(NASDAQ: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and six month periods ended June 30, 2011.

SUMMARY:
  • Horizon’s second quarter 2011 net income was $3.1 million or $.83 diluted earnings per share, a 23.0% increase in net income from the same period in 2010 and the highest second quarter net income in the Company’s history.
  • Horizon’s net income for the first half of 2011 was $5.9 million or $1.57 diluted earnings per share, a 36.0% increase in net income from the same period in 2010 and the highest first half net income in the Company’s history.
  • Total deposits surpassed $1.0 billion at June 30, 2011 and increased $34.8 million from December 31, 2010.
  • Borrowings decreased by $30.6 million since December 31, 2010.
  • Net interest income, after provisions for loan losses, during the six months of 2011 was $19.7 million compared with $15.7 million for the same period in the prior year.
  • Horizon’s non-performing loans decreased by 6.7% in the second quarter of 2011 compared to the first quarter of 2011.
  • The provision for loan losses decreased to $2.9 million for the first six months of 2011 compared to $6.2 million for the same period in 2010.
  • The Company’s mortgage servicing asset recovered $728,000 of impairment during the first six months of 2011 as mortgage loan refinancing activity slowed.
  • Horizon’s tangible book value per share rose to $28.76 compared with $25.39 at the close of the second quarter of 2010.
  • Horizon’s capital ratios, including Tier 1 Capital to total risk weighted assets of 13.61%, continue to be well above the regulatory standards for well-capitalized banks.

Craig M. Dwight, President and CEO, stated: “Our continuing ability to generate record earnings reflects our commitment to balanced revenue streams and the tremendous dedication and quality of Horizon’s employees. We have acquired new customers and expanded banking relationships with existing clients by providing exceptional service at competitive pricing. We continued to win market share.”

“While a slowdown in residential mortgage lending and refinancing led to lower income from mortgage warehousing, other areas of our diversified and balanced business mix more than offset the declines. This is our strategy which is working as designed.”

Mr. Dwight also stated: “The operating efficiencies implemented in the past several years have made us more productive and profitable. Economic recovery is slow, with businesses and consumers remaining cautious and conservative. We have focused on pursing every quality opportunity available to build and expand banking relationships.”

“An encouraging sign for Horizon and the economy is a measurable reduction of non-accrual loans and a decline in loans that are 30 to 89 days delinquent, which represent the highest risk for requiring additional loan loss reserves or restructuring.”

“We continue to develop initiatives to expand our product and service capabilities and build market share. In addition, we remain watchful for opportunities to grow organically by hiring exceptionally talented producers and for accretive acquisition opportunities in a consolidated banking market.”

Performance Highlights

Net income for the second quarter of 2011 was $3.1 million or $.83 diluted earnings per share, up 23% compared to $2.5 million or $.65 diluted earnings per share in the second quarter of 2010.

Net income for the first six months of 2011 rose 36% to $5.9 million or $1.57 diluted earnings per share, compared with $4.3 million or $1.09 diluted earnings per share in the first half of 2010. This is the highest first six months of net income in the Company’s history.

Net interest income increased $609,000 for the first six months of 2011 compared to the same prior year period. This was primarily due to an increase in the balance of interest earning assets partially offset by a slight decrease in the net interest margin. The net interest margin was 3.62% in the first half of 2011 compared to 3.66% in the prior year for the same period.

The net interest margin decreased to 3.67% in the second quarter of 2011 from 3.78% for the three month period ending June 30, 2010. The decrease in the net interest margin during the first and second quarters of 2011, as compared to the same periods in 2010 was primarily due to the decline in average mortgage warehouse loan volume and balances, which caused a corresponding increase in average federal funds sold and investments during the quarters at lower yields.

“We have operated our mortgage warehousing business for 12 years without a loss,” noted Mr. Dwight, “While it is subject to seasonal and rate-driven fluctuations in the mortgage market, it is an important part of our diversified income stream. Mortgage warehouse loans in 2011 are significantly lower than in 2010, but this was anticipated. Overall, in an environment that has caused margin compression, we were satisfied with our ability to maintain relative stability in our net interest margin.”

Lending Activity

With respect to Horizon’s lending activities, Mr. Dwight commented, “Horizon’s overall loan activity continues to be a challenge, given the local and national economies. Given this challenge, Horizon has increased its marketing and outbound calling efforts in order to increase market share. In addition, we continue to pursue the hiring of good people to help fuel our expansion efforts.”

Total loans decreased during the first six months as the balance of mortgage warehouse loans decreased $48.7 million from December 31, 2010 as a result of decreased refinancing activity.

Residential mortgage loan activity during the second quarter of 2011 generated $1.3 million of income from the gain on sale of mortgage loans, down $366,000 from the same period in 2010 but an increase of $775,000 from the first quarter of 2011. In addition, Horizon recognized a gain on the sale of securities of $365,000 during the second quarter of 2011 as the result of restructuring a portion of the investment portfolio.

The provision for loan losses was $1.3 million in the second quarter 2011, which was approximately $1.7 million less than the provision for the same period of the prior year. The 2011 second quarter provision was $216,000 less than the 2011 first quarter provision and was the lowest quarterly provision since the first quarter of 2008.

The ratio of allowance for loan losses to total loans increased to 2.20% from 2.11% as of June 30, 2011 and December 31, 2010, respectively. The increase in the ratio was due to an overall decline in total loan balances since the total non-performing loan balance amount also decreased. Horizon’s net loans charged off decreased during the second quarter of 2011 to $1.8 million compared to $2.6 million in second quarter 2010.

Non-performing loans totaled $20.6 million on June 30, 2011, down from $22.1 million on March 31, 2011, and from $21.2 million on June 30, 2010. As a percentage of total loans non-performing loans were 2.44% on June 30, 2011, down from 2.71% on March 31, 2011, but up from 2.26% on June 30, 2010. The increase from a year ago was due to a decrease in total loans.

The decrease of non-performing loans from the prior quarter was primarily due to lower non-performing mortgage loans, partially offset by higher non-performing installment and commercial loans. Non-performing mortgage loans declined from $8.7 million at March 31, 2011, to $7.0 million on June 30, 2011. This decrease was primarily due to $2.7 million of loans moving to OREO during the quarter. It was also reduced by $384,000 for a loan brought current and $659,000 of charge-offs. These reductions were partially offset by the addition of $2.1 million of mortgage loans to non-performing status.

Non-performing installment loans increased from $3.9 million on March 31, 2011 to $4.0 million during the quarter. Non-performing commercial loans increased from $9.4 million on March 31, 2011 to $9.6 million on June 30, 2011.

“We have confidence in our credit analysis and risk management capabilities,” said Mr. Dwight. “We believe the decrease in total non-performing loans indicates a slowing of financial problems caused by the sluggish economy, challenging employment conditions, and a housing market that continues to struggle with an overload of inventory.”

“We continue to reserve for potential loan losses, but we believe the outlook is significantly more encouraging than a year ago. Because our non-performing assets represent a small percentage of our total loans, and our capital position remains strong, we are able to seek out new quality lending opportunities that other banks are not able to pursue because of their financial or regulatory situation. We are not afraid to lend.”

Real estate and installment non-performing loans on June 30, 2011 include $1.7 million and $2.7 million, respectively, of loans in bankruptcy. This compares to $1.8 million and $2.0 million on March 31, 2011. These loans are not considered troubled debt restructures (TDRs) while they are going through bankruptcy, a process that can take six to eighteen months. The Company’s experience with loans in bankruptcy has demonstrated that some debtors continue to make payments during the bankruptcy process, many reaffirm their obligations to the Court when they come out of bankruptcy, and some loans are discharged or restructured by the court.

TDRs are also included in total non-performing loans. TDRs increased from $4.7 million on March 31, 2011 to $6.1 million on June 30, 2011. Of these, $3.9 million were mortgage loans, $1.4 million were commercial loans, and $793,000 were consumer installment loans. The increase was primarily due to the addition of one commercial loan to a developer totaling $841,000 and a mortgage and second mortgage to one individual totaling $1.1 million. The commercial loan did not increase the total non-performing loans since it was comprised of the refinancing of several previously non-performing commercial loans.

Non-accrual loans totaled $14.4 million on June 30, 2011, down from $17.4 million on March 31, 2011, and $17.7 million on June 30, 2010. On June 30, 2011, non-accrual commercial loans were the largest component at $8.2 million. Non-accrual commercial loans to hotel owners totaled $4.3 million, with no other group over $1.0 million. Loans 90 days delinquent but still on accrual totaled $55,000 on June 30, 2011, similar to $57,000 on March 31, 2011, and down from $77,000 on June 30, 2010. Horizon’s policy is to place loans over 90 days delinquent on non-accrual status unless they are in the process of collection and a full recovery is expected.

Other Real Estate Owned (OREO) totaled $4.1 million on June 30, 2011, up from $2.3 million on March 31, 2011, and $2.9 million on June 30, 2010. During the quarter five properties with a book value of $477,000 as of March 31, 2010 were sold. Seventeen properties with a book value of $2.4 million on June 30, 2011 were transferred to OREO status during the quarter. On June 30, 2011, OREO was comprised of 28 properties. Of these, five totaling $1.6 million were commercial properties and 23 totaling $2.5 million were residential real estate.

Expense Management

Total non-interest expenses were $303,000 higher in the second quarter of 2011 compared to the second quarter of 2010 and $1.0 million higher for the six months ended June 30, 2011 compared to the same period in the prior year. Salaries and employee benefits increased $280,000 compared to the same quarter in 2010 and $843,000 compared to the same six-month period of 2010. These increases are primarily the result of additional payroll expense from the consolidation of the American Trust & Savings Bank transaction that closed at the end of the second quarter of 2010, the expansion into Portage, Michigan, and annual merit pay increases. Other losses during the second quarter of 2011 included a write down on bank owned property of $140,000.

Mr. Dwight explained: “Our increased investment in people and facilities has directly resulted in income production. We expect these expenditures to generate additional income for Horizon well in excess of the related cost.”

Diluted earnings per share were reduced by $.08 and $.16 for the three and six months ending June 30, 2011, respectively, and $.11 and $.22 for the three and six months ending June 30, 2010, respectively, due to the decrease in preferred stock dividends and the accretion of the discount on the preferred stock. The reduction in 2011 on the preferred stock dividend and the accretion of the discount on the preferred stock was due to the repurchase of $6.25 million of preferred stock issued pursuant to the US Treasury’s Capital Purchase Program during the fourth quarter of 2010.

Horizon has applied to the US Treasury Department to make its second $6.25 million repurchase of preferred stock. In addition, Horizon has applied to the US Treasury to participate in the Small Business Lending Fund. Both applications are still pending approval from the US Treasury and at this time Horizon is not aware of any issues that would cause a denial of its applications.

Mr. Dwight concluded: “Horizon’s business model continues to perform well during these challenging times, and as a result, we believe it will provide us with new opportunities. We also believe that the increase in regulatory burdens on banks and the decreasing fee revenue most banks are facing are likely to result in continued consolidation in the banking industry, and Horizon’s historical performance has positioned us well for these opportunities.”

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

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in “Item 1A Risk Factors” of Part I of Horizon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. 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.
         
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
June 30 March 31 December 31 September 30 June 30
  2011       2011       2010       2010       2010  
Balance sheet:
Total assets $ 1,413,737 $ 1,382,390 $ 1,400,919 $ 1,485,058 $ 1,464,415
Investment securities 460,449 445,988 391,939 397,694 410,284
Commercial loans 338,439 335,758 330,018 329,230 326,401
Mortgage warehouse loans 75,057 49,034 123,743 193,848 156,915
Residential mortgage loans 163,803 164,240 162,435 165,234 168,238
Installment loans 261,971 260,525 266,681 270,503 271,241
Earning assets 1,316,452 1,274,171 1,307,313 1,387,594 1,360,488
Non-interest bearing deposit accounts 113,747 111,155 107,606 105,376 99,291
Interest bearing transaction accounts 567,456 531,250 508,953 506,031 529,612
Time deposits 339,073 359,004 368,939 388,076 394,092
Borrowings 230,141 224,358 260,741 318,516 282,137
Subordinated debentures 30,630 30,607 30,584 30,562 30,539
Common stockholders' equity 103,206 97,802 94,066 95,686 92,127
Total stockholders’ equity 121,507 116,060 112,283 120,112 116,512
 
Income statement: Three months ended
Net interest income $ 11,463 $ 11,067 $ 13,075 $ 12,620 $ 11,368
Provision for loan losses 1,332 1,548 2,664 2,657 3,000
Other income 4,448 4,314 4,961 5,648 4,923
Other expenses 10,487 10,258 11,576 11,257 10,184
Income tax expense 999 810 926 1,075 592
Net income 3,093 2,765 2,870 3,279 2,515
Preferred stock dividend (277 ) (276 ) (349 ) (353 ) (352 )
Net income available to common shareholders 2,816 2,489 2,521 2,926 2,163
 
Per share data:
Basic earnings per share $ 0.86 $ 0.76 $ 0.77 $ 0.89 $ 0.66
Diluted earnings per share 0.83 0.74 0.75 0.88 0.65
Cash dividends declared per common share 0.17 0.17 0.17 0.17 0.17
Book value per common share 31.32 29.76 28.68 29.17 28.10
Tangible book value per common share 28.76 27.17 26.04 26.50 25.39
Market value - high $ 27.92 $ 29.19 $ 26.99 $ 22.60 $ 22.81
Market value - low $ 26.50 $ 26.20 $ 21.89 $ 21.15 $ 19.48
Weighted average shares outstanding - Basic 3,291,833 3,283,143 3,280,331 3,279,201 3,278,392
Weighted average shares outstanding - Diluted 3,376,969 3,383,175 3,362,118 3,336,634 3,333,768
 
Key ratios:
Return on average assets 0.89 % 0.80 % 0.79 % 0.90 % 0.75 %
Return on average common stockholders' equity 11.25 10.55 10.22 12.12 9.33
Net interest margin 3.67 3.57 4.01 3.84 3.78
Loan loss reserve to total loans 2.20 2.34 2.11 1.85 1.77
Non-performing loans to loans 2.44 2.71 2.38 2.22 2.26
Average equity to average assets 8.51 8.14 8.22 8.32 8.67
Bank only capital ratios:
Tier 1 capital to average assets 9.03 8.83 8.60 8.53 8.92
Tier 1 capital to risk weighted assets 13.61 13.56 12.70 11.69 11.89
Total capital to risk weighted assets 14.87 14.79 13.96 12.94 13.15
 
Loan data:
30 to 89 days delinquent $ 4,903 $ 6,948 $ 5,907 $ 9,084 $ 8,637
90 days and greater delinquent - accruing interest 55 57 358 833 77
Trouble debt restructures - accruing interest 4,227 4,014 4,119 3,445 3,414
Trouble debt restructures - non-accrual 1,912 682 278 463 -
Non-accrual loans 14,430 17,359 16,673 16,939 17,682
Total non-performing loans 20,624 22,112 21,428 21,680 21,173
       
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
June 30 June 30
  2011         2010  
Balance sheet:
Total assets $ 1,413,737 $ 1,464,415
Investment securities 460,449 410,284
Commercial loans 338,439 326,401
Mortgage warehouse loans 75,057 156,915
Residential mortgage loans 163,803 168,238
Installment loans 261,971 271,241
Earning assets 1,316,452 1,360,488
Non-interest bearing deposit accounts 113,747 99,291
Interest bearing transaction accounts 567,456 529,612
Time deposits 339,073 394,092
Borrowings 230,141 282,137
Subordinated debentures 30,630 30,539
Common stockholders' equity 103,206 92,127
Total stockholders’ equity 121,507 116,512
 
Income statement: Six months ended
Net interest income $ 22,530 $ 21,921
Provision for loan losses 2,880 6,233
Other income 8,762 9,297
Other expenses 20,745 19,738
Income tax expense 1,809 941
Net income 5,858 4,306
Preferred stock dividend (553 ) (704 )
Net income available to common shareholders 5,305 3,602
 
Per share data:
Basic earnings per share $ 1.61 $ 1.10
Diluted earnings per share 1.57 1.09
Cash dividends declared per common share 0.34 0.34
Book value per common share 31.32 28.14
Tangible book value per common share 28.76 25.42
Market value - high $ 29.19 $ 22.81
Market value - low $ 26.20 $ 16.44
Weighted average shares outstanding - Basic 3,287,258 3,274,327
Weighted average shares outstanding - Diluted 3,379,458 3,316,671
 
Key ratios:
Return on average assets 0.85 % 0.65 %
Return on average common stockholders' equity 10.91 7.86
Net interest margin 3.62 3.66
Loan loss reserve to total loans 2.20 1.77
Non-performing loans to loans 2.44 2.26
Average equity to average assets 8.34 8.69
Bank only capital ratios:
Tier 1 capital to average assets 9.03 8.92
Tier 1 capital to risk weighted assets 13.61 11.89
Total capital to risk weighted assets 14.87 13.15
 
Loan data:
30 to 89 days delinquent $ 4,903 $ 8,637
90 days and greater delinquent - accruing interest 55 77
Trouble debt restructures - accruing interest 4,227 3,414
Trouble debt restructures - non-accrual 1,912 -
Non-accrual loans 14,430 17,682
Total non-performing loans 20,624 21,173
 
HORIZON BANCORP
 
Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)
         
June 30 March 31 December 31 September 30 June 30
2011   2011   2010   2010   2010
Commercial $ 7,078 $ 8,609 $ 7,554 $ 7,029 $ 6,204
Real estate 1,710 2,357 2,379 1,957 1,536
Mortgage warehousing 1,516 1,421 1,435 1,441 1,362
Consumer 8,282 6,703 7,696 7,603 7,441
Unallocated   -     -     -     -     -
Total $ 18,586   $ 19,090   $ 19,064   $ 18,030   $ 16,543
 
Net Charge-offs

(Dollars in Thousands, Unaudited)
 
Three months ended
June 30 March 31 December 31 September 30 June 30
2011   2011   2010   2010   2010
Commercial $ 366 $ 59 $ 426 $ 485 $ 884
Real estate 659 82 128 86 288
Mortgage warehousing - - - - -
Consumer   811     1,380     1,076     599     1,406
Total $ 1,836   $ 1,521   $ 1,630   $ 1,170   $ 2,578
 
Total Non-performing Loans

(Dollars in Thousands, Unaudited)
 
June 30 March 31 December 31 September 30 June 30
2011   2011   2010   2010   2010
Commercial $ 9,613 $ 9,428 $ 8,082 $ 8,855 $ 9,805
Real estate 6,983 8,744 9,326 8,467 8,021
Mortgage warehousing - - - - -
Consumer   4,028     3,940     4,020     4,358     3,347
Total $ 20,624   $ 22,112   $ 21,428   $ 21,680   $ 21,173
 
Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)
 
June 30 March 31 December 31 September 30 June 30
2011   2011   2010   2010   2010
Commercial $ 1,414 $ 1,443 $ 1,622 $ 2,751 $ 623
Real estate 2,679 839 1,042 1,283 2,160
Mortgage warehousing - - - - -
Consumer   16     8     -     107     70
Total $ 4,109   $ 2,290   $ 2,664   $ 4,141   $ 2,853
         
HORIZON BANCORP
 
Loan Portfolio Detail
 
Non- Percent Specific Percent of
Loan Performing of Reserves on Non - Non-performing
June 30, 2011 (Unaudited) Balance   Loans Loans Performing Loans Loans
Owner occupied real estate $ 125,418 $ 2,471 1.97 % $ 374 15.14 %
Non owner occupied real estate 141,537 5,527 3.90 % 665 12.03 %
Residential development 10,718 214 2.00 % 125 58.41 %
Commercial and industrial   60,766       1,401 2.31 %   326 23.27 %
Total commercial 338,439 9,613 2.84 % 1,490 15.50 %
 
Residential mortgage (1) 159,316 6,486 4.07 % 318 4.90 %
Residential construction 8,830 497 5.63 % - 0.00 %
Mortgage warehouse   75,057       - 0.00 %   - 0.00 %
Total real estate 243,203 6,983 2.87 % 318 4.55 %
 
Direct installment 24,265 276 1.14 % 562 203.62 %
Indirect installment 125,535 1,235 0.98 % 13 1.05 %
Home equity   112,171       2,517 2.24 %   776 30.83 %
Total consumer 261,971 4,028 1.54 % 1,351 33.54 %
       
Total loans 843,613 20,624 2.44 % 3,159 15.32 %
Allowance for loan losses   (18,586 )      
Net loans $ 825,027     $ 20,624 2.50 % $ 3,159
(1) Residential mortgage total includes Held for Sale mortgage loans
 
Non- Percent Specific Percent of
Loan Performing of Reserves on Non - Non-performing
December 31, 2010 Balance   Loans Loans Performing Loans Loans
Owner occupied real estate $ 125,909 $ 1,042 0.83 % $ 385 36.95 %
Non owner occupied real estate 137,073 6,329 4.62 % 665 10.51 %
Residential development 8,694 266 3.06 % 142 53.38 %
Commercial and industrial   58,342       445 0.76 %   265 59.55 %
Total commercial 330,018 8,082 2.45 % 1,457 18.03 %
 
Residential mortgage (1) 173,800 9,326 5.37 % 969 10.39 %
Residential construction 7,468 - 0.00 % - 0.00 %
Mortgage warehouse   123,743       - 0.00 %   - 0.00 %
Total real estate 305,011 9,326 3.06 % 969 10.39 %
 
Direct installment 25,058 287 1.15 % 976 340.07 %
Indirect installment 128,129 1,431 1.12 % - 0.00 %
Home equity   113,494       2,302 2.03 %   - 0.00 %
Total consumer 266,681 4,020 1.51 % 976 24.28 %
       
Total loans 901,710 21,428 2.38 % 3,402 15.88 %
Allowance for loan losses   (19,064 )      
Net loans $ 882,646     $ 21,428 2.43 % $ 3,402
(1) Residential mortgage total includes Held for Sale mortgage loans
         
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)
 
Three Months Ended Three Months Ended
June 30, 2011 June 30, 2010
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
 
ASSETS
Interest-earning assets
Federal funds sold $ 14,529 $ 5 0.14 % $ 10,968 $ 4 0.15 %
Interest-earning deposits 8,333 5 0.24 % 6,988 4 0.23 %
Investment securities - taxable 351,596 2,776 3.17 % 283,883 2,509 3.54 %
Investment securities - non-taxable (1) 112,279 1,035 5.28 % 110,940 1,078 5.73 %
Loans receivable (2)   814,581       11,891 5.86 %   849,296       13,212 6.25 %
Total interest-earning assets (1) 1,301,318 15,712 4.98 % 1,262,075 16,807 5.51 %
 
Noninterest-earning assets
Cash and due from banks 15,476 14,904
Allowance for loan losses (19,089 ) (16,723 )
Other assets   96,056     92,376  
 
$ 1,393,761   $ 1,352,632  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 893,836 $ 2,195 0.98 % $ 840,647 $ 2,706 1.29 %
Borrowings 224,864 1,600 2.85 % 264,964 2,338 3.54 %
Subordinated debentures   31,446       454 5.79 %   30,181       395 5.25 %
Total interest-bearing liabilities 1,150,146 4,249 1.48 % 1,135,792 5,439 1.92 %
 
Noninterest-bearing liabilities
Demand deposits 115,659 90,301
Accrued interest payable and
other liabilities 9,297 9,216
Shareholders' equity   118,659     117,323  
 
$ 1,393,761   $ 1,352,632  
 
Net interest income/spread $ 11,463 3.50 % $ 11,368 3.59 %
 
Net interest income as a percent
of average interest earning assets (1) 3.67 % 3.78 %
 

(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.

         
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)
 
Six Months Ended Six Months Ended
June 30, 2011 June 30, 2010
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
ASSETS
Interest-earning assets
Federal funds sold $ 38,740 $ 44 0.23 % $ 39,431 $ 13 0.07 %
Interest-earning deposits 5,771 6 0.21 % 5,928 38 1.29 %
Investment securities - taxable 326,790 5,236 3.23 % 268,949 4,912 3.68 %
Investment securities - non-taxable (1) 113,281 2,078 5.07 % 111,604 2,159 5.42 %
Loans receivable (2)   817,468       23,779 5.88 %   830,429       25,817 6.28 %
Total interest-earning assets (1) 1,302,050 31,143 4.95 % 1,256,341 32,939 5.43 %
 
Noninterest-earning assets
Cash and due from banks 15,039 14,381
Allowance for loan losses (19,077 ) (16,365 )
Other assets   96,513     88,667  
 
$ 1,394,525   $ 1,343,024  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 898,635 $ 4,532 1.02 % $ 834,775 $ 5,469 1.32 %
Borrowings 226,161 3,177 2.83 % 267,145 4,781 3.61 %
Subordinated debentures   31,446       904 5.80 %   29,015       768 5.34 %
Total interest-bearing liabilities 1,156,242 8,613 1.50 % 1,130,935 11,018 1.96 %
 
Noninterest-bearing liabilities
Demand deposits 112,618 86,501
Accrued interest payable and
other liabilities 9,390 8,822
Shareholders' equity   116,275     116,766  
 
$ 1,394,525   $ 1,343,024  
 
Net interest income/spread $ 22,530 3.45 % $ 21,921 3.46 %
 
Net interest income as a percent
of average interest earning assets (1) 3.62 % 3.66 %
 

(3) 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.

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

   
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)
 
June 30 December 31
2011 2010
(Unaudited)    
Assets
Cash and due from banks $ 20,832 $ 15,683
Investment securities, available for sale 449,817 382,344
Investment securities, held to maturity 10,632 9,595
Loans held for sale 4,343 18,833
Loans, net of allowance for loan losses of $18,586 and $19,064 820,684 863,813
Premises and equipment 33,255 34,194
Federal Reserve and Federal Home Loan Bank stock 12,390 13,664
Goodwill 5,910 5,910
Other intangible assets 2,515 2,741
Interest receivable 6,778 6,519
Cash value life insurance 27,611 27,195
Other assets   18,970     20,428
Total assets $ 1,413,737   $ 1,400,919
Liabilities
Deposits
Non-interest bearing $ 113,747 $ 107,606
Interest bearing   906,529     877,892
Total deposits 1,020,276 985,498
Borrowings 230,141 260,741
Subordinated debentures 30,630 30,584
Interest payable 705 781
Other liabilities   10,478     11,032
Total liabilities   1,292,230     1,288,636
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, no par value, $1,000 liquidation value
Authorized, 1,000,000 shares
Issued 18,750 shares 18,301 18,217
Common stock, $.2222 stated value
Authorized, 22,500,000 shares
Issued, 3,329,576 and 3,300,659 shares 1,139 1,122
Additional paid-in capital 10,471 10,356
Retained earnings 84,417 80,240
Accumulated other comprehensive income   7,179     2,348
Total stockholders’ equity   121,507     112,283
Total liabilities and stockholders’ equity $ 1,413,737   $ 1,400,919
     
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)
 
Three Months Ended June 30     Six Months Ended June 30
2011   2010 2011   2010
(Unaudited)   (Unaudited)     (Unaudited)   (Unaudited)
Interest Income
Loans receivable $ 11,891 $ 13,212 $ 23,779 $ 25,817
Investment securities
Taxable 2,786 2,517 5,286 4,963
Tax exempt   1,035       1,078         2,078       2,159  
Total interest income   15,712       16,807         31,143       32,939  
Interest Expense
Deposits 2,195 2,706 4,532 5,469
Borrowed funds 1,600 2,338 3,177 4,781
Subordinated debentures   454       395         904       768  
Total interest expense   4,249       5,439         8,613       11,018  
Net Interest Income 11,463 11,368 22,530 21,921
Provision for loan losses   1,332       3,000         2,880       6,233  
Net Interest Income after Provision for Loan Losses   10,131       8,368         19,650       15,688  
Other Income
Service charges on deposit accounts 825 964 1,620 1,829
Wire transfer fees 137 185 245 325
Interchange fees 639 560 1,184 1,014
Fiduciary activities 932 1,007 1,895 2,002
Gain on sale of securities 365 131 639 131
Gain on sale of mortgage loans 1,308 1,674 1,841 3,056
Mortgage servicing income net of impairment 99 (97 ) 863 (32 )
Increase in cash surrender value of bank owned life insurance 211 197 416 353
Other income   (68 )     302         59       619  
Total other income   4,448       4,923         8,762       9,297  
Other Expenses
Salaries and employee benefits 5,470 5,190 10,831 9,988
Net occupancy expenses 1,039 979 2,120 2,041
Data processing 494 570 901 972
Professional fees 331 530 680 1,001
Outside services and consultants 386 424 767 789
Loan expense 694 771 1,456 1,521
FDIC insurance expense 303 408 690 796
Other losses 246 10 277 37
Other expenses   1,524       1,302         3,023       2,593  
Total other expenses   10,487       10,184         20,745       19,738  
Income Before Income Tax 4,092 3,107 7,667 5,247
Income tax expense   999       592         1,809       941  
Net Income 3,093 2,515 5,858 4,306
Preferred stock dividend and discount accretion   (277 )     (352 )       (553 )     (704 )
Net Income Available to Common Shareholders $ 2,816     $ 2,163       $ 5,305     $ 3,602  
Basic Earnings Per Share $ 0.86 $ 0.66 $ 1.61 $ 1.10
Diluted Earnings Per Share 0.83 0.65 1.57 1.09

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