10-Q

HORIZON BANCORP

FORM 10-Q

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

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 Square, Michigan City, Indiana	46360
(Address of principal executive offices)	(Zip Code)

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

Former name, former address and former fiscal year, if changed since last report: N/A

Indicate by check mark 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 check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer	¨	Accelerated Filer	x
Non-accelerated Filer	¨  (Do not check if smaller reporting company)	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 8,693,741 shares of Common Stock, no par value, at November 8, 2012.

HORIZON BANCORP

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statement of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	51
Item 4.	Controls and Procedures	51
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		54
Index To Exhibits		55

2

PART 1 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

	September 30 2012 (Unaudited)		December 31 2011
Assets
Cash and due from banks	$	41,562	$	20,447
Investment securities, available for sale		497,704		431,045
Investment securities, held to maturity		6,100		7,100
Loans held for sale		18,163		14,090
Loans, net of allowance for loan losses of $18,568 and $18,882		1,136,480		964,311
Premises and equipment		40,297		34,665
Federal Reserve and Federal Home Loan Bank stock		13,333		12,390
Goodwill		19,748		5,910
Other intangible assets		4,295		2,292
Interest receivable		8,248		6,671
Cash value life insurance		34,929		30,190
Other assets		25,917		18,051
Total assets	$	1,846,776	$	1,547,162
Liabilities
Deposits
Non-interest bearing	$	211,935	$	130,673
Interest bearing		1,095,036		879,192
Total deposits		1,306,971		1,009,865
Borrowings		333,150		370,111
Subordinated debentures		32,282		30,676
Interest payable		579		596
Other liabilities		17,932		14,449
Total liabilities		1,690,914		1,425,697
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, $.01 par value, $1,000 liquidation value Authorized, 1,000,000 Series B shares Issued 12,500 and 12,500 shares		12,500		12,500
Common stock, no par value Authorized, 22,500,000 shares Issued, 8,685,490 and 7,450,794 shares Outstanding, 8,617,735 and 7,421,544 shares		—		—
Additional paid-in capital		31,894		11,736
Retained earnings		101,267		89,387
Accumulated other comprehensive income		10,201		7,842
Total stockholders’ equity		155,862		121,465
Total liabilities and stockholders’ equity	$	1,846,776	$	1,547,162

See notes to condensed consolidated financial statements

3

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

	Nine Months Ended September 30						Three Months Ended September 30
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest Income
Loans receivable	$	15,527		$	12,481		$	42,386		$	36,260
Investment securities
Taxable		2,178			2,542			6,738			7,828
Tax exempt		1,014			988			2,944			3,066
Total interest income		18,719			16,011			52,068			47,154
Interest Expense
Deposits		1,638			1,978			4,803			6,510
Borrowed funds		1,597			1,583			4,635			4,760
Subordinated debentures		485			459			1,427			1,363
Total interest expense		3,720			4,020			10,865			12,633
Net Interest Income		14,999			11,991			41,203			34,521
Provision for loan losses		1,041			1,564			1,809			4,444
Net Interest Income after Provision for Loan Losses		13,958			10,427			39,394			30,077
Other Income
Service charges on deposit accounts		1,002			802			2,477			2,422
Wire transfer fees		248			167			643			412
Interchange fees		885			721			2,227			1,905
Fiduciary activities		971			1,016			2,928			2,911
Gain on sale of securities		2			1,115			2			1,754
Gain on sale of mortgage loans		4,436			2,145			10,121			3,986
Mortgage servicing income net of impairment		(355	)		(172	)		(95	)		691
Increase in cash value of bank owned life insurance		300			245			760			661
Death benefit on officer life insurance		—			453			—			453
Other income		221			46			344			105
Total other income		7,710			6,538			19,407			15,300
Other Expenses
Salaries and employee benefits		7,905			6,081			20,407			16,912
Net occupancy expenses		1,186			1,056			3,216			3,176
Data processing		754			549			1,883			1,450
Professional fees		366			359			1,483			1,039
Outside services and consultants		624			454			1,621			1,221
Loan expense		1,311			820			2,879			2,276
FDIC insurance expense		291			254			798			944
Other losses		309			1,088			501			1,365
Other expenses		2,094			1,652			5,392			4,675
Total other expenses		14,840			12,313			38,180			33,058
Income Before Income Tax		6,828			4,652			20,621			12,319
Income tax expense		1,978			1,235			6,248			3,044
Net Income		4,850			3,417			14,373			9,275
Preferred stock dividend and discount accretion		(63	)		(710	)		(325	)		(1,263	)
Net Income Available to Common Shareholders	$	4,787		$	2,707		$	14,048		$	8,012
Basic Earnings Per Share	$	0.56		$	0.37		$	1.81		$	1.08
Diluted Earnings Per Share		0.54			0.36			1.75			1.05

See notes to condensed consolidated financial statements

4

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Dollar Amounts in Thousands)

	Three Months Ended September 30						Nine Months Ended September 30
	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Net Income	$	4,850		$	3,417		$	14,373		$	9,275
Other Comprehensive Income
Change in fair value of derivative instruments, net of taxes of $(92) and $(317) for three and nine months ended 2012 and $(1,051) and $(1,221), for three and nine months ended 2011, respectively		(170	)		(1,951	)		(589	)		(2,268	)
Unrealized appreciation on available-for-sale securities, net of taxes of $860 and $1,588, for three and nine months ended 2012 and $1,856 and $4,852 for the three and nine months ended 2011, respectively		1,597			3,447			2,949			9,011
Less: reclassification adjustment for realized gains included in net income, net of taxes of $1 for three and nine months ended 2012, and $390 and $614, for three and nine months ended 2011, respectively		1			725			1			1,140
		1,426			771			2,359			5,603
Comprehensive Income	$	6,276		$	4,188		$	16,732		$	14,878

See notes to condensed consolidated financial statements

5

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

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

	Preferred Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total
Balances, January 1, 2012	$	12,500	$	11,736	$	89,387		$	7,842	$	121,465
Net income						14,373					14,373
Other comprehensive income, net of tax									2,359		2,359
Amortization of unearned compensation				124							124
Issuance of restricted shares				115							115
Exercise of stock options				226							226
Stock option expense				25							25
Stock issued from acquisition				19,668							19,668
Cash dividends on preferred stock						(325	)				(325	)
Cash dividends on common stock ($.27 per share)						(2,168	)				(2,168	)
Balances, September 30, 2012	$	12,500	$	31,894	$	101,267		$	10,201	$	155,862

See notes to condensed consolidated financial statements

6

HORIZON BANCORP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

	Nine Months Ended September 30
	2012 (Unaudited)			2011 (Unaudited)
Operating Activities
Net income	$	14,373		$	9,275
Items not requiring (providing) cash
Provision for loan losses		1,809			4,444
Depreciation and amortization		1,988			1,868
Share based compensation		25			27
Mortgage servicing rights impairment (recovery)		369			(464	)
Premium amortization on securities available for sale, net		2,387			1,612
Gain on sale of investment securities		(2	)		(1,754	)
Gain on sale of mortgage loans		(10,121	)		(3,986	)
Proceeds from sales of loans		293,909			178,239
Loans originated for sale		(283,788	)		(174,253	)
Change in cash value of life insurance		(727	)		236
(Gain) loss on sale of other real estate owned		(5	)		126
Net change in
Interest receivable		(757	)		(132	)
Interest payable		(107	)		(199	)
Other assets		217			(1,590	)
Other liabilities		(2,112	)		1,416
Net cash provided by operating activities		17,458			14,865
Investing Activities
Purchases of securities available for sale		(96,713	)		(170,689	)
Proceeds from sales, maturities, calls, and principal repayments of securities available for sale		92,734			134,583
Purchase of securities held to maturity		—			(2,437	)
Proceeds from maturities of securities held to maturity		4,177			1,400
(Purchase) proceeds from the sale of Federal Home Loan Bank stock		—			1,274
Net change in loans		(66,596	)		(44,766	)
Proceeds on the sale of OREO and repossessed assets		2,661			2,008
Purchases of premises and equipment		(4,520	)		(1,548	)
Purchases of bank owned life insurance		—			(3,000	)
Acquisition of Heartland		26,283			—
Net cash used in by investing activities		(41,974	)		(83,175	)
Financing Activities
Net change in
Deposits		85,861			4,251
Borrowings		(38,078	)		75,423
Redemption of preferred stock		—			(18,750	)
Issuance of preferred stock		—			12,500
Proceeds from issuance of stock		341			115
Tax benefit from issuance of stock		—			8
Dividends paid on common shares		(2,168	)		(1,728	)
Dividends paid on preferred shares		(325	)		(730	)
Net cash provided by financing activities		45,631			71,089
Net Change in Cash and Cash Equivalent		21,115			2,779
Cash and Cash Equivalents, Beginning of Period		20,447			15,683
Cash and Cash Equivalents, End of Period	$	41,562		$	18,462
Additional Cash Flows Information
Interest paid	$	10,882		$	12,832
Income taxes paid		3,925			2,100
Transfer of loans to other real estate owned		3,486			4,273

See notes to condensed consolidated financial statements

7

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 1 – Accounting Policies

The accompanying condensed consolidated financial statements include the accounts of Horizon Bancorp (“Horizon” or the “Company”) and its wholly-owned subsidiaries, including Horizon Bank, N.A. (“Bank”). All inter-company balances and transactions have been eliminated. The results of operations for the periods ended September 30, 2012 and September 30, 2011 are not necessarily indicative of the operating results for the full year of 2012 or 2011. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of Horizon’s management, necessary to fairly present the financial position, results of operations and cash flows of Horizon for the periods presented. Those adjustments consist only of normal recurring adjustments.

Certain information and note disclosures normally included in Horizon’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Horizon’s Annual Report on Form 10-K for 2011 filed with the Securities and Exchange Commission on March 12, 2012. The consolidated condensed balance sheet of Horizon as of December 31, 2011 has been derived from the audited balance sheet as of that date.

Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted-average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The following table shows computation of basic and diluted earnings per share.

	Three months ended September 30				Nine months ended September 30
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Basic earnings per share
Net income	$	4,850	$	3,417	$	14,373	$	9,275
Less: Preferred stock dividends and accretion of discount		63		710		325		1,263
Net income available to common shareholders	$	4,787	$	2,707	$	14,048	$	8,012
Weighted average common shares outstanding(1)(2)		8,503,475		7,414,043		7,758,537		7,402,300
Basic earnings per share	$	0.56	$	0.37	$	1.81	$	1.08
Diluted earnings per share
Net income available to common shareholders	$	4,787	$	2,707	$	14,048	$	8,012
Weighted average common shares outstanding(1)(2)		8,503,475		7,414,043		7,758,537		7,402,300
Effect of dilutive securities:
Warrants		269,432		163,325		231,038		167,668
Restricted stock		30,971		4,399		19,317		13,676
Stock options		34,782		14,803		26,105		15,307
Weighted average shares outstanding		8,838,659		7,596,569		8,034,996		7,598,950
Diluted earnings per share	$	0.54	$	0.36	$	1.75	$	1.05

⁽¹⁾  Adjusted for 3:2 stock split announced on October 16, 2012 payable November 9, 2012

⁽²⁾  Includes average shares issued for the Heartland acquisition for the three and nine months ending September 30, 2012

8

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

At September 30, 2012 and 2011, there were no shares and 66,551 for the three months ended and 12,750 shares and 73,359 shares for the nine months ended, respectively that were not included in the computation of diluted earnings per share because they were non-dilutive.

Horizon has share-based employee compensation plans, which are described in the notes to the financial statements included in the December 31, 2011 Annual Report on Form 10-K.

Reclassifications

Certain reclassifications have been made to the 2011 consolidated financial statements to be comparable to 2012. These reclassifications had no effect on net income.

Note 2 – Acquisition

On July 17, 2012 Horizon closed its acquisition of Heartland Bancshares, Inc. and Horizon Bank N.A.’s acquisition of Heartland Community Bank, through mergers effective July 17, 2012. Under the final terms of the acquisition, the exchange ratio was 0.54 shares of Horizon’s common stock for each share of Heartland common stock outstanding. Heartland shares outstanding at the closing were 1,442,449, and the shares of HBNC common stock issued to Heartland shareholders totaled 778,922. Horizon’s stock price was $25.25 per share at the close of business on July 17, 2012. Based upon these numbers, the total value of the consideration, including the retirement of TARP, for the acquisition was $26.9 million. For the nine months ended September 30, 2012, the Company had approximately $1.5 million is costs related to the acquisition. These expenses are classified in the other expense section of the income statement primarily located in the salaries and employee benefits, professional services and other expense line items. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce cost through economies of scale.

Under the purchase method of accounting, the total estimated purchase price is allocated to Heartland’s net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the preliminary purchase price for the Heartland acquisition is allocated as follows (in thousands):

ASSETS			LIABILITIES
Cash and due from banks	$	33,531	Deposits
Investment securities, available for sale		63,707	Non-interest bearing	$	59,350
			NOW accounts		42,681
Commercial		70,343	Savings and money market		61,465
Residential mortgage		20,838	Certificates of deposits		47,749
Consumer		23,423	Total deposits		211,245
Total loans		114,604
			Borrowings		1,186
Premises and equipment		2,647	Subordinated debentures		1,537
FRB and FHLB stock		943	Interest payable		90
Goodwill		13,838	Other liabilities		4,670
Core deposit intangible		2,332
Interest receivable		820
Cash value life insurance		4,012
Other assets		9,210
Total assets purchased	$	245,644	Total liabilities assumed	$	218,728
Common shares issued	$	19,668
Retirement of TARP preferred shares		7,248
Total estimated purchase price	$	26,916

9

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Prior to the end of the measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

Of the total estimated purchase price of $26.9 million, $2.3 million has been allocated to core deposit intangible. Additionally, $13.8 million has been allocated to goodwill and $10.8 million of the purchase price is deductible and was assigned to the business assets. The core deposit intangible will be amortized over seven years on a straight line basis.

The Company acquired loans in the acquisition and the transferred loans had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The Company acquired the $131.1 million loan portfolio at a fair value discount of $16.5 million. The performing portion of the portfolio, $95.4 million, had an estimated fair value or $91.6 million. The excess of expected cash flows above the fair value of the performing portion of loans will be accreted to interest income over the remaining lives of the loans in accordance with ASC 310-20.

Preliminary estimates of certain loans, those for which specific credit-related deterioration, since origination, was identified are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected. Many of the acquired loans deemed impaired and considered collateral dependent, with the timing of a sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.

The following table details the acquired loans that are accounted for in accordance with ASC 310-30 (formerly Statement of Position “SOP” 03-3) as of July 17, 2012.

Contractually required principal and interest at acquisition	$	35,574
Contractual cash flows not expected to be collected (nonaccretable differences)		9,747
Expected cash flows at acquisition		25,827
Interest component of expected cash flows (accretable discount)		2,886
Fair value of acquired loans accounted for under ASC 310-30	$	22,941

Pro-forma statements were determined to be impracticable due to the materiality of the transaction.

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 3 – Securities

The fair value of securities is as follows:

September 30, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	46,982	$	394	$	—		$	47,376
State and municipal		163,407		11,476		(62	)		174,821
Federal agency collateralized mortgage obligations		97,534		1,621		(114	)		99,041
Federal agency mortgage-backed pools		166,029		8,114		(6	)		174,137
Private labeled mortgage-backed pools		2,207		81		—			2,288
Corporate notes		32		9		—			41
Total available for sale investment securities	$	476,191	$	21,695	$	(182	)	$	497,704
Held to maturity, State and Municipal	$	6,100	$	—	$	—		$	6,100

December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	12,693	$	329	$	—		$	13,022
State and municipal		135,011		8,950		(71	)		143,890
Federal agency collateralized mortgage obligations		89,016		2,106		—			91,122
Federal agency mortgage-backed pools		173,797		5,669		(115	)		179,351
Private labeled mortgage-backed pools		3,518		118		—			3,636
Corporate notes		32		—		(8	)		24
Total available for sale investment securities	$	414,067	$	17,172	$	(194	)	$	431,045
Held to maturity, State and Municipal	$	7,100	$	34	$	—		$	7,134

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. While these securities are held in the available for sale portfolio, Horizon intends, and has the ability, to hold them until the earlier of a recovery in fair value or maturity.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. At September 30, 2012, no individual investment security had an unrealized loss that was determined to be other-than-temporary.

The unrealized losses on the Company’s investments in securities of state and municipal governmental agencies, and federal agency mortgage-backed pools were caused by interest rate volatility and not a decline in credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company expects to recover the amortized cost basis over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at September 30, 2012.

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2012 and December 31, 2011, 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.

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HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale
Within one year	$	4,232	$	4,245	$	931	$	940
One to five years		45,096		46,420		30,796		31,910
Five to ten years		97,217		102,990		51,476		55,053
After ten years		63,876		68,583		64,533		69,033
		210,421		222,238		147,736		156,936
Federal agency collateralized mortgage obligations		97,534		99,041		89,016		91,122
Federal agency mortgage-backed pools		166,029		174,137		173,797		179,351
Private labeled mortgage-backed pools		2,207		2,288		3,518		3,636
Total available for sale investment securities	$	476,191	$	497,704	$	414,067	$	431,045
Held to maturity
Within one year	$	6,100	$	6,100	$	7,100	$	7,134
One to five years		—		—		—		—
Total held to maturity investment securities	$	6,100	$	6,100	$	7,100	$	7,134

The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	Less than 12 Months					12 Months or More					Total
September 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	9,535	$	(62	)	$	—	$	—		$	9,535	$	(62	)
Federal agency collateralized mortgage obligations		19,284		(114	)		—		—			19,284		(114	)
Federal agency mortgage-backed pools		4,479		(6	)		—		—			4,479		(6	)
Total temporarily impaired securities	$	33,298	$	(182	)	$	—	$	—		$	33,298	$	(182	)
	Less than 12 Months					12 Months or More					Total
December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	1,550	$	(44	)	$	1,948	$	(27	)	$	3,498	$	(71	)
Federal agency mortgage-backed pools		23,442		(115	)		23		—			23,465		(115	)
Corporate notes		24		(8	)		—		—			24		(8	)
Total temporarily impaired securities	$	25,016	$	(167	)	$	1,971	$	(27	)	$	26,987	$	(194	)

	Three months ended September 30					Nine months ended September 30
	2012			2011		2012			2011
Sales of securities available for sale (Unaudited)
Proceeds	$	14,991		$	153,299	$	14,991		$	170,689
Gross gains		3			1,115		3			1,754
Gross losses		(1	)		—		(1	)		—

12

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 4 – Loans

	September 30 2012			December 31 2011
Commercial
Working capital and equipment	$	193,671		$	170,325
Real estate, including agriculture		242,212			172,910
Tax exempt		4,719			3,818
Other		6,812			5,323
Total		447,414			352,376
Real estate
1–4 family		172,770			153,039
Other		3,783			4,102
Total		176,553			157,141
Consumer
Auto		137,490			134,686
Recreation		5,005			4,737
Real estate/home improvement		30,905			27,729
Home equity		105,960			92,249
Unsecured		4,435			3,183
Other		3,053			2,793
Total		286,848			265,377
Mortgage warehouse		244,233			208,299
Total loans		1,155,048			983,193
Allowance for loan losses		(18,568	)		(18,882	)
Loans, net	$	1,136,480		$	964,311

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves larger loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of property type, and are monitored for concentrations of credit. Management monitors and evaluates commercial real estate loans based on collateral, cash flow and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

13

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Real Estate and Consumer

With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Mortgage Warehousing

Horizon’s mortgage warehouse lending has specific mortgage companies as customers of Horizon Bank. Individual mortgage loans originated by these mortgage companies are funded as a secured borrowing with a pledge of collateral under Horizon’s agreement with the mortgage company. Each individual mortgage is assigned to Horizon until the loan is sold to the secondary market by the mortgage company. In addition, Horizon takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. At the time a loan is transferred to the secondary market, the mortgage company repurchases the loan under its option within the agreement. Due to the repurchase feature contained in the agreement, the transaction does not qualify as a sale and therefore is accounted for as a secured borrowing with a pledge of collateral pursuant to the agreement with the mortgage company. When the individual loan is sold to the end investor by the mortgage company, the proceeds from the sale of the loan are received by Horizon and used to pay off the loan balance with Horizon along with any accrued interest and any related fees. The remaining balance from the sale is forwarded to the mortgage company. These individual loans typically are sold by the mortgage company within 30 days and are seldom held more than 90 days. Interest income is accrued during this period and collected at the time each loan is sold. Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.

Based on the agreements with each mortgage company, at any time a mortgage company can repurchase from Horizon their outstanding loan balance on an individual mortgage and regain possession of the original note. Horizon also has the option to request that the mortgage company repurchase an individual mortgage. Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company. Also, in the event that the end investor would not be able to honor the purchase commitment and the mortgage company would not be able to repurchase its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.

14

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following table shows the recorded investment of individual loan categories.

September 30, 2012	Loan Balance			Interest Due		Deferred Fees / (Costs)			Recorded Investment
Owner occupied real estate	$	168,015		$	614	$	20		$	168,649
Non owner occupied real estate		187,953			547		55			188,555
Residential spec homes		1,130			2		—			1,132
Development & spec land loans		6,645			19		—			6,664
Commercial and industrial		83,589			390		7			83,986
Total commercial		447,332			1,572		82			448,986
Residential mortgage		164,720			646		91			165,457
Residential construction		11,742			19		—			11,761
Mortgage warehouse		244,233			427		—			244,660
Total real estate		420,695			1,092		91			421,878
Direct installment		30,247			116		(346	)		30,017
Direct installment purchased		518			—		—			518
Indirect installment		128,502			373		—			128,875
Home equity		128,671			620		(744	)		128,547
Total consumer		287,938			1,109		(1,090	)		287,957
Total loans		1,155,965			3,773		(917	)		1,158,821
Allowance for loan losses		(18,568	)		—		—			(18,568	)
Net loans	$	1,137,397		$	3,773	$	(917	)	$	1,140,253
December 31, 2011	Loan Balance			Interest Due		Deferred Fees / (Costs)			Recorded Investment
Owner occupied real estate	$	131,893		$	383	$	30		$	132,306
Non owner occupied real estate		142,269			360		94			142,723
Residential spec homes		3,574			6		—			3,580
Development & spec land loans		8,739			16		—			8,755
Commercial and industrial		65,774			169		3			65,946
Total commercial		352,249			934		127			353,310
Residential mortgage		150,893			513		68			151,474
Residential construction		6,181			8		—			6,189
Mortgage warehouse		208,299			427		—			208,726
Total real estate		365,373			948		68			366,389
Direct installment		24,252			94		(360	)		23,986
Direct installment purchased		981			—		—			981
Indirect installment		127,751			420		(56	)		128,115
Home equity		113,561			559		(752	)		113,368
Total consumer		266,545			1,073		(1,168	)		266,450
Total loans		984,167			2,955		(973	)		986,149
Allowance for loan losses		(18,882	)		—		—			(18,882	)
Net loans	$	965,285		$	2,955	$	(973	)	$	967,267

15

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 5 – Allowance for Loan Losses

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior one to five years. Management believes the two-year historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed. The actual allowance for loan loss activity is provided below.

	Three Months Ended September 30					Nine Months Ended September 30
	2012 (Unaudited)		2011 (Unaudited)			2012 (Unaudited)		2011 (Unaudited)
Balance at beginning of the period	$	18,374	$	18,586		$	18,882	$	19,064
Loans charged-off:
Commercial
Owner occupied real estate		92		65			95		189
Non owner occupied real estate		81		196			109		310
Residential development		—		—			—		—
Development & Spec Land Loans		—		—			—		—
Commercial and industrial		221		17			548		227
Total commercial		394		278			752		726
Real estate
Residential mortgage		247		86			451		837
Residential construction		—		—			—		—
Mortgage warehouse		—		—			—		—
Total real estate		247		86			451		837
Consumer
Direct Installment		90		78			261		480
Direct Installment Purchased		—		—			—		—
Indirect Installment		313		494			922		1,280
Home Equity		123		359			1,010		1,888
Total consumer		526		931			2,193		3,648
Total loans charged-off		1,167		1,295			3,396		5,211
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		—		—			352		18
Non owner occupied real estate		—		—			7		—
Residential development		—		—			—		—
Development & Spec Land Loans		—		—			—		—
Commercial and industrial		61		9			114		14
Total commercial		61		9			473		32
Real estate
Residential mortgage		42		—			74		10
Residential construction		—		—			—		—
Mortgage warehouse		—		—			—		—
Total real estate		42		—			74		10
Consumer
Direct Installment		28		16			63		83
Direct Installment Purchased		—		—			—		—
Indirect Installment		173		179			563		568
Home Equity		16		51			100		120
Total consumer		217		246			726		771
Total loan recoveries		320		255			1,273		813
Net loans charged-off		847		1,040			2,123		4,398
Provision charged to operating expense
Commercial		625		1,341			320		1,290
Real estate		254		815			900		968
Consumer		162		(592	)		589		2,186
Total provision charged to operating expense		1,041		1,564			1,809		4,444
Balance at the end of the period	$	18,568	$	19,110		$	18,568	$	19,110

16

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Certain loans are individually evaluated for impairment, and the Company’s general practice is to proactively charge down impaired loans to the fair value of the underlying collateral.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down or specific allocation of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the value is known but no later than when a loan is 180 days past due. Pursuant to such guidelines, the Company also charges-off unsecured open-end loans when the loan is 90 days past due, and charges down to the net realizable value other secured loans when they are 90 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection in full will occur regardless of delinquency status, are not charged off.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment analysis:

September 30, 2012	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,403	$	—	$	—	$	—	$	2,403
Collectively evaluated for impairment		5,655		2,974		1,716		5,820		16,165
Total ending allowance balance	$	8,058	$	2,974	$	1,716	$	5,820	$	18,568
Loans:
Individually evaluated for impairment	$	12,865	$	—	$	—	$	—	$	12,865
Collectively evaluated for impairment		436,121		177,218		244,660		287,957		1,145,956
Total ending loans balance	$	448,986	$	177,218	$	244,660	$	287,957	$	1,158,821
December 31, 2011	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,136	$	—	$	—	$	—	$	2,136
Collectively evaluated for impairment		5,881		2,472		1,695		6,698		16,746
Total ending allowance balance	$	8,017	$	2,472	$	1,695	$	6,698	$	18,882
Loans:
Individually evaluated for impairment	$	7,960	$	—	$	—	$	—	$	7,960
Collectively evaluated for impairment		345,350		157,663		208,726		266,450		978,189
Total ending loans balance	$	353,310	$	157,663	$	208,726	$	266,450	$	986,149

17

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 6 – Non-performing Loans and Impaired Loans

The following table presents the nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured (“TDRs”) by class of loans:

September 30, 2012	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Non Performing TDR’s		Performing TDR’s		Total Non- Performing Loans
Commercial
Owner occupied real estate	$	3,887	$	—	$	1,472	$	—	$	5,359
Non owner occupied real estate		3,754		—		375		—		4,129
Residential development		—		—		—		—		—
Development & Spec Land Loans		789		—		—		—		789
Commercial and industrial		492		9		801		—		1,302
Total commercial		8,922		9		2,648		—		11,579
Real estate
Residential mortgage		4,266		57		2,361		1,857		8,541
Residential construction		—		—		—		292		292
Mortgage warehouse		—		—		—		—		—
Total real estate		4,266		57		2,361		2,149		8,833
Consumer
Direct Installment		97		1		—		—		98
Direct Installment Purchased		—		—		—		—		—
Indirect Installment		923		42		—		—		965
Home Equity		1,679		—		52		832		2,563
Total Consumer		2,699		43		52		832		3,626
Total	$	15,887	$	109	$	5,061	$	2,981	$	24,038

December 31, 2011	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Non Performing TDR’s		Performing TDR’s		Total Non- Performing Loans
Commercial
Owner occupied real estate	$	2,515	$	—	$	—	$	—	$	2,515
Non owner occupied real estate		3,970		—		152		—		4,122
Residential development		—		—		—		—		—
Development & Spec Land Loans		90		—		—		—		90
Commercial and industrial		330		—		901		—		1,231
Total commercial		6,905		—		1,053		—		7,958
Real estate
Residential mortgage		4,550		—		1,120		2,389		8,059
Residential construction		144		—		—		293		437
Mortgage warehouse		—		—		—		—		—
Total real estate		4,694		—		1,120		2,682		8,496
Consumer
Direct Installment		256		1		—		—		257
Direct Installment Purchased		—		4		—		—		4
Indirect Installment		926		29		—		—		955
Home Equity		1,587		3		25		858		2,473
Total Consumer		2,769		37		25		858		3,689
Total	$	14,368	$	37	$	2,198	$	3,540	$	20,143

18

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

From time to time, the Bank obtains information that may lead management to believe that the collection of payments may be doubtful on a particular loan. In recognition of this, it is management’s policy to convert the loan from an “earning asset” to a non-accruing loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Further, it is management’s policy to place a loan on a non-accrual status when the payment is delinquent in excess of 90 days or the loan has had the accrual of interest discontinued by management. The officer responsible for the loan and the Chief Operating Officer or the senior collection officer must review all loans placed on non-accrual status. Subsequent payments on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal in accordance with the loan terms. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

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 for its collateral, 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. Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

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 non-accrual status when they are 90 days or more past due. These loans are often considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms, including TDRs, are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

The Company’s TDRs are considered impaired loans and included in the allowance methodology using the guidance for impaired loans. At September 30, 2012, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments. Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan. A restructured loan is returned to accruing status after six consecutive payments but is still reported as TDR unless the loan bears interest at a market rate. As of September 30, 2012, the Company had $8.4 million in TDRs and $3.4 million were performing according to the restructured terms. The financial statement impact of non-performing TDRs was not material for the three and nine months ending September 30, 2012. There was $1.3 million of specific reserves allocated to TDRs at September 30, 2012 based on the collateral deficiencies.

19

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Loans transferred and classified as troubled debt restructuring during the nine months ended September 30, 2012 and 2011, segregated by class, are shown in the table below.

	September 30, 2012				September 30, 2011
	Number of Defaults		Unpaid Principal Balance		Number of Defaults		Unpaid Principal Balance
Commercial
Owner occupied real estate		3	$	1,472		—	$	—
Non owner occupied real estate		3		637		—		—
Residential development		—		—		—		—
Development & Spec Land Loans		—		—		—		—
Commercial and industrial		—		—		1		841
Total commercial		6		2,109		1		841
Real estate
Residential mortgage		1		582		2		174
Residential construction		—		—		—		—
Mortgage warehouse		—		—		—		—
Total real estate		1		582		2		174
Consumer
Direct Installment		—		—		—		—
Direct Installment Purchased		—		—		—		—
Indirect Installment		—		—		—		—
Home Equity		—		—		8		724
Total Consumer		—		—		8		724
Total		7	$	2,691		11	$	1,739

Troubled debt restructured loans which had payment defaults during the nine months ended September 30, 2012 and 2011, segregated by class, are shown in the table below. Default occurs when a loan is 90 days or more past due or has been transferred to nonaccrual.

	September 30, 2012				September 30, 2011
	Number of Defaults		Unpaid Principal Balance		Number of Defaults		Unpaid Principal Balance
Commercial
Owner occupied real estate		3	$	1,473		—	$	—
Non owner occupied real estate		2		261		—		—
Residential development		—		—		—		—
Development & Spec Land Loans		—		—		—		—
Commercial and industrial		—		—		2		361
Total commercial		5		1,734		2		361
Real estate
Residential mortgage		2		677		2		1,143
Residential construction		—		—		—		—
Mortgage warehouse		—		—		—		—
Total real estate		2		677		2		1,143
Consumer
Direct Installment		—		—		—		—
Direct Installment Purchased		—		—		—		—
Indirect Installment		—		—		—		—
Home Equity		—		—		2		65
Total Consumer		—		—		2		65
Total		7	$	2,411		6	$	1,569

20

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following table presents commercial loans individually evaluated for impairment by class of loan:

							Three Months Ending					Nine Months Ending
September 30, 2012	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Loss Allocated		Average Balance in Impaired Loans		Cash/Accrual Interest Income Recognized			Average Balance in Impaired Loans		Cash/Accrual Interest Income Recognized
With no recorded allowance
Commercial
Owner occupied real estate	$	4,457	$	4,460	$	—	$	3,810	$	—		$	1,978	$	3
Non owner occupied real estate		2,521		2,542		—		2,429		70			1,920		72
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		131		131		—		109		(0	)		37		—
Commercial and industrial		456		471		—		382		—			129		—
Total commercial		7,565		7,604		—		6,730		69			4,064		75
With an allowance recorded
Commercial
Owner occupied real estate		903		903		450		910		(0	)		1,109		1
Non owner occupied real estate		2,938		2,938		1,065		2,943		—			2,843		—
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		658		658		615		660		—			523		6
Commercial and industrial		801		801		273		801		—			807		—
Total commercial		5,300		5,300		2,403		5,314		(0	)		5,282		7
Total	$	12,865	$	12,904	$	2,403	$	12,044	$	69		$	9,346	$	82
							Three Months Ending					Nine Months Ending
September 30, 2011	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Loss Allocated		Average Balance in Impaired Loans		Interest Income Recognized			Average Balance in Impaired Loans		Interest Income Recognized
With no recorded allowance
Commercial
Owner occupied real estate	$	1,315	$	1,314	$	—	$	1,224	$	31		$	856	$	32
Non owner occupied real estate		2,403		2,625		—		1,683		85			985		89
Residential development		—		—		—		—		—			9		—
Development & Spec Land Loans		—		111		—		—		—			69		—
Commercial and industrial		1,154		1,156		—		1,091		47			1,099		47
Total commercial		4,872		5,206		—		3,998		163			3,018		168
With an allowance recorded
Commercial
Owner occupied real estate		1,420		1,420		460		1,449		—			1,234		—
Non owner occupied real estate		5,499		5,538		996		4,943		—			4,859		—
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		90		90		125		90		—			179		—
Commercial and industrial		234		308		225		284		—			393		—
Total commercial		7,243		7,356		1,806		6,766		—			6,665		—
Total	$	12,115	$	12,562	$	1,806	$	10,764	$	163		$	9,683	$	168

21

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following table presents the payment status by class of loan:

September 30, 2012	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial
Owner occupied real estate	$	1,008	$	110	$	—	$	1,118	$	166,897	$	168,015
Non owner occupied real estate		—		123		—		123		187,830		187,953
Residential development		—		—		—		—		1,130		1,130
Development & Spec Land Loans		—		—		—		—		6,645		6,645
Commercial and industrial		433		2,373		9		2,815		80,774		83,589
Total commercial		1,441		2,606		9		4,056		443,276		447,332
Real estate
Residential mortgage		1,300		197		57		1,554		163,166		164,720
Residential construction		—		—		—		—		11,742		11,742
Mortgage warehouse		—		—		—		—		244,233		244,233
Total real estate		1,300		197		57		1,554		419,141		420,695
Consumer
Direct Installment		162		243		1		406		29,841		30,247
Direct Installment Purchased		—		—		—		—		518		518
Indirect Installment		1,124		101		42		1,267		127,235		128,502
Home Equity		1,038		139		—		1,177		127,494		128,671
Total consumer		2,324		483		43		2,850		285,088		287,938
Total	$	5,065	$	3,286	$	109	$	8,460	$	1,147,505	$	1,155,965
December 31, 2011	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial
Owner occupied real estate	$	89	$	168	$	—	$	257	$	131,636	$	131,893
Non owner occupied real estate		228		—		—		228		142,041		142,269
Residential development		—		—		—		—		3,574		3,574
Development & Spec Land Loans		—		—		—		—		8,739		8,739
Commercial and industrial		34		22		—		56		65,718		65,774
Total commercial		351		190		—		541		351,708		352,249
Real estate
Residential mortgage		411		—		—		411		150,482		150,893
Residential construction		—		—		—		—		6,181		6,181
Mortgage warehouse		—		—		—		—		208,299		208,299
Total real estate		411		—		—		411		364,962		365,373
Consumer
Direct Installment		164		22		1		187		24,065		24,252
Direct Installment Purchased		7		14		4		25		956		981
Indirect Installment		1,333		335		29		1,697		126,054		127,751
Home Equity		363		92		3		458		113,103		113,561
Total consumer		1,867		463		37		2,367		264,178		266,545
Total	$	2,629	$	653	$	37	$	3,319	$	980,848	$	984,167

The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

Horizon Bank’s processes for determining credit quality differ slightly depending on whether a new loan or a renewed loan is being underwritten, or whether an existing loan is being re-evaluated for credit quality. The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the loan grade.

• For new and renewed commercial loans, the Bank’s Credit Department, which acts independently of the loan officer, assigns the credit quality grade to the loan. Loan grades for loans with an aggregate credit exposure of $500,000 or greater are validated by the Loan Committee, which is chaired by the Chief Operating Officer (COO).

22

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

• Commercial loan officers are responsible for reviewing their loan portfolios and report any adverse material change to the COO or Loan Committee. When circumstances warrant a change in the credit quality grade, loan officers are required to notify the COO and the Credit Department of the change in the loan grade. Downgrades are accepted immediately by the COO however, lenders must present their factual information to either the Loan Committee or the COO when recommending an upgrade.

• The COO meets weekly with loan officers to discuss the status of past-due loans and classified loans. These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.

• Monthly, senior management meets with the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets. This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, and collateral repossessions. The information reviewed in this meeting acts as a precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.

For real estate and consumer loans, Horizon uses a grading system based on delinquency. Loans that are 90 days or more past due, on non-accrual, or are classified as a TDR are graded “Substandard.” After being 90 days delinquent a loan is charged off unless it is well secured and in the process of collection. If the latter case exists, the loan is placed on non-accrual. Occasionally a mortgage loan may be graded as “Special Mention.” When this situation arises, it is because the characteristics of the loan and the borrower fit the definition of a Risk Grade 5 described below, which is normally used for grading commercial loans. Loans not graded Substandard are considered Pass.

Horizon Bank employs an eight-grade rating system to determine the credit quality of commercial loans. The first four grades represent acceptable quality, and the last four grades mirror the criticized and classified grades used by the bank regulatory agencies (special mention, substandard, doubtful, and loss). The loan grade definitions are detailed below.

Risk Grade 1: Excellent (Pass)

Loans secured by liquid collateral, such as certificates of deposit, reputable bank letters of credit, or other cash equivalents; loans that are guaranteed or otherwise backed by the full faith and credit of the United States government or an agency thereof, such as the Small Business Administration; or loans to any publicly held company with a current long-term debt rating of A or better.

Risk Grade 2: Good (Pass)

Loans to businesses that have strong financial statements containing an unqualified opinion from a CPA firm and at least three consecutive years of profits; loans supported by unaudited financial statements containing strong balance sheets, five consecutive years of profits, a five-year satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive; loans secured by publicly traded marketable securities where there is no impediment to liquidation; loans to individuals backed by liquid personal assets and unblemished credit history; or loans to publicly held companies with current long-term debt ratings of Baa or better.

Risk Grade 3: Satisfactory (Pass)

Loans supported by financial statements (audited or unaudited) that indicate average or slightly below average risk and having some deficiency or vulnerability to changing economic conditions; loans with some weakness but offsetting features of other support are readily available; loans that are meeting the terms of repayment, but which may be susceptible to deterioration if adverse factors are encountered. Loans may be graded Satisfactory when there is no recent information on which to base a current risk evaluation and the following conditions apply:

23

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

• At inception, the loan was properly underwritten, did not possess an unwarranted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory;

• At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss.

• The loan has exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance.

• During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the borrower is in an industry known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk grade may be warranted.

Risk Grade 4: Satisfactory/Monitored (Pass)

Loans in this category are considered to be of acceptable credit quality, but contain greater credit risk than Satisfactory loans due to weak balance sheets, marginal earnings or cash flow, lack of financial information, weakening markets, insufficient or questionable collateral coverage or other uncertainties. These loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in a Satisfactory/Monitored loan is within acceptable underwriting guidelines so long as the loan is given the proper level of management supervision. Loans that normally fall into this grade include construction of commercial real estate buildings, land development and subdivisions, and rental properties that have not attained stabilization.

Risk Grade 5: Special Mention

Loans which possess some credit deficiency or potential weakness which deserves close attention. Such loans pose an unwarranted financial risk that, if not corrected, could weaken the loan by adversely impacting the future repayment ability of the borrower. The key distinctions of a Special Mention classification are that (1) it is indicative of an unwarranted level of risk and (2) weaknesses are considered “potential,” not “defined,” impairments to the primary source of repayment. These loans may be to borrowers with adverse trends in financial performance, collateral value and/or marketability, or balance sheet strength.

Risk Grade 6: Substandard

One or more of the following characteristics may be exhibited in loans classified Substandard:

• Loans which possess a defined credit weakness. The likelihood that a loan will be paid from the primary source of repayment is uncertain. Financial deterioration is under way and very close attention is warranted to ensure that the loan is collected without loss.

• Loans are inadequately protected by the current net worth and paying capacity of the obligor.

• The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees.

• Loans have a distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

• Unusual courses of action are needed to maintain a high probability of repayment.

• The borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments.

• The lender is forced into a subordinated or unsecured position due to flaws in documentation.

• Loans have been restructured so that payment schedules, terms, and collateral represent concessions to the borrower when compared to the normal loan terms.

24

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

• The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

• There is a significant deterioration in market conditions to which the borrower is highly vulnerable.

Risk Grade 7: Doubtful

One or more of the following characteristics may be present in loans classified Doubtful:

• Loans have all of the weaknesses of those classified as Substandard. However, based on existing conditions, these weaknesses make full collection of principal highly improbable.

• The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

• The possibility of loss is high but because of certain important pending factors which may strengthen the loan, loss classification is deferred until the exact status of repayment is known.

Risk Grade 8: Loss

Loans are considered uncollectible and of such little value that continuing to carry them as assets is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

25

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following table presents loans by credit grades.

September 30, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial
Owner occupied real estate	$	137,121	$	8,826	$	17,632	$	4,436	$	168,015
Non owner occupied real estate		153,131		20,694		13,008		1,120		187,953
Residential development		434		—		696		—		1,130
Development & Spec Land Loans		3,637		251		2,627		130		6,645
Commercial and industrial		74,279		4,339		4,715		256		83,589
Total commercial		368,602		34,110		38,678		5,942		447,332
Real estate
Residential mortgage		156,179		—		8,541		—		164,720
Residential construction		11,450		—		292		—		11,742
Mortgage warehouse		244,233		—		—		—		244,233
Total real estate		411,862		—		8,833		—		420,695
Consumer
Direct Installment		30,149		—		98		—		30,247
Direct Installment Purchased		518		—		—		—		518
Indirect Installment		127,537		—		965		—		128,502
Home Equity		126,108		—		2,563		—		128,671
Total Consumer		284,312		—		3,626		—		287,938
Total	$	1,064,776	$	34,110	$	51,137	$	5,942	$	1,155,965
December 31, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial
Owner occupied real estate	$	107,155	$	4,101	$	20,637	$	—	$	131,893
Non owner occupied real estate		118,446		11,423		12,400		—		142,269
Residential development		1,677		529		1,368		—		3,574
Development & Spec Land Loans		3,778		860		4,101		—		8,739
Commercial and industrial		55,964		3,012		6,798		—		65,774
Total commercial		287,020		19,925		45,304		—		352,249
Real estate
Residential mortgage		142,834		—		8,059		—		150,893
Residential construction		5,744		—		437		—		6,181
Mortgage warehouse		208,299		—		—		—		208,299
Total real estate		356,877		—		8,496		—		365,373
Consumer
Direct Installment		23,995		—		257		—		24,252
Direct Installment Purchased		977		—		4		—		981
Indirect Installment		126,796		—		955		—		127,751
Home Equity		111,088		—		2,473		—		113,561
Total Consumer		262,856		—		3,689		—		266,545
Total	$	906,753	$	19,925	$	57,489	$	—	$	984,167

26

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Note 7 – Derivative financial instruments

Cash Flow Hedges

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into interest rate swap agreements for a portion of its floating rate debt. The agreements provide for the Company to receive interest from the counterparty at three month LIBOR and to pay interest to the counterparty at a weighted average fixed rate of 5.63% on a notional amount of $30.5 million at September 30, 2012. Under these agreements, the Company pays or receives the net interest amount monthly, with the monthly settlements included in interest expense.

Management has designated the interest rate swap agreement as a cash flow hedging instrument. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of the other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. At September 30, 2012, the Company’s cash flow hedge was effective and is not expected to have a significant impact the Company’s net income over the next 12 months.

Fair Value Hedges

Fair value hedges are intended to reduce the interest rate risk associated with the underlying hedged item. The Company enters into fixed rate loan agreements as part of its lending activities. To mitigate the risk of changes in fair value based on fluctuations in interest rates, the Company has entered into interest rate swap agreements on individual loans, converting the fixed rate loans to a variable rate. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings. At September 30, 2012, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

The change in fair value of both the hedge instruments and the underlying loan agreements are recorded as gains or losses in interest income. The fair value hedges are considered to be highly effective, and any hedge ineffectiveness was deemed not material. The notional amounts of the loan agreements being hedged were $72.4 million at September 30, 2012.

Other Derivative Instruments

The Company enters into non-hedging derivatives in the form of mortgage loan forward sale commitments with investors and commitments to originate mortgage loans as part of its mortgage banking business. At September 30, 2012, the Company’s fair value of these derivatives was recorded and over the next 12 months, this activity is not expected to have a significant impact on the Company’s net income.

The change in fair value of both the forward sale commitments and commitments to originate mortgage loans were recorded and the net gains or losses included in the Company’s gain on sale of loans.

27

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following tables summarize the fair value of derivative financial instruments utilized by Horizon Bancorp:

	Asset Derivative September 30, 2012			Liability Derivatives September 30, 2012
Derivatives designated as hedging instruments (Unaudited)	Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value
Interest rate contracts	Loans	$	443		Other liabilities	$	2,523
Interest rate contracts	Other Assets		2,080		Other liabilities		5,820
Total derivatives designated as hedging instruments			2,523				8,343
Derivatives not designated as hedging instruments
Mortgage loan contracts	Other assets		1,262		Other liabilities		—
Total derivatives not designated as hedging instruments			1,262				—
Total derivatives		$	3,785			$	8,343

	Asset Derivative December 31, 2011			Liability Derivatives December 31, 2011
Derivatives designated as hedging instruments (Unaudited)	Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value
Interest rate contracts	Loans	$	754		Other liabilities	$	2,187
Interest rate contracts	Other Assets		1,433		Other liabilities		4,914
Total derivatives designated as hedging instruments			2,187				7,101
Derivatives not designated as hedging instruments
Mortgage loan contracts	Other assets		662		Other liabilities		—
Total derivatives not designated as hedging instruments			662				—
Total derivatives		$	2,849			$	7,101

The effect of the derivative instruments on the consolidated statement of income for the three and nine-month periods ending is as follows:

	Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Three Months Ended September 30						Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Nine Months Ended September 30
Derivative in cash flow hedging relationship	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest rate contracts	$	(170	)	$	(1,951	)	$	(589	)	$	(2,268	)

FASB Accounting Standards Codification (“ASC”) Topic 820-10-20 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820-10-55 establishes a fair value hierarchy that emphasizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

28

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

		Amount of Gain (Loss) Recognized on Derivative Three Months Ended September 30						Amount of Gain (Loss) Recognized on Derivative Nine Months Ended September 30
Derivative in fair value hedging relationship	Location of gain (loss) recognized on derivative	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest rate contracts	Interest income - loans	$	112		$	394		$	336		$	335
Interest rate contracts	Interest income - loans		(112	)		(394	)		(336	)		(335	)
Total		$	—		$	—		$	—		$	—
		Amount of Gain (Loss) Recognized on Derivative Three Months Ended September 30						Amount of Gain (Loss) Recognized on Derivative Nine Months Ended September 30
Derivative not designated as hedging relationship	Location of gain (loss) recognized on derivative	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Mortgage contracts	Other income - gain on sale of loans	$	320		$	359		$	600		$	1,157

Note 8 – Disclosures about fair value of assets and liabilities

The Fair Value Measurements topic of the FASB ASC defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. There are three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated financial statements, as well as the general classification of such instruments pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended September 30, 2012. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available for sale securities

When quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include U.S. Treasury and federal agency securities, state and municipal securities, federal agency mortgage obligations and mortgage-backed pools, private-label mortgage-backed pools and corporate notes. Level 2 securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs. Observable inputs include dealer quotes, market spreads, cash flow analysis, the U.S. Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s terms and conditions. The pricing provider utilizes evaluated pricing models that vary based on asset class. These models incorporate available market information including quoted prices of securities with similar characteristics and, because many fixed-income securities do not trade on a daily basis, apply available information through processes such as benchmark curves, benchmarking of like securities, sector grouping, and matrix pricing. In addition, model processes, such as an option adjusted spread model is used to develop prepayment and interest rate scenarios for securities with prepayment features.

29

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Hedged loans

Certain fixed rate loans have been converted to variable rate loans by entering into interest rate swap agreements. The fair value of those fixed rate loans is based on discounting the estimated cash flows using interest rates determined by the respective interest rate swap agreement. Loans are classified within Level 2 of the valuation hierarchy based on the unobservable inputs used.

Interest rate swap agreements

The fair value of the Company’s interest rate swap agreements is estimated by a third party using inputs that are primarily unobservable including a yield curve, adjusted for liquidity and credit risk, contracted terms and discounted cash flow analysis, therefore, are classified within Level 2 of the valuation hierarchy.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying financial statements measured at fair value on a recurring basis and the level within the FASB ASC fair value hierarchy in which the fair value measurements fall at the following:

	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
September 30, 2012
Available-for-sale securities
U.S. Treasury and federal agencies	$	47,376		$	—	$	47,376		$	—
State and municipal		174,821			—		174,821			—
Federal agency collateralized mortgage obligations		99,041			—		99,041			—
Federal agency mortgage-backed pools		174,137			—		174,137			—
Private labeled mortgage-backed pools		2,288			—		2,288			—
Corporate notes		41			—		41			—
Total available-for-sale securities		497,704			—		497,704			—
Hedged loans		74,947			—		74,947			—
Forward sale commitments		942			—		942			—
Interest rate swap agreements		(7,969	)		—		(7,969	)		—
Commitments to originate loans		—			—		—			—
December 31, 2011
Available-for-sale securities
U.S. Treasury and federal agencies	$	13,022		$	—	$	13,022		$	—
State and municipal		143,890			—		143,890			—
Federal agency collateralized mortgage obligations		91,122			—		91,122			—
Federal agency mortgage-backed pools		179,351			—		179,351			—
Private labeled mortgage-backed pools		3,636			—		3,636			—
Corporate notes		24			—		24			—
Total available-for-sale securities		431,045			—		431,045			—
Hedged loans		54,362			—		—			54,362
Forward sale commitments		662			—		—			662
Interest rate swap agreements		(7,102	)		—		—			(7,102	)
Commitments to originate loans		—			—		—			—

30

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Transfers between levels

Transfers between Levels 1, 2 and 3 and the reasons for those transfers are as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Reason for Transfer
Transfers to level:
Hedged loans	$	—	$	74,947		$	—		(a	)
Forward sale commitments		—		942			—		(b	)
Interest rate swap agreements		—		(7,969	)		—		(a	)
Commitments to originate loans		—		—			—		(b	)
Total transfers to level	$	—	$	67,920		$	—

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs (Unaudited):

	Hedged Loans			Forward Sale Commitments			Interest Rate Swaps			Commitments to Originate Loans
Beginning balance December 31, 2011	$	54,362		$	662		$	(7,101	)	$	—
Total realized and unrealized gains and losses
Included in net income		(74	)		(152	)		74			(71	)
Included in other comprehensive income, gross		—			—			563			—
Purchases, issuances, and settlements		6,114			—			—			—
Principal payments		(491	)		—			—			—
Transfers out to Level 2		(59,911	)		(510	)		6,464			71
Ending balance September 30, 2012	$	—		$	—		$	—		$	—
	Hedged Loans			Forward Sale Commitments			Interest Rate Swaps			Commitments to Originate Loans
Beginning balance December 31, 2010	$	50,088		$	407		$	(3,415	)	$	—
Total realized and unrealized gains and losses
Included in net income		(410	)		(126	)		410			(56	)
Included in other comprehensive income, gross		—			—			451			—
Purchases, issuances, and settlements		(352	)		—			—			—
Principal payments		(915	)		—			—			—
Ending balance March 31, 2011		48,411			281			(2,554	)		(56	)
Total realized and unrealized gains and losses
Included in net income		351			174			(351	)		(8	)
Included in other comprehensive income, gross		—			—			(941	)		—
Purchases, issuances, and settlements		1,200			—			—			—
Principal payments		(344	)		—			—			—
Ending balance June 30, 2011		49,618			455			(3,846	)		(64	)
Total realized and unrealized gains and losses
Included in net income		393			294			(393	)		64
Included in other comprehensive income, gross		—			—			(3,001	)		—
Purchases, issuances, and settlements		1,797			—			—			—
Principal payments		(628	)		—			—			—
Ending balance September 30, 2011	$	51,180		$	749		$	(7,240	)	$	—

31

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Realized gains and losses included in net income for the periods are reported in the condensed consolidated statements of income as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2012			2011			2012			2011
Non Interest Income	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Total gains and losses from:
Hedged loans	$	112		$	394		$	336		$	335
Fair value interest rate swap agreements		(112	)		(394	)		(336	)		(335	)
Derivative loan commitments		320			359			600			1,157
	$	320		$	359		$	600		$	1,157

Certain other assets are measured at fair value on a nonrecurring basis in the ordinary course of business and are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment):

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012
Impaired loans	$	10,462	$	—	$	—	$	10,462
Mortgage servicing rights		4,602		—		—		4,602
December 31, 2011
Impaired loans	$	5,822	$	—	$	—	$	5,822
Mortgage servicing rights		4,193		—		—		4,193

Impaired (collateral dependent): Fair value adjustments for impaired and non-accrual loans typically occur when there is evidence of impairment. Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be timely collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. The Company measures fair value based on the value of the collateral securing the loans. Collateral may be in the form of real estate or personal property, including equipment and inventory. The value of the collateral is determined based on internal estimates as well as third-party appraisals or non-binding broker quotes. These measurements were classified as Level 3. The fair value of the Company’s other real estate owned is determined using Level 3 inputs, which include current and prior appraisals net of estimated costs to sell. Fair value adjustments on impaired loans were $2.5 million at September 30, 2012 and $2.1 million at December 31, 2011.

Mortgage Servicing Rights (MSRs): MSRs do not trade in an active market with readily observable prices. Accordingly, the fair value of these assets is classified as Level 3. The Company determines the fair value of MSRs using an income approach model based upon the Company’s month-end interest rate curve and prepayment assumptions. The model utilizes assumptions to estimate future net servicing income cash flows, including estimates of time decay, payoffs and changes in valuation inputs and assumptions. The Company reviews the valuation assumptions against this market data for reasonableness and adjusts the assumptions if deemed appropriate.

32

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The following table presents qualitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at September 30, 2012.

	Fair Value at September 30, 2012		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans		10,462	Collateral based measurement	Discount to reflect current market conditions and ultimate collectability	0% - 50%
Mortgage servicing rights		4,602	Discounted cashflows	Discount to reflect current market conditions	0% - 20%

Note 9 – Fair Value of Financial Instruments

The estimated fair value amounts of the Company’s financial instruments were determined using available market information, current pricing information applicable to Horizon and various valuation methodologies. Where market quotations were not available, considerable management judgment 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 estimated fair value amounts.

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 September 30, 2012 and December 31, 2011. 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 the FASB ASC fair value hierarchy.

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

Cash and Due from Banks — The carrying amounts approximate fair value.

Held-to-Maturity Securities — For debt securities 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.

Loans Held for Sale — The carrying amounts approximate fair value.

Net Loans — The fair value of portfolio 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. The carrying amounts of loans held for sale 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.

Interest Receivable/Payable — The carrying amounts approximate fair value.

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.

33

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Borrowings — Rates currently available to Horizon for debt with similar terms and remaining maturities are used to estimate fair values of existing borrowings.

Subordinated Debentures — Rates currently available for debentures with similar terms and remaining maturities are used to estimate fair values of existing debentures.

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.

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall (unaudited).

	September 30, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and due from banks	$	41,562	$	41,562	$	—	$	—
Investment securities held to maturity		6,100		—		6,100		—
Loans held for sale		18,163		—		—		18,163
Loans, net		1,136,480		—		—		1,166,649
Stock in FHLB and FRB		13,333		—		13,333		—
Interest receivable		8,248		—		8,248		—
Liabilities
Non-interest bearing deposits	$	211,935	$	211,935	$	—	$	—
Interest-bearing deposits		1,095,036		—		1,108,316		—
Borrowings		333,150		—		344,884		—
Subordinated debentures		32,282		—		32,140		—
Interest payable		579		—		579		—

34

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

	December 31, 2011
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and due from banks	$	20,447	$	20,447	$	—	$	—
Investment securities held to maturity		7,100		—		7,134		—
Loans held for sale		14,090		—		—		14,090
Loans, net		964,311		—		—		979,401
Stock in FHLB and FRB		12,390		—		12,390		—
Interest receivable		6,671		—		6,671		—
Liabilities
Non-interest bearing deposits	$	130,673	$	130,673	$	—	$	—
Interest-bearing deposits		879,192		—		874,160		—
Borrowings		370,111		—		398,789		—
Subordinated debentures		30,676		—		30,083		—
Interest payable		596		—		596		—

Note 10 – Other Comprehensive Income

	Three Months Ended						Nine Months Ended
	September 30 2012 (Unaudited)			September 30 2011 (Unaudited)			September 30 2012 (Unaudited)			September 30 2011 (Unaudited)
Unrealized gains (losses) on securities:
Unrealized holding gains arising during the period	$	2,458		$	5,303		$	4,537		$	13,863
Less: reclassification adjustment for gains realized in net income		2			1,115			2			1,754
		2,456			4,188			4,535			12,109
Unrealized gain (loss) on derivative instruments		(262	)		(3,002	)		(906	)		(3,489	)
Net unrealized gains		2,194			1,186			3,629			8,620
Tax effect		(768	)		(415	)		(1,270	)		(3,017	)
Other comprehensive income	$	1,426		$	771		$	2,359		$	5,603

	September 30 2012			December 31 2011
Unrealized gain on securities available for sale	$	21,514		$	16,978
Unrealized gain (loss) on derivative instruments		(5,820	)		(4,914	)
Tax effect		(5,493	)		(4,222	)
Total accumulated other comprehensive income	$	10,201		$	7,842

Note 11 – Future accounting matters

FASB Accounting Standards Update 2011-12, Comprehensive Income. In December 2011 the FASB issued Accounting Standards Update 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.

This ASU defers the changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income.

35

HORIZON BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

This ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company’s financial statements now include separate statements of comprehensive income and additional footnote disclosures (see Note 10 – Other Comprehensive Income).

FASB Accounting Standards Update 2012-02, Intangibles – Goodwill and Other. In July 2012, the FASB issued Accounting Standards Update 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The amendments in this ASU allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, bases on qualitative assessment, that it is more likely than not, the indefinite-lived intangible asset is impaired.

This ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this standard on January 1, 2012 and did not have a significant impact on the Company’s financial statements.

FASB Accounting Standards Update 2012-04, Technical Corrections and Improvements. In October 2012, the FASB issued Accounting Standards Update 2012-04, Technical Corrections and Improvements. The amendments in this ASU make technical corrections, clarifications and limited-scope improvements to various Topics throughout the Codification.

This ASU is effective for public entities for fiscal periods beginning after December 15, 2012.

36

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward–Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to Horizon Bancorp (“Horizon” or the “Company”) and Horizon Bank, N.A. (the “Bank”). Horizon intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for the purposes of these safe harbor provisions. Statements in this report should be considered in conjunction with the other information available about Horizon, including the information in the other filings we make with the Securities and Exchange Commission. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “expect,” “estimate,” “project,” “intend,” “plan,” “believe,” “could,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.

Actual results may differ materially, and adversely or positively, from the expectations of the Company that are expressed or implied by any forward-looking statement. Risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement include but not limited to:

• Changes to regulations governing bank capital and liquidity standards, including changes made pursuant to the Dodd-Frank Act and to the Basel III initiatives;

• the use of proceeds of future offerings of securities;

• the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates;

• changes in competitive conditions;

• the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies;

• changes in customer borrowing, repayment, investment and deposit practices;

• changes in fiscal, monetary and tax policies;

• changes in financial and capital markets;

• deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration;

• capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities;

• risks of expansion through acquisitions and mergers, such as unexpected credit quality problems of the acquired loans or other assets, unexpected attrition of the customer base of the acquired institution or branches, and difficulties in integration of the acquired operations;

• factors that may cause the Company to incur impairment charges on its investment securities;

• the impact, extent and timing of technological changes

• electronic, cyber and physical security breaches;

• claims and litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;

• actions of the Federal Reserve Board;

• changes in accounting principles and interpretations;

37

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

• potential increases of federal deposit insurance premium expense, and possible future special assessments of FDIC premiums, either industry wide or specific to the Company’s banking subsidiary;

• actions of the regulatory authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms;

• the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends; and

• other factors and risks described under the caption “Risk Factors” in this report and in any of our subsequent reports that we have made or make with the Securities and Exchange Commission (“SEC”).

Because such forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. The foregoing list of important factors is not exclusive, and you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document or, in the case of documents incorporated by reference, the dates of those documents. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of us. For a detailed discussion of the risks and uncertainties that may cause our actual results or performance to differ materially from the results or performance expressed or implied by forward-looking statements, see “Risk Factors” in Item 1A of Part I of our 2011 Annual Report on Form 10-K and in the subsequent reports we file with the SEC.

Overview

Horizon is a registered bank holding company incorporated in Indiana and headquartered in Michigan City, Indiana. Horizon provides a broad range of banking services in Northwestern and Central Indiana and Southwestern Michigan through its bank subsidiary. Horizon operates as a single segment, which is commercial banking. Horizon’s common stock is traded on the NASDAQ Global Market under the symbol HBNC. The Bank was chartered as a national banking association in 1873 and has operated continuously since that time. The Bank is a full-service commercial bank offering commercial and retail banking services, corporate and individual trust and agency services, and other services incident to banking.

Horizon continues to operate in a challenging economic and banking environment. Within the Company’s primary market areas of Northwest and Central Indiana and Southwest Michigan, unemployment rates increased during 2009 and have remained elevated through the first nine months of 2012. This rise in unemployment has been driven by multiple factors including slowdowns in commercial industries as well as a continued lower activity in the housing and construction industries. The Company’s higher than historical levels of non-performing loans at September 30, 2012 and over the past two years can be attributed to the continued slow economy and continued high local unemployment, which have resulted in lower business revenues and increased bankruptcies. The acquisition of Heartland on July 17, 2012, further added to the non-performing credits. Despite these economic factors and events, Horizon has continued to post record positive results through the first nine months of 2012.

On July 17, 2012 Horizon completed the acquisition of Heartland Bancshares, Inc. and its wholly owned subsidiary, Heartland Community Bank, which was merged into Horizon Bank. Under the final terms of the acquisition, the exchange ratio was 0.54 shares of Horizon’s common stock for each outstanding share of Heartland common stock. Heartland shares outstanding at the closing were 1,442,449, and the shares of HBNC common stock issued to Heartland shareholders totaled 778,922. Horizon’s stock price was $25.25 per share at the close of business on July 17, 2012. Based upon these numbers, the total value of the consideration for the acquisition was $19.7 million.

38

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Following are some highlights of Horizon’s financial performance through the third quarter of 2012:

• Horizon’s net income of $14.4 million for the first nine months of 2012 surpasses the $12.8 million earned for the entire prior year and represents the highest first nine months of net income in the Company’s history.

• Third quarter 2012 net income was $4.9 million or $.54 diluted earnings per share, which reflects a 50% increase in diluted earnings per share compared to the same period in 2011.

• Horizon’s net income for the first nine months of 2012 was $14.4 million or $1.75 diluted earnings per share, which reflects a 67% increase in diluted earnings per share compared to the same period in 2011.

• On July 17, 2012 Horizon completed its acquisition of Heartland Bancshares, Inc. (“Heartland”). On that date Horizon recorded $229.5 million in assets and $218.7 million in liabilities.

• Total loans increased $157.9 million during the quarter, consisting of $43.3 million in organic loan growth and $114.6 million net loans acquired from Heartland.

• Total deposits increased $261.2 million during the quarter, comprising $50.0 million in organic deposit growth and $211.2 million in deposits acquired from Heartland.

• Net interest income, after provisions for loan losses, for the first nine months of 2012 was $39.4 million compared with $30.1 million for the same period in the prior year.

• The provision for loan losses decreased to $1.8 million for the first nine months of 2012 compared to $4.4 million for the same period in 2011.

• Net charge-offs for the first nine months of 2012 were $2.1 million compared to $4.4 million for the same period in 2011.

• Substandard and delinquent loans increased by $21.4 million and $4.6 million respectively over the prior quarter. The increases were primarily due to loans acquired in the Heartland merger.

• Return on average assets was 1.09% for the third quarter of 2012 and 1.21% for the first nine months of 2012.

• Return on average common equity was 13.96% for the third quarter of 2012 and 15.24% for the first nine months of 2012.

• Horizon Bank’s capital ratios continue to be well above the regulatory standards for well-capitalized banks.

Critical Accounting Policies

The notes to the consolidated financial statements included in Item 8 of the Company’s Annual Report on Form 10-K for 2011 contain a summary of the Company’s significant accounting policies. Certain of these policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management has identified as critical accounting policies the allowance for loan losses, intangible assets, mortgage servicing rights, hedge accounting and valuation measurements.

Allowance for Loan Losses

An allowance for loan losses is maintained to absorb probable incurred loan losses inherent in the loan portfolio. The determination of the allowance for loan losses is a critical accounting policy that involves management’s ongoing quarterly assessments of the probable incurred losses inherent in the loan portfolio. The identification of loans that have probable incurred losses is subjective; therefore, a general reserve is maintained to cover all probable losses within the entire loan portfolio. Horizon utilizes a loan grading system that helps identify, monitor and address asset quality problems 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 as well as transaction risk to determine the effect they may have on the loss experience of the loan portfolio.

39

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Goodwill and Intangible Assets

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. FASB ASC 350-10 establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill. At September 30, 2012, Horizon had core deposit intangibles of $4.3 million subject to amortization and $19.7 million of goodwill, which is not subject to amortization. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. Horizon’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of Horizon to provide quality, cost effective banking services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely affect earnings in future periods. FASB ASC 350-10 requires an annual evaluation of goodwill for impairment. The evaluation of goodwill for impairment requires the use of estimates and assumptions. Market price at the close of business on September 30, 2012 was $19.05 per share compared to a book value of $16.64 per common share. Horizon reported record earnings for the twelfth consecutive year in 2011, and the first nine months of 2012 were the highest first nine months of net income in the Company’s history.

Horizon has concluded that, based on its own internal evaluation the recorded, value of goodwill is not impaired.

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired through purchase or through the sale of financial assets on a servicing-retained basis. Capitalized servicing rights are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated regularly for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying servicing rights by predominant characteristics, such as interest rates, original loan terms and whether the loans are fixed or adjustable rate mortgages. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. When the book value of an individual stratum exceeds its fair value, an impairment reserve is recognized so that each individual stratum is carried at the lower of its amortized book value or fair value. In periods of falling market interest rates, accelerated loan prepayment can adversely affect the fair value of these mortgage-servicing rights relative to their book value. In the event that the fair value of these assets was to increase in the future, Horizon can recognize the increased fair value to the extent of the impairment allowance but cannot recognize an asset in excess of its amortized book value. Future changes in management’s assessment of the impairment of these servicing assets, as a result of changes in observable market data relating to market interest rates, loan prepayment speeds, and other factors, could impact Horizon’s financial condition and results of operations either positively or negatively.

Generally, when market interest rates decline and other factors favorable to prepayments occur, there is a corresponding increase in prepayments as customers refinance existing mortgages under more favorable interest rate terms. When a mortgage loan is prepaid, the anticipated cash flows associated with servicing that loan are terminated, resulting in a reduction of the fair value of the capitalized mortgage servicing rights. To the extent that actual borrower prepayments do not react as anticipated by the prepayment model (i.e., the historical data observed in the model does not correspond to actual market activity), it is possible that the prepayment model could fail to accurately predict mortgage prepayments and could result in significant earnings volatility. To estimate prepayment speeds, Horizon utilizes a third-party prepayment model, which

40

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

is based upon statistically derived data linked to certain key principal indicators involving historical borrower prepayment activity associated with mortgage loans in the secondary market, current market interest rates and other factors, including Horizon’s own historical prepayment experience. For purposes of model valuation, estimates are made for each product type within the mortgage servicing rights portfolio on a monthly basis. In addition, on a quarterly basis Horizon engages a third party to independently test the value of its servicing asset.

Derivative Instruments

As part of the Company’s asset/liability management program, Horizon utilizes, from time-to-time, interest rate floors, caps or swaps to reduce the Company’s sensitivity to interest rate fluctuations. These are derivative instruments, which are recorded as assets or liabilities in the consolidated balance sheets at fair value. Changes in the fair values of derivatives are reported in the consolidated income statements or other comprehensive income (“OCI”) depending on the use of the derivative and whether the instrument qualifies for hedge accounting. The key criterion for the hedge accounting is that the hedged relationship must be highly effective in achieving offsetting changes in those cash flows that are attributable to the hedged risk, both at inception of the hedge and on an ongoing basis.

Horizon’s accounting policies related to derivatives reflect the guidance in FASB ASC 815-10. Derivatives that qualify for the hedge accounting treatment are designated as either: a hedge of the fair value of the recognized asset or liability or of an unrecognized firm commitment (a fair value hedge) or a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (a cash flow hedge). For fair value hedges, the cumulative change in fair value of both the hedge instruments and the underlying loans is recorded in non-interest income. For cash flow hedges, changes in the fair values of the derivative instruments are reported in OCI to the extent the hedge is effective. The gains and losses on derivative instruments that are reported in OCI are reflected in the consolidated income statement in the periods in which the results of operations are impacted by the variability of the cash flows of the hedged item. Generally, net interest income is increased or decreased by amounts receivable or payable with respect to the derivatives, which qualify for hedge accounting. At inception of the hedge, Horizon establishes the method it uses for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. The ineffective portion of the hedge, if any, is recognized currently in the consolidated statements of income. Horizon excludes the time value expiration of the hedge when measuring ineffectiveness.

Valuation Measurements

Valuation methodologies often involve a significant degree of judgment, particularly when there are no observable active markets for the items being valued. Investment securities, residential mortgage loans held for sale and derivatives are carried at fair value, as defined in FASB ASC 820, which requires key judgments affecting how fair value for such assets and liabilities is determined. In addition, the outcomes of valuations have a direct bearing on the carrying amounts of goodwill, mortgage servicing rights, and pension and other post-retirement benefit obligations. To determine the values of these assets and liabilities, as well as the extent, to which related assets may be impaired, management makes assumptions and estimates related to discount rates, asset returns, prepayment speeds and other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect Horizon’s results of operations.

41

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Financial Condition

On September 30, 2012, Horizon’s total assets were $1.8 billion, an increase of approximately $300.0 million compared to December 31, 2011. This increase was primarily due to the addition of $245.6 million in assets from the Heartland acquisition and $57.4 million in net organic loan growth during the first nine months of 2012.

Investment securities were comprised of the following as of:

	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale
U.S. Treasury and federal agencies	$	46,982	$	47,376	$	12,693	$	13,022
State and municipal		163,407		174,821		135,011		143,890
Federal agency collateralized mortgage obligations		97,534		99,041		89,016		91,122
Federal agency mortgage-backed pools		166,029		174,137		173,797		179,351
Private labeled mortgage-backed pools		2,207		2,288		3,518		3,636
Corporate notes		32		41		32		24
Total available for sale investment securities	$	476,191	$	497,704	$	414,067	$	431,045
Held to maturity, State and Municipal	$	6,100	$	6,100	$	7,100	$	7,134

Investment securities increased by approximately $65.6 million compared to the end of 2011. This growth was primarily the result of acquiring $63.7 million of investment securities through the Heartland acquisition.

Net loans increased $172.2 million since December 31, 2011. This increase was the result of $114.6 million in net loans acquired in the Heartland acquisition and organic increases in commercial and mortgage warehouse loans of $24.7 million and $35.9 million, respectively. These organic increases were partially offset by decreases in real estate and consumer loans of $1.4 million and $2.0 million, respectively. The increase in commercial loans is the direct result of increased calling efforts and market expansion allowing opportunities to increase Horizon’s market share within the Company’s footprint. Mortgage warehouse loans increased as a result of market expansion and refinancing activity.

Total deposits increased $297.1 million during the first nine months of 2012. This increase was the result of $211.2 million in deposits acquired in the Heartland acquisition and organic increases $85.9 million. Organically, non-interest bearing deposit accounts increased $21.9 million due to increased calling and marketing efforts, interest bearing deposit accounts increased $125.0 million primarily due to increased municipal deposits, and time deposits decreased $61.0 million due a decrease in brokered deposits and movement of funds from consumer certificates of deposit to interest bearing deposit accounts during the first nine months of 2012.

The Company’s borrowings decreased $37.0 million from December 31, 2011. At September 30, 2012, the Company had $123.9 million in short-term funds borrowed compared to $157.0 million at December 31, 2011. The Company uses short-term borrowings to fund the increase in mortgage warehouse lending when it is determined that the loan demand may fluctuate as a result of refinancing activity. In addition, the Company’s current balance sheet strategy is to utilize a reasonable level of short-term borrowing during extended low rate environments in addition to what is needed for the fluctuations in mortgage warehouse lending.

Stockholders’ equity totaled $155.9 million at September 30, 2012 compared to $121.5 million at December 31, 2011. The increase in stockholders’ equity during the period was the result of $19.7 million from the

42

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

issuance of common shares in the Heartland transaction, the generation of net income and an increase in accumulated other comprehensive income, net of dividends declared. At September 30, 2012, the ratio of average stockholders’ equity to average assets was 8.45% compared to 7.96% for December 31, 2011. Book value per common share at September 30, 2012 increased to $16.64 compared to $14.68 at December 31, 2011.

Results of Operations

Overview

Consolidated net income for the three-month period ended September 30, 2012 was $4.9 million, an increase of 41.9% from the $3.4 million for the same period in 2011. Earnings per common share for the three months ended September 30, 2012 increased to $0.56 basic and $0.54 diluted, compared to $0.37 basic and $0.36 diluted for the same three-month period in 2011. Dividends paid on preferred shares reduced diluted earnings per share by $0.01 and $0.09 per share for the three-month periods ended September 30, 2012 and 2011, respectively.

Consolidated net income for the nine-month period ended September 30, 2012 was $14.4 million, an increase of 55.0% from the $9.3 million for the same period in 2011. Earnings per common share for the nine months ended September 30, 2012 increased to $1.81 basic and $1.75 diluted, compared to $1.08 basic and $1.05 diluted for the same nine-month period in 2011. Dividends paid on preferred shares reduced diluted earnings per share by $0.04 and $0.17 per share for the nine-month periods ended September 30, 2012 and 2011, respectively.

Net Interest Income

The largest component of net income is net interest income. Net interest income is the difference between interest income, principally from loans and investment securities, and interest expense, principally on deposits and borrowings. Changes in the net interest income are the result of changes in volume and the net interest spread, which affects the net interest margin. Volume refers to the average dollar levels of interest-earning assets and interest-bearing liabilities. Net interest spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Net interest margin refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities.

The reduction in interest rates has influenced the cost of the Company’s interest bearing liabilities more significantly than the reduction in the yields received on the Company’s interest earning assets, resulting in an increase of the net interest margin. Management does not expect a significant rise in interest rates in the short term, but an increase in rates is expected at some time in the future due to the current historically low interest rate environment.

Net interest income during the three months ended September 30, 2012 was $15.0 million, an increase of $3.0 million over the $12.0 million earned during the same period in 2011. Yields on the Company’s interest-earning assets decreased by 27 basis points to 4.70% from 4.97% for the three months ended September 30, 2012 and 2011, respectively. Interest income increased $2.7 million from $16.0 million for the three months ended September 30, 2011 to $18.7 million for the same period in 2012. This increase was due to an increase in interest earning assets offset by the lower yield on new and repriced earning assets. However, the asset yields on loans receivable has not declined at the same pace as some market indices partially due to interest rate floors that are in place on approximately $456.6 million of the Company’s $618.4 million of adjustable rate loans.

43

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Rates paid on interest-bearing liabilities decreased by 31 basis points for the three months ended September 30, 2012 compared to the same period in 2011 due to the lower interest rate environment. Interest expense decreased $300,000 from $4.0 million for the three-months ended September 30, 2011 to $3.7 million for the same period in 2012. This decrease was due to the lower rates being paid on the Company’s interest bearing liabilities. Due to a more significant decrease in the rates paid on the Company’s interest-bearing liabilities compared to the decrease in yields received on the Company’s interest-earning assets the net interest margin increased 3 basis points from 3.76% for the three months ended September 30, 2011 to 3.79% for the same period in 2012.

The following are the average balance sheets for the three months ending:

	Three Months Ended September 30, 2012								Three Months Ended September 30, 2011
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
ASSETS
Interest-earning assets
Federal funds sold	$	13,854		$	8		0.23	%	$	2,265		$	1		0.18	%
Interest-earning deposits		6,252			2		0.13	%		14,868			1		0.03	%
Investment securities - taxable		383,200			2,168		2.25	%		336,027			2,540		3.00	%
Investment securities - non-taxable (1)		121,428			1,014		5.27	%		109,875			988		5.41	%
Loans receivable (2)(3)(4)		1,112,712			15,527		5.56	%		855,938			12,481		5.79	%
Total interest-earning assets (1)		1,637,446			18,719		4.70	%		1,318,973			16,011		4.97	%
Noninterest-earning assets
Cash and due from banks		21,385								17,169
Allowance for loan losses		(18,195	)							(18,823	)
Other assets		121,919								99,560
	$	1,762,555							$	1,416,879
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities
Interest-bearing deposits	$	1,041,268		$	1,638		0.63	%	$	871,621		$	1,978		0.90	%
Borrowings		324,975			1,597		1.96	%		259,783			1,583		2.42	%
Subordinated debentures		33,353			485		5.78	%		31,446			459		5.79	%
Total interest-bearing liabilities		1,399,596			3,720		1.06	%		1,162,850			4,020		1.37	%
Noninterest-bearing liabilities
Demand deposits		196,640								121,034
Accrued interest payable and other liabilities		17,435								11,158
Shareholders’ equity		148,884								121,837
	$	1,762,555							$	1,416,879
Net interest income/spread				$	14,999		3.64	%				$	11,991		3.60	%
Net interest income as a percent of average interest earning assets (1)							3.79	%							3.76	%

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

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

(3) Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loans fees.

(4) Loan fees and late fees included in interest on loans.

44

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Net interest income during the nine months ended September 30, 2012 was $41.2 million, an increase of $6.7 million over the $34.5 million earned during the same period in 2011. Yields on the Company’s interest-earning assets decreased by 19 basis points to 4.77% for the nine months ended September 30, 2012 from 4.96% for the same period in 2011. Interest income increased $4.9 million from $47.2 million for the nine months ended September 30, 2011 to $52.1 million for the same period in 2012. This increase was due to an increase in interest earning assets offset partially by the reduction in the yield on interest earning assets.

Rates paid on interest-bearing liabilities decreased by 33 basis points for the nine months ended September 30, 2012 compared to the same period in 2011 due to the lower interest rate environment. Interest expense decreased $1.8 million from $12.6 million for the nine-months ended September 30, 2011 to $10.9 million for the same period in 2012. This decrease was due to the lower rates being paid on the Company’s interest bearing liabilities partially offset with a higher volume of interest bearing liabilities. Due to a more significant decrease in the rates paid on the Company’s interest-bearing liabilities compared to the decrease in yields received on the Company’s interest-earning assets the net interest margin increased 13 basis points from 3.67% for the nine months ended September 30, 2011 to 3.80% for the same period in 2012.

The following are the average balance sheets for the nine months ending:

	Nine Months Ended September 30, 2012								Nine Months Ended September 30, 2011
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
ASSETS
Interest-earning assets
Federal funds sold	$	6,870		$	13		0.25	%	$	26,448		$	49		0.25	%
Interest-earning deposits		3,533			4		0.15	%		8,837			2		0.03	%
Investment securities - taxable		358,935			6,721		2.50	%		329,903			7,777		3.15	%
Investment securities - non-taxable (1)(2)		111,750			2,944		4.89	%		112,133			3,066		5.22	%
Loans receivable (2)(3)(4)		1,009,052			42,386		5.62	%		830,432			36,260		5.85	%
Total interest-earning assets (1)		1,490,140			52,068		4.77	%		1,307,753			47,154		4.96	%
Noninterest-earning assets
Cash and due from banks		17,708								15,756
Allowance for loan losses		(18,970	)							(18,992	)
Other assets		95,986								97,540
	$	1,584,864							$	1,402,057
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities
Interest-bearing deposits	$	958,651		$	4,803		0.67	%	$	889,531		$	6,510		0.98	%
Borrowings		299,074			4,635		2.07	%		237,491			4,760		2.68	%
Subordinated debentures		31,606			1,427		6.03	%		31,446			1,363		5.80	%
Total interest-bearing liabilities		1,289,331			10,865		1.13	%		1,158,468			12,633		1.46	%
Noninterest-bearing liabilities
Demand deposits		154,244								115,454
Accrued interest payable and other liabilities		13,387								9,989
Shareholders’ equity		134,820								118,146
	$	1,591,782							$	1,402,057
Net interest income/spread				$	41,203		3.65	%				$	34,521		3.50	%
Net interest income as a percent of average interest earning assets (1)							3.80	%							3.67	%

45

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

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

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

(3) Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loans fees.

(4) Loan fees and late fees included in interest on loans.

Provision for Loan Losses

Horizon assesses the adequacy of its Allowance for Loan and Lease Losses (“ALLL”) by regularly reviewing the performance of its loan portfolios. During the third quarter of 2012, a provision for loan losses of $1.0 million was required to adequately fund the ALLL compared to a provision of $1.6 million for the third quarter of 2011. Commercial loan net charge-offs during the third quarter of 2012 were $334,000, residential mortgage loan net charge-offs were $205,000, and installment loans net charge-offs were $308,000. A single credit required a $500,000 specific reserve during the third quarter, contributing to the required provision for loan losses. The ALLL balance at September 30, 2012 was $18.6 million or 1.58% of total loans. This compares to an ALLL balance of $18.9 million at December 31, 2011 or 1.89% of total loans and $19.1 million at September 30, 2011 or 2.04% of total loans. The decrease in the ratio at September 30, 2012 was primarily due to the increase in total loans from the Heartland acquisition that were recorded at fair value with no allowance allocated to them.

For the nine months ended September 30, 2012, the provision for loan losses totaled $1.8 million compared to $4.4 million in the prior year for the same period. The commercial loans net charge-offs for the first nine months of 2012 were $280,000, real estate loans had net charge-offs of $377,000, and installment loans had net charge-offs of $1.5 million.

No assurance can be given that Horizon will not, in any particular period, sustain loan losses that are significant in relation to the amount reserved, or that subsequent evaluations of the loan portfolio, in light of factors then prevailing, including economic conditions and management’s ongoing quarterly assessments of the portfolio, will not require increases in the allowance for loan losses. Horizon considers the allowance for loan losses to be appropriate to cover probable incurred losses in the loan portfolio as of September 30, 2012.

Non-performing loans totaled $24.4 million on September 30, 2012, up from $20.8 million on June 30, 2012, and $23.6 million on September 30, 2011. The increase was due to the Heartland acquisition. Excluding Heartland, non-performing loans declined to $19.1 million from $20.8 million at June 30, 2012. As a percentage of total loans, non-performing loans were 2.08% on September 30, 2012, up from 2.07% on June 30, 2012, and 2.52% on September 30, 2011.

Other Real Estate Owned (OREO) totaled $2.6 million on September 30, 2012, up from $1.0 million on June 30, 2012, but down from $3.6 million on September 30, 2011. During the quarter, five properties with a book value of $431,000 were sold, four properties with a fair value of $405,000 were acquired from Heartland, and twelve properties with a book value of $1.6 million as of June 30, 2012 were transferred into OREO. On September 30, 2012, OREO was comprised of 21 properties. Of these, ten totaling $1.9 million were commercial real estate and twelve totaling $716,000 were residential real estate.

46

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Other Income

The following is a summary of changes in other income:

	Three Months Ended
Other income	September 30 2012			September 30 2011			Amount Change			Percent Change
Service charges on deposit accounts	$	1,002		$	802		$	200			24.9	%
Wire transfer fees		248			167			81			48.5	%
Interchange fees		885			721			164			22.7	%
Fiduciary activities		971			1,016			(45	)		-4.4	%
Gain on sale of securities		2			1,115			(1,113	)		-99.8	%
Gain on sale of mortgage loans		4,436			2,145			2,291			106.8	%
Mortgage servicing net of impairment		(355	)		(172	)		(183	)		106.4	%
Increase in cash surrender value of bank owned life insurance		300			245			55			22.4	%
Death benefit on officer life insurance		—			453			(453	)		-100.0	%
Other income		221			46			175			380.4	%
Total other income	$	7,710		$	6,538		$	1,172			17.9	%

Service charges on deposit accounts were $200,000 higher and interchange fees were $164,000 higher during the third quarter of 2012 compared to the same period in 2011 primarily due to an increase in transaction accounts and volume. The residential mortgage loan activity during the third quarter of 2012 generated $4.4 million of income from the gain on sale of mortgage loans, up $2.3 million from the same period in 2011. This increase was primarily due to more favorable pricing on loans sold and additional volume. Loans originated for sale during the third quarter of 2012 were $105.2 million compared to $66.0 million for the same period in 2011.

	Nine Months Ended
Other income	September 30 2012			September 30 2011		Amount Change			Percent Change
Service charges on deposit accounts	$	2,477		$	2,422	$	55			2.3	%
Wire transfer fees		643			412		231			56.1	%
Interchange fees		2,227			1,905		322			16.9	%
Fiduciary activities		2,928			2,911		17			0.6	%
Gain on sale of securities		2			1,754		(1,752	)		-99.9	%
Gain on sale of mortgage loans		10,121			3,986		6,135			153.9	%
Mortgage servicing net of impairment		(95	)		691		(786	)		-113.7	%
Increase in cash surrender value of bank owned life insurance		760			661		99			15.0	%
Death benefit on officer life insurance		—			453		(453	)		-100.0	%
Other income		344			105		239			227.6	%
Total other income	$	19,407		$	15,300	$	4,107			26.8	%

Service charges on deposit accounts were $55,000 higher and interchange fees were $322,000 higher during the first nine months of 2012 compared to the same period in 2011 due to an increase in transaction accounts and volume. Wire transfer fees were $231,000 higher during the first nine months of 2012 compared to the same period in 2011 due to an increase in mortgage warehouse activity. The residential mortgage loan activity during the first nine months of 2012 generated $10.1 million of income from the gain on sale of mortgage loans, up $6.1 million from the same period in 2011. This increase was primarily due to more favorable

47

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

pricing on loans sold and additional volume. Loans originated for sale during the first nine months of 2012 were $283.8 million compared to $178.6 million for the same period in 2011. In addition, loans originated for sale for the first nine months of 2011 included the recovery of $626,000 of impairment on the Company’s mortgage servicing asset, a gain on the sale of securities of $1.8 million and $453,000 from the death benefit on officer life insurance. In comparison, the amount for the first nine months of 2012 includes $379,000 of impairment on the Company’s mortgage servicing asset and a $2,000 gain on sales of securities for the same period in 2012.

Other Expense

The following is a summary of changes in other expense:

	Three Months Ended
Other expense	September 30 2012		September 30 2011		Amount Change			Percent Change
Salaries	$	5,191	$	3,975	$	1,216			30.6	%
Commission and bonuses		1,484		942		542			57.5	%
Employee benefits		1,230		1,164		66			5.7	%
Net occupancy expenses		1,186		1,056		130			12.3	%
Data processing		754		549		205			37.3	%
Professional fees		366		359		7			1.9	%
Outside services and consultants		624		454		170			37.4	%
Loan expense		1,311		820		491			59.9	%
FDIC deposit insurance		291		254		37			14.6	%
Other losses		309		1,088		(779	)		-71.6	%
Other expenses		2,094		1,652		442			26.8	%
Total other expense	$	14,840	$	12,313	$	2,527			20.5	%

Total other expenses were $2.5 million higher in the third quarter of 2012 compared to the third quarter of 2011. Salaries, commissions and bonuses, and employee benefits increased $1.8 million compared to the same quarter in 2011. This increase is the result of annual merit pay, increase in staff due to expansion, increased employee benefits costs, commissions earned and bonus accruals. In addition, compensation expense was $412,000 higher due to one-time costs for the Heartland merger. Also included in the third quarter of 2012’s other expense were data processing costs, professional fees, fees for outside services and consultants and approximately $588,000 of additional transaction costs related to the Heartland merger. The increase in loan expense during the third quarter of 2012 compared to the prior year was related to an increase in loan volume.

48

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

	Nine Months Ended
	September 30		September 30		Amount			Percent
Other expense	2012		2011		Change			Change
Salaries	$	13,331	$	11,509	$	1,822			15.8	%
Commission and bonuses		3,450		2,158		1,292			59.9	%
Employee benefits		3,626		3,245		381			11.7	%
Net occupancy expenses		3,216		3,176		40			1.3	%
Data processing		1,883		1,450		433			29.9	%
Professional fees		1,483		1,039		444			42.7	%
Outside services and consultants		1,621		1,221		400			32.8	%
Loan expense		2,879		2,276		603			26.5	%
FDIC deposit insurance		798		944		(146	)		-15.5	%
Other losses		501		1,365		(864	)		-63.3	%
Other expenses		5,392		4,675		717			15.3	%
Total other expense	$	38,180	$	33,058	$	5,122			15.5	%

Total other expenses were $5.1 million higher in the first nine months of 2012 compared to the same period in 2011. Salaries, commissions and bonuses, and employee benefits increased $3.5 million compared to the same period in 2011. This increase is the result of annual merit pay, increase in staff due to expansion, increased employee benefits costs, commissions earned and bonus accruals. In addition, compensation expense was $412,000 higher due to one-time costs for the Heartland merger. Included in the first nine months of 2012’s other expense were data processing costs, professional fees, fees for outside services and consultants and approximately $1.1 million of transaction costs related to the Heartland merger. The increase in loan expense during the first nine months of 2012 compared to the prior year was related to an increase in loan volume. FDIC deposit insurance expense decreased during the first nine months of 2012 compared to 2011 as the assessment calculation has resulted in lower expense for the Company.

Income Taxes

Income tax expense for the third quarter of 2012 was $2.0 million compared to $1.2 million of tax expense for the third quarter of 2011. The effective tax rate for the third quarter of 2012 was 29.0% compared to 26.5% in 2011. The increase in the effective tax rate is primarily due to higher income before income tax for the third quarter of 2012 compared to the same period in 2011 with a similar level of tax exempt income.

Income tax expense for the first nine months of 2012 was $6.2 million compared to $3.0 million of tax expense for the first nine months of 2011. The effective tax rate for the first nine months of 2012 was 30.3% compared to 24.7% in 2011. The increase in the effective tax rate is primarily due to higher income before income tax for the first nine months of 2012 compared to the same period in 2011 with a similar level of tax exempt income.

Liquidity

The Bank maintains a stable base of core deposits provided by long-standing relationships with individuals 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, proceeds from the sale of residential mortgage loans, and borrowing relationships with correspondent banks, including the FHLB. During the nine months ended September 30, 2012, cash and cash equivalents increased by approximately $21.1 million. At September 30, 2012, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $364.1 million in unused credit lines with various money center banks, including the FHLB and the FRB Discount Window compared to $288.7 million at December 31, 2011 and $211.8 million at September 30, 2011.

49

HORIZON BANCORP AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the Three and Nine Months Ended September 30, 2012

Capital Resources

The capital resources of Horizon and the Bank exceeded regulatory capital ratios for “well capitalized” banks at September 30, 2012. Stockholders’ equity totaled $155.9 million as of September 30, 2012, compared to $121.5 million as of December 31, 2011. At September 30, 2012, the ratio of average stockholders’ equity to average assets was 8.45% compared to 7.96% at December 31, 2011. Horizon’s capital increased during the nine months as a result of the issuance of common stock in the Heartland transaction, increased earnings and an increase in accumulated other comprehensive income, net of dividends declared and the amortization of unearned compensation.

The Company currently intends to continue its participation in the Small Business Lending Fund, pursuant to which it issued preferred stock to the US Treasury, since the growth in the Company’s small business lending has reduced the dividend cost. For the three months ending September 30, 2012, the dividend cost was approximately $62,500, or 2.0% annualized. For the fourth quarter of 2012, the dividend cost will be approximately $156,250, or 5.0% annualized, and for the first quarter of 2013, the dividend cost will be approximately $146,168 or 4.7% annualized. The increase in the fourth quarter’s dividend cost was due to the reduction of small business loans during the first quarter of 2012, the measurement period for the fourth quarter’s dividend cost, primarily due to the Company’s reduction in substandard loans which were small business loans. The Company plans to reserve cash for the ability to redeem this preferred stock if and when the cost of this capital exceeds other forms of capital.

Horizon declared common stock dividends in the amount of $0.27 per share during the first nine months of 2012 compared to $0.23 for the same period of 2011. The dividend payout ratio (dividends as a percent of basic earnings per share) was 15.1% and 21.4% for the first nine months of 2012 and 2011, respectively. For additional information regarding dividend, see Horizon’s Annual Report on Form 10-K for 2011.

50

HORIZON BANCORP AND SUBSIDIARIES

Quantitative and Qualitative Disclosures About Market Risk

For the Three and Nine Months Ended September 30, 2012

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Horizon’s 2011 Annual Report on Form 10-K for analysis of its interest rate sensitivity. Horizon believes there have been no significant changes in its interest rate sensitivity since it was reported in its 2011 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation Of Disclosure Controls And Procedures

Based on an evaluation of disclosure controls and procedures as of September 30, 2012, Horizon’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Horizon’s disclosure controls (as defined in Exchange Act Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on such evaluation, such officers have concluded that, as of the evaluation date, Horizon’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by Horizon in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time specified in Securities and Exchange Commission rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure.

Changes In Internal Control Over Financial Reporting

Horizon’s management, including its Chief Executive Officer and Chief Financial Officer, also have concluded that during the fiscal quarter ended September 30, 2012, there have been no changes in Horizon’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Horizon’s internal control over financial reporting.

51

HORIZON BANCORP AND SUBSIDIARIES

Part II – Other Information

For the Three and Nine Months Ended September 30, 2012

ITEM 1. LEGAL PROCEEDINGS

Horizon and its subsidiaries are involved in various legal proceedings incidental to the conduct of their business. Management does not expect that the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes from the factors previously disclosed under Item 1A of Horizon’s Annual Report on Form 10-K for 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

Not Applicable

52

HORIZON BANCORP AND SUBSIDIARIES

Part II – Other Information

For the Three and Nine Months Ended September 30, 2011

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit No.	Description
31.1	Certification of Craig M. Dwight
31.2	Certification of Mark E. Secor
32	Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive Data Files*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

53

SIGNATURES

Pursuant to the requirements 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
Dated: November 8, 2012		/s/ Craig M. Dwight
		Craig M. Dwight
		Chief Executive Officer
Dated: November 8, 2012		/s/ Mark E. Secor
		Mark E. Secor
		Chief Financial Officer

54

INDEX TO EXHIBITS

Exhibit No.	Description	Location
Exhibit 31.1	Certification of Craig M. Dwight	Attached
Exhibit 31.2	Certification of Mark E. Secor	Attached
Exhibit 32	Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Attached
Exhibit 101	Interactive Data Files*	Attached

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

55

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CRAIG M. DWIGHT

I, Craig M. Dwight, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Horizon Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November 8, 2012	/s/ Craig M. Dwight
	Craig M. Dwight
	Chief Executive Officer

56

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF MARK E. SECOR

I, Mark E. Secor, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Horizon Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November8, 2012	/s/ Mark E. Secor
	Mark E. Secor
	Chief Financial Officer

57

EX-32

EXHIBIT 32

HORIZON BANCORP

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Horizon Bancorp (the “Company”) certifies that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 8, 2012	/s/ Craig M. Dwight
	Craig M. Dwight Chief Executive Officer

Dated: November 8, 2012	/s/ Mark E. Secor
	Mark E. Secor Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Horizon Bancorp and will be retained by Horizon Bancorp and furnished to the Securities Exchange Commission or its staff upon request.

XML

Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Gross unrealized losses and the fair of value investments
Fair Value less than 12 months	$ 33,298	$ 25,016
Unrealized losses less than 12 months	(182)	(167)
Fair value more than 12 months		1,971
Unrealized losses more than 12 months		(27)
Total fair value	33,298	26,987
Total unrealized losses	(182)	(194)
State and municipal [Member]
Gross unrealized losses and the fair of value investments
Fair Value less than 12 months	9,535	1,550
Unrealized losses less than 12 months	(62)	(44)
Fair value more than 12 months		1,948
Unrealized losses more than 12 months		(27)
Total fair value	9,535	3,498
Total unrealized losses	(62)	(71)
Federal agency collateralized mortgage obligations [Member]
Gross unrealized losses and the fair of value investments
Fair Value less than 12 months	19,284
Unrealized losses less than 12 months	(114)
Fair value more than 12 months
Unrealized losses more than 12 months
Total fair value	19,284
Total unrealized losses	(114)
Federal agency mortgage-backed pools [Member]
Gross unrealized losses and the fair of value investments
Fair Value less than 12 months	4,479	23,442
Unrealized losses less than 12 months	(6)	(115)
Fair value more than 12 months		23
Unrealized losses more than 12 months
Total fair value	4,479	23,465
Total unrealized losses	(6)	(115)
Corporate notes [Member]
Gross unrealized losses and the fair of value investments
Fair Value less than 12 months		24
Unrealized losses less than 12 months		(8)
Fair value more than 12 months
Unrealized losses more than 12 months
Total fair value		24
Total unrealized losses		$ (8)

XML

Non-Performing Loans and Impaired Loans (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012
Non - Performing Loans and Impaired Loans (Textual) [Abstract]
Restructured loan reported in TDRs	8,400,000
Specific reserves allocated to troubled debt restructuring	1,300,000
Loans with an aggregate credit exposure	500,000
Restructured loan returned to accruing status number of Consecutive Payments Of loan	6
Maximum [Member]
Financing Receivable, Modifications [Line Items]
Delay or shortfall in payments of loan	30 days or more
Minimum [Member]
Financing Receivable, Modifications [Line Items]
Period for loans moved to non accrual status	90 days or more
Performing Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Restructured loan	3,400,000
Good Pass [Member]
Financing Receivable, Modifications [Line Items]
Number of consecutive years of profit for Good Pass Rating	3 years
Number of consecutive years of profit Unaudited Financial Information for Good Pass Rating	5 years
Number of years of Satisfactory Relationship with bank for Good Pass Rating	5 years
Satisfactory Pass [Member]
Financing Receivable, Modifications [Line Items]
Number of years of Satisfactory Repayment for Good Pass Rating, Minimum	2 years

XML

Non-Performing Loans and Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	$ 15,887	$ 14,368
Loans Past Due Over 90 Days Still Accruing	109	37
Non Performing TDR's	5,061	2,198
Performing TDR's	2,981	3,540
Total Non-Performing Loans	24,038	20,143
Commercial [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	8,922	6,905
Loans Past Due Over 90 Days Still Accruing	9
Non Performing TDR's	2,468	1,053
Total Non-Performing Loans	11,579	7,958
Commercial [Member] | Owner occupied real estate [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	3,887	2,515
Non Performing TDR's	1,472
Total Non-Performing Loans	5,359	2,515
Commercial [Member] | Non owner occupied real estate [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	3,754	3,970
Non Performing TDR's	375	152
Total Non-Performing Loans	4,129	4,122
Commercial [Member] | Residential development [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual
Loans Past Due Over 90 Days Still Accruing
Non Performing TDR's
Performing TDR's
Total Non-Performing Loans
Commercial [Member] | Development & Spec Land Loans [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	789	90
Total Non-Performing Loans	789	90
Commercial [Member] | Commercial and industrial [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	492	330
Loans Past Due Over 90 Days Still Accruing	9
Non Performing TDR's	801	901
Total Non-Performing Loans	1,302	1,231
Real estate [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	4,266	4,694
Loans Past Due Over 90 Days Still Accruing	57
Non Performing TDR's	2,361	1,120
Performing TDR's	2,149	2,682
Total Non-Performing Loans	8,833	8,496
Real estate [Member] | Residential mortgage [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	4,266	4,550
Loans Past Due Over 90 Days Still Accruing	57
Non Performing TDR's	2,361	1,120
Performing TDR's	1,857	2,389
Total Non-Performing Loans	8,541	8,059
Real estate [Member] | Residential construction [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual		144
Performing TDR's	292	293
Total Non-Performing Loans	292	437
Real estate [Member] | Mortgage warehouse [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual
Loans Past Due Over 90 Days Still Accruing
Non Performing TDR's
Performing TDR's
Total Non-Performing Loans
Consumer [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	2,699	2,769
Loans Past Due Over 90 Days Still Accruing	43	37
Non Performing TDR's	52	25
Performing TDR's	832	858
Total Non-Performing Loans	3,626	3,689
Consumer [Member] | Direct Installment [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	97	256
Loans Past Due Over 90 Days Still Accruing	1	1
Total Non-Performing Loans	98	257
Consumer [Member] | Direct Installment Purchased [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Loans Past Due Over 90 Days Still Accruing		4
Total Non-Performing Loans		4
Consumer [Member] | Indirect Installment [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	923	926
Loans Past Due Over 90 Days Still Accruing	42	29
Total Non-Performing Loans	965	955
Consumer [Member] | Home Equity [Member]
Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDR's") by class of loans:
Nonaccrual	1,679	1,587
Loans Past Due Over 90 Days Still Accruing		3
Non Performing TDR's	52	25
Performing TDR's	832	858
Total Non-Performing Loans	$ 2,563	$ 2,473

XML

Derivative Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair value of derivative financial instruments
Total Asset Derivative	$ 3,785	$ 2,849
Total Liability Derivative	8,343	7,101
Derivatives designated as hedging instruments [Member]
Fair value of derivative financial instruments
Total Asset Derivative	2,523	2,187
Total Liability Derivative	8,343	7,101
Derivatives designated as hedging instruments [Member] | Interest Rate Contracts One [Member] | Loans [Member]
Fair value of derivative financial instruments
Total Asset Derivative	443	754
Derivatives designated as hedging instruments [Member] | Interest Rate Contracts One [Member] | Other Liabilities [Member]
Fair value of derivative financial instruments
Total Liability Derivative	2,523	2,187
Derivatives designated as hedging instruments [Member] | Interest Rate Contracts Two [Member] | Other Assets [Member]
Fair value of derivative financial instruments
Total Asset Derivative	2,080	1,433
Derivatives designated as hedging instruments [Member] | Interest Rate Contracts Two [Member] | Other Liabilities [Member]
Fair value of derivative financial instruments
Total Liability Derivative	5,820	4,914
Derivatives not designated as hedging instruments [Member]
Fair value of derivative financial instruments
Total Asset Derivative	1,262	662
Total Liability Derivative
Derivatives not designated as hedging instruments [Member] | Mortgage loan contracts [Member] | Other Assets [Member]
Fair value of derivative financial instruments
Total Asset Derivative	1,262	662
Derivatives not designated as hedging instruments [Member] | Mortgage loan contracts [Member] | Other Liabilities [Member]
Fair value of derivative financial instruments
Total Liability Derivative

XML

Allowance for Loan Losses (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
Allowance for loan losses and the recorded investment in loans by portfolio segment
Total ending allowance balance	$ 18,568	$ 18,374	$ 18,882	$ 19,110	$ 18,586	$ 19,064
Total ending loans balance	12,904			12,562
Allowance for Loan Losses [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Allowance For Loan Losses, Individually evaluated for impairment	2,403		2,136
Allowance For Loan Losses, Collectively evaluated for impairment	16,165		16,746
Total ending allowance balance	18,568		18,882
Loans [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Loans: Individually evaluated for impairment	12,865		7,960
Loans: Collectively evaluated for impairment	1,145,956		978,189
Total ending loans balance	1,158,821		986,149
Commercial [Member] | Allowance for Loan Losses [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Allowance For Loan Losses, Individually evaluated for impairment	2,403		2,136
Allowance For Loan Losses, Collectively evaluated for impairment	5,655		5,881
Total ending allowance balance	8,058		8,017
Commercial [Member] | Loans [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Loans: Individually evaluated for impairment	12,865		7,960
Loans: Collectively evaluated for impairment	436,121		345,350
Total ending loans balance	448,986		353,310
Real estate [Member] | Allowance for Loan Losses [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Allowance For Loan Losses, Collectively evaluated for impairment	2,974		2,472
Total ending allowance balance	2,974		2,472
Real estate [Member] | Loans [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Loans: Collectively evaluated for impairment	177,218		157,663
Total ending loans balance	177,218		157,663
Mortgage Warehousing [Member] | Allowance for Loan Losses [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Allowance For Loan Losses, Collectively evaluated for impairment	1,716		1,695
Total ending allowance balance	1,716		1,695
Mortgage Warehousing [Member] | Loans [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Loans: Collectively evaluated for impairment	244,660		208,726
Total ending loans balance	244,660		208,726
Consumer [Member] | Allowance for Loan Losses [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Allowance For Loan Losses, Collectively evaluated for impairment	5,820		6,698
Total ending allowance balance	5,820		6,698
Consumer [Member] | Loans [Member]
Allowance for loan losses and the recorded investment in loans by portfolio segment
Loans: Collectively evaluated for impairment	287,957		266,450
Total ending loans balance	$ 287,957		$ 266,450

XML

Accounting Policies (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Accounting Policies (Textual) [Abstract]
Shares, non-dilutive	0	66,551	12,750	73,359
Reclassifications effect on net income			$ 0
Stock split conversion ratio			1.5

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Derivative Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Derivative in fair value hedging relationship [Member]
Effect of the derivative instruments on the consolidated statement of income Derivative in fair value hedging relationship
Location of gain (loss) recognized on derivative
Interest Rate Contracts One [Member] | Derivative in fair value hedging relationship [Member] | Interest Income [Member]
Effect of the derivative instruments on the consolidated statement of income Derivative in fair value hedging relationship
Location of loss recognized on derivative	112	394	336	335
Interest Rate Contracts Two [Member] | Derivative in fair value hedging relationship [Member] | Interest Income [Member]
Effect of the derivative instruments on the consolidated statement of income Derivative in fair value hedging relationship
Location of gain recognized on derivative	(112)	(394)	(336)	(335)
Derivatives not designated as hedging instruments [Member] | Mortgage contracts [Member] | Other income - gain on sale of loans [Member]
Effect of the derivative instruments on the consolidated statement of income Derivative in fair value hedging relationship
Location of loss recognized on derivative	320		600
Location of gain recognized on derivative		$ 359		$ 1,157

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Loans (Tables)

9 Months Ended

Sep. 30, 2012

Loans [Abstract]

Summary of Loans

	September 30 2012			December 31 2011
Commercial
Working capital and equipment	$	193,671		$	170,325
Real estate, including agriculture		242,212			172,910
Tax exempt		4,719			3,818
Other		6,812			5,323
Total		447,414			352,376
Real estate
1–4 family		172,770			153,039
Other		3,783			4,102
Total		176,553			157,141
Consumer
Auto		137,490			134,686
Recreation		5,005			4,737
Real estate/home improvement		30,905			27,729
Home equity		105,960			92,249
Unsecured		4,435			3,183
Other		3,053			2,793
Total		286,848			265,377
Mortgage warehouse		244,233			208,299
Total loans		1,155,048			983,193
Allowance for loan losses		(18,568	)		(18,882	)
Loans, net	$	1,136,480		$	964,311

Recorded investment of individual loan

September 30, 2012	Loan Balance			Interest Due		Deferred Fees / (Costs)			Recorded Investment
Owner occupied real estate	$	168,015		$	614	$	20		$	168,649
Non owner occupied real estate		187,953			547		55			188,555
Residential spec homes		1,130			2		—			1,132
Development & spec land loans		6,645			19		—			6,664
Commercial and industrial		83,589			390		7			83,986
Total commercial		447,332			1,572		82			448,986
Residential mortgage		164,720			646		91			165,457
Residential construction		11,742			19		—			11,761
Mortgage warehouse		244,233			427		—			244,660
Total real estate		420,695			1,092		91			421,878
Direct installment		30,247			116		(346	)		30,017
Direct installment purchased		518			—		—			518
Indirect installment		128,502			373		—			128,875
Home equity		128,671			620		(744	)		128,547
Total consumer		287,938			1,109		(1,090	)		287,957
Total loans		1,155,965			3,773		(917	)		1,158,821
Allowance for loan losses		(18,568	)		—		—			(18,568	)
Net loans	$	1,137,397		$	3,773	$	(917	)	$	1,140,253
December 31, 2011	Loan Balance			Interest Due		Deferred Fees / (Costs)			Recorded Investment
Owner occupied real estate	$	131,893		$	383	$	30		$	132,306
Non owner occupied real estate		142,269			360		94			142,723
Residential spec homes		3,574			6		—			3,580
Development & spec land loans		8,739			16		—			8,755
Commercial and industrial		65,774			169		3			65,946
Total commercial		352,249			934		127			353,310
Residential mortgage		150,893			513		68			151,474
Residential construction		6,181			8		—			6,189
Mortgage warehouse		208,299			427		—			208,726
Total real estate		365,373			948		68			366,389
Direct installment		24,252			94		(360	)		23,986
Direct installment purchased		981			—		—			981
Indirect installment		127,751			420		(56	)		128,115
Home equity		113,561			559		(752	)		113,368
Total consumer		266,545			1,073		(1,168	)		266,450
Total loans		984,167			2,955		(973	)		986,149
Allowance for loan losses		(18,882	)		—		—			(18,882	)
Net loans	$	965,285		$	2,955	$	(973	)	$	967,267

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Non-Performing Loans and Impaired Loans (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 NoOfDefaults	Sep. 30, 2011 NoOfDefaults
Loans classified as troubled debt restructuring
Number of Defaults	7	6
Unpaid Principal Balance	$ 2,411	$ 1,569
Commercial [Member]
Loans classified as troubled debt restructuring
Number of Defaults	5	2
Unpaid Principal Balance	1,734	361
Commercial [Member] | Owner occupied real estate [Member]
Loans classified as troubled debt restructuring
Number of Defaults	3
Unpaid Principal Balance	1,473
Commercial [Member] | Non owner occupied real estate [Member]
Loans classified as troubled debt restructuring
Number of Defaults	2
Unpaid Principal Balance	261
Commercial [Member] | Residential development [Member]
Loans classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Commercial [Member] | Development & Spec Land Loans [Member]
Loans classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Commercial [Member] | Commercial and industrial [Member]
Loans classified as troubled debt restructuring
Number of Defaults		2
Unpaid Principal Balance		361
Real estate [Member]
Loans classified as troubled debt restructuring
Number of Defaults	2	2
Unpaid Principal Balance	677	1,143
Real estate [Member] | Residential mortgage [Member]
Loans classified as troubled debt restructuring
Number of Defaults	2	2
Unpaid Principal Balance	677	1,143
Real estate [Member] | Residential construction [Member]
Loans classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Real estate [Member] | Mortgage warehouse [Member]
Loans classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member]
Loans classified as troubled debt restructuring
Number of Defaults		2
Unpaid Principal Balance		65
Consumer [Member] | Direct Installment [Member]
Loans classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member] | Direct Installment Purchased [Member]
Loans classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member] | Home Equity [Member]
Loans classified as troubled debt restructuring
Number of Defaults		2
Unpaid Principal Balance		$ 65

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
Summary of Loans
Commercial, Total	$ 447,414		$ 352,376
Real Estate, Total	176,553		157,141
Consumer, Including Mortgage warehouse	286,848		265,377
Mortgage warehouse	244,233		208,299
Consumer Loans, net of mortgage warehouse	244,233		208,299
Total Loans	1,155,048		983,193
Allowance for loan losses	(18,568)	(18,374)	(18,882)	(19,110)	(18,586)	(19,064)
Loans, net	1,136,480		964,311
Consumer Loans Auto Financing Receivable [Member]
Summary of Loans
Consumer, Including Mortgage warehouse	137,490		134,686
Home equity line of credit [Member]
Summary of Loans
Consumer, Including Mortgage warehouse	105,960		92,249
Working capital and equipment [Member]
Summary of Loans
Commercial, Total	193,671		170,325
Real estate including agriculture [Member]
Summary of Loans
Commercial, Total	242,212		172,910
Tax exempt loans receivable [Member]
Summary of Loans
Commercial, Total	4,719		3,818
Other commercial loans [Member]
Summary of Loans
Commercial, Total	6,812		5,323
1-4 family [Member]
Summary of Loans
Real Estate, Total	172,770		153,039
Other [Member]
Summary of Loans
Real Estate, Total	3,783		4,102
Recreation consumer loans receivable [Member]
Summary of Loans
Consumer, Including Mortgage warehouse	5,005		4,737
Real estate home improvement loans receivable [Member]
Summary of Loans
Consumer, Including Mortgage warehouse	30,905		27,729
Unsecured Debt [Member]
Summary of Loans
Consumer, Including Mortgage warehouse	4,435		3,183
Other consumer loans [Member]
Summary of Loans
Consumer, Including Mortgage warehouse	$ 3,053		$ 2,793

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Fair value of securities
Total available for sale investment securities, Amortized Cost	$ 476,191	$ 414,067
Gross Unrealized Gains	21,695	17,172
Gross Unrealized Losses	(182)	(194)
Available-for-sale Securities, Fair Value Disclosure	497,704	431,045
Held-to-maturity, Amortized Cost	6,100	7,100
Held-to-maturity, Fair Value	6,100	7,134
U.S. Treasury and federal agencies [Member]
Fair value of securities
Total available for sale investment securities, Amortized Cost	46,982	12,693
Gross Unrealized Gains	394	329
Gross Unrealized Losses
Available-for-sale Securities, Fair Value Disclosure	47,376	13,022
State and municipal [Member]
Fair value of securities
Total available for sale investment securities, Amortized Cost	163,407	135,011
Gross Unrealized Gains	11,476	8,950
Gross Unrealized Losses	(62)	(71)
Available-for-sale Securities, Fair Value Disclosure	174,821	143,890
Held-to-maturity, Amortized Cost	6,100	7,100
Held-to-maturity, Gross Unrealized Gains		34
Federal agency collateralized mortgage obligations [Member]
Fair value of securities
Total available for sale investment securities, Amortized Cost	97,534	89,016
Gross Unrealized Gains	1,621	2,106
Gross Unrealized Losses	(114)
Available-for-sale Securities, Fair Value Disclosure	99,041	91,122
Federal agency mortgage-backed pools [Member]
Fair value of securities
Total available for sale investment securities, Amortized Cost	166,029	173,797
Gross Unrealized Gains	8,114	5,669
Gross Unrealized Losses	(6)	(115)
Available-for-sale Securities, Fair Value Disclosure	174,137	179,351
Private labeled mortgage-backed pools [Member]
Fair value of securities
Total available for sale investment securities, Amortized Cost	2,207	3,518
Gross Unrealized Gains	81	118
Gross Unrealized Losses
Available-for-sale Securities, Fair Value Disclosure	2,288	3,636
Corporate notes [Member]
Fair value of securities
Total available for sale investment securities, Amortized Cost	32	32
Gross Unrealized Gains	9
Gross Unrealized Losses		(8)
Available-for-sale Securities, Fair Value Disclosure	$ 41	$ 24

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Non-Performing Loans and Impaired Loans (Details 4) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Payment status by class of loan
30 - 59 Days Past Due	$ 5,065	$ 2,629
60 - 89 Days Past Due	3,286	653
Greater than 90 Days Past Due	109	37
Total Past Due	8,460	3,319
Loans Not Past Due	1,147,505	980,848
Total	1,155,965	984,167
Commercial [Member]
Payment status by class of loan
30 - 59 Days Past Due	1,441	351
60 - 89 Days Past Due	2,606	190
Greater than 90 Days Past Due	9
Total Past Due	4,056	541
Loans Not Past Due	443,276	351,708
Total	447,332	352,249
Commercial [Member] | Owner occupied real estate [Member]
Payment status by class of loan
30 - 59 Days Past Due	1,008	89
60 - 89 Days Past Due	110	168
Total Past Due	1,118	257
Loans Not Past Due	166,897	131,636
Total	168,015	131,893
Commercial [Member] | Non owner occupied real estate [Member]
Payment status by class of loan
30 - 59 Days Past Due		228
60 - 89 Days Past Due	123
Total Past Due	123	228
Loans Not Past Due	187,830	142,041
Total	187,953	142,269
Commercial [Member] | Residential development [Member]
Payment status by class of loan
Loans Not Past Due	1,130	3,574
Total	1,130	3,574
Commercial [Member] | Development & Spec Land Loans [Member]
Payment status by class of loan
Loans Not Past Due	6,645	8,739
Total	6,645	8,739
Commercial [Member] | Commercial and industrial [Member]
Payment status by class of loan
30 - 59 Days Past Due	433	34
60 - 89 Days Past Due	2,373	22
Greater than 90 Days Past Due	9
Total Past Due	2,815	56
Loans Not Past Due	80,774	65,718
Total	83,589	65,774
Real estate [Member]
Payment status by class of loan
30 - 59 Days Past Due	1,300	411
60 - 89 Days Past Due	197
Greater than 90 Days Past Due	57
Total Past Due	1,554	411
Loans Not Past Due	419,141	364,962
Total	420,695	365,373
Real estate [Member] | Residential mortgage [Member]
Payment status by class of loan
30 - 59 Days Past Due	1,300	411
60 - 89 Days Past Due	197
Greater than 90 Days Past Due	57
Total Past Due	1,554	411
Loans Not Past Due	163,166	150,482
Total	164,720	150,893
Real estate [Member] | Residential construction [Member]
Payment status by class of loan
Loans Not Past Due	11,742	6,181
Total	11,742	6,181
Real estate [Member] | Mortgage warehouse [Member]
Payment status by class of loan
Loans Not Past Due	244,233	208,299
Total	244,233	208,299
Consumer [Member]
Payment status by class of loan
30 - 59 Days Past Due	2,324	1,867
60 - 89 Days Past Due	483	463
Greater than 90 Days Past Due	43	37
Total Past Due	2,850	2,367
Loans Not Past Due	285,088	264,178
Total	287,938	266,545
Consumer [Member] | Direct Installment [Member]
Payment status by class of loan
30 - 59 Days Past Due	162	164
60 - 89 Days Past Due	243	22
Greater than 90 Days Past Due	1	1
Total Past Due	406	187
Loans Not Past Due	29,841	24,065
Total	30,247	24,252
Consumer [Member] | Direct Installment Purchased [Member]
Payment status by class of loan
30 - 59 Days Past Due		7
60 - 89 Days Past Due		14
Greater than 90 Days Past Due		4
Total Past Due		25
Loans Not Past Due	518	956
Total	518	981
Consumer [Member] | Indirect Installment [Member]
Payment status by class of loan
30 - 59 Days Past Due	1,124	1,333
60 - 89 Days Past Due	101	335
Greater than 90 Days Past Due	42	29
Total Past Due	1,267	1,697
Loans Not Past Due	127,235	126,054
Total	128,502	127,751
Consumer [Member] | Home Equity [Member]
Payment status by class of loan
30 - 59 Days Past Due	1,038	363
60 - 89 Days Past Due	139	92
Greater than 90 Days Past Due		3
Total Past Due	1,177	458
Loans Not Past Due	127,494	113,103
Total	$ 128,671	$ 113,561

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Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Other Comprehensive Income
Unrealized holding gains arising during the period	$ 2,458	$ 5,303	$ 4,537	$ 13,863
Less: reclassification adjustment for realized gains included in net income, net of taxes of $1 for three and nine months ended 2012, and $390 and $614, for three and nine months ended 2011, respectively	1	725	1	1,140
Unrealized gains (losses) on securities, total	2,456	4,188	4,535	12,109
Unrealized gain (loss) on derivative instruments	(262)	(3,002)	(906)	(3,489)
Net unrealized gains	2,194	1,186	3,629	8,620
Tax effect	(768)	(415)	(1,270)	(3,017)
Other comprehensive income	1,426	771	2,359	5,603
Unrealized gain on securities available for sale	21,514		21,514		16,978
Unrealized gain (loss) on derivative instruments	(5,820)		(5,820)		(4,914)
Tax effect	(5,493)		(5,493)		(4,222)
Total accumulated other comprehensive income	$ 10,201		$ 10,201		$ 7,842

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Disclosures About Fair Value of Assets and Liabilities (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Sep. 30, 2012
Hedged loans [Member]
Reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs
Beginning balance	$ 49,618	$ 48,411	$ 50,088	$ 54,362
Included in net income	393	351	(410)	(74)
Purchases, issuances, and settlements	1,797	1,200	(352)	6,114
Principal payments	(628)	(344)	(915)	(491)
Transfers out to Level 2				(59,911)
Ending balance	51,180	49,618	48,411
Forward sale commitments [Member]
Reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs
Beginning balance	455	281	407	662
Included in net income	294	174	(126)	(152)
Transfers out to Level 2				(510)
Ending balance	749	455	281
Interest Rate Swap [Member]
Reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs
Beginning balance	(3,846)	(2,554)	(3,415)	(7,101)
Included in net income	(393)	(351)	410	74
Included in other comprehensive income, gross	(3,001)	(941)	451	563
Transfers out to Level 2				6,464
Ending balance	(7,240)	(3,846)	(2,554)
Commitment to originate loan [Member]
Reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs
Beginning balance	(64)	(56)
Included in net income	64	(8)	(56)	(71)
Transfers out to Level 2				71
Ending balance		$ (64)	$ (56)

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Allowance for Loan Losses (Details Textual)	9 Months Ended
	Sep. 30, 2012
Scenario, Actual [Member]
Allowance for Loan Losses (Textual) [Abstract]
Actual loss history experienced by the Company	2 years
Maximum [Member]
Allowance for Loan Losses (Textual) [Abstract]
Actual loss history experienced by the Company	5 years
Allowance for loan losses charge down family first and junior lien mortgages past due period	180 days
Allowance for loan losses charge down unsecured open end loans past due period	90 days
Allowance for loan losses charge down other secured loans past due period	90 days
Minimum [Member]
Allowance for Loan Losses (Textual) [Abstract]
Actual loss history experienced by the Company	1 year

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating Activities
Net Income	$ 14,373	$ 9,275
Items not requiring (providing) cash
Provision for loan losses	1,809	4,444
Depreciation and amortization	1,988	1,868
Share based compensation	25	27
Mortgage servicing rights impairment (recovery)	369	(464)
Premium amortization on securities available for sale, net	2,387	1,612
Gain on sale of investment securities	(2)	(1,754)
Gain on sale of mortgage loans	(10,121)	(3,986)
Proceeds from sales of loans	293,909	178,239
Loans originated for sale	(283,788)	(174,253)
Change in cash value of life insurance	(727)	236
(Gain) loss on sale of other real estate owned	(5)	126
Net change in
Interest receivable	(757)	(132)
Interest payable	(107)	(199)
Other assets	217	(1,590)
Other liabilities	(2,112)	1,416
Net cash provided by operating activities	17,458	14,865
Investing Activities
Purchases of securities available for sale	(96,713)	(170,689)
Proceeds from sales, maturities, calls, and principal repayments of securities available for sale	92,734	134,583
Purchase of securities held to maturity		(2,437)
Proceeds from maturities of securities held to maturity	4,177	1,400
(Purchase) proceeds from the sale of Federal Home Loan Bank stock		1,274
Net change in loans	(66,596)	(44,766)
Proceeds on the sale of OREO and repossessed assets	2,661	2,008
Purchases of premises and equipment	(4,520)	(1,548)
Purchases of bank owned life insurance		(3,000)
Acquisition of Heartland	26,283
Net cash used in by investing activities	(41,974)	(83,175)
Net change in
Deposits	85,861	4,251
Borrowings	(38,078)	75,423
Redemption of preferred stock		(18,750)
Issuance of preferred stock		12,500
Proceeds from issuance of stock	341	115
Tax benefit from issuance of stock		8
Dividends paid on common shares	(2,168)	(1,728)
Dividends paid on preferred shares	(325)	(730)
Net cash provided by financing activities	45,631	71,089
Net Change in Cash and Cash Equivalent	21,115	2,779
Cash and Cash Equivalents, Beginning of Period	20,447	15,683
Cash and Cash Equivalents, End of Period	41,562	18,462
Additional Cash Flows Information
Interest paid	10,882	12,832
Income taxes paid	3,925	2,100
Transfer of loans to other real estate owned	$ 3,486	$ 4,273

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Disclosures About Fair Value of Assets and Liabilities (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Realized gains and losses included in net income for the periods in the condensed consolidated statements of income
Non Interest Income	$ 320	$ 359	$ 600	$ 1,157
Hedged loans [Member]
Realized gains and losses included in net income for the periods in the condensed consolidated statements of income
Non Interest Income	112	394	336	335
Fair value interest rate swap agreements [Member]
Realized gains and losses included in net income for the periods in the condensed consolidated statements of income
Non Interest Income	(112)	(394)	(336)	(335)
Derivative loan commitments [Member]
Realized gains and losses included in net income for the periods in the condensed consolidated statements of income
Non Interest Income	$ 320	$ 359	$ 600	$ 1,157

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Loans (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
Recorded investment of individual loan
Financing Receivable, Gross	$ 1,155,965		$ 984,167
Interest Due	3,773		2,955
Deferred Fees (Costs)	(917)		(973)
Recorded Investment	1,140,253		967,267
Allowance for loan losses	(18,568)	(18,374)	(18,882)	(19,110)	(18,586)	(19,064)
Net loans	1,137,397		965,285
Loan Receivable [Member]
Recorded investment of individual loan
Financing Receivable, Gross	1,155,965		984,167
Interest Due	3,773		2,955
Deferred Fees (Costs)	(917)		(973)
Recorded Investment	1,158,821		986,149
Commercial [Member]
Recorded investment of individual loan
Financing Receivable, Gross	447,332		352,249
Interest Due	1,572		934
Deferred Fees (Costs)	82		127
Recorded Investment	448,986		353,310
Commercial [Member] | Owner occupied real estate [Member]
Recorded investment of individual loan
Financing Receivable, Gross	168,015		131,893
Interest Due	614		383
Deferred Fees (Costs)	20		30
Recorded Investment	168,649		132,306
Commercial [Member] | Non owner occupied real estate [Member]
Recorded investment of individual loan
Financing Receivable, Gross	187,953		142,269
Interest Due	547		360
Deferred Fees (Costs)	55		94
Recorded Investment	188,555		142,723
Commercial [Member] | Residential Spec Homes [Member]
Recorded investment of individual loan
Financing Receivable, Gross	1,130		3,574
Interest Due	2		6
Recorded Investment	1,132		3,580
Commercial [Member] | Development & Spec Land Loans [Member]
Recorded investment of individual loan
Financing Receivable, Gross	6,645		8,739
Interest Due	19		16
Recorded Investment	6,664		8,755
Commercial [Member] | Commercial and Development [Member]
Recorded investment of individual loan
Financing Receivable, Gross	83,589		65,774
Interest Due	390		169
Deferred Fees (Costs)	7		3
Recorded Investment	83,986		65,946
Real Estate Segment [Member]
Recorded investment of individual loan
Financing Receivable, Gross	420,695		365,373
Interest Due	1,092		948
Deferred Fees (Costs)	91		68
Recorded Investment	421,878		366,389
Real Estate Segment [Member] | Residential mortgage [Member]
Recorded investment of individual loan
Financing Receivable, Gross	164,720		150,893
Interest Due	646		513
Deferred Fees (Costs)	91		68
Recorded Investment	165,457		151,474
Real Estate Segment [Member] | Residential construction [Member]
Recorded investment of individual loan
Financing Receivable, Gross	11,742		6,181
Interest Due	19		8
Recorded Investment	11,761		6,189
Real Estate Segment [Member] | Mortgage warehouse [Member]
Recorded investment of individual loan
Financing Receivable, Gross	244,233		208,299
Interest Due	427		427
Recorded Investment	244,660		208,726
Consumer Loan [Member]
Recorded investment of individual loan
Financing Receivable, Gross	287,938		266,545
Interest Due	1,109		1,073
Deferred Fees (Costs)	(1,090)		(1,168)
Recorded Investment	287,957		266,450
Consumer Loan [Member] | Direct Installment [Member]
Recorded investment of individual loan
Financing Receivable, Gross	30,247		24,252
Interest Due	116		94
Deferred Fees (Costs)	(346)		(360)
Recorded Investment	30,017		23,986
Consumer Loan [Member] | Direct Installment Purchased [Member]
Recorded investment of individual loan
Financing Receivable, Gross	518		981
Recorded Investment	518		981
Consumer Loan [Member] | Indirect Installment [Member]
Recorded investment of individual loan
Financing Receivable, Gross	128,502		127,751
Interest Due	373		420
Deferred Fees (Costs)			(56)
Recorded Investment	128,875		128,115
Consumer Loan [Member] | Home Equity [Member]
Recorded investment of individual loan
Financing Receivable, Gross	128,671		113,561
Interest Due	620		559
Deferred Fees (Costs)	(744)		(752)
Recorded Investment	$ 128,547		$ 113,368

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Disclosures About Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Fair value measurements of assets and liabilities recognized on a recurring basis

	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
September 30, 2012
Available-for-sale securities
U.S. Treasury and federal agencies	$	47,376		$	—	$	47,376		$	—
State and municipal		174,821			—		174,821			—
Federal agency collateralized mortgage obligations		99,041			—		99,041			—
Federal agency mortgage-backed pools		174,137			—		174,137			—
Private labeled mortgage-backed pools		2,288			—		2,288			—
Corporate notes		41			—		41			—
Total available-for-sale securities		497,704			—		497,704			—
Hedged loans		74,947			—		74,947			—
Forward sale commitments		942			—		942			—
Interest rate swap agreements		(7,969	)		—		(7,969	)		—
Commitments to originate loans		—			—		—			—
December 31, 2011
Available-for-sale securities
U.S. Treasury and federal agencies	$	13,022		$	—	$	13,022		$	—
State and municipal		143,890			—		143,890			—
Federal agency collateralized mortgage obligations		91,122			—		91,122			—
Federal agency mortgage-backed pools		179,351			—		179,351			—
Private labeled mortgage-backed pools		3,636			—		3,636			—
Corporate notes		24			—		24			—
Total available-for-sale securities		431,045			—		431,045			—
Hedged loans		54,362			—		—			54,362
Forward sale commitments		662			—		—			662
Interest rate swap agreements		(7,102	)		—		—			(7,102	)
Commitments to originate loans		—			—		—			—

Schedule of fair value transfer among levels

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Reason for Transfer
Transfers to level:
Hedged loans	$	—	$	74,947		$	—		(a	)
Forward sale commitments		—		942			—		(b	)
Interest rate swap agreements		—		(7,969	)		—		(a	)
Commitments to originate loans		—		—			—		(b	)
Total transfers to level	$	—	$	67,920		$	—

Reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs.

	Hedged Loans			Forward Sale Commitments			Interest Rate Swaps			Commitments to Originate Loans
Beginning balance December 31, 2011	$	54,362		$	662		$	(7,101	)	$	—
Total realized and unrealized gains and losses
Included in net income		(74	)		(152	)		74			(71	)
Included in other comprehensive income, gross		—			—			563			—
Purchases, issuances, and settlements		6,114			—			—			—
Principal payments		(491	)		—			—			—
Transfers out to Level 2		(59,911	)		(510	)		6,464			71
Ending balance September 30, 2012	$	—		$	—		$	—		$	—
	Hedged Loans			Forward Sale Commitments			Interest Rate Swaps			Commitments to Originate Loans
Beginning balance December 31, 2010	$	50,088		$	407		$	(3,415	)	$	—
Total realized and unrealized gains and losses
Included in net income		(410	)		(126	)		410			(56	)
Included in other comprehensive income, gross		—			—			451			—
Purchases, issuances, and settlements		(352	)		—			—			—
Principal payments		(915	)		—			—			—
Ending balance March 31, 2011		48,411			281			(2,554	)		(56	)
Total realized and unrealized gains and losses
Included in net income		351			174			(351	)		(8	)
Included in other comprehensive income, gross		—			—			(941	)		—
Purchases, issuances, and settlements		1,200			—			—			—
Principal payments		(344	)		—			—			—
Ending balance June 30, 2011		49,618			455			(3,846	)		(64	)
Total realized and unrealized gains and losses
Included in net income		393			294			(393	)		64
Included in other comprehensive income, gross		—			—			(3,001	)		—
Purchases, issuances, and settlements		1,797			—			—			—
Principal payments		(628	)		—			—			—
Ending balance September 30, 2011	$	51,180		$	749		$	(7,240	)	$	—

Realized gains and losses included in net income for the periods in the condensed consolidated statements of income

	Three Months Ended September 30						Nine Months Ended September 30
	2012			2011			2012			2011
Non Interest Income	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Total gains and losses from:
Hedged loans	$	112		$	394		$	336		$	335
Fair value interest rate swap agreements		(112	)		(394	)		(336	)		(335	)
Derivative loan commitments		320			359			600			1,157
	$	320		$	359		$	600		$	1,157

Other assets are measured at fair value on a nonrecurring basis

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012
Impaired loans	$	10,462	$	—	$	—	$	10,462
Mortgage servicing rights		4,602		—		—		4,602
December 31, 2011
Impaired loans	$	5,822	$	—	$	—	$	5,822
Mortgage servicing rights		4,193		—		—		4,193

Unobservable inputs in recurring and nonrecurring level 3 fair value measurements

	Fair Value at September 30, 2012		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans		10,462	Collateral based measurement	Discount to reflect current market conditions and ultimate collectability	0% - 50%
Mortgage servicing rights		4,602	Discounted cashflows	Discount to reflect current market conditions	0% - 20%

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Financial Instruments [Abstract]

Fair value of derivative financial instruments

	Asset Derivative September 30, 2012			Liability Derivatives September 30, 2012
Derivatives designated as hedging instruments (Unaudited)	Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value
Interest rate contracts	Loans	$	443		Other liabilities	$	2,523
Interest rate contracts	Other Assets		2,080		Other liabilities		5,820
Total derivatives designated as hedging instruments			2,523				8,343
Derivatives not designated as hedging instruments
Mortgage loan contracts	Other assets		1,262		Other liabilities		—
Total derivatives not designated as hedging instruments			1,262				—
Total derivatives		$	3,785			$	8,343

	Asset Derivative December 31, 2011			Liability Derivatives December 31, 2011
Derivatives designated as hedging instruments (Unaudited)	Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value
Interest rate contracts	Loans	$	754		Other liabilities	$	2,187
Interest rate contracts	Other Assets		1,433		Other liabilities		4,914
Total derivatives designated as hedging instruments			2,187				7,101
Derivatives not designated as hedging instruments
Mortgage loan contracts	Other assets		662		Other liabilities		—
Total derivatives not designated as hedging instruments			662				—
Total derivatives		$	2,849			$	7,101

Effect of the derivative instruments on the consolidated statement of income Derivative in cash flow hedging relationship

	Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Three Months Ended September 30						Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Nine Months Ended September 30
Derivative in cash flow hedging relationship	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest rate contracts	$	(170	)	$	(1,951	)	$	(589	)	$	(2,268	)

Effect of the derivative instruments on the consolidated statement of income Derivative in fair value hedging relationship

		Amount of Gain (Loss) Recognized on Derivative Three Months Ended September 30						Amount of Gain (Loss) Recognized on Derivative Nine Months Ended September 30
Derivative in fair value hedging relationship	Location of gain (loss) recognized on derivative	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest rate contracts	Interest income - loans	$	112		$	394		$	336		$	335
Interest rate contracts	Interest income - loans		(112	)		(394	)		(336	)		(335	)
Total		$	—		$	—		$	—		$	—
		Amount of Gain (Loss) Recognized on Derivative Three Months Ended September 30						Amount of Gain (Loss) Recognized on Derivative Nine Months Ended September 30
Derivative not designated as hedging relationship	Location of gain (loss) recognized on derivative	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Mortgage contracts	Other income - gain on sale of loans	$	320		$	359		$	600		$	1,157

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Derivative Financial Instruments (Details 1) (Interest Rate Contracts One [Member], Derivative in cash flow hedging relationship [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest Rate Contracts One [Member] | Derivative in cash flow hedging relationship [Member]
Effect of the derivative instruments on the consolidated statement of income
Comprehensive Income on Derivative	$ (170)	$ (1,951)	$ (589)	$ (2,268)

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Loans (Details Textual)	9 Months Ended
	Sep. 30, 2012
Loans (Textual) [Abstract]
Period of Loan sold	30 days
Minimum period seldom held	90 days
Mortgage warehousing maximum pay off period	30 days

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Summary of estimated fair values of the financial instruments and the level within the fair value hierarchy

	September 30, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and due from banks	$	41,562	$	41,562	$	—	$	—
Investment securities held to maturity		6,100		—		6,100		—
Loans held for sale		18,163		—		—		18,163
Loans, net		1,136,480		—		—		1,166,649
Stock in FHLB and FRB		13,333		—		13,333		—
Interest receivable		8,248		—		8,248		—
Liabilities
Non-interest bearing deposits	$	211,935	$	211,935	$	—	$	—
Interest-bearing deposits		1,095,036		—		1,108,316		—
Borrowings		333,150		—		344,884		—
Subordinated debentures		32,282		—		32,140		—
Interest payable		579		—		579		—

	December 31, 2011
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and due from banks	$	20,447	$	20,447	$	—	$	—
Investment securities held to maturity		7,100		—		7,134		—
Loans held for sale		14,090		—		—		14,090
Loans, net		964,311		—		—		979,401
Stock in FHLB and FRB		12,390		—		12,390		—
Interest receivable		6,671		—		6,671		—
Liabilities
Non-interest bearing deposits	$	130,673	$	130,673	$	—	$	—
Interest-bearing deposits		879,192		—		874,160		—
Borrowings		370,111		—		398,789		—
Subordinated debentures		30,676		—		30,083		—
Interest payable		596		—		596		—

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Other Comprehensive Income (Tables)	9 Months Ended
	Sep. 30, 2012
Other Comprehensive Income [Abstract]
Other Comprehensive Income	Other Comprehensive Income

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Condensed Consolidated Statement of Stockholders' Equity (Parenthetical) (Unaudited) (Retained Earnings, USD $)	9 Months Ended
	Sep. 30, 2012
Retained Earnings
Cash dividends on common stock, per share	$ 0.27

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Accounting Policies (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Basic earnings per share
Net Income	$ 4,850	$ 3,417	$ 14,373	$ 9,275
Less: Preferred stock dividends and accretion of discount	63	710	325	1,263
Net Income Available to Common Shareholders	4,787	2,707	14,048	8,012
Weighted average common shares outstanding	8,503,475	7,414,043	7,758,537	7,402,300
Basic Earnings Per Share	$ 0.56	$ 0.37	$ 1.81	$ 1.08
Diluted earnings per share
Net income available to common shareholders	$ 4,787	$ 2,707	$ 14,048	$ 8,012
Weighted average common shares outstanding	8,503,475	7,414,043	7,758,537	7,402,300
Effect of dilutive securities:
Warrants	269,432	163,325	231,038	167,668
Weighted average shares outstanding total	8,838,659	7,596,569	8,034,996	7,598,950
Diluted Earnings Per Share	$ 0.54	$ 0.36	$ 1.75	$ 1.05
Restricted Stock [Member]
Effect of dilutive securities:
Effect of dilutive securities	30,971	4,399	19,317	13,676
Stock Options [Member]
Effect of dilutive securities:
Effect of dilutive securities	34,782	14,803	26,105	15,307

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Securities (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Sales of securities available for sale
Proceeds	$ 14,991	$ 153,299	$ 14,991	$ 170,689
Gross gains	3	1,115	3	1,754
Gross losses	$ (1)		$ (1)

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Non-Performing Loans and Impaired Loans (Details 5) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Loans by credit grades
Total	$ 1,155,965	$ 984,167
Commercial [Member]
Loans by credit grades
Total	447,332	352,249
Commercial [Member] | Owner occupied real estate [Member]
Loans by credit grades
Total	168,015	131,893
Commercial [Member] | Non owner occupied real estate [Member]
Loans by credit grades
Total	187,953	142,269
Commercial [Member] | Residential development [Member]
Loans by credit grades
Total	1,130	3,574
Commercial [Member] | Development & Spec Land Loans [Member]
Loans by credit grades
Total	6,645	8,739
Commercial [Member] | Commercial and industrial [Member]
Loans by credit grades
Total	83,589	65,774
Real estate [Member]
Loans by credit grades
Total	420,695	365,373
Real estate [Member] | Residential mortgage [Member]
Loans by credit grades
Total	164,720	150,893
Real estate [Member] | Residential construction [Member]
Loans by credit grades
Total	11,742	6,181
Real estate [Member] | Mortgage warehouse [Member]
Loans by credit grades
Total	244,233	208,299
Consumer [Member]
Loans by credit grades
Total	287,938	266,545
Consumer [Member] | Direct Installment [Member]
Loans by credit grades
Total	30,247	24,252
Consumer [Member] | Direct Installment Purchased [Member]
Loans by credit grades
Total	518	981
Consumer [Member] | Indirect Installment [Member]
Loans by credit grades
Total	128,502	127,751
Consumer [Member] | Home Equity [Member]
Loans by credit grades
Total	128,671	113,561
Pass [Member]
Loans by credit grades
Total	1,064,776	906,753
Pass [Member] | Commercial [Member]
Loans by credit grades
Total	368,602	287,020
Pass [Member] | Commercial [Member] | Owner occupied real estate [Member]
Loans by credit grades
Total	137,121	107,155
Pass [Member] | Commercial [Member] | Non owner occupied real estate [Member]
Loans by credit grades
Total	153,131	118,446
Pass [Member] | Commercial [Member] | Residential development [Member]
Loans by credit grades
Total	434	1,677
Pass [Member] | Commercial [Member] | Development & Spec Land Loans [Member]
Loans by credit grades
Total	3,637	3,778
Pass [Member] | Commercial [Member] | Commercial and industrial [Member]
Loans by credit grades
Total	74,279	55,964
Pass [Member] | Real estate [Member]
Loans by credit grades
Total	411,862	356,877
Pass [Member] | Real estate [Member] | Residential mortgage [Member]
Loans by credit grades
Total	156,179	142,834
Pass [Member] | Real estate [Member] | Residential construction [Member]
Loans by credit grades
Total	11,450	5,744
Pass [Member] | Real estate [Member] | Mortgage warehouse [Member]
Loans by credit grades
Total	244,233	208,299
Pass [Member] | Consumer [Member]
Loans by credit grades
Total	284,312	262,856
Pass [Member] | Consumer [Member] | Direct Installment [Member]
Loans by credit grades
Total	30,149	23,995
Pass [Member] | Consumer [Member] | Direct Installment Purchased [Member]
Loans by credit grades
Total	518	977
Pass [Member] | Consumer [Member] | Indirect Installment [Member]
Loans by credit grades
Total	127,537	126,796
Pass [Member] | Consumer [Member] | Home Equity [Member]
Loans by credit grades
Total	126,108	111,088
Special Mention [Member]
Loans by credit grades
Total	34,110	19,925
Special Mention [Member] | Commercial [Member]
Loans by credit grades
Total	34,110	19,925
Special Mention [Member] | Commercial [Member] | Owner occupied real estate [Member]
Loans by credit grades
Total	8,826	4,101
Special Mention [Member] | Commercial [Member] | Non owner occupied real estate [Member]
Loans by credit grades
Total	20,694	11,423
Special Mention [Member] | Commercial [Member] | Residential development [Member]
Loans by credit grades
Total		529
Special Mention [Member] | Commercial [Member] | Development & Spec Land Loans [Member]
Loans by credit grades
Total	251	860
Special Mention [Member] | Commercial [Member] | Commercial and industrial [Member]
Loans by credit grades
Total	4,339	3,012
Substandard [Member]
Loans by credit grades
Total	51,137	57,489
Substandard [Member] | Commercial [Member]
Loans by credit grades
Total	38,678	45,304
Substandard [Member] | Commercial [Member] | Owner occupied real estate [Member]
Loans by credit grades
Total	17,632	20,637
Substandard [Member] | Commercial [Member] | Non owner occupied real estate [Member]
Loans by credit grades
Total	13,008	12,400
Substandard [Member] | Commercial [Member] | Residential development [Member]
Loans by credit grades
Total	696	1,368
Substandard [Member] | Commercial [Member] | Development & Spec Land Loans [Member]
Loans by credit grades
Total	2,627	4,101
Substandard [Member] | Commercial [Member] | Commercial and industrial [Member]
Loans by credit grades
Total	4,715	6,798
Substandard [Member] | Real estate [Member]
Loans by credit grades
Total	8,833	8,496
Substandard [Member] | Real estate [Member] | Residential mortgage [Member]
Loans by credit grades
Total	8,541	8,059
Substandard [Member] | Real estate [Member] | Residential construction [Member]
Loans by credit grades
Total	292	437
Substandard [Member] | Consumer [Member]
Loans by credit grades
Total	3,626	3,689
Substandard [Member] | Consumer [Member] | Direct Installment [Member]
Loans by credit grades
Total	98	257
Substandard [Member] | Consumer [Member] | Direct Installment Purchased [Member]
Loans by credit grades
Total		4
Substandard [Member] | Consumer [Member] | Indirect Installment [Member]
Loans by credit grades
Total	965	955
Substandard [Member] | Consumer [Member] | Home Equity [Member]
Loans by credit grades
Total	2,563	2,473
Doubtful [Member]
Loans by credit grades
Total	5,942
Doubtful [Member] | Commercial [Member]
Loans by credit grades
Total	5,942
Doubtful [Member] | Commercial [Member] | Owner occupied real estate [Member]
Loans by credit grades
Total	4,436
Doubtful [Member] | Commercial [Member] | Non owner occupied real estate [Member]
Loans by credit grades
Total	1,120
Doubtful [Member] | Commercial [Member] | Residential development [Member]
Loans by credit grades
Total
Doubtful [Member] | Commercial [Member] | Development & Spec Land Loans [Member]
Loans by credit grades
Total	130
Doubtful [Member] | Commercial [Member] | Commercial and industrial [Member]
Loans by credit grades
Total	256
Doubtful [Member] | Real estate [Member]
Loans by credit grades
Total
Doubtful [Member] | Real estate [Member] | Residential mortgage [Member]
Loans by credit grades
Total
Doubtful [Member] | Real estate [Member] | Residential construction [Member]
Loans by credit grades
Total
Doubtful [Member] | Real estate [Member] | Mortgage warehouse [Member]
Loans by credit grades
Total
Doubtful [Member] | Consumer [Member]
Loans by credit grades
Total
Doubtful [Member] | Consumer [Member] | Direct Installment [Member]
Loans by credit grades
Total
Doubtful [Member] | Consumer [Member] | Direct Installment Purchased [Member]
Loans by credit grades
Total
Doubtful [Member] | Consumer [Member] | Indirect Installment [Member]
Loans by credit grades
Total
Doubtful [Member] | Consumer [Member] | Home Equity [Member]
Loans by credit grades
Total

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and due from banks	$ 41,562	$ 20,447
Investment securities, available for sale	497,704	431,045
Investment securities, held to maturity	6,100	7,100
Loans held for sale	18,163	14,090
Loans, net of allowance for loan losses of $18,568 and $18,882	1,136,480	964,311
Premises and equipment	40,297	34,665
Federal Reserve and Federal Home Loan Bank stock	13,333	12,390
Goodwill	19,748	5,910
Other intangible assets	4,295	2,292
Interest receivable	8,248	6,671
Cash value life insurance	34,929	30,190
Other assets	25,917	18,051
Total assets	1,846,776	1,547,162
Deposits
Non-interest bearing	211,935	130,673
Interest bearing	1,095,036	879,192
Total deposits	1,306,971	1,009,865
Borrowings	333,150	370,111
Subordinated debentures	32,282	30,676
Interest payable	579	596
Other liabilities	17,932	14,449
Total liabilities	1,690,914	1,425,697
Commitments and contingent liabilities
Stockholders' Equity
Preferred stock, $.01 par value, $1,000 liquidation value Authorized, 1,000,000 Series B shares Issued 12,500 and 12,500 shares	12,500	12,500
Common stock, no par value Authorized, 22,500,000 shares Issued, 8,685,490 and 7,450,794 shares Outstanding, 8,617,735 and 7,421,544 shares
Additional paid-in capital	31,894	11,736
Retained earnings	101,267	89,387
Accumulated other comprehensive income	10,201	7,842
Total stockholders' equity	155,862	121,465
Total liabilities and stockholders' equity	$ 1,846,776	$ 1,547,162

XML

Allowance for Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Allowance for Loans Losses
Balance at beginning of the period	$ 18,374	$ 18,586	$ 18,882	$ 19,064
Loans charged-off	1,167	1,295	3,396	5,211
Net loans charged-off	847	1,040	2,123	4,398
Provision charged to operating expense	320	255	1,273	813
Total provision charged to operating expense	1,041	1,564	1,809	4,444
Balance at the end of the period	18,568	19,110	18,568	19,110
Commercial [Member]
Allowance for Loans Losses
Loans charged-off	394	278	752	726
Provision charged to operating expense	61	9	473	32
Total provision charged to operating expense	625	1,341	320	1,290
Commercial [Member] | Owner occupied real estate [Member]
Allowance for Loans Losses
Loans charged-off	92	65	95	189
Provision charged to operating expense			352	18
Commercial [Member] | Non owner occupied real estate [Member]
Allowance for Loans Losses
Loans charged-off	81	196	109	310
Provision charged to operating expense			7
Commercial [Member] | Residential development [Member]
Allowance for Loans Losses
Loans charged-off
Provision charged to operating expense
Commercial [Member] | Development & Spec Land Loans [Member]
Allowance for Loans Losses
Loans charged-off
Provision charged to operating expense
Commercial [Member] | Commercial and industrial [Member]
Allowance for Loans Losses
Loans charged-off	221	17	548	227
Provision charged to operating expense	61	9	114	14
Real estate [Member]
Allowance for Loans Losses
Loans charged-off	247	86	451	837
Provision charged to operating expense	42		74	10
Total provision charged to operating expense	254	815	900	968
Real estate [Member] | Residential construction [Member]
Allowance for Loans Losses
Loans charged-off
Provision charged to operating expense
Real estate [Member] | Mortgage warehouse [Member]
Allowance for Loans Losses
Loans charged-off
Provision charged to operating expense
Real estate [Member] | Residential mortgage [Member]
Allowance for Loans Losses
Loans charged-off	247	86	451	837
Provision charged to operating expense	42		74	10
Consumer [Member]
Allowance for Loans Losses
Loans charged-off	526	931	2,193	3,648
Provision charged to operating expense	217	246	726	771
Total provision charged to operating expense	162	(592)	589	2,186
Consumer [Member] | Direct Installment Purchased [Member]
Allowance for Loans Losses
Loans charged-off
Provision charged to operating expense
Consumer [Member] | Direct Installment [Member]
Allowance for Loans Losses
Loans charged-off	90	78	261	480
Provision charged to operating expense	28	16	63	83
Consumer [Member] | Indirect Installment [Member]
Allowance for Loans Losses
Loans charged-off	313	494	922	1,280
Provision charged to operating expense	173	179	563	568
Consumer [Member] | Home Equity [Member]
Allowance for Loans Losses
Loans charged-off	123	359	1,010	1,888
Provision charged to operating expense	$ 16	$ 51	$ 100	$ 120

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Change in fair value of derivative instruments, taxes	$ (92)	$ (1,051)	$ (317)	$ (1,221)
Unrealized appreciation on available-for-sale securities, taxes	860	1,856	1,588	4,852
Reclassification adjustment for realized gains included in net income, taxes	$ 1	$ 390	$ 1	$ 614

XML

Disclosures About Fair Value of Assets and Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	$ 497,704	$ 431,045
Recurring basis [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	497,704	431,045
Available-for-sale securities
Recurring basis [Member] | Hedged loans [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities	74,947	54,362
Recurring basis [Member] | Forward sale commitments [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities	942	662
Recurring basis [Member] | Interest rate swap agreements [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities	(7,969)	(7,102)
Recurring basis [Member] | Commitment to originate loan [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | U.S. Treasury and federal agencies [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	47,376	13,022
Recurring basis [Member] | State and municipal [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	174,821	143,890
Recurring basis [Member] | Federal agency collateralized mortgage obligations [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	99,041	91,122
Recurring basis [Member] | Federal agency mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	174,137	179,351
Recurring basis [Member] | Private labeled mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	2,288	3,636
Recurring basis [Member] | Corporate notes [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	41	24
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Hedged loans [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Forward sale commitments [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Interest rate swap agreements [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commitment to originate loan [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury and federal agencies [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | State and municipal [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Federal agency collateralized mortgage obligations [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Federal agency mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Private labeled mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate notes [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	497,704	431,045
Available-for-sale securities
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Hedged loans [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities	74,947
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Forward sale commitments [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities	942
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Interest rate swap agreements [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities	(7,969)
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Commitment to originate loan [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Treasury and federal agencies [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	47,376	13,022
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | State and municipal [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	174,821	143,890
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Federal agency collateralized mortgage obligations [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	99,041	91,122
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Federal agency mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	174,137	179,351
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Private labeled mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	2,288	3,636
Recurring basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate notes [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value	41	24
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Hedged loans [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities		54,362
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Forward sale commitments [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities		662
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Interest rate swap agreements [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities		(7,101)
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commitment to originate loan [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Available-for-sale securities
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury and federal agencies [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | State and municipal [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Federal agency collateralized mortgage obligations [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Federal agency mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Private labeled mortgage-backed pools [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value
Recurring basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate notes [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Total available for sale securities, Fair Value

XML

Acquisition (Details 1) (USD $) In Thousands, unless otherwise specified	Jul. 17, 2012
Schedule of acquired loans accounted for in accordance with ASC 310-30
Contractually required principal and interest at acquisition	$ 35,574
Contractual cash flows not expected to be collected (non accretable differences)	9,747
Expected cash flows at acquisition	25,827
Interest component of expected cash flows (accretable discount)	2,886
Fair value of acquired loans accounted for under ASC 310-30	$ 22,941

XML

Disclosures About Fair Value of Assets and Liabilities (Details Textual) (USD $) In Millions, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Disclosures About Fair Value of Assets and Liabilities (Textual) [Abstract]
Fair value adjustments on impaired loans	$ 2.5	$ 2.1

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Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Summary of computation of basic and diluted earnings per share

	Three months ended September 30				Nine months ended September 30
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Basic earnings per share
Net income	$	4,850	$	3,417	$	14,373	$	9,275
Less: Preferred stock dividends and accretion of discount		63		710		325		1,263
Net income available to common shareholders	$	4,787	$	2,707	$	14,048	$	8,012
Weighted average common shares outstanding (1)(2)		8,503,475		7,414,043		7,758,537		7,402,300
Basic earnings per share	$	0.56	$	0.37	$	1.81	$	1.08
Diluted earnings per share
Net income available to common shareholders	$	4,787	$	2,707	$	14,048	$	8,012
Weighted average common shares outstanding (1)(2)		8,503,475		7,414,043		7,758,537		7,402,300
Effect of dilutive securities:
Warrants		269,432		163,325		231,038		167,668
Restricted stock		30,971		4,399		19,317		13,676
Stock options		34,782		14,803		26,105		15,307
Weighted average shares outstanding		8,838,659		7,596,569		8,034,996		7,598,950
Diluted earnings per share	$	0.54	$	0.36	$	1.75	$	1.05

⁽¹⁾  Adjusted for 3:2 stock split announced on October 16, 2012 payable November 9, 2012

⁽²⁾  Includes average shares issued for the Heartland acquisition for the three and nine months ending September 30, 2012

XML

Acquisition (Details Textual) (USD $)	9 Months Ended		9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Heartland [Member]	Jul. 17, 2012 Heartland [Member]
Acquisition (Textual) [Abstract]
Date of Acquisition Agreement	Jul. 17, 2012
Exchange Ratio Per Share To Heartland shareholder				$ 0.54
Market closing price per share				$ 25.25
Transaction value is estimated				$ 26,900,000
Costs related to the acquisition			1,500,000
Common stock outstanding	8,617,735	7,421,544		1,442,449
Common stock issued			778,922
Net tangible assets acquired				26,900,000
Net intangible assets acquired	2,332,000			2,300,000
Purchase price of the business assets	2,647,000			10,800,000
Acquisition of goodwill	13,838,000			13,800,000
Core deposit intangible amortization period			7 years
Loan portfolio acquired				131,100,000
Discount on loan portfolio acquired				16,500,000
Performing portion of the loan portfolio acquired				95,400,000
Estimated fair value of performing portion of the loan portfolio				$ 91,600,000

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Securities (Tables)

9 Months Ended

Sep. 30, 2012

Securities [Abstract]

Fair value of securities

September 30, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	46,982	$	394	$	—		$	47,376
State and municipal		163,407		11,476		(62	)		174,821
Federal agency collateralized mortgage obligations		97,534		1,621		(114	)		99,041
Federal agency mortgage-backed pools		166,029		8,114		(6	)		174,137
Private labeled mortgage-backed pools		2,207		81		—			2,288
Corporate notes		32		9		—			41
Total available for sale investment securities	$	476,191	$	21,695	$	(182	)	$	497,704
Held to maturity, State and Municipal	$	6,100	$	—	$	—		$	6,100

December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	12,693	$	329	$	—		$	13,022
State and municipal		135,011		8,950		(71	)		143,890
Federal agency collateralized mortgage obligations		89,016		2,106		—			91,122
Federal agency mortgage-backed pools		173,797		5,669		(115	)		179,351
Private labeled mortgage-backed pools		3,518		118		—			3,636
Corporate notes		32		—		(8	)		24
Total available for sale investment securities	$	414,067	$	17,172	$	(194	)	$	431,045
Held to maturity, State and Municipal	$	7,100	$	34	$	—		$	7,134

Amortized cost and fair value of securities available for sale and held to maturity

	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale
Within one year	$	4,232	$	4,245	$	931	$	940
One to five years		45,096		46,420		30,796		31,910
Five to ten years		97,217		102,990		51,476		55,053
After ten years		63,876		68,583		64,533		69,033
		210,421		222,238		147,736		156,936
Federal agency collateralized mortgage obligations		97,534		99,041		89,016		91,122
Federal agency mortgage-backed pools		166,029		174,137		173,797		179,351
Private labeled mortgage-backed pools		2,207		2,288		3,518		3,636
Total available for sale investment securities	$	476,191	$	497,704	$	414,067	$	431,045
Held to maturity
Within one year	$	6,100	$	6,100	$	7,100	$	7,134
One to five years		—		—		—		—
Total held to maturity investment securities	$	6,100	$	6,100	$	7,100	$	7,134

Gross unrealized losses and the fair value of the Company's investments

	Less than 12 Months					12 Months or More					Total
September 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	9,535	$	(62	)	$	—	$	—		$	9,535	$	(62	)
Federal agency collateralized mortgage obligations		19,284		(114	)		—		—			19,284		(114	)
Federal agency mortgage-backed pools		4,479		(6	)		—		—			4,479		(6	)
Total temporarily impaired securities	$	33,298	$	(182	)	$	—	$	—		$	33,298	$	(182	)
	Less than 12 Months					12 Months or More					Total
December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	1,550	$	(44	)	$	1,948	$	(27	)	$	3,498	$	(71	)
Federal agency mortgage-backed pools		23,442		(115	)		23		—			23,465		(115	)
Corporate notes		24		(8	)		—		—			24		(8	)
Total temporarily impaired securities	$	25,016	$	(167	)	$	1,971	$	(27	)	$	26,987	$	(194	)

Sales of securities available for sale

	Three months ended September 30					Nine months ended September 30
	2012			2011		2012			2011
Sales of securities available for sale (Unaudited)
Proceeds	$	14,991		$	153,299	$	14,991		$	170,689
Gross gains		3			1,115		3			1,754
Gross losses		(1	)		—		(1	)		—

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Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $) In Thousands	Total	Preferred Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income
Beginning Balances at Dec. 31, 2011	$ 121,465	$ 12,500	$ 11,736	$ 89,387	$ 7,842
Net Income	14,373			14,373
Other comprehensive income, net of tax	2,359				2,359
Amortization of unearned compensation	124		124
Issuance of restricted shares	115		115
Exercise of stock options	226		226
Stock option expense	25		25
Stock issued from acquisition	19,668		19,668
Cash dividends on preferred stock	(325)			(325)
Cash dividends on common stock ($.27 per share)	(2,168)			(2,168)
Ending Balances at Sep. 30, 2012	$ 155,862	$ 12,500	$ 31,894	$ 101,267	$ 10,201

XML

Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Allowance for loan losses	$ 18,568	$ 18,882
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, liquidation value	$ 1,000	$ 1,000
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	12,500	12,500
Common stock, stated value	$ 0	$ 0
Common stock, shares authorized	22,500,000	22,500,000
Common stock, shares issued	8,685,490	7,450,794
Common stock, shares outstanding	8,617,735	7,421,544

XML

Disclosures about fair value of assets and liabilities

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Disclosures about fair value of assets and liabilities

Note 8 – Disclosures about fair value of assets and liabilities

The Fair Value Measurements topic of the FASB ASC defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. There are three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated financial statements, as well as the general classification of such instruments pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended September 30, 2012. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available for sale securities

When quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include U.S. Treasury and federal agency securities, state and municipal securities, federal agency mortgage obligations and mortgage-backed pools, private-label mortgage-backed pools and corporate notes. Level 2 securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs. Observable inputs include dealer quotes, market spreads, cash flow analysis, the U.S. Treasury yield curve, trade execution data, market consensus prepayment spreads and available credit information and the bond’s terms and conditions. The pricing provider utilizes evaluated pricing models that vary based on asset class. These models incorporate available market information including quoted prices of securities with similar characteristics and, because many fixed-income securities do not trade on a daily basis, apply available information through processes such as benchmark curves, benchmarking of like securities, sector grouping, and matrix pricing. In addition, model processes, such as an option adjusted spread model is used to develop prepayment and interest rate scenarios for securities with prepayment features.

Hedged loans

Certain fixed rate loans have been converted to variable rate loans by entering into interest rate swap agreements. The fair value of those fixed rate loans is based on discounting the estimated cash flows using interest rates determined by the respective interest rate swap agreement. Loans are classified within Level 2 of the valuation hierarchy based on the unobservable inputs used.

Interest rate swap agreements

The fair value of the Company’s interest rate swap agreements is estimated by a third party using inputs that are primarily unobservable including a yield curve, adjusted for liquidity and credit risk, contracted terms and discounted cash flow analysis, therefore, are classified within Level 2 of the valuation hierarchy.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying financial statements measured at fair value on a recurring basis and the level within the FASB ASC fair value hierarchy in which the fair value measurements fall at the following:

	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
September 30, 2012
Available-for-sale securities
U.S. Treasury and federal agencies	$	47,376		$	—	$	47,376		$	—
State and municipal		174,821			—		174,821			—
Federal agency collateralized mortgage obligations		99,041			—		99,041			—
Federal agency mortgage-backed pools		174,137			—		174,137			—
Private labeled mortgage-backed pools		2,288			—		2,288			—
Corporate notes		41			—		41			—
Total available-for-sale securities		497,704			—		497,704			—
Hedged loans		74,947			—		74,947			—
Forward sale commitments		942			—		942			—
Interest rate swap agreements		(7,969	)		—		(7,969	)		—
Commitments to originate loans		—			—		—			—
December 31, 2011
Available-for-sale securities
U.S. Treasury and federal agencies	$	13,022		$	—	$	13,022		$	—
State and municipal		143,890			—		143,890			—
Federal agency collateralized mortgage obligations		91,122			—		91,122			—
Federal agency mortgage-backed pools		179,351			—		179,351			—
Private labeled mortgage-backed pools		3,636			—		3,636			—
Corporate notes		24			—		24			—
Total available-for-sale securities		431,045			—		431,045			—
Hedged loans		54,362			—		—			54,362
Forward sale commitments		662			—		—			662
Interest rate swap agreements		(7,102	)		—		—			(7,102	)
Commitments to originate loans		—			—		—			—

Transfers between levels

Transfers between Levels 1, 2 and 3 and the reasons for those transfers are as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Reason for Transfer
Transfers to level:
Hedged loans	$	—	$	74,947		$	—		(a	)
Forward sale commitments		—		942			—		(b	)
Interest rate swap agreements		—		(7,969	)		—		(a	)
Commitments to originate loans		—		—			—		(b	)
Total transfers to level	$	—	$	67,920		$	—

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheet using significant unobservable (Level 3) inputs (Unaudited):

	Hedged Loans			Forward Sale Commitments			Interest Rate Swaps			Commitments to Originate Loans
Beginning balance December 31, 2011	$	54,362		$	662		$	(7,101	)	$	—
Total realized and unrealized gains and losses
Included in net income		(74	)		(152	)		74			(71	)
Included in other comprehensive income, gross		—			—			563			—
Purchases, issuances, and settlements		6,114			—			—			—
Principal payments		(491	)		—			—			—
Transfers out to Level 2		(59,911	)		(510	)		6,464			71
Ending balance September 30, 2012	$	—		$	—		$	—		$	—
	Hedged Loans			Forward Sale Commitments			Interest Rate Swaps			Commitments to Originate Loans
Beginning balance December 31, 2010	$	50,088		$	407		$	(3,415	)	$	—
Total realized and unrealized gains and losses
Included in net income		(410	)		(126	)		410			(56	)
Included in other comprehensive income, gross		—			—			451			—
Purchases, issuances, and settlements		(352	)		—			—			—
Principal payments		(915	)		—			—			—
Ending balance March 31, 2011		48,411			281			(2,554	)		(56	)
Total realized and unrealized gains and losses
Included in net income		351			174			(351	)		(8	)
Included in other comprehensive income, gross		—			—			(941	)		—
Purchases, issuances, and settlements		1,200			—			—			—
Principal payments		(344	)		—			—			—
Ending balance June 30, 2011		49,618			455			(3,846	)		(64	)
Total realized and unrealized gains and losses
Included in net income		393			294			(393	)		64
Included in other comprehensive income, gross		—			—			(3,001	)		—
Purchases, issuances, and settlements		1,797			—			—			—
Principal payments		(628	)		—			—			—
Ending balance September 30, 2011	$	51,180		$	749		$	(7,240	)	$	—

Realized gains and losses included in net income for the periods are reported in the condensed consolidated statements of income as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2012			2011			2012			2011
Non Interest Income	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Total gains and losses from:
Hedged loans	$	112		$	394		$	336		$	335
Fair value interest rate swap agreements		(112	)		(394	)		(336	)		(335	)
Derivative loan commitments		320			359			600			1,157
	$	320		$	359		$	600		$	1,157

Certain other assets are measured at fair value on a nonrecurring basis in the ordinary course of business and are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment):

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012
Impaired loans	$	10,462	$	—	$	—	$	10,462
Mortgage servicing rights		4,602		—		—		4,602
December 31, 2011
Impaired loans	$	5,822	$	—	$	—	$	5,822
Mortgage servicing rights		4,193		—		—		4,193

Impaired (collateral dependent): Fair value adjustments for impaired and non-accrual loans typically occur when there is evidence of impairment. Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be timely collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. The Company measures fair value based on the value of the collateral securing the loans. Collateral may be in the form of real estate or personal property, including equipment and inventory. The value of the collateral is determined based on internal estimates as well as third-party appraisals or non-binding broker quotes. These measurements were classified as Level 3. The fair value of the Company’s other real estate owned is determined using Level 3 inputs, which include current and prior appraisals net of estimated costs to sell. Fair value adjustments on impaired loans were $2.5 million at September 30, 2012 and $2.1 million at December 31, 2011.

Mortgage Servicing Rights (MSRs): MSRs do not trade in an active market with readily observable prices. Accordingly, the fair value of these assets is classified as Level 3. The Company determines the fair value of MSRs using an income approach model based upon the Company’s month-end interest rate curve and prepayment assumptions. The model utilizes assumptions to estimate future net servicing income cash flows, including estimates of time decay, payoffs and changes in valuation inputs and assumptions. The Company reviews the valuation assumptions against this market data for reasonableness and adjusts the assumptions if deemed appropriate.

The following table presents qualitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at September 30, 2012.

	Fair Value at September 30, 2012		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans		10,462	Collateral based measurement	Discount to reflect current market conditions and ultimate collectability	0% - 50%
Mortgage servicing rights		4,602	Discounted cashflows	Discount to reflect current market conditions	0% - 20%

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 08, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	HORIZON BANCORP /IN/
Entity Central Index Key	0000706129
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		8,693,741

XML

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 9 – Fair Value of Financial Instruments

The estimated fair value amounts of the Company’s financial instruments were determined using available market information, current pricing information applicable to Horizon and various valuation methodologies. Where market quotations were not available, considerable management judgment 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 estimated fair value amounts.

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 September 30, 2012 and December 31, 2011. 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 the FASB ASC fair value hierarchy.

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

Cash and Due from Banks — The carrying amounts approximate fair value.

Held-to-Maturity Securities — For debt securities 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.

Loans Held for Sale — The carrying amounts approximate fair value.

Net Loans — The fair value of portfolio 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. The carrying amounts of loans held for sale 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.

Interest Receivable/Payable — The carrying amounts approximate fair value.

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.

Borrowings — Rates currently available to Horizon for debt with similar terms and remaining maturities are used to estimate fair values of existing borrowings.

Subordinated Debentures — Rates currently available for debentures with similar terms and remaining maturities are used to estimate fair values of existing debentures.

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.

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall (unaudited).

	September 30, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and due from banks	$	41,562	$	41,562	$	—	$	—
Investment securities held to maturity		6,100		—		6,100		—
Loans held for sale		18,163		—		—		18,163
Loans, net		1,136,480		—		—		1,166,649
Stock in FHLB and FRB		13,333		—		13,333		—
Interest receivable		8,248		—		8,248		—
Liabilities
Non-interest bearing deposits	$	211,935	$	211,935	$	—	$	—
Interest-bearing deposits		1,095,036		—		1,108,316		—
Borrowings		333,150		—		344,884		—
Subordinated debentures		32,282		—		32,140		—
Interest payable		579		—		579		—

	December 31, 2011
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and due from banks	$	20,447	$	20,447	$	—	$	—
Investment securities held to maturity		7,100		—		7,134		—
Loans held for sale		14,090		—		—		14,090
Loans, net		964,311		—		—		979,401
Stock in FHLB and FRB		12,390		—		12,390		—
Interest receivable		6,671		—		6,671		—
Liabilities
Non-interest bearing deposits	$	130,673	$	130,673	$	—	$	—
Interest-bearing deposits		879,192		—		874,160		—
Borrowings		370,111		—		398,789		—
Subordinated debentures		30,676		—		30,083		—
Interest payable		596		—		596		—

XML

Condensed Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest Income
Loans receivable	$ 15,527	$ 12,481	$ 42,386	$ 36,260
Investment securities
Taxable	2,178	2,542	6,738	7,828
Tax exempt	1,014	988	2,944	3,066
Total interest income	18,719	16,011	52,068	47,154
Interest Expense
Deposits	1,638	1,978	4,803	6,510
Borrowed funds	1,597	1,583	4,635	4,760
Subordinated debentures	485	459	1,427	1,363
Total interest expense	3,720	4,020	10,865	12,633
Net Interest Income	14,999	11,991	41,203	34,521
Provision for loan losses	1,041	1,564	1,809	4,444
Net Interest Income after Provision for Loan Losses	13,958	10,427	39,394	30,077
Other Income
Service charges on deposit accounts	1,002	802	2,477	2,422
Wire transfer fees	248	167	643	412
Interchange fees	885	721	2,227	1,905
Fiduciary activities	971	1,016	2,928	2,911
Gain on sale of securities	2	1,115	2	1,754
Gain on sale of mortgage loans	4,436	2,145	10,121	3,986
Mortgage servicing income net of impairment	(355)	(172)	(95)	691
Increase in cash value of bank owned life insurance	300	245	760	661
Death benefit on officer life insurance		453		453
Other income	221	46	344	105
Total other income	7,710	6,538	19,407	15,300
Other Expenses
Salaries and employee benefits	7,905	6,081	20,407	16,912
Net occupancy expenses	1,186	1,056	3,216	3,176
Data processing	754	549	1,883	1,450
Professional fees	366	359	1,483	1,039
Outside services and consultants	624	454	1,621	1,221
Loan expense	1,311	820	2,879	2,276
FDIC insurance expense	291	254	798	944
Other losses	309	1,088	501	1,365
Other expenses	2,094	1,652	5,392	4,675
Total other expenses	14,840	12,313	38,180	33,058
Income Before Income Tax	6,828	4,652	20,621	12,319
Income tax expense	1,978	1,235	6,248	3,044
Net Income	4,850	3,417	14,373	9,275
Preferred stock dividend and discount accretion	(63)	(710)	(325)	(1,263)
Net Income Available to Common Shareholders	$ 4,787	$ 2,707	$ 14,048	$ 8,012
Basic Earnings Per Share	$ 0.56	$ 0.37	$ 1.81	$ 1.08
Diluted Earnings Per Share	$ 0.54	$ 0.36	$ 1.75	$ 1.05

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Securities

9 Months Ended

Sep. 30, 2012

Securities [Abstract]

Securities

Note 3 – Securities

The fair value of securities is as follows:

September 30, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	46,982	$	394	$	—		$	47,376
State and municipal		163,407		11,476		(62	)		174,821
Federal agency collateralized mortgage obligations		97,534		1,621		(114	)		99,041
Federal agency mortgage-backed pools		166,029		8,114		(6	)		174,137
Private labeled mortgage-backed pools		2,207		81		—			2,288
Corporate notes		32		9		—			41
Total available for sale investment securities	$	476,191	$	21,695	$	(182	)	$	497,704
Held to maturity, State and Municipal	$	6,100	$	—	$	—		$	6,100

December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	12,693	$	329	$	—		$	13,022
State and municipal		135,011		8,950		(71	)		143,890
Federal agency collateralized mortgage obligations		89,016		2,106		—			91,122
Federal agency mortgage-backed pools		173,797		5,669		(115	)		179,351
Private labeled mortgage-backed pools		3,518		118		—			3,636
Corporate notes		32		—		(8	)		24
Total available for sale investment securities	$	414,067	$	17,172	$	(194	)	$	431,045
Held to maturity, State and Municipal	$	7,100	$	34	$	—		$	7,134

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. While these securities are held in the available for sale portfolio, Horizon intends, and has the ability, to hold them until the earlier of a recovery in fair value or maturity.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. At September 30, 2012, no individual investment security had an unrealized loss that was determined to be other-than-temporary.

The unrealized losses on the Company’s investments in securities of state and municipal governmental agencies, and federal agency mortgage-backed pools were caused by interest rate volatility and not a decline in credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company expects to recover the amortized cost basis over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at September 30, 2012.

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2012 and December 31, 2011, 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.

	September 30, 2012				December 31, 2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale
Within one year	$	4,232	$	4,245	$	931	$	940
One to five years		45,096		46,420		30,796		31,910
Five to ten years		97,217		102,990		51,476		55,053
After ten years		63,876		68,583		64,533		69,033
		210,421		222,238		147,736		156,936
Federal agency collateralized mortgage obligations		97,534		99,041		89,016		91,122
Federal agency mortgage-backed pools		166,029		174,137		173,797		179,351
Private labeled mortgage-backed pools		2,207		2,288		3,518		3,636
Total available for sale investment securities	$	476,191	$	497,704	$	414,067	$	431,045
Held to maturity
Within one year	$	6,100	$	6,100	$	7,100	$	7,134
One to five years		—		—		—		—
Total held to maturity investment securities	$	6,100	$	6,100	$	7,100	$	7,134

The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	Less than 12 Months					12 Months or More					Total
September 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	9,535	$	(62	)	$	—	$	—		$	9,535	$	(62	)
Federal agency collateralized mortgage obligations		19,284		(114	)		—		—			19,284		(114	)
Federal agency mortgage-backed pools		4,479		(6	)		—		—			4,479		(6	)
Total temporarily impaired securities	$	33,298	$	(182	)	$	—	$	—		$	33,298	$	(182	)
	Less than 12 Months					12 Months or More					Total
December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	1,550	$	(44	)	$	1,948	$	(27	)	$	3,498	$	(71	)
Federal agency mortgage-backed pools		23,442		(115	)		23		—			23,465		(115	)
Corporate notes		24		(8	)		—		—			24		(8	)
Total temporarily impaired securities	$	25,016	$	(167	)	$	1,971	$	(27	)	$	26,987	$	(194	)

	Three months ended September 30					Nine months ended September 30
	2012			2011		2012			2011
Sales of securities available for sale (Unaudited)
Proceeds	$	14,991		$	153,299	$	14,991		$	170,689
Gross gains		3			1,115		3			1,754
Gross losses		(1	)		—		(1	)		—

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Acquisition

9 Months Ended

Sep. 30, 2012

Business Combination [Abstract]

Business Combination

Note 2 – Acquisition

On July 17, 2012 Horizon closed its acquisition of Heartland Bancshares, Inc. and Horizon Bank N.A.’s acquisition of Heartland Community Bank, through mergers effective July 17, 2012. Under the final terms of the acquisition, the exchange ratio was 0.54 shares of Horizon’s common stock for each share of Heartland common stock outstanding. Heartland shares outstanding at the closing were 1,442,449, and the shares of HBNC common stock issued to Heartland shareholders totaled 778,922. Horizon’s stock price was $25.25 per share at the close of business on July 17, 2012. Based upon these numbers, the total value of the consideration, including the retirement of TARP, for the acquisition was $26.9 million. For the nine months ended September 30, 2012, the Company had approximately $1.5 million is costs related to the acquisition. These expenses are classified in the other expense section of the income statement primarily located in the salaries and employee benefits, professional services and other expense line items. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce cost through economies of scale.

Under the purchase method of accounting, the total estimated purchase price is allocated to Heartland’s net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, the preliminary purchase price for the Heartland acquisition is allocated as follows (in thousands):

ASSETS			LIABILITIES
Cash and due from banks	$	33,531	Deposits
Investment securities, available for sale		63,707	Non-interest bearing	$	59,350
			NOW accounts		42,681
Commercial		70,343	Savings and money market		61,465
Residential mortgage		20,838	Certificates of deposits		47,749
Consumer		23,423	Total deposits		211,245
Total loans		114,604
			Borrowings		1,186
Premises and equipment		2,647	Subordinated debentures		1,537
FRB and FHLB stock		943	Interest payable		90
Goodwill		13,838	Other liabilities		4,670
Core deposit intangible		2,332
Interest receivable		820
Cash value life insurance		4,012
Other assets		9,210
Total assets purchased	$	245,644	Total liabilities assumed	$	218,728
Common shares issued	$	19,668
Retirement of TARP preferred shares		7,248
Total estimated purchase price	$	26,916

Prior to the end of the measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

Of the total estimated purchase price of $26.9 million, $2.3 million has been allocated to core deposit intangible. Additionally, $13.8 million has been allocated to goodwill and $10.8 million of the purchase price is deductible and was assigned to the business assets. The core deposit intangible will be amortized over seven years on a straight line basis.

The Company acquired loans in the acquisition and the transferred loans had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The Company acquired the $131.1 million loan portfolio at a fair value discount of $16.5 million. The performing portion of the portfolio, $95.4 million, had an estimated fair value or $91.6 million. The excess of expected cash flows above the fair value of the performing portion of loans will be accreted to interest income over the remaining lives of the loans in accordance with ASC 310-20.

Preliminary estimates of certain loans, those for which specific credit-related deterioration, since origination, was identified are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans is based on reasonable expectation about the timing and amount of cash flows to be collected. Many of the acquired loans deemed impaired and considered collateral dependent, with the timing of a sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.

The following table details the acquired loans that are accounted for in accordance with ASC 310-30 (formerly Statement of Position “SOP” 03-3) as of July 17, 2012.

Contractually required principal and interest at acquisition	$	35,574
Contractual cash flows not expected to be collected (nonaccretable differences)		9,747
Expected cash flows at acquisition		25,827
Interest component of expected cash flows (accretable discount)		2,886
Fair value of acquired loans accounted for under ASC 310-30	$	22,941

Pro-forma statements were determined to be impracticable due to the materiality of the transaction.

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Acquisition (Tables)

9 Months Ended

Sep. 30, 2012

Business Combination [Abstract]

Schedule of preliminary purchase price of assets acquired and liabilities assumed

ASSETS			LIABILITIES
Cash and due from banks	$	33,531	Deposits
Investment securities, available for sale		63,707	Non-interest bearing	$	59,350
			NOW accounts		42,681
Commercial		70,343	Savings and money market		61,465
Residential mortgage		20,838	Certificates of deposits		47,749
Consumer		23,423	Total deposits		211,245
Total loans		114,604
			Borrowings		1,186
Premises and equipment		2,647	Subordinated debentures		1,537
FRB and FHLB stock		943	Interest payable		90
Goodwill		13,838	Other liabilities		4,670
Core deposit intangible		2,332
Interest receivable		820
Cash value life insurance		4,012
Other assets		9,210
Total assets purchased	$	245,644	Total liabilities assumed	$	218,728
Common shares issued	$	19,668
Retirement of TARP preferred shares		7,248
Total estimated purchase price	$	26,916

Schedule of acquired loans accounted for in accordance with ASC 310-30

Contractually required principal and interest at acquisition	$	35,574
Contractual cash flows not expected to be collected (nonaccretable differences)		9,747
Expected cash flows at acquisition		25,827
Interest component of expected cash flows (accretable discount)		2,886
Fair value of acquired loans accounted for under ASC 310-30	$	22,941

XML

Other Comprehensive Income

9 Months Ended

Sep. 30, 2012

Other Comprehensive Income [Abstract]

Other Comprehensive Income

Note 10 – Other Comprehensive Income

	Three Months Ended						Nine Months Ended
	September 30 2012 (Unaudited)			September 30 2011 (Unaudited)			September 30 2012 (Unaudited)			September 30 2011 (Unaudited)
Unrealized gains (losses) on securities:
Unrealized holding gains arising during the period	$	2,458		$	5,303		$	4,537		$	13,863
Less: reclassification adjustment for gains realized in net income		2			1,115			2			1,754
		2,456			4,188			4,535			12,109
Unrealized gain (loss) on derivative instruments		(262	)		(3,002	)		(906	)		(3,489	)
Net unrealized gains		2,194			1,186			3,629			8,620
Tax effect		(768	)		(415	)		(1,270	)		(3,017	)
Other comprehensive income	$	1,426		$	771		$	2,359		$	5,603

	September 30 2012			December 31 2011
Unrealized gain on securities available for sale	$	21,514		$	16,978
Unrealized gain (loss) on derivative instruments		(5,820	)		(4,914	)
Tax effect		(5,493	)		(4,222	)
Total accumulated other comprehensive income	$	10,201		$	7,842

XML

Non-Performing Loans and Impaired Loans

9 Months Ended

Sep. 30, 2012

Non-Performing Loans and Impaired Loans [Abstract]

Non-performing Loans and Impaired Loans

Note 6 – Non-performing Loans and Impaired Loans

The following table presents the nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured (“TDRs”) by class of loans:

September 30, 2012	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Non Performing TDR’s		Performing TDR’s		Total Non- Performing Loans
Commercial
Owner occupied real estate	$	3,887	$	—	$	1,472	$	—	$	5,359
Non owner occupied real estate		3,754		—		375		—		4,129
Residential development		—		—		—		—		—
Development & Spec Land Loans		789		—		—		—		789
Commercial and industrial		492		9		801		—		1,302
Total commercial		8,922		9		2,648		—		11,579
Real estate
Residential mortgage		4,266		57		2,361		1,857		8,541
Residential construction		—		—		—		292		292
Mortgage warehouse		—		—		—		—		—
Total real estate		4,266		57		2,361		2,149		8,833
Consumer
Direct Installment		97		1		—		—		98
Direct Installment Purchased		—		—		—		—		—
Indirect Installment		923		42		—		—		965
Home Equity		1,679		—		52		832		2,563
Total Consumer		2,699		43		52		832		3,626
Total	$	15,887	$	109	$	5,061	$	2,981	$	24,038

December 31, 2011	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Non Performing TDR’s		Performing TDR’s		Total Non- Performing Loans
Commercial
Owner occupied real estate	$	2,515	$	—	$	—	$	—	$	2,515
Non owner occupied real estate		3,970		—		152		—		4,122
Residential development		—		—		—		—		—
Development & Spec Land Loans		90		—		—		—		90
Commercial and industrial		330		—		901		—		1,231
Total commercial		6,905		—		1,053		—		7,958
Real estate
Residential mortgage		4,550		—		1,120		2,389		8,059
Residential construction		144		—		—		293		437
Mortgage warehouse		—		—		—		—		—
Total real estate		4,694		—		1,120		2,682		8,496
Consumer
Direct Installment		256		1		—		—		257
Direct Installment Purchased		—		4		—		—		4
Indirect Installment		926		29		—		—		955
Home Equity		1,587		3		25		858		2,473
Total Consumer		2,769		37		25		858		3,689
Total	$	14,368	$	37	$	2,198	$	3,540	$	20,143

From time to time, the Bank obtains information that may lead management to believe that the collection of payments may be doubtful on a particular loan. In recognition of this, it is management’s policy to convert the loan from an “earning asset” to a non-accruing loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Further, it is management’s policy to place a loan on a non-accrual status when the payment is delinquent in excess of 90 days or the loan has had the accrual of interest discontinued by management. The officer responsible for the loan and the Chief Operating Officer or the senior collection officer must review all loans placed on non-accrual status. Subsequent payments on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal in accordance with the loan terms. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

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 for its collateral, 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. Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

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 non-accrual status when they are 90 days or more past due. These loans are often considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms, including TDRs, are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

The Company’s TDRs are considered impaired loans and included in the allowance methodology using the guidance for impaired loans. At September 30, 2012, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments. Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan. A restructured loan is returned to accruing status after six consecutive payments but is still reported as TDR unless the loan bears interest at a market rate. As of September 30, 2012, the Company had $8.4 million in TDRs and $3.4 million were performing according to the restructured terms. The financial statement impact of non-performing TDRs was not material for the three and nine months ending September 30, 2012. There was $1.3 million of specific reserves allocated to TDRs at September 30, 2012 based on the collateral deficiencies.

Loans transferred and classified as troubled debt restructuring during the nine months ended September 30, 2012 and 2011, segregated by class, are shown in the table below.

	September 30, 2012				September 30, 2011
	Number of Defaults		Unpaid Principal Balance		Number of Defaults		Unpaid Principal Balance
Commercial
Owner occupied real estate		3	$	1,472		—	$	—
Non owner occupied real estate		3		637		—		—
Residential development		—		—		—		—
Development & Spec Land Loans		—		—		—		—
Commercial and industrial		—		—		1		841
Total commercial		6		2,109		1		841
Real estate
Residential mortgage		1		582		2		174
Residential construction		—		—		—		—
Mortgage warehouse		—		—		—		—
Total real estate		1		582		2		174
Consumer
Direct Installment		—		—		—		—
Direct Installment Purchased		—		—		—		—
Indirect Installment		—		—		—		—
Home Equity		—		—		8		724
Total Consumer		—		—		8		724
Total		7	$	2,691		11	$	1,739

Troubled debt restructured loans which had payment defaults during the nine months ended September 30, 2012 and 2011, segregated by class, are shown in the table below. Default occurs when a loan is 90 days or more past due or has been transferred to nonaccrual.

	September 30, 2012				September 30, 2011
	Number of Defaults		Unpaid Principal Balance		Number of Defaults		Unpaid Principal Balance
Commercial
Owner occupied real estate		3	$	1,473		—	$	—
Non owner occupied real estate		2		261		—		—
Residential development		—		—		—		—
Development & Spec Land Loans		—		—		—		—
Commercial and industrial		—		—		2		361
Total commercial		5		1,734		2		361
Real estate
Residential mortgage		2		677		2		1,143
Residential construction		—		—		—		—
Mortgage warehouse		—		—		—		—
Total real estate		2		677		2		1,143
Consumer
Direct Installment		—		—		—		—
Direct Installment Purchased		—		—		—		—
Indirect Installment		—		—		—		—
Home Equity		—		—		2		65
Total Consumer		—		—		2		65
Total		7	$	2,411		6	$	1,569

The following table presents commercial loans individually evaluated for impairment by class of loan:

							Three Months Ending					Nine Months Ending
September 30, 2012	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Loss Allocated		Average Balance in Impaired Loans		Cash/Accrual Interest Income Recognized			Average Balance in Impaired Loans		Cash/Accrual Interest Income Recognized
With no recorded allowance
Commercial
Owner occupied real estate	$	4,457	$	4,460	$	—	$	3,810	$	—		$	1,978	$	3
Non owner occupied real estate		2,521		2,542		—		2,429		70			1,920		72
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		131		131		—		109		(0	)		37		—
Commercial and industrial		456		471		—		382		—			129		—
Total commercial		7,565		7,604		—		6,730		69			4,064		75
With an allowance recorded
Commercial
Owner occupied real estate		903		903		450		910		(0	)		1,109		1
Non owner occupied real estate		2,938		2,938		1,065		2,943		—			2,843		—
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		658		658		615		660		—			523		6
Commercial and industrial		801		801		273		801		—			807		—
Total commercial		5,300		5,300		2,403		5,314		(0	)		5,282		7
Total	$	12,865	$	12,904	$	2,403	$	12,044	$	69		$	9,346	$	82
							Three Months Ending					Nine Months Ending
September 30, 2011	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Loss Allocated		Average Balance in Impaired Loans		Interest Income Recognized			Average Balance in Impaired Loans		Interest Income Recognized
With no recorded allowance
Commercial
Owner occupied real estate	$	1,315	$	1,314	$	—	$	1,224	$	31		$	856	$	32
Non owner occupied real estate		2,403		2,625		—		1,683		85			985		89
Residential development		—		—		—		—		—			9		—
Development & Spec Land Loans		—		111		—		—		—			69		—
Commercial and industrial		1,154		1,156		—		1,091		47			1,099		47
Total commercial		4,872		5,206		—		3,998		163			3,018		168
With an allowance recorded
Commercial
Owner occupied real estate		1,420		1,420		460		1,449		—			1,234		—
Non owner occupied real estate		5,499		5,538		996		4,943		—			4,859		—
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		90		90		125		90		—			179		—
Commercial and industrial		234		308		225		284		—			393		—
Total commercial		7,243		7,356		1,806		6,766		—			6,665		—
Total	$	12,115	$	12,562	$	1,806	$	10,764	$	163		$	9,683	$	168

The following table presents the payment status by class of loan:

September 30, 2012	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial
Owner occupied real estate	$	1,008	$	110	$	—	$	1,118	$	166,897	$	168,015
Non owner occupied real estate		—		123		—		123		187,830		187,953
Residential development		—		—		—		—		1,130		1,130
Development & Spec Land Loans		—		—		—		—		6,645		6,645
Commercial and industrial		433		2,373		9		2,815		80,774		83,589
Total commercial		1,441		2,606		9		4,056		443,276		447,332
Real estate
Residential mortgage		1,300		197		57		1,554		163,166		164,720
Residential construction		—		—		—		—		11,742		11,742
Mortgage warehouse		—		—		—		—		244,233		244,233
Total real estate		1,300		197		57		1,554		419,141		420,695
Consumer
Direct Installment		162		243		1		406		29,841		30,247
Direct Installment Purchased		—		—		—		—		518		518
Indirect Installment		1,124		101		42		1,267		127,235		128,502
Home Equity		1,038		139		—		1,177		127,494		128,671
Total consumer		2,324		483		43		2,850		285,088		287,938
Total	$	5,065	$	3,286	$	109	$	8,460	$	1,147,505	$	1,155,965
December 31, 2011	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial
Owner occupied real estate	$	89	$	168	$	—	$	257	$	131,636	$	131,893
Non owner occupied real estate		228		—		—		228		142,041		142,269
Residential development		—		—		—		—		3,574		3,574
Development & Spec Land Loans		—		—		—		—		8,739		8,739
Commercial and industrial		34		22		—		56		65,718		65,774
Total commercial		351		190		—		541		351,708		352,249
Real estate
Residential mortgage		411		—		—		411		150,482		150,893
Residential construction		—		—		—		—		6,181		6,181
Mortgage warehouse		—		—		—		—		208,299		208,299
Total real estate		411		—		—		411		364,962		365,373
Consumer
Direct Installment		164		22		1		187		24,065		24,252
Direct Installment Purchased		7		14		4		25		956		981
Indirect Installment		1,333		335		29		1,697		126,054		127,751
Home Equity		363		92		3		458		113,103		113,561
Total consumer		1,867		463		37		2,367		264,178		266,545
Total	$	2,629	$	653	$	37	$	3,319	$	980,848	$	984,167

The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

Horizon Bank’s processes for determining credit quality differ slightly depending on whether a new loan or a renewed loan is being underwritten, or whether an existing loan is being re-evaluated for credit quality. The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the loan grade.

• For new and renewed commercial loans, the Bank’s Credit Department, which acts independently of the loan officer, assigns the credit quality grade to the loan. Loan grades for loans with an aggregate credit exposure of $500,000 or greater are validated by the Loan Committee, which is chaired by the Chief Operating Officer (COO).

• Commercial loan officers are responsible for reviewing their loan portfolios and report any adverse material change to the COO or Loan Committee. When circumstances warrant a change in the credit quality grade, loan officers are required to notify the COO and the Credit Department of the change in the loan grade. Downgrades are accepted immediately by the COO however, lenders must present their factual information to either the Loan Committee or the COO when recommending an upgrade.

• The COO meets weekly with loan officers to discuss the status of past-due loans and classified loans. These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.

• Monthly, senior management meets with the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets. This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, and collateral repossessions. The information reviewed in this meeting acts as a precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.

For real estate and consumer loans, Horizon uses a grading system based on delinquency. Loans that are 90 days or more past due, on non-accrual, or are classified as a TDR are graded “Substandard.” After being 90 days delinquent a loan is charged off unless it is well secured and in the process of collection. If the latter case exists, the loan is placed on non-accrual. Occasionally a mortgage loan may be graded as “Special Mention.” When this situation arises, it is because the characteristics of the loan and the borrower fit the definition of a Risk Grade 5 described below, which is normally used for grading commercial loans. Loans not graded Substandard are considered Pass.

Horizon Bank employs an eight-grade rating system to determine the credit quality of commercial loans. The first four grades represent acceptable quality, and the last four grades mirror the criticized and classified grades used by the bank regulatory agencies (special mention, substandard, doubtful, and loss). The loan grade definitions are detailed below.

Risk Grade 1: Excellent (Pass)

Loans secured by liquid collateral, such as certificates of deposit, reputable bank letters of credit, or other cash equivalents; loans that are guaranteed or otherwise backed by the full faith and credit of the United States government or an agency thereof, such as the Small Business Administration; or loans to any publicly held company with a current long-term debt rating of A or better.

Risk Grade 2: Good (Pass)

Loans to businesses that have strong financial statements containing an unqualified opinion from a CPA firm and at least three consecutive years of profits; loans supported by unaudited financial statements containing strong balance sheets, five consecutive years of profits, a five-year satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive; loans secured by publicly traded marketable securities where there is no impediment to liquidation; loans to individuals backed by liquid personal assets and unblemished credit history; or loans to publicly held companies with current long-term debt ratings of Baa or better.

Risk Grade 3: Satisfactory (Pass)

Loans supported by financial statements (audited or unaudited) that indicate average or slightly below average risk and having some deficiency or vulnerability to changing economic conditions; loans with some weakness but offsetting features of other support are readily available; loans that are meeting the terms of repayment, but which may be susceptible to deterioration if adverse factors are encountered. Loans may be graded Satisfactory when there is no recent information on which to base a current risk evaluation and the following conditions apply:

• At inception, the loan was properly underwritten, did not possess an unwarranted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory;

• At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss.

• The loan has exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance.

• During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the borrower is in an industry known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk grade may be warranted.

Risk Grade 4: Satisfactory/Monitored (Pass)

Loans in this category are considered to be of acceptable credit quality, but contain greater credit risk than Satisfactory loans due to weak balance sheets, marginal earnings or cash flow, lack of financial information, weakening markets, insufficient or questionable collateral coverage or other uncertainties. These loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in a Satisfactory/Monitored loan is within acceptable underwriting guidelines so long as the loan is given the proper level of management supervision. Loans that normally fall into this grade include construction of commercial real estate buildings, land development and subdivisions, and rental properties that have not attained stabilization.

Risk Grade 5: Special Mention

Loans which possess some credit deficiency or potential weakness which deserves close attention. Such loans pose an unwarranted financial risk that, if not corrected, could weaken the loan by adversely impacting the future repayment ability of the borrower. The key distinctions of a Special Mention classification are that (1) it is indicative of an unwarranted level of risk and (2) weaknesses are considered “potential,” not “defined,” impairments to the primary source of repayment. These loans may be to borrowers with adverse trends in financial performance, collateral value and/or marketability, or balance sheet strength.

Risk Grade 6: Substandard

One or more of the following characteristics may be exhibited in loans classified Substandard:

• Loans which possess a defined credit weakness. The likelihood that a loan will be paid from the primary source of repayment is uncertain. Financial deterioration is under way and very close attention is warranted to ensure that the loan is collected without loss.

• Loans are inadequately protected by the current net worth and paying capacity of the obligor.

• The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees.

• Loans have a distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

• Unusual courses of action are needed to maintain a high probability of repayment.

• The borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments.

• The lender is forced into a subordinated or unsecured position due to flaws in documentation.

• Loans have been restructured so that payment schedules, terms, and collateral represent concessions to the borrower when compared to the normal loan terms.

• The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

• There is a significant deterioration in market conditions to which the borrower is highly vulnerable.

Risk Grade 7: Doubtful

One or more of the following characteristics may be present in loans classified Doubtful:

• Loans have all of the weaknesses of those classified as Substandard. However, based on existing conditions, these weaknesses make full collection of principal highly improbable.

• The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

• The possibility of loss is high but because of certain important pending factors which may strengthen the loan, loss classification is deferred until the exact status of repayment is known.

Risk Grade 8: Loss

Loans are considered uncollectible and of such little value that continuing to carry them as assets is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following table presents loans by credit grades.

September 30, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial
Owner occupied real estate	$	137,121	$	8,826	$	17,632	$	4,436	$	168,015
Non owner occupied real estate		153,131		20,694		13,008		1,120		187,953
Residential development		434		—		696		—		1,130
Development & Spec Land Loans		3,637		251		2,627		130		6,645
Commercial and industrial		74,279		4,339		4,715		256		83,589
Total commercial		368,602		34,110		38,678		5,942		447,332
Real estate
Residential mortgage		156,179		—		8,541		—		164,720
Residential construction		11,450		—		292		—		11,742
Mortgage warehouse		244,233		—		—		—		244,233
Total real estate		411,862		—		8,833		—		420,695
Consumer
Direct Installment		30,149		—		98		—		30,247
Direct Installment Purchased		518		—		—		—		518
Indirect Installment		127,537		—		965		—		128,502
Home Equity		126,108		—		2,563		—		128,671
Total Consumer		284,312		—		3,626		—		287,938
Total	$	1,064,776	$	34,110	$	51,137	$	5,942	$	1,155,965
December 31, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial
Owner occupied real estate	$	107,155	$	4,101	$	20,637	$	—	$	131,893
Non owner occupied real estate		118,446		11,423		12,400		—		142,269
Residential development		1,677		529		1,368		—		3,574
Development & Spec Land Loans		3,778		860		4,101		—		8,739
Commercial and industrial		55,964		3,012		6,798		—		65,774
Total commercial		287,020		19,925		45,304		—		352,249
Real estate
Residential mortgage		142,834		—		8,059		—		150,893
Residential construction		5,744		—		437		—		6,181
Mortgage warehouse		208,299		—		—		—		208,299
Total real estate		356,877		—		8,496		—		365,373
Consumer
Direct Installment		23,995		—		257		—		24,252
Direct Installment Purchased		977		—		4		—		981
Indirect Installment		126,796		—		955		—		127,751
Home Equity		111,088		—		2,473		—		113,561
Total Consumer		262,856		—		3,689		—		266,545
Total	$	906,753	$	19,925	$	57,489	$	—	$	984,167

XML

Disclosures About Fair Value of Assets and Liabilities (Details 1) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Schedule of fair value transfer among levels
Reason for Transfer (a)	Valuation determined by widely accepted techniques including discounted cash flow analysis on expected cash flows of each derivative and observable market rate inputs such as yield curves and contractual terms on each instrument
Reason for Transfer (b)	Valuation determined by quoted prices for similar loans in the secondary market with an expected fallout rate (interest rate locked pipeline loans not expected to close). Fallout rate is not considered a significant input to the fair value in its entirety
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	67,920
Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Hedged loans [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	(59,911)
Hedged loans [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Hedged loans [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	74,947
Hedged loans [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Forward sale commitments [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	(510)
Forward sale commitments [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Forward sale commitments [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	942
Forward sale commitments [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Interest rate swap agreements [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	6,464
Interest rate swap agreements [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Interest rate swap agreements [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	(7,969)
Interest rate swap agreements [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Commitment to originate loan [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3	71
Commitment to originate loan [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Commitment to originate loan [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3
Commitment to originate loan [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value transfer among levels
Transfers between Levels 1, 2 and 3

XML

Loans

9 Months Ended

Sep. 30, 2012

Loans [Abstract]

Loans

Note 4 – Loans

	September 30 2012			December 31 2011
Commercial
Working capital and equipment	$	193,671		$	170,325
Real estate, including agriculture		242,212			172,910
Tax exempt		4,719			3,818
Other		6,812			5,323
Total		447,414			352,376
Real estate
1–4 family		172,770			153,039
Other		3,783			4,102
Total		176,553			157,141
Consumer
Auto		137,490			134,686
Recreation		5,005			4,737
Real estate/home improvement		30,905			27,729
Home equity		105,960			92,249
Unsecured		4,435			3,183
Other		3,053			2,793
Total		286,848			265,377
Mortgage warehouse		244,233			208,299
Total loans		1,155,048			983,193
Allowance for loan losses		(18,568	)		(18,882	)
Loans, net	$	1,136,480		$	964,311

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves larger loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of property type, and are monitored for concentrations of credit. Management monitors and evaluates commercial real estate loans based on collateral, cash flow and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Real Estate and Consumer

With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Mortgage Warehousing

Horizon’s mortgage warehouse lending has specific mortgage companies as customers of Horizon Bank. Individual mortgage loans originated by these mortgage companies are funded as a secured borrowing with a pledge of collateral under Horizon’s agreement with the mortgage company. Each individual mortgage is assigned to Horizon until the loan is sold to the secondary market by the mortgage company. In addition, Horizon takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. At the time a loan is transferred to the secondary market, the mortgage company repurchases the loan under its option within the agreement. Due to the repurchase feature contained in the agreement, the transaction does not qualify as a sale and therefore is accounted for as a secured borrowing with a pledge of collateral pursuant to the agreement with the mortgage company. When the individual loan is sold to the end investor by the mortgage company, the proceeds from the sale of the loan are received by Horizon and used to pay off the loan balance with Horizon along with any accrued interest and any related fees. The remaining balance from the sale is forwarded to the mortgage company. These individual loans typically are sold by the mortgage company within 30 days and are seldom held more than 90 days. Interest income is accrued during this period and collected at the time each loan is sold. Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.

Based on the agreements with each mortgage company, at any time a mortgage company can repurchase from Horizon their outstanding loan balance on an individual mortgage and regain possession of the original note. Horizon also has the option to request that the mortgage company repurchase an individual mortgage. Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company. Also, in the event that the end investor would not be able to honor the purchase commitment and the mortgage company would not be able to repurchase its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.

The following table shows the recorded investment of individual loan categories.

September 30, 2012	Loan Balance			Interest Due		Deferred Fees / (Costs)			Recorded Investment
Owner occupied real estate	$	168,015		$	614	$	20		$	168,649
Non owner occupied real estate		187,953			547		55			188,555
Residential spec homes		1,130			2		—			1,132
Development & spec land loans		6,645			19		—			6,664
Commercial and industrial		83,589			390		7			83,986
Total commercial		447,332			1,572		82			448,986
Residential mortgage		164,720			646		91			165,457
Residential construction		11,742			19		—			11,761
Mortgage warehouse		244,233			427		—			244,660
Total real estate		420,695			1,092		91			421,878
Direct installment		30,247			116		(346	)		30,017
Direct installment purchased		518			—		—			518
Indirect installment		128,502			373		—			128,875
Home equity		128,671			620		(744	)		128,547
Total consumer		287,938			1,109		(1,090	)		287,957
Total loans		1,155,965			3,773		(917	)		1,158,821
Allowance for loan losses		(18,568	)		—		—			(18,568	)
Net loans	$	1,137,397		$	3,773	$	(917	)	$	1,140,253
December 31, 2011	Loan Balance			Interest Due		Deferred Fees / (Costs)			Recorded Investment
Owner occupied real estate	$	131,893		$	383	$	30		$	132,306
Non owner occupied real estate		142,269			360		94			142,723
Residential spec homes		3,574			6		—			3,580
Development & spec land loans		8,739			16		—			8,755
Commercial and industrial		65,774			169		3			65,946
Total commercial		352,249			934		127			353,310
Residential mortgage		150,893			513		68			151,474
Residential construction		6,181			8		—			6,189
Mortgage warehouse		208,299			427		—			208,726
Total real estate		365,373			948		68			366,389
Direct installment		24,252			94		(360	)		23,986
Direct installment purchased		981			—		—			981
Indirect installment		127,751			420		(56	)		128,115
Home equity		113,561			559		(752	)		113,368
Total consumer		266,545			1,073		(1,168	)		266,450
Total loans		984,167			2,955		(973	)		986,149
Allowance for loan losses		(18,882	)		—		—			(18,882	)
Net loans	$	965,285		$	2,955	$	(973	)	$	967,267

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Allowance for Loan Losses

9 Months Ended

Sep. 30, 2012

Allowance for Loan Losses [Abstract]

Allowance for Loan Losses

Note 5 – Allowance for Loan Losses

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior one to five years. Management believes the two-year historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed. The actual allowance for loan loss activity is provided below.

	Three Months Ended September 30					Nine Months Ended September 30
	2012 (Unaudited)		2011 (Unaudited)			2012 (Unaudited)		2011 (Unaudited)
Balance at beginning of the period	$	18,374	$	18,586		$	18,882	$	19,064
Loans charged-off:
Commercial
Owner occupied real estate		92		65			95		189
Non owner occupied real estate		81		196			109		310
Residential development		—		—			—		—
Development & Spec Land Loans		—		—			—		—
Commercial and industrial		221		17			548		227
Total commercial		394		278			752		726
Real estate
Residential mortgage		247		86			451		837
Residential construction		—		—			—		—
Mortgage warehouse		—		—			—		—
Total real estate		247		86			451		837
Consumer
Direct Installment		90		78			261		480
Direct Installment Purchased		—		—			—		—
Indirect Installment		313		494			922		1,280
Home Equity		123		359			1,010		1,888
Total consumer		526		931			2,193		3,648
Total loans charged-off		1,167		1,295			3,396		5,211
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		—		—			352		18
Non owner occupied real estate		—		—			7		—
Residential development		—		—			—		—
Development & Spec Land Loans		—		—			—		—
Commercial and industrial		61		9			114		14
Total commercial		61		9			473		32
Real estate
Residential mortgage		42		—			74		10
Residential construction		—		—			—		—
Mortgage warehouse		—		—			—		—
Total real estate		42		—			74		10
Consumer
Direct Installment		28		16			63		83
Direct Installment Purchased		—		—			—		—
Indirect Installment		173		179			563		568
Home Equity		16		51			100		120
Total consumer		217		246			726		771
Total loan recoveries		320		255			1,273		813
Net loans charged-off		847		1,040			2,123		4,398
Provision charged to operating expense
Commercial		625		1,341			320		1,290
Real estate		254		815			900		968
Consumer		162		(592	)		589		2,186
Total provision charged to operating expense		1,041		1,564			1,809		4,444
Balance at the end of the period	$	18,568	$	19,110		$	18,568	$	19,110

Certain loans are individually evaluated for impairment, and the Company’s general practice is to proactively charge down impaired loans to the fair value of the underlying collateral.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down or specific allocation of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the value is known but no later than when a loan is 180 days past due. Pursuant to such guidelines, the Company also charges-off unsecured open-end loans when the loan is 90 days past due, and charges down to the net realizable value other secured loans when they are 90 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection in full will occur regardless of delinquency status, are not charged off.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment analysis:

September 30, 2012	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,403	$	—	$	—	$	—	$	2,403
Collectively evaluated for impairment		5,655		2,974		1,716		5,820		16,165
Total ending allowance balance	$	8,058	$	2,974	$	1,716	$	5,820	$	18,568
Loans:
Individually evaluated for impairment	$	12,865	$	—	$	—	$	—	$	12,865
Collectively evaluated for impairment		436,121		177,218		244,660		287,957		1,145,956
Total ending loans balance	$	448,986	$	177,218	$	244,660	$	287,957	$	1,158,821
December 31, 2011	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,136	$	—	$	—	$	—	$	2,136
Collectively evaluated for impairment		5,881		2,472		1,695		6,698		16,746
Total ending allowance balance	$	8,017	$	2,472	$	1,695	$	6,698	$	18,882
Loans:
Individually evaluated for impairment	$	7,960	$	—	$	—	$	—	$	7,960
Collectively evaluated for impairment		345,350		157,663		208,726		266,450		978,189
Total ending loans balance	$	353,310	$	157,663	$	208,726	$	266,450	$	986,149

XML

Derivative Financial Instruments

9 Months Ended

Sep. 30, 2012

Derivative Financial Instruments [Abstract]

Derivative financial instruments

Note 7 – Derivative financial instruments

Cash Flow Hedges

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flow due to interest rate fluctuations, the Company entered into interest rate swap agreements for a portion of its floating rate debt. The agreements provide for the Company to receive interest from the counterparty at three month LIBOR and to pay interest to the counterparty at a weighted average fixed rate of 5.63% on a notional amount of $30.5 million at September 30, 2012. Under these agreements, the Company pays or receives the net interest amount monthly, with the monthly settlements included in interest expense.

Management has designated the interest rate swap agreement as a cash flow hedging instrument. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of the other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. At September 30, 2012, the Company’s cash flow hedge was effective and is not expected to have a significant impact the Company’s net income over the next 12 months.

Fair Value Hedges

Fair value hedges are intended to reduce the interest rate risk associated with the underlying hedged item. The Company enters into fixed rate loan agreements as part of its lending activities. To mitigate the risk of changes in fair value based on fluctuations in interest rates, the Company has entered into interest rate swap agreements on individual loans, converting the fixed rate loans to a variable rate. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings. At September 30, 2012, the Company’s fair value hedges were effective and are not expected to have a significant impact on the Company’s net income over the next 12 months.

The change in fair value of both the hedge instruments and the underlying loan agreements are recorded as gains or losses in interest income. The fair value hedges are considered to be highly effective, and any hedge ineffectiveness was deemed not material. The notional amounts of the loan agreements being hedged were $72.4 million at September 30, 2012.

Other Derivative Instruments

The Company enters into non-hedging derivatives in the form of mortgage loan forward sale commitments with investors and commitments to originate mortgage loans as part of its mortgage banking business. At September 30, 2012, the Company’s fair value of these derivatives was recorded and over the next 12 months, this activity is not expected to have a significant impact on the Company’s net income.

The change in fair value of both the forward sale commitments and commitments to originate mortgage loans were recorded and the net gains or losses included in the Company’s gain on sale of loans.

The following tables summarize the fair value of derivative financial instruments utilized by Horizon Bancorp:

	Asset Derivative September 30, 2012			Liability Derivatives September 30, 2012
Derivatives designated as hedging instruments (Unaudited)	Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value
Interest rate contracts	Loans	$	443		Other liabilities	$	2,523
Interest rate contracts	Other Assets		2,080		Other liabilities		5,820
Total derivatives designated as hedging instruments			2,523				8,343
Derivatives not designated as hedging instruments
Mortgage loan contracts	Other assets		1,262		Other liabilities		—
Total derivatives not designated as hedging instruments			1,262				—
Total derivatives		$	3,785			$	8,343

	Asset Derivative December 31, 2011			Liability Derivatives December 31, 2011
Derivatives designated as hedging instruments (Unaudited)	Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value
Interest rate contracts	Loans	$	754		Other liabilities	$	2,187
Interest rate contracts	Other Assets		1,433		Other liabilities		4,914
Total derivatives designated as hedging instruments			2,187				7,101
Derivatives not designated as hedging instruments
Mortgage loan contracts	Other assets		662		Other liabilities		—
Total derivatives not designated as hedging instruments			662				—
Total derivatives		$	2,849			$	7,101

The effect of the derivative instruments on the consolidated statement of income for the three and nine-month periods ending is as follows:

	Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Three Months Ended September 30						Amount of Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) Nine Months Ended September 30
Derivative in cash flow hedging relationship	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest rate contracts	$	(170	)	$	(1,951	)	$	(589	)	$	(2,268	)

FASB Accounting Standards Codification (“ASC”) Topic 820-10-20 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820-10-55 establishes a fair value hierarchy that emphasizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

		Amount of Gain (Loss) Recognized on Derivative Three Months Ended September 30						Amount of Gain (Loss) Recognized on Derivative Nine Months Ended September 30
Derivative in fair value hedging relationship	Location of gain (loss) recognized on derivative	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Interest rate contracts	Interest income - loans	$	112		$	394		$	336		$	335
Interest rate contracts	Interest income - loans		(112	)		(394	)		(336	)		(335	)
Total		$	—		$	—		$	—		$	—
		Amount of Gain (Loss) Recognized on Derivative Three Months Ended September 30						Amount of Gain (Loss) Recognized on Derivative Nine Months Ended September 30
Derivative not designated as hedging relationship	Location of gain (loss) recognized on derivative	2012 (Unaudited)			2011 (Unaudited)			2012 (Unaudited)			2011 (Unaudited)
Mortgage contracts	Other income - gain on sale of loans	$	320		$	359		$	600		$	1,157

XML

Disclosures About Fair Value of Assets and Liabilities (Details 5) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Impaired loans [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Unobservable Inputs	Discount to reflect current market conditions and ultimate collectability
Mortgage servicing rights [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Unobservable Inputs	Discount to reflect current market conditions
Level 3 [Member] | Impaired loans [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Fair Value at September 30, 2012	10,462
Valuation Technique	Collateral based measurement
Level 3 [Member] | Mortgage servicing rights [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Fair Value at September 30, 2012	4,602
Valuation Technique	Discounted cashflows
Maximum [Member] | Level 3 [Member] | Impaired loans [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Range (Weighted Average)	50.00%
Maximum [Member] | Level 3 [Member] | Mortgage servicing rights [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Range (Weighted Average)	20.00%
Minimum [Member] | Level 3 [Member] | Impaired loans [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Range (Weighted Average)	0.00%
Minimum [Member] | Level 3 [Member] | Mortgage servicing rights [Member]
Unobservable inputs in recurring and nonrecurring level three fair value measurements
Range (Weighted Average)	0.00%

XML

Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair value measurements of assets and liabilities recognized on a recurring basis
Cash and due from banks	$ 41,562	$ 20,447
Investment securities, held to maturity	6,100	7,100
Loans held for sale	18,163	14,090
Loans, net	1,136,480	964,311
Stock in FHLB and FRB	13,333	12,390
Interest receivable	8,248	6,671
Liabilities
Non-interest bearing deposits	211,935	130,673
Interest-bearing deposits	1,095,036	879,192
Borrowings	333,150	370,111
Subordinated debentures	32,282	30,676
Interest payable	579	596
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Cash and due from banks	41,562	20,447
Investment securities, held to maturity
Loans held for sale
Loans, net
Stock in FHLB and FRB
Interest receivable
Liabilities
Non-interest bearing deposits	211,935	130,673
Interest-bearing deposits
Borrowings
Subordinated debentures
Interest payable
Significant Other Observable Inputs (Level 2) [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Cash and due from banks
Investment securities, held to maturity	6,100	7,134
Loans held for sale
Loans, net
Stock in FHLB and FRB	13,333	12,390
Interest receivable	8,248	6,671
Liabilities
Non-interest bearing deposits
Interest-bearing deposits	1,108,316	874,160
Borrowings	344,884	398,789
Subordinated debentures	32,140	30,083
Interest payable	579	596
Level 3 [Member]
Fair value measurements of assets and liabilities recognized on a recurring basis
Cash and due from banks
Investment securities, held to maturity
Loans held for sale	18,163	14,090
Loans, net	1,166,649	979,401
Stock in FHLB and FRB
Interest receivable
Liabilities
Non-interest bearing deposits
Interest-bearing deposits
Borrowings
Subordinated debentures
Interest payable

XML

Disclosures About Fair Value of Assets and Liabilities (Details 4) (Fair Value, Measurements, Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Other assets are measured at fair value on a nonrecurring basis
Impaired loans	$ 10,462	$ 5,822
Mortgage servicing rights	4,602	4,193
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Other assets are measured at fair value on a nonrecurring basis
Impaired loans
Mortgage servicing rights
Significant Other Observable Inputs (Level 2) [Member]
Other assets are measured at fair value on a nonrecurring basis
Impaired loans
Mortgage servicing rights
Significant Unobservable Inputs (Level 3) [Member]
Other assets are measured at fair value on a nonrecurring basis
Impaired loans	10,462	5,822
Mortgage servicing rights	$ 4,602	$ 4,193

XML

Acquisition (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Schedule of preliminary purchase price of assets acquired and liabilities assumed
Cash and due from banks	$ 33,531
Investment securities, available for sale	63,707
Total loans	114,604
Premises and equipment	2,647
FRB and FHLB stock	943
Goodwill	13,838
Core deposit intangible	2,332
Interest receivable	820
Cash value life insurance	4,012
Other assets	9,210
Total assets purchased	245,644
Common shares issued	19,668
Retirement of TARP preferred shares	7,248
Total estimated purchase price	26,916
Deposits
Non-interest bearing	59,350
NOW accounts	42,681
Savings and money market	61,465
Certificates of deposits	47,749
Total deposits	211,245
Borrowings	1,186
Subordinated debentures	1,537
Interest Payable	90
Total liabilities	4,670
Total liabilities assumed	218,728
Consumer Loan [Member]
Schedule of preliminary purchase price of assets acquired and liabilities assumed
Total loans	23,423
Residential mortgage [Member]
Schedule of preliminary purchase price of assets acquired and liabilities assumed
Total loans	20,838
Commercial Loan [Member]
Schedule of preliminary purchase price of assets acquired and liabilities assumed
Total loans	$ 70,343

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Non-Performing Loans and Impaired Loans (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Unpaid Principal Balance total
Unpaid Principal Balance total	$ 12,865	$ 12,115	$ 12,865	$ 12,115
Recorded Investment total
Total ending loans balance	12,904	12,562	12,904	12,562
Allowance For Loan Loss Allocated	2,403	1,806	2,403	1,806
Average Balance in Impaired Loans total
Average Balance in Impaired Loans total	12,044	10,764	9,346	9,683
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, Total	69	163	82	168
Commercial [Member]
Unpaid Principal Balance total
Unpaid Principal Balance With no recorded allowance	7,565	4,872	7,565	4,872
Unpaid Principal Balance With an allowance recorded	5,300	7,243	5,300	7,243
Recorded Investment total
Recorded Investment With no recorded allowance	7,604	5,206	7,604	5,206
Recorded Investment With an allowance recorded	5,300	7,356	5,300	7,356
Allowance For Loan Loss Allocated	2,403	1,806	2,403	1,806
Average Balance in Impaired Loans total
Average Balance in Impaired Loans With no recorded allowance	6,730	3,998	4,064	3,018
Average Balance in Impaired Loans With an allowance recorded	5,314	6,766	5,282	6,665
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, With no recorded allowance	69	163	75	168
Cash/Accrual Interest Income Recognized, With an allowance recorded	0		7
Commercial [Member] | Owner occupied real estate [Member]
Unpaid Principal Balance total
Unpaid Principal Balance With no recorded allowance	4,457	1,315	4,457	1,315
Unpaid Principal Balance With an allowance recorded	903	1,420	903	1,420
Recorded Investment total
Recorded Investment With no recorded allowance	4,460	1,314	4,460	1,314
Recorded Investment With an allowance recorded	903	1,420	903	1,420
Allowance For Loan Loss Allocated	450	460	450	460
Average Balance in Impaired Loans total
Average Balance in Impaired Loans With no recorded allowance	3,810	1,224	1,978	856
Average Balance in Impaired Loans With an allowance recorded	910	1,449	1,109	1,234
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, With no recorded allowance		31	3	32
Cash/Accrual Interest Income Recognized, With an allowance recorded	0		1
Commercial [Member] | Non owner occupied real estate [Member]
Unpaid Principal Balance total
Unpaid Principal Balance With no recorded allowance	2,521	2,403	2,521	2,403
Unpaid Principal Balance With an allowance recorded	2,938	5,499	2,938	5,499
Recorded Investment total
Recorded Investment With no recorded allowance	2,542	2,625	2,542	2,625
Recorded Investment With an allowance recorded	2,938	5,538	2,938	5,538
Allowance For Loan Loss Allocated	1,065	996	1,065	996
Average Balance in Impaired Loans total
Average Balance in Impaired Loans With no recorded allowance	2,429	1,683	1,920	985
Average Balance in Impaired Loans With an allowance recorded	2,943	4,943	2,843	4,859
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, With no recorded allowance	70	85	72	89
Cash/Accrual Interest Income Recognized, With an allowance recorded
Commercial [Member] | Residential development [Member]
Unpaid Principal Balance total
Unpaid Principal Balance With no recorded allowance
Unpaid Principal Balance With an allowance recorded
Recorded Investment total
Recorded Investment With no recorded allowance
Recorded Investment With an allowance recorded
Allowance For Loan Loss Allocated
Average Balance in Impaired Loans total
Average Balance in Impaired Loans With no recorded allowance				9
Average Balance in Impaired Loans With an allowance recorded
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, With no recorded allowance
Cash/Accrual Interest Income Recognized, With an allowance recorded
Commercial [Member] | Development & Spec Land Loans [Member]
Unpaid Principal Balance total
Unpaid Principal Balance With no recorded allowance	131		131
Unpaid Principal Balance With an allowance recorded	658	90	658	90
Recorded Investment total
Recorded Investment With no recorded allowance	131	111	131	111
Recorded Investment With an allowance recorded	658	90	658	90
Allowance For Loan Loss Allocated	615	125	615	125
Average Balance in Impaired Loans total
Average Balance in Impaired Loans With no recorded allowance	109		37	69
Average Balance in Impaired Loans With an allowance recorded	660	90	523	179
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, With no recorded allowance	0
Cash/Accrual Interest Income Recognized, With an allowance recorded			6
Commercial [Member] | Commercial and industrial [Member]
Unpaid Principal Balance total
Unpaid Principal Balance With no recorded allowance	456	1,154	456	1,154
Unpaid Principal Balance With an allowance recorded	801	234	801	234
Recorded Investment total
Recorded Investment With no recorded allowance	471	1,156	471	1,156
Recorded Investment With an allowance recorded	801	308	801	308
Allowance For Loan Loss Allocated	273	225	273	225
Average Balance in Impaired Loans total
Average Balance in Impaired Loans With no recorded allowance	382	1,091	129	1,099
Average Balance in Impaired Loans With an allowance recorded	801	284	807	393
Cash/Accrual Interest Income Recognized total
Cash/Accrual Interest Income Recognized, With no recorded allowance		47		47
Cash/Accrual Interest Income Recognized, With an allowance recorded

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Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Reclassifications

Reclassifications

Certain reclassifications have been made to the 2011 consolidated financial statements to be comparable to 2012. These reclassifications had no effect on net income.

Computation of basic and diluted earnings per share

Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted-average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The following table shows computation of basic and diluted earnings per share.

Intangibles-Goodwill and Other

FASB Accounting Standards Update 2012-02, Intangibles – Goodwill and Other. In July 2012, the FASB issued Accounting Standards Update 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The amendments in this ASU allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, bases on qualitative assessment, that it is more likely than not, the indefinite-lived intangible asset is impaired.

This ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this standard on January 1, 2012 and did not have a significant impact on the Company’s financial statements.

Comprehensive Income

FASB Accounting Standards Update 2011-12, Comprehensive Income. In December 2011 the FASB issued Accounting Standards Update 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.

This ASU defers the changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income.

This ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company’s financial statements now include separate statements of comprehensive income and additional footnote disclosures (see Note 10 – Other Comprehensive Income).

Transfers and Servicing

FASB Accounting Standards Codification (“ASC”) Topic 820-10-20 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820-10-55 establishes a fair value hierarchy that emphasizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

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Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2012

Allowance for Loan Losses [Abstract]

Allowance for Loans Losses

	Three Months Ended September 30					Nine Months Ended September 30
	2012 (Unaudited)		2011 (Unaudited)			2012 (Unaudited)		2011 (Unaudited)
Balance at beginning of the period	$	18,374	$	18,586		$	18,882	$	19,064
Loans charged-off:
Commercial
Owner occupied real estate		92		65			95		189
Non owner occupied real estate		81		196			109		310
Residential development		—		—			—		—
Development & Spec Land Loans		—		—			—		—
Commercial and industrial		221		17			548		227
Total commercial		394		278			752		726
Real estate
Residential mortgage		247		86			451		837
Residential construction		—		—			—		—
Mortgage warehouse		—		—			—		—
Total real estate		247		86			451		837
Consumer
Direct Installment		90		78			261		480
Direct Installment Purchased		—		—			—		—
Indirect Installment		313		494			922		1,280
Home Equity		123		359			1,010		1,888
Total consumer		526		931			2,193		3,648
Total loans charged-off		1,167		1,295			3,396		5,211
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		—		—			352		18
Non owner occupied real estate		—		—			7		—
Residential development		—		—			—		—
Development & Spec Land Loans		—		—			—		—
Commercial and industrial		61		9			114		14
Total commercial		61		9			473		32
Real estate
Residential mortgage		42		—			74		10
Residential construction		—		—			—		—
Mortgage warehouse		—		—			—		—
Total real estate		42		—			74		10
Consumer
Direct Installment		28		16			63		83
Direct Installment Purchased		—		—			—		—
Indirect Installment		173		179			563		568
Home Equity		16		51			100		120
Total consumer		217		246			726		771
Total loan recoveries		320		255			1,273		813
Net loans charged-off		847		1,040			2,123		4,398
Provision charged to operating expense
Commercial		625		1,341			320		1,290
Real estate		254		815			900		968
Consumer		162		(592	)		589		2,186
Total provision charged to operating expense		1,041		1,564			1,809		4,444
Balance at the end of the period	$	18,568	$	19,110		$	18,568	$	19,110

Allowance for loan losses and the recorded investment in loans by portfolio segment

September 30, 2012	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,403	$	—	$	—	$	—	$	2,403
Collectively evaluated for impairment		5,655		2,974		1,716		5,820		16,165
Total ending allowance balance	$	8,058	$	2,974	$	1,716	$	5,820	$	18,568
Loans:
Individually evaluated for impairment	$	12,865	$	—	$	—	$	—	$	12,865
Collectively evaluated for impairment		436,121		177,218		244,660		287,957		1,145,956
Total ending loans balance	$	448,986	$	177,218	$	244,660	$	287,957	$	1,158,821
December 31, 2011	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,136	$	—	$	—	$	—	$	2,136
Collectively evaluated for impairment		5,881		2,472		1,695		6,698		16,746
Total ending allowance balance	$	8,017	$	2,472	$	1,695	$	6,698	$	18,882
Loans:
Individually evaluated for impairment	$	7,960	$	—	$	—	$	—	$	7,960
Collectively evaluated for impairment		345,350		157,663		208,726		266,450		978,189
Total ending loans balance	$	353,310	$	157,663	$	208,726	$	266,450	$	986,149

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Non-Performing Loans and Impaired Loans (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 NoOfDefaults	Sep. 30, 2011 NoOfDefaults
Loans transferred and classified as troubled debt restructuring
Number of Defaults	7	11
Unpaid Principal Balance	$ 2,691	$ 1,739
Commercial [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults	6	1
Unpaid Principal Balance	2,109	841
Commercial [Member] | Owner occupied real estate [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults	3
Unpaid Principal Balance	1,472
Commercial [Member] | Non owner occupied real estate [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults	3
Unpaid Principal Balance	637
Commercial [Member] | Residential development [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Commercial [Member] | Development & Spec Land Loans [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Commercial [Member] | Commercial and industrial [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults		1
Unpaid Principal Balance		841
Real estate [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults	1	2
Unpaid Principal Balance	582	174
Real estate [Member] | Residential mortgage [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults	1	2
Unpaid Principal Balance	582	174
Real estate [Member] | Residential construction [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Real estate [Member] | Mortgage warehouse [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults		8
Unpaid Principal Balance		724
Consumer [Member] | Direct Installment [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member] | Direct Installment Purchased [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member] | Indirect Installment [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults
Unpaid Principal Balance
Consumer [Member] | Home Equity [Member]
Loans transferred and classified as troubled debt restructuring
Number of Defaults		8
Unpaid Principal Balance		$ 724

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Securities (Details Textual) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Securities (Textual) [Abstract]
Unrealized loss, other than temporary securities	$ 0

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Net Income	$ 4,850	$ 3,417	$ 14,373	$ 9,275
Other Comprehensive Income
Change in fair value of derivative instruments, net of taxes of $(92) and $(317) for three and nine months ended 2012 and $(1,051) and $(1,221), for three and nine months ended 2011, respectively	(170)	(1,951)	(589)	(2,268)
Unrealized appreciation on available-for-sale securities, net of taxes of $860 and $1,588, for three and nine months ended 2012 and $1,856 and $4,852 for the three and nine months ended 2011, respectively	1,597	3,447	2,949	9,011
Less: reclassification adjustment for realized gains included in net income, net of taxes of $1 for three and nine months ended 2012, and $390 and $614, for three and nine months ended 2011, respectively	1	725	1	1,140
Other Comprehensive Income	1,426	771	2,359	5,603
Comprehensive Income	$ 6,276	$ 4,188	$ 16,732	$ 14,878

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Accounting Policies

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Accounting Policies

Note 1 – Accounting Policies

The accompanying condensed consolidated financial statements include the accounts of Horizon Bancorp (“Horizon” or the “Company”) and its wholly-owned subsidiaries, including Horizon Bank, N.A. (“Bank”). All inter-company balances and transactions have been eliminated. The results of operations for the periods ended September 30, 2012 and September 30, 2011 are not necessarily indicative of the operating results for the full year of 2012 or 2011. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of Horizon’s management, necessary to fairly present the financial position, results of operations and cash flows of Horizon for the periods presented. Those adjustments consist only of normal recurring adjustments.

Certain information and note disclosures normally included in Horizon’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Horizon’s Annual Report on Form 10-K for 2011 filed with the Securities and Exchange Commission on March 12, 2012. The consolidated condensed balance sheet of Horizon as of December 31, 2011 has been derived from the audited balance sheet as of that date.

Basic earnings per share is computed by dividing net income available to common shareholders (net income less dividend requirements for preferred stock and accretion of preferred stock discount) by the weighted-average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The following table shows computation of basic and diluted earnings per share.

	Three months ended September 30				Nine months ended September 30
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Basic earnings per share
Net income	$	4,850	$	3,417	$	14,373	$	9,275
Less: Preferred stock dividends and accretion of discount		63		710		325		1,263
Net income available to common shareholders	$	4,787	$	2,707	$	14,048	$	8,012
Weighted average common shares outstanding (1)(2)		8,503,475		7,414,043		7,758,537		7,402,300
Basic earnings per share	$	0.56	$	0.37	$	1.81	$	1.08
Diluted earnings per share
Net income available to common shareholders	$	4,787	$	2,707	$	14,048	$	8,012
Weighted average common shares outstanding (1)(2)		8,503,475		7,414,043		7,758,537		7,402,300
Effect of dilutive securities:
Warrants		269,432		163,325		231,038		167,668
Restricted stock		30,971		4,399		19,317		13,676
Stock options		34,782		14,803		26,105		15,307
Weighted average shares outstanding		8,838,659		7,596,569		8,034,996		7,598,950
Diluted earnings per share	$	0.54	$	0.36	$	1.75	$	1.05

⁽¹⁾  Adjusted for 3:2 stock split announced on October 16, 2012 payable November 9, 2012

⁽²⁾  Includes average shares issued for the Heartland acquisition for the three and nine months ending September 30, 2012

At September 30, 2012 and 2011, there were no shares and 66,551 for the three months ended and 12,750 shares and 73,359 shares for the nine months ended, respectively that were not included in the computation of diluted earnings per share because they were non-dilutive.

Horizon has share-based employee compensation plans, which are described in the notes to the financial statements included in the December 31, 2011 Annual Report on Form 10-K.

Reclassifications

Certain reclassifications have been made to the 2011 consolidated financial statements to be comparable to 2012. These reclassifications had no effect on net income.

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Derivative Financial Instruments (Details Textual) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Derivative Financial Instruments (Textual) [Abstract]
Weighted average fixed rate	5.63%
LIBOR period	3 months
Notional amount of interest	$ 30.5
Notional amounts of the loan agreements	$ 72.4
Interest Rate Swap Agreement, Reckoning Period for swaption	monthly

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Non-Performing Loans and Impaired Loans (Tables)

9 Months Ended

Sep. 30, 2012

Non-Performing Loans and Impaired Loans [Abstract]

Nonaccrual, loans past due over 90 days still on accrual, and troubled debt restructured ("TDRs") by class of loans:

September 30, 2012	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Non Performing TDR’s		Performing TDR’s		Total Non- Performing Loans
Commercial
Owner occupied real estate	$	3,887	$	—	$	1,472	$	—	$	5,359
Non owner occupied real estate		3,754		—		375		—		4,129
Residential development		—		—		—		—		—
Development & Spec Land Loans		789		—		—		—		789
Commercial and industrial		492		9		801		—		1,302
Total commercial		8,922		9		2,648		—		11,579
Real estate
Residential mortgage		4,266		57		2,361		1,857		8,541
Residential construction		—		—		—		292		292
Mortgage warehouse		—		—		—		—		—
Total real estate		4,266		57		2,361		2,149		8,833
Consumer
Direct Installment		97		1		—		—		98
Direct Installment Purchased		—		—		—		—		—
Indirect Installment		923		42		—		—		965
Home Equity		1,679		—		52		832		2,563
Total Consumer		2,699		43		52		832		3,626
Total	$	15,887	$	109	$	5,061	$	2,981	$	24,038

December 31, 2011	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Non Performing TDR’s		Performing TDR’s		Total Non- Performing Loans
Commercial
Owner occupied real estate	$	2,515	$	—	$	—	$	—	$	2,515
Non owner occupied real estate		3,970		—		152		—		4,122
Residential development		—		—		—		—		—
Development & Spec Land Loans		90		—		—		—		90
Commercial and industrial		330		—		901		—		1,231
Total commercial		6,905		—		1,053		—		7,958
Real estate
Residential mortgage		4,550		—		1,120		2,389		8,059
Residential construction		144		—		—		293		437
Mortgage warehouse		—		—		—		—		—
Total real estate		4,694		—		1,120		2,682		8,496
Consumer
Direct Installment		256		1		—		—		257
Direct Installment Purchased		—		4		—		—		4
Indirect Installment		926		29		—		—		955
Home Equity		1,587		3		25		858		2,473
Total Consumer		2,769		37		25		858		3,689
Total	$	14,368	$	37	$	2,198	$	3,540	$	20,143

Loans transferred and classified as troubled debt restructuring

	September 30, 2012				September 30, 2011
	Number of Defaults		Unpaid Principal Balance		Number of Defaults		Unpaid Principal Balance
Commercial
Owner occupied real estate		3	$	1,472		—	$	—
Non owner occupied real estate		3		637		—		—
Residential development		—		—		—		—
Development & Spec Land Loans		—		—		—		—
Commercial and industrial		—		—		1		841
Total commercial		6		2,109		1		841
Real estate
Residential mortgage		1		582		2		174
Residential construction		—		—		—		—
Mortgage warehouse		—		—		—		—
Total real estate		1		582		2		174
Consumer
Direct Installment		—		—		—		—
Direct Installment Purchased		—		—		—		—
Indirect Installment		—		—		—		—
Home Equity		—		—		8		724
Total Consumer		—		—		8		724
Total		7	$	2,691		11	$	1,739

	September 30, 2012				September 30, 2011
	Number of Defaults		Unpaid Principal Balance		Number of Defaults		Unpaid Principal Balance
Commercial
Owner occupied real estate		3	$	1,473		—	$	—
Non owner occupied real estate		2		261		—		—
Residential development		—		—		—		—
Development & Spec Land Loans		—		—		—		—
Commercial and industrial		—		—		2		361
Total commercial		5		1,734		2		361
Real estate
Residential mortgage		2		677		2		1,143
Residential construction		—		—		—		—
Mortgage warehouse		—		—		—		—
Total real estate		2		677		2		1,143
Consumer
Direct Installment		—		—		—		—
Direct Installment Purchased		—		—		—		—
Indirect Installment		—		—		—		—
Home Equity		—		—		2		65
Total Consumer		—		—		2		65
Total		7	$	2,411		6	$	1,569

Commercial loans individually evaluated for impairment by class of loans

							Three Months Ending					Nine Months Ending
September 30, 2012	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Loss Allocated		Average Balance in Impaired Loans		Cash/Accrual Interest Income Recognized			Average Balance in Impaired Loans		Cash/Accrual Interest Income Recognized
With no recorded allowance
Commercial
Owner occupied real estate	$	4,457	$	4,460	$	—	$	3,810	$	—		$	1,978	$	3
Non owner occupied real estate		2,521		2,542		—		2,429		70			1,920		72
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		131		131		—		109		(0	)		37		—
Commercial and industrial		456		471		—		382		—			129		—
Total commercial		7,565		7,604		—		6,730		69			4,064		75
With an allowance recorded
Commercial
Owner occupied real estate		903		903		450		910		(0	)		1,109		1
Non owner occupied real estate		2,938		2,938		1,065		2,943		—			2,843		—
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		658		658		615		660		—			523		6
Commercial and industrial		801		801		273		801		—			807		—
Total commercial		5,300		5,300		2,403		5,314		(0	)		5,282		7
Total	$	12,865	$	12,904	$	2,403	$	12,044	$	69		$	9,346	$	82
							Three Months Ending					Nine Months Ending
September 30, 2011	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Loss Allocated		Average Balance in Impaired Loans		Interest Income Recognized			Average Balance in Impaired Loans		Interest Income Recognized
With no recorded allowance
Commercial
Owner occupied real estate	$	1,315	$	1,314	$	—	$	1,224	$	31		$	856	$	32
Non owner occupied real estate		2,403		2,625		—		1,683		85			985		89
Residential development		—		—		—		—		—			9		—
Development & Spec Land Loans		—		111		—		—		—			69		—
Commercial and industrial		1,154		1,156		—		1,091		47			1,099		47
Total commercial		4,872		5,206		—		3,998		163			3,018		168
With an allowance recorded
Commercial
Owner occupied real estate		1,420		1,420		460		1,449		—			1,234		—
Non owner occupied real estate		5,499		5,538		996		4,943		—			4,859		—
Residential development		—		—		—		—		—			—		—
Development & Spec Land Loans		90		90		125		90		—			179		—
Commercial and industrial		234		308		225		284		—			393		—
Total commercial		7,243		7,356		1,806		6,766		—			6,665		—
Total	$	12,115	$	12,562	$	1,806	$	10,764	$	163		$	9,683	$	168

Payment status by class of loan

September 30, 2012	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial
Owner occupied real estate	$	1,008	$	110	$	—	$	1,118	$	166,897	$	168,015
Non owner occupied real estate		—		123		—		123		187,830		187,953
Residential development		—		—		—		—		1,130		1,130
Development & Spec Land Loans		—		—		—		—		6,645		6,645
Commercial and industrial		433		2,373		9		2,815		80,774		83,589
Total commercial		1,441		2,606		9		4,056		443,276		447,332
Real estate
Residential mortgage		1,300		197		57		1,554		163,166		164,720
Residential construction		—		—		—		—		11,742		11,742
Mortgage warehouse		—		—		—		—		244,233		244,233
Total real estate		1,300		197		57		1,554		419,141		420,695
Consumer
Direct Installment		162		243		1		406		29,841		30,247
Direct Installment Purchased		—		—		—		—		518		518
Indirect Installment		1,124		101		42		1,267		127,235		128,502
Home Equity		1,038		139		—		1,177		127,494		128,671
Total consumer		2,324		483		43		2,850		285,088		287,938
Total	$	5,065	$	3,286	$	109	$	8,460	$	1,147,505	$	1,155,965
December 31, 2011	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial
Owner occupied real estate	$	89	$	168	$	—	$	257	$	131,636	$	131,893
Non owner occupied real estate		228		—		—		228		142,041		142,269
Residential development		—		—		—		—		3,574		3,574
Development & Spec Land Loans		—		—		—		—		8,739		8,739
Commercial and industrial		34		22		—		56		65,718		65,774
Total commercial		351		190		—		541		351,708		352,249
Real estate
Residential mortgage		411		—		—		411		150,482		150,893
Residential construction		—		—		—		—		6,181		6,181
Mortgage warehouse		—		—		—		—		208,299		208,299
Total real estate		411		—		—		411		364,962		365,373
Consumer
Direct Installment		164		22		1		187		24,065		24,252
Direct Installment Purchased		7		14		4		25		956		981
Indirect Installment		1,333		335		29		1,697		126,054		127,751
Home Equity		363		92		3		458		113,103		113,561
Total consumer		1,867		463		37		2,367		264,178		266,545
Total	$	2,629	$	653	$	37	$	3,319	$	980,848	$	984,167

Loans by credit grades

September 30, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial
Owner occupied real estate	$	137,121	$	8,826	$	17,632	$	4,436	$	168,015
Non owner occupied real estate		153,131		20,694		13,008		1,120		187,953
Residential development		434		—		696		—		1,130
Development & Spec Land Loans		3,637		251		2,627		130		6,645
Commercial and industrial		74,279		4,339		4,715		256		83,589
Total commercial		368,602		34,110		38,678		5,942		447,332
Real estate
Residential mortgage		156,179		—		8,541		—		164,720
Residential construction		11,450		—		292		—		11,742
Mortgage warehouse		244,233		—		—		—		244,233
Total real estate		411,862		—		8,833		—		420,695
Consumer
Direct Installment		30,149		—		98		—		30,247
Direct Installment Purchased		518		—		—		—		518
Indirect Installment		127,537		—		965		—		128,502
Home Equity		126,108		—		2,563		—		128,671
Total Consumer		284,312		—		3,626		—		287,938
Total	$	1,064,776	$	34,110	$	51,137	$	5,942	$	1,155,965
December 31, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial
Owner occupied real estate	$	107,155	$	4,101	$	20,637	$	—	$	131,893
Non owner occupied real estate		118,446		11,423		12,400		—		142,269
Residential development		1,677		529		1,368		—		3,574
Development & Spec Land Loans		3,778		860		4,101		—		8,739
Commercial and industrial		55,964		3,012		6,798		—		65,774
Total commercial		287,020		19,925		45,304		—		352,249
Real estate
Residential mortgage		142,834		—		8,059		—		150,893
Residential construction		5,744		—		437		—		6,181
Mortgage warehouse		208,299		—		—		—		208,299
Total real estate		356,877		—		8,496		—		365,373
Consumer
Direct Installment		23,995		—		257		—		24,252
Direct Installment Purchased		977		—		4		—		981
Indirect Installment		126,796		—		955		—		127,751
Home Equity		111,088		—		2,473		—		113,561
Total Consumer		262,856		—		3,689		—		266,545
Total	$	906,753	$	19,925	$	57,489	$	—	$	984,167

XML

Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Available for sale
Amortized cost within one year	$ 4,232	$ 931
Fair value within one year	4,245	940
Amortized cost one to five years	45,096	30,796
Fair value for one to five years	46,420	31,910
Amortized cost for five to ten years	97,217	51,476
Fair value for five to ten years	102,990	55,053
Amortized cost for after ten years	63,876	64,533
Fair value for after ten years	68,583	69,033
Total amortized cost	210,421	147,736
Total fair value	222,238	156,936
Total available for sale investment securities, Amortized Cost	476,191	414,067
Total available for sale securities, Fair Value	497,704	431,045
Held to maturity
Within one year, amortized cost	6,100	7,100
Within one year, fair value	6,100	7,134
One to five years, amortized cost
One to five years, fair value
Total held to maturity investment securities, amortized cost	6,100	7,100
Total held to maturity investment securities, fair value	6,100	7,134
Federal agency collateralized mortgage obligations [Member]
Available for sale
Total available for sale investment securities, Amortized Cost	97,534	89,016
Total available for sale securities, Fair Value	99,041	91,122
Federal agency mortgage-backed pools [Member]
Available for sale
Total available for sale investment securities, Amortized Cost	166,029	173,797
Total available for sale securities, Fair Value	174,137	179,351
Private labeled mortgage-backed pools [Member]
Available for sale
Total available for sale investment securities, Amortized Cost	2,207	3,518
Total available for sale securities, Fair Value	$ 2,288	$ 3,636

XML

Future Accounting Matters

9 Months Ended

Sep. 30, 2012

Future Accounting Matters [Abstract]

Future accounting matters

Note 11 – Future accounting matters

FASB Accounting Standards Update 2011-12, Comprehensive Income. In December 2011 the FASB issued Accounting Standards Update 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.

This ASU defers the changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income.

This ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company’s financial statements now include separate statements of comprehensive income and additional footnote disclosures (see Note 10 – Other Comprehensive Income).

FASB Accounting Standards Update 2012-02, Intangibles – Goodwill and Other. In July 2012, the FASB issued Accounting Standards Update 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The amendments in this ASU allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, bases on qualitative assessment, that it is more likely than not, the indefinite-lived intangible asset is impaired.

This ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this standard on January 1, 2012 and did not have a significant impact on the Company’s financial statements.

FASB Accounting Standards Update 2012-04, Technical Corrections and Improvements. In October 2012, the FASB issued Accounting Standards Update 2012-04, Technical Corrections and Improvements. The amendments in this ASU make technical corrections, clarifications and limited-scope improvements to various Topics throughout the Codification.

This ASU is effective for public entities for fiscal periods beginning after December 15, 2012.