HBNC Horizon Bancorp Inc

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

SUMMARY:

• Net income for the year ended December 31, 2016 was $23.9 million or $1.19 diluted earnings per share compared to $20.5 million or $1.26 diluted earnings per share for the year ended December 31, 2015.
• Excluding acquisition-related expenses, gain on sale of investment securities, the death benefit on bank owned life insurance, prepayment penalties on borrowings and purchase accounting adjustments, net income for the year ended December 31, 2016 increased 34.5% to $29.2 million or $1.45 diluted earnings per share compared to $21.7 million or $1.33 diluted earnings per share for the year ended December 31, 2015.
• Total loans increased 22.0% or $387.0 million during the year ended December 31, 2016.
• Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased 4.3% or $69.6 million during the year ended December 31, 2016.
• Net interest income for the year ended December 31, 2016 increased 15.1% or $11.3 million compared to the year ended December 31, 2015.
• Net interest margin was 2.92% for the fourth quarter of 2016 compared to 3.37% for the prior quarter and 3.50% for the same period in 2015.
• Net interest margin, excluding the impact of the prepayment penalties on borrowings and purchase accounting adjustments (“core net interest margin”), was 3.45% for the fourth quarter of 2016 compared to 3.31% for the prior quarter and 3.38% for the same period in 2015.
• Non-interest income for the year ended December 31, 2016 increased 24.9% or $7.6 million compared to the year ended December 31, 2015.
• Horizon’s tangible book value per share rose to $11.48 at December 31, 2016, compared to $11.02 at December 31, 2015.
• Horizon opened its first loan and deposit production office in Grand Rapids, Michigan during the fourth quarter of 2016 led by David Quade, Horizon’s Grand Rapids Market President. In February 2017, we anticipate moving into our permanent downtown location with a total of 10 professionals where we will provide our full array of products and services including retail, commercial, private banking, treasury management, wealth management and mortgage services to customers throughout the Grand Rapids region.
• During the fourth quarter of 2016, Horizon began a series of balance sheet restructuring transactions to improve its overall financial position, including an increase in net interest margin, return on average assets and return on average equity. The transactions included the prepayment of $106.0 million in high fixed-rate borrowings funded from the sale of available-for-sale investment securities totaling $168.0 million. Horizon realized a loss of $4.8 million from the early redemption of the debt which was partially offset by net gains on the sale of the investment securities.
• On November 7, 2016, Horizon completed the acquisition of CNB Bancorp and its wholly-owned subsidiary, The Central National Bank and Trust Company, headquartered in Attica, Indiana and executed the system conversion on December 3, 2016.
• On December 23, 2016, the Office of the Comptroller of the Currency approved Horizon’s purchase and assumption of certain assets and liabilities of a single branch of First Farmers Bank & Trust Co. located in Bargersville, Indiana. This transaction is expected to be completed on February 3, 2017.

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

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

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

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

Income Statement Highlights

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

  Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share (Dollars in Thousands Except per Share Data)         Three Months Ended Twelve Months Ended December 31 December 31

Non-GAAP Reconciliation of Net Income

2016   2015   2016   2015 (Unaudited)   (Unaudited) Net income as reported $ 5,603 $ 6,175 $ 23,912 $ 20,549 Merger expenses 1,354 525 6,827 4,889 Tax effect   (416 )     (182 )     (1,998 )     (1,585 ) Net income excluding merger expenses 6,541 6,518 28,741 23,853   Gain on sale of investment securities (961 ) (65 ) (1,836 ) (189 ) Tax effect   336       23       643       66   Net income excluding gain on sale of investment securities 5,916 6,476 27,548 23,730   Death benefit on bank owned life insurance ("BOLI") - - - (145 ) Tax effect   -       -       -       51   Net income excluding death benefit on BOLI 5,916 6,476 27,548 23,636   Prepayment penalties on borrowings 4,839 - 4,839 - Tax effect   (1,694 )     -       (1,694 )     -   Net income excluding prepayment penalties on borrowings 9,061 6,476 30,693 23,636   Acquisition-related purchase accounting adjustments ("PAUs") (900 ) (695 ) (2,304 ) (2,977 ) Tax effect   315       243       807       1,042   Net income excluding PAUs $ 8,476     $ 6,024     $ 29,196     $ 21,701    

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported $ 0.25 $ 0.34 $ 1.19 $ 1.26 Merger expenses 0.06 0.03 0.34 0.30 Tax effect   (0.02 )     (0.01 )     (0.10 )     (0.10 ) Diluted earnings per share excluding merger expenses 0.29 0.36 1.43 1.46   Gain on sale of investment securities (0.04 ) (0.00 ) (0.09 ) (0.01 ) Tax effect   0.02       0.00       0.03       0.00   Net income excluding gain on sale of investment securities 0.27 0.36 1.37 1.46   Death benefit on BOLI - - - (0.01 ) Tax effect   -       -       -       0.00   Net income excluding death benefit on BOLI 0.27 0.36 1.37 1.45   Prepayment penalties on borrowings 0.22 - 0.24 - Tax effect   (0.08 )     -       (0.08 )     -   Net income excluding prepayment penalties on borrowings 0.41 0.36 1.53 1.45   Acquisition-related PAUs (0.04 ) (0.04 ) (0.11 ) (0.18 ) Tax effect   0.01       0.01       0.03       0.06   Diluted earnings per share excluding PAUs $ 0.38     $ 0.33     $ 1.45     $ 1.33    

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

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

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

          Non-GAAP Reconciliation of Net Interest Margin (Dollars in Thousands, Unaudited)   Three Months Ended Twelve Months Ended December 31 September 30 December 31 December 31

Net Interest Margin As Reported

2016   2016   2015   2016   2015 Net interest income $ 20,939 $ 24,410 $ 20,222 $ 85,992 $ 74,734 Average interest-earning assets 2,932,145 2,957,944 2,369,301 2,683,383 2,166,006 Net interest income as a percent of average interest- earning assets ("Net Interest Margin") 2.92 % 3.37 % 3.50 % 3.29 % 3.56 %  

Impact of Prepayment Penalties on Borrowings

Interest expense from prepayment penalties on borrowings $ 4,839 $ - $ - $ 4,839 $ -  

Impact of Acquisitions

Interest income from acquisition-related purchase accounting adjustments $ (900 ) $ (459 ) $ (695 ) $ (2,304 ) $ (2,977 )  

Excluding Impact of Prepayment Penalties and Acquisitions

Net interest income $ 24,878 $ 23,951 $ 19,527 $ 88,527 $ 71,757 Average interest-earning assets 2,932,145 2,957,944 2,369,301 2,683,383 2,166,006 Core Net Interest Margin 3.45 % 3.31 % 3.38 % 3.38 % 3.42 %  

Lending Activity

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

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

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

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

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

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

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

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

Expense Management

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

Total non-interest expense was $15.2 million higher for the year ended December 31, 2016 compared to the same period of 2015. The increase in non-interest expense was due to an increase in salaries expense of $5.6 million, employee benefits of $664,000, net occupancy expenses of $1.9 million, data processing expense of $1.1 million, professional fees of $682,000, loan expense of $203,000, other losses of $252,000 and other expense of $2.6 million due to overall company growth. Outside services and consultants expense increased $2.1 million primarily due to the expense associated with the Kosciusko, LaPorte and CNB Bancorp acquisitions. Non-interest expense for the year ended December 31, 2016 included $6.8 million of one-time merger-related expenses due to the Kosciusko, LaPorte Bancorp and CNB Bancorp acquisitions compared to $4.9 million in one-time merger-related expenses in the same period of 2015 due to the Peoples Bancorp acquisition.

Use of Non-GAAP Financial Measures

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

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

About Horizon

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

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.

          HORIZON BANCORP Financial Highlights (Dollars in thousands except share and per share data and ratios, Unaudited)   December 31 September 30 June 30 March 31 December 31 2016   2016   2016   2016   2015 Balance sheet: Total assets $ 3,141,156 $ 3,325,650 $ 2,918,080 $ 2,627,918 $ 2,652,401 Investment securities 633,025 744,240 628,935 642,767 632,611 Commercial loans 1,069,957 1,047,450 874,580 797,754 804,995 Mortgage warehouse loans 135,727 226,876 205,699 119,876 144,692 Residential mortgage loans 531,874 530,162 493,626 442,806 437,144 Consumer loans 398,428 386,031 363,920 359,636 362,300 Earning assets 2,801,030 2,963,005 2,591,208 2,379,830 2,403,482 Non-interest bearing deposit accounts 496,248 479,771 397,412 343,025 335,955 Interest bearing transaction accounts 1,499,120 1,367,285 1,213,659 1,118,617 1,177,651 Time deposits 475,842 489,106 471,190 416,837 366,547 Borrowings 267,489 569,908 492,883 430,507 449,347 Subordinated debentures 37,456 37,418 32,874 32,836 32,797 Common stockholders' equity 340,855 345,736 281,002 261,417 254,332 Total stockholders’ equity 340,855 345,736 281,002 261,417 266,832   Income statement: Three months ended Net interest income $ 20,939 $ 24,410 $ 20,869 $ 19,774 $ 20,222 Provision for loan losses 623 455 232 532 342 Non-interest income 10,185 10,056 9,869 7,864 7,750 Non-interest expenses 23,289 24,820 21,555 19,747 19,240 Income tax expense   1,609       2,589       2,625       1,978       2,215   Net income 5,603 6,602 6,326 5,381 6,175 Preferred stock dividend   -       -       -       (42 )     (31 ) Net income available to common shareholders $ 5,603     $ 6,602     $ 6,326     $ 5,339     $ 6,144     Per share data: Basic earnings per share $ 0.25 $ 0.31 $ 0.35 $ 0.30 $ 0.34 Diluted earnings per share 0.25 0.30 0.34 0.30 0.34 Cash dividends declared per common share 0.11 0.10 0.10 0.10 0.10 Book value per common share 15.37 15.61 14.90 14.54 14.20 Tangible book value per common share 11.48 11.83 11.45 11.39 11.02 Market value - high 28.41 20.01 16.76 18.59 18.77 Market value - low $ 17.84 $ 16.61 $ 15.87 $ 15.41 $ 15.72 Weighted average shares outstanding - Basic 22,155,549 21,538,752 18,268,880 17,924,124 17,905,871 Weighted average shares outstanding - Diluted 22,283,722 21,651,953 18,364,167 18,012,726 18,020,615   Key ratios: Return on average assets 0.69 % 0.80 % 0.94 % 0.83 % 0.94 % Return on average common stockholders' equity 6.49 7.88 9.43 8.26 9.53 Net interest margin 2.92 3.37 3.48 3.45 3.50 Loan loss reserve to total loans 0.69 0.66 0.73 0.83 0.83 Non-performing loans to loans 0.50 0.58 0.68 0.87 0.95 Average equity to average assets 10.59 10.18 9.94 10.16 10.32 Bank only capital ratios: Tier 1 capital to average assets 10.14 9.65 9.39 8.98 8.77 Tier 1 capital to risk weighted assets 13.77 12.73 12.51 12.33 11.80 Total capital to risk weighted assets 14.41 13.34 13.23 13.10 12.57   Loan data: Substandard loans $ 30,361 $ 33,914 $ 28,629 $ 23,600 $ 25,127 30 to 89 days delinquent 6,315 3,821 2,887 2,149 5,011   90 days and greater delinquent - accruing interest $ 241 $ 59 $ 24 $ 1 $ 28 Trouble debt restructures - accruing interest 1,492 1,523 1,256 1,231 1,218 Trouble debt restructures - non-accrual 1,014 1,164 1,466 2,857 3,172 Non-accrual loans   7,936       10,091       10,426       10,895       12,262   Total non-performing loans $ 10,683     $ 12,837     $ 13,172     $ 14,984     $ 16,680       HORIZON BANCORP Financial Highlights (Dollars in thousands except share and per share data and ratios, Unaudited)   December 31 December 31 2016   2015 Balance sheet: Total assets $ 3,141,156 $ 2,652,401 Investment securities 633,025 632,611 Commercial loans 1,069,957 804,995 Mortgage warehouse loans 135,727 144,692 Residential mortgage loans 531,874 437,144 Consumer loans 398,428 362,300 Earning assets 2,801,030 2,403,482 Non-interest bearing deposit accounts 496,248 335,955 Interest bearing transaction accounts 1,499,120 1,177,651 Time deposits 475,842 366,547 Borrowings 267,489 449,347 Subordinated debentures 37,456 32,797 Common stockholders' equity 340,855 254,332 Total stockholders’ equity 340,855 266,832   Income statement: Twelve Months Ended Net interest income $ 85,992 $ 74,734 Provision for loan losses 1,842 3,162 Non-interest income 37,974 30,402 Non-interest expenses 89,411 74,193 Income tax expense   8,801       7,232   Net income 23,912 20,549 Preferred stock dividend   (42 )     (125 ) Net income available to common shareholders $ 23,870     $ 20,424     Per share data: Basic earnings per share $ 1.19 $ 1.94 Diluted earnings per share 1.19 1.89 Cash dividends declared per common share 0.41 0.39 Book value per common share 15.37 14.20 Tangible book value per common share 11.48 11.02 Market value - high 28.41 18.77 Market value - low $ 15.41 $ 14.92 Weighted average shares outstanding - Basic 19,987,728 15,765,444 Weighted average shares outstanding - Diluted 20,082,410 16,197,312   Key ratios: Return on average assets 0.81 % 0.87 % Return on average common stockholders' equity 8.23 9.87 Net interest margin 3.29 3.56 Loan loss reserve to total loans 0.69 0.83 Non-performing loans to loans 0.50 0.95 Average equity to average assets 10.22 9.30 Bank only capital ratios: Tier 1 capital to average assets 10.14 8.69 Tier 1 capital to risk weighted assets 13.77 11.89 Total capital to risk weighted assets 14.41 12.68   Loan data: Substandard loans $ 30,361 $ 25,233 30 to 89 days delinquent 6,315 5,012   90 days and greater delinquent - accruing interest $ 241 $ 28 Trouble debt restructures - accruing interest 1,492 1,218 Trouble debt restructures - non-accrual 1,014 3,172 Non-accrual loans   7,936       12,262   Total non-performing loans $ 10,683     $ 16,680             HORIZON BANCORP Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)

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

(Dollars in Thousands, Unaudited)

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

(Dollars in Thousands, Unaudited)

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

(Dollars in Thousands, Unaudited)

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

(Dollar Amounts in Thousands, Unaudited)

  Three Months Ended Three Months Ended December 31, 2016 December 31, 2015 Average     Average Average     Average Balance   Interest   Rate Balance   Interest   Rate   ASSETS Interest-earning assets Federal funds sold $ 27,034 $ 42 0.62 % $ 4,285 $ 2 0.19 % Interest-earning deposits 33,901 73 0.86 % 20,265 5 0.10 % Investment securities - taxable 496,794 2,221 1.78 % 452,628 2,337 2.05 % Investment securities - non-taxable (1) 219,937 1,338 3.36 % 174,768 1,213 4.17 % Loans receivable (2)(3)   2,154,479       25,715 4.76 %   1,717,355       20,233 4.69 % Total interest-earning assets (1) 2,932,145 29,389 4.07 % 2,369,301 23,790 4.10 %   Non-interest-earning assets Cash and due from banks 40,788 33,621 Allowance for loan losses (14,593 ) (15,739 ) Other assets   283,410     213,386     $ 3,241,750   $ 2,600,569     LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities Interest-bearing deposits $ 1,949,549 $ 1,693 0.35 % $ 1,604,394 $ 1,524 0.38 % Borrowings 382,177 6,199 6.45 % 324,496 1,539 1.88 % Subordinated debentures   38,084       558 5.83 %   32,773       505 6.11 % Total interest-bearing liabilities 2,369,810 8,450 1.42 % 1,961,663 3,568 0.72 %   Non-interest-bearing liabilities Demand deposits 504,274 349,127 Accrued interest payable and other liabilities 24,322 21,468 Stockholders' equity   343,344     268,311     $ 3,241,750   $ 2,600,569     Net interest income/spread $ 20,939 2.65 % $ 20,222 3.38 %   Net interest income as a percent of average interest earning assets (1) 2.92 % 3.50 % (1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis. (2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate. (3) Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.         HORIZON BANCORP AND SUBSIDIARIES Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

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

(1)

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

(2)

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

(3)

Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.     HORIZON BANCORP AND SUBSIDIARIES Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

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

(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20170125006245/en/

Horizon BancorpMark E. SecorChief Financial Officer(219) 873-2611Fax: (219) 874-9280