10-K405

TABLE OF CONTENTS

	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
EXHIBIT INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1999

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from

Commission file number 0-10792

HORIZON BANCORP

(Exact name of registrant as specified in its charter)

INDIANA	35-1562417
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)
515 Franklin St., Michigan City, Indiana	46360
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 219-879-0211

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None

Securities registered pursuant to Section 12(g) of the Act:

Common stock, no par value, 689,458 shares outstanding at February 29, 2000

(Title of class)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X    No    

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K    X  .

The aggregate market value of the registrant’s common stock held by nonaffiliates of the registrant, based on the bid price of such stock on February 29, 2000 was $18,302,000.

Documents Incorporated by Reference

	Part of Form 10-K into which
Document	portion of document is incorporated
Portions of the Registrant’s		I, II, VI
1999 annual report to shareholders
Portions of the Registrant’s		III
proxy statement to be filed for its May 4, 2000 annual meeting of shareholders

Except as provided in Part I, Part II and Part III, no part of the Registrant’s 1999 annual report to shareholders or proxy statement shall be deemed incorporated herein by this reference or to be filed with the Securities and Exchange Commission for any purposes.

2

PART I

ITEM 1. BUSINESS

(a) General Development of Business

Horizon Bancorp, a registered bank holding company organized under the laws of the State of Indiana on April 26, 1983, (Registrant), became the parent corporation and sole shareholder of The First Merchants National Bank of Michigan City pursuant to a plan of reorganization effective October 31, 1983. Prior to October 31, 1983, the Registrant conducted no business and had only nominal assets necessary to complete the plan of reorganization.

On October 1, 1986 the Registrant issued 399,340 shares of its common stock in exchange for all of the common stock of Citizens Michiana Financial Corporation in connection with mergers of such companies and their subsidiaries. Subsequent to the merger, the Registrant remains a one-bank holding company with a wholly-owned subsidiary, Horizon Bank, N.A. (Bank) and Bank’s wholly-owned subsidiaries, Horizon Trust & Investment Management, N.A. (Horizon Trust) and Horizon Insurance Services, Inc. (Horizon Insurance) and non-bank subsidiaries, HBC Insurance Group (Insurance Company) and The Loan Store, Inc., (Loan Store).

(b) Financial Information About Industry Segments

The Registrant, Bank and its subsidiaries are engaged in the commercial and retail banking business, investment management services, commercial and personal property and casualty insurance services, retail lending and insurance credit life sales. Refer to Item 1(e) and Item 6 for information pertaining to Registrant’s banking business.

(c) Narrative Description of Business

The Registrant’s business is that incident to its 100% ownership of Bank, Loan Store and the Insurance Company. The main source of funds for the Registrant is dividends from Bank. Bank was chartered as a national bank association in 1873 and has operated continuously since that time. Bank , whose deposits are insured by the Federal Deposit Insurance Corporation to the extent provided by law, is a full-service commercial bank offering a broad range of commercial and retail banking services, corporate and individual trust and agency services, commercial and personal property and casualty insurance services and other services incident to banking. Bank maintains four facilities located within LaPorte County, Indiana and four facilities located in Porter County, Indiana. At December 31, 1999, Bank had total assets of $525,996,000 and total deposits of $363,668,000. Aside from the stock of Bank, Insurance Company and Loan Store, the Registrant’s only other significant assets are cash and cash equivalents totaling approximately $462,000, investment securities totaling approximately $286,000 and taxes receivable of approximately $434,000 at December 31, 1999.

The business of the Registrant, Bank, Horizon Trust, Horizon Insurance, Insurance Company and Loan Store is not seasonal to any material degree.

No material part of the Registrant’s business is dependent upon a single or small group of customers, the loss of any one or more of whom would have a materially adverse effect on the business of the Registrant. Revenues from loans accounted for 69% in 1999, 70% in 1998, and 72% in 1997 of the total consolidated revenue. Revenues from investment securities accounted for 14% in 1999, 13% in 1998 and 14% in 1997 of total consolidated revenue.

The Registrant has no employees and there are approximately 197 full and part-time persons employed by Bank , Horizon Trust, Horizon Insurance and Loan Store as of December 31, 1999.

A high degree of competition exists in all major areas where the Registrant engages in business. Bank’s primary market consists of LaPorte County, Indiana, Porter County, Indiana, and Berrien County, Michigan. Bank competes with commercial banks located in the home county and contiguous counties in Indiana and Michigan, as well as with savings and loan associations, consumer finance companies, and credit unions located therein. To a more moderate extent, Bank competes with Chicago money center banks, mortgage banking companies, insurance companies, brokerage houses, other institutions engaged in money market financial services, and certain government agencies.

The Insurance Company offers credit life and accident and health insurance. The Loan Store, Inc. sold the majority of its assets in August 1999. The net income generated from the Insurance Company and the Loan Store are not significant to the overall operations of the Registrant.

3

I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL

Information required by this section of Securities Act Industry Guide 3 is presented in Management ‘s Discussion and Analysis Section of the Corporation’s 1999 Annual Report to Shareholders.

II. INVESTMENT PORTFOLIO

(A) The following is a schedule of the book value of investment securities available for sale and held to maturity at December 31, 1999, 1998 and 1997:

(in thousands)	1999			1998		1997
AVAILABLE FOR SALE
U.S. Treasury and U.S. Government agencies and corporations	$	30,428		$	12,568	$	3,965
State and Municipal		4,230
Mortgage-backed securities		23,565			41,167		39,985
Collateralized mortgage obligations		11,322
Other securities		315			4,289		4,020
Unrealized gain/(loss)		(1,980	)		561		668
Total investment securities available for sale	$	67,880		$	58,585	$	48,638
HELD TO MATURITY
U.S. Treasury and U.S. Government agencies and corporations				$	1,630	$	2,040
Obligations of states and political subdivisions					10,116		9,407
Total investment securities held to maturity	$	0		$	11,746	$	11,447
Toal investment securities available for sale and held to maturity	$	67,880		$	70,331	$	60,085

4

II. INVESTMENT PORTFOLIO (Continued)

(B) The following is a schedule of maturities of each category of debt securities and the related weighted average yield of such securities as of December 31, 1999:

						After one year					After five years
	One year or less					through five years					through ten years					After ten years
(Thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
AVAILABLE FOR SALE
U.S. Treasury and U.S. Government agency securities (1)	$	5,052		5.24	%	$	15,419		5.72	%	$	7,624		6.03	%	$	2,333		6.35	%
Obligations of states and political subdivisions		32		4.34	%		1,151		5.77	%		2,074		6.65	%		973		6.84	%
Mortgage-backed securities (2)							4,765		6.23	%		8,247		6.81	%		10,553		6.79	%
Collateralized mortgage obligations												8,051		5.98	%		3,271		7.11	%
Other securities		315		2.93	%
Total	$	5,399		5.10	%	$	21,335		5.84	%	$	25,996		6.31	%	$	17,130		6.79	%

(1)	Amortized cost is based on contractual maturity or call date where a call option exists
(2)	Maturity based upon maturity date

	The weighted average interest rates are based on coupon rates for securities purchased at par value and on effective interest rates considering amortization or accretion if the securities were purchased at a premium or discount. Yields are not presented on a tax-equivalent basis.
(C)	Excluding those holdings of the investment portfolio in U.S. Treasury securities and other agencies and corporations of the U.S. Government, there were no investments in securities of any one issuer which exceeded 10% of the consolidated stockholders’ equity of the Registrant at December 31, 1999.

III. LOAN PORTFOLIO

(A) Types of Loans — Total loans on the balance sheet are comprised of the following classifications at December 31 for the years indicated.

(Thousands)	1999		1998		1997		1996		1995
Commercial, financial, agricultural and commercial tax-exempt loans	$	89,361	$	76,682	$	73,177	$	75,460	$	66,125
Mortgage warehouse loans		85,542
Real estate mortgage loans		154,717		152,390		120,345		133,739		119,739
Installment loans		64,737		61,274		64,593		62,277		55,798
Total loans	$	394,357	$	290,346	$	258,115	$	271,476	$	241,662

5

III. LOAN PORTFOLIO (Continued)

(B) Maturities and Sensitivities of Loans to Changes in Interest Rates — The following is a schedule of maturities and sensitivities of loans to changes in interest rates, excluding real estate mortgage, mortgage warehousing and installment loans, as of December 31, 1999:

	One year or		One through		After five
Maturing or repricing (thousands)	less		five years		years		Total
Commercial, financial, agricultural and commercial tax-exempt loans	$	33,151	$	45,351	$	10,859	$	89,361

The following is a schedule of fixed-rate and variable-rate commercial, financial, agricultural and commercial tax-exempt loans due after one year. (Variable-rate loans are those loans with floating or adjustable interest rates.)

(Thousands)	Fixed Rate		Variable Rate
Total commercial, financial, agricultural, and commercial tax-exempt loans due after one year	$	29,741	$	26,469

(C) Risk Elements

1. Nonaccrual, Past Due and Restructured Loans — The following schedule summarizes nonaccrual, past due and restructured loans.

December 31 (thousands)		1999		1998		1997		1996		1995
(a) Loans accounted for on a nonaccrual basis		$	1,173	$	64	$	319	$	316	$	668
(b) Accruing loans which are contractually past due 90 days or more as to interest and principal payments			401		830		862		682		533
(c) Loans not included in (a) or (b) which are “Troubled Debt Restructuring’s” as defined by SFAS No. 15
	Totals	$	1,574	$	894	$	1,181	$	998	$	1,201

The increase in nonaccrual loans in 1999 is primarily due to the addition of 4 mortgage loans totaling $375 thousand, 8 consumer loans totaling $252 thousand and 7 commercial loans totaling $546 thousand.

6

III. LOAN PORTFOLIO (Continued)

(Thousands)
Gross interest income that would have been recorded on nonaccrual loans out standing as of Decmber 31, 1999 in the period if the loans had been current, in accordance with their original terms and had been outstanding throughout the period or since origination if held for part of the period	$	62
Interest income actually recorded on nonaccrual loans outstanding as of December 31, 1998 and included in net income for the period		0
Interest income not recognized during the period on nonaccrual loans outstanding as of December 31, 1999.	$	62

Discussion of Nonaccrual Policy

From time to time, the Bank obtains information which may lead management to believe that the collection of interest may be doubtful on a particular loan. In recognition of such, it is management’s policy to convert the loan from an “earning asset” to a nonaccruing loan. Further, it is management’s policy to place a commercial loan on a nonaccrual status when delinquent in excess of 90 days, unless the Loan Committee approves otherwise. All loans placed on nonaccrual status must be reviewed by the officer responsible for the loan, the senior lending officer and the loan review officer. The loan review officer monitors the loan portfolio for any potential problem loans.

2. Potential Problem Loans

There are no loans where there are serious doubts as to the ability of the borrower to comply with present loan repayment terms which are not included in Section 1 above at December 31, 1999.

3. Foreign outstandings

None

4. Loan Concentrations

As of December 31, 1999 there are no significant concentrations of loans exceeding 10% of total loans other than those disclosed in Item III above.

7

III. LOAN PORTFOLIO (Continued)

(D) Other Interest-Bearing Assets

There are no other interest-bearing assets as of December 31, 1999 which would be required to be disclosed under Item III C.1 or 2 if such assets were loans.

IV. SUMMARY OF LOAN LOSS EXPERIENCE

(A) The following is an analysis of the activity in the allowance for loan losses account:

(Thousands)		1999		1998		1997		1996		1995
LOANS
Loans outstanding at the end of the period (1)			394,357		290,346		258,115		271,476		241,662
Average loans outstanding during the period (1)			306,142		268,209		269,348		256,580		226,198
	(1) Net of unearned income and deferred loan fees

ALLOWANCE FOR LOAN LOSSES		1999			1998			1997			1996			1995
Balance at beginning of the period		$	2,787		$	2,702		$	2,435		$	2,777		$	2,555
Loans charged-off:
	Commercial and agricultural loans		(50	)		(39	)		(56	)		(11	)		(45	)
	Real estate mortgage loans		(42	)		(2	)		(1	)		(14	)		(17	)
	Installment loans		(1,135	)		(1,275	)		(1,384	)		(532	)		(231	)
Total loans charged-off			(1,227	)		(1,316	)		(1,441	)		(557	)		(293	)
Recoveries of loans previously charged-off:
	Commercial and agricultural loans		82			3			50			27			358
	Real estate mortgage loans					3									8
	Installment loans		281			395			333			122			149
Total loan recoveries			363			401			383			149			515
Net loans (charged-off)/recovered			(864	)		(915	)		(1,058	)		(408	)		222
Provision charged to operating expense			1,100			1,000			1,325			66
Provision charged to discontinued operations			250
Balance at the end of the period		$	3,273		$	2,787		$	2,702		$	2,435		$	2,777
Ratio of net (charge-offs)/recoveries to coverage loans outstanding for the period			(0.28	)%		(0.34	)%		(0.39	)%		(0.16	)%		0.10	%

The provision for loan losses in 1996 and 1995 were below normal because of low delinquency experienced in all loan portfolios at that time. Management expects charge-offs in all other portfolios to remain at the current levels.

8

IV. SUMMARY OF LOAN LOSS EXPERIENCE (Continued)

(B) The following schedule is a breakdown of the allowance for loan losses allocated by type of loan and the percentage of loans in each category to total loans.

Allocation of the Allowance for Loan Losses at December 31.(thousands)

	1999					1998					1997
	Allowance		% of Total			Allowance		% of Total			Allowance		% of Total
	Amount		Loans			Amount		Loans			Amount		Loans
Commercial, financial and agricultural	$	819		0.2	%	$	725		0.2	%	$	765		0.3	%
Real estate mortgage		149		0.0	%		61		0.0	%		82		0.0	%
Mortgage warehousing		812		0.2	%
Installment		1,345		0.3	%		1,800		0.6	%		1,290		0.5	%
Unallocated		148					201					565
Total	$	3,273		0.8	%	$	2,787		1.1	%	$	2,702		1.0	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

	1996					1995
	Allowance		% of Total			Allowance		% of Total
	Amount		Loans			Amount		Loans
Commercial, financial and agricultural	$	576		0.2	%	$	733		0.3	%
Real estate mortgage		102		0.0	%		139		0.0	%
Mortgage warehousing
Installment		1,075		0.4	%		655		0.3	%
Unallocated		682					1,250
Total	$	2,435		1.0	%	$	2,777		0.6	%

The increase in the reserve allocation for installment loans from 1995 to 1996 is primarily the result of the change in methodology for the historical portion of the allowance calculation. In 1996, the Bank began using the industry average charge-off rate instead of the Bank’s historical charge-off rate which was used in previous years. This change in methodolgy resulted in a $325 increase in the portion of the allowance allocated to installment loans in 1996.

In 1998, $277 thousand of the increase in the allowance allocated to installment loans is related to loans originated at the Loan Store. The majority of the assets of The Loan Store were sold in August 1999. The remaining increase in the allocation associated with installment loans is related to the methodology adopted in 1996 in which the higher of the Bank or the industry average charge-off rate is utilized. The industry average historical rate was higher than Banks historical charge-off rate in 1998 resulting in an additional allocation to the installment loan portfolio of $160 thousand.

In 1999, Horizon began a mortgage warehousing program. This program is described in the “Management Discussion and Analysis” and Note 1 of the Registrant’s Annual Report to Shareholders, Exhibit 13.

V. DEPOSITS

Information required by this section is incorporated by reference to the information appearing under the caption “Summary of Selected Financial Data” of the Registrant’s Annual Report to Shareholders, Exhibit 13.

VI. RETURN ON EQUITY AND ASSETS

Information required by this section is incorporated by reference to the information appearing under the caption “Summary of Selected Financial Data” of the Registrant’s Annual Report to Shareholders, Exhibit 13.

VII. SHORT-TERM BORROWINGS

There were no categories of short-term borrowings for which the average balance outstanding during the period was 30 percent or more of shareholders’ equity at the end of the period.

9

Regulation

The earnings and growth of the banking industry and the Registrant are affected not only by the general economic conditions, but also by the credit policies of monetary authorities, particularly the Federal Reserve System. An important function of the Federal Reserve System is to regulate the national supply of bank credit in order to contest recessionary trends and curb inflationary pressures. Among the instruments of monetary policy used by the Federal Reserve System to implement these objectives are open market operations in U.S. Government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans or paid on deposits. The monetary policies of the Federal Reserve System have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing conditions in the national and international economy and the money markets, and as a result of actions by monetary and fiscal authorities, including the Federal Reserve System, interest rates, credit availability and deposit levels may change due to circumstances beyond the control of the Registrant or Bank.

The Registrant, as a bank holding company, is subject to regulation under the Bank Holding Company Act of 1956, as amended (Act), and is registered with the Board of Governors of the Federal Reserve System (Board of Governors). Under the Act, the Registrant is required to obtain prior approval of the Board of Governors before acquiring direct ownership or control of more than 5% of the voting shares of any bank. With certain exceptions, the Act precludes the Registrant from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks, or furnishing services to its subsidiary. The Registrant may engage in, and may own shares of companies engaged in, certain activities found by the Board of Governors to be so closely related to banking as to be a proper incident thereto.

The Registrant is required to file annual reports of its operations with the Board of Governors and such additional information as they may require pursuant to the Act, and the Registrant and Bank are subject to examination by the Board of Governors. Further, the Registrant and Bank are prohibited from engaging in certain tie-in arrangements with respect to any extension of credit or provision of property or services.

The Board of Governors also possesses the authority through cease and desist powers to regulate parent holding company and nonbank subsidiaries where action of a parent holding company or its nonbank subsidiaries constitutes a serious threat to the safety, soundness or stability of a subsidiary bank. Federal bank regulatory agencies also have the power to regulate debt obligations issued by bank holding companies. Included in these powers is the authority to impose interest ceilings and reserve requirements on such debt obligations.

The acquisition of banking subsidiaries by bank holding companies is subject to the jurisdiction of, and requires the prior approval of, the Federal Reserve and, for institutions resident in Indiana, the Indiana Department of Financial Institutions. Bank holding companies located in Indiana are permitted to acquire banking subsidiaries throughout the state, subject to limitations based upon the percentage of total state deposits of the holding company’s subsidiary banks. Further, Indiana law permits interstate bank holding company acquisitions on a reciprocal basis, subject to certain limitations. Beginning July 1, 1992, Indiana law permits the Registrant to acquire banks, and be acquired by bank holding companies, located in any state in the country which permits reciprocal entry by Indiana bank holding companies.

The Registrant, Bank, Horizon Trust, Horizon Insurance, Insurance Company and Loan Store are “affiliates” within the meaning of the Federal Reserve Act. The Federal Reserve Act and the Federal Deposit Insurance Act limit the amount of the Bank’s loans or extensions of credit to affiliates, its investments in the stock or other securities thereof, and its taking of such stock or securities as collateral for loans to any borrower.

Bank, as a national bank, is regulated and regularly examined by the Office of the Comptroller of the Currency (OCC). In addition to certain statutory limitations on the payment of dividends, approval of the OCC is required for any dividend to the Registrant by Bank if the total of all dividends, including any proposed dividend, declared by Bank in any calendar year exceeds the total of its net profits (as defined by the OCC) for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus.

The Federal Reserve Board implemented risk-based capital requirements for banks and bank holding companies in December, 1988. The risk-based capital requirements have little effect on the Registrant because existing capital is in excess of the requirements. (See additional discussion in Management’s Discussion and Analysis in Registrant’s Annual Report to Shareholders, Exhibit 13.)

10

(d) Financial Information about Foreign and Domestic Operations and Export Sales

None

(e) Available Information

N/A

ITEM 2. PROPERTIES

The main office of the Registrant and Bank is located at 515 Franklin Square, Michigan City, Indiana. The building located adjacent to the main office of the Registrant and Bank, at 502 Franklin Square, houses the credit administration, operations and micro-computer departments of Bank. In addition to these principal facilities, the Bank has eight sales offices located at:

515 Franklin Square, Michigan City, Indiana

3631 South Franklin Street, Michigan City, Indiana

117 E. First St., Wanatah, Indiana

1410 Lincolnway, LaPorte, Indiana

754 Indian Boundary Road, Chesterton, Indiana

4208 N. Calumet, Valparaiso, Indiana

6504 U.S. Highway 6, Portage, Indiana

265 U.S. Highway 30, Valparaiso, Indiana

ITEM 3. LEGAL PROCEEDINGS

The information required under this Item is incorporated by reference to the information appearing under the caption “Note 18 — Commitments, Off-Balance Sheet Risk and Contingencies” of the registrants Annual Report to Shareholders, Exhibit 13.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Registrant’s stockholders during the fourth quarter of the 1999 fiscal year.

11

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information required under this item is incorporated by reference to the information appearing under the caption “Market for Horizon’s Common Stock and Related Stockholder Matters” of the Registrant’s Annual Report to Shareholders, Exhibit 13.

ITEM 6. SELECTED FINANCIAL DATA

The information required under this item is incorporated by reference to the information appearing under the caption “Summary of Selected Financial Data” of the Registrant’s Annual Report to Shareholders, Exhibit 13.

ITEM 7. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      Management’s discussion and analysis of financial condition and results of operations appears in the 1999 Annual report to Shareholders, Exhibit 13 and is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data required under this item are incorporated herein by reference to the Annual Report to Shareholders, Exhibit 13. The Registrant is not required to furnish the supplementary financial information specified by Item 302 of Regulation S-K.

Consolidated Balance Sheets, December 31, 1999 and 1998

Consolidated Statements of Income for the years ended December 31,1999, 1998 and 1997

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,1999, 1998 and 1997

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997

Notes to the Consolidated Financial Statements

Report of Independent Public Accountants

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

PART III

Information relating to the following items will be included in the Registrant’s definitive proxy statement for the annual meeting of shareholders to be held May 4, 2000 (“2000 Proxy Statement”). The 2000 Proxy Statement will be filed with the Commission within one hundred twenty days of the close of the Registrant’s last fiscal year and is in part incorporated into this Form 10-K Annual Report by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

12

PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The following consolidated financial statements of the Registrant appear in the 1999 annual report to shareholders on the pages referenced and are specifically incorporated by reference under Item 8 of this Form 10-K:

	Annual Report
	Page Number
Consolidated Balance Sheets		30
Consolidated Statements of Income		31
Consolidated Statements of Changes in Stockholders’ Equity		32
Consolidated Statements of Cash Flows		33 - 34
Notes to the Consolidated Financial Statements		35 - 57
Report of Independent Public Accountants		58

(a) 2. Financial Statement Schedules

Financial statement schedules are omitted for the reason that they are not required or are not applicable, or the required information is included in the financial statements.

(a) 3. Exhibits

Reference is made to the Exhibit Index which is found on page 16 of this Form 10-K.

(b) Reports on Form 8-K

None

Exhibits

(c) Reference is made to the Exhibit Index which is found on page 16 of this Form 10-K.

(d) Financial Statement Schedules

Financial statement schedules are omitted for the reason that they are not required or are not applicable, or the required information is included in the financial statements.

13

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		HORIZON BANCORP
		(Registrant)
Date	3/27/2000	/s/ Robert C. Dabagia
		Robert C. Dabagia
		Chairman & Chief Executive Officer
Date	3/27/2000	/s/ Diana E. Taylor
		Diana E. Taylor
		Chief Financial Officer/Secretary/Treasurer

14

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date	Signature and Title
3/27/2000	/s/ Dale W. Alspaugh
	Dale W. Alspaugh, Director
3/27/2000	/s/ George R. Averitt
	George R. Averitt, Director
3/27/2000	/s/ Robert C. Dabagia
	Robert C. Dabagia, Director Chairman & Chief Executive Officer
3/27/2000	/s/ Craig M. Dwight
	Craig M. Dwight, Director President
3/27/2000	/s/ Robert E. McBride
	Robert E. McBride, Director
3/27/2000	/s/ Larry N. Middleton
	Larry N. Middleton, Director
3/27/2000	/s/ Bruce E. Rampage
	Bruce E. Rampage, Director
3/27/2000	/s/ Gene L. Rice
	Gene L. Rice, Director
3/27/2000	/s/ Susan D. Sterger
	Susan D. Sterger, Director
3/27/2000	/s/ Robert E. Swinehart
	Robert E. Swinehart, Director
3/27/2000	/s/ Spero W. Valavanis
	Spero W. Valavanis, Director

15

EXHIBIT INDEX

EXHIBIT INDEX

The following exhibits are included in this Form 10-K or are incorporated by reference as noted in the following table:

EXHIBIT		SEQUENTIAL
NUMBER	DESCRIPTION	PAGE NUMBERS
3.1	ARTICLES OF INCORPORATION OF HORIZON BANCORP	INCORPORATED BY REFERENCE File number 0-10792
3.2	BY-LAWS OF HORIZON BANCORP	INCORPORATED BY REFERENCE File number 0-10792
10.1	MATERIAL CONTRACTS-1987 STOCK OPTION STOCK AND APPRECIATION RIGHTS PLAN OF HORIZON BANCORP	INCORPORATED BY REFERENCE File number 0-10792
10.2	MATERIAL CONTRACTS-NONQUALIFIED STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT	INCORPORATED BY REFERENCE File number 0-10792
10.3	MATERIAL CONTRACTS-SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN	INCORPORATED BY REFERENCE TO 12/31/96 FORM 10-K
10.4	MATERIAL CONTRACTS-FIRST AMENDMENT TO SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN	INCORPORATED BY REFERENCE TO 12/31/96 FORM 10-K
10.5	MATERIAL CONTRACTS-SECOND AMENDMENT TO SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN	INCORPORATED BY REFERENCE TO 12/31/96 FORM 10-K
10.6	MATERIAL CONTRACTS — FIRST AMENDMENT TO THE 1987 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN	INCORPORATED BY REFERENCE TO 1997 PROXY STATEMENT
10.7	MATERIAL CONTRACTS — 1997 KEY EMPLOYEES STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN	INCORPORATED BY REFERENCE TO 1997 PROXY STATEMENT
10.8	MATERIAL CONTRACTS — DIRECTORS DEFERRED COMPENSATION PLAN	INCORPORATED HEREIN
10.9	MATERIAL CONTRACTS — EXECUTIVE EMPLOYMENT CONTRACT — LAWRENCE J. MAZUR	INCORPORATED HEREIN
10.10	MATERIAL CONTRACTS — CHANGE OF CONTROL AGREEMENT	INCORPORATED HEREIN
10.11	MATERIAL CONTRACTS — EXECUTIVE EMPLOYMENT CONTRACT — JAMES D. NEFF	INCORPORATED HEREIN
11	STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS-REFER TO ANNUAL REPORT FOOTNOTE 1 (EXHIBIT 13)	ANNUAL REPORT ATTACHED PAGE 38
13	REGISTRANT’S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1999 (NOT DEEMED FILED EXCEPT FOR PORTIONS THEREOF WHICH ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THIS FORM 10-K)	ANNUAL REPORT ATTACHED
21	SUBSIDIARIES OF THE REGISTRANT	INCORPORATED HEREIN
27	FINANCIAL DATA SCHEDULE	INCORPORATED HEREIN

16 EX-10.8 2 EXHIBIT 10.8 1 Exhibit 10.8 HORIZON BANCORP DIRECTORS DEFERRED COMPENSATION PLAN Amended and Restated Effective April 1, 1998 2/98 2 HORIZON BANCORP DIRECTORS DEFERRED COMPENSATION PLAN TABLE OF CONTENTS ----------------- ARTICLE PAGE - ------- ---- I. DEFINITIONS...........................................................1 1.1 Adjustment.....................................................1 1.2 Affiliate .....................................................1 1.3 Board..........................................................1 1.4 Code ..........................................................1 1.5 Committee .....................................................1 1.6 Company .......................................................1 1.7 Director ......................................................1 1.8 Disabled or Disability ........................................1 1.9 Fees ..........................................................1 1.10 Individual Account ............................................1 1.11 Participant ...................................................1 1.12 Participation Agreement........................................2 1.13 Plan...........................................................2 1.14 Plan Year......................................................2 II. INTRODUCTION..........................................................2 2.1 Purpose........................................................2 2.2 Effective Date.................................................2 2.3 Affiliates.....................................................2 III. PARTICIPATION.........................................................3 3.1 Right to Defer.................................................3 3.2 Participation Agreement .......................................3 3.3 Establishment of Individual Accounts...........................3 IV. INVESTMENT OF CONTRIBUTIONS...........................................4 4.1 Investments....................................................4 4.2 Unsecured Contractual Rights...................................4 V. DISTRIBUTIONS.........................................................5 5.1 Time of Payment of Benefits....................................5 5.2 Method of Payment of Benefits..................................5 5.3 Benefit Payment Elections......................................5 5.4 New Mandatory Benefit Payment Elections........................6 5.5 Death of a Participant and Beneficiary Designations............6 3 VI. PLAN ADMINISTRATION.................................................7 6.1 Administration of Plan.......................................7 6.2 Powers and Responsibilities of the Committee.................7 6.3 Liabilities .................................................8 6.4 Claims Procedure.............................................8 6.5 Income and Employment Tax Withholding........................9 VII. AMENDMENT AND TERMINATION...........................................9 VIII. PARTICIPATION BY AFFILIATES........................................10 8.1 Affiliate Participation.....................................10 8.2 Horizon Bancorp Action Binding on Other Employers...........10 IX. GENERAL PROVISIONS.................................................10 9.1 Governing Law...............................................10 9.2 Headings and Gender.........................................10 9.3 Participant's Rights; Acquittance...........................10 9.4 Spendthrift Clause..........................................10 9.5 Counterparts................................................11 9.6 No Enlargement of Employment Rights.........................11 9.7 Limitations on Liability....................................11 9.8 Incapacity of Participant or Beneficiary....................11 9.9 Corporate Successors........................................11 9.10 Evidence....................................................11 9.11 Action by a Company ........................................11 9.12 Severability................................................11 SIGNATURES.........................................................12 4 ARTICLE I --------- DEFINITIONS ----------- Whenever the initial letter of a word or phrase is capitalized herein, the following words and phrases shall have the meanings stated below unless a different meaning is plainly required by the context: 1.1 "Adjustment" means the net increases and decreases in the market value of the Individual Account of each Participant. Such increases and decreases shall include such items as realized or unrealized investment gains and losses, if any, and investment income, if any, and may, in the discretion of Horizon Bancorp, include expenses properly attributable to administering the Plan. 1.2 "Affiliate" means Horizon Bancorp and any other corporation or trade or business whose employees are treated as being employed by Horizon Bancorp under Code Sections 414(b), 414(c), 414(m) or 414(o). 1.3 "Board" means the Board of Directors of Horizon Bancorp. 1.4 "Code" means the Internal Revenue Code of 1986, as amended. 1.5 "Committee" means the Administrative Committee appointed by the Board to administer the Plan as directed by the Board. 1.6 "Company" means Horizon Bancorp, Horizon Bank and each other Affiliate that adopts the Plan. 1.7 "Director" means any duly elected and serving member or former member of the Board of Directors of a Company who is not also an employee of the Company at any time during the Plan Year immediately preceding his participation in the Plan. 1.8 "Disabled" or "Disability" means any disability that would qualify as a disability under Section 22(c)(3) of the Code. 1.9 "Fees" means all fees paid to a Participant for a Plan Year for services rendered to a Company as a Director with respect to such Plan Year including retainer fees for attendance at regularly scheduled Board of Directors meetings, special meetings called from time to time, and fees for attendance at any and all meetings of committees of a Company's Board of Directors. 1.10 "Individual Account" means the individual bookkeeping account maintained for each Participant in accordance with Section 2.2. 5 1.11 "Participant" means a non-employee Director of a Company who becomes a Participant pursuant to Article II of the Plan. 1.12 "Participation Agreement" means the written agreement between the Participant and a Company pursuant to which the Participant elects to defer receipt of Fees, designate a beneficiary, and elect a form and the time of distribution of his benefits under the Plan. 1.13 "Plan" means this Horizon Bancorp Directors Deferred Compensation Plan, as amended and restated, generally effective April 1, 1998. 1.14 "Plan Year" means the twelve (12) month period beginning January 1, and ending December 31. ARTICLE II ---------- INTRODUCTION ------------ 2.1 PURPOSE. The Horizon Bancorp Directors Deferred Compensation Plan ("Plan") as set forth herein is a complete amendment and restatement of the Plan which was originally effective January 1, 1984. The purpose of this Plan is to permit Directors of Horizon Bancorp, Horizon Bank and any other Company under the Plan to defer the receipt and resulting taxation of the Fees received from a Company for services as a Director of a Company. All benefits payable under this Plan shall be paid solely out of the general assets of the Companies. 2.2 EFFECTIVE DATE. The Horizon Bancorp Directors Deferred Compensation Plan was originally established by Horizon Bancorp, effective January 1, 1984. The effective date of the Plan, as amended and restated is April 1, 1998. The provisions of the Plan only apply to a Director who was not receiving a distribution of his benefit under the Plan or a predecessor plan before the effective date. The rights and benefits, if any, of a Director who was receiving a distribution of his benefit under the Plan before the effective date will be determined in accordance with the terms of the Plan in effect as of the date he began receiving a distribution of his benefit. 2.3 AFFILIATES. Any Affiliate may adopt the Plan for the benefit of its Directors with Horizon Bancorp's consent in accordance with Section 8.1. 6 ARTICLE III ----------- PARTICIPATION ------------- 3.1 RIGHT TO DEFER. A Director may become a Participant by electing, on a Participation Agreement, to defer the receipt of all or a portion of the Fees he or she would otherwise receive with respect to a Plan Year as a Director of a Company. 3.2 PARTICIPATION AGREEMENT. (a) REQUIREMENT FOR PARTICIPATION AGREEMENT. As a condition to a Company's and the Committee's obligation to credit deferred Fees for the benefit of a Participant pursuant to Section 3.1, the Participant must execute a Participation Agreement (on such forms as shall be prescribed by the Committee) in which it is agreed that the Participant's Company will withhold payment of all or a portion of the Participant's Fees and shall credit such amount withheld to the Participant's Individual Account at the time set forth in the Plan. (b) TIMING OF EXECUTION AND DELIVERY OF PARTICIPATION AGREEMENT. Except as provided in Section 5.4, a Participation Agreement must be executed by the Participant and the Committee prior to the first day of the year in which the Participant is entitled to receive the Fees with respect to which the Participant Fees specified in the Participation Agreement relate. (c) MODIFICATION OF PARTICIPANT DEFERRAL ELECTION. At any time, a Participant and the Committee may execute and deliver an amended Participation Agreement which increases, decreases, commences or terminates the deferral of the Participant's Fees. Provided, however, except as provided in Section 5.4, such amended Participation Agreement must be executed by the Participant and the Committee prior to the first day of the Plan Year in which the Participant is entitled to receive the Fees with respect to which the Participant Fees specified in the Participation Agreement relate. (d) DIRECTORS ELECTED MID-YEAR. A non-employee elected to fill a vacancy on a Company's Board of Directors who was not a Director on the preceding December 31st may, by completing a Participation Agreement before his term begins, elect to defer Fees for the balance of the Plan Year following such election and for succeeding Plan Years. 3.3 ESTABLISHMENT OF INDIVIDUAL ACCOUNTS. 3 7 (a) INDIVIDUAL ACCOUNT. All amounts to be allocated to each Participant pursuant to Section 3.1, shall be credited to the Participant's Individual Account as of the last day of the Plan Year for which such Fees are payable and all amounts paid to the Participant or his designated beneficiary pursuant to Article V shall be debited from his Individual Account as of the time actually paid. Additionally, all amounts credited to each Participant under the Plan prior to April 1, 1998, shall be credited, as of April 1, 1998, to such Participants' Individual Accounts under this restated Plan. (b) ALLOCATION OF ADJUSTMENTS. Following the allocations made pursuant to the foregoing, the Committee shall determine the Adjustments for each Plan Year, and on such other dates as the Committee deems necessary or advisable, by adding together all income received, and realized and unrealized gains and losses, and deducting therefrom all taxes, charges or expenses (unless paid separately by a Company in a Company's discretion, outside the confines of this Plan) and any realized and unrealized losses since the most recent allocation of Adjustments to Participants' Individual Accounts. The Adjustments shall be allocated as of the allocation date specified herein to the Individual Accounts of Participants who maintain a credit balance in their Individual Accounts as of such date as provided in Section 4.1. ARTICLE IV ---------- INVESTMENT OF CONTRIBUTIONS --------------------------- 4.1 INVESTMENTS. For periods ending prior to April 1, 1998, the Adjustment to each Participant's Individual Account equals the rate of interest equal to the average of the rates paid on the last business day of each month during the Plan Year for one (1) year notes issued by the U.S. Treasury. Effective for periods beginning on and after April 1, 1998, the Adjustment to each Participant's Individual Account shall be determined as if the amounts credited to such Individual Account were invested in hypothetical investments designated by the Committee to be used to measure increases or decreases in the Individual Account over time. No provision of the Plan shall impose or be deemed to impose any obligation upon a Company, other than an unsecured contractual obligation to make a cash payment to Participants and their beneficiaries in accordance with the terms of the Plan. Benefits payable under the Plan shall be paid directly by a Company from its general assets. A Company shall not be required to segregate any funds or other assets for the payment of benefits under the Plan. 4.2 UNSECURED CONTRACTUAL RIGHTS. The Plan at all times shall be unfunded and shall constitute a mere promise by a Company to make benefit payments in the future. Notwithstanding any other provision of this Plan, neither a Participant nor his designated 4 8 beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of a Company prior to the time benefits are paid as provided in Article V, including any Fees deferred by the Participant. All rights created under this Plan shall be mere unsecured contractual rights of the Participant against a Company. ARTICLE V --------- DISTRIBUTIONS ------------- 5.1 TIME OF PAYMENT OF BENEFITS. All amounts credited to a Participant's Individual Account, including any Adjustments credited in accordance with Section 3.3, shall be or commence to be distributed to or for the benefit of a Participant (or his designated beneficiary) on the date effectively elected by the Participant in his Participation Agreement. A Participant may amend his Participation Agreement as to the time of payment only pursuant to Section 5.4 or if the amended Participation Agreement provides for the deferral of the distribution to a date later than the date previously elected. 5.2 METHOD OF PAYMENT OF BENEFITS. The balance of a Participant's Individual Account shall be distributed in cash in a single lump sum payment or in substantially equal annual installments over a period of not less than three (3) nor more than twelve (12) years, or in a combination of those two methods, as elected by a Participant in accordance with the provisions of Section 5.3. 5.3 BENEFIT PAYMENT ELECTIONS. (a) In order to be effective, a Participant's election of the time and the method in which his benefits shall be distributed (including benefits which become payable as a result of the Participant's death as set forth in Section 5.5) must be made by delivering a Participation Agreement or an amended Participation Agreement to the Committee not later than sixty (60) days prior to the beginning of the Plan Year in which the Participant has elected to begin receiving his benefits. If the Participant does not elect a time or method of distribution under Section 5.2, or such election is not timely or properly made under this Section 5.3, a Company shall pay the entire benefit at the time and in the method effectively elected in the most recent Participation Agreement, or if no such effective Participation Agreement exists, in the form of a single lump sum within thirty (30) to sixty (60) days after the first to occur of the following: (i) Disability; or (ii) Attainment of age sixty-five (65); 5 9 (b) In the event a Participant properly elects and is eligible to receive his Individual Account in the form of installments, the Participant must specify in his written election the number of years over which the installments are to be distributed. (c) In the event a Participant properly elects and is eligible to receive his Individual Account in a combination of a lump sum and installments, the Participant must specify in his written election the percentage of the account which will be distributed in a single lump sum and the percentage of the account which will be distributed in installments, including the number of years over which such installments shall be distributed. 5.4 NEW MANDATORY BENEFIT PAYMENT ELECTIONS. Notwithstanding any provision in this Plan to the contrary, a Participation Agreement providing an effective election as to the deferral amount and the time and method of payment of benefits under the Plan shall be entered into by all existing Participants and by all directors beginning participation effective April 1, 1998, prior to April 1, 1998, including all Participants who are no longer actively deferring Fees under the Plan, and such election shall supersede all prior benefit payment elections; provided, however, that if a Participant's benefit under the Plan is in pay status before April 1, 1998, pursuant to a prior election, then that Participant may not effectively make a new election and must continue to receive his benefit payments at the time and in the manner previously elected. If a Participant does not make an effective election as required by this Section 5.4 or pursuant to Section 5.3(a), then his benefit shall be paid at the time and in the manner provided in Section 5.3(a). 5.5 DEATH OF A PARTICIPANT AND BENEFICIARY DESIGNATION. (a) FORM AND TIME OF PAYMENT. In the event of a Participant's death prior to the time his benefits under the Plan commence to be distributed, the balance in his Individual Account shall be paid to his designated beneficiary in the form elected by the Participant in his most recently filed Participation Agreement. Such distribution shall be made or commence to be made within 60 days of the date of the Participant's death. If the Participant has not made an election as to the form in which his benefit under the Plan is to be distributed, or if his election was not timely filed with the Committee or is not in proper form, such benefit shall be paid to the Participant's designated beneficiary, in a single lump sum, within sixty (60) days of the date of the Participant's death. If the Participant dies after distribution of his benefits under the Plan has commenced, his remaining benefit, if any, shall be distributed in the same form(s) and at the same time(s) as such benefit was being distributed prior to his death, or in a single lump sum, if effectively elected by the Participant in his most recently filed Participation Agreement. Notwithstanding any provision to 6 10 the contrary, however, the Committee, in its sole discretion, may approve an accelerated method and time of distribution to said beneficiary or beneficiaries. (b) DESIGNATION OF BENEFICIARIES. The Participant may designate a primary and contingent beneficiary or beneficiaries on forms provided by the Committee, which for this purpose may include the Participation Agreement. Such designation may be changed at any time for any reason by the Participant. If the Participant fails to designate a beneficiary, or if such designation shall for any reason be illegal or ineffective, or if the designated beneficiary(ies) shall not survive the Participant, his benefits under the Plan shall be paid to his estate. ARTICLE VI ---------- PLAN ADMINISTRATION ------------------- 6.1 ADMINISTRATION BY THE COMMITTEE. The Committee shall be responsible for administering the Plan. Except as Horizon Bancorp shall otherwise expressly determine, the Committee shall be charged with the full power and the responsibility for administering the Plan in all its details. 6.2 POWERS AND RESPONSIBILITIES OF THE COMMITTEE. (a) The Committee shall have all powers necessary to administer the Plan, including the power to construe and interpret the Plan documents; to decide all questions relating to an individual's eligibility to participate in the Plan; to determine the amount, manner and timing of any distribution of benefits or withdrawal under the Plan; to resolve any claim for benefits in accordance with Section 6.4, and to appoint or employ advisors, including legal counsel, to render advice with respect to any of the Committee's responsibilities under the Plan. Any construction, interpretation, or application of the Plan by the Committee shall be final, conclusive and binding. All actions by the Committee shall be taken pursuant to uniform standards applied to all persons similarly situated. (b) RECORDS AND REPORTS. The Committee shall be responsible for maintaining sufficient records to determine each Participant's eligibility to participate in the Plan, and the Fees of each Participant for purposes of determining the amount of contributions that may be made by or on behalf of the Participant under the Plan. (c) RULES AND DECISIONS. The Committee may adopt such rules as it deems necessary, desirable, or appropriate in the administration of the Plan. All 7 11 rules and decisions of the Committee shall be applied uniformly and consistently to all Participants in similar circumstances. When making a determination or calculation, the Committee shall be entitled to rely upon information furnished by a Participant or beneficiary, a Company or the legal counsel of a Company. (d) APPLICATION AND FORMS FOR BENEFITS. The Committee may require a Participant or beneficiary to complete and file with it an application for a benefit, and to furnish all pertinent information requested by it. The Committee may rely upon all such information so furnished to it, including the Participant's or beneficiary's current mailing address. 6.3 LIABILITIES. The Committee shall be indemnified and held harmless by the Companies with respect to any actual or alleged breach of responsibilities performed or to be performed hereunder. 6.4 CLAIMS PROCEDURE. (a) FILING A CLAIM. Any Participant or beneficiary under the Plan may file a written claim for a Plan benefit with the Committee or with a person named by the Committee to receive claims under the Plan. (b) NOTICE OF DENIAL OF CLAIM. In the event of a denial or limitation of any benefit or payment due to or requested by any Participant or beneficiary under the Plan ("claimant"), the claimant shall be given a written notification containing specific reasons for the denial or limitation of his benefit. The written notification shall contain specific reference to the pertinent Plan provisions on which the denial or limitation of his benefit is based. In addition, it shall contain a description of any other material or information necessary for the claimant to perfect a claim, and an explanation of why such material or information is necessary. The notification shall further provide appropriate information as to the steps to be taken if the claimant wishes to submit his claim for review. This written notification shall be given to a claimant within 90 days after receipt of his claim by the Committee unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of said 90-day period, and such notice shall indicate the special circumstances which make the postponement appropriate. (c) RIGHT OF REVIEW. In the event of a denial or limitation of his benefit, the claimant or his duly authorized representative shall be permitted to review 8 12 pertinent documents and to submit to the Committee issues and comments in writing. In addition, the claimant or his duly authorized representative may make a written request for a full and fair review of his claim and its denial by the Committee; provided, however, that such written request must be received by the Committee (or its delegate to receive such requests) within 60 days after receipt by the claimant of written notification of the denial or limitation of the claim. The 60-day requirement may be waived by the Committee in appropriate cases. (d) DECISION ON REVIEW. A decision shall be rendered by the Committee within 60 days after the receipt of the request for review, provided that where special circumstances require an extension of time for processing the decision, it may be postponed on written notice to the claimant (prior to the expiration of the initial 60-day period) for an additional 60 days after the receipt of such request for review. Any decision by the Committee shall be furnished to the claimant in writing and shall set forth the specific reasons for the decision and the specific Plan provisions on which the decision is based. (e) COURT ACTION. No Participant or beneficiary shall have the right to seek judicial review of a denial of benefits, or to bring any action in any court to enforce a claim for benefits prior to filing a claim for benefits or exhausting his rights to review under this Section 6.4. 6.5 INCOME AND EMPLOYMENT TAX WITHHOLDING. The Companies shall be responsible for withholding, and the Participant shall agree to such withholdings in his Participation Agreement, from the Participant"s Fees or from the distribution of his benefit under the Plan of all applicable federal, state, city and local taxes. ARTICLE VII AMENDMENT AND TERMINATION ------------------------- The Board may amend, suspend or terminate, in whole or in part, the Plan without the consent of the Committee, the Participant, beneficiary or other person, except that no amendment, suspension or termination shall retroactively impair or otherwise adversely affect (without consent) the rights of a Participant, beneficiary or other person entitled to benefits under the Plan which have accrued prior to the date of such action, as determined by the Committee in its sole discretion. It is noted, however, that the Participant's benefits under the Plan constitute mere unsecured claims on the general assets of a Company. In addition, the Plan will terminate with respect to an individual Company by resolution of the Company's Board of Directors, provided that 30 days advance written notice is given to the Committee and Horizon Bancorp. 9 13 ARTICLE VIII PARTICIPATION BY AFFILIATES --------------------------- SECTION 8.1. AFFILIATE PARTICIPATION. Any Affiliate may adopt the Plan and become a participating Company under the Plan by filing with the Committee: (a) a certified copy of a resolution of its Board of Directors to that effect; and (b) a written document signed by an authorized officer of Horizon Bancorp which indicates the consent of Horizon Bancorp to that action. Notwithstanding any provision herein to the contrary, Horizon Bank shall automatically be a participating Company as of the effective date of the restatement of this Plan, April 1, 1998. SECTION 8.2. HORIZON BANCORP ACTION BINDING ON OTHER EMPLOYERS. As long as Horizon Bancorp is a Company under the Plan, it is empowered to act for any other Company in all matters relating to the Plan or the Committee. ARTICLE IX GENERAL PROVISIONS ------------------ 9.1 GOVERNING LAW. The Plan shall be construed, regulated and administered according to the laws of the State of Indiana, except in those areas preempted by the laws of the United States of America in which case such laws will control. 9.2 HEADINGS AND GENDER. The headings and subheadings in the Plan have been inserted for convenience of reference only and shall not affect the construction of the provisions hereof. In any necessary construction the masculine shall include the feminine and the singular the plural, and vice versa. 9.3 PARTICIPANT'S RIGHTS; ACQUITTANCE. No Participant shall acquire any right to be retained in an Employer's employ by virtue of the Plan, nor, upon his dismissal, or upon his voluntary termination of employment, shall he have any right or interest in or to any Plan assets other than as specifically provided herein. 9.4 SPENDTHRIFT CLAUSE. No benefit or interest available hereunder will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant's designated beneficiary, either voluntarily or involuntarily. 10 14 9.5 COUNTERPARTS. This Plan may be executed in any number of counterparts, each of which shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart. 9.6 NO ENLARGEMENT OF EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be construed as a contract of employment between a Company and any person, nor shall the Plan be deemed to give any person the right to be retained in the employ or as a Director of a Company or limit the right of a Company to employ or discharge any person with or without cause. 9.7 LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding provisions of the Plan, none of the Companies, the Committee and each individual acting as an employee or agent of any of them shall be liable to any Participant, Director or beneficiary for any claim, loss, liability or expense incurred in connection with the Plan, except when the same shall have been judicially determined to be due to the gross negligence or willful misconduct of such person. 9.8 INCAPACITY OF PARTICIPANT OR BENEFICIARY. If any person entitled to receive a distribution under the Plan is physically or mentally incapable of personally receiving and giving a valid receipt for any payment due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative), then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Committee may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Companies and the Plan. 9.9 CORPORATE SUCCESSORS. The Plan shall not be automatically terminated by a transfer or sale of assets of Horizon Bancorp or by the merger or consolidation of Horizon Bancorp into or with any other corporation or other entity ("Transaction"), but the Plan shall be continued after the Transaction only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. 9.10 EVIDENCE. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person relying thereon considers pertinent and reliable, and signed, made or presented by the proper party or parties. 9.11 ACTION BY A COMPANY. Any action required of or permitted by a Company under the Plan shall be by resolution of its Board of Directors or, for Horizon Bancorp, by resolution of the Board or the Committee or by a person or persons authorized by resolution of the Board or the Committee. 9.12 SEVERABILITY. In the event any provisions of the Plan shall be held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the 11 15 Plan, and the Plan shall be construed and endorsed as if such illegal or invalid provisions had never been contained in the Plan. SIGNATURES ---------- IN WITNESS WHEREOF, Horizon Bancorp, by its officers thereunder duly authorized, have caused this Horizon Bancorp Directors Deferred Compensation Plan to be executed this _____ day of _________________, 1997, effective April 1, 1998. HORIZON BANCORP By: ------------------------------ Title: --------------------------- ATTEST: By: --------------------------- Title: ------------------------ SS-144873-2 12 EX-10.9 3 EXHIBIT 10.9 1 Exhibit 10.9 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, executed this _______ day of ______________, 1999 but effective as of December 28, 1998, by and among Horizon Bank, N.A. a national banking association ("Bank"), IMS Investment Management, N.A. ("IMS") and Lawrence J. Mazur ("Executive"); W I T N E S S E T H: WHEREAS, on the date hereof the Bank's parent company, Horizon Bancorp ("Horizon") acquired substantially all of the assets and certain liabilities of Financial Planning and Management Corp.("FPMC"), an Indiana corporation; and WHEREAS, the Executive is the sole shareholder and President of FPMC; and WHEREAS, the Bank desires, due to the Executive's knowledge and experience, to retain by contract the Executive to serve as President of IMS, the Bank's national trust bank subsidiary and as a Trust Officer of the Bank; and WHEREAS, the Executive is willing to serve in the employ of the Bank and IMS in such and other capacities; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. EMPLOYMENT. The Bank and IMS hereby employ the Executive to render full-time services to IMS as President and to serve as a Trust Officer of the Bank for the period commencing on the effective date of this Agreement and extending through the Term specified in Section 2 until such full-time services are terminated as hereinafter provided. The Executive hereby accepts and agrees to such employment. 2. TERM. Subject to the provisions for termination of this Agreement contained in Section 8, the term of this Agreement shall be for a period of five (5) years from the effective date hereof ("Term"). 3. DUTIES. (a) During the period of his employment hereunder, the Executive agrees to diligently perform such executive duties and administrative functions which are appropriate to the office of President as, from time to time, shall be assigned to him by the Chairman or Vice Chairman or Board of Directors of IMS or by the Board of Directors of the Bank (collectively referred to herein as the "Board") or its designees and he further agrees to give his full business time and attention to, and his best efforts to promote, the business and affairs of the Bank and IMS. The Executive further agrees to hold the office of President and such other offices of the Bank or 2 IMS to which he may be elected or appointed and to perform and discharge the duties thereof faithfully and to the best of his ability. (b) The Executive, subject to the direction and control of the Board, shall have all power and authority commensurate with his executive status and necessary to perform his duties hereunder. The Bank shall provide the Executive with such assistance and working accommodations as are suitable to the character of his positions with the Bank and IMS and as are adequate for the performance of his duties. 4. COMPENSATION. (a) During the period of his employment hereunder, the Executive's basic annual salary as President shall be One Hundred Thirty Thousand Dollars ($130,000.00). Such salary shall be payable in cash on the same schedule as all other salaried employees. Such salary payments shall be subject to the withholding of applicable income and employment taxes and other appropriate and customary amounts. Upon any change in the Executive's salary, a written addendum to this Employment Agreement shall be executed by the Executive and the appropriate officer or officers of the Bank. (b) In addition to his basic annual salary as President, the Executive shall be entitled to receive a cash bonus payable semi-annually as described in Schedule A hereto commencing in 2000, unless this Agreement is terminated as provided for herein, and subject to the terms and conditions set forth in Schedule A. (c) In addition to the salary and bonus compensation described above, Executive shall also receive a one-time signing bonus effective upon execution of this Agreement. Such bonus shall be paid to the Executive in the form of forgiveness of indebtedness and shall be in an amount equal to the principal and interest owed by the Executive to the Bank on a loan made by the Bank to the Executive in the original principal amount of $100,000 dated as of December 28, 1998. 5. EMPLOYEE BENEFITS. During the Term of his employment hereunder, the following shall apply with respect to the Executive's coverage by and participation under employee benefit plans and programs sponsored or otherwise made available by the Bank: (a) Subject to the more specific provisions of subsection (c) below, the Executive shall be entitled to participate in any retirement, deferred compensation, life, accident, health, hospitalization and any other employee benefit plan or program, excluding bonus programs, that is generally available to the employees of Horizon or the Bank, if and to the extent the Executive is eligible to participate thereunder in accordance with the provisions thereof. Nothing herein shall be construed to require the Bank to institute any particular benefit plan or program or to prevent the Bank or Horizon from modifying or terminating any plan or program it may determine to adopt from time to time. Further, the Executive shall be treated as a new employee for purposes of eligibility and vesting under any employee benefit plan or program that is available to the executive officers of the Bank. Years of service as an employee of FPMC shall 2 3 not be credited to the Executive for purposes of eligibility and vesting under any employee benefit plan or program that is generally available to the employees of the Bank. (b) During the Term, Executive shall be entitled to four (4) weeks per calendar year of paid vacation, which shall be utilized at such times when his absence will not materially impair the Bank's normal business functions. Any unused vacation time in any calendar year shall lapse, and Executive shall not be entitled to any additional compensation for any such unused and lapsed vacation time. In addition to the vacation described above, Executive also shall be entitled to all paid holidays customarily given by the Bank to its officers. (c) The Executive shall be entitled to participate in the following employee benefit plans, subject to the terms and conditions of the specific plan documents or agreements provided with respect to each plan: (i) Supplemental Executive Retirement Program ("SERP"). Executive shall be eligible for participation in such program, with an effective date of January 1, 1999, provided that Executive executes the Bank's standard SERP Agreement. Vesting under the SERP Program will be accelerated upon a Change in Control (as hereinafter defined). (ii) Stock Options. The Executive shall be granted options under Horizon's Stock Option and Stock Appreciation Rights program for 6000 shares of Horizon Stock, in accordance with Horizon's standard agreement governing the program. The grant hereunder will only be effective if this Employment Agreement is executed, notwithstanding that actual employment may have commenced prior to such date. Vesting of stock options granted under the program will be accelerated upon a Change in Control. (iii) 401(k) Retirement Plan. The Executive shall be entitled to participate in Horizon's 401(k) Plan in accordance with the terms and conditions of the plan documents. Until the Executive is eligible for actual enrollment under the Plan, the Executive shall receive an equivalent benefit under the SERP for the amount the Executive would have received for the period from January 1, 1999 to the enrollment date. (iv) Employer Stock Ownership Plan ("ESOP"). The Executive shall be entitled to participate in Horizon's ESOP in accordance with the terms and conditions of the plan documents. Until the Executive is eligible for actual enrollment under the ESOP, the Executive shall receive an equivalent benefit under the SERP for the amount the Executive would have received for the period from January 1, 1999 to the enrollment date. 6. REIMBURSEMENT OF EXPENSES AND CONTINUING EDUCATION. The Bank shall pay to the Executive, or to the extent paid in the first instance by the Executive, shall reimburse the Executive 3 4 for, travel, entertainment and similar expenses he incurs in connection with the performance of his duties hereunder in accordance with the Bank's policies governing such activities, as such policies may be amended or modified from time to time. Further, the Bank shall pay or reimburse Executive for the cost of up to 40 hours of continuing professional education courses per year, provided that such costs are reasonable and the courses are approved in advance by the Bank. 7. INSURANCE. The Bank shall have the right to maintain one (1) or more insurance policies against the life of the Executive in such face amounts as the Board considers appropriate, and to name itself as beneficiary under such policies. 8. TERMINATION. (a) At any time during the term of this Agreement, the Board shall have the right to terminate the Executive's employment hereunder, provided that the Board, or its designee, has followed the Bank's policies regarding review of employee performance, due to the failure of the Executive to perform satisfactorily any of the duties assigned to him by the Board, upon sixty (60) days' prior written notice to the Executive and the Executive shall have the right to terminate his employment hereunder at any time and for any reason, upon sixty (60) days' prior written notice to the Bank. (b) This Agreement shall also terminate on the death of the Executive. (c) The Bank shall have the right to terminate the Executive's employment hereunder for cause upon thirty (30) days' prior written notice. For purposes of this Agreement, the Executive may be terminated "for cause" if his employment is terminated by the Bank as a result of any of the following: (i) An action by the Executive which involves fraud, willful misfeasance or gross negligence in connection with the performance of his duties hereunder; (ii) The requirement or direction of a federal or state regulatory agency which has jurisdiction over the Bank to terminate the employment of the Executive; (iii) Conviction of the Executive due to the commission of any criminal offense which involves dishonesty or breach of trust; or (iv) Any breach by the Executive of a material term, condition or covenant hereunder or any other agreement between the Executive and the Bank and IMS, including, but not limited to that certain Purchase and Sale Agreement dated of even date herewith. (d) The Executive may also be terminated upon sixty (60) days prior written notice in the event of a Change in Control (as defined herein) subject to Section 9.c. hereof. For purposes of this Agreement, "Change in Control" of the Bank or IMS shall mean (i) a change in 4 5 control of Horizon, of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Act of 1934, or (ii) a transfer of more than fifty percent (50%) of the stock of IMS. (e) Any termination of the Executive's employment by the Bank or by the Executive shall be communicated by written Notice of Termination to the non-terminating party. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (f) As used herein, "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination; provided that, if within thirty (30) days after any Notice of Termination is given, the parties who receive such Notice of Termination notify the other parties that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 9. COMPENSATION UPON TERMINATION. (a) In the event that the Bank terminates the employment of the Executive pursuant to Section 8(a), the Executive shall continue for a period of two (2) years after the Date of Termination to receive his full compensation, as provided in Section 4(a), at a rate equal to the Executive's basic compensation received by the Executive for the twelve (12) months prior to the Date of Termination. Such payments shall be made by the Bank at the same intervals as his basic annual compensation and shall continue for such 2-year period, together with all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement, provided, however, that the Bank's obligations to make payments hereunder shall be reduced by the amount the Executive receives in compensation and cash benefits from any other employer or any person to or for whom Executive is providing services as a consultant or independent contractor, excluding however, compensation received by the Executive from the independent practice of law. (b) If the Executive terminates his employment pursuant to Section 8(a) or the Bank terminates the Executive's employment for cause, the Bank shall pay the Executive his (i) basic annual salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; and (ii) all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement. (c) If the Executive is terminated due to a Change in Control, the Executive shall continue for a period of three (3) years after the Date of Termination to receive his full compensation as provided in Section 4(a) at a rate equal to the Executive's basic compensation received for the twelve (12) months prior to the Date of Termination. 5 6 (d) All payments due under this Section 9 shall survive the Executive's death and shall be payable thereafter to the Executive's spouse or his estate, as the case may be, in accordance with this Agreement, provided that the Bank reserves the right, in its sole discretion, to make such payments in one lump sum discounted to present value, rather than in periodic payments as required above. 10. NON-SOLICITATION COVENANTS OF EXECUTIVE. For purposes of this Section 10, the term "Employer" includes the Bank and any direct or indirect parent or subsidiary thereof. (a) If this Agreement is terminated by the Executive pursuant to Section 8(a) or is terminated by the Employer for cause, the Executive shall not, directly or indirectly, on his own behalf or on behalf of any other person, corporation or other business entity, for a period of one (1) year from the Date of Termination, solicit business (for products or services similar to those under active development, or provided by, the Bank prior to the termination of the Executive's employment hereunder) from any person, firm, company or other business entity that is doing business with, is a customer or account of, or that has been solicited within six (6) months prior to the Date of Termination of the Executive's employment hereunder by or is within a fifty (50) mile radius of the city limits of Michigan City, Indiana. (b) Except as shall be required in the course of his employment hereunder, during the term of the Executive's employment hereunder and thereafter, the Executive shall keep secret and shall not, directly or indirectly, without the prior written consent of the Employer: (i) Divulge or communicate to any third person or entity, or use for the benefit of the Executive or any third person or entity, any trade secrets, or any trade knowledge, formulae, processes, programs, methods or other information relating to the operation of the business of the Employer or which were originated in connection therewith and any and all privileged, proprietary or confidential information relating to the business, planning or research activities of the Employer or any of its clients, customers, consultants or licensees; or (ii) Retain for the benefit of the Executive or any third person or entity any document or paper used or owned by the Employer which comes into the Executive's possession in the course of her employment with the Employer, or make or cause to be made any copy, abstract or summary thereof. (c) Because the services to the Employer of the Executive are unique and extraordinary and the Employer does not have an adequate remedy at law to protect its business from the Executive's competition or its interests in its trade secrets, privileged, proprietary and confidential information and similar commercial assets, the Employer shall be entitled to injunctive relief, in addition to such other remedies and relief that would, in the event of a breach of the provisions of this Section 10, be available to the Employer. In the event of such a breach, in addition to any other remedies, the Employer shall be entitled to receive from the Executive payment of, or reimbursement for, the Employer's reasonable attorneys' fees and disbursements 6 7 incurred in enforcing any such provision. In the event of a breach of this Agreement by the Employer, in addition to any other remedies, the Executive shall be entitled to recover from the Employer payment of or reimbursement for, the Executive's reasonable attorneys' fees and disbursements incurred in enforcing the Agreement if the Executive is successful on the merits of any action for enforcement. (d) If the Employee does not comply with the provisions of this Section 10, the one (1) year period of non-solicitation provided herein shall be tolled and deemed not to run during any period(s) of non-compliance, the intention of the parties being to provide for one (1) full year of non-solicitation by the Employee after the termination or expiration of this Agreement. (e) The provisions of this Section 10 shall survive any termination of this Agreement. 11. NOTICES. All communications, notices and elections pursuant to Sections 9 and 10, and all other notices, requests, consents or demands given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered to, or mailed by prepaid registered or certified mail addressed to the party for whom intended as follows, or to such other address as may be furnished by such party in the manner provided herein: If to the Executive: Lawrence J. Mazur 326 Oak Drive LaPorte, Indiana 46350 If to the Bank: Horizon Bank, N.A. 515 Franklin Square Michigan City, Indiana 46360 Attention: President 12. GOVERNING LAW. This Agreement has been executed and delivered in the State of Indiana and shall be construed in accordance with and governed by the laws of the State of Indiana, without giving effect to any conflicts of laws rules. 13. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding of the parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter, and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties hereto. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. 14. CONSTRUCTION. Headings contained in this Agreement are for convenience of reference only and shall not be used in the interpretation of this Agreement. References herein to Sections are to the sections of this Agreement. As used herein, the singular includes the plural and the masculine, feminine and neuter gender each includes the others where the context so indicates. 7 8 15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, enforceable against, and inure to the benefit of, the parties hereto and their respective heirs, successors and assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. The rights, duties and obligations of the Executive hereunder may not be assigned. This Agreement may not be assigned by the Bank or IMS without the prior written consent of the Executive, which consent shall not be unreasonably withheld. 16. SEVERABILITY. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited or payment reduced, but only to the extent necessary to render such provision and this Agreement enforceable. 17. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first set forth above, but effective as of ____________________, 1999. EXECUTIVE -------------------------------------- Lawrence J. Mazur ATTEST: (SEAL) HORIZON BANK, N.A. By: By: ------------------------------ ----------------------------------- Printed: Printed: Craig M. Dwight ------------------------- Title: Title: President and Chief Executive Officer --------------------------- ATTEST: (SEAL) IMS INVESTMENT MANAGEMENT, N.A. By: BY: ------------------------------ Printed: Printed: Robert C. Dabagia ------------------------- Title: Title: Chairman -------------------------- SCHEDULE A TO EMPLOYMENT AGREEMENT BETWEEN HORIZON BANK, IMS AND LAWRENCE J. MAZUR 8 9 DATED _______________, 1999 Section 4(b) BONUS COMPENSATION. ------------------ Within ____ (___) days following each June 30 and December 31, commencing June 30, 2000, the Bank shall pay to the Executive a lump sum cash bonus equal to: 25% of the net annual growth in gross fee income for IMS calculated semiannually with the amount of growth in fee income to be calculated from a base of IMS' total fee income at December 31, 1999. The amount of growth in fee income will not take into account any fees earned or other revenues generated from any assets originally delivered to IMS from the Executive or the Corporation (as defined below) and in no event will the Executive receive a bonus based upon those assets or any revenue, now or hereafter, generated therefrom. The Executive shall not be eligible for any other bonus program offered to Employees by the Bank or IMS. ADJUSTMENTS TO BONUS AND OTHER COMPENSATION The Executive has entered into a Purchase and Sale Agreement and Plan of Reorganization (the "Purchase Agreement") whereby the Executive has sold to Horizon all of the assets of Financial Planning and Management Corporation (the "Corporation"). As part of such Agreement, the Executive has guaranteed that the assets of the Corporation sold to Horizon shall produce gross revenue to IMS not less than $150,000 per annum from the date of purchase, for a period of five (5) years. In the event that such amount is not generated in any year, the bonus to be paid to Executive under this Agreement shall be reduced by the amount of such deficiency. To the extent bonus income for such year is insufficient to cover any shortfall, the Executive further agrees that such deficiency may carry forward to reduce future bonuses, or at the Bank's discretion, annual base salary under Section 4(a) may be reduced or, where permitted by applicable law, other benefits or distributions may be reduced. 9 EX-10.10 4 EXHIBIT 10.10 1 Exhibit 10.10 AGREEMENT --------- THIS AGREEMENT ("Agreement"), dated as of ___________________, 1999, is entered into between Horizon Bank, N.A. ("Bank"), a national banking association organized under the laws of the United States of America, and _____________ (hereinafter referred to as "Employee"), an Indiana resident. WITNESSETH: WHEREAS, Bank is a subsidiary of Horizon Bancorp ("Holding Company"), a corporation formed under the laws of the State of Indiana; WHEREAS, Employee is employed by the Bank to serve as its ____________; WHEREAS, because of Employee's experience and familiarity with general banking affairs, the Bank wishes to assure that, in the event of a change of control of the Holding Company, the Bank will continue to have Employee available to perform duties substantially similar to those currently being performed by Employee and to continue to contribute to the Bank's growth and success; and WHEREAS, Employee is willing to commit to continue in the performance of such services for the Bank upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT. (A) The Bank hereby agrees that, effective upon a Change of Control of the Holding Company and provided that Employee is still serving as ______________ of the Bank at that time, the Bank will continue to employ Employee as _________________ to perform the duties described herein, and Employee hereby accepts such employment on the terms and conditions stated herein. It is understood that, prior to such Change of Control, this Agreement shall confer no rights of employment or other benefits (or obligations) whatsoever upon Employee, and that Employee shall remain subject to termination at will. (B) For purposes of this Agreement, "Change of Control" shall mean a Change of Control of the Holding Company of a nature which would be required to be reported in response to Item 5(f) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended, or any merger, tender offer, consolidation or sale of substantially all of the assets of Holding Company, or related series of such events, as a result of which: (i) the majority shareholders of Holding Company immediately prior to such event hold less than fifty-percent (50%) of the outstanding voting securities of Holding Company or its survivor or successor immediately after such event; or (ii) persons holding less than twenty-percent (20%) of such securities before such event own more than fifty-percent (50%) of such securities after such 2 event; or (iii) persons constituting a majority of the Board of Directors of the Holding Company (the "Holding Company Board") were not directors of the Holding Company for at least twenty-four (24) months preceding the event. 2. TERM OF EMPLOYMENT. Subject to the provisions for termination set forth herein, the term of Employee's employment hereunder shall commence on the date a Change of Control occurs and shall extend until two (2) years after the date of such Change of Control (such term, including any extension thereof shall herein be referred to as the "Term"). Notwithstanding the foregoing, this Agreement shall automatically terminate (and the Term shall thereupon end) without notice when Employee attains sixty-five (65) years of age. 3. DUTIES OF EMPLOYEE. During the Term, Employee shall be the Executive Vice President of the Bank and shall perform such duties and responsibilities for the Bank as may be assigned by the Bank and which are not unreasonably inconsistent with the duties currently being performed by Employee; provided, however, that such duties shall be performed in or from the principal executive offices of Bank, currently located in Michigan City, Indiana. Employee shall not be required to be absent from the location of the principal executive offices of Bank on travel status or otherwise more than thirty (30) days in any calendar year. Bank shall not, without the written consent of Employee, relocate or transfer Employee to a location more than thirty (30) miles from his principal residence. During the Term, Employee shall devote substantially all business time, attention and energy, and reasonable best efforts, to the interests and business of the Bank and to the performance of the Employee's duties and responsibilities on behalf of the Bank. Employee may use his discretion in fixing the hours and schedule of work consistent with the proper discharge of the Employee's duties. Employee, subject to the direction and control of the Bank's Board of Directors ("Bank Board") and Chief Executive Officer, shall have all power and authority commensurate with the Employee's status and necessary to perform the Employee's duties hereunder. So long as Employee is employed by Bank pursuant to this Agreement, Employee shall be entitled to office space and working conditions consistent with the position as __________________. The Bank shall provide Employee with such assistance and working accommodations as are suitable to the character of the position with the Bank and as are adequate for the performance of the Employee's duties. 4. COMPENSATION. Employee's basic annual salary as _____________________ ("Base Salary") shall be the Employee's basic annual salary at the time of the Change of Control. Such Base Salary shall be payable in accordance with the Bank's standard payroll practices. The rate of Employee's Base Salary shall be reviewed by the Bank Board not less often than annually and may be increased, but not decreased, from time to time in such amounts as the Board in its discretion may determine. Any and all increases in Employee's salary pursuant to this Section shall cause the level of Base Salary to be increased by the amount of each such increase for purposes of this Agreement. The increased level of Base Salary as provided in this Section shall become the level of Base Salary for the remainder of the Term until there is a further increase in Base Salary as provided herein. Such salary payments shall be subject to the withholding of applicable income and employment taxes and other appropriate and customary amounts. 2 3 5. VACATION. During the Term, Employee shall be entitled to the number of weeks per calendar year of paid vacation in effect for the Employee upon the Change in Control as increased in accordance with the Bank's vacation policy then in effect or as changed from time to time, but provided that such vacation may not be decreased below that amount in effect on the date of the Change in Control. Such vacation shall be utilized at such times when the Employee's absence will not materially impair Bank's normal business functions. Employee shall not be entitled to any additional compensation for any unused and lapsed vacation time. In addition to the vacation described above, Employee also shall be entitled to all paid holidays customarily given by Bank to its officers. 6. OTHER BENEFITS. The following shall apply with respect to Employee's coverage by and participation under employee benefit plans and programs sponsored or otherwise made available by the Bank. (A) During the Term, Employee shall be entitled to participate in or receive benefits under (i) any life, health, hospitalization, medical, dental, disability or other insurance policy or plan, (ii) pension, retirement or employee stock ownership plan, (iii) bonus or profit-sharing plan or program, (iv) deferred compensation plan or arrangement, and (v) any other employee benefit plan, program or arrangement, made available by Bank on the date of this Agreement and from time to time in the future to Bank's directors, officers and employees on a basis consistent with the terms, conditions and overall administration of the foregoing plans, programs or arrangements and with respect to which Employee is otherwise eligible to participate or receive benefits. (B) During the Term, Employee shall be entitled to receive such other benefits or participate in such other activities as the Employee participated in or was entitled to receive on the date of the Change in Control, including but not limited to bonus or incentive plans, use of company cars, or payment of membership fees to clubs and organizations, but this provision does not grant the Employee any greater benefits than the Employee had in effect on the date of the Change in Control. 7. EXPENSES. The Bank shall pay or reimburse Employee for all reasonable expenses actually incurred or paid by the Employee in the performance of services rendered by the Employee pursuant to this Agreement. Such expenses shall be supported by the documentary evidence required to substantiate them as income tax deductions for the Bank. Employee shall attend, at the Employee's discretion, those professional meetings, conventions and/or similar functions that Employee and Bank mutually deem appropriate and useful for the purposes of keeping abreast of current developments in the industry and/or promoting the interests of Bank. 8. TERMINATION. Subject to the respective continuing obligations of the parties, including but not limited to those set forth in Section 10 below, Employee's employment by Bank may be terminated prior to the expiration of the Term as follows: 3 4 (A) Bank Board or Chief Executive Officer, upon written notice to Employee, may terminate Employee's employment with Bank immediately for cause. For purposes of this subsection 8(A), "cause" shall be defined as (i) personal dishonesty, (ii) incompetence, (iii) willful misconduct, (iv) willful violation of any law, rule, or regulation (other than traffic violations or smaller offenses) or final cease-and-desist order, or (v) any material breach of any term, condition or covenant of this Agreement. (B) Bank Board or Chief Executive Officer may terminate Employee's employment with Bank without cause at any time; provided, however, that the "date of termination" for purpose of determining benefits payable to Employee under Section 6 hereof shall be the date which is thirty (30) days after Employee receives written notice of such termination. (C) Employee, by written notice to Bank, may terminate his employment with Bank immediately for cause. For purposes of this subsection 8(C), "cause" shall be defined as: (i) any action by Bank Board or the Chief Executive Officer to remove the Employee as Executive Vice President of Bank, except where Bank Board or the Chief Executive Officer properly acts to remove Employee from such office for "cause" as defined in subsection 8(A) hereof; (ii) any action by Bank Board or the Chief Executive Officer to materially eliminate, limit, increase, or modify Employee's duties and/or authority as ________________ of Bank (including authority, subject to corporate controls no more restrictive than those in effect on the date hereof, to hire and discharge employees who are not bona fide officers of Employer); (iii) any failure of Bank or Holding Company to obtain the assumption of the obligation to perform this Agreement by any successor as contemplated in Section 19 hereof; or (iv) any intentional breach by Bank of a term, condition or covenant of this Agreement. (D) Employee, upon sixty (60) days written notice to Bank, may terminate his employment with Bank without cause. (E) Employee's employment with Bank shall terminate in the event of Employee's death or disability. For purposes hereof, "disability" shall be defined as Employee's inability by reason of illness or other physical or mental incapacity to perform the duties required by the Employee's employment for any consecutive one hundred eighty (180) day period. Notice of any termination by Bank because of Employee's "disability" shall be given to Employee prior to the full resumption by him of the performance of such duties. 9. COMPENSATION UPON TERMINATION. In the event of termination of Employee's employment with Bank pursuant to Section 8 hereof, compensation shall continue to be paid by Bank to Employee as follows: (A) In the event of termination pursuant to subsection 8(A), 8(B), 8(C) or 8(D), compensation provided for herein (including Base Salary) shall continue to be paid, and Employee shall continue to participate in the employment benefit, retirement, and compensation plans and other perquisites as provided in Section 6 hereof, through the date of termination specified in the notice of termination. Any benefits payable under insurance, health, retirement and bonus plans as a result of Employer's participation in such plans through such date shall be paid when due under those plans. The date of termination specified in any notice of termination 4 5 pursuant to subsection 8(A) shall be no later than the last business day of the month in which said notice is provided to Employee. (B) In the event of termination pursuant to subsection 8(E), compensation provided for herein (including Base Salary) shall continue to be paid, and Employee shall continue to participate in the employment benefit, retirement, and compensation plans and other perquisites as provided in Section 6 hereof, (i) in the event of Employee's death, through the date of death, or (ii) in the event of Employee's disability, through the date of proper notice of disability as required by subsection 8 (E). Any benefits payable under insurance, health, retirement and bonus plans as a result of Bank's participation in such plans through such date shall be paid when due under those plans. 10. NONSOLICITATION COVENANTS OF EMPLOYEE. In order to induce Bank to enter into this Agreement, Employee hereby agrees as follows: (A) During the Term and for a period of two (2) years after termination of such employment for any reason Employee shall not divulge or furnish any trade secrets (as defined in IND. CODE Section 24-2-3-2) of Bank or any confidential information acquired by him while employed by Bank concerning the policies, plans, procedures or customers of Bank to any person, firm or corporation, other than Bank or upon its written request, or use any such trade secret or confidential information directly or indirectly for Employee's own benefit or for the benefit of any person, firm or corporation other than Bank, since such trade secrets and confidential information are confidential and shall at all times remain the property of Bank. (B) During the Term and for a period of two (2) years after termination of Employee's employment by Bank for reasons other than those set forth in subsections 8(B) or 8(C) of this Agreement, Employee shall not directly or indirectly provide banking or bank-related services to or solicit the banking or bank-related business of any person, firm, company or other business entity that is doing business with the Bank, or assist any actual or potential competitor of Bank to provide banking or bank-related services to or solicit banking or bank-related business from any such person, firm, company, or business entity, in any such place. (C) If Employee's employment by Bank is terminated for any reasons, Employee will turn over immediately thereafter to Bank all business correspondence, letters, papers, reports, customers' lists, financial statements, credit reports or other confidential information or documents of bank or its affiliates in the possession or control of Employee, all of which writings are and will continue to be the sole and exclusive property of Bank or its affiliates. (D) If Employee is terminated by Bank during the Term for reasons set forth in subsection 8(B) of this Agreement, Employee shall have no obligations to Bank with respect to nonsolicitation under Section 10(B), but shall continue with respect to confidential information, trade secrets and return of property under Section 10(A) and 10(C). 11. NOTICE OF TERMINATION. Any termination of Employee's employment with Bank as contemplated by Section 8 hereof, except in the circumstances of Employee's death, shall be communicated by written "Notice of Termination" by the terminating party to the other party 5 6 hereto. Any Notice of Termination pursuant to subsections 8(A), 8(C), or 8(E) shall indicate the specific provisions of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. 12. EMPLOYEE DISCIPLINE. (A) If Employee is suspended and/or temporarily prohibited from participating in the conduct of Bank's or any affiliates' affairs by a notice from the Comptroller of the Currency or other applicable regulatory body having jurisdiction, Bank's obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Bank shall (i) pay Employee all or part of the compensation withheld while its obligations under this Agreement were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended. (B) If Employee is removed and/or permanently prohibited from participating in the conduct of Bank's or any affiliates' affairs by an order issued from the Comptroller of the Currency or other applicable regulatory body having jurisdiction, all obligations of Bank under this Agreement shall terminate as of the effective date of the Order, although the vested rights of the parties to the Agreement shall not be affected. 13. TAX PAYMENTS. Anything in this Agreement to the contrary notwithstanding, in the event Bank's independent public accountants determine that any payment by Bank to or for the benefit of Employee, whether paid or payable pursuant to the terms of this Agreement, would be non-deductible by Employer for federal income tax purposes because of Section 280G of the Internal Revenue Code, the amount payable to or for the benefit of Employee pursuant to the Agreement shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Section 13, the "Reduced Amount" shall be the amount which maximizes the amount payable without causing the payment to be non-deductible by Bank because of Section 280G of the Internal Revenue Code. 14. SUCCESSORS AND ASSIGNS. This Agreement is binding upon and shall be for the benefit of the successors and assigns of the Bank, including any corporation or any other form of business organization with which the Bank may merge or consolidate, or to which it may transfer substantially all of its assets. This Agreement may not be assigned by the Bank without the prior written consent of Employee, which consent shall not be unreasonably withheld. The Agreement will also be binding upon, enforceable against, and inure to the benefit of the Employee and the Employee's heirs and representatives, and nothing herein is intended to confer any right, remedy or benefit upon any other person. Employee shall not assign his interest in this Agreement or any part thereof. 15. CONSENT OF THE BANK. Any act, request, approval, consent or opinion of the Bank under this Agreement, must be in writing and may be authorized, given or expressed only by resolution of the Bank Board, or by such other person as the Bank Board may designate. 16. NOTICES. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been given when delivered or 6 7 mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (A) If to Employee: --------------------------- (B) If to Bank: Horizon Bank, N. A. 515 Franklin Square Michigan City, Indiana 46360 17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana applicable to contracts made and to be performed therein. 18. ENFORCEMENT EXPENSES. If a dispute arises regarding the termination of Employee pursuant to Section 8 above or as to the interpretation or enforcement of this Agreement and Employee obtains a final judgment in the Employee's favor in a court of competent jurisdiction or the Employee's claim is settled by Bank prior to the rendering of a judgment by such a court, all reasonable legal fees and expenses incurred by Employee in contesting or disputing any such termination or seeking to obtain or enforce any right or benefit provided for in this Agreement or otherwise pursuing his claims shall be paid by Bank (except as otherwise decided in any settlement between the parties) to the extent permitted by law. 19. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding of the parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter, and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties hereto. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. 20. CONSTRUCTION. Headings contained in this Agreement are for convenience of reference only and shall not be used in the interpretation of this Agreement. References herein to Sections are to the sections of this Agreement. 21. SUCCESSOR TO BANK. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. Failure of the Bank to obtain such agreement prior to the effectiveness of any such succession shall be a material intentional breach of this Agreement and shall entitle Employee to terminate employment with Bank pursuant to subsection 8(C) hereof. As used in this 7 8 Agreement, "Bank" shall mean the Bank as herein before defined and any successor to its business and/or assets. 22. SEVERABILITY. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited or such payment reduced, but only to the extent necessary to render such provision and this Agreement enforceable. 23. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Bank: Horizon Bank, N. A. By: ------------------------------ PRINTED: Title: --------------------------- Employee By: ------------------------------ Printed: --------------------------------- Address IM-262314-1 9 ADDENDUM TO AGREEMENT --------------------- Horizon Bank, N.A. ("Bank") and ______________ (the "Employee") being parties to that certain Agreement dated ________, 1999 (the "Agreement") with respect the Employee's rights and responsibilities upon a "Change in Control" (as defined in the Agreement) of the Bank or its parent corporation, Horizon Bancorp ("Holding Company"), hereby agree to enter into this Addendum as follows: 1. COMPENSATION UPON CHANGE IN CONTROL. Notwithstanding any provision in the Agreement to the contrary, at the time of a Change in Control, the Employee shall have the option to resign from his position and receive a severance payment equal to two (2) times the Employee's Base Salary in effect at the time of the resignation. In the event that the Employee does not resign, but the Employee is then terminated or forced to resign as a result of a Change in Control, whether immediately or, at any time during the term of the Agreement pursuant to Section 8(B) or 8(C) of the Agreement, the Employee shall receive a severance payment equal to two (2) times the Employee's Base Salary in effect at the time the termination occurs. 2. AMENDMENT. In the event of any conflict between the terms of this Addendum and this Agreement, the terms of this Addendum shall control and the Agreement shall be deemed to be amended to the extent necessary to effectuate the purposes of the Addendum. In all other respects, the Agreement shall be and remain in full force and effect pursuant to the terms thereof. 3. DEFINITIONS. All defined terms used but not otherwise defined herein shall have the meanings ascribed to herein the Agreement. In witness whereof, the Bank and the Employee have executed this Addendum as of this ________ day of _______________________, 2000. By ----------------------------- Printed -------------------------- Title ---------------------------- EMPLOYEE --------------------------------- Printed: --------------------------------- --------------------------------- address EX-10.11 5 EXHIBIT 10.11 1 Exhibit 10.11 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT, executed this _____ day of ____________, 1999 by and between HORIZON BANK, N.A. a national banking association ("Bank"), and JAMES D. NEFF ("Employee"); W I T N E S S E T H: WHEREAS, Bank desires to encourage Employee to make valuable contributions to Employer's business operations and not to seek or accept employment elsewhere; WHEREAS, Employee desires to be assured of a secured minimum compensation from Bank for his services over a defined term; WHEREAS, Bank desires to provide fair and reasonable benefits to Employee on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Employee is willing to serve as an employee of the Bank on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. EMPLOYMENT. The Bank hereby employs the Employee to render full-time services to the Bank as Senior Vice President-Mortgage Warehousing Division for the period commencing on the effective date of this Agreement and extending through the Term specified in Section 2 until such full-time services are terminated as hereinafter provided. The Employee hereby accepts and agrees to such employment. 2. TERM. Subject to the provisions for termination of this Agreement contained in Section 8, the term of this Agreement shall be for a period of two (2) years from the effective date hereof ("Term"). 3. DUTIES. (a) During the period of his employment hereunder, the Employee agrees to diligently perform such executive duties and administrative functions which are appropriate to the office of Senior Vice President-Mortgage Warehousing Division as, from time to time, shall be assigned to him by the Board of Directors (the "Board") or Chief Executive Officer of the Bank or their designees and he further agrees to give his full business time and attention to, and his best efforts to promote, the business and affairs of the Bank. The Employee further agrees to hold the office of Senior Vice President and such other offices of the Bank to which he may be elected or appointed and to perform and discharge the duties thereof faithfully and to the best of his ability. 2 (b) The Employee, subject to the direction and control of the Board, shall have all power and authority commensurate with his status and necessary to perform his duties hereunder. The Bank shall provide the Employee with such assistance and working accommodations as are suitable to the character of his position with the Bank as are adequate for the performance of his duties. 4. COMPENSATION. (a) During the period of his employment hereunder, the Employee's basic annual salary as Senior Vice President shall be One Hundred Ten Thousand Dollars ($110,000.00). Such salary shall be payable in cash on the same schedule as all other salaried employees. Such salary payments shall be subject to the withholding of applicable income and employment taxes and other appropriate and customary amounts. Upon any change in the Employee's salary, a written addendum to this Employment Agreement shall be executed by the Employee and the appropriate officer or officers of the Bank. (b) In addition to his basic annual salary as Senior Vice President, the Employee shall be entitled to receive a cash bonus payable annually as described in Schedule A hereto commencing in 2000, unless this Agreement is terminated as provided for herein, and subject to the terms and conditions set forth in Schedule A. (c) In addition to the salary and bonus compensation described above, Employee shall also receive a one-time signing bonus in the amount of Twenty-Nine Thousand Dollars ($29,000.00) effective upon execution of this Agreement. 5. EMPLOYEE BENEFITS. During the Term of his employment hereunder, the following shall apply with respect to the Employee's coverage by and participation under employee benefit plans and programs sponsored or otherwise made available by the Bank: (a) Subject to the more specific provisions of subsection (c) below, the Employee shall be entitled to participate in any retirement, deferred compensation, life, accident, health, hospitalization and any other employee benefit plan or program, excluding bonus programs, that is generally available to the employees of the Bank, if and to the extent the Employee is eligible to participate thereunder in accordance with the provisions thereof. Nothing herein shall be construed to require the Bank to institute any particular benefit plan or program or to prevent the Bank from modifying or terminating any plan or program it may determine to adopt from time to time. Further, the Employee shall be treated as a new employee for purposes of eligibility and vesting under any employee benefit plan or program that is available to the executive officers of the Bank. (b) During the Term, Employee shall be entitled to four (4) weeks per calendar year of paid vacation, which shall be utilized at such times when his absence will not materially impair the Bank's normal business functions. Any unused vacation time in any calendar year shall lapse, and Employee shall not be entitled to any additional compensation for any such 2 3 unused and lapsed vacation time. In addition to the vacation described above, Employee also shall be entitled to all paid holidays customarily given by the Bank to its officers. (c) The Employee shall be entitled to participate in the following employee benefit plans, subject to the terms and conditions of the specific plan documents or agreements provided with respect to each plan: (i) Stock Options. The Employee shall be granted options under Stock Option and Stock Appreciation Rights program of Horizon Bancorp ("Horizon"), the parent company of the Bank for 2,000 shares of Horizon Stock, in accordance with Horizon's standard agreement governing the program. The grant hereunder will only be effective if this Employment Agreement is executed, notwithstanding that actual employment may have commenced prior to such date. (ii) 401(k) Retirement Plan. The Employee shall be entitled to participate in Horizon's 401(k) Plan in accordance with the terms and conditions of the plan documents. The Employee's enrollment date will be November 1, 2000. 6. REIMBURSEMENT OF EXPENSES. The Bank shall pay to the Employee, or to the extent paid in the first instance by the Employee, shall reimburse the Employee for, travel, entertainment and similar expenses he incurs in connection with the performance of his duties hereunder in accordance with the Bank's policies governing such activities, as such policies may be amended or modified from time to time. 7. INSURANCE. The Bank shall have the right to maintain one (1) or more insurance policies against the life of the Employee in such face amounts as the Board considers appropriate, and to name itself as beneficiary under such policies. 8. TERMINATION. (a) At any time during the term of this Agreement, the Board shall have the right to terminate the Employee's employment hereunder for any reason, upon thirty (30) days' prior written notice to the Employee and the Employee shall have the right to terminate his employment hereunder at any time and for any reason, upon thirty (30) days' prior written notice to the Bank. (b) This Agreement shall also terminate on the death of the Employee. (c) The Bank shall have the right to terminate the Employee's employment hereunder "for cause" upon thirty (30) days' prior written notice. For purposes of this Agreement, the Employee may be terminated "for cause" if his employment is terminated by the Bank as a result of any of the following: 3 4 (i) The failure of the Mortgage Warehousing Division to attain at least break even profitability as determined by the Bank based upon the Division's return on equity, on a month to month basis, by September, 2000. (ii) An action by the Employee which involves fraud, willful misfeasance or gross negligence in connection with the performance of his duties hereunder; (iii) The requirement or direction of a federal or state regulatory agency which has jurisdiction over the Bank to terminate the employment of the Employee; (iv) Conviction of the Employee due to the commission of any criminal offense which involves dishonesty or breach of trust; or (v) Any breach by the Employee of a material term, condition or covenant hereunder or any other agreement between the Employee and the Bank. (d) The Employee may also be terminated upon thirty (30) days prior written notice in the event of a Change in Control (as defined herein). For purposes of this Agreement, "Change in Control" of the Bank shall mean (i) a change in control of Horizon, of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Act of 1934, or (ii) a transfer of more than fifty percent (50%) of the stock of Bank. (e) Any termination of the Employee's employment by the Bank or by the Employee shall be communicated by written Notice of Termination to the non-terminating party. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated. (f) As used herein, "Date of Termination" shall mean (i) if the Employee's employment is terminated by his death, the date of his death, (ii) if the Employee's employment is terminated for any other reason, the date specified in the Notice of Termination; provided that, if within thirty (30) days after any Notice of Termination is given, the parties who receive such Notice of Termination notify the other parties that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 9. COMPENSATION UPON TERMINATION. (a) In the event that the Bank terminates the employment of the Employee pursuant to Section 8(a), the Employee shall continue for the remainder of the Term to receive his full compensation, as provided in Section 4(a), at a rate equal to the Employee's basic compensation 4 5 received by the Employee for the twelve (12) months prior to the Date of Termination. Such payments shall be made by the Bank at the same intervals as his basic annual compensation and shall continue for the remainder of the Term, together with all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement, provided, however, that the Bank's obligations to make payments hereunder shall be reduced by the amount the Employee receives in compensation and cash benefits from any other employer or any person to or for whom Employee is providing services as a consultant or independent contractor. (b) If the Employee terminates his employment pursuant to Section 8(a) or the Bank terminates the Employee's employment for cause, the Bank shall pay the Employee his (i) basic annual salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; and (ii) all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement. (c) All payments due under this Section 9 shall survive the Employee's death and shall be payable thereafter to the Employee's spouse or his estate, as the case may be, in accordance with this Agreement, provided that the Bank reserves the right, in its sole discretion, to make such payments in one lump sum discounted to present value, rather than in periodic payments as required above. 10. NOTICES. All communications, notices and elections pursuant to Section 9, and all other notices, requests, consents or demands given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered to, or mailed by prepaid registered or certified mail addressed to the party for whom intended as follows, or to such other address as may be furnished by such party in the manner provided herein: If to the Employee: James D. Neff 134 Country Club Drive LaPorte, Indiana 46350 If to the Bank: Horizon Bank, N.A. 515 Franklin Square Michigan City, Indiana 46360 Attention: President 11. GOVERNING LAW. This Agreement has been executed and delivered in the State of Indiana and shall be construed in accordance with and governed by the laws of the State of Indiana, without giving effect to any conflicts of laws rules. 12. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding of the parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter, and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties hereto. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. 5 6 13. CONSTRUCTION. Headings contained in this Agreement are for convenience of reference only and shall not be used in the interpretation of this Agreement. References herein to Sections are to the sections of this Agreement. As used herein, the singular includes the plural and the masculine, feminine and neuter gender each includes the others where the context so indicates. 14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, enforceable against, and inure to the benefit of, the parties hereto and their respective heirs, successors and assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. The rights, duties and obligations of the Employee hereunder may not be assigned. This Agreement may not be assigned by the Bank without the prior written consent of the Employee, which consent shall not be unreasonably withheld. 15. SEVERABILITY. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited or payment reduced, but only to the extent necessary to render such provision and this Agreement enforceable. 16. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first set forth above. EMPLOYEE ------------------------------------- James D. Neff ATTEST: (SEAL) HORIZON BANK, N.A. By: By: ---------------------------- ---------------------------------- Printed: Printed: Craig M. Dwight ----------------------- Title: Title: President and Chief Executive Officer ------------------------- 6 7 SCHEDULE A TO EMPLOYMENT AGREEMENT BETWEEN HORIZON BANK, N.A. AND JAMES D. NEFF DATED _______________, 1999 Section 4(b) INCENTIVE COMPENSATION. ----------------------- (1) Within __________ (_____) days following each December 31, commencing December 31, 2000, the Bank shall pay the Employee, subject to certain conditions set forth herein, an incentive compensation bonus provided that the Mortgage Warehousing Division meets or exceeds certain Return on Equity ("ROE") goals. The goals and amounts of bonus are as follows: Goal Bonus ------------------------- ----------------------------- 12% ROE 25% of annual base salary 15% ROE 40% of annual base salary 20% ROE or above 50% of annual base salary (2) If the Division exceeds 20% ROE in any fiscal year, the Employee shall receive an additional bonus equal to 15% of the dollar amount of net income that exceeds the amount necessary to reach the 20% ROE target. (3) In no event will the amounts paid in Incentive Compensation hereunder, in the aggregate with incentive compensation paid to the Vice President of the Mortgage Warehousing Division, exceed $250,000 in any fiscal year and the Bank shall reduce pro rata the amount paid to the Employee hereunder and such other officer to avoid exceeding such limitation. (4) For each of fiscal year 2000 and 2001, the Employee shall be guaranteed a minimum incentive compensation bonus of $15,000 under paragraph (1) above, even if the ROE goals are not met. (5) The Bank will not materially alter or amend this schedule through fiscal year 2004 unless agreed to in writing by the Bank and the Employee. 7 8 BANK: EMPLOYEE: HORIZON BANK, N.A. By: ---------------------------------- ------------------------------ Printed: Craig M. Dwight James D. Neff Title: President and Chief Executive Officer IM-267892-1 8 EX-13 6 EXHIBIT 13 1 Exhibit 13 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) ANALYSIS OF FINANCIAL CONDITION Investment Securities Horizon maintains a high quality investment portfolio with very low credit risk. Investment securities totaled $67.880 million at December 31, 1999 and consisted of U.S. Treasury and Government Agency securities of $29.580 million (43.5%); Municipal securities of $4.100 million (6%); Equity securities of $286 thousand (.5%); and Mortgage-Backed securities of $33.914 million (50%). As indicated above, the majority of the investment portfolio consists of mortgage-backed securities. These instruments are secured by residential mortgages of varying maturities. Principal and interest payments are received monthly as the underlying mortgages are repaid. These payments also include prepayments of mortgage balances as borrowers either sell their homes or refinance their mortgages. Therefore, mortgage-backed securities have maturities that are stated in terms of average life. The average life is the average amount of time that each principal dollar is expected to be outstanding. As of December 31, 1999, the mortgage-backed securities in the investment portfolio had an average life of 5.3 years. Mortgage-backed securities that have interest rates above current market rates are purchased at a premium. These securities may experience a significant increase in prepayments when lower market interest rates create an incentive for the borrower to refinance the underlying mortgage. This may result in a decrease of current income. That risk is mitigated by a shorter average life. Management currently believes that prepayment risk on these securities is nominal. During the second quarter of 1999, debt securities with an amortized cost of $10.050 million were transferred from held to maturity to available for sale in order to minimize the tax consequences of holding tax-exempt securities. The majority of the tax-exempt portfolio was subsequently sold. Therefore, at December 31, 1999, all investment securities were classified as available for sale compared to 82.3% at December 31, 1998. Securities classified as available for sale are carried at their fair value, with both unrealized gains and losses added or subtracted, net of tax, directly to stockholders' equity. This accounting method adds potential volatility to stockholders' equity, but net income is not affected unless securities are sold. Net depreciation on these securities totaled $1.980 million, which resulted in a $1.201 million reduction, net of tax, to stockholders' equity at December 31, 1999. This compared to a $336 thousand, net of tax, addition to stockholders' equity at December 31, 1998. As a member of the Federal Reserve and Federal Home Loan Bank system, Horizon is required to maintain an investment in the common stock of each entity. The investment in common stock is based on a predetermined formula. At December 31, 1999, Horizon has investments in the common stock of the Federal Reserve and Federal Home Loan Bank totaling $5.897 million compared to $3.973 million at December 31, 1998. At December 31, 1999, Horizon does not maintain a trading account and is not using any derivative products for hedging or other purposes. HORIZON BANCORP & SUBSIDIARIES 15 2 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) LOANS Total loans, the principal earning asset of the Bank, were $394.357 million at December 31, 1999. The current level of loans is an increase of 35.8% from the December 31, 1998 level of $290.346 million. As the table below indicates, the increases are primarily related to the mortgage warehousing business that was started in November 1999.

DOLLAR PERCENT DECEMBER 31 1999 1998 CHANGE CHANGE - -------------------------------------------------------------------------------------------- Real estate loans 1 - 4 family $152,999 $150,066 2,933 1.95% Multi-family 279 312 (33) -10.58 Other 1,439 2,012 (573) -28.48 ------------------------------------ Total 154,717 152,390 2,327 1.53 ------------------------------------ Commercial loans Working capital and equipment 67,480 61,725 5,755 9.32 Real estate, including agriculture 8,428 5,277 3,151 59.71 Tax exempt 7,903 8,673 (770) -8.88 Other 5,550 1,007 4,543 451.14 ------------------------------------ Total 89,361 76,682 12,679 16.53 ------------------------------------ Consumer loans Auto 14,060 16,411 (2,351) -14.33 Recreation 1,567 1,381 186 13.47 Real estate/home improvement 30,974 24,210 6,764 27.94 Home equity 6,470 2,782 3,688 132.57 Credit cards 5,092 5,637 (545) -9.67 Unsecured 4,126 3,229 897 27.78 Other 2,448 7,624 (5,176) -67.89 ------------------------------------ Total 64,737 61,274 3,463 5.65 ------------------------------------ Mortgage warehouse loans Prime 10,410 10,410 Sub-Prime 75,132 75,132 ------------------------------------ Total 85,542 85,542 ------------------------------------ Grand total $394,357 $290,346 $ 104,011 35.82% ===================================================

The acceptance and management of credit risk is an integral part of Bank's business as a financial intermediary. The Bank has established rigorous underwriting standards including a policy that monitors the lending function through strict administrative and reporting requirements. The Bank engages an independent third-party loan review function that regularly reviews asset quality. HORIZON BANCORP & SUBSIDIARIES 16 3 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) REAL ESTATE LOANS Real estate loans totaled $154.717 million or 39% of total loans as of December 31, 1999, compared to $152.390 million or 52% as of December 31, 1998. This category consists of home mortgages that generally require a loan to value of at least 80%. Some special guaranteed or insured real estate loan programs do permit a higher loan to collateral value ratio. In addition to the customary real estate loans described above, the Bank also has outstanding on December 31, 1999, $6.470 million in home equity lines of credit and $2.782 million at December 31, 1998. Credit lines normally limit the loan to collateral value to no more than 89%. These loans are classified as consumer loans in the table above and in Note 4 to the consolidated financial statements. Residential real estate lending is a highly competitive business. As of December 31, 1999, the real estate loan portfolio reflected a wide range of interest rate and repayment patterns, but could generally be categorized as follows:

1999 1998 ----------------------------------------------------------- PERCENT OF PERCENT OF AMOUNT PORTFOLIO YIELD AMOUNT PORTFOLIO YIELD ----------------------------------------------------------- Fixed rate Monthly payment $109,967 71.08% 7.27% $ 99,168 65.08% 7.43% Biweekly payment 16,362 10.57 7.52 18,718 12.28 7.47 Adjustable rate Monthly payment 28,051 18.13 7.44 33,963 22.28 7.20 Biweekly payment 337 .22 7.71 541 .36 7.75 ------------------- -------------------- Total $154,717 100.00% 7.32% $152,390 100.00% 7.69% =================== ====================

In addition to the real estate loan portfolio, the Bank sold real estate loans, which it services. On December 31, 1999, the portfolio serviced consisted of 448 loans totaling $29.480 million. Total loans sold during 1999 totaled $11.953 million. COMMERCIAL LOANS Commercial loans totaled $89.361 million or 22.7% of total loans as of December 31, 1999, compared to $76.682 million or 26% as of December 31, 1998. Commercial loans consisted of the following types of loans at December 31: 1999 1998 -------------------------------------------------------- PERCENT OF PERCENT OF NUMBER AMOUNT PORTFOLIO NUMBER AMOUNT PORTFOLIO -------------------------------------------------------- SBA guaranteed loans 21 $ 2,565 2.87% 24 $ 3,028 3.95% Municipal government 47 8,344 9.34 53 9,349 12.19 Lines of credit 158 17,328 19.39 143 15,159 19.77 Real estate and equipment term loans 337 61,124 68.40 297 49,146 64.09 -------------------------------------------------------- Total 563 $89,361 100.00% 517 $76,682 100.00% ======================================================== HORIZON BANCORP & SUBSIDIARIES 17 4 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) CONSUMER LOANS Consumer loans totaled $64.737 million or 16% of total loans as of December 31, 1999, compared to $61.274million or 21% as of December 31, 1998. The total consumer loan portfolio increased 5.65% in 1999. MORTGAGE WAREHOUSE LOANS In November 1999, Horizon began a mortgage warehousing program. Horizon enters into agreements with mortgage companies and purchases, at its discretion, mortgage loans from mortgage companies at par, net of certain fees, and later sells them back to the mortgage companies at the same amount and without recourse provisions. Interest income is recorded based upon a rate of interest tied to the prime rate during the funding period, not the rates on the individual note. Such loans are reviewed, prior to purchase, for evidence that the loans are of secondary market quality and meet Horizon's internal underwriting guidelines. An assignment of the mortgage to Horizon is required. In addition, Horizon takes possession of the original note and forwards such note to the end investor. In the event that the end investor would not honor this commitment and the mortgage companies would not be able to honor their repurchase obligations, Horizon would then need to sell these loans in the secondary market at the fair value of these loans. Loans are typically resold within 30 days and are seldom held more than 90 days. ALLOWANCE AND PROVISION FOR LOAN LOSSES The allowance for loan losses represents Horizon's estimate of potential credit losses associated with the loan portfolio. The identification of loans that may have potential losses is necessarily subjective. Therefore, a general reserve is maintained to cover all potential losses within the entire loan portfolio. Horizon utilizes a loan grading system that helps identify, monitor, and address asset quality problems, should they arise, in an adequate and timely manner. Each quarter, various factors affecting the quality of the loan portfolio are reviewed. Large credits are reviewed on an individual basis for loss potential. Other loans are reviewed as a group based upon previous trends of loss experience. Horizon also reviews the current and anticipated economic conditions of its lending market to determine the effect they may have on the loss experience of the loan portfolio. The methodology described above is consistent with the Office of the Comptroller of the Currency's guidance in determining the adequacy of the allowance for loan losses. At December 31, 1999, the allowance for loan losses was .83% of total loans outstanding, compared to .96% at December 31, 1998. During 1999, the provision for loan losses totaled $1.350 million (including $250 thousand for The Loan Store, which was discontinued in 1999) compared to $1.000 million in 1998. NONPERFORMING LOANS Nonperforming loans are defined as loans that are greater than 90 days delinquent or have had the accrual of interest discontinued by management. Management continues to work diligently toward returning nonperforming loans to an earning asset basis. Nonperforming loans for the previous three years ending December 31 are as follows: 1999 1998 1997 - -------------------------------------------------------------------------------- Nonperforming loans $ 1,574 $ 894 $ 1,181 Nonperforming loans total 48% of the allowance for loan losses at December 31, 1999 compared to 32% and 44% of the allowance for loan losses on December 31, 1998 and 1997, respectively. HORIZON BANCORP & SUBSIDIARIES 18 5 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) A loan becomes impaired when, based on current information, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is classified as impaired, the degree of impairment must be recognized by estimating future cash flows from the debtor. The present value of these cash flows is computed at a discount rate based on the interest rate contained in the loan agreement. However, if a particular loan has a determinable market value, the creditor may use that value. Also, if the loan is secured and considered collateral dependent, the creditor may use the fair value of the collateral. Smaller-balance, homogeneous loans are evaluated for impairment in total. Such loans include residential first mortgage loans secured by 1 - 4 family residences, residential construction loans, automobile, home equity, second mortgage loans and mortgage warehouse loans. Commercial loans and mortgage loans secured by other properties are evaluated individually for impairment. When analysis of borrower operating results and financial condition indicate that underlying cash flows of a borrower's business are not adequate to meet its debt service requirements, the loan is evaluated for impairment. Often this is associated with a delay or shortfall in payments of 30 days or more. Loans are generally moved to nonaccrual status when 90 days or more past due. These loans are often considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Other real estate owned (OREO) for the previous three years ending December 31 is as follows: 1999 1998 1997 - -------------------------------------------------------------------------------- Other real estate owned $ 0 $ 133 $ 125 DEPOSITS The primary source of funds for the Bank comes from the acceptance of demand and time deposits. However, at times the Bank will use its ability to borrow funds from the Federal Home Loan Bank when it can do so at interest rates and terms that are superior to those required for deposited funds. Total deposits were $363.668 million at December 31, 1999 compared to $322.401 million at December 31, 1998 or an increase of 12.80%. Below is a table of average deposits and rates by category for the pervious three years ended December 31.

AVERAGE BALANCE OUTSTANDING FOR AVERAGE RATE PAID FOR THE YEAR THE YEAR ENDED DECEMBER 31 ENDED DECEMBER 31 - --------------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------- Noninterest-bearing demand deposits $ 43,258 $ 58,032 $ 45,016 Interest-bearing demand deposits 45,679 18,088 37,256 2.45% 2.64% 1.62% Savings deposits 45,358 50,194 61,089 1.77 2.17 2.24 Time deposits 203,180 161,029 147,639 5.25 5.64 5.67 ---------------------------------- Total deposits $348,475 $287,343 $291,000 ==================================

During late 1997, Horizon changed its standard consumer checking accounts from interest bearing to noninterest bearing. Remaining in the interest-bearing demand deposits is a high yield consumer account that requires relatively high balances. In early 1999, Horizon began offering a new lower rate interest bearing consumer demand deposit product. These product changes caused the changes in the average balances and average rates paid as displayed in the table above. HORIZON BANCORP & SUBSIDIARIES 19 6 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) -- RETIREMENT PLAN On July 20, 1999, the Board of Directors of Horizon Bancorp authorized the termination of the Horizon Bancorp Employee Stock Ownership Plan ("ESOP"). This decision was based upon a thorough financial analysis of the impact this plan has had on the earnings and capital of Horizon since it's inception and the expected future impact retaining this plan would likely have on Horizon. On December 31, 1999 the debt owed by the ESOP was repaid with the proceeds from the sale of a portion of the unallocated shares to Horizon Bancorp. The remaining shares will be allocated to participants. The termination of the ESOP resulted in an expense of $2.073 million. The expense recorded was based upon a valuation preformed by an independent stock valuation firm who determined that the appraised value of Horizon Bancorp stock was $44.00 as of December 31, 1999. Upon the termination of the ESOP, the retirement plans of Horizon Bancorp will own approximately 24% of the outstanding shares. CAPITAL RESOURCES The capital resources of Horizon and Bank exceed regulatory capital ratios for "well capitalized" banks at December 31, 1999. Stockholders' equity totaled $28.999 million ($7.808 million from ESOP) as of December 31, 1999 compared to $31.886 million ($4.418 million from ESOP) as of December 31, 1998. At year-end 1999, the ratio of stockholders' equity to assets was 5.51% compared to 7.66% for 1998. Horizon's capital to asset ratio decreased during December 1999 as a result of low earnings and the repurchase of treasury shares and as a result of the significant growth in the new mortgage warehousing program. The growth of this new line of business was not anticipated to be as significant when the program was started, however, as a result of a competitor discontinuing their like operations, Horizon's mortgage warehouse program grew quickly. Management has evaluated alternatives to increase capital and has decided to pursue the issuance of pooled trust preferred securities. It is anticipated that this transaction will be completed June 30, 2000. Horizon selectively purchases shares that become available in the market from time to time. During 1999, management purchased 167,245 shares at a cost of $7.619 million compared to 36,785 shares at a cost of $2.115 million, and 22,178 shares at a cost of $1.173 million for 1998 and 1997, respectively. Treasury stock repurchases in 1999 included the repurchase of 107,936 shares totaling $4.749 million from the ESOP plan as part of the termination. Horizon paid dividends in the amount of $1.80 per share in 1999, 1998 and 1997. The dividend pay-out ratio (dividends as a percent of net income) was -344% during 1999 as compared to 114% and 73% in 1998 and 1997, respectively. The dividend pay-out ratio is high because of lower than anticipated earnings. For additional information regarding dividend conditions, see Note 1 of the Notes to the Consolidated Financial Statements. As of December 31, 1999, management is not aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have or are reasonably likely to have a material effect on Horizon's liquidity, capital resources, or operations. TRUST AND INVESTMENT MANAGEMENT Horizon Trust & Investment Management, N.A. is a wholly-owned subsidiary of Horizon Bank, which manages the majority of the trust and investment management accounts. Assets under management have a book value of $362 million at December 31, 1999 compared to $258 million at December 31, 1998. This represents a 40.3% increase from 1998. HORIZON BANCORP & SUBSIDIARIES 20 7 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) The book value of assets held at December 31, 1999 by asset type are as follows: BOOK VALUE PERCENTAGE - -------------------------------------------------------------------------------- Cash $ 711 .20% Money market funds 75,104 20.75 Government and agency bonds 58,640 16.21 Municipal bonds 21,044 5.82 Corporate bonds 31,089 8.59 Common and preferred stock 137,978 38.13 Mutual funds 37,251 10.30 ---------------------- Total $361,817 100.00% ====================== A variety of types of investment accounts including personal trusts, agencies, estates and guardianships, corporate agencies, and employee benefit agencies and trusts are managed by Horizon. The total book values of each of these types of accounts at December 31, 1999 are as follows: BOOK MARKET VALUE PERCENTAGE VALUE PERCENTAGE - -------------------------------------------------------------------------------- Personal $116,689 32.25% $134,353 31.60% Agency 75,791 20.95 94,367 22.20 Employee benefit 113,706 31.43 139,226 32.75 Cash management 35,060 9.69 34,960 8.22 Retail accounts 20,553 5.68 22,173 5.22 Other 18 54 .01 --------------------------------------------------------- Total $361,817 100.00% $425,133 100.00% ========================================================= RESULTS OF OPERATIONS Net Income Consolidated net income/(loss) from continuing operations $(191) thousand or $(.29) per share in 1999, $1.254 million or $1.83 per share in 1998 and $1.997 million or $2.81 per share in 1997. In April 1999, the Board of Directors of Horizon Bancorp approved discontinuing the operations of The Loan Store, Inc., a wholly owned subsidiary of Horizon Bancorp. On August 13, 1999 substantially all of the assets of The Loan Store, Inc. were sold. Losses related to this subsidiary were $163 thousand or $.25 per share in 1999, $171 thousand or $.25 per share in 1998 and $276 thousand or $.39 per share in 1997. Horizon is required to repurchase any loan sold which does not have the lien properly perfected for up to 6 months from the date of sale. There is no material loss anticipated related to these repurchases. NET INTEREST INCOME The primary source of earnings for Horizon is net interest income. Net interest income is the difference between what Horizon has earned on assets it has invested and the interest paid on deposits and other funding sources. The net interest margin is net interest income expressed as a percentage of average earnings assets. Horizon's earning assets consist of loans, investment securities, and interest-bearing balances in banks. HORIZON BANCORP & SUBSIDIARIES 21 8 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

1999 1998 1997 -------------------------------------------------------------------------------------------- AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE -------------------------------------------------------------------------------------------- ASSETS Interest-bearing assets Loans - total (1) (3) $306,142 $ 25,634 8.37% $264,810 $23,346 8.82% $268,919 $24,306 9.04% Taxable investment securities, including FRB and FHLB stock 73,322 4,647 6.34 57,242 3,636 6.35 55,963 3,968 7.09 Nontaxable investment securities (2) 3,417 167 4.89 9,721 447 4.60 10,000 435 4.35 Interest-bearing balances and money market investments (4) 943 43 4.56 773 29 3.75 1,348 60 4.45 Bankers acceptances Federal funds sold 8,375 406 4.85 6,441 345 5.36 4,170 228 5.47 ------------------ ------------------ ------------------ Total interest- bearing assets 392,199 30,897 7.88 338,987 27,803 8.20 340,400 28,997 8.52 -------- -------- -------- Noninterest-earning assets Cash and due from banks 14,083 12,917 13,874 Allowance for loan losses (2,748) (2,826) (2,320) Other assets 24,825 22,328 21,799 -------- -------- -------- Total assets $428,359 $371,406 $373,753 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities Savings deposits $ 45,358 805 1.77 $ 50,194 1,091 2.17 $ 61,089 1,371 2.24 Interest-bearing demand deposits 45,679 1,121 2.45 18,088 477 2.64 37,256 605 1.62 Time deposits 203,180 10,677 5.25 161,029 9,010 5.60 147,639 8,367 5.67 Short-term borrowings 1,173 76 6.48 864 50 5.79 1,911 110 5.76 Long-term debt 55,934 3,086 5.52 47,121 2,658 5.64 43,493 2,484 5.71 ------------------ ------------------ ------------------ Total interest- bearing liabilities 351,324 15,765 4.49 277,296 13,286 4.79 291,388 12,937 4.44 -------- -------- -------- Noninterest-bearing liabilities Demand deposits 43,258 58,032 45,016 Other liabilities 3,615 3,017 3,342 Stockholders' equity 30,162 33,061 34,007 ------ ------ ------ Total liabilities and stockholders' equity $428,359 $371,406 $373,753 ======== ======== ======== Net interest income $ 15,132 $ 14,517 $ 16,060 ======== ======== ======== Net interest income as a percent of interest-bearing assets 3.86% 4.28% 4.72% ==== ==== ====

(1) Nonaccruing 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 loans fees. (2) Yields are not presented on a tax-equivalent basis. (3) Loan fees and late fees included in interest on loans aggregated $1,165,000, $1,156,000, and $1,195,000 in 1999, 1998, and 1997, respectively. (4) Horizon has no foreign office and, accordingly, no assets or liabilities to foreign operations. Horizon's subsidiary bank had no funds invested in Eurodollar Certificates of Deposit at December 31, 1999. HORIZON BANCORP & SUBSIDIARIES 22 9 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

1999 - 1998 1998 - 1997 INCREASE/(DECREASE) INCREASE/(DECREASE) ---------------------------------------------------------------- CHANGE CHANGE CHANGE CHANGE TOTAL DUE TO DUE TO TOTAL DUE TO DUE TO CHANGE VOLUME RATE CHANGE VOLUME RATE ---------------------------------------------------------------- INTEREST INCOME Loans - total $ 2,288 $ 3,505 $(1,217) $ (960) $ (368) $ (592) Taxable investment securities 1,011 1,019 (8) (332) 89 (421) Nontaxable investment securities (280) (306) 26 12 (12) 24 Interest-bearing balances and money market investments 14 7 7 (31) (23) (8) Federal funds sold 61 96 (35) 117 122 (5) ---------------------------------------------------------------- Total interest income $ 3,094 $ 4,321 $(1,227) $(1,194) $ (192) $(1,002) ================================================================ Interest Expense Savings deposits $ (285) $ (98) $ (187) $ (281) $ (238) $ (43) Interest-bearing demand deposits 644 679 (35) (128) (399) 271 Time deposits 1,666 2,242 (576) 644 750 (106) Short-term borrowings 26 19 7 (60) (61) 1 Long-term debt 428 487 (59) 174 205 (31) ---------------------------------------------------------------- Total interest expense $ 2,479 $ 3,329 $ (850) $ 349 $ 257 $ 92 ---------------------------------------------------------------- NET INTEREST EARNINGS $ 615 $ 992 $ (377) $(1,543) $ (449) $(1,094) ================================================================

Horizon's average earning assets were $392.199 million in 1999 compared to $338.987 million in 1998 and $340,400 million in 1997. The net interest margin for 1999 was 3.86% compared to 4.28% and 4.72% in 1998 and 1997, respectively. The decrease in net interest margin from 1998 to 1999 is primarily a result of increased volume in the loan portfolio at a lower rate than the previous year and an increase in the volume of time deposits to fund the loan growth. The decrease in net interest margin from 1997 to 1998 was primarily due to the decrease in rate of the loan and investment portfolios, the increase in volume in the time deposit portfolio and the reduction in volume in the interest-bearing demand deposits and savings portfolios. NONINTEREST INCOME The major components of noninterest income consist of service charges on deposit accounts and fiduciary fees. Service charges on deposit accounts are based upon: a) recovery of direct operating expenses associated with providing the service, b) allowing for a profit margin that provides an adequate return on assets and stockholders' equity, and c) competitive factors within the Bank's markets. Service charges on deposits were $2.048 million, $2.255 million, and $2.020 million for 1999, 1998, and 1997, respectively. The decline in service charges in 1999 is the result of the redesign of Horizon's checking accounts to stay more competitive within our markets. Fiduciary fees were $2.113 million in 1999 compared to $2.141 million and $2.423 million in 1998 and 1997 respectively. HORIZON BANCORP & SUBSIDIARIES 23 10 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NONINTEREST EXPENSE Noninterest expense totaled $19.430 million in 1999 compared to $17.436 million and $17.063 million in 1998 and 1997, respectively. The increase in 1999 is a result of the ESOP termination expense. Excluding this one time charge, noninterest expenses would have declined slightly from 1998 to 1999. The increase in 1998 related to an increase in salaries and benefits and occupancy expense partially offset by a reduction in data processing and equipment expenses. Salaries and benefits decreased 1.43% during 1999 compared to an increase of 14.12% during 1998 and a decrease of 4.09% for 1997. The increase in 1998 is primarily a result of the payment of the severance benefit after the termination of the President and Chief Administrative Officer who was a party to an employment contract and increased expenses related to ESOP. Total other expenses decreased 9.65% in 1999 and 3.51% in 1998 and increased 11.40% in 1997. The primary factors in the reduction of the 1999 expenses were: 1) $294 thousand decrease in other losses and; 2) $178 thousand decrease in corporate expenses. The primary factors in the reduction of the 1998 expenses were: 1) $146 thousand decrease in supplies and printing expenses, 2) $273 thousand decrease in advertising expenses, 3) $236 thousand increase in professional fees, 4) $166 thousand decrease in training expenses, and; 5) $93 thousand decrease in outside services and consultants. The primary factors contributing to the 1997 increase in other expense were: 1) $273 thousand increase in advertising expense, primarily related to the change in the Bank's name, 2) $195 thousand increase in supplies and printing expenses, and; 3) $154 thousand increase in outside services and consultants. INCOME TAXES Income tax expense, before discontinued operations, totaled $675 thousand in 1999 compared to $460 thousand and $664 thousand in 1998 and 1997, respectively. The effective tax rate was 139.46%, 26.84%, and 24.95% for 1999, 1998, and 1997, respectively. The effective tax rate is high in 1999 because the majority of the ESOP termination expenses were not tax deductible. Excluding that expense, the effective tax rate for 1999 would have been 26.40%. LIQUIDITY AND RATE SENSITIVITY MANAGEMENT Management and the Board of Directors meet regularly to review both the liquidity and rate sensitivity position of Horizon. Effective asset and liability management ensures Horizon's ability to monitor the cash flow requirements of depositors along with the demands of borrowers and to measure and manage interest rate risk. Horizon utilizes an interest rate risk assessment model designed to highlight sources of existing interest rate risk and consider the effect of these risks on strategic planning. Management maintains an essentially balanced ratio of interest sensitive assets to liabilities in order to protect against the effects of wide interest rate fluctuations. LIQUIDITY The Bank maintains a stable base of core deposits provided by long standing relationships with consumers and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayment, investment security sales and maturities, sale of real estate loans and borrowing relationships with correspondent banks, including the Federal Home Loan Bank (FHLB). During 1999, cash flows were generated from an increase in deposits of $41 million and an increase in FHLB borrowings of $51 million and increases in short term borrowings of $21 million. Cash flows were used for a $104 million increase in loan demand, including $86 million in mortgage warehousing. The net cash and cash equivalent position increased $3 million, in cash and due from banks. HORIZON BANCORP & SUBSIDIARIES 24 11 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) INTEREST SENSITIVITY The degree by which net interest income may fluctuate due to changes in interest rates is monitored by Horizon using computer simulation modeling, incorporating not only the current GAP position but the effect of expected repricing of specific financial assets and liabilities. When repricing opportunities are not properly aligned, net interest income may be affected when interest rates change. Forecasting results of the possible outcomes determine the exposure of interest rate risk inherent in Horizon's balance sheet. The goal is to manage imbalanced positions that arise when the total amount of assets repricing or maturing in a given time period differs significantly from liabilities that are repricing or maturing in the same time period. The theory behind managing the difference between repricing assets and repricing liabilities is to have more assets repricing in a rising rate environment and more liabilities repricing in a declining rate environment. At December 31, 1999, Horizon had a negative GAP position of .71. This indicates that the total amount of assets repricing within one year were 71% of the total amount of liabilities repricing within the same time period. This compares to a negative GAP position of .72 at December 31, 1998.

RATE SENSITIVITY --------------------------------------------------------------- GREATER THAN GREATER THAN 3 MONTHS 6 MONTHS 3 MONTHS AND LESS AND LESS GREATER THAN OR LESS THAN 6 MONTHS THAN 1 YEAR 1 YEAR TOTAL --------------------------------------------------------------- Loans $ 127,410 $ 13,329 $ 24,397 $ 225,948 $ 391,084 Money market investments 174 174 Interest-bearing balances with Banks 232 232 Investment securities and FRB and FHLB stock 26,404 1,642 3,992 41,739 73,777 Other assets 60,729 60,729 --------------------------------------------------------------- Total assets $ 153,988 $ 14,971 $ 28,621 $ 328,416 $ 525,996 =============================================================== Noninterest-bearing deposits $ 44,890 $ 44,890 Interest-bearing deposits $ 113,053 $ 38,008 $ 43,559 124,158 318,778 Borrowed funds 94,500 10,000 25,000 129,500 Other liabilities 3,829 3,829 Stockholders' equity 28,999 28,999 --------------------------------------------------------------- Total liabilities and stockholders' equity $ 207,553 $ 38,008 $ 53,559 $ 226,876 $ 525,996 =============================================================== GAP $ (53,565) $ (23,037) $ (24,938) $ 101,540 Cumulative GAP $ (53,565) $ (76,602) $(101,540)

Included in the GAP analysis are certain interest-bearing demand accounts and savings accounts. These interest-bearing accounts are subject to immediate withdrawal. However, Horizon considers approximately 70% of these deposits to be insensitive to gradual changes in interest rates and generally to behave like deposits with longer maturities based upon historical experience. Accordingly, Horizon has considered the balances of interest-bearing demand and savings account deposits which totaled $53.329 million at December 31, 1999 to be nonrate sensitive. HORIZON BANCORP & SUBSIDIARIES 25 12 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Horizon's primary market risk exposure is interest rate risk. Interest rate risk (IRR) is the risk that Horizon's earnings and capital will be adversely affected by changes in interest rates. The primary approach to IRR management is one that focuses on adjustments to the asset/liability mix in order to limit the magnitude of IRR. Horizon's exposure to interest rate risk is due to repricing or mismatch risk, embedded options risk, and yield curve risk. Repricing risk is the risk of adverse consequence from a change in interest rates that arise because of differences in the timing of when those interest rate changes affect Horizon's assets and liabilities. Basis risk is the risk that the spread, or rate difference, between instruments of similar maturities will change. Options risk arises whenever products give the customer the right, but not the obligation, to alter the quantity or timing of cash flows. Yield curve risk is the risk that changes in prevailing interest rates will affect instruments of different maturities by different amounts. Horizon's objective is to remain reasonably neutral with respect to IRR. Horizon utilizes a variety of strategies to maintain this position including the sale of mortgage loans on the secondary market and varying maturities of FHLB advances, certificates of deposit funding, and investment securities. The table, which follows, provides information about Horizon's financial instruments that are sensitive to changes in interest rates as of December 31, 1999. Horizon had no derivative financial instruments or trading portfolio as of December 31, 1999. The table incorporates Horizon's internal system generated data related to the maturity and repayment/withdrawal of interest-earning assets and interest-bearing liabilities. For loans, securities, and liabilities with contractual maturities, the table presents principal cash flows and related weighted average interest rates by contractual maturities as well as the historical experience of Horizon related to the impact of interest rate fluctuations on the prepayment of residential loans and mortgage-backed securities. From a risk management perspective, Horizon believes that repricing dates are more relevant than contractual maturity dates when analyzing the value of financial instruments. For deposits with no contractual maturity dates, the table presents principal cash flows and weighted average rate, as applicable, based upon Horizon's experience and management's judgment concerning the most likely withdrawal behaviors. HORIZON BANCORP & SUBSIDIARIES 26 13 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) QUANTITATIVE DISCLOSURE OF MARKET RISK

2005 AND FAIR VALUE 2000 2001 2002 2003 2004 BEYOND TOTAL 12/31/99 --------------------------------------------------------------------------------------------------- RATE-SENSITIVE ASSETS Fixed interest rate loans $ 27,822 $ 24,583 $ 31,445 $ 28,326 $ 18,505 $ 83,527 $ 214,208 $212,755 Average interest rate 8.48% 8.27% 7.86% 7.62% 7.53% 7.33% 7.72% Variable interest rate loans 137,313 10,177 7,535 10,844 9,455 4,825 180,149 179,778 Average interest rate 9.80% 7.81% 7.83% 7.68% 7.86% 7.52% 9.31% Total loans 165,135 34,760 38,980 39,170 27,960 88,352 394,357 392,533 Average interest rate 9.58% 8.13% 7.86% 7.64% 7.64% 7.34% 8.45% Securities, including FRB and FHLB stock 30,058 22,527 8,004 5,277 4,864 3,047 73,777 73,777 Average interest rate 6.28% 5.90% 6.32% 6.37% 6.16% 6.71% 6.19% Other interest-bearing assets 406 406 406 Average interest rate 5.08% 5.08% Total earnings assets 195,599 57,287 46,984 44,447 32,824 91,399 468,540 466,716 Average interest rate 9.03% 7.25% 7.60% 7.49% 7.42% 7.32% 8.08% RATE-SENSITIVE LIABILITIES Noninterest-bearing deposits $ 44,890 $ 44,890 $ 44,890 NOW accounts $ 36,416 23,711 60,127 60,127 Average interest rate 3.67% 2.15% 3.07% Savings and money market accounts 12,693 29,618 42,311 42,295 Average interest rate 1.80% 1.80% 1.80% Certificates of deposit 145,033 $ 57,724 $ 9,172 $ 4,287 $ 16 108 216,340 215,769 Average interest rate 5.51% 5.41% 5.33% 5.10% 4.94% 7.50% 5.47% Total deposits 194,142 57,724 9,172 4,287 16 98,327 363,668 363,081 Average interest rate 4.93% 5.41% 5.33% 5.10% 4.94% 1.07% 3.97% Fixed interest rate borrowings 41,000 15,000 5,000 5,000 66,000 65,700 Average interest rate 5.59% 6.50% 6.18% 6.68% 5.93% Variable interest rate borrowings 63,500 63,500 63,496 Average interest rate 5.77% 5.77% Total funds 298,642 72,724 14,172 4,287 5,016 98,327 493,168 492,277 Average interest rate 5.20% 5.64% 5.63% 5.10% 6.67% 1.07% 4.47%

HORIZON BANCORP & SUBSIDIARIES 27 14 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement requires companies to record derivatives on the balance sheet at their fair value. SFAS No. 133 also acknowledges that the method of recording a gain or loss depends on the use of the derivative. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. - - For a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (referred to as a fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. - - For a derivative designated as hedging the exposure to variable cash flows of a forecasted transaction (referred to as a cash flow hedge), the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. - - For a derivative designated as hedging the foreign currency exposure of a net investment in a foreign operation, the gain or loss is reported in other comprehensive income (outside earnings) as part of the cumulative translation adjustment. The accounting for a fair value hedge described above applies to a derivative designated as a hedge of the foreign currency exposure of an unrecognized firm commitment or an available-for-sale security. Similarly, the accounting for a cash flow hedge described above applies to a derivative designated as a hedge of the foreign currency exposure of a foreign-currency-denominated forecasted transaction. - - For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change. The new Statement applies to all entities. If hedge accounting is elected by the entity, the method of assessing the effectiveness of the hedging derivative and the measurement approach of determining the hedge's ineffectiveness must be established at the inception of the hedge. SFAS No. 133 amends SFAS No. 52 and supercedes SFAS Nos. 80, 105, and 119. SFAS No. 107 is amended to include the disclosure provisions about the concentrations of credit risk from SFAS No. 105. Several Emerging Issues Task Force consensuses are also changed or nullified by the provisions of SFAS No. 133. SFAS No. 133 will be effective for all fiscal years beginning after June 15, 2000. Early application is encouraged; however, this Statement may not be applied retroactively to financial statements of prior periods. At this time, management is evaluating the statement to determine the impact, if any, it may have on the financial condition or results of operations of Horizon. HORIZON BANCORP & SUBSIDIARIES 28 15 Management Discussion and Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 134, Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise. This Statement establishes accounting standards for certain activities of mortgage banking enterprises and for other enterprises with similar mortgage operations. This Statement amends Statement of Financial Accounting Standards (SFAS) No. 65. SFAS No. 65, as previously amended by SFAS Nos. 115 and 125, required a mortgage banking enterprise to classify a mortgage-backed security as a trading security following the securitization of the mortgage loan held for sale. This Statement further amends SFAS No. 65 to require that after the securitization of mortgage loans held for sale, an entity engaged in mortgage banking activities must classify the resulting mortgage-backed security or other retained interests based on the entity's ability and intent to sell or hold those investments. The determination of the appropriate classification for securities retained after the securitization of mortgage loans by a mortgage banking enterprise now conforms to SFAS No. 115. The only requirement the new Statement adds is that if an entity has a sales commitment in place, the security must be classified into trading. This Statement is effective for the first fiscal quarter beginning after December 15, 1998. On the date this Statement is initially applied, an entity may reclassify mortgage-backed securities and other beneficial interests retained after the securitization of mortgage loans held for sale from the trading category, except for those with sales commitments in place. Those securities and other interests shall be classified based on the entity's present ability and intent to hold the investments. The adoption of this statement had no effect on the statement of condition or results of operation of Horizon. FORWARD-LOOKING STATEMENTS Certain statements in this section constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Company to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. HORIZON BANCORP & SUBSIDIARIES 29 16 Consolidated Balance Sheets - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

DECEMBER 31 1999 1998 - --------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 34,670 $ 12,771 Federal funds sold 18,500 Interest-bearing demand deposits 174 598 ----------------------- Cash and cash equivalents 34,844 31,869 Interest-bearing deposits 232 225 Investment securities Available for sale 67,880 54,612 Held to maturity (fair value of $12,090) 11,746 Total investment securities 67,880 66,358 ----------------------- Loans, net of allowance for loan losses of $3,273 and $2,787 391,084 287,559 Premises and equipment 18,134 18,393 Federal Reserve and Federal Home Loan Bank stock 5,897 3,973 Interest receivable 2,780 2,249 Other assets 5,145 5,528 ----------------------- Total assets $ 525,996 $ 416,154 ======================= LIABILITIES Deposits Noninterest bearing $ 44,890 $ 58,658 Interest bearing 318,778 263,743 ----------------------- Total deposits 363,668 322,401 Short-term borrowings 24,500 4,000 Federal Home Loan Bank advances 105,000 54,000 Interest payable 920 817 Other liabilities 2,909 3,050 ----------------------- Total liabilities 496,997 384,268 ----------------------- COMMITMENTS AND CONTINGENCIES EQUITY RECEIVED FROM CONTRIBUTIONS AND DIVIDENDS TO THE ESOP 7,808 4,418 ----------------------- STOCKHOLDERS' EQUITY Common stock, $1 stated value Authorized, 5,000,000 shares Issued, 1,034,428 shares, less ESOP shares of 165,309 and 292,960 873 741 Additional paid-in capital 13,153 8,834 Retained earnings 22,629 24,201 Accumulated other comprehensive income (loss) (1,201) 336 Treasury stock, at cost, 350,293 and 183,048 shares (14,263) (6,644) ----------------------- Total stockholders' equity 21,191 27,468 ----------------------- Total liabilities and stockholders' equity $ 525,996 $ 416,154 =======================

See notes to consolidated financial statements. HORIZON BANCORP & SUBSIDIARIES 30 17 Consolidated Statement of Income - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands, Except per data share)

YEAR ENDED DECEMBER 31 1999 1998 1997 - ------------------------------------------------------------------------------------------------------ INTEREST INCOME Loans receivable $ 25,634 $ 23,346 $ 24,306 Investment securities Taxable 5,096 4,010 4,256 Tax exempt 167 447 435 -------------------------------- Total interest income 30,897 27,803 28,997 -------------------------------- INTEREST EXPENSE Deposits 12,603 10,578 10,343 Federal funds purchased and short-term borrowings 76 50 110 Federal Home Loan Bank advances 3,086 2,658 2,484 -------------------------------- Total interest expense 15,765 13,286 12,937 -------------------------------- NET INTEREST INCOME 15,132 14,517 16,060 Provision for loan losses 1,100 820 1,255 -------------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 14,032 13,697 14,805 -------------------------------- OTHER INCOME Service charges on deposit accounts 2,048 2,255 2,020 Fiduciary activities 2,113 2,141 2,423 Gain on sale of other real estate owned 72 9 Gain on sale of securities 177 9 Commission income from insurance agency 811 462 Income from reinsurance company 158 158 221 Other income 503 437 237 -------------------------------- Total other income 5,882 5,453 4,919 -------------------------------- OTHER EXPENSES Salaries and employee benefits 9,017 9,148 8,016 ESOP termination expense 2,073 Net occupancy expenses 1,692 1,344 1,281 Data processing and equipment expenses 2,079 2,108 2,489 Loss on disposal of fixed assets 219 26 274 Loss on other real estate owned 4 18 Other expenses 4,346 4,810 4,985 -------------------------------- Total other expenses 19,430 17,436 17,063 -------------------------------- INCOME BEFORE INCOME TAX 484 1,714 2,661 Income tax expense 675 460 664 -------------------------------- NET INCOME (LOSS) FROM CONTINUING OPERATIONS (191) 1,254 1,997 -------------------------------- DISCONTINUED OPERATIONS Loss from operation of discontinued subsidiary (less tax benefit of $56, $115, and $80 for 1999, 1998, and 1997) (81) (171) (276) Loss on disposal of subsidiary, including provision of $134 for operating losses during phase-out period (less tax benefit of $52 in 1999) (82) -------------------------------- Total loss from discontinued operations (163) (171) (276) -------------------------------- NET INCOME (LOSS) $ (354) $ 1,083 $ 1,721 ================================ Basic and Diluted Earnings per Share From Continued Operations $ (0.29) $ 1.83 $ 2.81 Basic and Diluted Earnings per Share From Loss on Discontinued Operations (0.25) (0.25) (0.39) -------------------------------- BASIC AND DILUTED EARNINGS PER SHARE $ (0.54) $ 1.58 $ 2.42 ================================

See notes to consolidated financial statements HORIZON BANCORP & SUBSIDIARIES 31 18 Consolidated Statement of Stockholders' Equity - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

ACCUMULATED ADDITIONAL OTHER COMMON PAID-IN COMPREHENSIVE RETAINED COMPREHENSIVE TREASURY STOCK CAPITOL INCOME (LOSS) EARNINGS INCOME (LOSS) STOCK TOTAL - -------------------------------------------------------------------------------------------------------------------- Balances, January 1, 1997 $ 708 $ 7,962 $ 23,898 $ 85 $ (3,356) $ 29,297 Net income $ 1,721 1,721 1,721 Other comprehensive income, net of tax Unrealized gains on securities, net of reclassification adjustment 315 315 315 -------- Comprehensive income $ 2,036 ======== Cash dividends ($1.80 per share) (1,264) (1,264) Purchase of 22,178 shares of treasury stock (1,173) (1,173) Net purchases and distributions with ESOP 12 (270) (258) Tax benefit of ESOP dividend deduction 71 71 ---------------- --------------------------------------------- Balances, December 31, 1997 720 7,763 24,355 400 (4,529) 28,709 Net income $ 1,083 1,083 1,083 Other comprehensive income, net of tax Unrealized losses on securities, net of reclassification adjustment (64) (64) (64) -------- Comprehensive income $ 1,019 ======== Cash dividends ($1.80 per share) (1,237) (1,237) Purchase of 36,785 shares of treasury stock (2,115) (2,115) Issuance of 6,897 shares of common stock for purchase of insurance agency 7 379 386 Net purchases and distributions with ESOP 14 627 641 Tax benefit of ESOP dividend deduction 65 65 ---------------- --------------------------------------------- Balances, December 31, 1998 741 8,834 24,201 336 (6,644) 27,468 Net loss $ (354) (354) (354) Other comprehensive income, net of tax Unrealized losses on securities, net of reclassification adjustment (1,537) (1,537) (1,537) -------- Comprehensive loss $ (1,891) ======== Cash dividends ($1.80 per share) (1,218) (1,218) Purchase of 165,245 shares of treasury stock (7,619) (7,619) Issuance of 4,000 shares of common stock for purchase of investment management entity 4 196 200 Net purchases and distributions with ESOP 128 4,058 4,186 Tax benefit of ESOP dividend deduction 65 65 ---------------- --------------------------------------------- BALANCES, DECEMBER 31, 1999 $873 $ 13,153 $ 22,629 $ (1,201) $(14,263) $ 21,191 ================ =============================================

See notes to consolidated financial statements. HORIZON BANCORP & SUBSIDIARIES 32 19 Consolidated Statement of Cash Flows - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

YEAR ENDED DECEMBER 31 1999 1998 1997 - ---------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ (354) $ 1,083 $ 1,721 Adjustments to reconcile net income (loss) to net cash provided by operating activities Provision for loan losses 1,100 820 1,225 Additional paid-in capital from release of ESOP shares 1,807 360 184 Depreciation and amortization 1,409 1,135 1,367 Deferred income tax (98) 392 (29) Investment securities amortization, net 164 199 158 Investment securities gains (177) (9) Discontinued operations 237 194 103 Loss on disposal of fixed assets 219 26 274 (Gain) loss on sale of loans 19 (56) Proceeds from sales of loans 11,955 2,765 17,039 (Gain) loss on sale of other real estate owned (68) 9 Deferred loan fees (49) (84) (57) Unearned income 102 (61) 54 Net change in Interest receivable (531) 15 (48) Interest payable 103 143 84 Other assets 1,586 (1,409) (826) Other liabilities (141) (857) (504) ------------------------------------ Net cash provided by operating activities 17,283 4,721 20,689 ------------------------------------ INVESTING ACTIVITIES Net change in interest-bearing deposits (7) (6) (8) Purchases of securities available for sale (35,250) (27,839) (1,000) Proceeds from maturities, calls, and principal repayments of securities available for sale 17,708 17,868 11,662 Proceeds from sales of securities available for sale 11,738 1,009 Purchases of securities held to maturity (2,597) (1,962) Proceeds from maturities, calls, and principal repayments of securities held to maturity 1,785 2,282 3,315 Net change in loans (117,265) (34,048) (4,766) Purchase of loans (1,379) Principal payments received on ESOP loan 5,769 651 250 Proceeds from sale of fixed assets 715 Recoveries on loans previously charged-off 363 401 383 Purchase of insurance agency (785) Purchase of investment management entity 200 Purchases of premises and equipment (2,070) (3,423) (3,735) Purchase of Federal Reserve and Federal Home Loan Bank stock (1,924) (350) (887) ------------------------------------ Net cash provided (used) by investing activities (118,238) (47,846) 2,882 ------------------------------------

(Continued) HORIZON BANCORP & SUBSIDIARIES 33 20 Consolidated Statement of Cash Flows, cont. - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

YEAR ENDED DECEMBER 31 1999 1998 1997 - ----------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net change in Deposits $ 41,267 $ 57,988 $ (24,767) Short-term borrowings 20,500 (12,000) 3,151 Federal Home Loan Bank advances 66,000 70,000 31,000 Repayment of Federal Home Loan Bank advances (15,000) (58,000) (30,500) Dividends paid (1,218) (1,237) (1,264) Purchase of treasury stock (7,619) (2,115) (1,173) ----------------------------------- Net cash provided (used) by financing activities 103,930 54,636 (23,553) ----------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 2,975 11,511 18 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 31,869 20,358 20,340 ----------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 34,844 $ 31,869 $ 20,358 =================================== ADDITIONAL CASH FLOWS INFORMATION Interest paid $ 15,868 $ 13,388 $ 10,427 Income tax paid 350 440 661

See notes to consolidated financial statements. HORIZON BANCORP & SUBSIDIARIES 34 21 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NOTE 1-- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS-- The consolidated financial statements of Horizon Bancorp (Horizon) and its wholly owned subsidiaries, Horizon Bank, N.A. (Bank), HBC Insurance Group, Inc. (Insurance Company), and The Loan Store, Inc. conform to generally accepted accounting principles and reporting practices followed by the banking industry. The Bank is a full-service commercial bank offering a broad range of commercial and retail banking and other services incident to banking. The Bank has two wholly-owned subsidiaries: Horizon Trust & Investment Management, N.A. (HTIM) and Horizon Insurance Services, Inc (Insurance Agency). HTIM offers corporate and individual trust and agency services and investment management services. The Insurance Agency offers a full line of commercial and personal insurance products. The Bank maintains four facilities in LaPorte County, Indiana and four facilities in Porter County, Indiana. The Insurance Company offers credit insurance. The net income generated from the insurance operations is not significant to the overall operations of Horizon. The Loan Store, Inc. is a discontinued operation and sold its loan portfolio to another finance company in August 1999. The Loan Store, Inc. was a subprime consumer finance company with offices located in Highland, South Bend, and Michigan City, Indiana. Horizon conducts no business except that incident to its ownership of the subsidiaries. BASIS OF REPORTING -- The consolidated financial statements include the accounts of Horizon and subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENT SECURITIES AVAILABLE FOR SALE -- Horizon and the Bank designate a portion of their investment portfolio as available for sale based on management's plans to use such securities for asset and liability management, liquidity, and not to hold such securities as long- term investments. Management repositions the portfolio to take advantage of future expected interest rate trends when Horizon's long-term profitability can be enhanced. Investment securities available for sale and marketable equity securities are carried at estimated fair value and any net unrealized gains/losses (after tax) on these securities are included in accumulated other comprehensive income. Gains/losses on the disposition of securities available for sale are recognized at the time of the transaction and are determined by the specific identification method. INVESTMENT SECURITIES HELD TO MATURITY -- Investment securities are purchased with the intent and ability to hold to maturity, and are carried at cost and adjusted for amortization of premiums and accretion of discounts. Gains/losses on the disposition of securities held to maturity are recognized at the time of the transaction and are determined by the specific identification method. LOANS HELD FOR SALE -- Loans held for sale are reported at the lower of cost or market value in the aggregate. HORIZON BANCORP & SUBSIDIARIES 35 22 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) INTEREST AND FEES ON LOANS -- Interest on commercial, mortgage, and installment loans is recognized over the term of the loans based on the principal amount outstanding. When principal or interest is past due 90 days or more, and the loan is not well secured and it is in the process of collection, or when serious doubt exists as to the collectibility of a loan, the accrual of interest is discontinued. Loan origination fees, net of direct loan origination costs, are deferred and recognized over the life of the loan as a yield adjustment. CONCENTRATIONS OF CREDIT RISK -- The Bank grants commercial, real estate, and consumer loans to customers located primarily in LaPorte County and portions of Porter County in Northwest Indiana and provides mortgage warehouse lines to mortgage companies in the United States. Commercial loans make up approximately 23% of the loan portfolio and are secured by both real estate and business assets. These loans are expected to be repaid from cash flow from operations of the businesses. Real estate loans make up approximately 39% of the loan portfolio and are secured by both commercial and residential real estate. Installment loans make up approximately 16% of the loan portfolio and are primarily secured by consumer assets. Mortgage warehouse loans make up approximately 22% of the loan portfolio and are secured by residential real estate. MORTGAGE WAREHOUSE LOANS -- Horizon purchases residential mortgage loans from various mortgage companies prior to sale of these loans by the mortgage companies on the secondary market. Horizon held loans that were purchased under agreements to resell from 22 of the 24 approved mortgage companies at December 31, 1999. Horizon purchases such loans from mortgage companies, net of certain fees, and later sells them back to the mortgage companies at the same amount and without recourse provisions. As a result, no gains and losses are recorded at the resale of loans. Horizon records interest and fee income on the loans during the funding period. Horizon uses the stated interest rate in the agreement with each mortgage company for interest income recognition, and not the interest rates on the individual loans. Horizon does not retain servicing of the loans when they are resold. Loans consist of purchase money and refinance mortgage loans and are generally held no more than 90 days by Horizon and are typically resold within 30 days. ALLOWANCE FOR LOAN LOSSES -- An allowance for loan losses is established and maintained because some loans may not be repaid in full. Increases to the allowance are recorded by a provision for loan losses charged to expense. Estimating the risk of loss and the amount of loss on any loan is necessarily subjective. Accordingly, the allowance is maintained by management at a level considered adequate to cover losses that are currently anticipated based on past loss experience, general economic conditions, information about specific borrower situations, including their financial position and collateral values, and other factors and estimates which are subject to change over time. Actual losses may vary from current estimates and the amount of the provisions may be either greater than or less than actual net charge-offs. While the largest portion of this reserve is intended to cover loan losses, it is considered a general reserve for all credit-related purposes. LOAN IMPAIRMENT -- When analysis determines a borrower's operating results and financial condition are not adequate to meet debt service requirements, the loan is evaluated for impairment. Often this is associated with a delay or shortfall in payments of 30 days or more. Loans are generally moved to nonaccrual status when 90 days or more past due. These loans are also often considered impaired. Impaired loans, or portions thereof are charged-off when deemed uncollectible. This typically occurs when the loan is 120 or more days past due. HORIZON BANCORP & SUBSIDIARIES 36 23 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) Loans are considered impaired if full principal or interest payments are not made in accordance with the original terms of the loan. Impaired loans are measured and carried at the lower of cost or the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price, or at the fair value of the collateral if the loan is collateral dependent. Smaller balance homogenous loans are evaluated for impairment in aggregate. Such loans include residential first mortgage loans secured by one to four family residences, residential construction loans and automobile, home equity, and second mortgages. Commercial loans and mortgage loans secured by other properties are evaluated individually for impairment. PREMISES AND EQUIPMENT -- Buildings and major improvements are capitalized and depreciated using primarily the straight-line method with useful lives ranging from 3 to 40 years. Furniture and equipment are capitalized and depreciated using primarily the straight- line method with useful lives ranging from 3 to 20 years. Maintenance and repairs are expensed as incurred. FEDERAL RESERVE AND FEDERAL HOME LOAN BANK STOCK -- The stock is a required investment for institutions that are members of the Federal Reserve and Federal Home Loan Bank systems. The required investment in the common stock is based on a predetermined formula. OTHER REAL ESTATE OWNED -- Other real estate owned is carried at the lower of cost or fair value, less selling costs, and is included in other assets. Any reduction to fair value from the carrying value of the related loans at the time of acquisition is charged to the allowance for loan losses. Subsequent reductions in fair value, and gains or losses on sales, are recognized in earnings in the period the reduction in value is determined or the sale is consummated. Other real estate owned, net of allowance, included in other assets, totaled $133,000 at December 31, 1998. There was no other real estate owned at December 31, 1999. SERVICING RIGHTS -- Prior to adopting Statement of Financial Accounting Standards (SFAS) No. 122 at the beginning of 1996, servicing right assets were recorded only for purchased rights to service mortgage loans. Subsequent to adopting this standard, servicing rights represent both purchased rights and the allocated value of servicing rights retained on loans sold. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenue. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans to interest rates and then, secondarily, as to geographic and prepayment characteristics. Any impairment of a grouping is reported as a valuation allowance. INTANGIBLE ASSETS -- Intangible assets are being amortized on the straight-line basis over a 15-year period. Such assets are periodically evaluated as to the recoverability of their carrying value. TREASURY STOCK -- Treasury stock is stated at cost. STOCK OPTIONS -- Stock options are granted for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Bank accounts for and will continue to account for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. HORIZON BANCORP & SUBSIDIARIES 37 24 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) INCOME TAXES -- Horizon files annual consolidated income tax returns with its subsidiaries. SFAS No. 109, Accounting for Income Taxes requires an asset and liability approach for accounting for income taxes. Its objective is to recognize the amount of taxes payable or refundable for the current year, and deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amount of assets and liabilities and their respective tax bases. The measurement of tax assets and liabilities is based on enacted tax laws. Deferred tax assets may be reduced, if necessary, by the amount of such benefits that are not expected to be realized based on available evidence. TRUST ASSETS AND INCOME -- Property, other than cash deposits, held in a fiduciary or agency capacity is not included in the consolidated balance sheet since such property is not owned by Horizon. Income from trust activities is recognized on a cash basis, which is not materially different from the accrual method. EARNINGS PER COMMON SHARE AND DIVIDENDS DECLARED PER COMMON SHARE -- Effective January 1, 1998, Horizon adopted SFAS No. 128, Earnings Per Share. SFAS No. 128 establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. SFAS No. 128 replaces the presentation of primary EPS with earnings per common share (basic EPS). Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. SFAS No. 128 also requires presentation of EPS assuming dilution (diluted EPS). Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Horizon has no potential dilutive instruments. The number of shares used in the computation of basic earnings per share is 655,391 for 1999, 686,804 for 1998, and 710,967 for 1997. DIVIDEND RESTRICTIONS-- Regulations of the Comptroller of the Currency limit the amount of dividends that may be paid by a national bank to its parent holding company without prior approval of the Comptroller of the Currency. According to these regulations, as of December 31, 1999, $569,000 of additional dividends may be paid by the Bank to Horizon without prior approval of the Comptroller of the Currency. Additionally, the Federal Reserve Board limits the amount of dividends that may be paid by Horizon to its stockholders under its capital adequacy guidelines. CONSOLIDATED STATEMENT OF CASH FLOWS -- For purposes of reporting cash flows, cash and cash equivalents are defined to include cash and due from banks, money market investments, and federal funds sold with maturities of one day or less. Horizon reports net cash flows for customer loan transactions, deposit transactions, short-term investments, and short-term borrowings. RECLASSIFICATIONS -- Certain reclassifications have been made to the 1998 and 1997 financial statements to be comparable to 1999. NOTE 2 -- FAIR VALUES OF FINANCIAL INSTRUMENTS The estimated fair value amounts were determined using available market information, current pricing information applicable to Horizon and various valuation methodologies. Where market quotations were not available, considerable management judgement was involved in the determination of estimated fair values. Therefore, the estimated fair value of financial instruments shown below may not be representative of the amounts at which they could be exchanged in a current or future transaction. Due to the inherent uncertainties of expected cash flows of financial instruments, the use of alternate valuation assumptions and methods could have a significant effect on the derived estimated fair value amounts. HORIZON BANCORP & SUBSIDIARIES 38 25 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) The estimated fair values of financial instruments, as shown below, are not intended to reflect the estimated liquidation or market value of Horizon taken as a whole. The disclosed fair value estimates are limited to Horizon's significant financial instruments at December 31, 1999 and 1998. These include financial instruments recognized as assets and liabilities on the consolidated balance sheet as well as certain off-balance sheet financial instruments. The estimated fair values shown below do not include any valuation of assets and liabilities which are not financial instruments as defined by SFAS No. 107 Disclosures about Fair Value of Financial Instruments, such as the value of real property, the value of core deposit intangibles, the value of mortgage servicing rights, nor the value of anticipated future business. The following methods and assumptions were used to estimate the fair value of each class of financial instrument: CASH AND CASH EQUIVALENTS -- The carrying amounts approximate fair value. INTEREST-BEARING DEPOSITS -- The carrying amounts approximate fair value. INVESTMENT SECURITIES -- For debt and marketable equity securities available for sale and held to maturity, fair values are based on quoted market prices or dealer quotes. For those securities where a quoted market price is not available, carrying amount is a reasonable estimate of fair value based upon comparison with similar securities. NET LOANS -- The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. INTEREST RECEIVABLE/PAYABLE -- The carrying amounts approximate fair value. FHLB AND FRB STOCK -- Fair value of FHLB and FRB stock is based on the price at which it may be resold to the FHLB and FRB. DEPOSITS -- The fair value of demand deposits, savings accounts, interest-bearing checking accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturity. SHORT-TERM BORROWINGS -- The carrying amounts approximate fair value. FEDERAL HOME LOAN BANK ADVANCES -- Rates currently available to the Bank for debt with similar terms and remaining maturities are used to estimate fair value of existing advances. COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTER OF CREDIT -- The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. Due to the short-term nature of these agreements, carrying amounts approximate fair value. HORIZON BANCORP & SUBSIDIARIES 39 26 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) The estimated fair values of Horizon's financial instruments are as follows:

1999 1998 ------------------------------------------------- CARRYING FAIR CARRYING FAIR DECEMBER 31 AMOUNT VALUE AMOUNT VALUE - --------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 34,844 $ 34,844 $ 31,869 $ 31,869 Interest-bearing deposits 232 232 225 225 Investment securities available for sale 67,880 67,880 54,612 54,612 Investment securities held to maturity 11,746 12,090 Loans including loans held for sale, net 391,084 389,260 287,559 287,277 Interest receivable 2,780 2,780 2,249 2,249 Stock in FHLB and FRB 5,897 5,897 3,973 3,973 LIABILITIES Noninterest-bearing deposits 44,890 44,890 58,658 58,658 Interest-bearing deposits 318,778 318,191 263,743 267,417 Short-term borrowings 24,500 24,500 4,000 4,006 Federal Home Loan Bank advances 105,000 104,696 54,000 54,032 Interest payable 920 920 817 817

NOTE 3 -- INVESTMENT SECURITIES

1999 ------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR DECEMBER 31 COST GAINS LOSSES VALUE - --------------------------------------------------------------------------------------------- AVAILABLE FOR SALE U.S. Treasury and federal agencies $ 30,428 $ 18 $ (866) $ 29,580 State and Municipal 4,230 (130) 4,100 FHLMC mortgage-backed securities 6,722 14 (127) 6,609 FNMA mortgage-backed securities 16,843 40 (267) 16,616 GNMA collateralized mortgage obligations 8,051 (582) 7,469 FHLMC collateralized mortgage obligation 964 (19) 945 FNMA collateralized mortgage obligations 2,307 (32) 2,275 Marketable equity securities 315 (29) 286 ------------------------------------------------- Total investment securities $ 69,860 $ 72 $ (2,052) $ 67,880 =================================================

HORIZON BANCORP & SUBSIDIARIES 40 27 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) 1998 -------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR DECEMBER 31 COST GAINS LOSSES VALUE - -------------------------------------------------------------------------------- Available for sale U.S. Treasury and federal agencies $12,568 $ 93 $ 16 $12,645 GNMA mortgage-backed securities 12,321 72 79 12,314 FHLMC mortgage-backed securities 9,117 220 4 9,333 FNMA mortgage-backed securities 19,729 217 3 19,943 Marketable equity securities 316 61 377 -------------------------------------- Total available for sale 54,051 663 102 54,612 -------------------------------------- Held to maturity Federal agencies 1,630 62 1,692 State and municipal 10,116 287 5 10,398 -------------------------------------- Total held to maturity 11,746 349 5 12,090 -------------------------------------- Total investment securities $65,797 $ 1,012 $ 107 $66,702 ====================================== The amortized cost and fair value of securities held to maturity and available for sale at December 31, 1999, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. AVAILABLE FOR SALE ---------------------- AMORTIZED COST FAIR VALUE - -------------------------------------------------------------------------------- Within one year $ 5,084 $ 5,073 One to five years 16,570 16,238 Five to ten years 9,697 9,356 After ten years 3,307 3,013 ---------------------- 34,658 33,680 Mortgage-backed securities 23,565 23,225 Collateralized mortgage obligations 11,322 10,689 Marketable equity securities 315 286 ---------------------- Totals $69,860 $67,880 ====================== Securities with a carrying value of $3,243,000 and $4,079,000 were pledged at December 31, 1999 and 1998 to secure certain public and trust deposits. Proceeds from sales of securities available for sale during 1999 were $11,738,000. Gross gains of $217,000 and gross losses of $40,000 were realized on these sales. There were no sales of securities available for sale during 1998. Proceeds from sales of securities available for sale during 1997 were $1,009,000. Gross gains of $9,000 were realized on these sales. There were no losses. HORIZON BANCORP & SUBSIDIARIES 41 28 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) During the second quarter of 1999, debt securities with an amortized cost of $10,050,000 were transferred from held to maturity to available for sale so the Bank could minimize the tax consequences of holding tax-exempt securities. The securities had an unrealized gain of approximately $350,000. There were no transfers between classifications during 1998. There were no sales of securities held to maturity during 1999, 1998, or 1997. At December 31, 1999 and 1998 there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies and corporations, in an amount greater than 10% of stockholders' equity. NOTE 4 -- LOANS AND ALLOWANCE DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------- Commercial loans $ 89,361 $ 76,682 Mortgage warehouse loans 85,542 Real estate loans 154,717 152,390 Installment loans 64,737 61,274 ---------------------------- Total loans $394,357 $290,346 ============================ YEAR ENDED DECEMBER 31 1999 1998 1997 - -------------------------------------------------------------------------------- Allowance for loan losses Balances, January 1 $ 2,787 $ 2,702 $ 2,435 Provision for losses 1,100 820 1,255 Provision for losses, discontinued operations 250 180 70 Recoveries on loans 363 401 383 Loans charged off (1,227) (1,316) (1,441) ------------------------------ Balances, December 31 $ 3,273 $ 2,787 $ 2,702 ============================== At December 31, 1999 and 1998, loans past due more than 90 days and still accruing interest totaled approximately $401,000 and $830,000. Loans on which the recognition of interest has been discontinued or reduced totaled approximately $1,173,000, $64,000, and $319,000 at December 31, 1999, 1998, and 1997. Interest income not recognized on these loans totaled approximately $62,000, $7,000, and $32,000 in 1999, 1998, and 1997. Loans to directors and executive officers of Horizon and the Bank, including associates of such persons, amounted to $4,277,000 and $4,819,000, as of December 31, 1999 and 1998. During 1999, new loans or advances were $3,210,000 and loan payments were $3,752,000. HORIZON BANCORP & SUBSIDIARIES 42 29 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NOTE 5 -- PREMISES AND EQUIPMENT DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------- Land $ 3,236 $ 3,255 Buildings and improvements 16,461 16,467 Furniture and equipment 8,319 7,947 -------------------------- Total cost 28,016 27,669 Accumulated depreciation (9,882) (9,276) -------------------------- Net $ 18,134 $ 18,393 ========================== Depreciation expense for the years ended December 31, 1999, 1998, and 1997 totaled $1,409,000, $1,135,000, and $1,367,000. NOTE 6 -- LEASES Horizon has several operating leases for premises and equipment that expire through 2004. These leases generally contain renewal options and require Horizon to pay all executory costs such as taxes, maintenance, and insurance. Rental expense for these leases amounted to $299,000, $291,000, and $246,000 for the years ended December 31, 1999, 1998, and 1997. Future minimum lease payments under operating leases are: YEARS ENDING DECEMBER 31 - ------------------------------------------------------------------ 2000 $140 2001 118 2002 21 2003 10 2004 2 --------- Total minimum lease payments $291 ========= NOTE 7 -- DEPOSITS DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------- Noninterest bearing demand deposits $ 44,890 $ 58,658 Interest bearing demand deposits 60,127 32,572 Money market (variable rate) 3,955 3,985 Savings deposits 38,356 41,692 Certificates of $100,000 or more 71,377 57,235 Other certificates and time deposits 144,963 128,259 ------------------------ Total deposits $363,668 $322,401 ======================== HORIZON BANCORP & SUBSIDIARIES 43 30 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) Interest expense on time certificates of $100,000 or more was approximately $4,067,000, $2,937,000, and $2,591,000 for 1999, 1998, and 1997, respectively. Certificates and other time deposits maturing in years ending December 31 are as follows: 2000 $ 145,033 2001 57,724 2002 9,172 2003 4,287 2004 16 Thereafter 108 --------- $ 216,340 ========= Certificates of deposit of $100,000 or more by remaining maturity as of December 31, 1999 are as follows: Due in three months or less $40,320 Due after three months through six months 12,626 Due after six months through one year 6,754 Due after one year 11,677 --------- $71,377 ========= NOTE 8 -- SHORT-TERM BORROWINGS DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------- Federal funds purchased $22,000 Notes payable, unsecured 2,500 $4,000 ---------------------- Total short-term borrowings $24,500 $4,000 ====================== The Horizon Bancorp has an unsecured $3,000,000 line of credit, of which $2,500,000 was outstanding at December 31, 1999. The loan is from an unrelated financial institution with interest payable monthly at LIBOR plus 2.20%. The note matures within one year. At December 31, 1999, the Bank has available approximately $7,000,000 in credit lines with various money center banks. NOTE 9 -- FHLB ADVANCES DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------- Federal Home Loan Bank advances, variable and fixed rates, due at various dates through August 2, 2004 $ 105,000 $ 54,000 ====================== HORIZON BANCORP & SUBSIDIARIES 44 31 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) The Federal Home Loan Bank advances are secured by first-mortgage loans and investment securities totaling approximately $272,252,000. Advances are subject to restrictions or penalties in the event of prepayment. Contractual maturities in years ending December 31 2000 $ 50,000 2001 25,000 2002 5,000 2003 20,000 2004 5,000 --------- $ 105,000 ========= NOTE 10 -- LOAN SERVICING Loans serviced for others are not included in the accompanying consolidated balance sheet. The unpaid principal balances of loans serviced for others totaled approximately $29,480,000 and $23,010,000 at December 31, 1999 and 1998. NOTE 11 -- EMPLOYEE STOCK OWNERSHIP PLAN Horizon maintains an employee stock ownership plan (ESOP) as a retirement plan that currently covers substantially all employees. The ESOP is noncontributory and each eligible employee is vested according to a schedule based upon years of service. In early 1993, the Compensation Committee of the Board initially discussed the continuation of Horizon's ESOP. In August 1993, the Board of Directors approved the continuation of this plan and authorized the transfer of 172,414 shares of Horizon's stock into the ESOP for future allocation to employee retirement accounts. Upon approval by all the required regulatory agencies, Horizon issued $5,000,006 in stock on August 26, 1994 at a price of $29 per share, the market value of the stock at the time the transaction was approved. Under Federal regulation, the Employee Stock Ownership Trust may pay a value equal to or less than market value for acquired shares. Under Statement of Position (SOP) 93-6, Employers Accounting for Employee Stock Ownership Plans issued by the American Institute of Certified Public Accountants, these shares are not included in outstanding shares for the purposes of computing earnings per share and book value per share until they are committed to be released for allocation to employee retirement accounts. On July 20, 1999, the Board of Directors of Horizon Bancorp authorized the termination of the Horizon Bancorp Employee Stock Ownership Plan (ESOP). On December 31, 1999 the debt owed by the ESOP was repaid with the proceeds from the sale of a portion of the unallocated shares to Horizon Bancorp. The remaining shares will be allocated to participants. The termination of the ESOP resulted in an expense of $2.073 million for the year ended December 31, 1999. The expense recorded was based upon a valuation performed by an independent stock valuation firm who determined that the appraised value of Horizon Bancorp stock was $44.00 as of December 31, 1999. Upon the termination of the ESOP, the retirement plans of Horizon Bancorp will own approximately 24% of the outstanding shares. HORIZON BANCORP & SUBSIDIARIES 45 32 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) Transactions affecting ESOP expense and cash contributions to the ESOP are as follows: DECEMBER 31 1999 1998 1997 - -------------------------------------------------------------------------------- Dividends paid on unallocated ESOP shares $ 200 $329 $340 Market value increase of shares released 1,807 360 184 Other contributions 793 139 --------------------- Total ESOP expense included in ESOP termination expense and salaries and benefits $2,800 $828 $524 --------------------- Total cash contributions made to ESOP during the year $ 793 $139 $ 0 ===================== Below are the transactions affecting the ESOP equity accounts:

ADDITIONAL UNALLOCATED COMMON PAID-IN ESOP STOCK CAPITAL SHARES TOTAL - --------------------------------------------------------------------------------------- Balance, January 1, 1997 $ 319 $ 9,707 $(5,815) $4,211 Market value increase in ESOP shares released 184 184 Loan repayments 250 250 Net ESOP share purchases and distributions (12) 270 258 Loan to fund ESOP share repurchases (855) (855) -------------------------------------- Balance, December 31, 1997 307 10,161 (6,420) 4,048 Market value increase in ESOP shares released 360 360 Loan repayments 651 651 Net ESOP share purchases and distributions (14) (627) (641) -------------------------------------- Balance, December 31, 1998 293 9,894 (5,769) 4,418 Market value increase in ESOP shares released 1,807 1,807 Loan repayments 5,769 5,769 Sale of stock, at cost (108) (3,749) (3,857) Net ESOP share purchases and distributions (20) (309) (329) -------------------------------------- Balance, December 31, 1999 $ 165 $ 7,643 $ 0 $7,808 ======================================

NOTE 12 -- EMPLOYEE THRIFT PLAN The Employee Thrift Plan (Plan) provides that all employees of the Bank with the requisite hours of service are eligible for the Plan. The Bank fully matches the first 2% and 50% of the subsequent 4% of individual employee contributions. Employee voluntary contributions are vested at all times and the Bank contributions are fully vested after six years. The Bank's 1999, 1998, and 1997 expense related to the thrift plan totaled $196,000, $184,000, and $189,000. HORIZON BANCORP & SUBSIDIARIES 46 33 Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ (Table Dollar Amounts in Thousands) Note 13 -- OTHER EXPENSES

YEAR ENDED DECEMBER 31 1999 1998 1997 - ----------------------------------------------------------------------------------------- Supplies and printing $ 311 $ 338 $ 484 Advertising 454 480 753 Communication 622 611 568 Professional fees 746 740 504 Training 87 105 271 Outside services and consultants 632 645 738 Reinsurance company 95 104 129 Loan expenses 275 204 161 Goodwill amortization 87 45 Directors fees 207 258 200 Insurance expense 197 211 137 Other 633 1,069 1,040 --------------------------- Total other expenses $4,346 $4,810 $4,985 ===========================

NOTE 14 -- INCOME TAX

YEAR ENDED DECEMBER 31 1999 1998 1997 - ----------------------------------------------------------------------------------------- Income tax expense Currently payable Federal $ 552 $ 53 $ 470 State 221 15 223 Deferred (98) 392 (29) --------------------------- Total income tax expense $ 675 $ 460 $ 664 =========================== Reconciliation of federal statutory to actual tax expense Federal statutory income tax at 34% $ 165 $ 583 $ 905 Tax exempt interest (220) (358) (271) Nondeductible and other (28) 25 (117) Nondeductible ESOP expense 612 Effect of state income taxes 146 10 147 Increase in valuation allowance 200 --------------------------- Actual tax expense $ 675 $ 460 $ 664 ===========================

HORIZON BANCORP & SUBSIDIARIES 47 34 Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) A cumulative net deferred tax asset is included in other assets. The components of the asset are as follows: DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------- ASSETS Allowance for loan losses $ 383 $ 176 Accrued operating expenses 152 152 Loan fees 84 103 Alternative minimum tax carryforward 329 329 Unrealized loss on securities available for sale 781 Other 416 416 ------- ------ Total assets 2,145 1,176 ------- ------ LIABILITIES Depreciation (590) (500) Accretion of investment discounts (5) (5) Unrealized gain on securities available for sale (222) ------- ------ Total liabilities (595) (727) ------- ------ VALUATION ALLOWANCE (200) (200) ------- ------ Net deferred tax asset $1,350 $ 249 ======= ====== The valuation allowance at December 31, 1999 and 1998 is $200,000. NOTE 15 -- EARNINGS PER SHARE Earnings per share (EPS) were computed as follows:

1999 ------------------------------ WEIGHTED AVERAGE PER-SHARE YEAR ENDED DECEMBER 31 LOSS SHARES AMOUNT - -------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE Loss available to common stockholders $(354) 655 $ (.54) EFFECT OF DILUTIVE SECURITIES Stock options ------------------------------ DILUTED EARNINGS PER SHARE Loss available to common stockholders and assumed conversions $(354) 655 $ (.54) ==============================

HORIZON BANCORP & SUBSIDIARIES 48 35 Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ (Table Dollar Amounts in Thousands) 1998 --------------------------- WEIGHTED AVERAGE PER-SHARE YEAR ENDED DECEMBER 31 INCOME SHARES AMOUNT - ------------------------------------------------------------------------------ BASIC EARNINGS PER SHARE Income available to common stockholders $1,083 687 $1.58 EFFECT OF DILUTIVE SECURITIES Stock options --------------------------- DILUTED EARNINGS PER SHARE Income available to common stockholders and assumed conversions $1,083 687 $1.58 =========================== 1997 --------------------------- WEIGHTED AVERAGE PER-SHARE YEAR ENDED DECEMBER 31 INCOME SHARES AMOUNT - ------------------------------------------------------------------------------ BASIC EARNINGS PER SHARE Income available to common stockholders $1,721 711 $2.42 EFFECT OF DILUTIVE SECURITIES Stock options --------------------------- DILUTED EARNINGS PER SHARE Income available to common stockholders and assumed conversions $1,721 711 $2.42 =========================== At December 31, 1999, 1998, and 1997 there were outstanding options to purchase 56,300, 29,100, and 51,800 shares of common stock at prices ranging from $13.50 to $60.00. The options were not included in the computation of diluted EPS because the contracts may be settled in common stock or in cash at the election of the option holder. Historically, all contracts have been settled in cash and it is anticipated that the exercise of future contracts will also be settled in cash. NOTE 16 -- OTHER COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31 1999 1998 1997 - -------------------------------------------------------------------------------------- Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year $(2,343) $(106) $ 531 Less: reclassification adjustment for gains (losses) realized in net income 177 9 ------------------------- Net unrealized gains (losses) (2,520) (106) 522 Tax (expense) benefit 983 42 (207) ------------------------- Other comprehensive income (loss) $(1,537) $ (64) $ 315 =========================

HORIZON BANCORP & SUBSIDIARIES 49 36 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NOTE 17 -- COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENCIES Because of the nature of activities, Horizon is subject to pending and threatened legal actions that arise in the normal course of business. In management's opinion, after consultation with counsel, none of the litigation to which Horizon or any of its subsidiaries is a party will have a material effect on the consolidated financial position or results of operations of Horizon. The Bank was required to have approximately $6,447,000 of cash on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing balance requirements at December 31, 1999. These balances are included in cash and cash equivalents and do not earn interest. The Bank is a party to financial instruments with off-balance sheet risk in the ordinary course of business to meet financing needs of its customers. These financial instruments include commitments to make loans and standby letters of credit. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank follows the same credit policy to make such commitments as is followed for those loans recorded in the financial statements. As of December 31, 1999 and 1998, commitments to make loans amounted to approximately $56,914,000 and $52,171,000. As of December 31, 1999 and 1998, commitments under outstanding standby letters of credit amounted to approximately $1,164,000 and $854,000. Since many commitments to make loans and standby letters of credit expire without being used, the amount does not necessarily represent future cash advances. No losses are anticipated as a result of these transactions. Collateral obtained upon exercise of the commitment is determined using management's credit evaluation. NOTE 18 -- REGULATORY CAPITAL Horizon and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies and are assigned to a capital category. The assigned capital category is largely determined by three ratios that are calculated according to the regulations: total risk adjusted capital, Tier I capital, and Tier I leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios. There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. At December 31, 1999 and 1998, Horizon and its Bank are categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 1999 that management believes have changed Horizon's or the Bank's classification. HORIZON BANCORP & SUBSIDIARIES 50 37 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) Horizon's and Bank's actual and required capital amounts (in millions) and ratios are as follows:

MINIMUM REQUIRED MINIMUM REQUIRED TO BE WELL CAPITALIZED(1) FOR CAPITAL(1) UNDER PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION REQUIREMENTS --------------------------------------------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO - -------------------------------------------------------------------------------------------------------------- AS OF DECEMBER 31, 1999 Total capital(1) (to risk-weighted assets) Consolidated $32.3 10.12% $25.5 8.00% N/A N/A Bank 32.7 10.39 25.2 8.00 $ 31.5 10.00% Tier I capital(1) (to risk-weighted assets) Consolidated 29.0 9.09 12.8 4.00 N/A N/A Bank 29.5 9.38 12.6 4.00 18.9 6.00 Tier I capital(1) (to average assets) Consolidated 29.0 6.40 18.1 4.00 N/A N/A Bank 29.5 6.55 18.0 4.00 22.5 5.00 AS OF DECEMBER 31, 1998 Total capital(1) (to risk-weighted assets) Consolidated $32.8 10.73% $24.4 8.00% N/A N/A Bank 28.8 11.57 19.9 8.00 $ 24.9 10.00% Tier I capital(1) (to risk-weighted assets) Consolidated 30.0 9.82 12.2 4.00 N/A N/A Bank 26.0 10.46 10.0 4.00 14.9 6.00 Tier I capital(1) (to average assets) Consolidated 30.0 7.53 15.9 4.00 N/A N/A Bank 26.0 6.63 15.7 4.00 $ 19.6 5.00

(1) As defined by regulatory agencies NOTE 19 -- STOCK OPTIONS Horizon maintains the 1987 Nonqualified Stock Option and Stock Appreciation Right Plan (1987 Plan) under which options and stock appreciation rights (SARs) were granted to certain officers and employees. SARs entitle eligible employees to receive cash, stock or a combination of cash and stock totaling the excess, on the date of exercise, of the fair market value of the shares of common stock covered by the option over the option exercise price. The underlying stock options are deemed to have been exercised upon exercise of the SARs. No options remain available for grant at December 31, 1999 and 1998, however, outstanding options may be exercised until their expiration. Horizon recognizes compensation expense related to the Plan on a periodic basis based on the difference between the excess of the fair market value of the shares of common stock over the exercise price for SARs and those options exercised during the year. Horizon's expense (benefit) related to the Plan was $(103,000) for 1999, $0 for 1998, and $677,000 for 1997. HORIZON BANCORP & SUBSIDIARIES 51 38 Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ (Table Dollar Amounts in Thousands) A summary of transactions for the plan follows: SHARES --------------------------- WEIGHTED AVAILABLE OPTIONS AVERAGE FOR GRANT OUTSTANDING EXERCISE PRICE --------------------------------------- Balance, January 1, 1997 0 79,750 $26.20 Exercised (27,950) 22.90 ---------------------- Balance, December 31, 1997 0 51,800 27.98 Exercised (34,700) 28.77 ---------------------- Balance, December 31, 1998 0 17,100 26.37 Exercised (0) ---------------------- Balance, December 31, 1999 0 17,100 26.37 ====================== As of December 31, 1999, the 17,100 options outstanding have exercise prices ranging from $13.50 to $31.50 and a weighted-average remaining contractual life of 8.4 years. The options granted under the 1987 plan are fully vested. Under Horizon's 1997 Stock Option and Stock Appreciation Right Plan (1997 Plan), which is accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations, Horizon may grant certain officers and employees stock option awards or stock appreciation rights which vest and become fully exercisable at the end of five years of continued employment. SARs entitle eligible employees to receive cash, stock or a combination of cash and stock totaling the excess, on the date of exercise, of the fair market value of the shares of common stock covered by the option over the option exercise price. The underlying stock options are deemed to have been exercised upon exercise of the SARs. During 1999, Horizon authorized the grant of options and SARs for 27,200 shares of common stock. A summary of transactions for the plan follows: SHARES --------------------------- WEIGHTED AVAILABLE OPTIONS AVERAGE FOR GRANT OUTSTANDING EXERCISE PRICE ------------------------------------------ Balance, January 1, 1998 90,000 Granted (22,000) 22,000 $60.00 Forfeitures 10,000 (10,000) 60.00 ------------------------ Balance, January 1, 1999 78,000 12,000 60.00 Granted (27,200) 27,200 49.28 Forfeitures ------------------------ Balance, December 31, 1999 50,800 39,200 $52.00 ======================== As of December 31, 1999, the 39,200 options outstanding have an exercise price ranging from $43.00 to $60.00 and a weighted average remaining contractual life of 19.1 years. The options granted under the 1997 plan vest at a rate of 20% per year. HORIZON BANCORP & SUBSIDIARIES 52 39 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NOTE 20-- CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) Presented below is condensed financial information as to financial position, results of operations and cash flows of Horizon Bancorp:

CONDENSED BALANCE SHEET - -------------------------------------------------------------------------------------------- DECEMBER 31 1999 1998 - -------------------------------------------------------------------------------------------- Assets Total cash and cash equivalents $ 462 $ 2,007 Investment in Bank 29,574 27,446 Investment in Insurance Company 351 280 Investment in The Loan Store 323 486 Investment securities, net 286 377 Accrued interest receivable 12 12 Dividends receivable from Bank 300 550 Other assets 1,135 1,545 --------------------- Total assets $32,443 $32,703 ===================== LIABILITIES Short-term borrowings $ 2,500 Other liabilities 944 $ 817 EQUITY RECEIVABLE FROM CONTRIBUTIONS AND DIVIDENDS TO ESOP 7,808 4,418 STOCKHOLDERS' EQUITY 21,191 27,468 --------------------- Total liabilities and stockholders' equity $32,443 $32,703 =====================

CONDENSED STATEMENT OF INCOME - -------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1999 1998 1997 - -------------------------------------------------------------------------------------------- OPERATING INCOME (EXPENSE) Dividend income from Bank $ 1,150 $ 3,000 $ 3,000 Investment income 115 47 139 Other income 16 15 21 Employee benefit expense (2,819) (749) (506) Other expense (102) (158) (155) --------------------------------- INCOME (LOSS) BEFORE DISTRIBUTED INCOME OF SUBSIDIARIES (1,640) 2,155 2,499 UNDISTRIBUTED INCOME OF SUBSIDIARIES 820 (1,372) (913) --------------------------------- INCOME (LOSS) BEFORE TAX (820) 783 1,586 INCOME TAX BENEFIT 466 300 135 --------------------------------- NET INCOME (LOSS) $ (354) $ 1,083 $ 1,721 =================================

HORIZON BANCORP & SUBSIDIARIES 53 40 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

CONDENSED STATEMENT OF CASH FLOWS - ---------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1999 1998 1997 - ---------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ (354) $ 1,083 $ 1,721 Adjustments to reconcile net income (loss) to net cash provided by operating activities Distributions in excess of (equity in undistributed) net income of Bank (912) 1,255 691 Distributions in excess of (equity in undistributed) net income of Insurance Company (71) (54) (54) Distributions in excess of (equity in undistributed) net income of The Loan Store 163 171 276 Additional paid-in capital from release of ESOP shares 1,807 360 184 Gain on sale of securities (10) Accretion (82) Change in Income taxes receivable 744 (133) (385) Interest receivable (12) 20 Dividends receivable from Bank 250 (50) 500 Other assets 5,538 3,508 (614) Other liabilities 127 (1,633) (158) --------------------------------- Net cash provided by operating activities 7,292 4,495 2,089 --------------------------------- INVESTING ACTIVITIES Sales of investment securities 1,000 Investment in The Loan Store (500) Investment in Bank (2,500) --------------------------------- Net cash provided (used) by investing activities (2,500) 500 --------------------------------- FINANCING ACTIVITIES Dividends paid (1,218) (1,237) (1,264) Proceeds from short-term borrowings 2,500 Purchase of treasury stock (7,619) (2,115) (1,173) --------------------------------- Net cash used by financing activities (6,337) (3,352) (2,437) --------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (1,545) 1,143 152 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,007 864 712 --------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 462 $ 2,007 $ 864 =================================

HORIZON BANCORP & SUBSIDIARIES 54 41 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) NOTE 21 -- SEGMENT INFORMATION Horizon's reportable segments are determined by the products and services offered, primarily distinguished between banking and trust and investment management operations. Loans, investments, and deposits provide the revenue in the banking operation, and fees provide the revenue in the trust and investment management operation. All operations are domestic. The accounting policies used are the same as those described in the summary of significant accounting policies. Occupancy expenses and indirect expenses are not allocated. Income taxes are allocated to each entity based on pretax income. Transactions among segments are recorded at fair value. Segments are evaluated based upon net income. Information reported internally for performance assessment follows:

1999 ------------------------------------------------ TRUST & INVESTMENT SEGMENT BANKING MANAGEMENT OTHER TOTALS - ------------------------------------------------------------------------------------------ Net interest income $ 15,026 $ 54 $ 52 $ 15,132 Provision for loan losses 1,100 1,100 Trust and investment management fees 2,113 2,113 Other income 2,694 1,075 3,769 Total other expenses 13,994 1,624 3,812 19,430 Income tax expense 930 183 (438) 675 Segment profit (loss) 1,696 360 (2,247) (191) Segment loss, discontinued operations (163) (163) Segment assets 521,768 1,276 35,527 558,571

1998 ------------------------------------------------ TRUST & INVESTMENT SEGMENT BANKING MANAGEMENT OTHER TOTALS - ------------------------------------------------------------------------------------------ Net interest income $ 14,421 $ 64 $ 32 $ 14,517 Provision for loan losses 820 820 Trust and investment management fees 2,141 2,141 Other income 2,646 666 3,312 Total other expenses 14,410 1,397 1,629 17,436 Income tax expense 478 316 (334) 460 Segment profit (loss) 1,359 492 (597) 1,254 Segment loss, discontinued operations (171) (171) Segment assets 406,836 1,000 36,530 444,366

HORIZON BANCORP & SUBSIDIARIES 55 42 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

1997 --------------------------------------------------- TRUST & INVESTMENT SEGMENT BANKING MANAGEMENT OTHER TOTALS - --------------------------------------------------------------------------------------------------------------- Net interest income $ 15,862 $ 59 $ 139 $ 16,060 Provision for loan losses 1,255 1,255 Trust and investment management fees 2,423 2,423 Other income 2,182 314 2,496 Total other expenses 14,161 1,359 1,543 17,063 Income tax expense 385 382 (103) 664 Segment profit (loss) 2,243 741 (987) 1,997 Segment loss, discontinued operations (276) (276) Segment assets 355,448 1,000 38,943 395,391 Amounts included in other column are as follows:

1999 1998 1997 ---------------------------------------- Net interest income Holding company interest income $ 52 $ 32 $ 139 Other income Holding company noninterest income 80 55 21 Nonreportable subsidiaries noninterest income 995 611 293 Other expense Holding company noninterest expense 2,922 1,011 1,338 Nonreportable subsidiaries noninterest expense 890 618 205 Income tax (benefit) expense Holding company benefit (466) (273) (136) Nonreportable subsidiaries (benefit) expense 28 (61) 33 Segment profits (losses) Holding company losses (2,330) (545) (1,042) Nonreportable subsidiaries profits (losses) 83 (52) 55 Segment losses, discontinued operations Nonreportable subsidiaries loss, discontinued operation (163) (171) (276) Segment assets Holding company assets 32,443 30,789 34,543 Nonreportable subsidiaries assets 3,084 5,741 4,400

HORIZON BANCORP & SUBSIDIARIES 56 43 Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) Reportable segment totals are reconciled to the financial statements as follows:

1999 --------------------------------------------------- REPORTABLE INTERSEGMENT CONSOLIDATED SEGMENTS OTHER ELIMINATION TOTALS - ----------------------------------------------------------------------------------------------- Net interest income $ 15,080 $ 52 $ 15,132 Provision for loan losses 1,100 1,100 Trust and investment management fees 2,113 2,113 Other income 2,694 1,075 3,769 Total other expenses 15,618 3,812 19,430 Income tax expense 1,113 (438) 675 Segment profit (loss) 2,056 (2,247) (191) Segment loss, discontinued operations (163) (163) Segment assets 523,044 35,527 $ (32,575) 525,996

1998 --------------------------------------------------- REPORTABLE INTERSEGMENT CONSOLIDATED SEGMENTS OTHER ELIMINATION TOTALS - ----------------------------------------------------------------------------------------------- Net interest income $ 14,485 $ 32 $ 14,517 Provision for loan losses 820 820 Trust and investment management fees 2,141 2,141 Other income 2,646 666 3,312 Total other expenses 15,807 1,629 17,436 Income tax expense 794 (334) 460 Segment profit (loss) 1,851 (597) 1,254 Segment loss, discontinued operations (171) (171) Segment assets 407,836 36,530 $ (28,212) 416,154

1997 --------------------------------------------------- REPORTABLE INTERSEGMENT CONSOLIDATED SEGMENTS OTHER ELIMINATION TOTALS - ----------------------------------------------------------------------------------------------- Net interest income $ 15,921 $ 139 $ 16,060 Provision for loan losses 1,255 1,255 Trust and investment management fees 2,423 2,423 Other income 2,182 314 2,496 Total other expenses 15,520 1,543 17,063 Income tax expense 767 (103) 664 Segment profit 2,984 (987) 1,997 Segment loss, discontinued operations (276) (276) Segment assets 356,448 38,943 $ (35,640) 359,751

HORIZON BANCORP & SUBSIDIARIES 57 44 Independent Auditor's Report - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) To the Stockholders and Board of Directors Horizon Bancorp We have audited the consolidated balance sheet of Horizon Bancorp and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of Horizon's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements of Horizon Bancorp and Subsidiaries for the year ended December 31, 1997, were audited by other auditors whose report dated February 25, 1998, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements described above present fairly, in all material respects, the consolidated financial position of Horizon Bancorp and Subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Olive LLP Fort Wayne, Indiana February 11, 2000 HORIZON BANCORP & SUBSIDIARIES 58 45 Management's Report on Financial Statements - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS Management is responsible for the preparation and presentation of the financial statements and related notes on the preceding pages. The statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances and include amounts that are based on management's best estimates and judgments. Financial information elsewhere in the Annual Report is consistent with that in the financial statements. In meeting its responsibility for the accuracy of the financial statements, management relies on Horizon's system of internal accounting controls. This system is designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded to permit the preparation of appropriate financial information. The system of internal controls is supplemented by a program of internal audits to independently evaluate the adequacy and application of financial and operating controls and compliance with Company policies and procedures. The Audit Committee of the Board of Directors meets periodically with management, the independent accountants and the internal auditors to ensure that each is properly discharging its responsibilities with regard to the financial statements and internal accounting controls. The independent accountants have full and free access to the Audit Committee and meet with it to discuss auditing and financial reporting matters. The financial statements in the Annual Report have been audited by Olive LLP, independent public accountants, for 1999 and 1998, and other independent public accountants for 1997. Their audits were conducted in accordance with generally accepted auditing standards and included a consideration of internal accounting controls, tests of accounting records and other audit procedures to the extent necessary to allow them to express their opinion on the fairness of the financial statements in conformity with generally accepted accounting principles. HORIZON BANCORP & SUBSIDIARIES 59 46 Summary of Selected Financial Data - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands)

1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------ EARNINGS Total interest income $ 30,897 $ 27,803 $ 28,997 $ 28,102 $ 26,257 Total interest expense 15,765 13,286 12,937 11,773 11,112 ---------------------------------------------------------------------- Net interest income 15,132 14,517 16,060 16,329 15,145 Provision for loan losses 1,100 820 1,255 Total noninterest income 5,882 5,453 4,919 5,685 3,987 Total noninterest expense 19,430 17,436 17,063 16,456 15,924 Provision for income taxes 675 460 664 1,669 167 ---------------------------------------------------------------------- Net income (loss) from continuing operations (191) 1,254 1,997 3,889 3,041 Loss, net of tax, from discontinued operations (163) (171) (276) (65) (2) ---------------------------------------------------------------------- Net income (loss) $ (354) $ 1,083 $ 1,721 $ 3,824 $ 3,039 ====================================================================== Cash dividend declared $ 1,218 $ 1,237 $ 1,264 $ 1,031 $ 895 ====================================================================== PER SHARE DATA Net income (loss) $ (.54) $ 1.58 $ 2.42 $ 5.19 $ 4.05 Cash dividends declared 1.80 1.80 1.80 1.40 1.20 Book value at period end 41.79 46.48 46.79 46.40 43.18 Weighted average share outstanding 655,391 686,804 710,967 736,887 750,286 PERIOD END TOTALS Loans, net of deferred loan fees and unearned income $394,357 $290,346 $258,115 $271,476 $241,662 Allowance for loan losses 3,273 2,787 2,702 2,435 2,777 Total assets 525,996 416,154 359,751 382,038 368,013 Total deposits 363,668 322,401 264,413 289,180 288,984 Long-term debt 105,000 54,000 42,000 41,500 21,400 RATIOS Loan to deposit 108.44% 90.06% 97.62% 93.88% 83.62% Loan to total funding 84.14 77.14 80.06 79.03 72.80 Return on average assets (.08) .29 .46 1.04 .86 Average stockholders' equity to average total assets 7.01 8.82 9.09 8.91 8.53 Return on average stockholders' equity (1.13) 3.27 5.06 11.67 10.09 Dividend payout ratio (dividends divided by net income) 344.07 114.25 73.45 26.96 29.45

HORIZON BANCORP & SUBSIDIARIES 60 47 Horizon's Common Stock and Related Stockholder's Matters - -------------------------------------------------------------------------------- (Table Dollar Amounts in Thousands) HORIZON'S COMMON STOCK AND RELATED STOCKHOLDERS' MATTERS Horizon common stock is traded on the over-the-counter market. ABN AMRO is the principal broker in Horizon stock. The following table sets forth, for the periods indicated, the high and low bid prices per share as reported by ABN AMRO. The bid prices represent dealer prices and do not include retail mark-up, mark-down, or commissions and may not represent actual transactions. Also summarized below are the cash dividends declared by quarter for 1999 and 1998. 1999 ---------------------------------------- COMMON STOCK BID PRICES DIVIDENDS ----------------------- DECLARED HIGH LOW PER SHARE ---------------------------------------- First Quarter $50.00 $49.25 $.45 Second Quarter 49.38 44.00 .45 Third Quarter 44.00 40.00 .45 Fourth Quarter 44.50 40.00 .45 1998 ---------------------------------------- COMMON STOCK BID PRICES DIVIDENDS ----------------------- DECLARED HIGH LOW PER SHARE ---------------------------------------- First Quarter $62.00 $58.63 $.45 Second Quarter 62.50 59.50 .45 Third Quarter 61.00 57.88 .45 Fourth Quarter 56.00 45.00 .45 There can be no assurance as to the amount of future dividends on Horizon common stock since future dividends are subject to the discretion of the Board of Directors, cash needs, general business conditions and dividends from the bank subsidiary. The approximate number of holders of outstanding common stock, based upon the number of record holders as of December 31, 1999 is 642. FORM 10-K Horizon will provide without charge to each stockholder upon written request to Diana E. Taylor, Chief Financial Officer, Horizon Bancorp, 515 Franklin Square, Michigan City, Indiana 46360, a copy of Horizon's Annual Report on Form 10-K, including the Financial Statements and schedules thereto required to the filed with the Securities and Exchange Commission for Horizon's most recent fiscal year. HORIZON BANCORP & SUBSIDIARIES 61 EX-21 7 EXHIBIT 21 1 EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT

STATE OF NAME UNDER WHICH SUBSIDIARY INCORPORATION BUSINESS IS ONE - ---------- ------------- --------------- Horizon Bank, National Association Indiana Horizon Bank Horizon Trust & Investment Management, National Association Indiana Horizon Trust (a subsidiary of Horizon Bank) & Investment Management Horizon Insurance Services, Inc. Indiana Horizon (a subsidiary of Horizon Bank) Insurance Services HBC Insurance Company, Inc. Arizona HBC Insurance Company The Loan Store, Inc. Indiana The Loan Store

18 EX-27 8 EXHIBIT 27

<ARTICLE> 9 <MULTIPLIER> 1,000 <CURRENCY> U.S. DOLLARS <PERIOD-TYPE> YEAR <FISCAL-YEAR-END> DEC-31-1999 <PERIOD-START> JAN-01-1999 <PERIOD-END> DEC-31-1999 <EXCHANGE-RATE> 1 <CASH> 34,670 <INT-BEARING-DEPOSITS> 406 <FED-FUNDS-SOLD> 0 <TRADING-ASSETS> 0 <INVESTMENTS-HELD-FOR-SALE> 67,880 <INVESTMENTS-CARRYING> 0 <INVESTMENTS-MARKET> 0 <LOANS> 394,357 <ALLOWANCE> 3,273 <TOTAL-ASSETS> 525,996 <DEPOSITS> 363,668 <SHORT-TERM> 24,500 <LIABILITIES-OTHER> 2,909 <LONG-TERM> 105,000 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <COMMON> 873 <OTHER-SE> 28,126 <TOTAL-LIABILITIES-AND-EQUITY> 525,996 <INTEREST-LOAN> 25,634 <INTEREST-INVEST> 5,263 <INTEREST-OTHER> 0 <INTEREST-TOTAL> 30,897 <INTEREST-DEPOSIT> 12,603 <INTEREST-EXPENSE> 15,765 <INTEREST-INCOME-NET> 15,132 <LOAN-LOSSES> 1,100 <SECURITIES-GAINS> 177 <EXPENSE-OTHER> 19,430 <INCOME-PRETAX> 484 <INCOME-PRE-EXTRAORDINARY> (191) <EXTRAORDINARY> (163) <CHANGES> 0 <NET-INCOME> (354) <EPS-BASIC> (.54) <EPS-DILUTED> (.54) <YIELD-ACTUAL> 3.86 <LOANS-NON> 1,173 <LOANS-PAST> 401 <LOANS-TROUBLED> 0 <LOANS-PROBLEM> 0 <ALLOWANCE-OPEN> 2,787 <CHARGE-OFFS> 1,227 <RECOVERIES> 363 <ALLOWANCE-CLOSE> 3,273 <ALLOWANCE-DOMESTIC> 3,273 <ALLOWANCE-FOREIGN> 0 <ALLOWANCE-UNALLOCATED> 148

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M+3(N,S8@5$0-"BA)5$5-(#,N($Q%1T%,(%!23T-%141)3D=3*51J#0HO1C(@ M,2!49@T*,"`M,BXS-"!41`T*6R@@*2TR,S`H("DM,3$U,"A4:&4@:6YF;W)M M871I;VX@2!R969E'0@70T*+T9O;G0@/#P-"B]&,B`T(#`@4@T*+T8S M(#4@,"!2#0HO1C4@,3(@,"!2#0H^/@T*+T5X=$=3=&%T92`\/`T*+T=3,2`W M(#`@4@T*/CX-"CX^#0IE;F1O8FH-"C0Y(#`@;V)J#0H\/`T*+TQE;F=T:"`S M-32!R969E2!R969E7-I2!D871A(')E<75I65A'D@*51J#0I4*@T**%-T871E;65N="!W M:6QL(&)E(&9I;&5D('=I=&@@=&AE($-O;6UI2!D87ES(&]F('1H92!C;&]S92!O9B!T:&4@4F5G:7-T M'0@ M70T*+T9O;G0@/#P-"B]&,B`T(#`@4@T*+T8S(#4@,"!2#0HO1C0@-B`P(%(- M"B]&-2`Q,B`P(%(-"CX^#0HO17AT1U-T871E(#P\#0HO1U,Q(#<@,"!2#0H^ M/@T*/CX-"F5N9&]B:@T*-3(@,"!O8FH-"CP\#0HO3&5N9W1H(#(U.#@-"CX^ M#0IS=')E86T-"D)4#0HO1C(@,2!49@T*,3(@,"`P(#$R(#(U+C8U(#DV,2XP M-2!4;0T*,"!G#0HO1U,Q(&=S#0HP(%1C#0HP(%1W#0HH("`@("`@("`@("`@ M("`@("`@*51J#0HO1C,@,2!49@T*,"XS,B`M,BXS-B!41`T**%!!4E0@258I M5&H-"B]&,B`Q(%1F#0HT+C`X(#`@5$0-"B@@*51J#0HO1C,@,2!49@T*,"XR M-B`P(%1$#0HH251%32`Q-"X@15A(24))5%,L($9)3D%.0TE!3"!35$%414U% 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M,"!2#0H^/@T*+T5X=$=3=&%T92`\/`T*+T=3,2`W(#`@4@T*/CX-"CX^#0IE M;F1O8FH-"C4X(#`@;V)J#0H\/`T*+TQE;F=T:"`U.3`X#0H^/@T*&-H86YG92!!8W0@;V8@,3DS-"P@=&AI&5C=71I=F4@3V9F:6-E2!.+B!-:61D;&5T M;VXL($1I'0@70T*+T9O;G0@/#P-"B]&,B`T(#`@ M4@T*+T8S(#4@,"!2#0H^/@T*+T5X=$=3=&%T92`\/`T*+T=3,2`W(#`@4@T* M/CX-"CX^#0IE;F1O8FH-"C8Q(#`@;V)J#0H\/`T*+TQE;F=T:"`T-C`Q#0H^ M/@T*'1'4W1A M=&4@/#P-"B]'4S$@-R`P(%(-"CX^#0H^/@T*96YD;V)J#0HV,R`P(&]B:@T* M/#P-"B]4>7!E("](86QF=&]N90T*+TAA;&9T;VYE5'EP92`Q#0HO2&%L9G1O M;F5.86UE("A$969A=6QT*0T*+T9R97%U96YC>2`V,`T*+T%N9VQE(#0U#0HO M4W!O=$9U;F-T:6]N("]2;W5N9`T*/CX-"F5N9&]B:@T*-R`P(&]B:@T*/#P- M"B]4>7!E("]%>'1'4W1A=&4-"B]302!F86QS90T*+T]0(&9A;'-E#0HO2%0@ M+T1E9F%U;'0-"CX^#0IE;F1O8FH-"C0@,"!O8FH-"CP\#0HO5'EP92`O1F]N M=`T*+U-U8G1Y<&4@+U1Y<&4Q#0HO3F%M92`O1C(-"B]"87-E1F]N="`O5&EM M97,M4F]M86X-"CX^#0IE;F1O8FH-"C4@,"!O8FH-"CP\#0HO5'EP92`O1F]N M=`T*+U-U8G1Y<&4@+U1Y<&4Q#0HO3F%M92`O1C,-"B]"87-E1F]N="`O5&EM M97,M0F]L9`T*/CX-"F5N9&]B:@T*-B`P(&]B:@T*/#P-"B]4>7!E("]&;VYT M#0HO4W5B='EP92`O5'EP93$-"B].86UE("]&-`T*+T5N8V]D:6YG(#8T(#`@ M4@T*+T)A7!E("]&;VYT#0HO4W5B='EP92`O5'EP93$-"B].86UE("]& M-0T*+T5N8V]D:6YG(#8T(#`@4@T*+T)A"]T:6QD92]M M86-R;VXO8G)E=F4O9&]T86-C96YT+V1I97)E7)I9VAT+V]R9&9E M;6EN:6YE(#$W,B]L;V=I8V%L;F]T+VAY<&AE;B]R96=I"])9&EE2]/7!E("]086=E#0HO4&%R96YT(#@@,"!2#0HO4F5S;W5R8V5S(#$U(#`@4@T* M+T-O;G1E;G1S(#$T(#`@4@T*/CX-"F5N9&]B:@T*,38@,"!O8FH-"CP\#0HO M5'EP92`O4&%G90T*+U!A7!E("]086=E#0HO4&%R96YT(#@@,"!2#0HO4F5S;W5R8V5S(#(T(#`@ M4@T*+T-O;G1E;G1S(#(S(#`@4@T*/CX-"F5N9&]B:@T*,C4@,"!O8FH-"CP\ M#0HO5'EP92`O4&%G90T*+U!A7!E("]086=E#0HO4&%R96YT(#@@,"!2#0HO4F5S;W5R8V5S(#,S M(#`@4@T*+T-O;G1E;G1S(#,R(#`@4@T*/CX-"F5N9&]B:@T*,S0@,"!O8FH- M"CP\#0HO5'EP92`O4&%G90T*+U!A7!E("]086=E#0HO4&%R96YT(#0Q(#`@4@T*+U)E7!E("]086=E#0HO4&%R96YT(#0Q(#`@4@T* M+U)E -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.8

   1
                                                                    Exhibit 10.8






                                 HORIZON BANCORP

                      DIRECTORS DEFERRED COMPENSATION PLAN

                              Amended and Restated

                                    Effective

                                  April 1, 1998












                                                                            2/98


   2


                                 HORIZON BANCORP
                      DIRECTORS DEFERRED COMPENSATION PLAN


                                TABLE OF CONTENTS
                                -----------------


ARTICLE                                                                   PAGE
- -------                                                                   ----

I.    DEFINITIONS...........................................................1
      1.1    Adjustment.....................................................1
      1.2    Affiliate .....................................................1
      1.3    Board..........................................................1
      1.4    Code ..........................................................1
      1.5    Committee .....................................................1
      1.6    Company .......................................................1
      1.7    Director ......................................................1
      1.8    Disabled or Disability ........................................1
      1.9    Fees ..........................................................1
      1.10   Individual Account ............................................1
      1.11   Participant ...................................................1
      1.12   Participation Agreement........................................2
      1.13   Plan...........................................................2
      1.14   Plan Year......................................................2

II.   INTRODUCTION..........................................................2
      2.1    Purpose........................................................2
      2.2    Effective Date.................................................2
      2.3    Affiliates.....................................................2

III.  PARTICIPATION.........................................................3
      3.1    Right to Defer.................................................3
      3.2    Participation Agreement .......................................3
      3.3    Establishment of Individual Accounts...........................3

IV.   INVESTMENT OF CONTRIBUTIONS...........................................4
      4.1    Investments....................................................4
      4.2    Unsecured Contractual Rights...................................4

V.    DISTRIBUTIONS.........................................................5
      5.1    Time of Payment of Benefits....................................5
      5.2    Method of Payment of Benefits..................................5
      5.3    Benefit Payment Elections......................................5
      5.4    New Mandatory Benefit Payment Elections........................6
      5.5    Death of a Participant and Beneficiary Designations............6



   3


VI.     PLAN ADMINISTRATION.................................................7
        6.1    Administration of Plan.......................................7
        6.2    Powers and Responsibilities of the Committee.................7
        6.3    Liabilities .................................................8
        6.4    Claims Procedure.............................................8
        6.5    Income and Employment Tax Withholding........................9

VII.    AMENDMENT AND TERMINATION...........................................9

VIII.   PARTICIPATION BY AFFILIATES........................................10
        8.1    Affiliate Participation.....................................10
        8.2    Horizon Bancorp Action Binding on Other Employers...........10

IX.     GENERAL PROVISIONS.................................................10
        9.1    Governing Law...............................................10
        9.2    Headings and Gender.........................................10
        9.3    Participant's Rights; Acquittance...........................10
        9.4    Spendthrift Clause..........................................10
        9.5    Counterparts................................................11
        9.6    No Enlargement of Employment Rights.........................11
        9.7    Limitations on Liability....................................11
        9.8    Incapacity of Participant or Beneficiary....................11
        9.9    Corporate Successors........................................11
        9.10   Evidence....................................................11
        9.11   Action by a Company ........................................11
        9.12   Severability................................................11

        SIGNATURES.........................................................12


   4


                                    ARTICLE I
                                    ---------

                                   DEFINITIONS
                                   -----------


         Whenever the initial letter of a word or phrase is capitalized herein,
the following words and phrases shall have the meanings stated below unless a
different meaning is plainly required by the context:

         1.1 "Adjustment" means the net increases and decreases in the market
value of the Individual Account of each Participant. Such increases and
decreases shall include such items as realized or unrealized investment gains
and losses, if any, and investment income, if any, and may, in the discretion of
Horizon Bancorp, include expenses properly attributable to administering the
Plan.

         1.2 "Affiliate" means Horizon Bancorp and any other corporation or
trade or business whose employees are treated as being employed by Horizon
Bancorp under Code Sections 414(b), 414(c), 414(m) or 414(o).

         1.3 "Board" means the Board of Directors of Horizon Bancorp.

         1.4 "Code" means the Internal Revenue Code of 1986, as amended.

         1.5 "Committee" means the Administrative Committee appointed by the
Board to administer the Plan as directed by the Board.

         1.6 "Company" means Horizon Bancorp, Horizon Bank and each other
Affiliate that adopts the Plan.

         1.7 "Director" means any duly elected and serving member or former
member of the Board of Directors of a Company who is not also an employee of the
Company at any time during the Plan Year immediately preceding his participation
in the Plan.

         1.8 "Disabled" or "Disability" means any disability that would qualify
as a disability under Section 22(c)(3) of the Code.

         1.9 "Fees" means all fees paid to a Participant for a Plan Year for
services rendered to a Company as a Director with respect to such Plan Year
including retainer fees for attendance at regularly scheduled Board of Directors
meetings, special meetings called from time to time, and fees for attendance at
any and all meetings of committees of a Company's Board of Directors.

         1.10 "Individual Account" means the individual bookkeeping account
maintained for each Participant in accordance with Section 2.2.

   5

         1.11 "Participant" means a non-employee Director of a Company who
becomes a Participant pursuant to Article II of the Plan.

         1.12 "Participation Agreement" means the written agreement between the
Participant and a Company pursuant to which the Participant elects to defer
receipt of Fees, designate a beneficiary, and elect a form and the time of
distribution of his benefits under the Plan.

         1.13 "Plan" means this Horizon Bancorp Directors Deferred Compensation
Plan, as amended and restated, generally effective April 1, 1998.

         1.14 "Plan Year" means the twelve (12) month period beginning January
1, and ending December 31.

                                   ARTICLE II
                                   ----------

                                  INTRODUCTION
                                  ------------

         2.1 PURPOSE. The Horizon Bancorp Directors Deferred Compensation Plan
("Plan") as set forth herein is a complete amendment and restatement of the Plan
which was originally effective January 1, 1984. The purpose of this Plan is to
permit Directors of Horizon Bancorp, Horizon Bank and any other Company under
the Plan to defer the receipt and resulting taxation of the Fees received from a
Company for services as a Director of a Company. All benefits payable under this
Plan shall be paid solely out of the general assets of the Companies.

         2.2 EFFECTIVE DATE. The Horizon Bancorp Directors Deferred Compensation
Plan was originally established by Horizon Bancorp, effective January 1, 1984.
The effective date of the Plan, as amended and restated is April 1, 1998. The
provisions of the Plan only apply to a Director who was not receiving a
distribution of his benefit under the Plan or a predecessor plan before the
effective date. The rights and benefits, if any, of a Director who was receiving
a distribution of his benefit under the Plan before the effective date will be
determined in accordance with the terms of the Plan in effect as of the date he
began receiving a distribution of his benefit.

         2.3 AFFILIATES. Any Affiliate may adopt the Plan for the benefit of its
Directors with Horizon Bancorp's consent in accordance with Section 8.1.



   6


                                   ARTICLE III
                                   -----------

                                  PARTICIPATION
                                  -------------

         3.1 RIGHT TO DEFER. A Director may become a Participant by electing, on
a Participation Agreement, to defer the receipt of all or a portion of the Fees
he or she would otherwise receive with respect to a Plan Year as a Director of a
Company.

         3.2 PARTICIPATION AGREEMENT.

             (a)  REQUIREMENT FOR PARTICIPATION AGREEMENT. As a condition to a
                  Company's and the Committee's obligation to credit deferred
                  Fees for the benefit of a Participant pursuant to Section 3.1,
                  the Participant must execute a Participation Agreement (on
                  such forms as shall be prescribed by the Committee) in which
                  it is agreed that the Participant's Company will withhold
                  payment of all or a portion of the Participant's Fees and
                  shall credit such amount withheld to the Participant's
                  Individual Account at the time set forth in the Plan.

             (b)  TIMING OF EXECUTION AND DELIVERY OF PARTICIPATION AGREEMENT.
                  Except as provided in Section 5.4, a Participation Agreement
                  must be executed by the Participant and the Committee prior to
                  the first day of the year in which the Participant is entitled
                  to receive the Fees with respect to which the Participant Fees
                  specified in the Participation Agreement relate.

             (c)  MODIFICATION OF PARTICIPANT DEFERRAL ELECTION. At any time, a
                  Participant and the Committee may execute and deliver an
                  amended Participation Agreement which increases, decreases,
                  commences or terminates the deferral of the Participant's
                  Fees. Provided, however, except as provided in Section 5.4,
                  such amended Participation Agreement must be executed by the
                  Participant and the Committee prior to the first day of the
                  Plan Year in which the Participant is entitled to receive the
                  Fees with respect to which the Participant Fees specified in
                  the Participation Agreement relate.

             (d)  DIRECTORS ELECTED MID-YEAR. A non-employee elected to fill a
                  vacancy on a Company's Board of Directors who was not a
                  Director on the preceding December 31st may, by completing a
                  Participation Agreement before his term begins, elect to defer
                  Fees for the balance of the Plan Year following such election
                  and for succeeding Plan Years.

         3.3 ESTABLISHMENT OF INDIVIDUAL ACCOUNTS.




                                       3
   7


             (a)  INDIVIDUAL ACCOUNT. All amounts to be allocated to each
                  Participant pursuant to Section 3.1, shall be credited to the
                  Participant's Individual Account as of the last day of the
                  Plan Year for which such Fees are payable and all amounts paid
                  to the Participant or his designated beneficiary pursuant to
                  Article V shall be debited from his Individual Account as of
                  the time actually paid. Additionally, all amounts credited to
                  each Participant under the Plan prior to April 1, 1998, shall
                  be credited, as of April 1, 1998, to such Participants'
                  Individual Accounts under this restated Plan.

             (b)  ALLOCATION OF ADJUSTMENTS. Following the allocations made
                  pursuant to the foregoing, the Committee shall determine the
                  Adjustments for each Plan Year, and on such other dates as the
                  Committee deems necessary or advisable, by adding together all
                  income received, and realized and unrealized gains and losses,
                  and deducting therefrom all taxes, charges or expenses (unless
                  paid separately by a Company in a Company's discretion,
                  outside the confines of this Plan) and any realized and
                  unrealized losses since the most recent allocation of
                  Adjustments to Participants' Individual Accounts. The
                  Adjustments shall be allocated as of the allocation date
                  specified herein to the Individual Accounts of Participants
                  who maintain a credit balance in their Individual Accounts as
                  of such date as provided in Section 4.1.

                                   ARTICLE IV
                                   ----------

                           INVESTMENT OF CONTRIBUTIONS
                           ---------------------------

         4.1 INVESTMENTS. For periods ending prior to April 1, 1998, the
Adjustment to each Participant's Individual Account equals the rate of interest
equal to the average of the rates paid on the last business day of each month
during the Plan Year for one (1) year notes issued by the U.S. Treasury.
Effective for periods beginning on and after April 1, 1998, the Adjustment to
each Participant's Individual Account shall be determined as if the amounts
credited to such Individual Account were invested in hypothetical investments
designated by the Committee to be used to measure increases or decreases in the
Individual Account over time. No provision of the Plan shall impose or be deemed
to impose any obligation upon a Company, other than an unsecured contractual
obligation to make a cash payment to Participants and their beneficiaries in
accordance with the terms of the Plan. Benefits payable under the Plan shall be
paid directly by a Company from its general assets. A Company shall not be
required to segregate any funds or other assets for the payment of benefits
under the Plan.

         4.2 UNSECURED CONTRACTUAL RIGHTS. The Plan at all times shall be
unfunded and shall constitute a mere promise by a Company to make benefit
payments in the future. Notwithstanding any other provision of this Plan,
neither a Participant nor his designated


                                       4
   8

beneficiary shall have any preferred claim on, or any beneficial ownership
interest in, any assets of a Company prior to the time benefits are paid as
provided in Article V, including any Fees deferred by the Participant. All
rights created under this Plan shall be mere unsecured contractual rights of the
Participant against a Company.

                                    ARTICLE V
                                    ---------

                                  DISTRIBUTIONS
                                  -------------

         5.1 TIME OF PAYMENT OF BENEFITS. All amounts credited to a
Participant's Individual Account, including any Adjustments credited in
accordance with Section 3.3, shall be or commence to be distributed to or for
the benefit of a Participant (or his designated beneficiary) on the date
effectively elected by the Participant in his Participation Agreement. A
Participant may amend his Participation Agreement as to the time of payment only
pursuant to Section 5.4 or if the amended Participation Agreement provides for
the deferral of the distribution to a date later than the date previously
elected.

         5.2 METHOD OF PAYMENT OF BENEFITS. The balance of a Participant's
Individual Account shall be distributed in cash in a single lump sum payment or
in substantially equal annual installments over a period of not less than three
(3) nor more than twelve (12) years, or in a combination of those two methods,
as elected by a Participant in accordance with the provisions of Section 5.3.

         5.3 BENEFIT PAYMENT ELECTIONS.

             (a)  In order to be effective, a Participant's election of the time
                  and the method in which his benefits shall be distributed
                  (including benefits which become payable as a result of the
                  Participant's death as set forth in Section 5.5) must be made
                  by delivering a Participation Agreement or an amended
                  Participation Agreement to the Committee not later than sixty
                  (60) days prior to the beginning of the Plan Year in which the
                  Participant has elected to begin receiving his benefits. If
                  the Participant does not elect a time or method of
                  distribution under Section 5.2, or such election is not timely
                  or properly made under this Section 5.3, a Company shall pay
                  the entire benefit at the time and in the method effectively
                  elected in the most recent Participation Agreement, or if no
                  such effective Participation Agreement exists, in the form of
                  a single lump sum within thirty (30) to sixty (60) days after
                  the first to occur of the following:

                  (i)       Disability; or

                  (ii)      Attainment of age sixty-five (65);




                                       5
   9


             (b)  In the event a Participant properly elects and is eligible to
                  receive his Individual Account in the form of installments,
                  the Participant must specify in his written election the
                  number of years over which the installments are to be
                  distributed.

             (c)  In the event a Participant properly elects and is eligible to
                  receive his Individual Account in a combination of a lump sum
                  and installments, the Participant must specify in his written
                  election the percentage of the account which will be
                  distributed in a single lump sum and the percentage of the
                  account which will be distributed in installments, including
                  the number of years over which such installments shall be
                  distributed.

         5.4 NEW MANDATORY BENEFIT PAYMENT ELECTIONS. Notwithstanding any
provision in this Plan to the contrary, a Participation Agreement providing an
effective election as to the deferral amount and the time and method of payment
of benefits under the Plan shall be entered into by all existing Participants
and by all directors beginning participation effective April 1, 1998, prior to
April 1, 1998, including all Participants who are no longer actively deferring
Fees under the Plan, and such election shall supersede all prior benefit payment
elections; provided, however, that if a Participant's benefit under the Plan is
in pay status before April 1, 1998, pursuant to a prior election, then that
Participant may not effectively make a new election and must continue to receive
his benefit payments at the time and in the manner previously elected. If a
Participant does not make an effective election as required by this Section 5.4
or pursuant to Section 5.3(a), then his benefit shall be paid at the time and in
the manner provided in Section 5.3(a).

         5.5 DEATH OF A PARTICIPANT AND BENEFICIARY DESIGNATION.

             (a)  FORM AND TIME OF PAYMENT. In the event of a Participant's
                  death prior to the time his benefits under the Plan commence
                  to be distributed, the balance in his Individual Account shall
                  be paid to his designated beneficiary in the form elected by
                  the Participant in his most recently filed Participation
                  Agreement. Such distribution shall be made or commence to be
                  made within 60 days of the date of the Participant's death. If
                  the Participant has not made an election as to the form in
                  which his benefit under the Plan is to be distributed, or if
                  his election was not timely filed with the Committee or is not
                  in proper form, such benefit shall be paid to the
                  Participant's designated beneficiary, in a single lump sum,
                  within sixty (60) days of the date of the Participant's death.
                  If the Participant dies after distribution of his benefits
                  under the Plan has commenced, his remaining benefit, if any,
                  shall be distributed in the same form(s) and at the same
                  time(s) as such benefit was being distributed prior to his
                  death, or in a single lump sum, if effectively elected by the
                  Participant in his most recently filed Participation
                  Agreement. Notwithstanding any provision to


                                       6
   10

                  the contrary, however, the Committee, in its sole
                  discretion, may approve an accelerated method and time of
                  distribution to said beneficiary or beneficiaries.

             (b)  DESIGNATION OF BENEFICIARIES. The Participant may designate a
                  primary and contingent beneficiary or beneficiaries on forms
                  provided by the Committee, which for this purpose may include
                  the Participation Agreement. Such designation may be changed
                  at any time for any reason by the Participant. If the
                  Participant fails to designate a beneficiary, or if such
                  designation shall for any reason be illegal or ineffective, or
                  if the designated beneficiary(ies) shall not survive the
                  Participant, his benefits under the Plan shall be paid to his
                  estate.

                                   ARTICLE VI
                                   ----------

                               PLAN ADMINISTRATION
                               -------------------

         6.1 ADMINISTRATION BY THE COMMITTEE. The Committee shall be responsible
for administering the Plan. Except as Horizon Bancorp shall otherwise expressly
determine, the Committee shall be charged with the full power and the
responsibility for administering the Plan in all its details.

         6.2 POWERS AND RESPONSIBILITIES OF THE COMMITTEE.

             (a)  The Committee shall have all powers necessary to administer
                  the Plan, including the power to construe and interpret the
                  Plan documents; to decide all questions relating to an
                  individual's eligibility to participate in the Plan; to
                  determine the amount, manner and timing of any distribution of
                  benefits or withdrawal under the Plan; to resolve any claim
                  for benefits in accordance with Section 6.4, and to appoint or
                  employ advisors, including legal counsel, to render advice
                  with respect to any of the Committee's responsibilities under
                  the Plan. Any construction, interpretation, or application of
                  the Plan by the Committee shall be final, conclusive and
                  binding. All actions by the Committee shall be taken pursuant
                  to uniform standards applied to all persons similarly
                  situated.

             (b)  RECORDS AND REPORTS. The Committee shall be responsible for
                  maintaining sufficient records to determine each Participant's
                  eligibility to participate in the Plan, and the Fees of each
                  Participant for purposes of determining the amount of
                  contributions that may be made by or on behalf of the
                  Participant under the Plan.

             (c)  RULES AND DECISIONS. The Committee may adopt such rules as it
                  deems necessary, desirable, or appropriate in the
                  administration of the Plan. All


                                       7
   11

                  rules and decisions of the Committee shall be applied
                  uniformly and consistently to all Participants in similar
                  circumstances. When making a determination or calculation,
                  the Committee shall be entitled to rely upon information
                  furnished by a Participant or beneficiary, a Company or the
                  legal counsel of a Company.

             (d)  APPLICATION AND FORMS FOR BENEFITS. The Committee may require
                  a Participant or beneficiary to complete and file with it an
                  application for a benefit, and to furnish all pertinent
                  information requested by it. The Committee may rely upon all
                  such information so furnished to it, including the
                  Participant's or beneficiary's current mailing address.

         6.3 LIABILITIES. The Committee shall be indemnified and held harmless
by the Companies with respect to any actual or alleged breach of
responsibilities performed or to be performed hereunder.

         6.4 CLAIMS PROCEDURE.

             (a)  FILING A CLAIM. Any Participant or beneficiary under the Plan
                  may file a written claim for a Plan benefit with the Committee
                  or with a person named by the Committee to receive claims
                  under the Plan.

             (b)  NOTICE OF DENIAL OF CLAIM. In the event of a denial or
                  limitation of any benefit or payment due to or requested by
                  any Participant or beneficiary under the Plan ("claimant"),
                  the claimant shall be given a written notification containing
                  specific reasons for the denial or limitation of his benefit.
                  The written notification shall contain specific reference to
                  the pertinent Plan provisions on which the denial or
                  limitation of his benefit is based. In addition, it shall
                  contain a description of any other material or information
                  necessary for the claimant to perfect a claim, and an
                  explanation of why such material or information is necessary.
                  The notification shall further provide appropriate information
                  as to the steps to be taken if the claimant wishes to submit
                  his claim for review. This written notification shall be given
                  to a claimant within 90 days after receipt of his claim by the
                  Committee unless special circumstances require an extension of
                  time for processing the claim. If such an extension of time
                  for processing is required, written notice of the extension
                  shall be furnished to the claimant prior to the termination of
                  said 90-day period, and such notice shall indicate the special
                  circumstances which make the postponement appropriate.


             (c)  RIGHT OF REVIEW. In the event of a denial or limitation of his
                  benefit, the claimant or his duly authorized representative
                  shall be permitted to review



                                       8
   12

                  pertinent documents and to submit to the Committee issues and
                  comments in writing. In addition, the claimant or his duly
                  authorized representative may make a written request for a
                  full and fair review of his claim and its denial by the
                  Committee; provided, however, that such written request must
                  be received by the Committee (or its delegate to receive such
                  requests) within 60 days after receipt by the claimant of
                  written notification of the denial or limitation of the claim.
                  The 60-day requirement may be waived by the Committee in
                  appropriate cases.

             (d)  DECISION ON REVIEW. A decision shall be rendered by the
                  Committee within 60 days after the receipt of the request for
                  review, provided that where special circumstances require an
                  extension of time for processing the decision, it may be
                  postponed on written notice to the claimant (prior to the
                  expiration of the initial 60-day period) for an additional 60
                  days after the receipt of such request for review. Any
                  decision by the Committee shall be furnished to the claimant
                  in writing and shall set forth the specific reasons for the
                  decision and the specific Plan provisions on which the
                  decision is based.

             (e)  COURT ACTION. No Participant or beneficiary shall have the
                  right to seek judicial review of a denial of benefits, or to
                  bring any action in any court to enforce a claim for benefits
                  prior to filing a claim for benefits or exhausting his rights
                  to review under this Section 6.4.

         6.5 INCOME AND EMPLOYMENT TAX WITHHOLDING. The Companies shall be
responsible for withholding, and the Participant shall agree to such
withholdings in his Participation Agreement, from the Participant"s Fees or from
the distribution of his benefit under the Plan of all applicable federal, state,
city and local taxes.

                                   ARTICLE VII

                            AMENDMENT AND TERMINATION
                            -------------------------

         The Board may amend, suspend or terminate, in whole or in part, the
Plan without the consent of the Committee, the Participant, beneficiary or other
person, except that no amendment, suspension or termination shall retroactively
impair or otherwise adversely affect (without consent) the rights of a
Participant, beneficiary or other person entitled to benefits under the Plan
which have accrued prior to the date of such action, as determined by the
Committee in its sole discretion. It is noted, however, that the Participant's
benefits under the Plan constitute mere unsecured claims on the general assets
of a Company. In addition, the Plan will terminate with respect to an individual
Company by resolution of the Company's Board of Directors, provided that 30 days
advance written notice is given to the Committee and Horizon Bancorp.



                                       9
   13



                                  ARTICLE VIII

                           PARTICIPATION BY AFFILIATES
                           ---------------------------

         SECTION 8.1. AFFILIATE PARTICIPATION. Any Affiliate may adopt the Plan
and become a participating Company under the Plan by filing with the Committee:

         (a)    a certified copy of a resolution of its Board of Directors to
                that effect; and

         (b)    a written document signed by an authorized officer of Horizon
                Bancorp which indicates the consent of Horizon Bancorp to that
                action.

         Notwithstanding any provision herein to the contrary, Horizon Bank
shall automatically be a participating Company as of the effective date of the
restatement of this Plan, April 1, 1998.

         SECTION 8.2. HORIZON BANCORP ACTION BINDING ON OTHER EMPLOYERS. As long
as Horizon Bancorp is a Company under the Plan, it is empowered to act for any
other Company in all matters relating to the Plan or the Committee.

                                   ARTICLE IX

                               GENERAL PROVISIONS
                               ------------------

         9.1 GOVERNING LAW. The Plan shall be construed, regulated and
administered according to the laws of the State of Indiana, except in those
areas preempted by the laws of the United States of America in which case such
laws will control.

         9.2 HEADINGS AND GENDER. The headings and subheadings in the Plan have
been inserted for convenience of reference only and shall not affect the
construction of the provisions hereof. In any necessary construction the
masculine shall include the feminine and the singular the plural, and vice
versa.

         9.3 PARTICIPANT'S RIGHTS; ACQUITTANCE. No Participant shall acquire any
right to be retained in an Employer's employ by virtue of the Plan, nor, upon
his dismissal, or upon his voluntary termination of employment, shall he have
any right or interest in or to any Plan assets other than as specifically
provided herein.

         9.4 SPENDTHRIFT CLAUSE. No benefit or interest available hereunder will
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors of the
Participant or the Participant's designated beneficiary, either voluntarily or
involuntarily.




                                       10
   14


         9.5 COUNTERPARTS. This Plan may be executed in any number of
counterparts, each of which shall constitute but one and the same instrument and
may be sufficiently evidenced by any one counterpart.

         9.6 NO ENLARGEMENT OF EMPLOYMENT RIGHTS. Nothing contained in the Plan
shall be construed as a contract of employment between a Company and any person,
nor shall the Plan be deemed to give any person the right to be retained in the
employ or as a Director of a Company or limit the right of a Company to employ
or discharge any person with or without cause.

         9.7 LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding
provisions of the Plan, none of the Companies, the Committee and each individual
acting as an employee or agent of any of them shall be liable to any
Participant, Director or beneficiary for any claim, loss, liability or expense
incurred in connection with the Plan, except when the same shall have been
judicially determined to be due to the gross negligence or willful misconduct of
such person.

         9.8 INCAPACITY OF PARTICIPANT OR BENEFICIARY. If any person entitled to
receive a distribution under the Plan is physically or mentally incapable of
personally receiving and giving a valid receipt for any payment due (unless
prior claim therefor shall have been made by a duly qualified guardian or other
legal representative), then, unless and until claim therefor shall have been
made by a duly appointed guardian or other legal representative of such person,
the Committee may provide for such payment or any part thereof to be made to any
other person or institution then contributing toward or providing for the care
and maintenance of such person. Any such payment shall be a payment for the
account of such person and a complete discharge of any liability of the
Companies and the Plan.

         9.9 CORPORATE SUCCESSORS. The Plan shall not be automatically
terminated by a transfer or sale of assets of Horizon Bancorp or by the merger
or consolidation of Horizon Bancorp into or with any other corporation or other
entity ("Transaction"), but the Plan shall be continued after the Transaction
only if and to the extent that the transferee, purchaser or successor entity
agrees to continue the Plan.

         9.10 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person relying
thereon considers pertinent and reliable, and signed, made or presented by the
proper party or parties.

         9.11 ACTION BY A COMPANY. Any action required of or permitted by a
Company under the Plan shall be by resolution of its Board of Directors or, for
Horizon Bancorp, by resolution of the Board or the Committee or by a person or
persons authorized by resolution of the Board or the Committee.

         9.12 SEVERABILITY. In the event any provisions of the Plan shall be
held to be illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the


                                       11
   15

Plan, and the Plan shall be construed and endorsed as if such illegal or invalid
provisions had never been contained in the Plan.

                                   SIGNATURES
                                   ----------

         IN WITNESS WHEREOF, Horizon Bancorp, by its officers thereunder duly
authorized, have caused this Horizon Bancorp Directors Deferred Compensation
Plan to be executed this _____ day of _________________, 1997, effective April
1, 1998.

                                 HORIZON BANCORP



                                 By:
                                    ------------------------------
                                 Title:
                                       ---------------------------
ATTEST:



By:
   ---------------------------
Title:
      ------------------------

SS-144873-2

                                          12

EX-10.9

   1
                                                                    Exhibit 10.9


                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT, executed this _______ day of ______________,
1999 but effective as of December 28, 1998, by and among Horizon Bank, N.A. a
national banking association ("Bank"), IMS Investment Management, N.A. ("IMS")
and Lawrence J. Mazur ("Executive");

                              W I T N E S S E T H:

         WHEREAS, on the date hereof the Bank's parent company, Horizon Bancorp
("Horizon") acquired substantially all of the assets and certain liabilities of
Financial Planning and Management Corp.("FPMC"), an Indiana corporation; and

         WHEREAS, the Executive is the sole shareholder and President of FPMC;
and

         WHEREAS, the Bank desires, due to the Executive's knowledge and
experience, to retain by contract the Executive to serve as President of IMS,
the Bank's national trust bank subsidiary and as a Trust Officer of the Bank;
and

         WHEREAS, the Executive is willing to serve in the employ of the Bank
and IMS in such and other capacities;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

         1. EMPLOYMENT. The Bank and IMS hereby employ the Executive to render
full-time services to IMS as President and to serve as a Trust Officer of the
Bank for the period commencing on the effective date of this Agreement and
extending through the Term specified in Section 2 until such full-time services
are terminated as hereinafter provided. The Executive hereby accepts and agrees
to such employment.

         2. TERM. Subject to the provisions for termination of this Agreement
contained in Section 8, the term of this Agreement shall be for a period of five
(5) years from the effective date hereof ("Term").

         3. DUTIES.

         (a) During the period of his employment hereunder, the Executive agrees
to diligently perform such executive duties and administrative functions which
are appropriate to the office of President as, from time to time, shall be
assigned to him by the Chairman or Vice Chairman or Board of Directors of IMS or
by the Board of Directors of the Bank (collectively referred to herein as the
"Board") or its designees and he further agrees to give his full business time
and attention to, and his best efforts to promote, the business and affairs of
the Bank and IMS. The Executive further agrees to hold the office of President
and such other offices of the Bank or


   2

IMS to which he may be elected or appointed and to perform and discharge the
duties thereof faithfully and to the best of his ability.

         (b) The Executive, subject to the direction and control of the Board,
shall have all power and authority commensurate with his executive status and
necessary to perform his duties hereunder. The Bank shall provide the Executive
with such assistance and working accommodations as are suitable to the character
of his positions with the Bank and IMS and as are adequate for the performance
of his duties.

         4. COMPENSATION.

         (a) During the period of his employment hereunder, the Executive's
basic annual salary as President shall be One Hundred Thirty Thousand Dollars
($130,000.00). Such salary shall be payable in cash on the same schedule as all
other salaried employees.

          Such salary payments shall be subject to the withholding of applicable
income and employment taxes and other appropriate and customary amounts. Upon
any change in the Executive's salary, a written addendum to this Employment
Agreement shall be executed by the Executive and the appropriate officer or
officers of the Bank.

         (b) In addition to his basic annual salary as President, the Executive
shall be entitled to receive a cash bonus payable semi-annually as described in
Schedule A hereto commencing in 2000, unless this Agreement is terminated as
provided for herein, and subject to the terms and conditions set forth in
Schedule A.

         (c) In addition to the salary and bonus compensation described above,
Executive shall also receive a one-time signing bonus effective upon execution
of this Agreement. Such bonus shall be paid to the Executive in the form of
forgiveness of indebtedness and shall be in an amount equal to the principal and
interest owed by the Executive to the Bank on a loan made by the Bank to the
Executive in the original principal amount of $100,000 dated as of December 28,
1998.

         5. EMPLOYEE BENEFITS. During the Term of his employment hereunder, the
following shall apply with respect to the Executive's coverage by and
participation under employee benefit plans and programs sponsored or otherwise
made available by the Bank:

     (a) Subject to the more specific provisions of subsection (c) below, the
Executive shall be entitled to participate in any retirement, deferred
compensation, life, accident, health, hospitalization and any other employee
benefit plan or program, excluding bonus programs, that is generally available
to the employees of Horizon or the Bank, if and to the extent the Executive is
eligible to participate thereunder in accordance with the provisions thereof.
Nothing herein shall be construed to require the Bank to institute any
particular benefit plan or program or to prevent the Bank or Horizon from
modifying or terminating any plan or program it may determine to adopt from time
to time. Further, the Executive shall be treated as a new employee for purposes
of eligibility and vesting under any employee benefit plan or program that is
available to the executive officers of the Bank. Years of service as an employee
of FPMC shall



                                       2
   3
not be credited to the Executive for purposes of eligibility and vesting under
any employee benefit plan or program that is generally available to the
employees of the Bank.

         (b) During the Term, Executive shall be entitled to four (4) weeks per
calendar year of paid vacation, which shall be utilized at such times when his
absence will not materially impair the Bank's normal business functions. Any
unused vacation time in any calendar year shall lapse, and Executive shall not
be entitled to any additional compensation for any such unused and lapsed
vacation time. In addition to the vacation described above, Executive also shall
be entitled to all paid holidays customarily given by the Bank to its officers.

         (c) The Executive shall be entitled to participate in the following
employee benefit plans, subject to the terms and conditions of the specific plan
documents or agreements provided with respect to each plan:

             (i)   Supplemental Executive Retirement Program ("SERP"). Executive
                   shall be eligible for participation in such program, with an
                   effective date of January 1, 1999, provided that Executive
                   executes the Bank's standard SERP Agreement. Vesting under
                   the SERP Program will be accelerated upon a Change in Control
                   (as hereinafter defined).

             (ii)  Stock Options. The Executive shall be granted options under
                   Horizon's Stock Option and Stock Appreciation Rights program
                   for 6000 shares of Horizon Stock, in accordance with
                   Horizon's standard agreement governing the program. The grant
                   hereunder will only be effective if this Employment Agreement
                   is executed, notwithstanding that actual employment may have
                   commenced prior to such date. Vesting of stock options
                   granted under the program will be accelerated upon a Change
                   in Control.

             (iii) 401(k) Retirement Plan. The Executive shall be entitled to
                   participate in Horizon's 401(k) Plan in accordance with the
                   terms and conditions of the plan documents. Until the
                   Executive is eligible for actual enrollment under the Plan,
                   the Executive shall receive an equivalent benefit under the
                   SERP for the amount the Executive would have received for the
                   period from January 1, 1999 to the enrollment date.

             (iv)  Employer Stock Ownership Plan ("ESOP"). The Executive shall
                   be entitled to participate in Horizon's ESOP in accordance
                   with the terms and conditions of the plan documents. Until
                   the Executive is eligible for actual enrollment under the
                   ESOP, the Executive shall receive an equivalent benefit under
                   the SERP for the amount the Executive would have received for
                   the period from January 1, 1999 to the enrollment date.

         6. REIMBURSEMENT OF EXPENSES AND CONTINUING EDUCATION. The Bank shall
pay to the Executive, or to the extent paid in the first instance by the
Executive, shall reimburse the Executive


                                       3
   4
for, travel, entertainment and similar expenses he incurs in connection with
the performance of his duties hereunder in accordance with the Bank's policies
governing such activities, as such policies may be amended or modified from time
to time. Further, the Bank shall pay or reimburse Executive for the cost of up
to 40 hours of continuing professional education courses per year, provided that
such costs are reasonable and the courses are approved in advance by the Bank.

         7. INSURANCE. The Bank shall have the right to maintain one (1) or more
insurance policies against the life of the Executive in such face amounts as the
Board considers appropriate, and to name itself as beneficiary under such
policies.

         8. TERMINATION.

         (a) At any time during the term of this Agreement, the Board shall have
the right to terminate the Executive's employment hereunder, provided that the
Board, or its designee, has followed the Bank's policies regarding review of
employee performance, due to the failure of the Executive to perform
satisfactorily any of the duties assigned to him by the Board, upon sixty (60)
days' prior written notice to the Executive and the Executive shall have the
right to terminate his employment hereunder at any time and for any reason, upon
sixty (60) days' prior written notice to the Bank.

         (b) This Agreement shall also terminate on the death of the Executive.

         (c) The Bank shall have the right to terminate the Executive's
employment hereunder for cause upon thirty (30) days' prior written notice. For
purposes of this Agreement, the Executive may be terminated "for cause" if his
employment is terminated by the Bank as a result of any of the following:

             (i)   An action by the Executive which involves fraud, willful
                   misfeasance or gross negligence in connection with the
                   performance of his duties hereunder;

             (ii)  The requirement or direction of a federal or state regulatory
                   agency which has jurisdiction over the Bank to terminate the
                   employment of the Executive;

             (iii) Conviction of the Executive due to the commission of any
                   criminal offense which involves dishonesty or breach of
                   trust; or

             (iv)  Any breach by the Executive of a material term, condition or
                   covenant hereunder or any other agreement between the
                   Executive and the Bank and IMS, including, but not limited to
                   that certain Purchase and Sale Agreement dated of even date
                   herewith.

         (d) The Executive may also be terminated upon sixty (60) days prior
written notice in the event of a Change in Control (as defined herein) subject
to Section 9.c. hereof. For purposes of this Agreement, "Change in Control" of
the Bank or IMS shall mean (i) a change in


                                       4
   5

control of Horizon, of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Act of 1934, or (ii) a transfer of more than fifty percent (50%) of
the stock of IMS.

         (e) Any termination of the Executive's employment by the Bank or by the
Executive shall be communicated by written Notice of Termination to the
non-terminating party. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.

         (f) As used herein, "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination; provided that, if within thirty (30)
days after any Notice of Termination is given, the parties who receive such
Notice of Termination notify the other parties that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
is finally determined, by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).

         9. COMPENSATION UPON TERMINATION.

         (a) In the event that the Bank terminates the employment of the
Executive pursuant to Section 8(a), the Executive shall continue for a period of
two (2) years after the Date of Termination to receive his full compensation, as
provided in Section 4(a), at a rate equal to the Executive's basic compensation
received by the Executive for the twelve (12) months prior to the Date of
Termination. Such payments shall be made by the Bank at the same intervals as
his basic annual compensation and shall continue for such 2-year period,
together with all other unpaid amounts previously accrued or awarded pursuant to
any other provision of this Agreement, provided, however, that the Bank's
obligations to make payments hereunder shall be reduced by the amount the
Executive receives in compensation and cash benefits from any other employer or
any person to or for whom Executive is providing services as a consultant or
independent contractor, excluding however, compensation received by the
Executive from the independent practice of law.

         (b) If the Executive terminates his employment pursuant to Section 8(a)
or the Bank terminates the Executive's employment for cause, the Bank shall pay
the Executive his (i) basic annual salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given; and (ii) all other
unpaid amounts previously accrued or awarded pursuant to any other provision of
this Agreement.

         (c) If the Executive is terminated due to a Change in Control, the
Executive shall continue for a period of three (3) years after the Date of
Termination to receive his full compensation as provided in Section 4(a) at a
rate equal to the Executive's basic compensation received for the twelve (12)
months prior to the Date of Termination.


                                       5
   6

         (d) All payments due under this Section 9 shall survive the Executive's
death and shall be payable thereafter to the Executive's spouse or his estate,
as the case may be, in accordance with this Agreement, provided that the Bank
reserves the right, in its sole discretion, to make such payments in one lump
sum discounted to present value, rather than in periodic payments as required
above.

         10. NON-SOLICITATION COVENANTS OF EXECUTIVE. For purposes of this
Section 10, the term "Employer" includes the Bank and any direct or indirect
parent or subsidiary thereof.

         (a) If this Agreement is terminated by the Executive pursuant to
Section 8(a) or is terminated by the Employer for cause, the Executive shall
not, directly or indirectly, on his own behalf or on behalf of any other person,
corporation or other business entity, for a period of one (1) year from the Date
of Termination, solicit business (for products or services similar to those
under active development, or provided by, the Bank prior to the termination of
the Executive's employment hereunder) from any person, firm, company or other
business entity that is doing business with, is a customer or account of, or
that has been solicited within six (6) months prior to the Date of Termination
of the Executive's employment hereunder by or is within a fifty (50) mile radius
of the city limits of Michigan City, Indiana.

         (b) Except as shall be required in the course of his employment
hereunder, during the term of the Executive's employment hereunder and
thereafter, the Executive shall keep secret and shall not, directly or
indirectly, without the prior written consent of the Employer:

             (i)  Divulge or communicate to any third person or entity, or use
                  for the benefit of the Executive or any third person or
                  entity, any trade secrets, or any trade knowledge, formulae,
                  processes, programs, methods or other information relating to
                  the operation of the business of the Employer or which were
                  originated in connection therewith and any and all privileged,
                  proprietary or confidential information relating to the
                  business, planning or research activities of the Employer or
                  any of its clients, customers, consultants or licensees; or

             (ii) Retain for the benefit of the Executive or any third person or
                  entity any document or paper used or owned by the Employer
                  which comes into the Executive's possession in the course of
                  her employment with the Employer, or make or cause to be made
                  any copy, abstract or summary thereof.

         (c) Because the services to the Employer of the Executive are unique
and extraordinary and the Employer does not have an adequate remedy at law to
protect its business from the Executive's competition or its interests in its
trade secrets, privileged, proprietary and confidential information and similar
commercial assets, the Employer shall be entitled to injunctive relief, in
addition to such other remedies and relief that would, in the event of a breach
of the provisions of this Section 10, be available to the Employer. In the event
of such a breach, in addition to any other remedies, the Employer shall be
entitled to receive from the Executive payment of, or reimbursement for, the
Employer's reasonable attorneys' fees and disbursements


                                       6
   7

incurred in enforcing any such provision. In the event of a breach of this
Agreement by the Employer, in addition to any other remedies, the Executive
shall be entitled to recover from the Employer payment of or reimbursement for,
the Executive's reasonable attorneys' fees and disbursements incurred in
enforcing the Agreement if the Executive is successful on the merits of any
action for enforcement.

         (d) If the Employee does not comply with the provisions of this Section
10, the one (1) year period of non-solicitation provided herein shall be tolled
and deemed not to run during any period(s) of non-compliance, the intention of
the parties being to provide for one (1) full year of non-solicitation by the
Employee after the termination or expiration of this Agreement.

         (e)  The provisions of this Section 10 shall survive any termination
of this Agreement.

         11. NOTICES. All communications, notices and elections pursuant to
Sections 9 and 10, and all other notices, requests, consents or demands given
under this Agreement shall be in writing and shall be deemed to have been duly
given when delivered to, or mailed by prepaid registered or certified mail
addressed to the party for whom intended as follows, or to such other address as
may be furnished by such party in the manner provided herein:

         If to the Executive:       Lawrence J. Mazur
                                    326 Oak Drive
                                    LaPorte, Indiana 46350

         If to the Bank:   Horizon Bank, N.A.
                                    515 Franklin Square
                                    Michigan City, Indiana 46360
                                    Attention:  President

         12. GOVERNING LAW. This Agreement has been executed and delivered in
the State of Indiana and shall be construed in accordance with and governed by
the laws of the State of Indiana, without giving effect to any conflicts of laws
rules.

         13. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes all prior and contemporaneous understandings with respect to its
subject matter, and may not be waived or modified, in whole or in part, except
by a writing signed by each of the parties hereto. No waiver of any provision of
this Agreement in any instance shall be deemed to be a waiver of the same or any
other provision in any other instance.

         14. CONSTRUCTION. Headings contained in this Agreement are for
convenience of reference only and shall not be used in the interpretation of
this Agreement. References herein to Sections are to the sections of this
Agreement. As used herein, the singular includes the plural and the masculine,
feminine and neuter gender each includes the others where the context so
indicates.


                                       7
   8

         15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
enforceable against, and inure to the benefit of, the parties hereto and their
respective heirs, successors and assigns, and nothing herein is intended to
confer any right, remedy or benefit upon any other person. The rights, duties
and obligations of the Executive hereunder may not be assigned. This Agreement
may not be assigned by the Bank or IMS without the prior written consent of the
Executive, which consent shall not be unreasonably withheld.

         16. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, this Agreement
shall be interpreted and enforceable as if such provision were severed or
limited or payment reduced, but only to the extent necessary to render such
provision and this Agreement enforceable.

         17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

         IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first set forth above, but effective as of
____________________, 1999.


                                    EXECUTIVE

                                    --------------------------------------
                                    Lawrence J. Mazur

ATTEST:  (SEAL)                     HORIZON BANK, N.A.

By:                                 By:
   ------------------------------      -----------------------------------
Printed:                            Printed:  Craig M. Dwight
        -------------------------
Title:                              Title: President and Chief Executive Officer
      ---------------------------


ATTEST:  (SEAL)                     IMS INVESTMENT MANAGEMENT, N.A.

                                    By:
BY:
   ------------------------------
Printed:                            Printed:  Robert C. Dabagia
        -------------------------
Title:                              Title:  Chairman
       --------------------------



                                   SCHEDULE A
                                       TO
                              EMPLOYMENT AGREEMENT
                            BETWEEN HORIZON BANK, IMS
                              AND LAWRENCE J. MAZUR

                                       8
   9


                           DATED _______________, 1999


                                  Section 4(b)


         BONUS COMPENSATION.
         ------------------

         Within ____ (___) days following each June 30 and December 31,
commencing June 30, 2000, the Bank shall pay to the Executive a lump sum cash
bonus equal to:

                  25% of the net annual growth in gross fee income for IMS
                  calculated semiannually with the amount of growth in fee
                  income to be calculated from a base of IMS' total fee income
                  at December 31, 1999. The amount of growth in fee income will
                  not take into account any fees earned or other revenues
                  generated from any assets originally delivered to IMS from the
                  Executive or the Corporation (as defined below) and in no
                  event will the Executive receive a bonus based upon those
                  assets or any revenue, now or hereafter, generated therefrom.
                  The Executive shall not be eligible for any other bonus
                  program offered to Employees by the Bank or IMS.

         ADJUSTMENTS TO BONUS AND OTHER COMPENSATION

         The Executive has entered into a Purchase and Sale Agreement and Plan
of Reorganization (the "Purchase Agreement") whereby the Executive has sold to
Horizon all of the assets of Financial Planning and Management Corporation (the
"Corporation"). As part of such Agreement, the Executive has guaranteed that the
assets of the Corporation sold to Horizon shall produce gross revenue to IMS not
less than $150,000 per annum from the date of purchase, for a period of five (5)
years. In the event that such amount is not generated in any year, the bonus to
be paid to Executive under this Agreement shall be reduced by the amount of such
deficiency. To the extent bonus income for such year is insufficient to cover
any shortfall, the Executive further agrees that such deficiency may carry
forward to reduce future bonuses, or at the Bank's discretion, annual base
salary under Section 4(a) may be reduced or, where permitted by applicable law,
other benefits or distributions may be reduced.


                                       9

EX-10.10

   1
                                                                   Exhibit 10.10

                                    AGREEMENT
                                    ---------

         THIS AGREEMENT ("Agreement"), dated as of ___________________, 1999, is
entered into between Horizon Bank, N.A. ("Bank"), a national banking association
organized under the laws of the United States of America, and _____________
(hereinafter referred to as "Employee"), an Indiana resident.

                                   WITNESSETH:

         WHEREAS, Bank is a subsidiary of Horizon Bancorp ("Holding Company"), a
corporation formed under the laws of the State of Indiana;

         WHEREAS, Employee is employed by the Bank to serve as its ____________;

         WHEREAS, because of Employee's experience and familiarity with general
banking affairs, the Bank wishes to assure that, in the event of a change of
control of the Holding Company, the Bank will continue to have Employee
available to perform duties substantially similar to those currently being
performed by Employee and to continue to contribute to the Bank's growth and
success; and

         WHEREAS, Employee is willing to commit to continue in the performance
of such services for the Bank upon the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

         1.       EMPLOYMENT.

         (A) The Bank hereby agrees that, effective upon a Change of Control of
the Holding Company and provided that Employee is still serving as
______________ of the Bank at that time, the Bank will continue to employ
Employee as _________________ to perform the duties described herein, and
Employee hereby accepts such employment on the terms and conditions stated
herein. It is understood that, prior to such Change of Control, this Agreement
shall confer no rights of employment or other benefits (or obligations)
whatsoever upon Employee, and that Employee shall remain subject to termination
at will.

         (B) For purposes of this Agreement, "Change of Control" shall mean a
Change of Control of the Holding Company of a nature which would be required to
be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended, or any merger, tender offer,
consolidation or sale of substantially all of the assets of Holding Company, or
related series of such events, as a result of which: (i) the majority
shareholders of Holding Company immediately prior to such event hold less than
fifty-percent (50%) of the outstanding voting securities of Holding Company or
its survivor or successor immediately after such event; or (ii) persons holding
less than twenty-percent (20%) of such securities before such event own more
than fifty-percent (50%) of such securities after such


   2

event; or (iii) persons constituting a majority of the Board of Directors of the
Holding Company (the "Holding Company Board") were not directors of the Holding
Company for at least twenty-four (24) months preceding the event.

         2. TERM OF EMPLOYMENT. Subject to the provisions for termination set
forth herein, the term of Employee's employment hereunder shall commence on the
date a Change of Control occurs and shall extend until two (2) years after the
date of such Change of Control (such term, including any extension thereof shall
herein be referred to as the "Term"). Notwithstanding the foregoing, this
Agreement shall automatically terminate (and the Term shall thereupon end)
without notice when Employee attains sixty-five (65) years of age.

         3. DUTIES OF EMPLOYEE. During the Term, Employee shall be the Executive
Vice President of the Bank and shall perform such duties and responsibilities
for the Bank as may be assigned by the Bank and which are not unreasonably
inconsistent with the duties currently being performed by Employee; provided,
however, that such duties shall be performed in or from the principal executive
offices of Bank, currently located in Michigan City, Indiana. Employee shall not
be required to be absent from the location of the principal executive offices of
Bank on travel status or otherwise more than thirty (30) days in any calendar
year. Bank shall not, without the written consent of Employee, relocate or
transfer Employee to a location more than thirty (30) miles from his principal
residence. During the Term, Employee shall devote substantially all business
time, attention and energy, and reasonable best efforts, to the interests and
business of the Bank and to the performance of the Employee's duties and
responsibilities on behalf of the Bank. Employee may use his discretion in
fixing the hours and schedule of work consistent with the proper discharge of
the Employee's duties. Employee, subject to the direction and control of the
Bank's Board of Directors ("Bank Board") and Chief Executive Officer, shall have
all power and authority commensurate with the Employee's status and necessary to
perform the Employee's duties hereunder. So long as Employee is employed by Bank
pursuant to this Agreement, Employee shall be entitled to office space and
working conditions consistent with the position as __________________. The Bank
shall provide Employee with such assistance and working accommodations as are
suitable to the character of the position with the Bank and as are adequate for
the performance of the Employee's duties.

         4. COMPENSATION. Employee's basic annual salary as
_____________________ ("Base Salary") shall be the Employee's basic annual
salary at the time of the Change of Control. Such Base Salary shall be payable
in accordance with the Bank's standard payroll practices. The rate of Employee's
Base Salary shall be reviewed by the Bank Board not less often than annually and
may be increased, but not decreased, from time to time in such amounts as the
Board in its discretion may determine. Any and all increases in Employee's
salary pursuant to this Section shall cause the level of Base Salary to be
increased by the amount of each such increase for purposes of this Agreement.
The increased level of Base Salary as provided in this Section shall become the
level of Base Salary for the remainder of the Term until there is a further
increase in Base Salary as provided herein. Such salary payments shall be
subject to the withholding of applicable income and employment taxes and other
appropriate and customary amounts.




                                       2
   3


         5. VACATION. During the Term, Employee shall be entitled to the number
of weeks per calendar year of paid vacation in effect for the Employee upon the
Change in Control as increased in accordance with the Bank's vacation policy
then in effect or as changed from time to time, but provided that such vacation
may not be decreased below that amount in effect on the date of the Change in
Control. Such vacation shall be utilized at such times when the Employee's
absence will not materially impair Bank's normal business functions. Employee
shall not be entitled to any additional compensation for any unused and lapsed
vacation time. In addition to the vacation described above, Employee also shall
be entitled to all paid holidays customarily given by Bank to its officers.

         6. OTHER BENEFITS. The following shall apply with respect to Employee's
coverage by and participation under employee benefit plans and programs
sponsored or otherwise made available by the Bank.

         (A) During the Term, Employee shall be entitled to participate in or
receive benefits under (i) any life, health, hospitalization, medical, dental,
disability or other insurance policy or plan, (ii) pension, retirement or
employee stock ownership plan, (iii) bonus or profit-sharing plan or program,
(iv) deferred compensation plan or arrangement, and (v) any other employee
benefit plan, program or arrangement, made available by Bank on the date of this
Agreement and from time to time in the future to Bank's directors, officers and
employees on a basis consistent with the terms, conditions and overall
administration of the foregoing plans, programs or arrangements and with respect
to which Employee is otherwise eligible to participate or receive benefits.

         (B) During the Term, Employee shall be entitled to receive such other
benefits or participate in such other activities as the Employee participated in
or was entitled to receive on the date of the Change in Control, including but
not limited to bonus or incentive plans, use of company cars, or payment of
membership fees to clubs and organizations, but this provision does not grant
the Employee any greater benefits than the Employee had in effect on the date of
the Change in Control.

         7. EXPENSES. The Bank shall pay or reimburse Employee for all
reasonable expenses actually incurred or paid by the Employee in the performance
of services rendered by the Employee pursuant to this Agreement. Such expenses
shall be supported by the documentary evidence required to substantiate them as
income tax deductions for the Bank. Employee shall attend, at the Employee's
discretion, those professional meetings, conventions and/or similar functions
that Employee and Bank mutually deem appropriate and useful for the purposes of
keeping abreast of current developments in the industry and/or promoting the
interests of Bank.

         8. TERMINATION. Subject to the respective continuing obligations of the
parties, including but not limited to those set forth in Section 10 below,
Employee's employment by Bank may be terminated prior to the expiration of the
Term as follows:





                                       3
   4


         (A) Bank Board or Chief Executive Officer, upon written notice to
Employee, may terminate Employee's employment with Bank immediately for cause.
For purposes of this subsection 8(A), "cause" shall be defined as (i) personal
dishonesty, (ii) incompetence, (iii) willful misconduct, (iv) willful violation
of any law, rule, or regulation (other than traffic violations or smaller
offenses) or final cease-and-desist order, or (v) any material breach of any
term, condition or covenant of this Agreement.

         (B) Bank Board or Chief Executive Officer may terminate Employee's
employment with Bank without cause at any time; provided, however, that the
"date of termination" for purpose of determining benefits payable to Employee
under Section 6 hereof shall be the date which is thirty (30) days after
Employee receives written notice of such termination.

         (C) Employee, by written notice to Bank, may terminate his employment
with Bank immediately for cause. For purposes of this subsection 8(C), "cause"
shall be defined as: (i) any action by Bank Board or the Chief Executive Officer
to remove the Employee as Executive Vice President of Bank, except where Bank
Board or the Chief Executive Officer properly acts to remove Employee from such
office for "cause" as defined in subsection 8(A) hereof; (ii) any action by Bank
Board or the Chief Executive Officer to materially eliminate, limit, increase,
or modify Employee's duties and/or authority as ________________ of Bank
(including authority, subject to corporate controls no more restrictive than
those in effect on the date hereof, to hire and discharge employees who are not
bona fide officers of Employer); (iii) any failure of Bank or Holding Company to
obtain the assumption of the obligation to perform this Agreement by any
successor as contemplated in Section 19 hereof; or (iv) any intentional breach
by Bank of a term, condition or covenant of this Agreement.

         (D) Employee, upon sixty (60) days written notice to Bank, may
terminate his employment with Bank without cause.

         (E) Employee's employment with Bank shall terminate in the event of
Employee's death or disability. For purposes hereof, "disability" shall be
defined as Employee's inability by reason of illness or other physical or mental
incapacity to perform the duties required by the Employee's employment for any
consecutive one hundred eighty (180) day period. Notice of any termination by
Bank because of Employee's "disability" shall be given to Employee prior to the
full resumption by him of the performance of such duties.

         9. COMPENSATION UPON TERMINATION. In the event of termination of
Employee's employment with Bank pursuant to Section 8 hereof, compensation shall
continue to be paid by Bank to Employee as follows:

         (A) In the event of termination pursuant to subsection 8(A), 8(B), 8(C)
or 8(D), compensation provided for herein (including Base Salary) shall continue
to be paid, and Employee shall continue to participate in the employment
benefit, retirement, and compensation plans and other perquisites as provided in
Section 6 hereof, through the date of termination specified in the notice of
termination. Any benefits payable under insurance, health, retirement and bonus
plans as a result of Employer's participation in such plans through such date
shall be paid when due under those plans. The date of termination specified in
any notice of termination


                                       4
   5

pursuant to subsection 8(A) shall be no later than the last business day of the
month in which said notice is provided to Employee.

         (B) In the event of termination pursuant to subsection 8(E),
compensation provided for herein (including Base Salary) shall continue to be
paid, and Employee shall continue to participate in the employment benefit,
retirement, and compensation plans and other perquisites as provided in Section
6 hereof, (i) in the event of Employee's death, through the date of death, or
(ii) in the event of Employee's disability, through the date of proper notice of
disability as required by subsection 8 (E). Any benefits payable under
insurance, health, retirement and bonus plans as a result of Bank's
participation in such plans through such date shall be paid when due under those
plans.

         10. NONSOLICITATION COVENANTS OF EMPLOYEE. In order to induce Bank to
enter into this Agreement, Employee hereby agrees as follows:

         (A) During the Term and for a period of two (2) years after termination
of such employment for any reason Employee shall not divulge or furnish any
trade secrets (as defined in IND. CODE Section 24-2-3-2) of Bank or any
confidential information acquired by him while employed by Bank concerning the
policies, plans, procedures or customers of Bank to any person, firm or
corporation, other than Bank or upon its written request, or use any such trade
secret or confidential information directly or indirectly for Employee's own
benefit or for the benefit of any person, firm or corporation other than Bank,
since such trade secrets and confidential information are confidential and shall
at all times remain the property of Bank.

         (B) During the Term and for a period of two (2) years after termination
of Employee's employment by Bank for reasons other than those set forth in
subsections 8(B) or 8(C) of this Agreement, Employee shall not directly or
indirectly provide banking or bank-related services to or solicit the banking or
bank-related business of any person, firm, company or other business entity that
is doing business with the Bank, or assist any actual or potential competitor of
Bank to provide banking or bank-related services to or solicit banking or
bank-related business from any such person, firm, company, or business entity,
in any such place.

         (C) If Employee's employment by Bank is terminated for any reasons,
Employee will turn over immediately thereafter to Bank all business
correspondence, letters, papers, reports, customers' lists, financial
statements, credit reports or other confidential information or documents of
bank or its affiliates in the possession or control of Employee, all of which
writings are and will continue to be the sole and exclusive property of Bank or
its affiliates.

         (D) If Employee is terminated by Bank during the Term for reasons set
forth in subsection 8(B) of this Agreement, Employee shall have no obligations
to Bank with respect to nonsolicitation under Section 10(B), but shall continue
with respect to confidential information, trade secrets and return of property
under Section 10(A) and 10(C).

         11. NOTICE OF TERMINATION. Any termination of Employee's employment
with Bank as contemplated by Section 8 hereof, except in the circumstances of
Employee's death, shall be communicated by written "Notice of Termination" by
the terminating party to the other party


                                       5
   6

hereto. Any Notice of Termination pursuant to subsections 8(A), 8(C), or
8(E) shall indicate the specific provisions of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.

         12. EMPLOYEE DISCIPLINE.

         (A) If Employee is suspended and/or temporarily prohibited from
participating in the conduct of Bank's or any affiliates' affairs by a notice
from the Comptroller of the Currency or other applicable regulatory body having
jurisdiction, Bank's obligations under this Agreement shall be suspended as of
the date of service of such notice, unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, Bank shall (i) pay Employee all or part
of the compensation withheld while its obligations under this Agreement were
suspended and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.

         (B) If Employee is removed and/or permanently prohibited from
participating in the conduct of Bank's or any affiliates' affairs by an order
issued from the Comptroller of the Currency or other applicable regulatory body
having jurisdiction, all obligations of Bank under this Agreement shall
terminate as of the effective date of the Order, although the vested rights of
the parties to the Agreement shall not be affected.

         13. TAX PAYMENTS. Anything in this Agreement to the contrary
notwithstanding, in the event Bank's independent public accountants determine
that any payment by Bank to or for the benefit of Employee, whether paid or
payable pursuant to the terms of this Agreement, would be non-deductible by
Employer for federal income tax purposes because of Section 280G of the Internal
Revenue Code, the amount payable to or for the benefit of Employee pursuant to
the Agreement shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Section 13, the "Reduced Amount" shall be the amount which
maximizes the amount payable without causing the payment to be non-deductible by
Bank because of Section 280G of the Internal Revenue Code.

         14. SUCCESSORS AND ASSIGNS. This Agreement is binding upon and shall be
for the benefit of the successors and assigns of the Bank, including any
corporation or any other form of business organization with which the Bank may
merge or consolidate, or to which it may transfer substantially all of its
assets. This Agreement may not be assigned by the Bank without the prior written
consent of Employee, which consent shall not be unreasonably withheld. The
Agreement will also be binding upon, enforceable against, and inure to the
benefit of the Employee and the Employee's heirs and representatives, and
nothing herein is intended to confer any right, remedy or benefit upon any other
person. Employee shall not assign his interest in this Agreement or any part
thereof.

         15. CONSENT OF THE BANK. Any act, request, approval, consent or opinion
of the Bank under this Agreement, must be in writing and may be authorized,
given or expressed only by resolution of the Bank Board, or by such other person
as the Bank Board may designate.

         16. NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been given when delivered or


                                       6
   7

mailed by United States registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

         (A)      If to Employee:
                                    ---------------------------



         (B)      If to Bank:       Horizon Bank, N. A.
                                    515 Franklin Square
                                    Michigan City, Indiana 46360


         17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana applicable to contracts made
and to be performed therein.

         18. ENFORCEMENT EXPENSES. If a dispute arises regarding the termination
of Employee pursuant to Section 8 above or as to the interpretation or
enforcement of this Agreement and Employee obtains a final judgment in the
Employee's favor in a court of competent jurisdiction or the Employee's claim is
settled by Bank prior to the rendering of a judgment by such a court, all
reasonable legal fees and expenses incurred by Employee in contesting or
disputing any such termination or seeking to obtain or enforce any right or
benefit provided for in this Agreement or otherwise pursuing his claims shall be
paid by Bank (except as otherwise decided in any settlement between the parties)
to the extent permitted by law.

         19. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes all prior and contemporaneous understandings with respect to its
subject matter, and may not be waived or modified, in whole or in part, except
by a writing signed by each of the parties hereto. No waiver of any provision of
this Agreement in any instance shall be deemed to be a waiver of the same or any
other provision in any other instance.

         20. CONSTRUCTION. Headings contained in this Agreement are for
convenience of reference only and shall not be used in the interpretation of
this Agreement. References herein to Sections are to the sections of this
Agreement.

         21. SUCCESSOR TO BANK. The Bank shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the Bank
would be required to perform it if no such succession had taken place. Failure
of the Bank to obtain such agreement prior to the effectiveness of any such
succession shall be a material intentional breach of this Agreement and shall
entitle Employee to terminate employment with Bank pursuant to subsection 8(C)
hereof. As used in this


                                       7
   8

Agreement, "Bank" shall mean the Bank as herein before defined and any successor
to its business and/or assets.

         22. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, this Agreement
shall be interpreted and enforceable as if such provision were severed or
limited or such payment reduced, but only to the extent necessary to render such
provision and this Agreement enforceable.

         23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                   Bank: Horizon Bank, N. A.


                                   By:
                                      ------------------------------
                                   PRINTED:
                                   Title:
                                         ---------------------------


                                   Employee


                                   By:
                                      ------------------------------
                                   Printed:


                                   ---------------------------------
                                            Address
IM-262314-1

   9
                              ADDENDUM TO AGREEMENT
                              ---------------------


         Horizon Bank, N.A. ("Bank") and ______________ (the "Employee") being
parties to that certain Agreement dated ________, 1999 (the "Agreement") with
respect the Employee's rights and responsibilities upon a "Change in Control"
(as defined in the Agreement) of the Bank or its parent corporation, Horizon
Bancorp ("Holding Company"), hereby agree to enter into this Addendum as
follows:

         1. COMPENSATION UPON CHANGE IN CONTROL. Notwithstanding any provision
            in the Agreement to the contrary, at the time of a Change in
            Control, the Employee shall have the option to resign from his
            position and receive a severance payment equal to two (2) times the
            Employee's Base Salary in effect at the time of the resignation. In
            the event that the Employee does not resign, but the Employee is
            then terminated or forced to resign as a result of a Change in
            Control, whether immediately or, at any time during the term of the
            Agreement pursuant to Section 8(B) or 8(C) of the Agreement, the
            Employee shall receive a severance payment equal to two (2) times
            the Employee's Base Salary in effect at the time the termination
            occurs.

         2. AMENDMENT. In the event of any conflict between the terms of this
            Addendum and this Agreement, the terms of this Addendum shall
            control and the Agreement shall be deemed to be amended to the
            extent necessary to effectuate the purposes of the Addendum. In all
            other respects, the Agreement shall be and remain in full force and
            effect pursuant to the terms thereof.

         3. DEFINITIONS. All defined terms used but not otherwise defined herein
            shall have the meanings ascribed to herein the Agreement.

         In witness whereof, the Bank and the Employee have executed this
         Addendum as of this ________ day of _______________________, 2000.


                                    By
                                       -----------------------------
                                    Printed
                                            --------------------------
                                    Title
                                          ----------------------------

                                    EMPLOYEE

                                    ---------------------------------
                                    Printed:
                                    ---------------------------------

                                    ---------------------------------
                                             address

EX-10.11

   1
                                                                   Exhibit 10.11

                              EMPLOYMENT AGREEMENT
                              --------------------


         THIS EMPLOYMENT AGREEMENT, executed this _____ day of ____________,
1999 by and between HORIZON BANK, N.A. a national banking association ("Bank"),
and JAMES D. NEFF ("Employee");

                              W I T N E S S E T H:

         WHEREAS, Bank desires to encourage Employee to make valuable
contributions to Employer's business operations and not to seek or accept
employment elsewhere;

         WHEREAS, Employee desires to be assured of a secured minimum
compensation from Bank for his services over a defined term;

         WHEREAS, Bank desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
and

         WHEREAS, the Employee is willing to serve as an employee of the Bank on
the terms and subject to the conditions set forth herein;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

         1. EMPLOYMENT. The Bank hereby employs the Employee to render full-time
services to the Bank as Senior Vice President-Mortgage Warehousing Division for
the period commencing on the effective date of this Agreement and extending
through the Term specified in Section 2 until such full-time services are
terminated as hereinafter provided. The Employee hereby accepts and agrees to
such employment.

         2. TERM. Subject to the provisions for termination of this Agreement
contained in Section 8, the term of this Agreement shall be for a period of two
(2) years from the effective date hereof ("Term").

         3. DUTIES.

         (a) During the period of his employment hereunder, the Employee agrees
to diligently perform such executive duties and administrative functions which
are appropriate to the office of Senior Vice President-Mortgage Warehousing
Division as, from time to time, shall be assigned to him by the Board of
Directors (the "Board") or Chief Executive Officer of the Bank or their
designees and he further agrees to give his full business time and attention to,
and his best efforts to promote, the business and affairs of the Bank. The
Employee further agrees to hold the office of Senior Vice President and such
other offices of the Bank to which he may be elected or appointed and to perform
and discharge the duties thereof faithfully and to the best of his ability.


   2

         (b) The Employee, subject to the direction and control of the Board,
shall have all power and authority commensurate with his status and necessary to
perform his duties hereunder. The Bank shall provide the Employee with such
assistance and working accommodations as are suitable to the character of his
position with the Bank as are adequate for the performance of his duties.

         4. COMPENSATION.

         (a) During the period of his employment hereunder, the Employee's basic
annual salary as Senior Vice President shall be One Hundred Ten Thousand Dollars
($110,000.00). Such salary shall be payable in cash on the same schedule as all
other salaried employees.

         Such salary payments shall be subject to the withholding of applicable
income and employment taxes and other appropriate and customary amounts. Upon
any change in the Employee's salary, a written addendum to this Employment
Agreement shall be executed by the Employee and the appropriate officer or
officers of the Bank.

         (b) In addition to his basic annual salary as Senior Vice President,
the Employee shall be entitled to receive a cash bonus payable annually as
described in Schedule A hereto commencing in 2000, unless this Agreement is
terminated as provided for herein, and subject to the terms and conditions set
forth in Schedule A.

         (c) In addition to the salary and bonus compensation described above,
Employee shall also receive a one-time signing bonus in the amount of
Twenty-Nine Thousand Dollars ($29,000.00) effective upon execution of this
Agreement.

         5. EMPLOYEE BENEFITS. During the Term of his employment hereunder, the
following shall apply with respect to the Employee's coverage by and
participation under employee benefit plans and programs sponsored or otherwise
made available by the Bank:

         (a) Subject to the more specific provisions of subsection (c) below,
the Employee shall be entitled to participate in any retirement, deferred
compensation, life, accident, health, hospitalization and any other employee
benefit plan or program, excluding bonus programs, that is generally available
to the employees of the Bank, if and to the extent the Employee is eligible to
participate thereunder in accordance with the provisions thereof. Nothing herein
shall be construed to require the Bank to institute any particular benefit plan
or program or to prevent the Bank from modifying or terminating any plan or
program it may determine to adopt from time to time. Further, the Employee shall
be treated as a new employee for purposes of eligibility and vesting under any
employee benefit plan or program that is available to the executive officers of
the Bank.

         (b) During the Term, Employee shall be entitled to four (4) weeks per
calendar year of paid vacation, which shall be utilized at such times when his
absence will not materially impair the Bank's normal business functions. Any
unused vacation time in any calendar year shall lapse, and Employee shall not be
entitled to any additional compensation for any such


                                       2
   3

unused and lapsed vacation time. In addition to the vacation described above,
Employee also shall be entitled to all paid holidays customarily given by the
Bank to its officers.

         (c) The Employee shall be entitled to participate in the following
employee benefit plans, subject to the terms and conditions of the specific plan
documents or agreements provided with respect to each plan:

             (i)  Stock Options. The Employee shall be granted options under
                  Stock Option and Stock Appreciation Rights program of Horizon
                  Bancorp ("Horizon"), the parent company of the Bank for 2,000
                  shares of Horizon Stock, in accordance with Horizon's standard
                  agreement governing the program. The grant hereunder will only
                  be effective if this Employment Agreement is executed,
                  notwithstanding that actual employment may have commenced
                  prior to such date.

             (ii) 401(k) Retirement Plan. The Employee shall be entitled to
                  participate in Horizon's 401(k) Plan in accordance with the
                  terms and conditions of the plan documents. The Employee's
                  enrollment date will be November 1, 2000.

         6. REIMBURSEMENT OF EXPENSES. The Bank shall pay to the Employee, or to
the extent paid in the first instance by the Employee, shall reimburse the
Employee for, travel, entertainment and similar expenses he incurs in connection
with the performance of his duties hereunder in accordance with the Bank's
policies governing such activities, as such policies may be amended or modified
from time to time.

         7. INSURANCE. The Bank shall have the right to maintain one (1) or more
insurance policies against the life of the Employee in such face amounts as the
Board considers appropriate, and to name itself as beneficiary under such
policies.

         8. TERMINATION.

         (a) At any time during the term of this Agreement, the Board shall have
the right to terminate the Employee's employment hereunder for any reason, upon
thirty (30) days' prior written notice to the Employee and the Employee shall
have the right to terminate his employment hereunder at any time and for any
reason, upon thirty (30) days' prior written notice to the Bank.

         (b) This Agreement shall also terminate on the death of the Employee.

         (c) The Bank shall have the right to terminate the Employee's
employment hereunder "for cause" upon thirty (30) days' prior written notice.
For purposes of this Agreement, the Employee may be terminated "for cause" if
his employment is terminated by the Bank as a result of any of the following:


                                       3
   4

             (i)   The failure of the Mortgage Warehousing Division to attain at
                   least break even profitability as determined by the Bank
                   based upon the Division's return on equity, on a month to
                   month basis, by September, 2000.

             (ii)  An action by the Employee which involves fraud, willful
                   misfeasance or gross negligence in connection with the
                   performance of his duties hereunder;

             (iii) The requirement or direction of a federal or state regulatory
                   agency which has jurisdiction over the Bank to terminate the
                   employment of the Employee;

             (iv)  Conviction of the Employee due to the commission of any
                   criminal offense which involves dishonesty or breach of
                   trust; or

             (v)   Any breach by the Employee of a material term, condition or
                   covenant hereunder or any other agreement between the
                   Employee and the Bank.

         (d) The Employee may also be terminated upon thirty (30) days prior
written notice in the event of a Change in Control (as defined herein). For
purposes of this Agreement, "Change in Control" of the Bank shall mean (i) a
change in control of Horizon, of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Act of 1934, or (ii) a transfer of more than fifty percent (50%) of
the stock of Bank.

         (e) Any termination of the Employee's employment by the Bank or by the
Employee shall be communicated by written Notice of Termination to the
non-terminating party. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.

         (f) As used herein, "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death, (ii) if
the Employee's employment is terminated for any other reason, the date specified
in the Notice of Termination; provided that, if within thirty (30) days after
any Notice of Termination is given, the parties who receive such Notice of
Termination notify the other parties that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected).

         9. COMPENSATION UPON TERMINATION.

         (a) In the event that the Bank terminates the employment of the
Employee pursuant to Section 8(a), the Employee shall continue for the remainder
of the Term to receive his full compensation, as provided in Section 4(a), at a
rate equal to the Employee's basic compensation


                                       4
   5

received by the Employee for the twelve (12) months prior to the Date of
Termination. Such payments shall be made by the Bank at the same intervals as
his basic annual compensation and shall continue for the remainder of the Term,
together with all other unpaid amounts previously accrued or awarded pursuant to
any other provision of this Agreement, provided, however, that the Bank's
obligations to make payments hereunder shall be reduced by the amount the
Employee receives in compensation and cash benefits from any other employer or
any person to or for whom Employee is providing services as a consultant or
independent contractor.

         (b) If the Employee terminates his employment pursuant to Section 8(a)
or the Bank terminates the Employee's employment for cause, the Bank shall pay
the Employee his (i) basic annual salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given; and (ii) all other
unpaid amounts previously accrued or awarded pursuant to any other provision of
this Agreement.

         (c) All payments due under this Section 9 shall survive the Employee's
death and shall be payable thereafter to the Employee's spouse or his estate, as
the case may be, in accordance with this Agreement, provided that the Bank
reserves the right, in its sole discretion, to make such payments in one lump
sum discounted to present value, rather than in periodic payments as required
above.

         10. NOTICES. All communications, notices and elections pursuant to
Section 9, and all other notices, requests, consents or demands given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered to, or mailed by prepaid registered or certified mail addressed to the
party for whom intended as follows, or to such other address as may be furnished
by such party in the manner provided herein:

         If to the Employee:        James D. Neff
                                    134 Country Club Drive
                                    LaPorte, Indiana 46350

         If to the Bank:   Horizon Bank, N.A.
                                    515 Franklin Square
                                    Michigan City, Indiana 46360
                                    Attention:  President

         11. GOVERNING LAW. This Agreement has been executed and delivered in
the State of Indiana and shall be construed in accordance with and governed by
the laws of the State of Indiana, without giving effect to any conflicts of laws
rules.

         12. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes all prior and contemporaneous understandings with respect to its
subject matter, and may not be waived or modified, in whole or in part, except
by a writing signed by each of the parties hereto. No waiver of any provision of
this Agreement in any instance shall be deemed to be a waiver of the same or any
other provision in any other instance.


                                       5
   6

         13. CONSTRUCTION. Headings contained in this Agreement are for
convenience of reference only and shall not be used in the interpretation of
this Agreement. References herein to Sections are to the sections of this
Agreement. As used herein, the singular includes the plural and the masculine,
feminine and neuter gender each includes the others where the context so
indicates.

         14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
enforceable against, and inure to the benefit of, the parties hereto and their
respective heirs, successors and assigns, and nothing herein is intended to
confer any right, remedy or benefit upon any other person. The rights, duties
and obligations of the Employee hereunder may not be assigned. This Agreement
may not be assigned by the Bank without the prior written consent of the
Employee, which consent shall not be unreasonably withheld.

         15. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, this Agreement
shall be interpreted and enforceable as if such provision were severed or
limited or payment reduced, but only to the extent necessary to render such
provision and this Agreement enforceable.

         16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

         IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first set forth above.


                                    EMPLOYEE

                                    -------------------------------------
                                    James D. Neff

ATTEST:  (SEAL)                     HORIZON BANK, N.A.

By:                                 By:
   ----------------------------        ----------------------------------
Printed:                            Printed:  Craig M. Dwight
        -----------------------
Title:                              Title: President and Chief Executive Officer
      -------------------------




                                       6
   7


                                   SCHEDULE A
                                       TO
                              EMPLOYMENT AGREEMENT
                           BETWEEN HORIZON BANK, N.A.
                                AND JAMES D. NEFF

                           DATED _______________, 1999


                                  Section 4(b)


         INCENTIVE COMPENSATION.
         -----------------------

(1)      Within __________ (_____) days following each December 31, commencing
         December 31, 2000, the Bank shall pay the Employee, subject to certain
         conditions set forth herein, an incentive compensation bonus provided
         that the Mortgage Warehousing Division meets or exceeds certain Return
         on Equity ("ROE") goals. The goals and amounts of bonus are as follows:

              Goal                          Bonus
              -------------------------     -----------------------------
              12% ROE                       25% of annual base salary
              15% ROE                       40% of annual base salary
              20% ROE or above              50% of annual base salary

(2)      If the Division exceeds 20% ROE in any fiscal year, the Employee shall
         receive an additional bonus equal to 15% of the dollar amount of net
         income that exceeds the amount necessary to reach the 20% ROE target.

(3)      In no event will the amounts paid in Incentive Compensation hereunder,
         in the aggregate with incentive compensation paid to the Vice President
         of the Mortgage Warehousing Division, exceed $250,000 in any fiscal
         year and the Bank shall reduce pro rata the amount paid to the Employee
         hereunder and such other officer to avoid exceeding such limitation.

(4)      For each of fiscal year 2000 and 2001, the Employee shall be guaranteed
         a minimum incentive compensation bonus of $15,000 under paragraph (1)
         above, even if the ROE goals are not met.

(5)      The Bank will not materially alter or amend this schedule through
         fiscal year 2004 unless agreed to in writing by the Bank and the
         Employee.


                                       7
   8


BANK:                                        EMPLOYEE:
HORIZON BANK, N.A.

By:
   ----------------------------------       ------------------------------
Printed:  Craig M. Dwight                   James D. Neff
Title:  President and Chief Executive
         Officer


IM-267892-1

                                         8

EX-13

   1
                                                                      Exhibit 13

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

ANALYSIS OF FINANCIAL CONDITION

Investment Securities

Horizon maintains a high quality investment portfolio with very low credit risk.
Investment securities totaled $67.880 million at December 31, 1999 and consisted
of U.S. Treasury and Government Agency securities of $29.580 million (43.5%);
Municipal securities of $4.100 million (6%); Equity securities of $286 thousand
(.5%); and Mortgage-Backed securities of $33.914 million (50%).

As indicated above, the majority of the investment portfolio consists of
mortgage-backed securities. These instruments are secured by residential
mortgages of varying maturities. Principal and interest payments are received
monthly as the underlying mortgages are repaid. These payments also include
prepayments of mortgage balances as borrowers either sell their homes or
refinance their mortgages. Therefore, mortgage-backed securities have maturities
that are stated in terms of average life. The average life is the average amount
of time that each principal dollar is expected to be outstanding. As of December
31, 1999, the mortgage-backed securities in the investment portfolio had an
average life of 5.3 years. Mortgage-backed securities that have interest rates
above current market rates are purchased at a premium. These securities may
experience a significant increase in prepayments when lower market interest
rates create an incentive for the borrower to refinance the underlying mortgage.
This may result in a decrease of current income. That risk is mitigated by a
shorter average life. Management currently believes that prepayment risk on
these securities is nominal.

During the second quarter of 1999, debt securities with an amortized cost of
$10.050 million were transferred from held to maturity to available for sale in
order to minimize the tax consequences of holding tax-exempt securities. The
majority of the tax-exempt portfolio was subsequently sold. Therefore, at
December 31, 1999, all investment securities were classified as available for
sale compared to 82.3% at December 31, 1998. Securities classified as available
for sale are carried at their fair value, with both unrealized gains and losses
added or subtracted, net of tax, directly to stockholders' equity. This
accounting method adds potential volatility to stockholders' equity, but net
income is not affected unless securities are sold. Net depreciation on these
securities totaled $1.980 million, which resulted in a $1.201 million reduction,
net of tax, to stockholders' equity at December 31, 1999. This compared to a
$336 thousand, net of tax, addition to stockholders' equity at December 31,
1998.

As a member of the Federal Reserve and Federal Home Loan Bank system, Horizon is
required to maintain an investment in the common stock of each entity. The
investment in common stock is based on a predetermined formula. At December 31,
1999, Horizon has investments in the common stock of the Federal Reserve and
Federal Home Loan Bank totaling $5.897 million compared to $3.973 million at
December 31, 1998.

At December 31, 1999, Horizon does not maintain a trading account and is not
using any derivative products for hedging or other purposes.

                         HORIZON BANCORP & SUBSIDIARIES

                                    15


   2
Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

LOANS

Total loans, the principal earning asset of the Bank, were $394.357 million at
December 31, 1999. The current level of loans is an increase of 35.8% from the
December 31, 1998 level of $290.346 million. As the table below indicates, the
increases are primarily related to the mortgage warehousing business that was
started in November 1999.



                                                                      DOLLAR        PERCENT
DECEMBER 31                                1999        1998           CHANGE        CHANGE
- --------------------------------------------------------------------------------------------
                                                                           
Real estate loans
  1 - 4 family                           $152,999     $150,066         2,933           1.95%
  Multi-family                                279          312           (33)        -10.58
  Other                                     1,439        2,012          (573)        -28.48
                                         ------------------------------------
    Total                                 154,717      152,390         2,327           1.53
                                         ------------------------------------

Commercial loans
  Working capital and equipment            67,480       61,725         5,755           9.32
  Real estate, including agriculture        8,428        5,277         3,151          59.71
  Tax exempt                                7,903        8,673          (770)         -8.88
  Other                                     5,550        1,007         4,543         451.14
                                         ------------------------------------
    Total                                  89,361       76,682        12,679          16.53
                                         ------------------------------------

Consumer loans
  Auto                                     14,060       16,411        (2,351)        -14.33
  Recreation                                1,567        1,381           186          13.47
  Real estate/home improvement             30,974       24,210         6,764          27.94
  Home equity                               6,470        2,782         3,688         132.57
  Credit cards                              5,092        5,637          (545)         -9.67
  Unsecured                                 4,126        3,229           897          27.78
  Other                                     2,448        7,624        (5,176)        -67.89
                                         ------------------------------------
    Total                                  64,737       61,274         3,463           5.65
                                         ------------------------------------

Mortgage warehouse loans
  Prime                                    10,410                     10,410
  Sub-Prime                                75,132                     75,132
                                         ------------------------------------
    Total                                  85,542                     85,542
                                         ------------------------------------
    Grand total                          $394,357     $290,346     $ 104,011          35.82%
                                         ===================================================


The acceptance and management of credit risk is an integral part of Bank's
business as a financial intermediary. The Bank has established rigorous
underwriting standards including a policy that monitors the lending function
through strict administrative and reporting requirements. The Bank engages an
independent third-party loan review function that regularly reviews asset
quality.

                         HORIZON BANCORP & SUBSIDIARIES

                                    16
   3

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

REAL ESTATE LOANS

Real estate loans totaled $154.717 million or 39% of total loans as of December
31, 1999, compared to $152.390 million or 52% as of December 31, 1998. This
category consists of home mortgages that generally require a loan to value of at
least 80%. Some special guaranteed or insured real estate loan programs do
permit a higher loan to collateral value ratio.

In addition to the customary real estate loans described above, the Bank also
has outstanding on December 31, 1999, $6.470 million in home equity lines of
credit and $2.782 million at December 31, 1998. Credit lines normally limit the
loan to collateral value to no more than 89%. These loans are classified as
consumer loans in the table above and in Note 4 to the consolidated financial
statements.

Residential real estate lending is a highly competitive business. As of December
31, 1999, the real estate loan portfolio reflected a wide range of interest rate
and repayment patterns, but could generally be categorized as follows:



                                 1999                            1998
                     -----------------------------------------------------------
                               PERCENT OF                      PERCENT OF
                      AMOUNT   PORTFOLIO    YIELD      AMOUNT   PORTFOLIO  YIELD
                     -----------------------------------------------------------
                                                        
Fixed rate
  Monthly payment    $109,967     71.08%     7.27%  $ 99,168      65.08%  7.43%
  Biweekly payment     16,362     10.57      7.52     18,718      12.28   7.47

Adjustable rate
  Monthly payment      28,051     18.13      7.44     33,963      22.28   7.20
  Biweekly payment        337       .22      7.71        541        .36   7.75
                     -------------------            --------------------
    Total            $154,717    100.00%     7.32%  $152,390     100.00%  7.69%
                     ===================            ====================


In addition to the real estate loan portfolio, the Bank sold real estate loans,
which it services. On December 31, 1999, the portfolio serviced consisted of 448
loans totaling $29.480 million. Total loans sold during 1999 totaled $11.953
million.

COMMERCIAL LOANS

Commercial loans totaled $89.361 million or 22.7% of total loans as of December
31, 1999, compared to $76.682 million or 26% as of December 31, 1998. Commercial
loans consisted of the following types of loans at December 31:

                                             1999                        1998
                        --------------------------------------------------------
                                           PERCENT OF                PERCENT OF
                         NUMBER    AMOUNT   PORTFOLIO NUMBER  AMOUNT  PORTFOLIO
                        --------------------------------------------------------
SBA guaranteed loans       21     $ 2,565      2.87%   24    $ 3,028      3.95%
Municipal government       47       8,344      9.34    53      9,349     12.19
Lines of credit           158      17,328     19.39   143     15,159     19.77
Real estate and
  equipment term loans    337      61,124     68.40   297     49,146     64.09
                        --------------------------------------------------------
    Total                 563     $89,361    100.00%  517    $76,682    100.00%
                        ========================================================

                        HORIZON BANCORP & SUBSIDIARIES

                                    17
   4

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

CONSUMER LOANS

Consumer loans totaled $64.737 million or 16% of total loans as of December 31,
1999, compared to $61.274million or 21% as of December 31, 1998. The total
consumer loan portfolio increased 5.65% in 1999.

MORTGAGE WAREHOUSE LOANS

In November 1999, Horizon began a mortgage warehousing program. Horizon enters
into agreements with mortgage companies and purchases, at its discretion,
mortgage loans from mortgage companies at par, net of certain fees, and later
sells them back to the mortgage companies at the same amount and without
recourse provisions. Interest income is recorded based upon a rate of interest
tied to the prime rate during the funding period, not the rates on the
individual note. Such loans are reviewed, prior to purchase, for evidence that
the loans are of secondary market quality and meet Horizon's internal
underwriting guidelines. An assignment of the mortgage to Horizon is required.
In addition, Horizon takes possession of the original note and forwards such
note to the end investor. In the event that the end investor would not honor
this commitment and the mortgage companies would not be able to honor their
repurchase obligations, Horizon would then need to sell these loans in the
secondary market at the fair value of these loans. Loans are typically resold
within 30 days and are seldom held more than 90 days.

ALLOWANCE AND PROVISION FOR LOAN LOSSES

The allowance for loan losses represents Horizon's estimate of potential credit
losses associated with the loan portfolio. The identification of loans that may
have potential losses is necessarily subjective. Therefore, a general reserve is
maintained to cover all potential losses within the entire loan portfolio.
Horizon utilizes a loan grading system that helps identify, monitor, and address
asset quality problems, should they arise, in an adequate and timely manner.
Each quarter, various factors affecting the quality of the loan portfolio are
reviewed. Large credits are reviewed on an individual basis for loss potential.
Other loans are reviewed as a group based upon previous trends of loss
experience. Horizon also reviews the current and anticipated economic conditions
of its lending market to determine the effect they may have on the loss
experience of the loan portfolio. The methodology described above is consistent
with the Office of the Comptroller of the Currency's guidance in determining the
adequacy of the allowance for loan losses.

At December 31, 1999, the allowance for loan losses was .83% of total loans
outstanding, compared to .96% at December 31, 1998. During 1999, the provision
for loan losses totaled $1.350 million (including $250 thousand for The Loan
Store, which was discontinued in 1999) compared to $1.000 million in 1998.

NONPERFORMING LOANS

Nonperforming loans are defined as loans that are greater than 90 days
delinquent or have had the accrual of interest discontinued by management.
Management continues to work diligently toward returning nonperforming loans to
an earning asset basis. Nonperforming loans for the previous three years ending
December 31 are as follows:

                                                     1999     1998    1997
- --------------------------------------------------------------------------------
Nonperforming loans                                $ 1,574   $ 894  $ 1,181

Nonperforming loans total 48% of the allowance for loan losses at December 31,
1999 compared to 32% and 44% of the allowance for loan losses on December 31,
1998 and 1997, respectively.

                         HORIZON BANCORP & SUBSIDIARIES

                                    18


   5
Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

A loan becomes impaired when, based on current information, it is probable that
a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. When a loan is classified as impaired,
the degree of impairment must be recognized by estimating future cash flows from
the debtor. The present value of these cash flows is computed at a discount rate
based on the interest rate contained in the loan agreement. However, if a
particular loan has a determinable market value, the creditor may use that
value. Also, if the loan is secured and considered collateral dependent, the
creditor may use the fair value of the collateral.

Smaller-balance, homogeneous loans are evaluated for impairment in total. Such
loans include residential first mortgage loans secured by 1 - 4 family
residences, residential construction loans, automobile, home equity, second
mortgage loans and mortgage warehouse loans. Commercial loans and mortgage loans
secured by other properties are evaluated individually for impairment. When
analysis of borrower operating results and financial condition indicate that
underlying cash flows of a borrower's business are not adequate to meet its debt
service requirements, the loan is evaluated for impairment. Often this is
associated with a delay or shortfall in payments of 30 days or more. Loans are
generally moved to nonaccrual status when 90 days or more past due. These loans
are often considered impaired. Impaired loans, or portions thereof, are charged
off when deemed uncollectible.

Other real estate owned (OREO) for the previous three years ending December 31
is as follows:

                                                      1999    1998   1997
- --------------------------------------------------------------------------------
Other real estate owned                                $ 0   $ 133   $ 125

DEPOSITS

The primary source of funds for the Bank comes from the acceptance of demand and
time deposits. However, at times the Bank will use its ability to borrow funds
from the Federal Home Loan Bank when it can do so at interest rates and terms
that are superior to those required for deposited funds. Total deposits were
$363.668 million at December 31, 1999 compared to $322.401 million at December
31, 1998 or an increase of 12.80%. Below is a table of average deposits and
rates by category for the pervious three years ended December 31.



                           AVERAGE BALANCE OUTSTANDING FOR    AVERAGE RATE PAID FOR THE YEAR
                             THE YEAR ENDED DECEMBER 31              ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------------
                            1999       1998         1997           1999       1998      1997
- ---------------------------------------------------------------------------------------------
                                                                    
Noninterest-bearing
demand deposits         $ 43,258     $ 58,032     $ 45,016
Interest-bearing
demand deposits           45,679       18,088       37,256        2.45%     2.64%     1.62%
Savings deposits          45,358       50,194       61,089        1.77      2.17      2.24
Time deposits            203,180      161,029      147,639        5.25      5.64      5.67
                        ----------------------------------
Total deposits          $348,475     $287,343     $291,000
                        ==================================



During late 1997, Horizon changed its standard consumer checking accounts from
interest bearing to noninterest bearing. Remaining in the interest-bearing
demand deposits is a high yield consumer account that requires relatively high
balances. In early 1999, Horizon began offering a new lower rate interest
bearing consumer demand deposit product. These product changes caused the
changes in the average balances and average rates paid as displayed in the table
above.

                         HORIZON BANCORP & SUBSIDIARIES

                                    19

   6

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) -- RETIREMENT PLAN

On July 20, 1999, the Board of Directors of Horizon Bancorp authorized the
termination of the Horizon Bancorp Employee Stock Ownership Plan ("ESOP"). This
decision was based upon a thorough financial analysis of the impact this plan
has had on the earnings and capital of Horizon since it's inception and the
expected future impact retaining this plan would likely have on Horizon. On
December 31, 1999 the debt owed by the ESOP was repaid with the proceeds from
the sale of a portion of the unallocated shares to Horizon Bancorp. The
remaining shares will be allocated to participants. The termination of the ESOP
resulted in an expense of $2.073 million. The expense recorded was based upon a
valuation preformed by an independent stock valuation firm who determined that
the appraised value of Horizon Bancorp stock was $44.00 as of December 31, 1999.
Upon the termination of the ESOP, the retirement plans of Horizon Bancorp will
own approximately 24% of the outstanding shares.

CAPITAL RESOURCES

The capital resources of Horizon and Bank exceed regulatory capital ratios for
"well capitalized" banks at December 31, 1999. Stockholders' equity totaled
$28.999 million ($7.808 million from ESOP) as of December 31, 1999 compared to
$31.886 million ($4.418 million from ESOP) as of December 31, 1998. At year-end
1999, the ratio of stockholders' equity to assets was 5.51% compared to 7.66%
for 1998. Horizon's capital to asset ratio decreased during December 1999 as a
result of low earnings and the repurchase of treasury shares and as a result of
the significant growth in the new mortgage warehousing program. The growth of
this new line of business was not anticipated to be as significant when the
program was started, however, as a result of a competitor discontinuing their
like operations, Horizon's mortgage warehouse program grew quickly. Management
has evaluated alternatives to increase capital and has decided to pursue the
issuance of pooled trust preferred securities. It is anticipated that this
transaction will be completed June 30, 2000.

Horizon selectively purchases shares that become available in the market from
time to time. During 1999, management purchased 167,245 shares at a cost of
$7.619 million compared to 36,785 shares at a cost of $2.115 million, and 22,178
shares at a cost of $1.173 million for 1998 and 1997, respectively. Treasury
stock repurchases in 1999 included the repurchase of 107,936 shares totaling
$4.749 million from the ESOP plan as part of the termination.

Horizon paid dividends in the amount of $1.80 per share in 1999, 1998 and 1997.
The dividend pay-out ratio (dividends as a percent of net income) was -344%
during 1999 as compared to 114% and 73% in 1998 and 1997, respectively. The
dividend pay-out ratio is high because of lower than anticipated earnings. For
additional information regarding dividend conditions, see Note 1 of the Notes to
the Consolidated Financial Statements.

As of December 31, 1999, management is not aware of any current recommendations
by banking regulatory authorities which, if they were to be implemented, would
have or are reasonably likely to have a material effect on Horizon's liquidity,
capital resources, or operations.

TRUST AND INVESTMENT MANAGEMENT

Horizon Trust & Investment Management, N.A. is a wholly-owned subsidiary of
Horizon Bank, which manages the majority of the trust and investment management
accounts. Assets under management have a book value of $362 million at December
31, 1999 compared to $258 million at December 31, 1998. This represents a 40.3%
increase from 1998.

                         HORIZON BANCORP & SUBSIDIARIES

                                    20

   7

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

The book value of assets held at December 31, 1999 by asset type are as follows:

                                                     BOOK VALUE    PERCENTAGE
- --------------------------------------------------------------------------------
Cash                                                  $    711           .20%
Money market funds                                      75,104         20.75
Government and agency bonds                             58,640         16.21
Municipal bonds                                         21,044          5.82
Corporate bonds                                         31,089          8.59
Common and preferred stock                             137,978         38.13
Mutual funds                                            37,251         10.30
                                                      ----------------------
    Total                                             $361,817        100.00%
                                                      ======================

A variety of types of investment accounts including personal trusts, agencies,
estates and guardianships, corporate agencies, and employee benefit agencies and
trusts are managed by Horizon. The total book values of each of these types of
accounts at December 31, 1999 are as follows:

                                        BOOK                          MARKET
                         VALUE       PERCENTAGE         VALUE       PERCENTAGE
- --------------------------------------------------------------------------------
Personal               $116,689         32.25%        $134,353         31.60%
Agency                   75,791         20.95           94,367         22.20
Employee benefit        113,706         31.43          139,226         32.75
Cash management          35,060          9.69           34,960          8.22
Retail accounts          20,553          5.68           22,173          5.22
Other                        18                             54           .01
                       ---------------------------------------------------------
    Total              $361,817        100.00%        $425,133        100.00%
                       =========================================================

RESULTS OF OPERATIONS

Net Income

Consolidated net income/(loss) from continuing operations $(191) thousand or
$(.29) per share in 1999, $1.254 million or $1.83 per share in 1998 and $1.997
million or $2.81 per share in 1997.

In April 1999, the Board of Directors of Horizon Bancorp approved discontinuing
the operations of The Loan Store, Inc., a wholly owned subsidiary of Horizon
Bancorp. On August 13, 1999 substantially all of the assets of The Loan Store,
Inc. were sold. Losses related to this subsidiary were $163 thousand or $.25 per
share in 1999, $171 thousand or $.25 per share in 1998 and $276 thousand or $.39
per share in 1997. Horizon is required to repurchase any loan sold which does
not have the lien properly perfected for up to 6 months from the date of sale.
There is no material loss anticipated related to these repurchases.

NET INTEREST INCOME

The primary source of earnings for Horizon is net interest income. Net interest
income is the difference between what Horizon has earned on assets it has
invested and the interest paid on deposits and other funding sources. The net
interest margin is net interest income expressed as a percentage of average
earnings assets. Horizon's earning assets consist of loans, investment
securities, and interest-bearing balances in banks.

                         HORIZON BANCORP & SUBSIDIARIES

                                    21

   8

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



                                                    1999                             1998                        1997
                                       --------------------------------------------------------------------------------------------
                                       AVERAGE                  YIELD/     AVERAGE            YIELD/  AVERAGE               YIELD/
                                       BALANCE    INTEREST       RATE      BALANCE  INTEREST   RATE   BALANCE  INTEREST      RATE
                                       --------------------------------------------------------------------------------------------
                                                                                                   
ASSETS
 Interest-bearing assets
 Loans - total (1) (3)                 $306,142   $ 25,634       8.37%    $264,810   $23,346    8.82% $268,919   $24,306      9.04%
 Taxable investment
  securities, including
  FRB and FHLB stock                     73,322      4,647       6.34       57,242     3,636    6.35    55,963     3,968      7.09
 Nontaxable investment
  securities (2)                          3,417        167       4.89        9,721       447    4.60    10,000       435      4.35
 Interest-bearing balances
  and money market
  investments (4)                           943         43       4.56          773        29    3.75     1,348        60      4.45
 Bankers acceptances
 Federal funds sold                       8,375        406       4.85        6,441       345    5.36     4,170       228      5.47
                                        ------------------                ------------------          ------------------
   Total interest-
     bearing assets                     392,199     30,897       7.88      338,987    27,803    8.20   340,400    28,997      8.52
                                                  --------                          --------                    --------
Noninterest-earning assets
 Cash and due
  from banks                             14,083                             12,917                      13,874
 Allowance for
  loan losses                            (2,748)                            (2,826)                     (2,320)
 Other assets                            24,825                             22,328                      21,799
                                       --------                           --------                    --------
   Total assets                        $428,359                           $371,406                    $373,753
                                       ========                           ========                    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities
 Savings deposits                      $ 45,358        805       1.77     $ 50,194     1,091    2.17  $ 61,089     1,371      2.24
 Interest-bearing
  demand deposits                        45,679      1,121       2.45       18,088       477    2.64    37,256       605      1.62
 Time deposits                          203,180     10,677       5.25      161,029     9,010    5.60   147,639     8,367      5.67
 Short-term borrowings                    1,173         76       6.48          864        50    5.79     1,911       110      5.76
 Long-term debt                          55,934      3,086       5.52       47,121     2,658    5.64    43,493     2,484      5.71
                                        ------------------                ------------------          ------------------
   Total interest-
    bearing liabilities                 351,324     15,765       4.49      277,296    13,286    4.79   291,388    12,937      4.44
                                                  --------                          --------                    --------
 Noninterest-bearing
  liabilities
  Demand deposits                        43,258                             58,032                      45,016
  Other liabilities                       3,615                              3,017                       3,342
  Stockholders' equity                   30,162                             33,061                      34,007
                                         ------                             ------                      ------
    Total liabilities
    and stockholders'
    equity                             $428,359                           $371,406                    $373,753
                                       ========                           ========                    ========
Net interest income                               $ 15,132                          $ 14,517                    $ 16,060
                                                  ========                          ========                    ========
Net interest income
as a percent of
interest-bearing assets                                          3.86%                          4.28%                         4.72%
                                                                 ====                           ====                          ====


(1)  Nonaccruing 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 loans fees.
(2)  Yields are not presented on a tax-equivalent basis.
(3)  Loan fees and late fees included in interest on loans aggregated
     $1,165,000, $1,156,000, and $1,195,000 in 1999, 1998, and 1997,
     respectively.
(4)  Horizon has no foreign office and, accordingly, no assets or liabilities to
     foreign operations. Horizon's subsidiary bank had no funds invested in
     Eurodollar Certificates of Deposit at December 31, 1999.

                         HORIZON BANCORP & SUBSIDIARIES

                                    22

   9


Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



                                               1999 - 1998                     1998 - 1997
                                           INCREASE/(DECREASE)             INCREASE/(DECREASE)
                                   ----------------------------------------------------------------
                                                CHANGE     CHANGE                 CHANGE    CHANGE
                                     TOTAL      DUE TO     DUE TO      TOTAL      DUE TO    DUE TO
                                     CHANGE     VOLUME      RATE       CHANGE     VOLUME    RATE
                                   ----------------------------------------------------------------

                                                                         
INTEREST INCOME
 Loans - total                      $ 2,288    $ 3,505    $(1,217)   $  (960)   $  (368)   $  (592)
 Taxable investment securities        1,011      1,019         (8)      (332)        89       (421)
 Nontaxable investment securities      (280)      (306)        26         12        (12)        24
 Interest-bearing balances and
  money market investments               14          7          7        (31)       (23)        (8)
 Federal funds sold                      61         96        (35)       117        122         (5)
                                   ----------------------------------------------------------------
 Total interest income              $ 3,094    $ 4,321    $(1,227)   $(1,194)   $  (192)   $(1,002)
                                   ================================================================
Interest Expense
 Savings deposits                   $  (285)   $   (98)   $  (187)   $  (281)   $  (238)   $   (43)
 Interest-bearing demand deposits       644        679        (35)      (128)      (399)       271
 Time deposits                        1,666      2,242       (576)       644        750       (106)
 Short-term borrowings                   26         19          7        (60)       (61)         1
 Long-term debt                         428        487        (59)       174        205        (31)
                                   ----------------------------------------------------------------
    Total interest expense          $ 2,479    $ 3,329    $  (850)   $   349    $   257    $    92
                                   ----------------------------------------------------------------
NET INTEREST EARNINGS               $   615    $   992    $  (377)   $(1,543)   $  (449)   $(1,094)
                                   ================================================================


Horizon's average earning assets were $392.199 million in 1999 compared to
$338.987 million in 1998 and $340,400 million in 1997. The net interest margin
for 1999 was 3.86% compared to 4.28% and 4.72% in 1998 and 1997, respectively.
The decrease in net interest margin from 1998 to 1999 is primarily a result of
increased volume in the loan portfolio at a lower rate than the previous year
and an increase in the volume of time deposits to fund the loan growth. The
decrease in net interest margin from 1997 to 1998 was primarily due to the
decrease in rate of the loan and investment portfolios, the increase in volume
in the time deposit portfolio and the reduction in volume in the
interest-bearing demand deposits and savings portfolios.

NONINTEREST INCOME

The major components of noninterest income consist of service charges on deposit
accounts and fiduciary fees. Service charges on deposit accounts are based upon:
a) recovery of direct operating expenses associated with providing the service,
b) allowing for a profit margin that provides an adequate return on assets and
stockholders' equity, and c) competitive factors within the Bank's markets.
Service charges on deposits were $2.048 million, $2.255 million, and $2.020
million for 1999, 1998, and 1997, respectively. The decline in service charges
in 1999 is the result of the redesign of Horizon's checking accounts to stay
more competitive within our markets.

Fiduciary fees were $2.113 million in 1999 compared to $2.141 million and $2.423
million in 1998 and 1997 respectively.

                         HORIZON BANCORP & SUBSIDIARIES

                                    23


   10


Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NONINTEREST EXPENSE

Noninterest expense totaled $19.430 million in 1999 compared to $17.436 million
and $17.063 million in 1998 and 1997, respectively. The increase in 1999 is a
result of the ESOP termination expense. Excluding this one time charge,
noninterest expenses would have declined slightly from 1998 to 1999. The
increase in 1998 related to an increase in salaries and benefits and occupancy
expense partially offset by a reduction in data processing and equipment
expenses.

Salaries and benefits decreased 1.43% during 1999 compared to an increase of
14.12% during 1998 and a decrease of 4.09% for 1997. The increase in 1998 is
primarily a result of the payment of the severance benefit after the termination
of the President and Chief Administrative Officer who was a party to an
employment contract and increased expenses related to ESOP.

Total other expenses decreased 9.65% in 1999 and 3.51% in 1998 and increased
11.40% in 1997. The primary factors in the reduction of the 1999 expenses were:
1) $294 thousand decrease in other losses and; 2) $178 thousand decrease in
corporate expenses. The primary factors in the reduction of the 1998 expenses
were: 1) $146 thousand decrease in supplies and printing expenses, 2) $273
thousand decrease in advertising expenses, 3) $236 thousand increase in
professional fees, 4) $166 thousand decrease in training expenses, and; 5) $93
thousand decrease in outside services and consultants. The primary factors
contributing to the 1997 increase in other expense were: 1) $273 thousand
increase in advertising expense, primarily related to the change in the Bank's
name, 2) $195 thousand increase in supplies and printing expenses, and; 3) $154
thousand increase in outside services and consultants.

INCOME TAXES

Income tax expense, before discontinued operations, totaled $675 thousand in
1999 compared to $460 thousand and $664 thousand in 1998 and 1997, respectively.
The effective tax rate was 139.46%, 26.84%, and 24.95% for 1999, 1998, and 1997,
respectively. The effective tax rate is high in 1999 because the majority of the
ESOP termination expenses were not tax deductible. Excluding that expense, the
effective tax rate for 1999 would have been 26.40%.

LIQUIDITY AND RATE SENSITIVITY MANAGEMENT

Management and the Board of Directors meet regularly to review both the
liquidity and rate sensitivity position of Horizon. Effective asset and
liability management ensures Horizon's ability to monitor the cash flow
requirements of depositors along with the demands of borrowers and to measure
and manage interest rate risk. Horizon utilizes an interest rate risk assessment
model designed to highlight sources of existing interest rate risk and consider
the effect of these risks on strategic planning. Management maintains an
essentially balanced ratio of interest sensitive assets to liabilities in order
to protect against the effects of wide interest rate fluctuations.

LIQUIDITY

The Bank maintains a stable base of core deposits provided by long standing
relationships with consumers and local businesses. These deposits are the
principal source of liquidity for Horizon. Other sources of liquidity for
Horizon include earnings, loan repayment, investment security sales and
maturities, sale of real estate loans and borrowing relationships with
correspondent banks, including the Federal Home Loan Bank (FHLB). During 1999,
cash flows were generated from an increase in deposits of $41 million and an
increase in FHLB borrowings of $51 million and increases in short term
borrowings of $21 million. Cash flows were used for a $104 million increase in
loan demand, including $86 million in mortgage warehousing. The net cash and
cash equivalent position increased $3 million, in cash and due from banks.

                         HORIZON BANCORP & SUBSIDIARIES

                                    24
   11

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

INTEREST SENSITIVITY

The degree by which net interest income may fluctuate due to changes in interest
rates is monitored by Horizon using computer simulation modeling, incorporating
not only the current GAP position but the effect of expected repricing of
specific financial assets and liabilities. When repricing opportunities are not
properly aligned, net interest income may be affected when interest rates
change. Forecasting results of the possible outcomes determine the exposure of
interest rate risk inherent in Horizon's balance sheet. The goal is to manage
imbalanced positions that arise when the total amount of assets repricing or
maturing in a given time period differs significantly from liabilities that are
repricing or maturing in the same time period. The theory behind managing the
difference between repricing assets and repricing liabilities is to have more
assets repricing in a rising rate environment and more liabilities repricing in
a declining rate environment. At December 31, 1999, Horizon had a negative GAP
position of .71. This indicates that the total amount of assets repricing within
one year were 71% of the total amount of liabilities repricing within the same
time period. This compares to a negative GAP position of .72 at December 31,
1998.



                                                      RATE SENSITIVITY
                                      ---------------------------------------------------------------
                                                  GREATER THAN  GREATER THAN
                                                    3 MONTHS      6 MONTHS
                                       3 MONTHS     AND LESS      AND LESS   GREATER THAN
                                        OR LESS   THAN 6 MONTHS  THAN 1 YEAR    1 YEAR      TOTAL
                                      ---------------------------------------------------------------
                                                                           
Loans                                  $ 127,410    $  13,329    $  24,397    $ 225,948   $ 391,084
Money market investments                     174                                                174
Interest-bearing balances with Banks                                   232                      232
Investment securities and FRB
 and FHLB stock                           26,404        1,642        3,992       41,739      73,777
Other assets                                                                     60,729      60,729
                                      ---------------------------------------------------------------
    Total assets                       $ 153,988    $  14,971    $  28,621    $ 328,416   $ 525,996
                                      ===============================================================
Noninterest-bearing deposits                                                  $  44,890   $  44,890
Interest-bearing deposits              $ 113,053    $  38,008    $  43,559      124,158     318,778
Borrowed funds                            94,500                    10,000       25,000      129,500
Other liabilities                                                                 3,829        3,829
Stockholders' equity                                                             28,999       28,999
                                      ---------------------------------------------------------------
    Total liabilities and
     stockholders' equity              $ 207,553    $  38,008    $  53,559    $ 226,876   $ 525,996
                                      ===============================================================
GAP                                    $ (53,565)   $ (23,037)   $ (24,938)   $ 101,540

Cumulative GAP                         $ (53,565)   $ (76,602)   $(101,540)


Included in the GAP analysis are certain interest-bearing demand accounts and
savings accounts. These interest-bearing accounts are subject to immediate
withdrawal. However, Horizon considers approximately 70% of these deposits to be
insensitive to gradual changes in interest rates and generally to behave like
deposits with longer maturities based upon historical experience. Accordingly,
Horizon has considered the balances of interest-bearing demand and savings
account deposits which totaled $53.329 million at December 31, 1999 to be
nonrate sensitive.

                         HORIZON BANCORP & SUBSIDIARIES

                                    25
   12

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Horizon's primary market risk exposure is interest rate risk. Interest rate risk
(IRR) is the risk that Horizon's earnings and capital will be adversely affected
by changes in interest rates. The primary approach to IRR management is one that
focuses on adjustments to the asset/liability mix in order to limit the
magnitude of IRR.

Horizon's exposure to interest rate risk is due to repricing or mismatch risk,
embedded options risk, and yield curve risk. Repricing risk is the risk of
adverse consequence from a change in interest rates that arise because of
differences in the timing of when those interest rate changes affect Horizon's
assets and liabilities. Basis risk is the risk that the spread, or rate
difference, between instruments of similar maturities will change. Options risk
arises whenever products give the customer the right, but not the obligation, to
alter the quantity or timing of cash flows. Yield curve risk is the risk that
changes in prevailing interest rates will affect instruments of different
maturities by different amounts. Horizon's objective is to remain reasonably
neutral with respect to IRR. Horizon utilizes a variety of strategies to
maintain this position including the sale of mortgage loans on the secondary
market and varying maturities of FHLB advances, certificates of deposit funding,
and investment securities.

The table, which follows, provides information about Horizon's financial
instruments that are sensitive to changes in interest rates as of December 31,
1999. Horizon had no derivative financial instruments or trading portfolio as of
December 31, 1999. The table incorporates Horizon's internal system generated
data related to the maturity and repayment/withdrawal of interest-earning assets
and interest-bearing liabilities. For loans, securities, and liabilities with
contractual maturities, the table presents principal cash flows and related
weighted average interest rates by contractual maturities as well as the
historical experience of Horizon related to the impact of interest rate
fluctuations on the prepayment of residential loans and mortgage-backed
securities. From a risk management perspective, Horizon believes that repricing
dates are more relevant than contractual maturity dates when analyzing the value
of financial instruments. For deposits with no contractual maturity dates, the
table presents principal cash flows and weighted average rate, as applicable,
based upon Horizon's experience and management's judgment concerning the most
likely withdrawal behaviors.

                         HORIZON BANCORP & SUBSIDIARIES

                                    26
   13

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

QUANTITATIVE DISCLOSURE OF MARKET RISK



                                                                                              2005 AND                  FAIR VALUE
                                   2000        2001         2002        2003          2004     BEYOND          TOTAL     12/31/99
                                ---------------------------------------------------------------------------------------------------
RATE-SENSITIVE ASSETS

                                                                                                  
 Fixed interest rate loans       $ 27,822    $ 24,583    $ 31,445    $ 28,326    $   18,505    $ 83,527    $   214,208    $212,755
 Average interest rate               8.48%       8.27%       7.86%       7.62%         7.53%       7.33%          7.72%

 Variable interest rate loans     137,313      10,177       7,535      10,844         9,455       4,825        180,149     179,778
 Average interest rate               9.80%       7.81%       7.83%       7.68%         7.86%       7.52%          9.31%

 Total loans                      165,135      34,760      38,980      39,170        27,960      88,352        394,357     392,533
 Average interest rate               9.58%       8.13%       7.86%       7.64%         7.64%       7.34%          8.45%

 Securities, including
  FRB and FHLB stock               30,058      22,527       8,004       5,277         4,864       3,047         73,777      73,777
 Average interest rate               6.28%       5.90%       6.32%       6.37%         6.16%       6.71%          6.19%

 Other interest-bearing assets        406                                                                          406         406
 Average interest rate               5.08%                                                                        5.08%

  Total earnings assets           195,599      57,287      46,984      44,447        32,824      91,399        468,540     466,716
  Average interest rate              9.03%       7.25%       7.60%       7.49%         7.42%       7.32%          8.08%

RATE-SENSITIVE LIABILITIES

 Noninterest-bearing deposits                                                                  $ 44,890       $ 44,890    $ 44,890

 NOW accounts                    $ 36,416                                                        23,711         60,127      60,127
 Average interest rate               3.67%                                                         2.15%          3.07%

 Savings and
 money market accounts             12,693                                                        29,618         42,311      42,295
 Average interest rate               1.80%                                                         1.80%          1.80%

 Certificates of deposit          145,033    $ 57,724    $  9,172    $  4,287    $       16         108        216,340     215,769
 Average interest rate               5.51%       5.41%       5.33%       5.10%         4.94%       7.50%          5.47%

 Total deposits                   194,142      57,724       9,172       4,287            16      98,327        363,668     363,081
 Average interest rate               4.93%       5.41%       5.33%       5.10%         4.94%       1.07%          3.97%

 Fixed interest rate
  borrowings                       41,000      15,000       5,000                     5,000                     66,000      65,700
 Average interest rate               5.59%       6.50%       6.18%                     6.68%                      5.93%

 Variable interest rate
  borrowings                       63,500                                                                       63,500      63,496
 Average interest rate               5.77%                                                                        5.77%

  Total funds                     298,642      72,724      14,172       4,287         5,016      98,327        493,168     492,277
  Average interest rate              5.20%       5.64%       5.63%       5.10%         6.67%       1.07%          4.47%


                         HORIZON BANCORP & SUBSIDIARIES

                                    27

   14

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement requires companies to record
derivatives on the balance sheet at their fair value. SFAS No. 133 also
acknowledges that the method of recording a gain or loss depends on the use of
the derivative. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.

- -  For a derivative designated as hedging the exposure to changes in the fair
   value of a recognized asset or liability or a firm commitment (referred to as
   a fair value hedge), the gain or loss is recognized in earnings in the period
   of change together with the offsetting loss or gain on the hedged item
   attributable to the risk being hedged. The effect of that accounting is to
   reflect in earnings the extent to which the hedge is not effective in
   achieving offsetting changes in fair value.

- -  For a derivative designated as hedging the exposure to variable cash flows of
   a forecasted transaction (referred to as a cash flow hedge), the effective
   portion of the derivative's gain or loss is initially reported as a component
   of other comprehensive income (outside earnings) and subsequently
   reclassified into earnings when the forecasted transaction affects earnings.
   The ineffective portion of the gain or loss is reported in earnings
   immediately.

- -  For a derivative designated as hedging the foreign currency exposure of a net
   investment in a foreign operation, the gain or loss is reported in other
   comprehensive income (outside earnings) as part of the cumulative translation
   adjustment. The accounting for a fair value hedge described above applies to
   a derivative designated as a hedge of the foreign currency exposure of an
   unrecognized firm commitment or an available-for-sale security. Similarly,
   the accounting for a cash flow hedge described above applies to a derivative
   designated as a hedge of the foreign currency exposure of a
   foreign-currency-denominated forecasted transaction.

- -  For a derivative not designated as a hedging instrument, the gain or loss is
   recognized in earnings in the period of change.

The new Statement applies to all entities. If hedge accounting is elected by the
entity, the method of assessing the effectiveness of the hedging derivative and
the measurement approach of determining the hedge's ineffectiveness must be
established at the inception of the hedge.

SFAS No. 133 amends SFAS No. 52 and supercedes SFAS Nos. 80, 105, and 119. SFAS
No. 107 is amended to include the disclosure provisions about the concentrations
of credit risk from SFAS No. 105. Several Emerging Issues Task Force consensuses
are also changed or nullified by the provisions of SFAS No. 133.

SFAS No. 133 will be effective for all fiscal years beginning after June 15,
2000. Early application is encouraged; however, this Statement may not be
applied retroactively to financial statements of prior periods. At this time,
management is evaluating the statement to determine the impact, if any, it may
have on the financial condition or results of operations of Horizon.

                         HORIZON BANCORP & SUBSIDIARIES

                                    28

   15

Management Discussion and Analysis of Results of Operations and Financial
Condition
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 134, Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise. This Statement establishes accounting standards
for certain activities of mortgage banking enterprises and for other enterprises
with similar mortgage operations. This Statement amends Statement of Financial
Accounting Standards (SFAS) No. 65.

SFAS No. 65, as previously amended by SFAS Nos. 115 and 125, required a mortgage
banking enterprise to classify a mortgage-backed security as a trading security
following the securitization of the mortgage loan held for sale. This Statement
further amends SFAS No. 65 to require that after the securitization of mortgage
loans held for sale, an entity engaged in mortgage banking activities must
classify the resulting mortgage-backed security or other retained interests
based on the entity's ability and intent to sell or hold those investments.

The determination of the appropriate classification for securities retained
after the securitization of mortgage loans by a mortgage banking enterprise now
conforms to SFAS No. 115. The only requirement the new Statement adds is that if
an entity has a sales commitment in place, the security must be classified into
trading.

This Statement is effective for the first fiscal quarter beginning after
December 15, 1998. On the date this Statement is initially applied, an entity
may reclassify mortgage-backed securities and other beneficial interests
retained after the securitization of mortgage loans held for sale from the
trading category, except for those with sales commitments in place. Those
securities and other interests shall be classified based on the entity's present
ability and intent to hold the investments. The adoption of this statement had
no effect on the statement of condition or results of operation of Horizon.

FORWARD-LOOKING STATEMENTS

Certain statements in this section constitute forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results, performance, or
achievements of the Company to differ materially from any future results,
performance, or achievements expressed or implied by such forward-looking
statements.

                         HORIZON BANCORP & SUBSIDIARIES

                                    29
   16

Consolidated Balance Sheets
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



DECEMBER 31                                                                   1999             1998
- ---------------------------------------------------------------------------------------------------
                                                                                   
ASSETS
 Cash and due from banks                                             $  34,670    $  12,771
 Federal funds sold                                                                  18,500
 Interest-bearing demand deposits                                          174          598
                                                                    -----------------------
 Cash and cash equivalents                                              34,844       31,869
 Interest-bearing deposits                                                 232          225
 Investment securities
 Available for sale                                                     67,880       54,612
 Held to maturity (fair value of $12,090)                                            11,746
    Total investment securities                                         67,880       66,358
                                                                    -----------------------
 Loans, net of allowance for loan losses of $3,273 and $2,787          391,084      287,559
 Premises and equipment                                                 18,134       18,393
 Federal Reserve and Federal Home Loan Bank stock                        5,897        3,973
 Interest receivable                                                     2,780        2,249
 Other assets                                                            5,145        5,528

                                                                    -----------------------
    Total assets                                                     $ 525,996    $ 416,154
                                                                    =======================

LIABILITIES
 Deposits
 Noninterest bearing                                                 $  44,890    $  58,658
 Interest bearing                                                      318,778      263,743
                                                                    -----------------------
    Total deposits                                                     363,668      322,401
 Short-term borrowings                                                  24,500        4,000
 Federal Home Loan Bank advances                                       105,000       54,000
 Interest payable                                                          920          817
 Other liabilities                                                       2,909        3,050
                                                                    -----------------------
    Total liabilities                                                  496,997      384,268
                                                                    -----------------------

COMMITMENTS AND CONTINGENCIES

EQUITY RECEIVED FROM CONTRIBUTIONS AND DIVIDENDS TO THE ESOP             7,808        4,418
                                                                    -----------------------

STOCKHOLDERS' EQUITY
 Common stock, $1 stated value
 Authorized, 5,000,000 shares
 Issued, 1,034,428 shares, less ESOP shares of 165,309 and 292,960         873          741
 Additional paid-in capital                                             13,153        8,834
 Retained earnings                                                      22,629       24,201
 Accumulated other comprehensive income (loss)                          (1,201)         336
 Treasury stock, at cost, 350,293 and 183,048 shares                   (14,263)      (6,644)
                                                                    -----------------------
    Total stockholders' equity                                          21,191       27,468
                                                                    -----------------------

    Total liabilities and stockholders' equity                       $ 525,996    $ 416,154
                                                                    =======================



See notes to consolidated financial statements.

                         HORIZON BANCORP & SUBSIDIARIES

                                    30
   17

Consolidated Statement of Income
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands, Except per data share)



YEAR ENDED DECEMBER 31                                                   1999       1998        1997
- ------------------------------------------------------------------------------------------------------
                                                                                     
INTEREST INCOME
 Loans receivable                                                     $ 25,634    $ 23,346    $ 24,306
 Investment securities
  Taxable                                                                5,096       4,010       4,256
  Tax exempt                                                               167         447         435
                                                                      --------------------------------
    Total interest income                                               30,897      27,803      28,997
                                                                      --------------------------------

INTEREST EXPENSE
 Deposits                                                               12,603      10,578      10,343
 Federal funds purchased and short-term borrowings                          76          50         110
 Federal Home Loan Bank advances                                         3,086       2,658       2,484
                                                                      --------------------------------
    Total interest expense                                              15,765      13,286      12,937
                                                                      --------------------------------

NET INTEREST INCOME                                                     15,132      14,517      16,060
 Provision for loan losses                                               1,100         820       1,255

                                                                      --------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                     14,032      13,697      14,805
                                                                      --------------------------------

OTHER INCOME
 Service charges on deposit accounts                                     2,048       2,255       2,020
 Fiduciary activities                                                    2,113       2,141       2,423
 Gain on sale of other real estate owned                                    72                       9
 Gain on sale of securities                                                177                       9
 Commission income from insurance agency                                   811         462
 Income from reinsurance company                                           158         158         221
 Other income                                                              503         437         237
                                                                      --------------------------------
    Total other income                                                   5,882       5,453       4,919
                                                                      --------------------------------
OTHER EXPENSES
 Salaries and employee benefits                                          9,017       9,148       8,016
 ESOP termination expense                                                2,073
 Net occupancy expenses                                                  1,692       1,344       1,281
 Data processing and equipment expenses                                  2,079       2,108       2,489
 Loss on disposal of fixed assets                                          219          26         274
 Loss on other real estate owned                                             4                      18
 Other expenses                                                          4,346       4,810       4,985
                                                                      --------------------------------
    Total other expenses                                                19,430      17,436      17,063
                                                                      --------------------------------
INCOME BEFORE INCOME TAX                                                   484       1,714       2,661
 Income tax expense                                                        675         460         664
                                                                      --------------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS                              (191)      1,254       1,997
                                                                      --------------------------------
DISCONTINUED OPERATIONS
 Loss from operation of discontinued subsidiary
  (less tax benefit of $56, $115, and $80 for 1999, 1998, and 1997)        (81)       (171)       (276)
 Loss on disposal of subsidiary, including provision of
 $134 for operating losses during phase-out period
  (less tax benefit of $52 in 1999)                                        (82)
                                                                      --------------------------------
    Total loss from discontinued operations                               (163)       (171)       (276)
                                                                      --------------------------------
NET INCOME (LOSS)                                                     $   (354)   $  1,083    $  1,721
                                                                      ================================
Basic and Diluted Earnings per Share From Continued Operations        $  (0.29)   $   1.83    $   2.81
Basic and Diluted Earnings per Share From Loss on
 Discontinued Operations                                                 (0.25)      (0.25)      (0.39)
                                                                      --------------------------------
BASIC AND DILUTED EARNINGS PER SHARE                                  $  (0.54)   $   1.58    $   2.42
                                                                      ================================


See notes to consolidated financial statements


                         HORIZON BANCORP & SUBSIDIARIES

                                    31

   18
Consolidated Statement of Stockholders' Equity
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



                                                                                 ACCUMULATED
                                             ADDITIONAL                            OTHER
                                      COMMON  PAID-IN   COMPREHENSIVE  RETAINED COMPREHENSIVE TREASURY
                                      STOCK   CAPITOL   INCOME (LOSS)  EARNINGS INCOME (LOSS)   STOCK       TOTAL
- --------------------------------------------------------------------------------------------------------------------
                                                                                      
Balances, January 1, 1997           $    708    $  7,962               $ 23,898     $     85    $ (3,356)   $ 29,297
 Net income                                                 $  1,721      1,721                                1,721
 Other comprehensive income,
  net of tax
 Unrealized gains on securities,
  net of reclassification
  adjustment                                                     315                     315                     315
                                                            --------
 Comprehensive income                                       $  2,036
                                                            ========
 Cash dividends ($1.80 per share)                                        (1,264)                              (1,264)
 Purchase of 22,178 shares of
  treasury stock                                                                                  (1,173)     (1,173)
 Net purchases and distributions
  with ESOP                               12        (270)                                                       (258)
 Tax benefit of ESOP
  dividend deduction                                  71                                                          71
                                        ----------------               ---------------------------------------------
Balances, December 31, 1997              720       7,763                 24,355          400      (4,529)     28,709
 Net income                                                 $  1,083      1,083                                1,083
 Other comprehensive income,
  net of tax
 Unrealized losses on securities,
  net of reclassification
  adjustment                                                     (64)                    (64)                    (64)
                                                            --------
 Comprehensive income                                       $  1,019
                                                            ========
 Cash dividends ($1.80 per share)                                        (1,237)                              (1,237)
 Purchase of 36,785 shares of
  treasury stock                                                                      (2,115)                 (2,115)
 Issuance of 6,897 shares of
  common stock for purchase
  of insurance agency                      7         379                                                         386
 Net purchases and distributions
  with ESOP                               14         627                                                         641
 Tax benefit of ESOP
  dividend deduction                                  65                                                          65
                                        ----------------               ---------------------------------------------
Balances, December 31, 1998              741       8,834                 24,201          336      (6,644)     27,468
 Net loss                                                   $   (354)      (354)                                (354)
 Other comprehensive income,
  net of tax
 Unrealized losses on securities,
  net of reclassification
  adjustment                                                  (1,537)                 (1,537)                 (1,537)
                                                            --------
 Comprehensive loss                                         $ (1,891)
                                                            ========
 Cash dividends ($1.80 per share)                                        (1,218)                              (1,218)
 Purchase of 165,245 shares
  of treasury stock                                                                               (7,619)     (7,619)
 Issuance of 4,000 shares of
  common stock for purchase
  of investment management
  entity                                   4         196                                                         200
 Net purchases and
  distributions with ESOP                128       4,058                                                       4,186
 Tax benefit of ESOP
  dividend deduction                                  65                                                          65
                                        ----------------               ---------------------------------------------
BALANCES, DECEMBER 31, 1999             $873    $ 13,153               $ 22,629     $ (1,201)   $(14,263)   $ 21,191
                                        ================               =============================================


See notes to consolidated financial statements.

                         HORIZON BANCORP & SUBSIDIARIES

                                    32
   19

Consolidated Statement of Cash Flows
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



YEAR ENDED DECEMBER 31                                         1999        1998         1997
- ----------------------------------------------------------------------------------------------
                                                                           
OPERATING ACTIVITIES
 Net income (loss)                                        $    (354)   $   1,083    $   1,721
 Adjustments to reconcile net income (loss) to
 net cash provided by operating activities
 Provision for loan losses                                    1,100          820        1,225
 Additional paid-in capital from release of ESOP shares       1,807          360          184
 Depreciation and amortization                                1,409        1,135        1,367
 Deferred income tax                                            (98)         392          (29)
 Investment securities amortization, net                        164          199          158
 Investment securities gains                                   (177)                       (9)
 Discontinued operations                                        237          194          103
 Loss on disposal of fixed assets                               219           26          274
 (Gain) loss on sale of loans                                    19          (56)
 Proceeds from sales of loans                                11,955        2,765       17,039
 (Gain) loss on sale of other real estate owned                 (68)           9
 Deferred loan fees                                             (49)         (84)         (57)
 Unearned income                                                102          (61)          54
 Net change in
  Interest receivable                                          (531)          15          (48)
  Interest payable                                              103          143           84
  Other assets                                                1,586       (1,409)        (826)
  Other liabilities                                            (141)        (857)        (504)
                                                          ------------------------------------
    Net cash provided by operating activities                17,283        4,721       20,689
                                                          ------------------------------------

INVESTING ACTIVITIES
 Net change in interest-bearing deposits                         (7)          (6)          (8)
 Purchases of securities available for sale                 (35,250)     (27,839)      (1,000)
 Proceeds from maturities, calls, and principal
 repayments of securities available for sale                 17,708       17,868       11,662
 Proceeds from sales of securities available for sale        11,738                     1,009
 Purchases of securities held to maturity                                 (2,597)      (1,962)
 Proceeds from maturities, calls, and principal
 repayments of securities held to maturity                    1,785        2,282        3,315
 Net change in loans                                       (117,265)     (34,048)      (4,766)
 Purchase of loans                                                                     (1,379)
 Principal payments received on ESOP loan                     5,769          651          250
 Proceeds from sale of fixed assets                             715
 Recoveries on loans previously charged-off                     363          401          383
 Purchase of insurance agency                                               (785)
 Purchase of investment management entity                       200
 Purchases of premises and equipment                         (2,070)      (3,423)      (3,735)
 Purchase of Federal Reserve and
 Federal Home Loan Bank stock                                (1,924)        (350)        (887)
                                                          ------------------------------------
    Net cash provided (used) by investing activities       (118,238)     (47,846)       2,882
                                                          ------------------------------------


(Continued)

                         HORIZON BANCORP & SUBSIDIARIES

                                    33
   20

Consolidated Statement of Cash Flows, cont.
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



YEAR ENDED DECEMBER 31                                     1999        1998         1997
- -----------------------------------------------------------------------------------------
                                                                        
FINANCING ACTIVITIES
 Net change in
  Deposits                                             $  41,267    $  57,988    $ (24,767)
  Short-term borrowings                                   20,500      (12,000)       3,151
 Federal Home Loan Bank advances                          66,000       70,000       31,000
 Repayment of Federal Home Loan Bank advances            (15,000)     (58,000)     (30,500)
 Dividends paid                                           (1,218)      (1,237)      (1,264)
 Purchase of treasury stock                               (7,619)      (2,115)      (1,173)
                                                       -----------------------------------
    Net cash provided (used) by financing activities     103,930       54,636      (23,553)
                                                       -----------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                    2,975       11,511           18

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR              31,869       20,358       20,340
                                                       -----------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                 $  34,844    $  31,869    $  20,358
                                                       ===================================
ADDITIONAL CASH FLOWS INFORMATION
 Interest paid                                         $  15,868    $  13,388    $  10,427
 Income tax paid                                             350          440          661


See notes to consolidated financial statements.

                         HORIZON BANCORP & SUBSIDIARIES

                                    34
   21

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NOTE 1-- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS-- The consolidated financial statements of Horizon Bancorp
(Horizon) and its wholly owned subsidiaries, Horizon Bank, N.A. (Bank), HBC
Insurance Group, Inc. (Insurance Company), and The Loan Store, Inc. conform to
generally accepted accounting principles and reporting practices followed by the
banking industry.

The Bank is a full-service commercial bank offering a broad range of commercial
and retail banking and other services incident to banking. The Bank has two
wholly-owned subsidiaries: Horizon Trust & Investment Management, N.A. (HTIM)
and Horizon Insurance Services, Inc (Insurance Agency). HTIM offers corporate
and individual trust and agency services and investment management services. The
Insurance Agency offers a full line of commercial and personal insurance
products. The Bank maintains four facilities in LaPorte County, Indiana and four
facilities in Porter County, Indiana. The Insurance Company offers credit
insurance. The net income generated from the insurance operations is not
significant to the overall operations of Horizon. The Loan Store, Inc. is a
discontinued operation and sold its loan portfolio to another finance company in
August 1999. The Loan Store, Inc. was a subprime consumer finance company with
offices located in Highland, South Bend, and Michigan City, Indiana. Horizon
conducts no business except that incident to its ownership of the subsidiaries.

BASIS OF REPORTING -- The consolidated financial statements include the accounts
of Horizon and subsidiaries. All material intercompany accounts and transactions
have been eliminated in consolidation.

USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

INVESTMENT SECURITIES AVAILABLE FOR SALE -- Horizon and the Bank designate a
portion of their investment portfolio as available for sale based on
management's plans to use such securities for asset and liability management,
liquidity, and not to hold such securities as long- term investments. Management
repositions the portfolio to take advantage of future expected interest rate
trends when Horizon's long-term profitability can be enhanced. Investment
securities available for sale and marketable equity securities are carried at
estimated fair value and any net unrealized gains/losses (after tax) on these
securities are included in accumulated other comprehensive income. Gains/losses
on the disposition of securities available for sale are recognized at the time
of the transaction and are determined by the specific identification method.

INVESTMENT SECURITIES HELD TO MATURITY -- Investment securities are purchased
with the intent and ability to hold to maturity, and are carried at cost and
adjusted for amortization of premiums and accretion of discounts. Gains/losses
on the disposition of securities held to maturity are recognized at the time of
the transaction and are determined by the specific identification method.

LOANS HELD FOR SALE -- Loans held for sale are reported at the lower of cost or
market value in the aggregate.

                         HORIZON BANCORP & SUBSIDIARIES

                                    35

   22
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

INTEREST AND FEES ON LOANS -- Interest on commercial, mortgage, and installment
loans is recognized over the term of the loans based on the principal amount
outstanding. When principal or interest is past due 90 days or more, and the
loan is not well secured and it is in the process of collection, or when serious
doubt exists as to the collectibility of a loan, the accrual of interest is
discontinued. Loan origination fees, net of direct loan origination costs, are
deferred and recognized over the life of the loan as a yield adjustment.

CONCENTRATIONS OF CREDIT RISK -- The Bank grants commercial, real estate, and
consumer loans to customers located primarily in LaPorte County and portions of
Porter County in Northwest Indiana and provides mortgage warehouse lines to
mortgage companies in the United States. Commercial loans make up approximately
23% of the loan portfolio and are secured by both real estate and business
assets. These loans are expected to be repaid from cash flow from operations of
the businesses. Real estate loans make up approximately 39% of the loan
portfolio and are secured by both commercial and residential real estate.
Installment loans make up approximately 16% of the loan portfolio and are
primarily secured by consumer assets. Mortgage warehouse loans make up
approximately 22% of the loan portfolio and are secured by residential real
estate.

MORTGAGE WAREHOUSE LOANS -- Horizon purchases residential mortgage loans from
various mortgage companies prior to sale of these loans by the mortgage
companies on the secondary market. Horizon held loans that were purchased under
agreements to resell from 22 of the 24 approved mortgage companies at December
31, 1999. Horizon purchases such loans from mortgage companies, net of certain
fees, and later sells them back to the mortgage companies at the same amount and
without recourse provisions. As a result, no gains and losses are recorded at
the resale of loans. Horizon records interest and fee income on the loans during
the funding period. Horizon uses the stated interest rate in the agreement with
each mortgage company for interest income recognition, and not the interest
rates on the individual loans. Horizon does not retain servicing of the loans
when they are resold. Loans consist of purchase money and refinance mortgage
loans and are generally held no more than 90 days by Horizon and are typically
resold within 30 days.

ALLOWANCE FOR LOAN LOSSES -- An allowance for loan losses is established and
maintained because some loans may not be repaid in full. Increases to the
allowance are recorded by a provision for loan losses charged to expense.
Estimating the risk of loss and the amount of loss on any loan is necessarily
subjective. Accordingly, the allowance is maintained by management at a level
considered adequate to cover losses that are currently anticipated based on past
loss experience, general economic conditions, information about specific
borrower situations, including their financial position and collateral values,
and other factors and estimates which are subject to change over time. Actual
losses may vary from current estimates and the amount of the provisions may be
either greater than or less than actual net charge-offs. While the largest
portion of this reserve is intended to cover loan losses, it is considered a
general reserve for all credit-related purposes.

LOAN IMPAIRMENT -- When analysis determines a borrower's operating results and
financial condition are not adequate to meet debt service requirements, the loan
is evaluated for impairment. Often this is associated with a delay or shortfall
in payments of 30 days or more. Loans are generally moved to nonaccrual status
when 90 days or more past due. These loans are also often considered impaired.
Impaired loans, or portions thereof are charged-off when deemed uncollectible.
This typically occurs when the loan is 120 or more days past due.

                         HORIZON BANCORP & SUBSIDIARIES

                                    36

   23

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

Loans are considered impaired if full principal or interest payments are not
made in accordance with the original terms of the loan. Impaired loans are
measured and carried at the lower of cost or the present value of expected
future cash flows discounted at the loan's effective interest rate, at the
loan's observable market price, or at the fair value of the collateral if the
loan is collateral dependent. Smaller balance homogenous loans are evaluated for
impairment in aggregate.

Such loans include residential first mortgage loans secured by one to four
family residences, residential construction loans and automobile, home equity,
and second mortgages. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment.

PREMISES AND EQUIPMENT -- Buildings and major improvements are capitalized and
depreciated using primarily the straight-line method with useful lives ranging
from 3 to 40 years. Furniture and equipment are capitalized and depreciated
using primarily the straight- line method with useful lives ranging from 3 to 20
years. Maintenance and repairs are expensed as incurred.

FEDERAL RESERVE AND FEDERAL HOME LOAN BANK STOCK -- The stock is a required
investment for institutions that are members of the Federal Reserve and Federal
Home Loan Bank systems. The required investment in the common stock is based on
a predetermined formula.

OTHER REAL ESTATE OWNED -- Other real estate owned is carried at the lower of
cost or fair value, less selling costs, and is included in other assets. Any
reduction to fair value from the carrying value of the related loans at the time
of acquisition is charged to the allowance for loan losses. Subsequent
reductions in fair value, and gains or losses on sales, are recognized in
earnings in the period the reduction in value is determined or the sale is
consummated. Other real estate owned, net of allowance, included in other
assets, totaled $133,000 at December 31, 1998. There was no other real estate
owned at December 31, 1999.

SERVICING RIGHTS -- Prior to adopting Statement of Financial Accounting
Standards (SFAS) No. 122 at the beginning of 1996, servicing right assets were
recorded only for purchased rights to service mortgage loans. Subsequent to
adopting this standard, servicing rights represent both purchased rights and the
allocated value of servicing rights retained on loans sold. Servicing rights are
expensed in proportion to, and over the period of, estimated net servicing
revenue. Impairment is evaluated based on the fair value of the rights, using
groupings of the underlying loans to interest rates and then, secondarily, as to
geographic and prepayment characteristics. Any impairment of a grouping is
reported as a valuation allowance.

INTANGIBLE ASSETS -- Intangible assets are being amortized on the straight-line
basis over a 15-year period. Such assets are periodically evaluated as to the
recoverability of their carrying value.

TREASURY STOCK -- Treasury stock is stated at cost.

STOCK OPTIONS -- Stock options are granted for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Bank accounts for and will continue to account for stock
option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued
to Employees.

                         HORIZON BANCORP & SUBSIDIARIES

                                    37
   24

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

INCOME TAXES -- Horizon files annual consolidated income tax returns with its
subsidiaries. SFAS No. 109, Accounting for Income Taxes requires an asset and
liability approach for accounting for income taxes. Its objective is to
recognize the amount of taxes payable or refundable for the current year, and
deferred tax assets and liabilities for future tax consequences attributable to
differences between the financial statement carrying amount of assets and
liabilities and their respective tax bases. The measurement of tax assets and
liabilities is based on enacted tax laws. Deferred tax assets may be reduced, if
necessary, by the amount of such benefits that are not expected to be realized
based on available evidence.

TRUST ASSETS AND INCOME -- Property, other than cash deposits, held in a
fiduciary or agency capacity is not included in the consolidated balance sheet
since such property is not owned by Horizon. Income from trust activities is
recognized on a cash basis, which is not materially different from the accrual
method.

EARNINGS PER COMMON SHARE AND DIVIDENDS DECLARED PER COMMON SHARE -- Effective
January 1, 1998, Horizon adopted SFAS No. 128, Earnings Per Share. SFAS No. 128
establishes standards for computing and presenting earnings per share (EPS) and
applies to entities with publicly held common stock or potential common stock.
SFAS No. 128 replaces the presentation of primary EPS with earnings per common
share (basic EPS). Basic EPS is computed by dividing net income by the weighted
average number of common shares outstanding for the period. SFAS No. 128 also
requires presentation of EPS assuming dilution (diluted EPS). Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
Horizon has no potential dilutive instruments. The number of shares used in the
computation of basic earnings per share is 655,391 for 1999, 686,804 for 1998,
and 710,967 for 1997.

DIVIDEND RESTRICTIONS-- Regulations of the Comptroller of the Currency limit the
amount of dividends that may be paid by a national bank to its parent holding
company without prior approval of the Comptroller of the Currency. According to
these regulations, as of December 31, 1999, $569,000 of additional dividends may
be paid by the Bank to Horizon without prior approval of the Comptroller of the
Currency. Additionally, the Federal Reserve Board limits the amount of dividends
that may be paid by Horizon to its stockholders under its capital adequacy
guidelines.

CONSOLIDATED STATEMENT OF CASH FLOWS -- For purposes of reporting cash flows,
cash and cash equivalents are defined to include cash and due from banks, money
market investments, and federal funds sold with maturities of one day or less.
Horizon reports net cash flows for customer loan transactions, deposit
transactions, short-term investments, and short-term borrowings.

RECLASSIFICATIONS -- Certain reclassifications have been made to the 1998 and
1997 financial statements to be comparable to 1999.

NOTE 2 -- FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair value amounts were determined using available market
information, current pricing information applicable to Horizon and various
valuation methodologies. Where market quotations were not available,
considerable management judgement was involved in the determination of estimated
fair values. Therefore, the estimated fair value of financial instruments shown
below may not be representative of the amounts at which they could be exchanged
in a current or future transaction. Due to the inherent uncertainties of
expected cash flows of financial instruments, the use of alternate valuation
assumptions and methods could have a significant effect on the derived estimated
fair value amounts.

                         HORIZON BANCORP & SUBSIDIARIES

                                    38
   25

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

The estimated fair values of financial instruments, as shown below, are not
intended to reflect the estimated liquidation or market value of Horizon taken
as a whole. The disclosed fair value estimates are limited to Horizon's
significant financial instruments at December 31, 1999 and 1998. These include
financial instruments recognized as assets and liabilities on the consolidated
balance sheet as well as certain off-balance sheet financial instruments. The
estimated fair values shown below do not include any valuation of assets and
liabilities which are not financial instruments as defined by SFAS No. 107
Disclosures about Fair Value of Financial Instruments, such as the value of real
property, the value of core deposit intangibles, the value of mortgage servicing
rights, nor the value of anticipated future business.

The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:

CASH AND CASH EQUIVALENTS -- The carrying amounts approximate fair value.

INTEREST-BEARING DEPOSITS -- The carrying amounts approximate fair value.

INVESTMENT SECURITIES -- For debt and marketable equity securities available for
sale and held to maturity, fair values are based on quoted market prices or
dealer quotes. For those securities where a quoted market price is not
available, carrying amount is a reasonable estimate of fair value based upon
comparison with similar securities.

NET LOANS -- The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.

INTEREST RECEIVABLE/PAYABLE -- The carrying amounts approximate fair value.

FHLB AND FRB STOCK -- Fair value of FHLB and FRB stock is based on the price at
which it may be resold to the FHLB and FRB.

DEPOSITS -- The fair value of demand deposits, savings accounts,
interest-bearing checking accounts, and money market deposits is the amount
payable on demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated by discounting the future cash flows using
rates currently offered for deposits of similar remaining maturity.

SHORT-TERM BORROWINGS -- The carrying amounts approximate fair value.

FEDERAL HOME LOAN BANK ADVANCES -- Rates currently available to the Bank for
debt with similar terms and remaining maturities are used to estimate fair value
of existing advances.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTER OF CREDIT -- The fair value of
commitments is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For fixed-rate loan commitments,
fair value also considers the difference between current levels of interest
rates and the committed rates. The fair value of letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties at
the reporting date. Due to the short-term nature of these agreements, carrying
amounts approximate fair value.

                         HORIZON BANCORP & SUBSIDIARIES

                                    39

   26



Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

The estimated fair values of Horizon's financial instruments are as follows:



                                                      1999                     1998
                                            -------------------------------------------------
                                             CARRYING       FAIR       CARRYING      FAIR
DECEMBER 31                                   AMOUNT       VALUE        AMOUNT       VALUE
- ---------------------------------------------------------------------------------------------
                                                                      
ASSETS
 Cash and cash equivalents                  $  34,844   $  34,844    $  31,869    $  31,869
 Interest-bearing deposits                        232         232          225          225
 Investment securities available for sale      67,880      67,880       54,612       54,612
 Investment securities held to maturity                                 11,746       12,090
 Loans including loans held for sale, net     391,084     389,260      287,559      287,277
 Interest receivable                            2,780       2,780        2,249        2,249
 Stock in FHLB and FRB                          5,897       5,897        3,973        3,973

LIABILITIES
 Noninterest-bearing deposits                  44,890      44,890       58,658       58,658
 Interest-bearing deposits                    318,778     318,191      263,743      267,417
 Short-term borrowings                         24,500      24,500        4,000        4,006
 Federal Home Loan Bank advances              105,000     104,696       54,000       54,032
 Interest payable                                 920         920          817          817


NOTE 3 -- INVESTMENT SECURITIES



                                                                  1999
                                            -------------------------------------------------
                                                           GROSS         GROSS
                                            AMORTIZED   UNREALIZED     UNREALIZED    FAIR
DECEMBER 31                                   COST         GAINS         LOSSES      VALUE
- ---------------------------------------------------------------------------------------------
AVAILABLE FOR SALE
                                                                      
 U.S. Treasury and federal agencies         $  30,428   $      18    $    (866)   $  29,580
 State and Municipal                            4,230                     (130)       4,100
 FHLMC mortgage-backed securities               6,722          14         (127)       6,609
 FNMA mortgage-backed securities               16,843          40         (267)      16,616
 GNMA collateralized mortgage obligations       8,051                     (582)       7,469
 FHLMC collateralized mortgage obligation         964                      (19)         945
 FNMA collateralized mortgage obligations       2,307                      (32)       2,275
 Marketable equity securities                     315                      (29)         286
                                            -------------------------------------------------
    Total investment securities             $  69,860   $      72    $  (2,052)   $  67,880
                                            =================================================


                         HORIZON BANCORP & SUBSIDIARIES

                                    40
   27

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

                                                           1998
                                          --------------------------------------
                                                     GROSS      GROSS
                                         AMORTIZED UNREALIZED UNREALIZED  FAIR
DECEMBER 31                                COST      GAINS      LOSSES    VALUE
- --------------------------------------------------------------------------------
Available for sale
 U.S. Treasury and federal agencies        $12,568   $    93   $    16   $12,645
 GNMA mortgage-backed securities            12,321        72        79    12,314
 FHLMC mortgage-backed securities            9,117       220         4     9,333
 FNMA mortgage-backed securities            19,729       217         3    19,943
 Marketable equity securities                  316        61                 377
                                          --------------------------------------
    Total available for sale                54,051       663       102    54,612
                                          --------------------------------------
 Held to maturity
 Federal agencies                            1,630        62               1,692
 State and municipal                        10,116       287         5    10,398
                                          --------------------------------------
    Total held to maturity                  11,746       349         5    12,090
                                          --------------------------------------
    Total investment securities            $65,797   $ 1,012   $   107   $66,702
                                          ======================================

The amortized cost and fair value of securities held to maturity and available
for sale at December 31, 1999, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.

                                                          AVAILABLE FOR SALE
                                                          ----------------------
                                                      AMORTIZED COST  FAIR VALUE
- --------------------------------------------------------------------------------
Within one year                                           $ 5,084        $ 5,073
One to five years                                          16,570         16,238
Five to ten years                                           9,697          9,356
After ten years                                             3,307          3,013
                                                          ----------------------
                                                           34,658         33,680
Mortgage-backed securities                                 23,565         23,225
Collateralized mortgage obligations                        11,322         10,689
Marketable equity securities                                  315            286
                                                          ----------------------
   Totals                                                 $69,860        $67,880
                                                          ======================

Securities with a carrying value of $3,243,000 and $4,079,000 were pledged at
December 31, 1999 and 1998 to secure certain public and trust deposits.

Proceeds from sales of securities available for sale during 1999 were
$11,738,000. Gross gains of $217,000 and gross losses of $40,000 were realized
on these sales. There were no sales of securities available for sale during
1998. Proceeds from sales of securities available for sale during 1997 were
$1,009,000. Gross gains of $9,000 were realized on these sales. There were no
losses.

                         HORIZON BANCORP & SUBSIDIARIES

                                    41
   28

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

During the second quarter of 1999, debt securities with an amortized cost of
$10,050,000 were transferred from held to maturity to available for sale so the
Bank could minimize the tax consequences of holding tax-exempt securities. The
securities had an unrealized gain of approximately $350,000. There were no
transfers between classifications during 1998.

There were no sales of securities held to maturity during 1999, 1998, or 1997.

At December 31, 1999 and 1998 there were no holdings of securities of any one
issuer, other than the U.S. Government and its agencies and corporations, in an
amount greater than 10% of stockholders' equity.

NOTE 4 -- LOANS AND ALLOWANCE

DECEMBER 31                                          1999                1998
- --------------------------------------------------------------------------------
Commercial loans                                     $ 89,361          $ 76,682
Mortgage warehouse loans                               85,542
Real estate loans                                     154,717           152,390
Installment loans                                      64,737            61,274

                                                    ----------------------------
   Total loans                                       $394,357          $290,346
                                                    ============================




YEAR ENDED DECEMBER 31                               1999      1998      1997
- --------------------------------------------------------------------------------
Allowance for loan losses
 Balances, January 1                             $ 2,787    $ 2,702    $  2,435
 Provision for losses                              1,100        820       1,255
 Provision for losses, discontinued operations       250        180          70
 Recoveries on loans                                 363        401         383
 Loans charged off                                (1,227)    (1,316)     (1,441)

                                                 ------------------------------
 Balances, December 31                           $ 3,273    $ 2,787    $  2,702
                                                 ==============================


At December 31, 1999 and 1998, loans past due more than 90 days and still
accruing interest totaled approximately $401,000 and $830,000.

Loans on which the recognition of interest has been discontinued or reduced
totaled approximately $1,173,000, $64,000, and $319,000 at December 31, 1999,
1998, and 1997. Interest income not recognized on these loans totaled
approximately $62,000, $7,000, and $32,000 in 1999, 1998, and 1997.

Loans to directors and executive officers of Horizon and the Bank, including
associates of such persons, amounted to $4,277,000 and $4,819,000, as of
December 31, 1999 and 1998. During 1999, new loans or advances were $3,210,000
and loan payments were $3,752,000.

                         HORIZON BANCORP & SUBSIDIARIES

                                    42
   29

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NOTE 5 -- PREMISES AND EQUIPMENT


DECEMBER 31                                            1999               1998
- --------------------------------------------------------------------------------
Land                                                 $  3,236          $  3,255
Buildings and improvements                             16,461            16,467
Furniture and equipment                                 8,319             7,947
                                                     --------------------------
   Total cost                                          28,016            27,669
Accumulated depreciation                               (9,882)           (9,276)
                                                     --------------------------

   Net                                               $ 18,134          $ 18,393
                                                     ==========================

Depreciation expense for the years ended December 31, 1999, 1998, and 1997
totaled $1,409,000, $1,135,000, and $1,367,000.

NOTE 6 -- LEASES

Horizon has several operating leases for premises and equipment that expire
through 2004. These leases generally contain renewal options and require Horizon
to pay all executory costs such as taxes, maintenance, and insurance. Rental
expense for these leases amounted to $299,000, $291,000, and $246,000 for the
years ended December 31, 1999, 1998, and 1997.

Future minimum lease payments under operating leases are:

YEARS ENDING DECEMBER 31
- ------------------------------------------------------------------
 2000                                                        $140
 2001                                                         118
 2002                                                          21
 2003                                                          10
 2004                                                           2
                                                         ---------
    Total minimum lease payments                             $291
                                                         =========
NOTE 7 -- DEPOSITS

DECEMBER 31                                                 1999          1998
- --------------------------------------------------------------------------------
Noninterest bearing demand deposits                      $ 44,890       $ 58,658
Interest bearing demand deposits                           60,127         32,572
Money market (variable rate)                                3,955          3,985
Savings deposits                                           38,356         41,692
Certificates of $100,000 or more                           71,377         57,235
Other certificates and time deposits                      144,963        128,259
                                                        ------------------------
   Total deposits                                        $363,668       $322,401
                                                        ========================
                         HORIZON BANCORP & SUBSIDIARIES

                                    43
   30

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

Interest expense on time certificates of $100,000 or more was approximately
$4,067,000, $2,937,000, and $2,591,000 for 1999, 1998, and 1997, respectively.

Certificates and other time deposits maturing in years ending December 31 are as
follows:

 2000                                                      $ 145,033
 2001                                                        57,724
 2002                                                         9,172
 2003                                                         4,287
 2004                                                            16
 Thereafter                                                     108
                                                          ---------
                                                          $ 216,340
                                                          =========

Certificates of deposit of $100,000 or more by remaining maturity as of December
31, 1999 are as follows:

Due in three months or less                                 $40,320
Due after three months through six months                    12,626
Due after six months through one year                         6,754
Due after one year                                           11,677
                                                          ---------
                                                            $71,377
                                                          =========

NOTE 8 -- SHORT-TERM BORROWINGS

DECEMBER 31                                                   1999         1998
- --------------------------------------------------------------------------------
Federal funds purchased                                     $22,000
Notes payable, unsecured                                      2,500       $4,000
                                                          ----------------------
Total short-term borrowings                                 $24,500       $4,000
                                                          ======================

The Horizon Bancorp has an unsecured $3,000,000 line of credit, of which
$2,500,000 was outstanding at December 31, 1999. The loan is from an unrelated
financial institution with interest payable monthly at LIBOR plus 2.20%. The
note matures within one year.

At December 31, 1999, the Bank has available approximately $7,000,000 in credit
lines with various money center banks.

NOTE 9 -- FHLB ADVANCES

DECEMBER 31                                                  1999         1998
- --------------------------------------------------------------------------------
 Federal Home Loan Bank advances, variable and fixed
 rates, due at various dates through August 2, 2004       $ 105,000     $ 54,000
                                                          ======================

                         HORIZON BANCORP & SUBSIDIARIES

                                    44
   31

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

The Federal Home Loan Bank advances are secured by first-mortgage loans and
investment securities totaling approximately $272,252,000. Advances are subject
to restrictions or penalties in the event of prepayment.

Contractual maturities in years ending December 31

 2000                                                      $  50,000
 2001                                                         25,000
 2002                                                          5,000
 2003                                                         20,000
 2004                                                          5,000
                                                           ---------
                                                           $ 105,000
                                                           =========

NOTE 10 -- LOAN SERVICING

Loans serviced for others are not included in the accompanying consolidated
balance sheet. The unpaid principal balances of loans serviced for others
totaled approximately $29,480,000 and $23,010,000 at December 31, 1999 and 1998.

NOTE 11 -- EMPLOYEE STOCK OWNERSHIP PLAN

Horizon maintains an employee stock ownership plan (ESOP) as a retirement plan
that currently covers substantially all employees. The ESOP is noncontributory
and each eligible employee is vested according to a schedule based upon years of
service.

In early 1993, the Compensation Committee of the Board initially discussed the
continuation of Horizon's ESOP. In August 1993, the Board of Directors approved
the continuation of this plan and authorized the transfer of 172,414 shares of
Horizon's stock into the ESOP for future allocation to employee retirement
accounts. Upon approval by all the required regulatory agencies, Horizon issued
$5,000,006 in stock on August 26, 1994 at a price of $29 per share, the market
value of the stock at the time the transaction was approved. Under Federal
regulation, the Employee Stock Ownership Trust may pay a value equal to or less
than market value for acquired shares. Under Statement of Position (SOP) 93-6,
Employers Accounting for Employee Stock Ownership Plans issued by the American
Institute of Certified Public Accountants, these shares are not included in
outstanding shares for the purposes of computing earnings per share and book
value per share until they are committed to be released for allocation to
employee retirement accounts.

On July 20, 1999, the Board of Directors of Horizon Bancorp authorized the
termination of the Horizon Bancorp Employee Stock Ownership Plan (ESOP). On
December 31, 1999 the debt owed by the ESOP was repaid with the proceeds from
the sale of a portion of the unallocated shares to Horizon Bancorp. The
remaining shares will be allocated to participants. The termination of the ESOP
resulted in an expense of $2.073 million for the year ended December 31, 1999.
The expense recorded was based upon a valuation performed by an independent
stock valuation firm who determined that the appraised value of Horizon Bancorp
stock was $44.00 as of December 31, 1999. Upon the termination of the ESOP, the
retirement plans of Horizon Bancorp will own approximately 24% of the
outstanding shares.

                         HORIZON BANCORP & SUBSIDIARIES

                                    45

   32

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

Transactions affecting ESOP expense and cash contributions to the ESOP are as
follows:

DECEMBER 31                                                  1999   1998   1997
- --------------------------------------------------------------------------------
 Dividends paid on unallocated ESOP shares                  $  200   $329   $340
 Market value increase of shares released                    1,807    360    184
 Other contributions                                           793    139
                                                           ---------------------

 Total ESOP expense included in ESOP
 termination expense and salaries and benefits              $2,800   $828   $524
                                                           ---------------------
    Total cash contributions made to ESOP during the year   $  793   $139   $  0
                                                           =====================

Below are the transactions affecting the ESOP equity accounts:



                                                          ADDITIONAL UNALLOCATED
                                                  COMMON   PAID-IN      ESOP
                                                  STOCK    CAPITAL     SHARES     TOTAL
- ---------------------------------------------------------------------------------------
                                                                     
 Balance, January 1, 1997                        $  319    $ 9,707    $(5,815)   $4,211
 Market value increase in
  ESOP shares released                                         184                  184
 Loan repayments                                                          250       250
 Net ESOP share purchases and distributions         (12)       270                  258
 Loan to fund ESOP share repurchases                                     (855)      (855)
                                                 --------------------------------------
 Balance, December 31, 1997                         307     10,161     (6,420)    4,048
 Market value increase in ESOP shares released                 360                  360
 Loan repayments                                                          651       651
 Net ESOP share purchases and distributions         (14)      (627)                (641)
                                                 --------------------------------------
 Balance, December 31, 1998                         293      9,894     (5,769)    4,418
 Market value increase in ESOP shares released               1,807                1,807
 Loan repayments                                                        5,769     5,769
 Sale of stock, at cost                            (108)    (3,749)              (3,857)
 Net ESOP share purchases and distributions         (20)      (309)                (329)
                                                 --------------------------------------
 Balance, December 31, 1999                      $  165    $ 7,643    $     0    $7,808
                                                 ======================================



NOTE 12 -- EMPLOYEE THRIFT PLAN

The Employee Thrift Plan (Plan) provides that all employees of the Bank with the
requisite hours of service are eligible for the Plan. The Bank fully matches the
first 2% and 50% of the subsequent 4% of individual employee contributions.
Employee voluntary contributions are vested at all times and the Bank
contributions are fully vested after six years. The Bank's 1999, 1998, and 1997
expense related to the thrift plan totaled $196,000, $184,000, and $189,000.

                         HORIZON BANCORP & SUBSIDIARIES

                                    46
   33

Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

Note 13 -- OTHER EXPENSES



YEAR ENDED DECEMBER 31                                        1999      1998      1997
- -----------------------------------------------------------------------------------------
                                                                        
 Supplies and printing                                       $  311    $  338    $  484
 Advertising                                                    454       480       753
 Communication                                                  622       611       568
 Professional fees                                              746       740       504
 Training                                                        87       105       271
 Outside services and consultants                               632       645       738
 Reinsurance company                                             95       104       129
 Loan expenses                                                  275       204       161
 Goodwill amortization                                           87        45
 Directors fees                                                 207       258       200
 Insurance expense                                              197       211       137
 Other                                                          633     1,069     1,040
                                                            ---------------------------
    Total other expenses                                     $4,346    $4,810    $4,985
                                                            ===========================


NOTE 14 -- INCOME TAX



YEAR ENDED DECEMBER 31                                         1999      1998      1997
- -----------------------------------------------------------------------------------------
                                                                        
 Income tax expense
  Currently payable
   Federal                                                   $  552    $   53    $  470
   State                                                        221        15       223
  Deferred                                                      (98)      392       (29)
                                                            ---------------------------
    Total income tax expense                                 $  675    $  460    $  664
                                                            ===========================
 Reconciliation of federal statutory to actual tax expense
  Federal statutory income tax at 34%                        $  165    $  583    $  905
  Tax exempt interest                                          (220)     (358)     (271)
  Nondeductible and other                                       (28)       25      (117)
  Nondeductible ESOP expense                                    612
  Effect of state income taxes                                  146        10       147
  Increase in valuation allowance                                         200
                                                            ---------------------------
    Actual tax expense                                       $  675    $  460    $  664
                                                            ===========================


                         HORIZON BANCORP & SUBSIDIARIES

                                    47

   34
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

A cumulative net deferred tax asset is included in other assets. The components
of the asset are as follows:

DECEMBER 31                                                 1999         1998
- --------------------------------------------------------------------------------
ASSETS
 Allowance for loan losses                                 $  383      $  176
 Accrued operating expenses                                   152         152
 Loan fees                                                     84         103
 Alternative minimum tax carryforward                         329         329
 Unrealized loss on securities available for sale             781
 Other                                                        416         416
                                                          -------      ------
    Total assets                                            2,145       1,176
                                                          -------      ------

LIABILITIES
 Depreciation                                                (590)       (500)
 Accretion of investment discounts                             (5)         (5)
 Unrealized gain on securities available for sale                        (222)
                                                          -------      ------
    Total liabilities                                        (595)       (727)
                                                          -------      ------
VALUATION ALLOWANCE                                          (200)       (200)
                                                          -------      ------
    Net deferred tax asset                                 $1,350      $  249
                                                          =======      ======


The valuation allowance at December 31, 1999 and 1998 is $200,000.

NOTE 15 -- EARNINGS PER SHARE

Earnings per share (EPS) were computed as follows:



                                                                 1999
                                                     ------------------------------
                                                                WEIGHTED
                                                                AVERAGE   PER-SHARE
YEAR ENDED DECEMBER 31                               LOSS       SHARES     AMOUNT
- --------------------------------------------------------------------------------

                                                                  
BASIC EARNINGS PER SHARE
 Loss available to common stockholders              $(354)        655      $  (.54)

EFFECT OF DILUTIVE SECURITIES
 Stock options
                                                    ------------------------------
DILUTED EARNINGS PER SHARE
 Loss available to common stockholders
 and assumed conversions                            $(354)        655      $  (.54)
                                                    ==============================


                         HORIZON BANCORP & SUBSIDIARIES

                                    48
   35

Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

                                                               1998
                                                   ---------------------------
                                                              WEIGHTED
                                                              AVERAGE PER-SHARE
YEAR ENDED DECEMBER 31                             INCOME     SHARES    AMOUNT
- ------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
 Income available to common stockholders           $1,083        687     $1.58

EFFECT OF DILUTIVE SECURITIES
 Stock options
                                                   ---------------------------

DILUTED EARNINGS PER SHARE
 Income available to common stockholders
 and assumed conversions                           $1,083        687     $1.58
                                                   ===========================


                                                                1997
                                                   ---------------------------
                                                              WEIGHTED
                                                               AVERAGE PER-SHARE
YEAR ENDED DECEMBER 31                             INCOME      SHARES   AMOUNT
- ------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
 Income available to common stockholders           $1,721        711     $2.42

EFFECT OF DILUTIVE SECURITIES
 Stock options
                                                   ---------------------------
DILUTED EARNINGS PER SHARE
 Income available to common stockholders
 and assumed conversions                           $1,721        711     $2.42
                                                   ===========================

At December 31, 1999, 1998, and 1997 there were outstanding options to purchase
56,300, 29,100, and 51,800 shares of common stock at prices ranging from $13.50
to $60.00. The options were not included in the computation of diluted EPS
because the contracts may be settled in common stock or in cash at the election
of the option holder. Historically, all contracts have been settled in cash and
it is anticipated that the exercise of future contracts will also be settled in
cash.

NOTE 16 -- OTHER COMPREHENSIVE INCOME



YEAR ENDED DECEMBER 31                                        1999      1998      1997
- --------------------------------------------------------------------------------------
                                                                        
Unrealized gains (losses) on securities:
 Unrealized holding gains (losses) arising during the year   $(2,343)   $(106)   $ 531
 Less: reclassification adjustment for gains (losses)
 realized in net income                                          177                 9
                                                             -------------------------
 Net unrealized gains (losses)                                (2,520)    (106)     522
 Tax (expense) benefit                                           983       42     (207)
                                                             -------------------------
Other comprehensive income (loss)                            $(1,537)   $ (64)   $ 315
                                                             =========================


                         HORIZON BANCORP & SUBSIDIARIES

                                    49

   36

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NOTE 17 -- COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENCIES

Because of the nature of activities, Horizon is subject to pending and
threatened legal actions that arise in the normal course of business. In
management's opinion, after consultation with counsel, none of the litigation to
which Horizon or any of its subsidiaries is a party will have a material effect
on the consolidated financial position or results of operations of Horizon.

The Bank was required to have approximately $6,447,000 of cash on hand or on
deposit with the Federal Reserve Bank to meet regulatory reserve and clearing
balance requirements at December 31, 1999. These balances are included in cash
and cash equivalents and do not earn interest.

The Bank is a party to financial instruments with off-balance sheet risk in the
ordinary course of business to meet financing needs of its customers. These
financial instruments include commitments to make loans and standby letters of
credit. The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to make loans and
standby letters of credit is represented by the contractual amount of those
instruments. The Bank follows the same credit policy to make such commitments as
is followed for those loans recorded in the financial statements.

As of December 31, 1999 and 1998, commitments to make loans amounted to
approximately $56,914,000 and $52,171,000. As of December 31, 1999 and 1998,
commitments under outstanding standby letters of credit amounted to
approximately $1,164,000 and $854,000. Since many commitments to make loans and
standby letters of credit expire without being used, the amount does not
necessarily represent future cash advances. No losses are anticipated as a
result of these transactions. Collateral obtained upon exercise of the
commitment is determined using management's credit evaluation.

NOTE 18 -- REGULATORY CAPITAL

Horizon and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies and are assigned to a capital
category. The assigned capital category is largely determined by three ratios
that are calculated according to the regulations: total risk adjusted capital,
Tier I capital, and Tier I leverage ratios. The ratios are intended to measure
capital relative to assets and credit risk associated with those assets and
off-balance sheet exposures of the entity. The capital category assigned to an
entity can also be affected by qualitative judgments made by regulatory agencies
about the risk inherent in the entity's activities that are not part of the
calculated ratios.

There are five capital categories defined in the regulations, ranging from well
capitalized to critically undercapitalized. Classification of a bank in any of
the undercapitalized categories can result in actions by regulators that could
have a material effect on a bank's operations. At December 31, 1999 and 1998,
Horizon and its Bank are categorized as well capitalized and met all subject
capital adequacy requirements. There are no conditions or events since December
31, 1999 that management believes have changed Horizon's or the Bank's
classification.

                         HORIZON BANCORP & SUBSIDIARIES

                                    50

   37

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

Horizon's and Bank's actual and required capital amounts (in millions) and
ratios are as follows:



                                                                                       MINIMUM REQUIRED
                                                                  MINIMUM REQUIRED  TO BE WELL CAPITALIZED(1)
                                                                   FOR CAPITAL(1)    UNDER PROMPT CORRECTIVE
                                                     ACTUAL       ADEQUACY PURPOSES    ACTION REQUIREMENTS
                                               ---------------------------------------------------------------
                                               AMOUNT     RATIO    AMOUNT     RATIO    AMOUNT    RATIO
- --------------------------------------------------------------------------------------------------------------
                                                                              
AS OF DECEMBER 31, 1999
Total capital(1) (to risk-weighted assets)
 Consolidated                                   $32.3      10.12%  $25.5      8.00%    N/A       N/A
 Bank                                            32.7      10.39    25.2      8.00   $ 31.5      10.00%
Tier I capital(1) (to risk-weighted assets)
 Consolidated                                    29.0       9.09    12.8      4.00     N/A       N/A
 Bank                                            29.5       9.38    12.6      4.00     18.9       6.00
Tier I capital(1) (to average assets)
 Consolidated                                    29.0       6.40    18.1      4.00     N/A       N/A
 Bank                                            29.5       6.55    18.0      4.00     22.5       5.00

AS OF DECEMBER 31, 1998
Total capital(1) (to risk-weighted assets)
 Consolidated                                   $32.8      10.73%  $24.4      8.00%    N/A       N/A
 Bank                                            28.8      11.57    19.9      8.00   $ 24.9      10.00%
Tier I capital(1) (to risk-weighted assets)
 Consolidated                                    30.0       9.82    12.2      4.00     N/A       N/A
 Bank                                            26.0      10.46    10.0      4.00     14.9       6.00
Tier I capital(1) (to average assets)
 Consolidated                                    30.0       7.53    15.9      4.00     N/A       N/A
 Bank                                            26.0       6.63    15.7      4.00   $ 19.6       5.00


(1) As defined by regulatory agencies

NOTE 19 -- STOCK OPTIONS

Horizon maintains the 1987 Nonqualified Stock Option and Stock Appreciation
Right Plan (1987 Plan) under which options and stock appreciation rights (SARs)
were granted to certain officers and employees. SARs entitle eligible employees
to receive cash, stock or a combination of cash and stock totaling the excess,
on the date of exercise, of the fair market value of the shares of common stock
covered by the option over the option exercise price. The underlying stock
options are deemed to have been exercised upon exercise of the SARs. No options
remain available for grant at December 31, 1999 and 1998, however, outstanding
options may be exercised until their expiration.

Horizon recognizes compensation expense related to the Plan on a periodic basis
based on the difference between the excess of the fair market value of the
shares of common stock over the exercise price for SARs and those options
exercised during the year. Horizon's expense (benefit) related to the Plan was
$(103,000) for 1999, $0 for 1998, and $677,000 for 1997.

                         HORIZON BANCORP & SUBSIDIARIES

                                    51
   38

Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

A summary of transactions for the plan follows:


                                                 SHARES
                                         --------------------------- WEIGHTED
                                         AVAILABLE     OPTIONS       AVERAGE
                                         FOR GRANT   OUTSTANDING  EXERCISE PRICE
                                         ---------------------------------------
Balance, January 1, 1997                      0          79,750        $26.20
 Exercised                                              (27,950)        22.90
                                         ----------------------
Balance, December 31, 1997                    0          51,800         27.98
 Exercised                                              (34,700)        28.77
                                         ----------------------
Balance, December 31, 1998                    0          17,100         26.37
 Exercised                                                   (0)
                                         ----------------------
Balance, December 31, 1999                    0          17,100         26.37
                                         ======================

As of December 31, 1999, the 17,100 options outstanding have exercise prices
ranging from $13.50 to $31.50 and a weighted-average remaining contractual life
of 8.4 years.

The options granted under the 1987 plan are fully vested.

Under Horizon's 1997 Stock Option and Stock Appreciation Right Plan (1997 Plan),
which is accounted for in accordance with Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to Employees, and related
interpretations, Horizon may grant certain officers and employees stock option
awards or stock appreciation rights which vest and become fully exercisable at
the end of five years of continued employment. SARs entitle eligible employees
to receive cash, stock or a combination of cash and stock totaling the excess,
on the date of exercise, of the fair market value of the shares of common stock
covered by the option over the option exercise price. The underlying stock
options are deemed to have been exercised upon exercise of the SARs. During
1999, Horizon authorized the grant of options and SARs for 27,200 shares of
common stock.

A summary of transactions for the plan follows:

                                                 SHARES
                                         --------------------------- WEIGHTED
                                         AVAILABLE     OPTIONS       AVERAGE
                                         FOR GRANT   OUTSTANDING  EXERCISE PRICE
                                      ------------------------------------------

Balance, January 1, 1998                90,000
 Granted                               (22,000)         22,000         $60.00
 Forfeitures                            10,000         (10,000)         60.00
                                       ------------------------
Balance, January 1, 1999                78,000          12,000          60.00
 Granted                               (27,200)         27,200          49.28
 Forfeitures
                                       ------------------------
Balance, December 31, 1999              50,800          39,200         $52.00
                                       ========================

As of December 31, 1999, the 39,200 options outstanding have an exercise price
ranging from $43.00 to $60.00 and a weighted average remaining contractual life
of 19.1 years. The options granted under the 1997 plan vest at a rate of 20% per
year.

                         HORIZON BANCORP & SUBSIDIARIES

                                    52

   39

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NOTE 20-- CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

Presented below is condensed financial information as to financial position,
results of operations and cash flows of Horizon Bancorp:



                              CONDENSED BALANCE SHEET
- --------------------------------------------------------------------------------------------
DECEMBER 31                                                                 1999        1998
- --------------------------------------------------------------------------------------------
                                                                               
Assets
 Total cash and cash equivalents                                         $   462     $ 2,007
 Investment in Bank                                                       29,574      27,446
 Investment in Insurance Company                                             351         280
 Investment in The Loan Store                                                323         486
 Investment securities, net                                                  286         377
 Accrued interest receivable                                                  12          12
 Dividends receivable from Bank                                              300         550
 Other assets                                                              1,135       1,545
                                                                       ---------------------
    Total assets                                                         $32,443     $32,703
                                                                       =====================
LIABILITIES
 Short-term borrowings                                                   $ 2,500
 Other liabilities                                                           944     $   817

EQUITY RECEIVABLE FROM CONTRIBUTIONS AND DIVIDENDS TO ESOP                 7,808       4,418

STOCKHOLDERS' EQUITY                                                      21,191      27,468
                                                                       ---------------------
    Total liabilities and stockholders' equity                           $32,443     $32,703
                                                                       =====================


                              CONDENSED STATEMENT OF INCOME
- --------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                       1999          1998           1997
- --------------------------------------------------------------------------------------------
OPERATING INCOME (EXPENSE)
 Dividend income from Bank                                  $ 1,150      $ 3,000     $ 3,000
 Investment income                                              115           47         139
 Other income                                                    16           15          21
 Employee benefit expense                                    (2,819)        (749)       (506)
 Other expense                                                 (102)        (158)       (155)
                                                            ---------------------------------
INCOME (LOSS) BEFORE DISTRIBUTED INCOME OF SUBSIDIARIES      (1,640)       2,155       2,499

UNDISTRIBUTED INCOME OF SUBSIDIARIES                            820       (1,372)       (913)
                                                            ---------------------------------
INCOME (LOSS) BEFORE TAX                                       (820)         783       1,586

INCOME TAX BENEFIT                                              466          300         135
                                                            ---------------------------------
NET INCOME (LOSS)                                           $  (354)     $ 1,083     $ 1,721
                                                            =================================



                         HORIZON BANCORP & SUBSIDIARIES

                                    53
   40

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



                            CONDENSED STATEMENT OF CASH FLOWS
- ----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                         1999         1998         1997
- ----------------------------------------------------------------------------------------------

                                                                             
OPERATING ACTIVITIES
 Net income (loss)                                          $  (354)     $ 1,083      $ 1,721
 Adjustments to reconcile net income (loss) to
 net cash provided by operating activities
 Distributions in excess of (equity in undistributed)
 net income of Bank                                            (912)       1,255          691
 Distributions in excess of (equity in undistributed)
 net income of Insurance Company                                (71)         (54)         (54)
 Distributions in excess of (equity in undistributed)
 net income of The Loan Store                                   163          171          276
 Additional paid-in capital from release of ESOP shares       1,807          360          184
 Gain on sale of securities                                                               (10)
 Accretion                                                                                (82)
 Change in
  Income taxes receivable                                       744         (133)        (385)
  Interest receivable                                                        (12)          20
  Dividends receivable from Bank                                250          (50)         500
  Other assets                                                5,538        3,508         (614)
  Other liabilities                                             127       (1,633)        (158)
                                                            ---------------------------------
    Net cash provided by operating activities                 7,292        4,495        2,089
                                                            ---------------------------------

INVESTING ACTIVITIES
 Sales of investment securities                                                         1,000
 Investment in The Loan Store                                                            (500)
 Investment in Bank                                          (2,500)
                                                            ---------------------------------
    Net cash provided (used) by investing activities         (2,500)                      500
                                                            ---------------------------------
FINANCING ACTIVITIES
 Dividends paid                                              (1,218)      (1,237)      (1,264)
 Proceeds from short-term borrowings                          2,500
 Purchase of treasury stock                                  (7,619)      (2,115)      (1,173)
                                                            ---------------------------------
    Net cash used by financing activities                    (6,337)      (3,352)      (2,437)
                                                            ---------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                      (1,545)       1,143          152

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                2,007          864          712
                                                            ---------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                    $   462      $ 2,007      $   864
                                                            =================================



                         HORIZON BANCORP & SUBSIDIARIES

                                    54
   41

Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

NOTE 21 -- SEGMENT INFORMATION

Horizon's reportable segments are determined by the products and services
offered, primarily distinguished between banking and trust and investment
management operations. Loans, investments, and deposits provide the revenue in
the banking operation, and fees provide the revenue in the trust and investment
management operation. All operations are domestic.

The accounting policies used are the same as those described in the summary of
significant accounting policies. Occupancy expenses and indirect expenses are
not allocated. Income taxes are allocated to each entity based on pretax income.
Transactions among segments are recorded at fair value. Segments are evaluated
based upon net income. Information reported internally for performance
assessment follows:



                                                                 1999
                                          ------------------------------------------------
                                                      TRUST &
                                                     INVESTMENT                  SEGMENT
                                           BANKING   MANAGEMENT       OTHER       TOTALS
- ------------------------------------------------------------------------------------------
                                                                     
Net interest income                       $ 15,026      $   54      $    52      $ 15,132
Provision for loan losses                    1,100                                  1,100
Trust and investment management fees                     2,113                      2,113
Other income                                 2,694                    1,075         3,769
Total other expenses                        13,994       1,624        3,812        19,430
Income tax expense                             930         183         (438)          675
Segment profit (loss)                        1,696         360       (2,247)         (191)
Segment loss, discontinued operations                                  (163)         (163)
Segment assets                             521,768       1,276       35,527       558,571



                                                                1998
                                          ------------------------------------------------
                                                      TRUST &
                                                     INVESTMENT                  SEGMENT
                                           BANKING   MANAGEMENT       OTHER       TOTALS
- ------------------------------------------------------------------------------------------
                                                                     
Net interest income                       $ 14,421      $   64      $    32      $ 14,517
Provision for loan losses                      820                                    820
Trust and investment management fees                     2,141                      2,141
Other income                                 2,646                      666         3,312
Total other expenses                        14,410       1,397        1,629        17,436
Income tax expense                             478         316         (334)          460
Segment profit (loss)                        1,359         492         (597)        1,254
Segment loss, discontinued operations                                  (171)         (171)
Segment assets                             406,836       1,000       36,530       444,366


                         HORIZON BANCORP & SUBSIDIARIES

                                    55

   42
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



                                                                                    1997
                                                            ---------------------------------------------------
                                                                         TRUST &
                                                                         INVESTMENT                   SEGMENT
                                                             BANKING     MANAGEMENT       OTHER       TOTALS
- ---------------------------------------------------------------------------------------------------------------
                                                                                         
Net interest income                                          $ 15,862      $    59      $   139      $ 16,060
Provision for loan losses                                       1,255                                   1,255
Trust and investment management fees                                         2,423                      2,423
Other income                                                    2,182                       314         2,496
Total other expenses                                           14,161        1,359        1,543        17,063
Income tax expense                                                385          382         (103)          664
Segment profit (loss)                                           2,243          741         (987)        1,997
Segment loss, discontinued operations                                                      (276)         (276)
Segment assets                                                355,448        1,000       38,943       395,391

Amounts included in other column are as follows:



                                                                               1999         1998          1997
                                                                       ----------------------------------------
                                                                                            
Net interest income
 Holding company interest income                                          $     52      $    32      $   139

Other income
 Holding company noninterest income                                             80           55           21
 Nonreportable subsidiaries noninterest income                                 995          611          293

Other expense
 Holding company noninterest expense                                         2,922        1,011        1,338
 Nonreportable subsidiaries noninterest expense                                890          618          205

Income tax (benefit) expense
 Holding company benefit                                                      (466)        (273)        (136)
 Nonreportable subsidiaries (benefit) expense                                   28          (61)          33

Segment profits (losses)
 Holding company losses                                                     (2,330)        (545)      (1,042)
 Nonreportable subsidiaries profits (losses)                                    83          (52)          55

Segment losses, discontinued operations
 Nonreportable subsidiaries loss, discontinued operation                      (163)        (171)        (276)

Segment assets
 Holding company assets                                                     32,443       30,789       34,543
 Nonreportable subsidiaries assets                                           3,084        5,741        4,400


                         HORIZON BANCORP & SUBSIDIARIES

                                    56

   43

Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

Reportable segment totals are reconciled to the financial statements as follows:



                                                                    1999
                                            ---------------------------------------------------
                                            REPORTABLE                INTERSEGMENT CONSOLIDATED
                                            SEGMENTS       OTHER      ELIMINATION     TOTALS
- -----------------------------------------------------------------------------------------------
                                                                          
Net interest income                       $  15,080      $      52                    $  15,132
Provision for loan losses                     1,100                                       1,100
Trust and investment management fees          2,113                                       2,113
Other income                                  2,694          1,075                        3,769
Total other expenses                         15,618          3,812                       19,430
Income tax expense                            1,113           (438)                         675
Segment profit (loss)                         2,056         (2,247)                        (191)
Segment loss, discontinued operations                         (163)                        (163)
Segment assets                              523,044         35,527      $ (32,575)      525,996



                                                                    1998
                                            ---------------------------------------------------
                                            REPORTABLE                INTERSEGMENT CONSOLIDATED
                                            SEGMENTS       OTHER      ELIMINATION     TOTALS
- -----------------------------------------------------------------------------------------------

                                                                          
Net interest income                       $  14,485      $      32                    $  14,517
Provision for loan losses                       820                                         820
Trust and investment management fees          2,141                                       2,141
Other income                                  2,646            666                        3,312
Total other expenses                         15,807          1,629                       17,436
Income tax expense                              794           (334)                         460
Segment profit (loss)                         1,851           (597)                       1,254
Segment loss, discontinued operations                         (171)                        (171)
Segment assets                              407,836         36,530      $ (28,212)      416,154



                                                                  1997
                                            ---------------------------------------------------
                                            REPORTABLE                INTERSEGMENT CONSOLIDATED
                                            SEGMENTS       OTHER      ELIMINATION     TOTALS
- -----------------------------------------------------------------------------------------------

                                                                          
Net interest income                       $  15,921      $     139                     $  16,060
Provision for loan losses                     1,255                                        1,255
Trust and investment management fees          2,423                                        2,423
Other income                                  2,182            314                         2,496
Total other expenses                         15,520          1,543                        17,063
Income tax expense                              767           (103)                          664
Segment profit                                2,984           (987)                        1,997
Segment loss, discontinued operations                         (276)                         (276)
Segment assets                              356,448         38,943      $ (35,640)       359,751


                         HORIZON BANCORP & SUBSIDIARIES

                                    57
   44

Independent Auditor's Report
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

To the Stockholders and
Board of Directors
Horizon Bancorp

We have audited the consolidated balance sheet of Horizon Bancorp and
Subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of income, stockholders' equity, and cash flows for the years then
ended. These consolidated financial statements are the responsibility of
Horizon's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The consolidated
financial statements of Horizon Bancorp and Subsidiaries for the year ended
December 31, 1997, were audited by other auditors whose report dated February
25, 1998, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements described above present
fairly, in all material respects, the consolidated financial position of Horizon
Bancorp and Subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.


/s/ Olive LLP
Fort Wayne, Indiana
February 11, 2000

                         HORIZON BANCORP & SUBSIDIARIES

                                    58

   45

Management's Report on Financial Statements
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS

Management is responsible for the preparation and presentation of the financial
statements and related notes on the preceding pages. The statements have been
prepared in conformity with generally accepted accounting principles appropriate
in the circumstances and include amounts that are based on management's best
estimates and judgments. Financial information elsewhere in the Annual Report is
consistent with that in the financial statements.

In meeting its responsibility for the accuracy of the financial statements,
management relies on Horizon's system of internal accounting controls. This
system is designed to provide reasonable assurance that assets are safeguarded
and transactions are properly recorded to permit the preparation of appropriate
financial information. The system of internal controls is supplemented by a
program of internal audits to independently evaluate the adequacy and
application of financial and operating controls and compliance with Company
policies and procedures.

The Audit Committee of the Board of Directors meets periodically with
management, the independent accountants and the internal auditors to ensure that
each is properly discharging its responsibilities with regard to the financial
statements and internal accounting controls. The independent accountants have
full and free access to the Audit Committee and meet with it to discuss auditing
and financial reporting matters.

The financial statements in the Annual Report have been audited by Olive LLP,
independent public accountants, for 1999 and 1998, and other independent public
accountants for 1997. Their audits were conducted in accordance with generally
accepted auditing standards and included a consideration of internal accounting
controls, tests of accounting records and other audit procedures to the extent
necessary to allow them to express their opinion on the fairness of the
financial statements in conformity with generally accepted accounting
principles.

                         HORIZON BANCORP & SUBSIDIARIES

                                    59

   46
Summary of Selected Financial Data
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)



                                          1999           1998           1997           1996           1995
- ------------------------------------------------------------------------------------------------------------
                                                                                    
EARNINGS
 Total interest income                 $ 30,897       $ 27,803       $ 28,997       $ 28,102       $ 26,257
 Total interest expense                  15,765         13,286         12,937         11,773         11,112
                                      ----------------------------------------------------------------------
 Net interest income                     15,132         14,517         16,060         16,329         15,145
 Provision for loan losses                1,100            820          1,255
 Total noninterest income                 5,882          5,453          4,919          5,685          3,987
 Total noninterest expense               19,430         17,436         17,063         16,456         15,924
 Provision for income taxes                 675            460            664          1,669            167
                                      ----------------------------------------------------------------------
 Net income (loss) from
  continuing operations                    (191)         1,254          1,997          3,889          3,041

 Loss, net of tax, from
 discontinued operations                   (163)          (171)          (276)           (65)            (2)
                                      ----------------------------------------------------------------------
 Net income (loss)                     $   (354)      $  1,083       $  1,721       $  3,824       $  3,039
                                      ======================================================================
 Cash dividend declared                $  1,218       $  1,237       $  1,264       $  1,031       $    895
                                      ======================================================================

PER SHARE DATA
 Net income (loss)                     $   (.54)      $   1.58       $   2.42       $   5.19       $   4.05
 Cash dividends declared                   1.80           1.80           1.80           1.40           1.20
 Book value at period end                 41.79          46.48          46.79          46.40          43.18
 Weighted average share
  outstanding                           655,391        686,804        710,967        736,887        750,286

PERIOD END TOTALS
 Loans, net of deferred loan
  fees and unearned income             $394,357       $290,346       $258,115       $271,476       $241,662
 Allowance for loan losses                3,273          2,787          2,702          2,435          2,777
 Total assets                           525,996        416,154        359,751        382,038        368,013
 Total deposits                         363,668        322,401        264,413        289,180        288,984
 Long-term debt                         105,000         54,000         42,000         41,500         21,400

RATIOS
 Loan to deposit                         108.44%         90.06%         97.62%         93.88%         83.62%
 Loan to total funding                    84.14          77.14          80.06          79.03          72.80
 Return on average assets                  (.08)           .29            .46           1.04            .86
 Average stockholders' equity to
  average total assets                     7.01           8.82           9.09           8.91           8.53
 Return on average stockholders'
  equity                                  (1.13)          3.27           5.06          11.67          10.09
 Dividend payout ratio
  (dividends divided by net income)      344.07         114.25          73.45          26.96          29.45


                         HORIZON BANCORP & SUBSIDIARIES

                                    60
   47

Horizon's Common Stock and Related Stockholder's Matters
- --------------------------------------------------------------------------------
(Table Dollar Amounts in Thousands)

HORIZON'S COMMON STOCK AND RELATED STOCKHOLDERS' MATTERS

Horizon common stock is traded on the over-the-counter market. ABN AMRO is the
principal broker in Horizon stock. The following table sets forth, for the
periods indicated, the high and low bid prices per share as reported by ABN
AMRO. The bid prices represent dealer prices and do not include retail mark-up,
mark-down, or commissions and may not represent actual transactions. Also
summarized below are the cash dividends declared by quarter for 1999 and 1998.

                                                         1999
                                        ----------------------------------------
                                        COMMON STOCK BID PRICES     DIVIDENDS
                                        -----------------------     DECLARED
                                           HIGH           LOW       PER SHARE
                                        ----------------------------------------
First Quarter                             $50.00        $49.25        $.45
Second Quarter                             49.38         44.00         .45
Third Quarter                              44.00         40.00         .45
Fourth Quarter                             44.50         40.00         .45

                                                         1998
                                        ----------------------------------------
                                        COMMON STOCK BID PRICES     DIVIDENDS
                                        -----------------------     DECLARED
                                           HIGH           LOW       PER SHARE
                                        ----------------------------------------
First Quarter                             $62.00        $58.63        $.45
Second Quarter                             62.50         59.50         .45
Third Quarter                              61.00         57.88         .45
Fourth Quarter                             56.00         45.00         .45

There can be no assurance as to the amount of future dividends on Horizon common
stock since future dividends are subject to the discretion of the Board of
Directors, cash needs, general business conditions and dividends from the bank
subsidiary.

The approximate number of holders of outstanding common stock, based upon the
number of record holders as of December 31, 1999 is 642.

FORM 10-K

Horizon will provide without charge to each stockholder upon written request to
Diana E. Taylor, Chief Financial Officer, Horizon Bancorp, 515 Franklin Square,
Michigan City, Indiana 46360, a copy of Horizon's Annual Report on Form 10-K,
including the Financial Statements and schedules thereto required to the filed
with the Securities and Exchange Commission for Horizon's most recent fiscal
year.

                         HORIZON BANCORP & SUBSIDIARIES

                                    61

EX-21

   1
                    EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT




                                          STATE OF                          NAME UNDER WHICH
SUBSIDIARY                              INCORPORATION                        BUSINESS IS ONE
- ----------                              -------------                        ---------------

                                                                        
Horizon Bank, National Association         Indiana                            Horizon Bank

Horizon Trust & Investment Management,
  National Association                     Indiana                            Horizon Trust
    (a subsidiary of Horizon Bank)                                             & Investment
                                                                               Management

Horizon Insurance Services, Inc.           Indiana                            Horizon
 (a subsidiary of Horizon Bank)                                                Insurance Services


HBC Insurance Company, Inc.                Arizona                            HBC Insurance
                                                                               Company

The Loan Store, Inc.                       Indiana                            The Loan Store




















                                                                              18

EX-27

 

<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<EXCHANGE-RATE>                                      1
<CASH>                                          34,670
<INT-BEARING-DEPOSITS>                             406
<FED-FUNDS-SOLD>                                     0
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                     67,880
<INVESTMENTS-CARRYING>                               0
<INVESTMENTS-MARKET>                                 0
<LOANS>                                        394,357
<ALLOWANCE>                                      3,273
<TOTAL-ASSETS>                                 525,996
<DEPOSITS>                                     363,668
<SHORT-TERM>                                    24,500
<LIABILITIES-OTHER>                              2,909
<LONG-TERM>                                    105,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           873
<OTHER-SE>                                      28,126
<TOTAL-LIABILITIES-AND-EQUITY>                 525,996
<INTEREST-LOAN>                                 25,634
<INTEREST-INVEST>                                5,263
<INTEREST-OTHER>                                     0
<INTEREST-TOTAL>                                30,897
<INTEREST-DEPOSIT>                              12,603
<INTEREST-EXPENSE>                              15,765
<INTEREST-INCOME-NET>                           15,132
<LOAN-LOSSES>                                    1,100
<SECURITIES-GAINS>                                 177
<EXPENSE-OTHER>                                 19,430
<INCOME-PRETAX>                                    484
<INCOME-PRE-EXTRAORDINARY>                       (191)
<EXTRAORDINARY>                                  (163)
<CHANGES>                                            0
<NET-INCOME>                                     (354)
<EPS-BASIC>                                      (.54)
<EPS-DILUTED>                                    (.54)
<YIELD-ACTUAL>                                    3.86
<LOANS-NON>                                      1,173
<LOANS-PAST>                                       401
<LOANS-TROUBLED>                                     0
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                                 2,787
<CHARGE-OFFS>                                    1,227
<RECOVERIES>                                       363
<ALLOWANCE-CLOSE>                                3,273
<ALLOWANCE-DOMESTIC>                             3,273
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                            148


 

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