EX-99.1 2 hb_8k012919ex.htm PRESS RELEASE ISSUED ON JANUARY 29, 2019
Exhibit 99.1

Contact: Mark E. Secor
Chief Financial Officer
Phone: (219) 873-2611
Fax: (219) 874-9280
Date: January 29, 2019

FOR IMMEDIATE RELEASE

Horizon Bancorp, Inc. Announces Record Earnings for 2018

Michigan City, Indiana (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) today announced its unaudited financial results for the three-month and twelve-month periods ended December 31, 2018. All share data has been adjusted to reflect Horizon’s three-for-two stock split effective June 15, 2018.

SUMMARY:
·
Net income for the year ended December 31, 2018 was $53.1 million, or $1.38 diluted earnings per share, compared to $33.1 million, or $0.95 diluted earnings per share for year-end 2017. This represents the highest annual net income and diluted earnings per share in the Company’s 145-year history.
·
Core net income for the year 2018 increased 38.0% to $48.9 million, or $1.27 diluted earnings per share, compared to $35.5 million, or $1.02 diluted earnings per share, for the year of 2017. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for the definition of core net income)
·
Net income for the fourth quarter of 2018 was $13.1 million, or $0.34 diluted earnings per share, compared to $7.6 million, or $0.20 diluted earnings per share, for the fourth quarter of 2017.
·
Core net income for the fourth quarter of 2018 was $12.5 million, or $0.33 diluted earnings per share, compared to $10.1 million, or $0.27 diluted earnings per share, for the fourth quarter of 2017.
·
Return on average assets was 1.31% for the year ended December 31, 2018 compared to 0.97% for the year ended December 31, 2017.
·
Core return on average assets for the year ended December 31, 2018 was 1.21% compared to 1.04% for the year ended December 31, 2017. (See the “Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” table on page 10 for the definition of core return on average assets)
·
Total loans increased by an annualized rate of 7.4%, or $55.0 million, during the three months ended December 31, 2018.
·
Total loans increased by a rate of 6.2%, or $176.1 million, during the year ended December 31, 2018. Total loans, excluding loans held for sale and mortgage warehouse loans, increased by a rate of 7.2%, or $198.5 million, during the year ended December 31, 2018.
·
Commercial loans increased by an annualized rate of 5.4%, or $23.0 million, during the three months ended December 31, 2018. For the year ended December 31, 2018, commercial loans increased by a rate of 3.1%, or $51.7 million.

Pg. 2 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018
 
·
Residential mortgage loans increased by an annualized rate of 10.3%, or $16.9 million, during the three months ended December 31, 2018. For the year ended December 31, 2018, residential mortgage loans increased at a rate of 9.6%, or $58.4 million.
·
Consumer loans increased by an annualized rate of 9.9%, or $13.3 million, during the three months ended December 31, 2018. For the year ended December 31, 2018, consumer loans increased at a rate of 19.2%, or $88.5 million.
·
Total deposits increased by a rate of 9.0%, or $258.4 million, during 2018.
·
Net interest income increased $2.4 million, or 7.6%, to $33.8 million for the three months ended December 31, 2018 compared to $31.5 million for the three months ended December 31, 2017. Net interest income increased $22.5 million, or 20.0%, to $134.6 million for the year ended December 31, 2018 compared to $112.1 million for the year ended December 31, 2017.
·
Net interest margin was 3.60% for the three months ended December 31, 2018 compared to 3.71% for the three months ended December 31, 2017. Net interest margin was 3.71% for the year 2018 and 3.75% for the year 2017.
·
Horizon’s tangible book value per share increased to $9.43 at December 31, 2018 compared to $9.04 and $8.48 at September 30, 2018 and December 31, 2017, respectively. This represents the highest tangible book value per share in the Company’s 145-year history.
·
On October 29, 2018, Horizon announced the pending acquisition of Salin Bancshares, Inc. (“Salin”) and its wholly-owned subsidiary, Salin Bank and Trust Company (“Salin Bank”), headquartered in Indianapolis, Indiana which is anticipated to close during February 2019.
Craig Dwight, Chairman and CEO of Horizon, commented:  “I am very pleased to announce Horizon Bancorp’s 2018 results. Our ability to generate organic growth through investments in growth markets, along with increased mass and scale, produced record earnings for 2018. Horizon’s 2018 diluted earnings per share of $1.38 is a 45.3% increase over our 2017 diluted earnings per share of $0.95. Net income increased $20.0 million, or 60.4%, when compared to 2017.”

Dwight added, “At December 31, 2018, Horizon’s total assets surpassed $4.2 billion, driven by loan growth since the beginning of the year. An increase in consumer loans of $88.5 million, mortgage loans of $58.4 million and commercial loans of $51.7 million resulted in a $176.1 million, or 6.3%, increase in total loans. Horizon originated approximately $337.1 million in commercial loans during 2018; however, only 58.0%, or $195.6 million, of these originations were funded at the time of the closing of the loan. The markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo experienced an increase in loan balances of $116.4 million, or 20.8%, during 2018 due to our talented local teams’ commitment to these growth markets.”

Dwight continued, “The acquisitions of Lafayette Community Bancorp and Wolverine Bancorp, Inc. in 2017, along with other operational leverage strategies have resulted in an improved efficiency ratio during 2018. Horizon’s efficiency ratio has decreased from 65.28% during 2017, which included a higher amount of merger expenses, to 60.67% during 2018. The improvement in Horizon’s efficiency ratio is a result of good execution by our entire team of Horizon’s merger and integration plans.”


Pg. 3 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

On October 29, 2018, Horizon entered into an agreement to acquire Salin and its wholly-owned subsidiary, Salin Bank in a cash and stock merger. The acquisition is expected to close in February 2019, subject to regulatory and Salin shareholder approval. Salin Bank is the third largest privately held bank in Indiana, with 20 banking centers in 10 Indiana counties, serving Columbus, Delphi, Edinburgh, Fishers, Flora, Fort Wayne, Galveston, Gas City, Kokomo, Lafayette, Logansport, Marion, West Lafayette and Indianapolis. As of September 30, 2018, Salin had total assets of approximately $918.4 million.

Dwight commented, “We are excited about the pending merger with Salin, as it provides entry into the attractive growth markets of Fort Wayne and Columbus, Indiana while also complementing our current Indiana locations. Salin Bank’s presence in the dynamic markets of Indianapolis and Lafayette, Indiana will add to Horizon’s current footprint. In addition, Salin has a talented team who will add depth and experience to our current sales network. Horizon’s strategic plan calls for continued expansion in the States of Indiana and Michigan with an emphasis on strong core deposit growth, investment in growth markets and to add mass and scale to gain additional efficiencies. Horizon’s pending merger with Salin is in alignment with our strategic plan.”

Income Statement Highlights

Net income for the fourth quarter of 2018 was $13.1 million, or $0.34 diluted earnings per share, compared to $7.6 million, or $0.20 diluted earnings per share, for the fourth quarter of 2017. Core net income for the fourth quarter of 2018 was $12.5 million, or $0.33 diluted earnings per share, compared to $10.1 million, or $0.27 diluted earnings per share, for the fourth quarter of 2017.

The increase in net income and diluted earnings per share from the fourth quarter of 2017 when compared to the same period of 2018 reflects an increase in net interest income of $2.4 million along with decreases in income tax expense of $3.2 million, provision for loan losses of $572,000 and non-interest expense of $174,000. These positive impacts to net income were partially offset by a decrease in non-interest income of $867,000 when comparing the fourth quarter of 2018 to the fourth quarter of 2017.

Net income for the year ended December 31, 2018 was $53.1 million, or $1.38 diluted earnings per share, compared to $33.1 million, or $0.95 diluted earnings per share, for the year ended December 31, 2017. Core net income for the year ended December 31, 2018 was $48.9 million, or $1.27 diluted earnings per share, compared to $35.5 million, or $1.02 diluted earnings per share, for the year ended December 31, 2017. This represents a 24.5% increase in core diluted earnings per share for 2018 compared to 2017.

The increase in net income and diluted earnings per share during 2018 when compared to the same period of 2017 reflects increases in core net interest income of $19.9 million and non-interest income of $1.3 million and a decrease in income tax expense of $4.4 million, partially offset by increases in non-interest expense of $7.7 million and provision for loan losses of $436,000.




Pg. 4 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018


Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
  
(Dollars in Thousands, Except per Share Data, Unaudited)
 
  
   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
September 30
    
December 31
    
December 31
    
December 31
  
   
2018
    
2018
    
2017
    
2018
    
2017
  
Non-GAAP Reconciliation of Net Income
                              
Net income as reported
  
$
13,133
    
$
13,065
    
$
7,650
    
$
53,117
    
$
33,117
  
Merger expenses
    
487
      
-
      
1,444
      
487
      
3,656
  
Tax effect
    
(102
)
    
-
      
(418
)
    
(102
)
    
(1,003
)
Net income excluding merger expenses
    
13,518
      
13,065
      
8,676
      
53,502
      
35,770
  
Loss (gain) on sale of investment securities
    
332
      
122
      
-
      
443
      
(38
)
Tax effect
    
(70
)
    
(25
)
    
-
      
(93
)
    
13
  
Net income excluding gain on sale of investment securities
    
13,780
      
13,162
      
8,676
      
53,852
      
35,745
  
Death benefit on bank owned life insurance ("BOLI")
    
-
      
-
      
-
      
(154
)
    
-
  
Tax effect
    
-
      
-
      
-
      
32
      
-
  
Net income excluding death benefit on BOLI
    
13,780
      
13,162
      
8,676
      
53,730
      
35,745
  
Gain on remeasurement of equity interest in Lafayette
    
-
      
-
      
(530
)
    
-
      
(530
)
Tax effect
    
-
      
-
      
78
      
-
      
78
  
Net income excluding gain on remeasurement of equity interest in Lafayette
    
13,780
      
13,162
      
8,224
      
53,730
      
35,293
  
Tax reform bill impact
    
-
      
-
      
2,426
      
-
      
2,426
  
Net income excluding tax reform bill impact
    
13,780
      
13,162
      
10,650
      
53,730
      
37,719
  
Acquisition-related purchase accounting adjustments ("PAUs")
    
(1,629
)
    
(789
)
    
(868
)
    
(6,089
)
    
(3,484
)
Tax effect
    
342
      
166
      
304
      
1,279
      
1,219
  
Core Net Income
  
$
12,493
    
$
12,539
    
$
10,086
    
$
48,920
    
$
35,454
  
                                         
Non-GAAP Reconciliation of Diluted Earnings per Share
                                        
Diluted earnings per share ("EPS") as reported
  
$
0.34
    
$
0.34
    
$
0.20
    
$
1.38
    
$
0.95
  
Merger expenses
    
0.01
      
-
      
0.04
      
0.01
      
0.11
  
Tax effect
    
-
      
-
      
(0.01
)
    
-
      
(0.03
)
Diluted EPS excluding merger expenses
    
0.35
      
0.34
      
0.23
      
1.39
      
1.03
  
Loss (gain) on sale of investment securities
    
0.01
      
-
      
-
      
0.01
      
-
  
Tax effect
    
-
      
-
      
-
      
-
      
-
  
Diluted EPS excluding gain on sale of investment securities
    
0.36
      
0.34
      
0.23
      
1.40
      
1.03
  
Death benefit on BOLI
    
-
      
-
      
-
      
-
      
-
  
Tax effect
    
-
      
-
      
-
      
-
      
-
  
Diluted EPS excluding death benefit on BOLI
    
0.36
      
0.34
      
0.23
      
1.40
      
1.03
  
Gain on remeasurement of equity interest in Lafayette
    
-
      
-
      
(0.01
)
    
-
      
(0.01
)
Tax effect
    
-
      
-
      
-
      
-
      
-
  
Diluted EPS excluding gain on remeasurement of equity interest in Lafayette
    
0.36
      
0.34
      
0.22
      
1.40
      
1.02
  
Tax reform bill impact
    
-
      
-
      
0.07
      
-
      
0.07
  
Diluted EPS excluding tax reform bill impact
    
0.36
      
0.34
      
0.29
      
1.40
      
1.09
  
Acquisition-related PAUs
    
(0.04
)
    
(0.02
)
    
(0.02
)
    
(0.16
)
    
(0.10
)
Tax effect
    
0.01
      
-
      
-
      
0.03
      
0.03
  
Core Diluted EPS
  
$
0.33
    
$
0.32
    
$
0.27
    
$
1.27
    
$
1.02
  



Pg. 5 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

Horizon’s net interest margin decreased to 3.60% for the fourth quarter of 2018 when compared to 3.67% for the third quarter of 2018 and 3.71% for the fourth quarter of 2017. The decrease in net interest margin from the third quarter of 2018 reflects slower increases on the yields for earning assets along with lower loan fees offset by an increase in the cost of interest-bearing liabilities of 17 basis points. This is a result of the flat to inverted yield curve and the mix of interest earning assets being originated and repriced. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits of 19 basis points and borrowings of 19 basis points.

The decrease in net interest margin from the fourth quarter of 2017 reflects an increase in the cost of interest-bearing liabilities of 54 basis points, offset by an increase in the yield of interest-earning assets of 31 basis points. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits of 56 basis points and borrowings of 60 basis points. The increase in the yield of interest-earning assets was due to an increase in the yield on loans receivable of 32 basis points and taxable investment securities of 45 basis points, offset by a decrease in the yield on non-taxable investment securities of 18 basis points.

Net interest margin, excluding acquisition-related purchase accounting adjustments (“core net interest margin”), was 3.43% for the fourth quarter of 2018 compared to 3.59% for the prior quarter and 3.61% for the fourth quarter of 2017. Interest income from acquisition-related purchase accounting adjustments was $1.6 million, $789,000 and $868,000 for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively.

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
    
December 31
  
   
2018
    
2018
    
2017
    
2018
    
2017
  
Non-GAAP Reconciliation of Net Interest Margin
                              
Net interest income as reported
  
$
33,836
    
$
33,772
    
$
31,455
    
$
134,569
    
$
112,100
  
                                         
Average interest-earning assets
    
3,808,822
      
3,717,139
      
3,471,169
      
3,697,938
      
3,074,464
  
                                         
Net interest income as a percentage of average interest-earning assets ("Net Interest Margin")
    
3.60
%
    
3.67
%
    
3.71
%
    
3.71
%
    
3.75
%
                                         
Acquisition-related purchase accounting adjustments ("PAUs")
  
$
(1,629
)
  
$
(789
)
  
$
(868
)
  
$
(6,089
)
  
$
(3,484
)
                                         
Core net interest income
  
$
32,207
    
$
32,983
    
$
30,587
    
$
128,480
    
$
108,616
  
                                         
Core net interest margin
    
3.43
%
    
3.59
%
    
3.61
%
    
3.54
%
    
3.64
%


Horizon’s net interest margin decreased to 3.71% for the year ended December 31, 2018 when compared to 3.75% for the year ended December 31, 2017. The cost of interest-bearing liabilities increased 41 basis points, primarily due to an increase in the cost of interest-bearing deposits of 36 basis points and borrowings of 61 basis points. The yield on interest-earning assets increased 27 basis points, primarily due to an increase in the yields earned on loans receivable of 25 basis points and taxable investment securities of 26 basis points, offset by a decrease in the yield earned on non-taxable securities of 26 basis points.

Core net interest margin for the year ended December 31, 2018 was 3.54% compared to 3.64% for the year ended December 31, 2017. Interest income from acquisition-related purchase accounting adjustments was $6.1 million and $3.5 million for the years ended December 31, 2018 and 2017, respectively.


Pg. 6 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

Lending Activity

Total loans increased $176.1 million from $2.838 billion as of December 31, 2017 to $3.014 billion as of December 31, 2018 as consumer loans increased by $88.5 million, residential mortgage loans increased by $58.4 million and commercial loans increased by $51.7 million, offset by a decrease in mortgage warehouse loans of $20.4 million. Consumer loans increased at a rate of 19.2%, primarily due to our experienced consumer loan team and increased focus on growing this portfolio. During 2018, Horizon originated approximately $337.1 million in commercial loans; however, only $195.6 million, or 58.0%, of the total originated loans were funded at the time of the closing of the loan.

Loan Growth by Type
  
(Dollars in Thousands, Unaudited)
  
                         
   
December 31
    
September 30
    
Amount
 Change
    
Percent
 Change
   
2018
    
2018
  
Commercial
  
$
1,721,590
    
$
1,698,582
    
$
23,008
      
1.4
%
Residential mortgage
    
668,141
      
651,250
      
16,891
      
2.6
%
Consumer
    
549,481
      
536,132
      
13,349
      
2.5
%
Subtotal
    
2,939,212
      
2,885,964
      
53,248
      
1.8
%
Held for sale loans
    
1,038
      
1,980
      
(942
)
    
-47.6
%
Mortgage warehouse loans
    
74,120
      
71,422
      
2,698
      
3.8
%
Total loans
  
$
3,014,370
    
$
2,959,366
    
$
55,004
      
1.9
%


Loan Growth by Type
  
(Dollars in Thousands, Unaudited)
  
                         
   
December 31
    
December 31
    
Amount
 Change
    
Percent
 Change
   
2018
    
2017
  
Commercial
  
$
1,721,590
    
$
1,669,934
    
$
51,656
      
3.1
%
Residential mortgage
    
668,141
      
609,739
      
58,402
      
9.6
%
Consumer
    
549,481
      
460,999
      
88,482
      
19.2
%
Subtotal
    
2,939,212
      
2,740,672
      
198,540
      
7.2
%
Held for sale loans
    
1,038
      
3,094
      
(2,056
)
    
-66.5
%
Mortgage warehouse loans
    
74,120
      
94,508
      
(20,388
)
    
-21.6
%
Total loans
  
$
3,014,370
    
$
2,838,274
    
$
176,096
      
6.2
%


Residential mortgage lending activity for the three months ended December 31, 2018 generated $1.5 million in income from the gain on sale of mortgage loans, a decrease of $384,000 from the third quarter of 2018 and a decrease of $533,000 from the fourth quarter of 2017. Total origination volume for the fourth quarter of 2018, including loans placed into portfolio, totaled $83.9 million, representing a decrease of 16.6% from the third quarter of 2018 and a decrease of 6.8% from the fourth quarter of 2017.


Pg. 7 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

Residential mortgage lending activity for the year ended December 31, 2018 generated $6.6 million in income from the gain on sale of mortgage loans, a decrease of $1.3 million when compared to the year ended December 31, 2017. Total origination volume for the year ended December 31, 2018, including loans placed into portfolio, totaled $365.9 million, an increase of $4.4 million when compared to the year ended December 31, 2017. Purchase money mortgage originations for the year ended December 31, 2018 represented 81.0% of total originations compared to 76.1% for the year ended December 31, 2017.

Revenue derived from Horizon’s residential mortgage lending activities was only 4.9% and 5.9% of Horizon’s total revenue for the fourth quarter of 2018 and the year ended December 31, 2018, respectively.

The provision for loan losses totaled $528,000 for the fourth quarter of 2018 compared to $1.2 million for the third quarter of 2018 and $1.1 million for the fourth quarter of 2017. The decrease in the provision for loan losses from the third quarter of 2018 and the fourth quarter of 2017 when compared to the fourth quarter of 2018 was primarily due to improving credit trends and a continued low level of charge-offs.

The provision for loan losses totaled $2.9 million for the year ended December 31, 2018 compared to $2.5 million for the year ended December 31, 2017. The increase in the provision for loan losses from 2017 to 2018 was due to an increase in specific allocations of approximately $851,000, along with additional general and non-specific allocations for loan growth in new markets, higher than anticipated growth of the indirect loan portfolio and an increase in allocation for other economic factors, offset by improving credit trends and a continued low level of charge-offs.

The ratio of the allowance for loan losses to total loans increased to 0.59% as of December 31, 2018 from 0.58% at December 31, 2017. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.72% as of December 31, 2018 compared to 0.81% as of December 31, 2017. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 0.98% as of December 31, 2018 compared to 1.23% as of December 31, 2017.

Non-GAAP Allowance for Loan and Lease Loss Detail
  
As of December 31, 2018
  
(Dollars in Thousands, Unaudited)
  
                                       
   
Pre-discount
 Loan Balance
  
Allowance
for Loan Losses
 (ALLL)
  
Loan
 Discount
  
ALLL
+
 Loan Discount
  
Loans, net
  
ALLL/
Pre-discount
 Loan Balance
  
Loan Discount/
Pre-discount
 Loan Balance
  
ALLL+Loan Discount/
Pre-discount
 Loan Balance
Horizon Legacy
  
$
2,482,496
  
$
17,760
    
N/A
  
$
17,760
  
$
2,464,736
  
0.72
%
  
0.00
%
  
0.72
%
Heartland
    
9,085
    
-
    
685
    
685
    
8,400
  
0.00
%
  
7.54
%
  
7.54
%
Summit
    
21,691
    
-
    
1,186
    
1,186
    
20,505
  
0.00
%
  
5.47
%
  
5.47
%
Peoples
    
86,634
    
-
    
1,958
    
1,958
    
84,676
  
0.00
%
  
2.26
%
  
2.26
%
Kosciusko
    
38,578
    
-
    
615
    
615
    
37,963
  
0.00
%
  
1.59
%
  
1.59
%
LaPorte
    
88,134
    
60
    
2,985
    
3,045
    
85,089
  
0.07
%
  
3.39
%
  
3.46
%
CNB
    
4,499
    
-
    
118
    
118
    
4,381
  
0.00
%
  
2.62
%
  
2.62
%
Lafayette
    
89,446
    
-
    
1,427
    
1,427
    
88,019
  
0.00
%
  
1.60
%
  
1.60
%
Wolverine
    
193,807
    
-
    
2,723
    
2,723
    
191,084
  
0.00
%
  
1.41
%
  
1.41
%
Total
  
$
3,014,370
  
$
17,820
  
$
11,697
  
$
29,517
  
$
2,984,853
  
0.59
%
  
0.39
%
  
0.98
%



Pg. 8 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

As of December 31, 2018, non-performing loans totaled $15.2 million, which reflects an 8 basis point decrease in non-performing loans to total loans, or a $1.2 million decline from $16.4 million in non-performing loans as of December 31, 2017. Compared to December 31, 2017, non-performing commercial loans decreased by $451,000, non-performing real estate loans decreased by $709,000 and non-performing consumer loans decreased by $79,000. Other real estate owned and repossessed assets totaled $2.1 million as of December 31, 2018 which is an increase of $1.2 million from December 31, 2017. The majority of this increase was because several bank owned properties acquired through acquisitions and listed for sale that were re-classified to other real estate owned and recorded at fair value during the second quarter of 2018.

Expense Management

Total non-interest expense was $497,000 higher in the fourth quarter of 2018 when compared to the third quarter of 2018, of which $487,000 was due to acquisition-related expenses. Outside services and consultants and professional fees increased $332,000 and $175,000, respectively, primarily due to acquisition-related expenses incurred during the fourth quarter of 2018. Other expenses increased $194,000 during the fourth quarter of 2018 when compared to the third quarter of 2018 primarily due to recruiting expenses. Loan expense increased $115,000 when compared to the third quarter primarily due to the increased volume in indirect lending and the timing of related origination and amortization costs. These increases were offset by a decrease in salaries and employee benefits of $245,000 when comparing the fourth quarter of 2018 to the third quarter of 2018. A decrease in salaries, commissions and bonus expense was offset by an increase in health insurance expense during the fourth quarter of 2018.

Total non-interest expense was $174,000 lower during the fourth quarter of 2018 compared to the same period of 2017. Outside services and consultants and professional fees decreased $491,000 and $81,000, respectively, primarily due to acquisition-related expenses incurred as a result of the Wolverine Bancorp, Inc. (“Wolverine”) acquisition during the fourth quarter of 2017. Salaries and employee benefits decreased $191,000 when comparing the fourth quarter of 2017 to the fourth quarter of 2018. These decreases were partially offset by increases in loan expense of $439,000, data processing of $151,000 and FDIC insurance expense of $123,000. Loan expense increased due to the increased volume in indirect lending and the timing of related origination and amortization costs. The increase in data processing and FDIC insurance expense reflect overall company growth and the acquisitions of Lafayette and Wolverine.

Total non-interest expense was $7.7 million higher for 2018 when compared to 2017. The increase was primarily due to increases in salaries and employee benefits of $5.2 million, loan expense of $1.4 million, net occupancy expenses of $947,000, data processing of $902,000, other expense of $851,000, FDIC insurance expense of $398,000 and other losses of $297,000. The increase in salaries and employee benefits, net occupancy expense, data processing, other expense and FDIC insurance expense reflect overall company growth and the acquisitions of Lafayette and Wolverine during the third and fourth quarters of 2017. Loan expense increased primarily due to the increased volume in indirect lending and the timing of related origination and amortization costs during 2018. Offsetting these increases was a decrease of $1.7 million and $564,000 in outside services and consultants expense and professional fees, respectively, primarily due to lower acquisition-related expenses in 2018.


Pg. 9 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

Income tax expense totaled $2.5 million for the fourth quarter of 2018, a decrease of $62,000 when compared to the third quarter of 2018 and a decrease of $3.2 million when compared to the fourth quarter of 2017. The decrease in income tax expense from the third quarter of 2018 was primarily due to an increase in tax exempt interest income during the fourth quarter of 2018 when compared to the third quarter of 2018. The decrease when comparing the fourth quarter of 2018 to the same prior year period was primarily due to the impact of the corporate tax rate signed into law at the end of 2017. In addition to a lower corporate tax rate being applied to 2018 income, a revaluation to Horizon’s net deferred tax asset of $2.4 million was recorded to income tax expense during the fourth quarter of 2017. Partially offsetting these decreases to income tax expense was an increase in income before taxes of $2.3 million during the fourth quarter of 2018 when compared to the same prior year period.

Income tax expense totaled $10.4 million for the year ended December 31, 2018, a decrease of $4.4 million when compared to the year ended December 31, 2017. The decrease was primarily due to the impact of the new corporate tax rate which was signed into law at the end of 2017 and the benefits from the exercising of stock options. This decrease was offset by an increase in income before income tax expense of $15.6 million when comparing 2018 to the prior year.

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 relating to net income, diluted earnings per share, net interest margin, total loans and loan growth, the allowance for loan and lease losses, tangible stockholders’ equity, tangible book value per share, the return on average assets and the return on average equity. In each case, we have identified special circumstances that we consider to be non-recurring and have excluded them, to show the impact of such events as acquisition-related purchase accounting adjustments, prepayment penalties on borrowings and the tax reform bill, among others we have identified in our reconciliations. 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. 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 below and 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, Unaudited)
  
                               
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2018
    
2018
    
2018
    
2018
    
2017
  
Total stockholders' equity
  
$
491,992
    
$
477,594
    
$
470,535
    
$
460,416
    
$
457,078
  
Less: Intangible assets
    
130,270
      
130,755
      
131,239
      
131,724
      
132,282
  
Total tangible stockholders' equity
  
$
361,722
    
$
346,839
    
$
339,296
    
$
328,692
    
$
324,796
  
                                         
Common shares outstanding
    
38,375,407
      
38,367,890
      
38,362,640
      
38,332,853
      
38,294,729
  
                                         
Tangible book value per common share
  
$
9.43
    
$
9.04
    
$
8.84
    
$
8.57
    
$
8.48
  



Pg. 10 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity
  
(Dollars in Thousands, Unaudited)
 
  
   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
September 30
    
December 31
    
December 31
    
December 31
  
   
2018
    
2018
    
2017
    
2018
    
2017
  
Non-GAAP Reconciliation of Return on Average Assets
                              
Average assets
  
$
4,179,140
    
$
4,105,096
    
$
3,841,551
    
$
4,062,635
    
$
3,396,873
  
Return on average assets ("ROAA") as reported
    
1.25
%
    
1.26
%
    
0.79
%
    
1.31
%
    
0.97
%
Merger expenses
    
0.05
%
    
0.00
%
    
0.15
%
    
0.01
%
    
0.11
%
Tax effect
    
-0.01
%
    
0.00
%
    
-0.04
%
    
0.00
%
    
-0.03
%
ROAA excluding merger expenses
    
1.29
%
    
1.26
%
    
0.90
%
    
1.32
%
    
1.05
%
Gain on sale of investment securities
    
0.03
%
    
0.01
%
    
0.00
%
    
0.01
%
    
0.00
%
Tax effect
    
-0.01
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
ROAA excluding gain on sale of investment securities
    
1.31
%
    
1.27
%
    
0.90
%
    
1.33
%
    
1.05
%
Death benefit on bank owned life insurance ("BOLI")
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
Tax effect
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
ROAA excluding death benefit on BOLI
    
1.31
%
    
1.27
%
    
0.90
%
    
1.33
%
    
1.05
%
Gain on remeasurement of equity interest in Lafayette
    
0.00
%
    
0.00
%
    
-0.05
%
    
0.00
%
    
-0.02
%
Tax effect
    
0.00
%
    
0.00
%
    
0.01
%
    
0.00
%
    
0.00
%
ROAA excluding gain on remeasurement of equity interest in Lafayette
    
1.31
%
    
1.27
%
    
0.86
%
    
1.33
%
    
1.03
%
Tax reform bill impact
    
0.00
%
    
0.00
%
    
0.25
%
    
0.00
%
    
0.07
%
ROAA excluding tax reform bill impact
    
1.31
%
    
1.27
%
    
1.11
%
    
1.33
%
    
1.10
%
Acquisition-related purchase accounting adjustments ("PAUs")
    
-0.15
%
    
-0.08
%
    
-0.09
%
    
-0.15
%
    
-0.10
%
Tax effect
    
0.03
%
    
0.02
%
    
0.03
%
    
0.03
%
    
0.04
%
Core ROAA
    
1.19
%
    
1.21
%
    
1.05
%
    
1.21
%
    
1.04
%
                                         
Non-GAAP Reconciliation of Return on Average Common Equity
                                        
Average Common Equity
  
$
485,662
    
$
476,959
    
$
449,318
    
$
473,420
    
$
378,709
  
Return on average common equity ("ROACE") as reported
    
10.73
%
    
10.87
%
    
6.75
%
    
11.22
%
    
8.74
%
Merger expenses
    
0.40
%
    
0.00
%
    
1.28
%
    
0.10
%
    
0.97
%
Tax effect
    
-0.08
%
    
0.00
%
    
-0.37
%
    
-0.02
%
    
-0.26
%
ROACE excluding merger expenses
    
11.05
%
    
10.87
%
    
7.66
%
    
11.30
%
    
9.45
%
Gain on sale of investment securities
    
0.27
%
    
0.10
%
    
0.00
%
    
0.09
%
    
-0.01
%
Tax effect
    
-0.06
%
    
-0.02
%
    
0.00
%
    
-0.02
%
    
0.00
%
ROACE excluding gain on sale of investment securities
    
11.26
%
    
10.95
%
    
7.66
%
    
11.37
%
    
9.44
%
Death benefit on bank owned life insurance ("BOLI")
    
0.00
%
    
0.00
%
    
0.00
%
    
-0.03
%
    
0.00
%
Tax effect
    
0.00
%
    
0.00
%
    
0.00
%
    
0.01
%
    
0.00
%
ROACE excluding death benefit on BOLI
    
11.26
%
    
10.95
%
    
7.66
%
    
11.35
%
    
9.44
%
Gain on remeasurement of equity interest in Lafayette
    
0.00
%
    
0.00
%
    
-0.47
%
    
0.00
%
    
-0.14
%
Tax effect
    
0.00
%
    
0.00
%
    
0.07
%
    
0.00
%
    
0.02
%
ROACE excluding gain on remeasurement of equity interest in Lafayette
    
11.26
%
    
10.95
%
    
7.26
%
    
11.35
%
    
9.32
%
Tax reform bill impact
    
0.00
%
    
0.00
%
    
2.14
%
    
0.00
%
    
0.64
%
ROACE excluding tax reform bill impact
    
11.26
%
    
10.95
%
    
9.40
%
    
11.35
%
    
9.96
%
Acquisition-related purchase accounting adjustments ("PAUs")
    
-1.33
%
    
-0.66
%
    
-0.77
%
    
-1.29
%
    
-0.92
%
Tax effect
    
0.28
%
    
0.14
%
    
0.27
%
    
0.27
%
    
0.32
%
Core ROACE
    
10.21
%
    
10.43
%
    
8.90
%
    
10.33
%
    
9.36
%


About Horizon

Horizon Bancorp, Inc. is an independent, commercial bank holding company serving northern and central Indiana, and southern, central and the Great Lakes Bay regions of Michigan through its commercial banking subsidiary Horizon Bank. Horizon also offers mortgage-banking services throughout the Midwest. Horizon may be reached online at www.horizonbank.com.  Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC.


Pg. 11 cont. Horizon Bancorp, Inc. Announces Record Earnings for 2018

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, Inc.
 
Mark E. Secor
 
Chief Financial Officer
 
(219) 873-2611
 
Fax: (219) 874-9280






#  #  #

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

   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2018
    
2018
    
2018
    
2018
    
2017
  
Balance sheet:
                              
Total assets
  
$
4,246,688
    
$
4,150,561
    
$
4,076,611
    
$
3,969,750
    
$
3,964,303
  
Investment securities
    
810,460
      
766,153
      
735,962
      
714,425
      
710,113
  
Commercial loans
    
1,721,590
      
1,698,582
      
1,672,998
      
1,656,374
      
1,669,934
  
Mortgage warehouse loans
    
74,120
      
71,422
      
109,016
      
101,299
      
94,508
  
Residential mortgage loans
    
668,141
      
651,250
      
634,636
      
618,131
      
609,739
  
Consumer loans
    
549,481
      
536,132
      
507,866
      
480,989
      
460,999
  
Earning assets
    
3,842,903
      
3,743,592
      
3,681,583
      
3,591,296
      
3,566,492
  
Non-interest bearing deposit accounts
    
642,129
      
621,475
      
615,018
      
602,175
      
601,805
  
Interest bearing transaction accounts
    
1,684,336
      
1,605,825
      
1,644,758
      
1,619,859
      
1,712,246
  
Time deposits
    
812,911
      
901,254
      
756,387
      
711,642
      
566,952
  
Borrowings
    
550,384
      
477,719
      
524,846
      
520,300
      
564,157
  
Subordinated debentures
    
37,837
      
37,791
      
37,745
      
37,699
      
37,653
  
Total stockholders' equity
    
491,992
      
477,594
      
470,535
      
460,416
      
457,078
  
                                         
   
Three Months Ended
  
Income statement:
                                        
Net interest income
  
$
33,836
    
$
33,772
    
$
33,550
    
$
33,411
    
$
31,455
  
Provision for loan losses
    
528
      
1,176
      
635
      
567
      
1,100
  
Non-interest income
    
8,477
      
8,686
      
8,932
      
8,318
      
9,344
  
Non-interest expense
    
26,117
      
25,620
      
24,942
      
25,837
      
26,291
  
Income tax expense
    
2,535
      
2,597
      
2,790
      
2,521
      
5,758
  
Net income
  
$
13,133
    
$
13,065
    
$
14,115
    
$
12,804
    
$
7,650
  
                                         
Per share data: (1)
                                        
Basic earnings per share
  
$
0.34
    
$
0.34
    
$
0.37
    
$
0.33
    
$
0.20
  
Diluted earnings per share
    
0.34
      
0.34
      
0.37
      
0.33
      
0.20
  
Cash dividends declared per common share
    
0.10
      
0.10
      
0.10
      
0.10
      
0.09
  
Book value per common share
    
12.82
      
12.45
      
12.27
      
12.01
      
11.93
  
Tangible book value per common share
    
9.43
      
9.04
      
8.84
      
8.57
      
8.48
  
Market value - high
    
19.40
      
21.39
      
21.94
      
20.59
      
19.47
  
Market value - low
  
$
14.94
    
$
19.44
    
$
19.17
    
$
17.87
    
$
17.33
  
Weighted average shares outstanding - Basic
    
38,367,972
      
38,365,379
      
38,347,612
      
38,306,395
      
37,711,200
  
Weighted average shares outstanding - Diluted
    
38,488,861
      
38,534,970
      
38,519,401
      
38,468,811
      
37,897,012
  
                                         
Key ratios:
                                        
Return on average assets
    
1.25
%
    
1.26
%
    
1.41
%
    
1.32
%
    
0.79
%
Return on average common stockholders' equity
    
10.73
      
10.87
      
12.15
      
11.29
      
6.75
  
Net interest margin
    
3.60
      
3.67
      
3.78
      
3.81
      
3.71
  
Loan loss reserve to total loans
    
0.59
      
0.60
      
0.58
      
0.58
      
0.58
  
Average equity to average assets
    
11.62
      
11.62
      
11.60
      
11.67
      
11.70
  
Bank only capital ratios:
                                        
Tier 1 capital to average assets
    
9.38
      
9.53
      
9.65
      
9.66
      
9.89
  
Tier 1 capital to risk weighted assets
    
11.91
      
12.09
      
12.21
      
12.32
      
12.29
  
Total capital to risk weighted assets
    
12.47
      
12.66
      
12.77
      
12.87
      
12.85
  
                                         
Loan data:
                                        
Substandard loans
  
$
38,775
    
$
34,655
    
$
40,941
    
$
43,035
    
$
46,162
  
30 to 89 days delinquent
    
7,161
      
6,878
      
3,978
      
8,932
      
9,329
  
                                         
90 days and greater delinquent - accruing interest
  
$
568
    
$
202
    
$
49
    
$
30
    
$
167
  
Trouble debt restructures - accruing interest
    
2,002
      
1,830
      
1,911
      
1,899
      
1,958
  
Trouble debt restructures - non-accrual
    
1,057
      
1,077
      
894
      
1,090
      
1,013
  
Non-accrual loans
    
11,548
      
11,417
      
12,555
      
12,062
      
13,276
  
Total non-performing loans
  
$
15,175
    
$
14,526
    
$
15,409
    
$
15,081
    
$
16,414
  
Non-performing loans to total loans
    
0.50
%
    
0.49
%
    
0.53
%
    
0.53
%
    
0.58
%

(1) Adjusted for 3:2 stock split on June 15, 2018

12

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

   
December 31
    
December 31
  
   
2018
    
2017
  
Balance sheet:
            
Total assets
  
$
4,246,688
    
$
3,964,303
  
Investment securities
    
810,460
      
710,113
  
Commercial loans
    
1,721,590
      
1,669,934
  
Mortgage warehouse loans
    
74,120
      
94,508
  
Residential mortgage loans
    
668,141
      
609,739
  
Consumer loans
    
549,481
      
460,999
  
Earning assets
    
3,842,903
      
3,566,492
  
Non-interest bearing deposit accounts
    
642,129
      
601,805
  
Interest bearing transaction accounts
    
1,684,336
      
1,712,246
  
Time deposits
    
812,911
      
566,952
  
Borrowings
    
550,384
      
564,157
  
Subordinated debentures
    
37,837
      
37,653
  
Total stockholders' equity
    
491,992
      
457,078
  
                 
   
Twelve Months Ended
  
Income statement:
                
Net interest income
  
$
134,569
    
$
112,100
  
Provision for loan losses
    
2,906
      
2,470
  
Non-interest income
    
34,413
      
33,136
  
Non-interest expense
    
102,516
      
94,813
  
Income tax expense
    
10,443
      
14,836
  
Net income
  
$
53,117
    
$
33,117
  
                 
Per share data: (1)
                
Basic earnings per share
  
$
1.39
    
$
0.96
  
Diluted earnings per share
    
1.38
      
0.95
  
Cash dividends declared per common share
    
0.40
      
0.33
  
Book value per common share
    
12.82
      
11.93
  
Tangible book value per common share
    
9.43
      
8.48
  
Market value - high
    
21.94
      
19.47
  
Market value - low
  
$
14.94
    
$
16.49
  
Weighted average shares outstanding - Basic
    
38,347,059
      
34,553,736
  
Weighted average shares outstanding - Diluted
    
38,495,980
      
34,774,930
  
                 
Key ratios:
                
Return on average assets
    
1.31
%
    
0.97
%
Return on average common stockholders' equity
    
11.22
      
8.74
  
Net interest margin
    
3.71
      
3.75
  
Loan loss reserve to total loans
    
0.59
      
0.58
  
Average equity to average assets
    
11.65
      
11.15
  
Bank only capital ratios:
                
Tier 1 capital to average assets
    
9.38
      
9.89
  
Tier 1 capital to risk weighted assets
    
11.91
      
12.29
  
Total capital to risk weighted assets
    
12.47
      
12.85
  
                 
Loan data:
                
Substandard loans
  
$
38,775
    
$
46,162
  
30 to 89 days delinquent
    
7,161
      
9,329
  
                 
90 days and greater delinquent - accruing interest
  
$
568
    
$
167
  
Trouble debt restructures - accruing interest
    
2,002
      
1,958
  
Trouble debt restructures - non-accrual
    
1,057
      
1,013
  
Non-accrual loans
    
11,548
      
13,276
  
Total non-performing loans
  
$
15,175
    
$
16,414
  
Non-performing loans to total loans
    
0.50
%
    
0.58
%
                 
(1) Adjusted for 3:2 stock split on June 15, 2018                

 

13

HORIZON BANCORP, INC.

Allocation of the Allowance for Loan and Lease Losses
  
(Dollars in Thousands, Unaudited)
  
                               
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2018
    
2018
    
2018
    
2018
    
2017
  
Commercial
  
$
10,495
    
$
10,581
    
$
8,865
    
$
7,840
    
$
9,093
  
Real estate
    
1,676
      
1,574
      
1,761
      
1,930
      
2,188
  
Mortgage warehousing
    
1,006
      
1,030
      
1,084
      
1,030
      
1,030
  
Consumer
    
4,643
      
4,613
      
5,361
      
5,674
      
4,083
  
Total
  
$
17,820
    
$
17,798
    
$
17,071
    
$
16,474
    
$
16,394
  


Net Charge-offs (Recoveries)
  
(Dollars in Thousands, Unaudited)
  
                               
   
Three Months Ended
  
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2018
    
2018
    
2018
    
2018
    
2017
  
Commercial
  
$
196
    
$
179
    
$
(40
)
  
$
(38
)
  
$
84
  
Real estate
    
47
      
(2
)
    
(2
)
    
6
      
(9
)
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
263
      
272
      
80
      
519
      
217
  
Total
  
$
506
    
$
449
    
$
38
    
$
487
    
$
292
  
Percent of net charge-offs to average loans outstanding for the period
    
0.02
%
    
0.02
%
    
0.00
%
    
0.01
%
    
0.01
%


Total Non-performing Loans
  
(Dollars in Thousands, Unaudited)
  
                               
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2018
    
2018
    
2018
    
2018
    
2017
  
Commercial
  
$
6,903
    
$
8,355
    
$
8,987
    
$
6,778
    
$
7,354
  
Real estate
    
5,007
      
3,754
      
3,915
      
5,276
      
5,716
  
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
3,265
      
2,417
      
2,507
      
3,027
      
3,344
  
Total
  
$
15,175
    
$
14,526
    
$
15,409
    
$
15,081
    
$
16,414
  
Non-performing loans to total loans
    
0.50
%
    
0.49
%
    
0.53
%
    
0.53
%
    
0.58
%


Other Real Estate Owned and Repossessed Assets
  
(Dollars in Thousands, Unaudited)
  
                               
   
December 31
    
September 30
    
June 30
    
March 31
    
December 31
  
   
2018
    
2018
    
2018
    
2018
    
2017
  
Commercial
  
$
1,967
    
$
2,181
    
$
2,628
    
$
547
    
$
578
  
Real estate
    
60
      
58
      
302
      
281
      
200
  
Mortgage warehousing
    
-
      
-
      
-
      
-
      
-
  
Consumer
    
48
      
26
      
62
      
42
      
60
  
Total
  
$
2,075
    
$
2,265
    
$
2,992
    
$
870
    
$
838
  


14

HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)

   
Three Months Ended
  
Three Months Ended
   
December 31, 2018
  
December 31, 2017
   
Average
 Balance
    
Interest
    
Average
 Rate 
  
Average
 Balance
    
Interest
    
Average
 Rate 
Assets
                                    
Interest-earning assets
                                    
Federal funds sold
  
$
10,093
    
$
62
    
2.44
%
  
$
10,175
    
$
24
    
0.94
%
Interest-earning deposits
    
21,763
      
93
    
1.70
%
    
22,939
      
49
    
0.85
%
Investment securities - taxable
    
432,620
      
2,734
    
2.51
%
    
422,864
      
2,196
    
2.06
%
Investment securities - non-taxable(1)
    
364,236
      
2,324
    
3.20
%
    
309,902
      
1,875
    
3.38
%
Loans receivable(2)(3)
    
2,980,110
      
38,517
    
5.14
%
    
2,705,289
      
32,630
    
4.82
%
Total interest-earning assets(1)
    
3,808,822
      
43,730
    
4.63
%
    
3,471,169
      
36,774
    
4.32
%
                                             
Non-interest-earning assets
                                            
Cash and due from banks
    
44,732
                    
44,765
                
Allowance for loan losses
    
(17,792
)
                  
(15,692
)
              
Other assets
    
343,378
                    
341,309
                
                                             
Total average assets
  
$
4,179,140
                  
$
3,841,551
                
                                             
Liabilities and Stockholders' Equity
                                            
Interest-bearing liabilities
                                            
Interest-bearing deposits
  
$
2,526,209
    
$
6,411
    
1.01
%
  
$
2,278,651
    
$
2,586
    
0.45
%
Borrowings
    
458,485
      
2,882
    
2.49
%
    
451,866
      
2,150
    
1.89
%
Subordinated debentures
    
36,616
      
601
    
6.51
%
    
36,431
      
583
    
6.35
%
Total interest-bearing liabilities
    
3,021,310
      
9,894
    
1.30
%
    
2,766,948
      
5,319
    
0.76
%
                                             
Non-interest-bearing liabilities
                                            
Demand deposits
    
656,114
                    
603,733
                
Accrued interest payable and other liabilities
    
16,054
                    
21,552
                
Stockholders' equity
    
485,662
                    
449,318
                
                                             
Total average liabilities and stockholders' equity
  
$
4,179,140
                  
$
3,841,551
                
                                                    
Net interest income/spread
          
$
33,836
    
3.33
%
          
$
31,455
    
3.55
%
Net interest income as a percent of average interest-earning assets(1)
                  
3.60
%
                  
3.71
%

(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. The average rate is presented on a tax equivalent basis.


15

HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)

   
Twelve Months Ended
  
Twelve Months Ended
   
December 31, 2018
  
December 31, 2017
   
Average
 Balance
    
Interest
    
Average
 Rate
  
Average
 Balance
    
Interest
    
Average
 Rate 
Assets
                                    
Interest-earning assets
                                    
Federal funds sold
  
$
4,696
    
$
115
    
2.45
%
  
$
5,450
    
$
80
    
1.47
%
Interest-earning deposits
    
24,491
      
393
    
1.60
%
    
23,865
      
301
    
1.26
%
Investment securities - taxable
    
431,970
      
10,113
    
2.34
%
    
417,993
      
8,705
    
2.08
%
Investment securities - non-taxable(1)
    
326,040
      
8,069
    
3.13
%
    
292,030
      
7,068
    
3.39
%
Loans receivable(2)(3)(4)
    
2,910,741
      
147,478
    
5.08
%
    
2,335,126
      
112,329
    
4.83
%
Total interest-earning assets(1)
    
3,697,938
      
166,168
    
4.56
%
    
3,074,464
      
128,483
    
4.29
%
                                             
Non-interest-earning assets
                                            
Cash and due from banks
    
44,645
                    
42,578
                
Allowance for loan losses
    
(16,964
)
                  
(15,226
)
              
Other assets
    
337,016
                    
295,057
                
                                                    
Total average assets
  
$
4,062,635
                  
$
3,396,873
                
                                             
Liabilities and Stockholders' Equity
                                            
Interest-bearing liabilities
                                            
Interest-bearing deposits
  
$
2,418,987
    
$
18,225
    
0.75
%
  
$
2,045,896
    
$
7,901
    
0.39
%
Borrowings
    
492,830
      
11,009
    
2.23
%
    
381,488
      
6,178
    
1.62
%
Subordinated debentures
    
36,547
      
2,365
    
6.47
%
    
36,362
      
2,304
    
6.34
%
Total interest-bearing liabilities
    
2,948,364
      
31,599
    
1.07
%
    
2,463,746
      
16,383
    
0.66
%
                                             
Non-interest-bearing liabilities
                                            
Demand deposits
    
624,576
                    
533,852
                
Accrued interest payable and other liabilities
    
16,275
                    
20,566
                
Stockholders' equity
    
473,420
                    
378,709
                
                                             
Total average liabilities and stockholders' equity
  
$
4,062,635
                  
$
3,396,873
                
                                                   
Net interest income/spread
          
$
134,569
    
3.49
%
          
$
112,100
    
3.63
%
Net interest income as a percent of average interest-earning assets(1)
                  
3.71
%
                  
3.75
%
 
(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. The average rate is presented on a tax equivalent basis.
 

16

HORIZON BANCORP, INC.
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)

   
December 31
    
December 31
  
   
2018
    
2017
  
Assets
    Unaudited        
Cash and due from banks
  
$
74,236
    
$
76,441
  
Investment securities, available for sale
    
600,348
      
509,665
  
Investment securities, held to maturity (fair value of $208,274 and $201,085)
    
210,112
      
200,448
  
Loans held for sale
    
1,038
      
3,094
  
Loans, net of allowance for loan losses of $17,820 and $16,394
    
2,995,512
      
2,818,786
  
Premises and equipment, net
    
74,331
      
75,529
  
Federal Home Loan Bank stock
    
18,073
      
18,105
  
Goodwill
    
119,880
      
119,880
  
Other intangible assets
    
10,390
      
12,402
  
Interest receivable
    
14,239
      
13,059
  
Cash value of life insurance
    
88,062
      
75,931
  
Other assets
    
40,467
      
40,963
  
Total assets
  
$
4,246,688
    
$
3,964,303
  
Liabilities
                
Deposits
                
Non-interest bearing
  
$
642,129
    
$
601,805
  
Interest bearing
    
2,497,247
      
2,279,198
  
Total deposits
    
3,139,376
      
2,881,003
  
Borrowings
    
550,384
      
564,157
  
Subordinated debentures
    
37,837
      
37,653
  
Interest payable
    
2,031
      
886
  
Other liabilities
    
25,068
      
23,526
  
Total liabilities
    
3,754,696
      
3,507,225
  
Commitments and contingent liabilities
                
Stockholders' Equity
                
Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares
    
-
      
-
  
Common stock, no par value, Authorized 99,000,000 shares (Restated - See Note 1)
                
Issued 38,400,476 and 38,323,604 shares (Restated - See Note 1),
 Outstanding 38,375,407 and 38,294,729 shares (Restated - See Note 1)
    
-
      
-
  
Additional paid-in capital
    
276,101
      
275,059
  
Retained earnings
    
224,035
      
185,570
  
Accumulated other comprehensive loss
    
(8,144
)
    
(3,551
)
Total stockholders' equity
    
491,992
      
457,078
  
Total liabilities and stockholders' equity
  
$
4,246,688
    
$
3,964,303
  

(1)          Adjusted for 3:2 stock split on June 15, 2018

17

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

   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
December 31
  
   
2018
    
2017
    
2018
    
2017
  
Interest Income
                        
Loans receivable
  
$
38,517
    
$
32,630
    
$
147,478
    
$
112,329
  
Investment securities
                                
Taxable
    
2,889
      
2,269
      
10,621
      
9,086
  
Tax exempt
    
2,324
      
1,875
      
8,069
      
7,068
  
Total interest income
    
43,730
      
36,774
      
166,168
      
128,483
  
Interest Expense
                                
Deposits
    
6,411
      
2,586
      
18,225
      
7,901
  
Borrowed funds
    
2,882
      
2,150
      
11,009
      
6,178
  
Subordinated debentures
    
601
      
583
      
2,365
      
2,304
  
Total interest expense
    
9,894
      
5,319
      
31,599
      
16,383
  
Net Interest Income
    
33,836
      
31,455
      
134,569
      
112,100
  
Provision for loan losses
    
528
      
1,100
      
2,906
      
2,470
  
Net Interest Income after Provision for Loan Losses
    
33,308
      
30,355
      
131,663
      
109,630
  
Non-interest Income
                                
Service charges on deposit accounts
    
1,958
      
1,745
      
7,762
      
6,383
  
Wire transfer fees
    
122
      
155
      
612
      
658
  
Interchange fees
    
1,422
      
1,295
      
5,715
      
5,104
  
Fiduciary activities
    
2,229
      
2,142
      
7,827
      
7,894
  
Gains on sale of investment securities (includes $(332) and $0 for the three months ended December 31, 2018 and 2017, respectively, and $(443) and $38 for the twelve months ended December 31, 2018 and 2017, respectively, related to accumulated other comprehensive earnings reclassifications)
    
(332
)
    
-
      
(443
)
    
38
  
Gain on sale of mortgage loans
    
1,455
      
1,988
      
6,613
      
7,906
  
Mortgage servicing income net of impairment
    
697
      
408
      
2,120
      
1,583
  
Increase in cash value of bank owned life insurance
    
532
      
451
      
1,912
      
1,797
  
Death benefit on bank owned life insurance
    
-
      
-
      
154
      
-
  
Other income
    
394
      
1,160
      
2,141
      
1,773
  
Total non-interest income
    
8,477
      
9,344
      
34,413
      
33,136
  
Non-interest Expense
                                
Salaries and employee benefits
    
14,098
      
14,289
      
56,623
      
51,375
  
Net occupancy expenses
    
2,501
      
2,487
      
10,482
      
9,535
  
Data processing
    
1,754
      
1,603
      
6,816
      
5,914
  
Professional fees
    
612
      
693
      
1,926
      
2,490
  
Outside services and consultants
    
1,536
      
2,027
      
5,271
      
7,018
  
Loan expense
    
1,837
      
1,398
      
6,341
      
4,970
  
FDIC insurance expense
    
393
      
270
      
1,444
      
1,046
  
Other losses
    
89
      
182
      
665
      
368
  
Other expense
    
3,297
      
3,342
      
12,948
      
12,097
  
Total non-interest expense
    
26,117
      
26,291
      
102,516
      
94,813
  
Income Before Income Taxes
    
15,668
      
13,408
      
63,560
      
47,953
  
Income tax expense (includes $(70) and $0 for the three months ended December 31, 2018 and 2017, respectively, and $(93) and $13 for the twelve months ended December 31, 2018 and 2017, respectively, related to income tax expense from reclassification items)
    
2,535
      
5,758
      
10,443
      
14,836
  
Net Income
  
$
13,133
    
$
7,650
    
$
53,117
    
$
33,117
  
Basic Earnings Per Share (Restated - See Note 1)
  
$
0.34
    
$
0.20
    
$
1.39
    
$
0.96
  
Diluted Earnings Per Share (Restated - See Note 1)
    
0.34
      
0.20
      
1.38
      
0.95
  

(1)          Adjusted for 3:2 stock split on June 15, 2018
18