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Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

MICHIGAN CITY, Ind., July 27, 2017 (GLOBE NEWSWIRE) -- (NASDAQ:HBNC) – Horizon Bancorp (“Horizon”) today announced its unaudited financial results for the three-month and six-month periods ended June 30, 2017. All share data has been adjusted to reflect Horizon’s three-for-two stock split effective November 14, 2016.

SUMMARY:

  • Net income for the second quarter of 2017 increased 43.4% to $9.1 million or $0.41 diluted earnings per share compared to $6.3 million or $0.35 diluted earnings per share for the second quarter of 2016.
  • Net income, excluding acquisition-related expenses, gain on sale of investment securities and purchase accounting adjustments (“core net income”), for the second quarter of 2017 increased 24.2% to $8.6 million or $0.39 diluted earnings per share compared to $6.9 million or $0.38 diluted earnings per share for the same period of 2016.
  • Net income for the first six months of 2017 was $17.3 million or $0.77 diluted earnings per share compared to $11.7 million or $0.64 diluted earnings per share for the same period in 2016.
  • Core net income for the first six months of 2017 increased 30.7% to $16.1 million or $0.71 diluted earnings per share compared to $12.3 million or $0.68 diluted earnings per share for the same period of 2016.
  • Return on average assets was 1.12% for the second quarter of 2017 compared to 0.94% for the same period in 2016.
  • Commercial loans, excluding acquired commercial loans, increased by an annualized rate of 13.4%, or $71.1 million, during the first six months of 2017.
  • Consumer loans, excluding acquired consumer loans, increased by an annualized rate of 25.9%, or $51.2 million, during the first six months of 2017.
  • Total loans, excluding acquired loans, increased by an annualized rate of 11.7%, or $124.3 million, during the first six months of 2017.
  • Net interest income for the second quarter of 2017 increased $6.3 million, or 30.3%, compared to the same period in 2016.
  • Net interest margin was 3.84% for the second quarter of 2017 compared to 3.80% for the prior quarter and 3.48% for the second quarter of 2016. The improvement in net interest margin was due to Horizon executing a strategy to reduce expensive funding costs in the fourth quarter of 2016, an increase in average interest-earning assets and an increase in loan yields.
  • Net interest margin, excluding the impact of purchase accounting adjustments (“core net interest margin”), was 3.71% for the second quarter of 2017 compared to 3.66% for the prior quarter and 3.42% for the same period in 2016.
  • Horizon’s tangible book value per share rose to $12.20 at June 30, 2017, compared to $11.48 at December 31, 2016.
  • Horizon’s Grand Rapids, Michigan loan production office converted into a full-service branch during the second quarter of 2017.
  • On May 4, 2017, Horizon announced its entrance into central Ohio by opening a loan production office located in Dublin, Ohio, in the Columbus metropolitan area, which will provide a full-range of commercial products and services.
  • On May 23, 2017, Horizon announced the pending acquisition of Lafayette Community Bancorp (“Lafayette”) and its wholly-owned subsidiary, Lafayette Community Bank, headquartered in Lafayette, Indiana.
  • On June 13, 2017, Horizon’s Board of Directors announced the approval of an 18% increase in the Company’s quarterly cash dividend from $0.11 to $0.13 per share, payable on July 21, 2017 to shareholders of record on July 7, 2017.
  • On June 14, 2017, Horizon announced the pending acquisition of Wolverine Bancorp, Inc. (“Wolverine”) and its wholly-owned subsidiary, Wolverine Bank, headquartered in Midland, Michigan.
  • On June 26, 2017, Horizon announced its wholly-owned subsidiary, Horizon Bank, N.A., converted from a national bank to an Indiana state-chartered non-member bank. The charter conversion became effective following the close of business on June 23, 2017 and the converted bank now operates under the name Horizon Bank.

Craig Dwight, Chairman and CEO, commented: “Horizon continued to expand upon its growth story during the second quarter of 2017 with the announcement of two acquisitions, solid organic loan growth, the opening of a full-service branch in Grand Rapids, Michigan, and a loan production office in Dublin, Ohio, a vibrant suburb of Columbus, Ohio. Additionally, Horizon Bank converted from a national bank to an Indiana state-chartered non-member bank during the quarter which should result in a pre-tax cost savings of approximately $432,000 annually. A portion of the cost savings from the charter conversion will be allocated to the state bank associations and expanded internal audit.”

Dwight continued, “Horizon experienced strong loan growth during the first six months of 2017, primarily in commercial and consumer loans. Our growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo, combined to produce total loan growth of $83.1 million during this time period. The loan growth in these markets spurred commercial loan growth, excluding acquired commercial loans, to an annualized growth rate of 13.4% during the first six months of 2017. Consumer loans, excluding acquired consumer loans, increased at an annualized growth rate of 25.9% during the first six months of 2017 due to an increased focus on the management of direct consumer loans and the addition of a seasoned consumer loan portfolio manager during the third quarter of 2016. Residential mortgage loans experienced an increase of $18.1 million, or an annualized growth of 6.8%, during the first six months of 2017. The increases in commercial, consumer and mortgage loans were offset by a decrease in mortgage warehouse loans of $12.0 million from December 31, 2016 to June 30, 2017. Excluding loans acquired through acquisition, total loans increased by 11.7% on an annualized basis. We believe Horizon is well positioned to continue our growth story by strengthening our existing market share and capitalizing on the recent investments in our growth markets.”

Loan Growth by Type, Excluding Acquired Loans
Six Months Ended June 30, 2017
(Dollars in Thousands)
Excluding Acquired Loans
June 30 December 31 Amount Acquired Amount Percent
2017 2016 Change FFBT Loans Change Change
(Unaudited)
Commercial loans $1,143,761 $1,069,956 $73,805 $(2,742) $71,063 6.6%
Residential mortgage loans 549,997 531,874 18,123 (59) 18,064 3.4%
Consumer loans 450,209 398,429 51,780 (562) 51,218 12.9%
Subtotal 2,143,967 2,000,259 143,708 (3,363) 140,345 7.0%
Held for sale loans 3,730 8,087 (4,357) - (4,357) -53.9%
Mortgage warehouse loans 123,757 135,727 (11,970) - (11,970) -8.8%
Total loans $ 2,271,454 $2,144,073 $127,381 $(3,363) $124,018 5.8%

Mr. Dwight stated, “Horizon realized core net income of $8.6 million and $16.1 million for the three and six months ended June 30, 2017, a strong increase of 24.2% and 30.7%, respectively, when compared to the same periods in 2016. Core net interest margin for the second quarter of 2017 was 3.71%, an increase from 3.66% for the prior quarter and 3.42% for the same period in 2016. Horizon’s core net interest margin for the six months ended June 30, 2017 increased 27 basis points to 3.67% when compared to the same period in 2016. Total non-interest income decreased during the three and six months ended June 30, 2017 when compared to the same periods in 2016 by $1.1 million and $882,000, respectively, primarily due to a decrease in gains on sale of mortgage loans. This decrease in income was due to a decrease in the volume of originations and an increase in the percentage of those originations being retained in our portfolio when comparing 2017 to 2016. Continued growth in service charges on deposit accounts, interchange fees and fiduciary activities partially offset the decrease in gains on sale of mortgage loans. These non-interest income sources offer a significant growth opportunity and will lessen the impact of mortgage revenue volatility. Horizon’s strategy of revenue diversification through commercial loan growth and non-mortgage related fee income is evident in our results. At its peak for the year ended December 31, 2012, mortgage warehouse and gain on sale of mortgage loans revenue comprised 24.5% of Horizon’s total revenue base (interest income and non-interest income). For the year ending December 31, 2016 and the six months ending June 30, 2017, mortgage warehouse and gain on sale of mortgage loans revenue as a percentage of total revenue declined to 13.5% and 8.46%, respectively.”

Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
(Dollars in Thousands Except per Share Data)
Three Months Ended Six Months Ended
June 30 June 30
Non-GAAP Reconciliation of Net Income 2017 2016 2017 2016
(Unaudited)(Unaudited)
Net income as reported $ 9,072 $6,326 $ 17,296 $11,707
Merger expenses 200 1,881 200 2,520
Tax effect (70) (531) (70) (696)
Net income excluding merger expenses 9,202 7,676 17,426 13,531
Gain on sale of investment securities 3 (767) (32) (875)
Tax effect (1) 268 11 306
Net income excluding gain on sale of investment securities 9,204 7,177 17,405 12,962
Acquisition-related purchase accounting adjustments ("PAUs") (939) (397) (1,955) (944)
Tax effect 329 139 684 330
Net income excluding PAUs $ 8,594 $6,919 $ 16,134 $12,348
Non-GAAP Reconciliation of Diluted Earnings per Share
Diluted earnings per share as reported $ 0.41 $0.35 $ 0.77 $0.64
Merger expenses 0.01 0.10 0.01 0.14
Tax effect (0.00) (0.03) (0.00) (0.04)
Diluted earnings per share excluding merger expenses 0.42 0.42 0.78 0.74
Gain on sale of investment securities 0.00 (0.04) (0.00) (0.05)
Tax effect (0.00) 0.01 0.00 0.02
Net income excluding gain on sale of investment securities 0.42 0.39 0.78 0.71
Acquisition-related PAUs (0.04) (0.02) (0.09) (0.05)
Tax effect 0.01 0.01 0.02 0.02
Diluted earnings per share excluding PAUs $0.39 $0.38 $ 0.71 $0.68

On May 23, 2017, Horizon entered into an agreement to acquire Lafayette and its wholly owned subsidiary, Lafayette Community Bank, in a cash and stock merger. The acquisition is expected to close in the third quarter of 2017, subject to regulatory and Lafayette shareholder approval. Lafayette Community Bank serves Tippecanoe County, Indiana through four full-service locations. As of March 31, 2017, Lafayette had total assets of $172.1 million.

On June 13, 2017, Horizon entered into an agreement to acquire Wolverine and its wholly owned subsidiary, Wolverine Bank, in a cash and stock merger. The acquisition is expected to close early in the fourth quarter of 2017, subject to regulatory and Wolverine shareholder approval. Wolverine Bank serves Midland and Saginaw Counties, Michigan through three full-service locations and one loan production office in Troy, Michigan in Oakland County. As of March 31, 2017, Wolverine had total assets of $379.3 million.

Mr. Dwight concluded, “We are very pleased to be partnering with these outstanding institutions and their talented and experienced teams. Lafayette Community Bancorp provides Horizon entry into the attractive Lafayette market and will fill a market gap between Indianapolis and Northwest Indiana. Wolverine Bancorp strengthens Horizon’s presence in the state of Michigan and provides entry into the key markets of the Great Lakes Bay Region and Oakland County. Over the years, both leadership teams have strived to provide customer focused advice and a commitment to community banking which complements Horizon’s customer focused philosophy and core values. We believe Horizon is well positioned to efficiently integrate each institution and take advantage of growth opportunities within the market each institution serves.”

Income Statement Highlights

Net income for the second quarter of 2017 was $9.1 million or $0.41 diluted earnings per share compared to $8.2 million or $0.37 diluted earnings per share for the first quarter of 2017. The increase in net income and diluted earnings per share from the previous quarter reflects increases in net interest income and non-interest income of $1.6 million and $653,000, respectively, offset by increases in non-interest expense and income tax expense of $967,000 and $468,000, respectively.

Net income for the second quarter of 2017 was $9.1 million or $0.41 diluted earnings per share compared to $6.3 million or $0.35 diluted earnings per share for the second quarter of 2016. The increase in net income and diluted earnings per share from the same period of 2016 reflects an increase in net interest income of $6.3 million offset by a decrease in non-interest income of $1.1 million and increases in non-interest expense and income tax expense of $1.5 million and $895,000, respectively.

Net income for the six months ended June 30, 2017 totaled $17.3 million or $0.77 diluted earnings per share compared to $11.7 million or $0.64 diluted earnings per share for the same period in 2016. The increase in net income and diluted earnings per share reflects an increase in net interest income of $12.2 million offset by a decrease in non-interest income of $882,000 and increases in non-interest expense and income tax expense of $3.8 million and $2.0 million, respectively.

The increases in diluted earnings per share when comparing 2017 periods to 2016 periods was partially offset by an increase in dilutive shares outstanding as a result of the stock issued in the Kosciusko Financial, Inc. and LaPorte Bancorp, Inc. acquisitions in 2016. Core net income for the second quarter of 2017 was $8.6 million or $0.39 diluted earnings per share compared to $6.9 million or $0.38 diluted earnings per share for the same period of 2016. For the six months ended June 30, 2017, core net income was $16.1 million or $0.71 diluted earnings per share compared to $12.3 million or $0.68 diluted earnings per share for the same period in 2016.

Horizon’s net interest margin was 3.84% for the second quarter of 2017, up from 3.80% for the prior quarter and 3.48% for same period of 2016. The increase in the net interest margin for the second quarter of 2017 was primarily due to an increase of 15 basis points in loan yields when compared to the prior quarter. The increase in the net interest margin compared to the same period of 2016 was due to an increase in loan yields of 25 basis points and a decrease in the cost of borrowings of 24 basis points. Excluding acquisition-related purchase accounting adjustments, the margin would have been 3.71% for the second quarter of 2017 compared to 3.66% for the first quarter of 2017 and 3.42% for the same period of 2016. Interest income from acquisition-related purchase accounting adjustments was $939,000, $1.0 million and $397,000, for the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively.

Horizon’s net interest margin for the six months ended June 30, 2017 was 3.81% compared to 3.47% for the same period in 2016. The increase in the net interest margin was primarily due to an increase in loan yields of 14 basis points which was offset by a decrease in the yield earned on non-taxable securities of 24 basis points. Also, the cost of interest-bearing liabilities decreased 16 basis points primarily due to a decrease in the cost of borrowings of 24 basis points. Excluding acquisition-related purchase accounting adjustments, the margin would have been 3.67% for the six months ended June 30, 2017 compared to 3.40% for the same period in 2016. Interest income from acquisition-related purchase accounting adjustments was $2.0 million and $944,000 for the six months ended June 30, 2017 and 2016, respectively.

Non-GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
Three Months Ended
Six Months Ended
June 30 March 31 June 30 June 30
Net Interest Margin As Reported 2017 2017 2016 2017 2016
Net interest income $27,198 $25,568 $20,869��$ 52,766 $40,643
Average interest-earning assets 2,943,627 2,797,429 2,471,354 2,870,884 2,406,468
Net interest income as a percent of average interest-
earning assets ("Net Interest Margin") 3.84% 3.80% 3.48% 3.81% 3.47%
Impact of Acquisitions
Interest income from acquisition-related
purchase accounting adjustments $(939) $(1,016) $(397) $ (1,955) $(944)
Excluding Impact of Prepayment Penalties and Acquisitions
Net interest income $26,259 $24,552 $20,472 $ 50,811 $39,699
Average interest-earning assets 2,943,627 2,797,429 2,471,354 2,870,884 2,406,468
Core Net Interest Margin 3.71% 3.66% 3.42% 3.67% 3.40%

Lending Activity

Total loans increased $127.7 million from $2.144 billion as of December 31, 2016 to $2.271 billion as of June 30, 2017 as commercial loans increased by $73.8 million, residential mortgage loans increased by $18.1 million and consumer loans increased by $51.8 million. Offsetting these increases was a decrease in mortgage warehouse loans of $12.0 million. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased by an annualized rate of 14.1%, or $140.3 million, during the six months ended June 30, 2017.

Loan balances in the growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo totaled $480.2 million as of June 30, 2017. Combined, these markets contributed $83.1 million, or 20.9%, in loan growth during the six months ended June 30, 2017.

Residential mortgage lending activity for the three months ended June 30, 2017 generated $2.2 million in income from the gain on sale of mortgage loans, an increase of $236,000 from the previous quarter and a decrease of $852,000 from the same period in 2016. Residential mortgage lending activity for the six months ended June 30, 2017 generated $4.2 million in income from the gain on sale of mortgage loans, a decrease of $989,000 from the same period in 2016. Total origination volume for the second quarter of 2017, including loans placed into portfolio, totaled $110.4 million, representing an increase of 67.5% from the previous quarter and a decrease of 17.0% from the same period in 2016. Total origination volume for the six months ended June 30, 2017, including loans placed into portfolio, totaled $176.3 million, a decrease of 17.0% compared to the same period in 2016. The decrease in mortgage loan origination volume was primarily due to an increase in mortgage loan interest rates when comparing 2017 to 2016. Purchase money mortgage originations during the second quarter of 2017 represented 78.4% of total originations compared to 69.8% of originations during the previous quarter and 78.2% during the second quarter of 2016. Purchase money mortgage originations for the six months ended June 30, 2017 represented 75.1% of originations compared to 73.4% for the same period in 2016.

The provision for loan losses totaled $330,000 for the second and first quarters of 2017 compared to $232,000 for the second quarter of 2016. The increase in the provision for loan losses in the second quarter of 2017 was due to the increase in gross loans when compared to the same period in 2016. The provision for loan losses totaled $660,000 and $764,000 for the six months ended June 30, 2017 and 2016, respectively. The decrease in the provision for loan losses was due to a decrease in net charge-offs when comparing the 2017 and 2016 periods.

The ratio of the allowance for loan losses to total loans decreased to 0.66% as of June 30, 2017 from 0.69% as of December 31, 2016 due to an increase in gross loans. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.82% as of June 30, 2017 compared to 0.91% as of December 31, 2016. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 1.18% as of June 30, 2017 compared to 1.39% as of December 31, 2016.

Non- GAAP Allowance for Loan and Lease Loss Detail
As of June 30, 2017
(Dollars in Thousands, Unaudited)
Horizon
Legacy Heartland Summit Peoples Kosciusko LaPorte CNB Total
Pre-discount loan balance $1,834,963 $13,823 $46,708 $130,009 $68,577 $176,902 $8,612 $ 2,279,594
Allowance for loan losses (ALLL) 14,956 71 - - - - - 15,027
Loan discount N/A 879 2,416 3,086 1,004 4,248 237 11,870
ALLL+loan discount 14,956 950 2,416 3,086 1,004 4,248 237 26,897
Loans, net $1,820,007 $12,873 $44,292 $126,923 $67,573 $172,654 $8,375 $ 2,252,697
ALLL/ pre-discount loan balance 0.82% 0.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.66%
Loan discount/ pre-discount loan balance N/A 6.36% 5.17% 2.37% 1.46% 2.40% 2.75% 0.52%
ALLL+loan discount/ pre-discount loan balance 0.82% 6.87% 5.17% 2.37% 1.46% 2.40% 2.75% 1.18%

Non-performing loans to total loans increased 1 basis point to 0.51% at June 30, 2017 from 0.50% at December 31, 2016. Non-performing loans totaled $11.6 million as of June 30, 2017, an increase of $880,000 from $10.7 million as of December 31, 2016. Compared to December 31, 2016, non-performing commercial loans increased by $362,000, non-performing real estate loans increased by $263,000 and non-performing consumer loans increased $255,000.

Expense Management

Total non-interest expense was $1.5 million higher in the second quarter of 2017 compared to the same period of 2016. Excluding merger-related expenses of $200,000 and $1.9 million recorded during the three months ended June 30, 2017 and 2016, respectively, total non-interest expense increased $3.2 million, or 16.9%. The increase was primarily due to an increase in salaries and employee benefits of $2.1 million, net occupancy expenses of $295,000, data processing expenses of $368,000, and other expenses of $252,000 reflecting overall company growth, market expansion and recent acquisitions. Outside services and consultant expense and professional fee expense decreased by $933,000 and $212,000, respectively, in the second quarter of 2017 when compared to the same period of 2016 primarily due to one-time expenses related to the Kosciusko Financial, Inc. and LaPorte Bancorp, Inc. acquisitions in 2016. FDIC insurance expense decreased $166,000 in the second quarter of 2017 when compared to the same period of 2016 as the assessment rate schedule was reduced effective for assessment payments due in the fourth quarter of 2016 and 2017. Loan expense decreased $159,000 in the second quarter of 2017 when compared to the same prior year period of 2016 primarily due to a decrease in loan collection expenses.

Total non-interest expense for the six months ended June 30, 2017 increased $3.8 million, or 9.4%, when compared to the same period in 2016. Excluding merger-related expenses of $200,000 and $2.5 million recorded during the six months ended June 30, 2017 and 2016, respectively, total non-interest expense increased $6.1 million, or 16.2%. The increase was primarily due to increases in salaries and employee benefits of $3.8 million, net occupancy expenses of $811,000, data processing expenses of $570,000 and other expenses of $683,000 reflecting overall company growth, market expansion and recent acquisitions. Outside services and consultant expense and professional fee expense decreased $810,000 and $430,000, respectively, for the six months ended June 30, 2017 when compared to the same period of 2016 primarily due to one-time expenses related to the Kosciusko Financial, Inc. and LaPorte Bancorp, Inc. acquisitions in 2016. FDIC insurance expense decreased $308,000 during the first six months of 2017 when compared to the same period in 2016 due to the reduced assessment rate schedule. Other losses decreased $275,000 for the six months ended June 30, 2017 when compared to the same 2016 period due to lower debit card fraud-related expenses. Loan expense was $247,000 lower for the six months ended June 30, 2017 when compared to the same period of 2016 primarily due to a decrease in loan collection expenses.

Use of Non-GAAP Financial Measures

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

Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share
(Dollars in Thousands Except per Share Data)
June 30 March 31 June 30
2017 2017 2016
(Unaudited) (Unaudited)
Total stockholders’ equity $ 357,259 $348,575 $281,002
Less: Intangible assets 86,726 87,094 65,144
Total tangible stockholders' equity $ 270,533 $261,481 $215,858
Common shares outstanding 22,176,465 22,176,465 18,857,301
Tangible book value per common share $ 12.20 $11.79 $11.45

About Horizon

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

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.

Additional Information for Shareholders

Communications in this document do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

In connection with the proposed merger with Lafayette Community Bancorp, Horizon has filed with the SEC a Registration Statement on Form S-4 that includes a proxy statement of Lafayette Community Bancorp and a prospectus of Horizon, as well as other relevant documents concerning the proposed transaction. Shareholders and investors are urged to read the Registration Statement and the proxy statement/prospectus regarding the merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain important information. A free copy of the proxy statement/prospectus, as well as other filings containing information about Horizon, may be obtained free of charge at the SEC’s website at www.sec.gov. You may also obtain these documents, free of charge, from Horizon at www.horizonbank.com under the tab “About Us – Investor Relations – Documents – SEC Filings.”

The information available through Horizon’s website is not and shall not be deemed part of this document or incorporated by reference into other filings Horizon makes with the SEC.

In connection with the proposed merger with Wolverine Bancorp, Inc. (“Wolverine Bancorp”), Horizon will file with the SEC a Registration Statement on Form S-4 that will include a proxy statement of Wolverine Bancorp and a prospectus of Horizon, as well as other relevant documents concerning the proposed transaction. Shareholders and investors are urged to read the Registration Statement and the proxy statement/prospectus regarding the merger when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the proxy statement/prospectus (when it becomes available), as well as other filing containing information about Horizon and Wolverine Bancorp, may be obtained free of charge at the SEC’s website at www.sec.gov. You will also be able to obtain these documents, free of charge, from Horizon at www.horizonbank.com under the tab “About Us – Investor Relations – Documents – SEC Filings,” or from Wolverine Bancorp at www.wolverinebank.com under the tab “Investor Information – SEC Filings.” The information available through Horizon’s and Wolverine Bancorp’s websites is not and shall not be deemed part of this filing or incorporated by reference into other filings Horizon or Wolverine Bancorp make with the SEC.

Horizon, Lafayette Community Bancorp and Wolverine Bancorp and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Lafayette Community Bancorp and Wolverine Bancorp in connection with the proposed merger. Information about the directors and executive officers of Horizon is set forth in Horizon’s Annual Report on Form 10-K filed with the SEC on February 28, 2017, and in the proxy statement for Horizon’s 2017 annual meeting of shareholders, as filed with the SEC on March 17, 2017. Information about the directors and executive officers of Wolverine Bancorp is set forth in Wolverine Bancorp’s Annual Report on Form 10-K filed with the SEC on March 31, 2017, and in the proxy statement for Wolverine Bancorp’s 2017 annual meeting of shareholders, as filed with the SEC on April 17, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the Lafayette Community Bancorp merger and by reading the proxy statement/prospectus regarding the Wolverine Bancorp merger when it becomes available. Free copies of these documents may be obtained as described in the preceding paragraph.

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
2017 2017 2016 2016 2016
Balance sheet:
Total assets $3,321,178 $3,169,643 $3,141,156 $3,325,650 $2,918,080
Investment securities 704,525 673,090 633,025 744,240 628,935
Commercial loans 1,143,761 1,106,471 1,069,956 1,047,450 874,580
Mortgage warehouse loans 123,757 89,360 135,727 226,876 205,699
Residential mortgage loans 549,997 533,646 531,874 530,162 493,626
Consumer loans 450,209 417,476 398,429 386,031 363,920
Earning assets 2,990,924 2,845,922 2,801,030 2,963,005 2,591,208
Non-interest bearing deposit accounts 508,305 502,400 496,248 479,771 397,412
Interest bearing transaction accounts 1,401,407 1,432,228 1,499,120 1,367,285 1,213,659
Time deposits 509,071 509,071 475,842 489,106 471,190
Borrowings 485,304 319,993 267,489 569,908 492,883
Subordinated debentures 37,562 37,516 37,456 37,418 32,874
Total stockholders’ equity 357,259 348,575 340,855 345,736 281,002
Income statement: Three months ended
Net interest income $27,198 $25,568 $20,939 $24,410 $20,869
Provision for loan losses 330 330 623 455 232
Non-interest income 8,212 7,559 9,484 9,318 9,266
Non-interest expenses 22,488 21,521 22,588 24,082 20,952
Income tax expense 3,520 3,052 1,609 2,589 2,625
Net income 9,072 8,224 5,603 6,602 6,326
Preferred stock dividend - - - - -
Net income available to common shareholders $9,072 $8,224 $5,603 $6,602 $6,326
Per share data:
Basic earnings per share (1) $0.41 $0.37 $0.25 $0.31 $0.35
Diluted earnings per share (1) 0.41 0.37 0.25 0.30 0.35
Cash dividends declared per common share (1) 0.13 0.11 0.11 0.10 0.10
Book value per common share (1) 16.11 15.72 15.37 15.61 14.90
Tangible book value per common share 12.20 11.79 11.48 11.83 11.45
Market value - high 27.50 28.09 28.41 20.01 16.76
Market value - low $24.73 $24.91 $17.84 $16.61 $15.87
Weighted average shares outstanding - Basic 22,176,465 22,175,526 22,155,549 21,538,752 18,268,880
Weighted average shares outstanding - Diluted 22,322,390 22,326,071 22,283,722 21,651,953 18,364,167
Key ratios:
Return on average assets 1.12% 1.07% 0.69% 0.80% 0.94%
Return on average common stockholders' equity 10.24 9.66 6.49 7.88 9.43
Net interest margin 3.84 3.80 2.92 3.37 3.48
Loan loss reserve to total loans 0.66 0.70 0.69 0.66 0.73
Non-performing loans to loans 0.51 0.46 0.50 0.58 0.68
Average equity to average assets 10.94 11.12 10.59 10.18 9.94
Bank only capital ratios:
Tier 1 capital to average assets 9.84 10.26 9.93 9.65 9.39
Tier 1 capital to risk weighted assets 12.83 13.40 13.33 12.73 12.51
Total capital to risk weighted assets 13.46 14.05 13.98 13.34 13.23
Loan data:
Substandard loans $34,870 $30,865 $30,361 $33,914 $28,629
30 to 89 days delinquent 4,555 5,476 6,315 3,821 2,887
90 days and greater delinquent - accruing interest $160 $245 $241 $59 $24
Trouble debt restructures - accruing interest 1,924 1,647 1,492 1,523 1,256
Trouble debt restructures - non-accrual 668 998 1,014 1,164 1,466
Non-accrual loans 8,811 6,944 7,936 10,091 10,426
Total non-performing loans $11,563 $9,834 $10,683 $12,837 $13,172
(1) Adjusted for 3:2 stock split on November 14, 2016


HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
June 30 June 30
2017 2016
Balance sheet:
Total assets$ 3,321,178 $2,918,080
Investment securities 704,525 628,935
Commercial loans 1,143,761 874,580
Mortgage warehouse loans 123,757 205,699
Residential mortgage loans 549,997 493,626
Consumer loans 450,209 363,920
Earning assets 2,990,924 2,591,208
Non-interest bearing deposit accounts 508,305 397,412
Interest bearing transaction accounts 1,401,407 1,213,659
Time deposits 509,071 471,190
Borrowings 485,304 492,883
Subordinated debentures 37,562 32,874
Total stockholders’ equity 357,259 281,002
Income statement:Six Months Ended
Net interest income$ 52,766 $40,643
Provision for loan losses 660 764
Non-interest income 15,771 17,733
Non-interest expenses 44,009 41,302
Income tax expense 6,572 4,603
Net income 17,296 11,707
Preferred stock dividend - (42)
Net income available to common shareholders$17,296 $11,665
Per share data:
Basic earnings per share (1)$0.78 $0.65
Diluted earnings per share (1) 0.77 0.64
Cash dividends declared per common share (1) 0.24 0.20
Book value per common share (1) 16.11 14.90
Tangible book value per common share 12.20 11.45
Market value - high 28.09 18.59
Market value - low$24.73 $15.41
Weighted average shares outstanding - Basic 22,175,998 18,096,503
Weighted average shares outstanding - Diluted 22,324,520 18,190,542
Key ratios:
Return on average assets 1.10% 0.89%
Return on average common stockholders' equity 9.99 9.26
Net interest margin 3.81 3.47
Loan loss reserve to total loans 0.66 0.73
Non-performing loans to loans 0.51 0.68
Average equity to average assets 11.03 10.05
Bank only capital ratios:
Tier 1 capital to average assets 9.84 9.39
Tier 1 capital to risk weighted assets 12.83 12.51
Total capital to risk weighted assets 13.46 13.23
Loan data:
Substandard loans$34,870 $28,629
30 to 89 days delinquent 4,555 2,887
90 days and greater delinquent - accruing interest$160 $24
Trouble debt restructures - accruing interest 1,924 1,256
Trouble debt restructures - non-accrual 668 1,466
Non-accrual loans 8,811 10,426
Total non-performing loans$11,563 $13,172
(1) Adjusted for 3:2 stock split on November 14, 2016

HORIZON BANCORP
Allocation of the Allowance for Loan and Lease Losses
(Dollars in Thousands, Unaudited)
June 30 March 31 December 31 September 30
2017 2017 2016 2016
Commercial $ 7,617 $7,600 $6,579 $6,222
Real estate 1,750 1,697 2,090 1,947
Mortgage warehousing 1,090 1,042 1,254 1,337
Consumer 4,570 4,715 4,914 5,018
Total $ 15,027 $15,054 $14,837 $14,524


Net Charge-offs (Recoveries)
(Dollars in Thousands, Unaudited)
June 30 March 31 December 31 September 30 June 30
2017 2017 2016 2016 2016
Commercial $ 24 $(134) $49 $(5) $101
Real estate (8) 38 64 - (31)
Mortgage warehousing - - - - -
Consumer 341 209 197 162 172
Total $ 357 $113 $310 $157 $242

Total Non-performing Loans
(Dollars in Thousands, Unaudited)
June 30 March 31 December 31 September 30 June 30
2017 2017 2016 2016 2016
Commercial $ 2,794 $1,530 $2,432 $5,419 $4,330
Real estate 5,285 5,057 5,022 4,251 5,659
Mortgage warehousing - - - - -
Consumer 3,484 3,247 3,229 3,108 3,183
Total $ 11,563 $9,834 $10,683 $12,778 $13,172


Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
June 30 March 31 December 31 September 30 June 30
2017 2017 2016 2016 2016
Commercial $ 409 $542 $542 $542 $542
Real estate 1,805 2,413 2,648 3,182 2,925
Mortgage warehousing - - - - -
Consumer 21 20 26 67 69
Total $ 2,235 $2,975 $3,216 $3,791 $3,536

HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
Three Months Ended Three Months Ended
June 30, 2017 June 30, 2016
Average Average Average Average
BalanceInterest Rate Balance InterestRate
ASSETS
Interest-earning assets
Federal funds sold$1,728$6 1.39% $3,309$40.49%
Interest-earning deposits 27,677 83 1.20% 28,045 590.85%
Investment securities - taxable 423,815 2,155 2.04% 469,925 2,5982.22%
Investment securities - non-taxable (1) 290,494 1,766 3.40% 182,886 1,1953.70%
Loans receivable (2)(3) 2,199,913 26,795 4.94% 1,787,189 20,7944.69%
Total interest-earning assets (1) 2,943,627 30,805 4.33% 2,471,354 24,6504.10%
Non-interest-earning assets
Cash and due from banks 42,331 35,435
Allowance for loan losses (15,131) (14,350)
Other assets 279,024 223,258
$3,249,851 $2,715,697
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits$1,980,025$1,721 0.35% $1,625,024$1,5570.39%
Borrowings 359,462 1,338 1.49% 400,585 1,7211.73%
Subordinated debentures 36,340 548 6.05% 32,854 5036.16%
Total interest-bearing liabilities 2,375,827 3,607 0.61% 2,058,463 3,7810.74%
Non-interest-bearing liabilities
Demand deposits 499,446 364,822
Accrued interest payable and
other liabilities 19,143 22,574
Stockholders' equity 355,435 269,838
$3,249,851 $2,715,697
Net interest income/spread $27,198 3.73% $20,8693.36%
Net interest income as a percent
of average interest earning assets (1) 3.84% 3.48%
(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.

HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016
Average Average Average Average
BalanceInterestRate BalanceInterestRate
ASSETS
Interest-earning assets
Federal funds sold$ 2,377$110.93% $2,853 $ 40.28%
Interest-earning deposits 26,220 1521.17% 24,300 1090.90%
Investment securities - taxable 411,417 4,4872.20% 464,209 5,0922.21%
Investment securities - non-taxable (1) 280,563 3,4033.40% 181,660 2,4323.64%
Loans receivable (2)(3) 2,150,307 51,5864.85% 1,733,446 40,5414.71%
Total interest-earning assets (1) 2,870,884 59,6394.29% 2,406,468 48,1784.10%
Non-interest-earning assets
Cash and due from banks 41,788 34,246
Allowance for loan losses (15,035) (14,350)
Other assets 279,497 217,797
$3,177,134 $2,644,161
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits$1,970,235$3,4740.36% $1,571,579 $ 3,0480.39%
Borrowings 305,116 2,2751.50% 401,594 3,4801.74%
Subordinated debentures 36,315 1,1246.24% 32,653 1,0076.20%
Total interest-bearing liabilities 2,311,666 6,8730.60% 2,005,826 7,5350.76%
Non-interest-bearing liabilities
Demand deposits 495,262 350,157
Accrued interest payable and
other liabilities 19,901 22,465
Stockholders' equity 350,305 265,713
$3,177,134 $2,644,161
Net interest income/spread $52,7663.69% $ 40,6433.34%
Net interest income as a percent
of average interest earning assets (1) 3.81% 3.47%
(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.


HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
June 30
December 31
20172016
(Unaudited)
Assets
Cash and due from banks$ 65,993 $70,832
Investment securities, available for sale 505,051 439,831
Investment securities, held to maturity (fair value of $203,542 and $194,086) 199,474 193,194
Loans held for sale 3,730 8,087
Loans, net of allowance for loan losses of $15,027 and $14,837 2,252,697 2,121,149
Premises and equipment, net 65,358 66,357
Federal Reserve and Federal Home Loan Bank stock 14,945 23,932
Goodwill 77,644 76,941
Other intangible assets 9,082 9,366
Interest receivable 13,316 12,713
Cash value of life insurance 75,006 74,134
Other assets 38,882 44,620
Total assets$ 3,321,178 $3,141,156
Liabilities
Deposits
Non-interest bearing$ 508,305 $496,248
Interest bearing 1,910,478 1,974,962
Total deposits 2,418,783 2,471,210
Borrowings 485,304 267,489
Subordinated debentures 37,562 37,456
Interest payable 559 472
Other liabilities 21,711 23,674
Total liabilities 2,963,919 2,800,301
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, Authorized, 1,000,000 shares
Issued 0 and 0 shares - -
Common stock, no par value
Authorized 66,000,000 shares(1)
Issued, 22,195,715 and 22,192,530 shares(1)
Outstanding, 22,176,465 and 22,171,596 shares(1) - -
Additional paid-in capital 182,552 182,326
Retained earnings 176,123 164,173
Accumulated other comprehensive loss (1,416) (5,644)
Total stockholders’ equity 357,259 340,855
Total liabilities and stockholders’ equity$ 3,321,178 $3,141,156
(1) Adjusted for 3:2 stock split on November 14, 2016


HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)
Three Months EndedSix Months Ended
June 30June 30
2017 2016 2017 2016
(Unaudited)
(Unaudited)(Unaudited)(Unaudited)
Interest Income
Loans receivable$ 26,795 $20,794 $ 51,586 $ 40,541
Investment securities
Taxable 2,244 2,661 4,650 5,205
Tax exempt 1,766 1,195 3,403 2,432
Total interest income 30,805 24,650 59,639 48,178
Interest Expense
Deposits 1,721 1,557 3,474 3,048
Borrowed funds 1,338 1,721 2,275 3,480
Subordinated debentures 548 503 1,124 1,007
Total interest expense 3,607 3,781 6,873 7,535
Net Interest Income 27,198 20,869 52,766 40,643
Provision for loan losses 330 232 660 764
Net Interest Income after Provision for Loan Losses 26,868 20,637 52,106 39,879
Non-interest Income
Service charges on deposit accounts 1,566 1,417 2,966 2,705
Wire transfer fees 178 175 328 296
Interchange fees 1,382 978 2,558 1,909
Fiduciary activities 1,943 1,465 3,865 3,100
Gain on sale of investment securities (includes $(3) and $767 for the three
months ended June 30, 2017 and 2016, respectively and $32 and $875 for the six
months ended June 30, 2017 and 2016, respectively, related to accumulated other
comprehensive earnings reclassifications)
(3) 767 32 875
Gain on sale of mortgage loans 2,054 3,529 3,968 5,643
Mortgage servicing income net of impairment 359 500 806 947
Increase in cash value of bank owned life insurance 408 351 872 696
Other income 325 84 376 482
Total non-interest income 8,212 9,266 15,771 16,653
Non-interest Expense
Salaries and employee benefits 12,466 10,317 24,175 20,382
Net occupancy expenses 2,196 1,901 4,648 3,837
Data processing 1,502 1,134 2,809 2,239
Professional fees 535 747 1,148 1,578
Outside services and consultants 1,265 2,198 2,487 3,297
Loan expense 1,250 1,409 2,357 2,604
FDIC insurance expense 243 409 506 814
Other losses 78 136 128 403
Other expense 2,953 2,701 5,751 5,068
Total non-interest expense 22,488 20,952 44,009 40,222
Income Before Income Tax 12,592 8,951 23,868 16,310
Income tax expense (includes $(1) and $268 for the three months ended
June 30, 2017 and 2016, respectively, and $11 and $306 for the six months ended June 30, 2017 and 2016, respectively related to income tax expense from
reclassification items) 3,520 2,625 6,572 4,603
Net Income 9,072 6,326 17,296 11,707
Preferred stock dividend - - - (42)
Net Income Available to Common Shareholders$ 9,072 $ 6,326 $ 17,296 $ 11,665
Basic Earnings Per Share$ 0.41 $ 0.35 $ 0.78 $ 0.65
Diluted Earnings Per Share 0.41 0.35 0.77 0.64


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

Source:Horizon Bancorp