in total loans.  The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.91% as of December 31, 2016 compared to 0.99% as of December 31, 2015.  Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 1.39% as of December 31, 2016 compared to 1.32% as of December 31, 2015.


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Pg. 8 cont. Horizon Bancorp Announces Record 2016 Net Income

Non-performing loans to total loans declined 45 basis points to 0.50% at December 31, 2016 from 0.95% at December 31, 2015.  Non-performing loans totaled $10.7 million as of December 31, 2016 a decrease of $6.0 million from $16.7 million as of December 31, 2015.  Compared to December 31, 2015, non-performing commercial loans decreased by $4.6 million, non-performing real estate loans decreased by $1.2 million and non-performing consumer loans decreased $209,000.

Non- GAAP Allowance for Loan and Lease Loss Detail
  
As of December 31, 2016
  
(Dollars in Thousands, Unaudited)
  
                                                 
   
Horizon
                                            
   
Legacy
    
Heartland
    
Summit
    
Peoples
    
Kosciusko
    
LaPorte
    
CNB
    
Total
  
Pre-discount loan balance
  
$
1,636,945
    
$
16,046
    
$
55,042
    
$
148,467
    
$
81,946
    
$
202,407
    
$
10,303
    
$
2,151,156
  
                                                                 
Allowance for loan losses (ALLL)
    
14,833
      
4
      
-
      
-
      
-
      
-
      
-
      
14,837
  
Loan discount
    
N/A
      
1,083
      
2,475
      
3,323
      
997
      
6,971
      
321
      
15,170
  
ALLL+loan discount
    
14,833
      
1,087
      
2,475
      
3,323
      
997
      
6,971
      
321
      
30,007
  
                                                                                         
Loans, net
  
$
1,622,112
    
$
14,959
    
$
52,567
    
$
145,144
    
$
80,949
    
$
195,436
    
$
9,982
    
$
2,121,149
  
                                                                 
ALLL/ pre-discount loan balance
    
0.91
%
    
0.02
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.69
%
Loan discount/ pre-discount loan balance
    
N/A
      
6.75
%
    
4.50
%
    
2.24
%
    
1.22
%
    
3.44
%
    
3.12
%
    
0.71
%
ALLL+loan discount/ pre-discount loan balance
    
0.91
%
    
6.77
%
    
4.50
%
    
2.24
%
    
1.22
%
    
3.44
%
    
3.12
%
    
1.39
%


Expense Management

Total non-interest expense was $4.0 million higher in the fourth quarter of 2016 compared to the same period of 2015.  The increase was primarily due to an increase in salaries, net occupancy expenses, data processing, professional fees, loan expense, and other expense reflecting overall company growth.  Outside services and consultants expense increased primarily due to the expense associated with the LaPorte and CNB Bancorp acquisitions.  Non-interest expense for the fourth quarter of 2016 included $1.4 million of one- time merger-related expenses due to the LaPorte Bancorp and CNB Bancorp acquisitions compared to $525,000 in one-time merger-related expenses during the same period of 2015 due to the Peoples Bancorp acquisition.  Employee benefits expense decreased $685,000 in the fourth quarter of 2016 compared to the same period in 2015 due to a decrease in a pension liability as a result of the rise in interest rates and a decrease in the number of participants.  FDIC insurance expense decreased $120,000 in the fourth quarter of 2016 when compared to the same period of 2015 as the assessment rate schedule was reduced effective for assessment payments due in the fourth quarter of 2016.

Total non-interest expense was $15.2 million higher for the year ended December 31, 2016 compared to the same period of 2015.  The increase in non-interest expense was due to an increase in salaries expense of $5.6 million, employee benefits of $664,000, net occupancy expenses of $1.9 million, data processing expense of $1.1 million, professional fees of $682,000, loan expense of $203,000, other losses of $252,000 and other expense of $2.6 million due to overall company growth.  Outside services and consultants expense increased $2.1 million primarily due to the expense associated with the Kosciusko, LaPorte and CNB Bancorp acquisitions.  Non-interest expense for the year ended December 31, 2016 included $6.8 million of one-time merger-related


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Pg. 9 cont. Horizon Bancorp Announces Record 2016 Net Income

expenses due to the Kosciusko, LaPorte Bancorp and CNB Bancorp acquisitions compared to $4.9 million in one-time merger-related expenses in the same period of 2015 due to the Peoples Bancorp acquisition.

Use of Non-GAAP Financial Measures

Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP.  Specifically, we have included non-GAAP financial measures of the net interest margin and the allowance for loan and lease losses excluding the impact of acquisition-related purchase accounting adjustments, total loans and loan growth, and net income and diluted earnings per share excluding the impact of one-time costs related to acquisitions, acquisition-related purchase accounting adjustments and other events that are considered to be non-recurring.  Horizon believes that these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non-core items, although these measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure.  See the tables and other information contained elsewhere in this press release for reconciliations of the non-GAAP figures identified herein and their most comparable GAAP measures.

Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share
  
(Dollars in Thousands Except per Share Data)
  
                               
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2016
    
2016
    
2016
    
2016
    
2015
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
        
Total stockholders’ equity
  
$
340,855
    
$
345,736
    
$
281,002
    
$
261,417
    
$
266,832
  
Less: Preferred stock
    
-
      
-
      
-
      
-
      
12,500
  
Less: Intangible assets
    
86,247
      
83,891
      
65,144
      
56,695
      
56,971
  
Total tangible stockholder's equity
  
$
254,608
    
$
261,845
    
$
215,858
    
$
204,722
    
$
197,361
  
                                         
Common shares outstanding
    
22,171,596
      
22,143,228
      
18,857,301
      
17,974,970
      
17,909,831
  
                                         
Tangible book value per common share
  
$
11.48
    
$
11.83
    
$
11.45
    
$
11.39
    
$
11.02
  


About Horizon

Horizon Bancorp is an independent, commercial bank holding company serving northern and central Indiana and southwest and central 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.horizonbank.com.  Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC.


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Pg. 10 cont. Horizon Bancorp Announces Record 2016 Net Income

Forward Looking Statements

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 its Form 10-K.  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)

   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2016
    
2016
    
2016
    
2016
    
2015
  
Balance sheet:
                              
Total assets
  
$
3,141,156
    
$
3,325,650
    
$
2,918,080
    
$
2,627,918
    
$
2,652,401
  
Investment securities
    
633,025
      
744,240
      
628,935
      
642,767
      
632,611
  
Commercial loans
    
1,069,957
      
1,047,450
      
874,580
      
797,754
      
804,995
  
Mortgage warehouse loans
    
135,727
      
226,876
      
205,699
      
119,876
      
144,692
  
Residential mortgage loans
    
531,874
      
530,162
      
493,626
      
442,806
      
437,144
  
Consumer loans
    
398,428
      
386,031
      
363,920
      
359,636
      
362,300
  
Earning assets
    
2,801,030
      
2,963,005
      
2,591,208
      
2,379,830
      
2,403,482
  
Non-interest bearing deposit accounts
    
496,248
      
479,771
      
397,412
      
343,025
      
335,955
  
Interest bearing transaction accounts
    
1,499,120
      
1,367,285
      
1,213,659
      
1,118,617
      
1,177,651
  
Time deposits
    
475,842
      
489,106
      
471,190
      
416,837
      
366,547
  
Borrowings
    
267,489
      
569,908
      
492,883
      
430,507
      
449,347
  
Subordinated debentures
    
37,456
      
37,418
      
32,874
      
32,836
      
32,797
  
Common stockholders' equity
    
340,855
      
345,736
      
281,002
      
261,417
      
254,332
  
Total stockholders’ equity
    
340,855
      
345,736
      
281,002
      
261,417
      
266,832
  
                                         
Income statement:
  
Three months ended
  
Net interest income
  
$
20,939
    
$
24,410
    
$
20,869
    
$
19,774
    
$
20,222
  
Provision for loan losses
    
623
      
455
      
232
      
532
      
342
  
Non-interest income
    
10,185
      
10,056
      
9,869
      
7,864
      
7,750
  
Non-interest expenses
    
23,289
      
24,820
      
21,555
      
19,747
      
19,240
  
Income tax expense
    
1,609
      
2,589
      
2,625
      
1,978
      
2,215
  
Net income
    
5,603
      
6,602
      
6,326
      
5,381
      
6,175
  
Preferred stock dividend
    
-
      
-
      
-
      
(42
)
    
(31
)
Net income available to common shareholders
  
$
5,603
    
$
6,602
    
$
6,326
    
$
5,339
    
$
6,144
  
                                         
Per share data:
                                        
Basic earnings per share
  
$
0.25
    
$
0.31
    
$
0.35
    
$
0.30
    
$
0.34
  
Diluted earnings per share
    
0.25
      
0.30
      
0.34
      
0.30
      
0.34
  
Cash dividends declared per common share
    
0.11
      
0.10
      
0.10
      
0.10
      
0.10
  
Book value per common share
    
15.37
      
15.61
      
14.90
      
14.54
      
14.20
  
Tangible book value per common share
    
11.48
      
11.83
      
11.45
      
11.39
      
11.02
  
Market value - high
    
28.41
      
20.01
      
16.76
      
18.59
      
18.77
  
Market value - low
  
$
17.84
    
$
16.61
    
$
15.87
    
$
15.41
    
$
15.72
  
Weighted average shares outstanding - Basic
    
22,155,549
      
21,538,752
      
18,268,880
      
17,924,124
      
17,905,871
  
Weighted average shares outstanding - Diluted
    
22,283,722
      
21,651,953
      
18,364,167
      
18,012,726
      
18,020,615
  
                                         
Key ratios:
                                        
Return on average assets
    
0.69
%
    
0.80
%
    
0.94
%
    
0.83
%
    
0.94
%
Return on average common stockholders' equity
    
6.49
      
7.88
      
9.43
      
8.26
      
9.53
  
Net interest margin
    
2.92
      
3.37
      
3.48
      
3.45
      
3.50
  
Loan loss reserve to total loans
    
0.69
      
0.66
      
0.73
      
0.83
      
0.83
  
Non-performing loans to loans
    
0.50
      
0.58
      
0.68
      
0.87
      
0.95
  
Average equity to average assets
    
10.59
      
10.18
      
9.94
      
10.16
      
10.32
  
Bank only capital ratios:
                                        
Tier 1 capital to average assets
    
10.14
      
9.65
      
9.39
      
8.98
      
8.77
  
Tier 1 capital to risk weighted assets
    
13.77
      
12.73
      
12.51
      
12.33
      
11.80
  
Total capital to risk weighted assets
    
14.41
      
13.34
      
13.23
      
13.10
      
12.57
  
                                         
Loan data:
                                        
Substandard loans
  
$
30,361
    
$
33,914
    
$
28,629
    
$
23,600
    
$
25,127
  
30 to 89 days delinquent
    
6,315
      
3,821
      
2,887
      
2,149
      
5,011
  
                                         
90 days and greater delinquent - accruing interest
  
$
241
    
$
59
    
$
24
    
$
1
    
$
28
  
Trouble debt restructures - accruing interest
    
1,492
      
1,523
      
1,256
      
1,231
      
1,218
  
Trouble debt restructures - non-accrual
    
1,014
      
1,164
      
1,466
      
2,857
      
3,172
  
Non-accrual loans
    
7,936
      
10,091
      
10,426
      
10,895
      
12,262
  
Total non-performing loans
  
$
10,683
    
$
12,837
    
$
13,172
    
$
14,984
    
$
16,680
  

11

HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)

   
December 31
    
December 31
  
   
2016
    
2015
  
Balance sheet:
            
Total assets
  
$
3,141,156
    
$
2,652,401
  
Investment securities
    
633,025
      
632,611
  
Commercial loans
    
1,069,957
      
804,995
  
Mortgage warehouse loans
    
135,727
      
144,692
  
Residential mortgage loans
    
531,874
      
437,144
  
Consumer loans
    
398,428
      
362,300
  
Earning assets
    
2,801,030
      
2,403,482
  
Non-interest bearing deposit accounts
    
496,248
      
335,955
  
Interest bearing transaction accounts
    
1,499,120
      
1,177,651
  
Time deposits
    
475,842
      
366,547
  
Borrowings
    
267,489
      
449,347
  
Subordinated debentures
    
37,456
      
32,797
  
Common stockholders' equity
    
340,855
      
254,332
  
Total stockholders’ equity
    
340,855
      
266,832
  
                 
Income statement:
  
Twelve Months Ended
  
Net interest income
  
$
85,992
    
$
74,734
  
Provision for loan losses
    
1,842
      
3,162
  
Non-interest income
    
37,974
      
30,402
  
Non-interest expenses
    
89,411
      
74,193
  
Income tax expense
    
8,801
      
7,232
  
Net income
    
23,912
      
20,549
  
Preferred stock dividend
    
(42
)
    
(125
)
Net income available to common shareholders
  
$
23,870
    
$
20,424
  
                 
Per share data:
                
Basic earnings per share
  
$
1.19
    
$
1.94
  
Diluted earnings per share
    
1.19
      
1.89
  
Cash dividends declared per common share
    
0.41
      
0.39
  
Book value per common share
    
15.37
      
14.20
  
Tangible book value per common share
    
11.48
      
11.02
  
Market value - high
    
28.41
      
18.77
  
Market value - low
  
$
15.41
    
$
14.92
  
Weighted average shares outstanding - Basic
    
19,987,728
      
15,765,444
  
Weighted average shares outstanding - Diluted
    
20,082,410
      
16,197,312
  
                 
Key ratios:
                
Return on average assets
    
0.81
%
    
0.87
%
Return on average common stockholders' equity
    
8.23
      
9.87
  
Net interest margin
    
3.29
      
3.56
  
Loan loss reserve to total loans
    
0.69
      
0.83
  
Non-performing loans to loans
    
0.50
      
0.95
  
Average equity to average assets
    
10.22
      
9.30
  
Bank only capital ratios:
                
Tier 1 capital to average assets
    
10.14
      
8.69
  
Tier 1 capital to risk weighted assets
    
13.77
      
11.89
  
Total capital to risk weighted assets
    
14.41
      
12.68
  
                 
Loan data:
                
Substandard loans
  
$
30,361
    
$
25,233
  
30 to 89 days delinquent
    
6,315
      
5,012
  
                 
90 days and greater delinquent - accruing interest
  
$
241
    
$
28
  
Trouble debt restructures - accruing interest
    
1,492
      
1,218
  
Trouble debt restructures - non-accrual
    
1,014
      
3,172
  
Non-accrual loans
    
7,936
      
12,262
  
Total non-performing loans
  
$
10,683
    
$
16,680
  


12

HORIZON BANCORP

Allocation of the Allowance for Loan and Lease Losses
(Dollars in Thousands, Unaudited)

   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2016
    
2016
    
2016
    
2016
    
2015
  
Commercial
  
$
6,579
    
$
6,222
    
$
6,051
    
$
6,460
    
$
7,195
  
Real estate
    
2,090
      
1,947
      
2,102
      
1,794
      
2,476
  
Mortgage warehousing
    
1,254
      
1,337
      
1,080
      
1,014
      
1,007
  
Consumer
    
4,914
      
5,018
      
4,993
      
4,968
      
3,856
  
Total
  
$
14,837
    
$
14,524
    
$
14,226
    
$
14,236
    
$
14,534
  


Net Charge-offs (Recoveries)
(Dollars in Thousands, Unaudited)

   
Three months ended
  
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
 
2016
    
2016
    
2016
    
2016
    
2015
  
Commercial
  
$
49
    
$
(5
)
  
$
101
    
$
403
    
$
1,595
  
Real estate
    
64
      
-
      
(31
)
    
83
      
(59
)
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
197
      
162
      
172
      
344
      
440
  
Total
  
$
310
    
$
157
    
$
242
    
$
830
    
$
1,976
  


Total Non-performing Loans
(Dollars in Thousands, Unaudited)

 
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2016
    
2016
    
2016
    
2016
    
2015
  
Commercial
  
$
2,432
    
$
5,419
    
$
4,330
    
$
5,774
    
$
7,005
  
Real estate
    
5,022
      
4,251
      
5,659
      
5,974
      
6,237
  
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
3,229
      
3,108
      
3,183
      
3,236
      
3,438
  
Total
  
$
10,683
    
$
12,778
    
$
13,172
    
$
14,984
    
$
16,680
  


Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)

 
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2016
    
2016
    
2016
    
2016
    
2015
  
Commercial
  
$
542
    
$
542
    
$
542
    
$
424
    
$
161
  
Real estate
    
2,648
      
3,182
      
2,925
      
3,393
      
3,046
  
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
26
      
67
      
69
      
-
      
-
  
Total
  
$
3,216
    
$
3,791
    
$
3,536
    
$
3,817
    
$
3,207
  

13

HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)

   
Three Months Ended
    
Three Months Ended
  
   
December 31, 2016
    
December 31, 2015
  
   
Average
          
Average
    
Average
          
Average
  
   
Balance
    
Interest
    
Rate
    
Balance
    
Interest
    
Rate
  
                                     
ASSETS
                                    
Interest-earning assets
                                    
Federal funds sold
  
$
27,034
    
$
42
      
0.62
%
  
$
4,285
    
$
2
      
0.19
%
Interest-earning deposits
    
33,901
      
73
      
0.86
%
    
20,265
      
5
      
0.10
%
Investment securities - taxable
    
496,794
      
2,221
      
1.78
%
    
452,628
      
2,337
      
2.05
%
Investment securities - non-taxable (1)
    
219,937
      
1,338
      
3.36
%
    
174,768
      
1,213
      
4.17
%
Loans receivable (2)(3)
    
2,154,479
      
25,715
      
4.76
%
    
1,717,355
      
20,233
      
4.69
%
Total interest-earning assets (1)
    
2,932,145
      
29,389
      
4.07
%
    
2,369,301
      
23,790
      
4.10
%
                                                 
Non-interest-earning assets
                                                
Cash and due from banks
    
40,788
                      
33,621
                  
Allowance for loan losses
    
(14,593
)
                    
(15,739
)
                
Other assets
    
283,410
                      
213,386
                  
                                                 
   
$
3,241,750
                    
$
2,600,569
                  
                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                
Interest-bearing liabilities
                                                
Interest-bearing deposits
  
$
1,949,549
    
$
1,693
      
0.35
%
  
$
1,604,394
    
$
1,524
      
0.38
%
Borrowings
    
382,177
      
6,199
      
6.45
%
    
324,496
      
1,539
      
1.88
%
Subordinated debentures
    
38,084
      
558
      
5.83
%
    
32,773
      
505
      
6.11
%
Total interest-bearing liabilities
    
2,369,810
      
8,450
      
1.42
%
    
1,961,663
      
3,568
      
0.72
%
                                                 
Non-interest-bearing liabilities
                                                
Demand deposits
    
504,274
                      
349,127
                  
Accrued interest payable and other liabilities
    
24,322
                      
21,468
                  
Stockholders' equity
    
343,344
                      
268,311
                  
                                                 
   
$
3,241,750
                    
$
2,600,569
                  
                                                 
Net interest income/spread
          
$
20,939
      
2.65
%
          
$
20,222
      
3.38
%
                                                 
Net interest income as a percent of average interest earning assets (1)
                    
2.92
%
                    
3.50
%
 
(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.

14

HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)

   
Twelve Months Ended
    
Twelve Months Ended
  
   
December 31, 2016
    
December 31, 2015
  
   
Average
          
Average
    
Average
          
Average
  
   
Balance
    
Interest
    
Rate
    
Balance
    
Interest
    
Rate
  
ASSETS
                                    
Interest-earning assets
                                    
Federal funds sold
  
$
17,142
    
$
95
      
0.55
%
  
$
10,264
    
$
11
      
0.11
%
Interest-earning deposits
    
34,506
      
278
      
0.81
%
    
14,045
      
10
      
0.07
%
Investment securities - taxable
    
490,274
      
9,666
      
1.97
%
    
394,976
      
8,700
      
2.20
%
Investment securities - non-taxable (1)
    
192,881
      
4,921
      
3.59
%
    
152,931
      
4,494
      
4.32
%
Loans receivable (2)(3)
    
1,948,580
      
91,569
      
4.71
%
    
1,593,790
      
75,373
      
4.74
%
Total interest-earning assets (1)
    
2,683,383
      
106,529
      
4.05
%
    
2,166,006
      
88,588
      
4.20
%
                                                 
Non-interest-earning assets
                                                
Cash and due from banks
    
37,549
                      
31,692
                  
Allowance for loan losses
    
(14,439
)
                    
(16,351
)
                
Other assets
    
255,129
                      
179,138
                  
                                                 
   
$
2,961,622
                    
$
2,360,485
                  
                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                
Interest-bearing liabilities
                                                
Interest-bearing deposits
  
$
1,752,326
    
$
6,616
      
0.38
%
  
$
1,438,026
    
$
5,559
      
0.39
%
Borrowings
    
425,444
      
11,807
      
2.78
%
    
336,618
      
6,286
      
1.87
%
Subordinated debentures
    
49,834
      
2,114
      
4.24
%
    
32,717
      
2,009
      
6.14
%
Total interest-bearing liabilities
    
2,227,604
      
20,537
      
0.92
%
    
1,807,361
      
13,854
      
0.77
%
                                                 
Non-interest-bearing liabilities
                                                
Demand deposits
    
417,900
                      
317,246
                  
Accrued interest payable and other liabilities
    
13,574
                      
16,364
                  
Stockholders' equity
    
302,544
                      
219,514
                  
                                                 
   
$
2,961,622
                    
$
2,360,485
                  
                                                 
Net interest income/spread
          
$
85,992
      
3.13
%
          
$
74,734
      
3.43
%
                                                 
Net interest income as a percent of average interest earning assets (1)
                    
3.29
%
                    
3.56
%
 
(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.

15

HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
   
December 31
    
December 31
  
   
2016
    
2015
  
   
(Unaudited)
        
Assets
            
Cash and due from banks
  
$
70,832
    
$
48,650
  
Investment securities, available for sale
    
439,831
      
444,982
  
Investment securities, held to maturity (fair value of $195,093 and $193,703)
    
193,194
      
187,629
  
Loans held for sale
    
8,087
      
7,917
  
Loans, net of allowance for loan losses of $14,837 and $14,534
    
2,121,149
      
1,734,597
  
Premises and equipment, net
    
66,357
      
60,798
  
Federal Reserve and Federal Home Loan Bank stock
    
23,932
      
13,823
  
Goodwill
    
77,052
      
49,600
  
Other intangible assets
    
9,195
      
7,371
  
Interest receivable
    
12,713
      
10,535
  
Cash value of life insurance
    
74,134
      
54,504
  
Other assets
    
44,680
      
31,995
  
Total assets
  
$
3,141,156
    
$
2,652,401
  
Liabilities
                
Deposits
                
Non-interest bearing
  
$
496,248
    
$
335,955
  
Interest bearing
    
1,974,962
      
1,544,198
  
Total deposits
    
2,471,210
      
1,880,153
  
Borrowings
    
267,489
      
449,347
  
Subordinated debentures
    
37,456
      
32,797
  
Interest payable
    
472
      
507
  
Other liabilities
    
23,674
      
22,765
  
Total liabilities
    
2,800,301
      
2,385,569
  
Commitments and contingent liabilities
                
Stockholders’ Equity
                
Preferred stock, Authorized, 1,000,000 shares
                
Series B shares $.01 par value, $1,000 liquidation value
                
Issued 0 and 12,500 shares
    
-
      
12,500
  
Common stock, no par value
                
Authorized, 66,000,000 shares
                
Issued, 22,190,846 and 17,992,986 shares
                
Outstanding, 22,171,596 and 17,909,831 shares
    
-
      
-
  
Additional paid-in capital
    
182,326
      
106,370
  
Retained earnings
    
164,173
      
148,685
  
Accumulated other comprehensive (loss)
    
(5,644
)
    
(723
)
Total stockholders’ equity
    
340,855
      
266,832
  
Total liabilities and stockholders’ equity
  
$
3,141,156
    
$
2,652,401
  



16

HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income
 (Dollar Amounts in Thousands, Except Per Share Data, Unaudited)

   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
December 31
  
   
2016
    
2015
    
2016
    
2015
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
Interest Income
                        
Loans receivable
  
$
25,715
    
$
20,233
    
$
91,569
    
$
75,373
  
Investment securities
                                
Taxable
    
2,336
      
2,344
      
10,039
      
8,721
  
Tax exempt
    
1,338
      
1,213
      
4,921
      
4,494
  
Total interest income
    
29,389
      
23,790
      
106,529
      
88,588
  
Interest Expense
                                
Deposits
    
1,693
      
1,524
      
6,616
      
5,559
  
Borrowed funds
    
6,199
      
1,539
      
11,807
      
6,286
  
Subordinated debentures
    
558
      
505
      
2,114
      
2,009
  
Total interest expense
    
8,450
      
3,568
      
20,537
      
13,854
  
Net Interest Income
    
20,939
      
20,222
      
85,992
      
74,734
  
Provision for loan losses
    
623
      
342
      
1,842
      
3,162
  
Net Interest Income after Provision for Loan Losses
    
20,316
      
19,880
      
84,150
      
71,572
  
Non-interest Income
                                
Service charges on deposit accounts
    
1,348
      
1,364
      
5,404
      
4,807
  
Wire transfer fees
    
218
      
140
      
806
      
633
  
Interchange fees
    
1,905
      
1,498
      
7,042
      
5,591
  
Fiduciary activities
    
1,868
      
1,604
      
6,621
      
5,637
  
Gain on sale of investment securities (includes $961 for the three months ended and $1,836 for the twelve months ended December 31, 2016 and $65 for the three months ended and $189 for the twelve months ended December 31, 2015, related to accumulated other comprehensive earnings reclassifications)
    
961
      
65
      
1,836
      
189
  
Gain on sale of mortgage loans
    
2,504
      
2,240
      
11,675
      
10,055
  
Mortgage servicing income net of impairment
    
552
      
268
      
1,908
      
993
  
Increase in cash value of bank owned life insurance
    
498
      
360
      
1,643
      
1,249
  
Death benefit on bank owned life insurance
    
-
      
-
      
-
      
145
  
Other income
    
331
      
211
      
1,039
      
1,103
  
Total non-interest income
    
10,185
      
7,750
      
37,974
      
30,402
  
Non-interest Expense
                                
Salaries and employee benefits
    
11,421
      
10,171
      
44,013
      
37,712
  
Net occupancy expenses
    
2,311
      
1,751
      
8,322
      
6,400
  
Data processing
    
1,512
      
1,081
      
5,367
      
4,251
  
Professional fees
    
562
      
474
      
2,752
      
2,070
  
Outside services and consultants
    
1,880
      
982
      
7,863
      
5,735
  
Loan expense
    
1,496
      
1,404
      
5,582
      
5,379
  
FDIC insurance expense
    
280
      
400
      
1,559
      
1,499
  
Other losses
    
174
      
81
      
684
      
432
  
Other expense
    
3,653
      
2,896
      
13,269
      
10,715
  
Total non-interest expense
    
23,289
      
19,240
      
89,411
      
74,193
  
Income Before Income Tax
    
7,212
      
8,390
      
32,713
      
27,781
  
Income tax expense (includes $336 for the three months ended and $643 for the twelve months ended December 31, 2016 and $23 for the three months ended and $66 for the twelve months ended December 31, 2015, related to income tax expense from reclassification items)
    
1,609
      
2,215
      
8,801
      
7,232
  
Net Income
    
5,603
      
6,175
      
23,912
      
20,549
  
Preferred stock dividend
    
-
      
(31
)
    
(42
)
    
(125
)
Net Income Available to Common Shareholders
  
$
5,603
    
$
6,144
    
$
23,870
    
$
20,424
  
Basic Earnings Per Share
  
$
0.25
    
$
0.34
    
$
1.19
    
$
1.30
  
Diluted Earnings Per Share
    
0.25
      
0.34
      
1.19
      
1.26
  

17