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 March 31, 2014 and March 31, 2013 are not necessarily indicative of the operating results for the full year of 2014 or 2013. 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 consolidated condensed 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 March 31
	2014		2013
	(Unaudited)		(Unaudited)
Basic earnings per share
Net income	$	3,417	$	5,311
Less: Preferred stock dividends and accretion of discount		31		146

Net income available to common shareholders	$	3,386	$	5,165
Weighted average common shares outstanding		8,630,966		8,617,466
Basic earnings per share	$	0.39	$	0.60

Diluted earnings per share
Net income available to common shareholders	$	3,386	$	5,165
Weighted average common shares outstanding		8,630,966		8,617,466
Effect of dilutive securities:
Warrants		311,278		293,237
Restricted stock		39,519		35,557
Stock options		40,023		34,395

Weighted average shares outstanding		9,021,786		8,980,655
Diluted earnings per share	$	0.38	$	0.58

At March 31, 2014 and 2013, there were no shares 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.