Access Horizon Press Releases

Michigan City, Indiana (NASDAQ GM: HBNC) Horizon Bancorp today announced its unaudited financial results for the three and twelve months ended December 31, 2009.

· Horizon's net income for the year ending December 31, 2009 was $9.14 million, which exceeded the net income from 2008 of $8.97 million and represents Horizon's tenth consecutive year of record earnings.

· Horizon's fourth quarter 2009 net income was $2.08 million or $0.53 diluted earnings per share.

· Net interest margin for the fourth quarter increased compared to the prior two quarters.

· Horizon continued to experience steady residential mortgage loan volume through the fourth quarter.

· Horizon's quarterly provision to the allowance for loan loss reserve increased by approximately $300,000 from the third quarter of 2009 increasing the ratio of allowance for loan losses to total loans to 1.80%.

· Horizon's net loans charged off during the fourth quarter were less than the net loans charged off in each of the previous three quarters of 2009.

· Horizon's balance of Other Real Estate Owned of $1.7 million at December 31, 2009 was at its lowest level compared to the balance at the end of the previous three quarters in 2009.

· Horizon's non-performing loans increased by $672,000 from September 30, 2009 to December 31, 2009.

· Horizon's non-performing loans to total loans ratio as of December 31, 2009 was 1.92%, which compares favorably to National and State of Indiana peer averages[1] of 4.48% and 2.71% of total loans as of September 30, 2009.

· Horizon's capital ratios continue to be above the regulatory standards for well-capitalized banks.

· At the end of the fourth quarter of 2009, Horizon announced the purchase of substantially all of the banking-related assets and assumption of all the deposits and certain other liabilities of American Trust & Savings Bank located in Whiting, Indiana.

Craig M. Dwight, Chief Executive Officer of Horizon Bancorp stated, "We are extremely pleased with Horizon's performance in 2009, especially given the current economic environment, the increase in credit costs and the increase in FDIC insurance premiums." Mr. Dwight further commented, "Horizon's talented team was able to achieve record earnings for the tenth consecutive year, due to hard work, investing our resources in counter cyclical business lines and preparing for the future." In addition, Mr. Dwight stated, "The future looks very promising for well run and profitable banks. Horizon is well positioned to capitalize on these opportunities." In conclusion, Mr. Dwight stated, "Horizon is safe, strong and still growing."

Net income for the fourth quarter 2009 was $2.08 million or $.53 diluted earnings per share. This compares to $2.12 million or $.64 diluted earnings per share for the same quarter of the prior year. Net income for the twelve months ended December 31, 2009 was $9.14 million or $2.37 diluted earnings per share. This compares to $8.97 million or $2.75 diluted earnings per share for the same period of the prior year.

Diluted earnings per share were reduced by $.11 for the three months and $.43 for the twelve months ending December 31, 2009 resulting from the preferred stock dividends and the accretion of the discount on the preferred stock. The preferred stock was issued late in the fourth quarter 2008 and therefore did not significantly impact diluted earnings per share for the three or twelve month periods ending December 31, 2008.

Net interest income increased $1.7 million for the three months and $7.4 million for the twelve months ending December 31, 2009 compared to the same prior year periods. This was primarily due to an increase in interest earning assets and a decrease in the cost of funds. The net interest margin increased to 3.66% for the twelve months ending December 31, 2009 compared to 3.45% in the prior year for the same period and the fourth quarter net interest margin increased to 3.76% from 3.65% in the prior year.

The improvement in year-to-date net interest income over the same period of the prior year is a result of Horizon's ability to reduce the cost of interest bearing liabilities more than the reduction in the yields experienced on the interest earning assets. In addition, interest rate floors on over 50.0% of the Company's adjustable rate loans have helped in maintaining the yield on interest earning assets.

The provision for loan losses was $3.7 million for three months ending December 31, 2009 compared to $2.2 million for the same period the prior year. The fourth quarter provision is slightly increased from the $3.2 million, $3.3 million, and $3.4 million in reserves taken in the first, second, and third quarters of 2009. Consumer loan charge-offs continue to require quarterly provisions for loan losses but appear to be stabilizing as the amount of consumer charge-offs have been decreasing over the last three quarters. However, the increase in non-performing loans required additional provision expense for loan losses as specific reserves were identified for these loans.

Non-performing loans at December 31, 2009 totaled $17.1 million which was 1.92% of total loans. This is an increase from a balance of $16.5 million on September 30, 2009, or 1.87% of total loans, and an increase from a balance of $7.9 million on December 31, 2008, which was 0.89% of total loans. Horizon's non-performing loan statistics, while having increased from the prior quarter, still compare favorably to National and State of Indiana¹ peer bank averages of 4.48% and 2.71% of total loans as of September 30, 2009.

The increase in non-performing loans over the past quarter is due to an increase of consumer installment borrowers under Chapter 13 bankruptcy repayment plans. The majority of consumer installment borrowers under Chapter 13 repayment plans are paying as agreed, but these loans remain on non-accrual status until six payments are made under the plan. Because of the time it takes for repayment plans to be approved and the six payments to be made, the level of non-performing consumer installment loans have increased as the level of charge-offs in the consumer portfolio has decreased. The increase in the Company's non-performing loans over the past year can be attributed to the slower economy and continued high local unemployment causing lower business revenues and increased consumer bankruptcies.

Non-accrual loans totaled $15.4 million on December 31, 2009, down slightly from $15.5 million on September 30, 2009, but up from $7.0 million on December 31, 2008. The decrease in the quarter ended December 31, 2009 was primarily due to a lower level of commercial loan non-accruals mostly offset by an increase in consumer loan non-accruals. Commercial loan non-accruals decreased from $9.2 million on September 30, 2009 to $8.1 million on December 31, 2009. During the quarter two loans to one borrower were written down by $535,000, one loan totaling $527,000 that was secured by 18 residential properties was transferred to Other Real Estate Owned ("OREO") and two loans totaling $441,000 were paid off. Only one commercial loan totaling $320,000 was added to non-accrual during the quarter. Non-accrual loans to restaurant operators totaled $2.6 million at December 31, 2009, the same as the previous quarter. Nonaccrual loans to home builders and land developers totaled $2.2 million on December 31, 2009, down from $2.7 million on September 30, 2009. Mortgage loans on non-accrual totaled $4.6 million at December 31, 2009, the same as at September 30, 2009. Consumer loans on non-accrual increased from $1.8 million to $2.7 million during the quarter primarily due to an increase in the number of consumer bankruptcy filings.

Loans 90 days delinquent but still accruing interest totaled $1.7 million on December 31, 2009, up from $856,000 on September 30, 2009, and $833,000 on December 31, 2008. One commercial loan totaling $925,000 secured by a commercial mixed-use building and one real estate development loan totaling $110,000 caused the increase. Subsequent to December 31, 2009, the $925,000 loan was brought current and renewed for a six-month term. Horizon's policy is to place loans over 90 days delinquent on non-accrual unless they are in the process of collection and a full recovery is expected.

OREO totaled $1.7 million on December 31, 2009, the same as September 30, 2009 and down from $2.9 million on December 31, 2008. During the current quarter, six properties with a book value of $563,000 (as of September 30, 2009) were sold. Also during the quarter, 19 properties with a book value of $540,000 (as of December 31, 2009) were transferred to OREO. On December 31, 2009, OREO was comprised of 32 properties. Of these, 31 totaling $1.6 million were residential, and the balance was commercial real estate. Repossessed property totaled $23,000 on December 31, 2009, down from $142,000 on September 30, 2009. Repossessed property consists primarily of vehicles.

No mortgage warehouse loans were non-performing or OREO as of December 31, 2009, September 30, 2009, or December 31, 2008.

The residential mortgage loan activity continued to be steady through the fourth quarter as evidenced by volumes higher than the prior year in both the conventional residential mortgage and mortgage warehouse business lines. Conventional residential mortgage refinancing activity has increased the gain on sale of loans by $3.1 million for the twelve months ending December 31, 2009 when compared to the same period in the prior year.

Salaries and benefits increased $2.5 million for the twelve months ended December 31, 2009 compared to the prior year primarily due to branch expansion, annual merit increases, and commissions paid to the mortgage loan division as the primary cost to originate residential mortgage loans is the commissions paid to mortgage originators.

FDIC expense for the twelve months ended December 31, 2009 totaled $2.1 million compared to the prior year of $546,000, an increase of $1.6 million. The increase in FDIC insurance premiums was due to higher assessment rates and a special assessment paid in 2009.

A gain on the sale of securities of $373,000 was realized during the fourth quarter as our analysis determined that market conditions provided the opportunity to add these gains to capital without a negative impact to long term earnings. In addition, the securities sold were experiencing a higher repayment speeds due to the low interest rate environment.

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On December 29, 2009 Horizon announced the signing of a definitive agreement to purchase substantially all of the banking-related assets and assume all deposits and certain other liabilities of American Trust & Savings Bank ("American") headquartered in Whiting, Indiana and its parent company Am Tru, Inc. ("Am Tru").

Under the terms of the agreement Horizon will purchase most of the banking-related assets of American (with an estimated value of approximately $110.0 million) and will assume all the deposits, federal home loan bank advances, and accrued interest payable in the approximate amount of $112.0 million. In addition, Horizon will pay a three percent premium on core deposits estimated to be $2.1 million and $500,000 in additional consideration. Horizon will not be purchasing approximately $12.0 million of loan participations owned by American or assuming any contingent liabilities. All values are approximate and based upon September 30, 2009 information and financial results. This transaction is subject to approval by the shareholders of American and Am Tru and bank regulators. This transaction is expected to close in the second quarter of 2010.

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

Statements in this press release which express "belief," "intention," "expectation," and similar expressions, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, such management. Such statements are inherently uncertain and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those contemplated by the forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

[1] National peer group: Consists of all insured commercial banks having assets between $1 Billion and $10 Billion as reported by the Uniform Bank Performance Report as of September 30, 2009. Indiana peer group: Consists of 18 publicly traded banks all headquartered in the State of Indiana as reported by the Uniform Bank Performance Reports as of September 30, 2009.

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