Note 1 – Accounting Policies

The accompanying unaudited 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 June 30, 2014 are not necessarily indicative of the operating results for the full year of 2014. 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 2013 filed with the Securities and Exchange Commission on February 28, 2014. The condensed consolidated balance sheet of Horizon as of December 31, 2013 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 June 30				Six months ended June 30
	2014		2013		2014		2013
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Basic earnings per share
Net income	$	4,778	$	5,665	$	8,195	$	10,976
Less: Preferred stock dividends and accretion of discount		32		96		63		242

Net income available to common shareholders	$	4,746	$	5,569	$	8,132	$	10,734

Weighted average common shares outstanding		9,182,986		8,617,466		8,908,492		8,617,466

Basic earnings per share	$	0.52	$	0.65	$	0.91	$	1.25


Diluted earnings per share
Net income available to common shareholders	$	4,746	$	5,569	$	8,132	$	10,734

Weighted average common shares outstanding		9,182,986		8,617,466		8,908,492		8,617,466
Effect of dilutive securities:
Warrants		303,399		287,815		308,060		290,550
Restricted stock		38,003		35,263		38,717		35,411
Stock options		36,551		33,559		38,154		33,981

Weighted average shares outstanding		9,560,939		8,974,103		9,293,423		8,977,408

Diluted earnings per share	$	0.50	$	0.62	$	0.88	$	1.20

At June 30, 2014 and 2013, there were 42,683 and 46,760 shares, respectively, which 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, 2013 Annual Report on Form 10-K.

Reclassifications

Certain reclassifications have been made to the 2013 condensed consolidated financial statements to be comparable to 2014. These reclassifications had no effect on net income.