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, 2013 and September 30, 2012 are not necessarily indicative of the operating results for the full year of 2013 or 2012. 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 2012 filed with the Securities and Exchange Commission on March 12, 2013. The consolidated condensed balance sheet of Horizon as of December 31, 2012 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
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Basic earnings per share
Net income	$	4,785	$	4,850	$	15,761	$	14,373
Less: Preferred stock dividends and accretion of discount		66		63		308		325

Net income available to common shareholders	$	4,719	$	4,787	$	15,453	$	14,048

Weighted average common shares outstanding⁽¹⁾⁽²⁾		8,618,969		8,503,475		8,617,972		7,758,537

Basic earnings per share	$	0.55	$	0.56	$	1.79	$	1.81


Diluted earnings per share
Net income available to common shareholders	$	4,719	$	4,787	$	15,453	$	14,048

Weighted average common shares outstanding⁽¹⁾⁽²⁾		8,618,969		8,503,475		8,617,972		7,758,537
Effect of dilutive securities:
Warrants		314,353		269,431		299,704		231,037
Restricted stock		40,833		30,971		39,883		19,317
Stock options		45,056		34,782		41,069		26,105

Weighted average shares outstanding		9,019,211		8,838,659		8,998,628		8,034,996

Diluted earnings per share	$	0.52	$	0.54	$	1.72	$	1.75

⁽¹⁾	Adjusted for 3:2 stock split on November 9, 2012

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

For the nine months ended September 30, 2013 and 2012, there were no shares and 12,750 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, 2012 Annual Report on Form 10-K.

Reclassifications

Certain reclassifications have been made to the 2012 consolidated financial statements to be comparable to 2013. These reclassifications had no effect on net income.