Filed by Horizon Bancorp
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Lafayette Community Bancorp
Commission File No. 333-219289

Filed by Horizon Bancorp
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Wolverine Bancorp, Inc.
Commission File No. 001-35034
 
 


 
Contact: Mark E. Secor
Chief Financial Officer
Phone: (219) 873-2611
Fax: (219) 874-9280
Date: July 27, 2017

FOR IMMEDIATE RELEASE

Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

Michigan City, Indiana (NASDAQ GS: 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.


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Pg. 2 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

·
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.”


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Pg. 3 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings
 
Loan Growth by Type, Excluding Acquired Loans
Twelve 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.”


 




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Pg. 4 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

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.”


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Pg. 5 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

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.


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Pg. 6 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings
 
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.


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Pg. 7 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

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.


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Pg. 8 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

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
 


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Pg. 9 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings

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 press release 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.
 



Pg. 10 cont. Horizon Bancorp Announces Record Quarterly and Six-Month Earnings
 
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 filings 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.

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






#  #  #



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

   
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
 
11



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
 



12


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
 
   
2017
   
2017
   
2016
   
2016
   
2016
 
Commercial
 
$
7,617
   
$
7,600
   
$
6,579
   
$
6,222
   
$
6,051
 
Real estate
   
1,750
     
1,697
     
2,090
     
1,947
     
2,102
 
Mortgage warehousing
   
1,090
     
1,042
     
1,254
     
1,337
     
1,080
 
Consumer
   
4,570
     
4,715
     
4,914
     
5,018
     
4,993
 
Total
 
$
15,027
   
$
15,054
   
$
14,837
   
$
14,524
   
$
14,226
 

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

   
Three months ended
 
   
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
 



13


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
 
   
Balance
   
Interest
   
Rate
   
Balance
   
Interest
   
Rate
 
                                     
ASSETS
                                   
Interest-earning assets
                                   
Federal funds sold
 
$
1,728
   
$
6
     
1.39
%
 
$
3,309
   
$
4
     
0.49
%
Interest-earning deposits
   
27,677
     
83
     
1.20
%
   
28,045
     
59
     
0.85
%
Investment securities - taxable
   
423,815
     
2,155
     
2.04
%
   
469,925
     
2,598
     
2.22
%
Investment securities - non-taxable (1)
   
290,494
     
1,766
     
3.40
%
   
182,886
     
1,195
     
3.70
%
Loans receivable (2)(3)
   
2,199,913
     
26,795
     
4.94
%
   
1,787,189
     
20,794
     
4.69
%
Total interest-earning assets (1)
   
2,943,627
     
30,805
     
4.33
%
   
2,471,354
     
24,650
     
4.10
%
                                                 
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
   
$
1,557
     
0.39
%
Borrowings
   
359,462
     
1,338
     
1.49
%
   
400,585
     
1,721
     
1.73
%
Subordinated debentures
   
36,340
     
548
     
6.05
%
   
32,854
     
503
     
6.16
%
Total interest-bearing liabilities
   
2,375,827
     
3,607
     
0.61
%
   
2,058,463
     
3,781
     
0.74
%
                                                 
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
%
         
$
20,869
     
3.36
%
                                                 
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.

14


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
 
   
Balance
   
Interest
   
Rate
   
Balance
   
Interest
   
Rate
 
ASSETS
                                   
Interest-earning assets
                                   
Federal funds sold
 
$
2,377
   
$
11
     
0.93
%
 
$
2,853
   
$
4
     
0.28
%
Interest-earning deposits
   
26,220
     
152
     
1.17
%
   
24,300
     
109
     
0.90
%
Investment securities - taxable
   
411,417
     
4,487
     
2.20
%
   
464,209
     
5,092
     
2.21
%
Investment securities - non-taxable (1)
   
280,563
     
3,403
     
3.40
%
   
181,660
     
2,432
     
3.64
%
Loans receivable (2)(3)
   
2,150,307
     
51,586
     
4.85
%
   
1,733,446
     
40,541
     
4.71
%
Total interest-earning assets (1)
   
2,870,884
     
59,639
     
4.29
%
   
2,406,468
     
48,178
     
4.10
%
                                                 
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
   
$
3,474
     
0.36
%
 
$
1,571,579
   
$
3,048
     
0.39
%
Borrowings
   
305,116
     
2,275
     
1.50
%
   
401,594
     
3,480
     
1.74
%
Subordinated debentures
   
36,315
     
1,124
     
6.24
%
   
32,653
     
1,007
     
6.20
%
Total interest-bearing liabilities
   
2,311,666
     
6,873
     
0.60
%
   
2,005,826
     
7,535
     
0.76
%
                                                 
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
         
$
52,766
     
3.69
%
         
$
40,643
     
3.34
%
                                                 
 
                                               
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.

15


HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)

   
June 30
   
December 31
 
   
2017
   
2016
 
   
(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
               


16


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


   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 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
 
                                 
Gains (losses) 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 (benefit) 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
 


17