Horizon Bancorp Announces Record Earnings for 2008

Craig M. Dwight, Horizon's Chief Executive Officer stated, "We are pleased to report our ninth consecutive year of record earnings. Given the multiple challenges confronting the banking industry, including higher unemployment, increasing loan defaults, overall deterioration in the national and local economies and complexity and frequency of change in accounting rules, we are extremely proud of the effort put forth by the entire Company to exceed last year's performance."

Net interest income for the quarter and year ended December 31, 2008 was $9.7 million and $37.4 million, respectively. This represents an increase of $818 thousand or 9.2% for the quarter and $4.5 million or 13.8% for the year when compared to the same prior year periods. The increases are due to an improvement in the net interest margin by 35 basis points to 3.38% for the year and 36 basis points to 3.57% for the quarter. This reduced funding costs by an amount that exceeded the decline in yields on earning assets. Horizon's cost of funds has dropped approximately 108 basis points since the fourth quarter of 2007 while the yield on earning assets declined approximately 72 basis points. Horizon reduced rates on NOW and money market accounts in line with short-term rate decreases put in place by the Federal Open Market Committee. In addition, a large amount of Certificates of Deposit (CDs) matured during the first half of 2008 and were renewed at lower rates. Additionally, at December 31, 2008, all mortgage warehouse loans ($123 million) and certain home equity and commercial loans (totaling approximately $136 million) reached contractual rate floors. This improved the net interest margin as funding costs continued to decline.

Horizon assesses the adequacy of its Allowance for Loan and Lease Losses (ALLL) by regularly reviewing the performance of all of its loan portfolios. As a result of its most recent review, a provision for loan losses of $2.2 million was taken for the fourth quarter of 2008. This compares to a provision of $3.1 million for the third quarter of 2008 and $1.9 million for the fourth quarter of 2007. For the year, the provision of $7.6 million is more than double the prior year. This increase is primarily due to the deterioration of loan quality in all segments of the portfolio except the mortgage warehouse area.

At December 31, 2008, Horizon's non-performing loans of approximately $7.9 million or .89% of total loans represents an increase from the end of the third quarter when non-performing loans totaled $6.6 million or .77% of total loans and an increase from the prior year-end totals of $2.9 million or .33% of total loans. Horizon's non-performing loan statistics, while having increased from the prior year, still compare favorably to National(1) and State of Indiana(2) bank averages for the same ratio as of September 30, 2008 of 1.99% and 1.87 %, respectively. As a result of the deterioration in the loan portfolio, Horizon has adjusted the historical ratios used to determine the ALLL to reflect these recent trends. Also, loans with specific reserves increased from the prior year-end. In addition to problem loans, Horizon has $2.9 million of other real estate owned which represents an increase from September 30, 2008 and December 31, 2007 of $1.5 million and $2.6 million respectively. Management feels that the total ALLL of $11.410 million or 1.29% of total loans is adequate to absorb probable incurred losses contained in the loan portfolio.

Non-interest income increased $1.56 million or 12.7% from 2007, however, was fairly level with the prior quarter and the same quarter of the prior year. The increase from the prior year resulted from the following: (a) NSF fees increased due to a price increase implemented during the first quarter of 2008, (b) wire transfer fees increased due to increased volume and a price change to mortgage warehouse customers, (c) fiduciary fees increased as additional income was generated by the ESOP management line of business, (d) gain on sale of loans increased and (e) proceeds from a death benefit received on a bank owned life insurance policy amounting to $538 thousand. The increase from gain on sale of loans resulted from (i) Horizon's transfer of loans from the loan portfolio to held for sale and subsequent sale of these loans generating a gain of approximately $194 thousand and (ii) Horizon's adoption of Securities and Exchange Commission Staff Accounting Bulletin 109 (which requires treating commitments to make and sell mortgage loans as a derivative) which created an additional $231 thousand gain. These increases were offset by a decline in the gain from brokering non-conforming mortgages.

Non-interest expense increased $1.6 million or 5.2% from 2007. The increase was driven primarily by two factors: (a) loan expense increased from the prior year due to higher collection expense and less deferred costs on new loans and (b) increased FDIC insurance costs as the one time credits granted in 2006 were fully utilized during the first quarter of 2008. Salaries and benefits decreased due to the staff reduction, which occurred during the third quarter of 2007.

Income tax expense was impacted in 2008 by $163 thousand of income tax refunds related to amended returns filed for prior years. Also, increased tax exempt income, including the life insurance death benefit, caused a decrease in the effective tax rate.

On December 31, 2008, Horizon's total assets were $1.306 billion, compared to $1.259 billion on December 31, 2007.

Federal funds sold decreased as Horizon's deposit totals were abnormally high at year-end 2007 due to deposits made by local municipalities near the end of the year.

Investment securities increased by approximately $77 million as investment securities were purchased during the fourth quarter to leverage the additional capital raised through the U.S. Department of Treasury's Capital Purchase Program which is part of the Economic Emergency Stabilization Act approved by Congress during the fourth quarter of 2008. The intent is to purchase a total of approximately $125 million of investment securities, until the new capital can be leveraged with loans. Horizon believes this increase will make the additional capital revenue neutral to common shareholders.

Gross loans for 2008 decreased $7 million since December 31, 2007. Mortgage warehouse loans increased late in the fourth quarter of 2008 due to increased refinance activity which is expected to continue through the first quarter of 2009. Real estate loans declined during the year as approximately $37 million of loans were transferred to held for sale and were subsequently sold during the first quarter to reduce Horizon's reliance on non-core funding and improve Horizon Bank's capital ratios. In addition, Horizon sold a high percentage of its 2008 residential mortgage loan production, which contributed to the reduction in the mortgage loan portfolio. Installment loans declined due to a lower volume of automobile loans. Commercial loans showed modest growth as efforts were concentrated on maintaining existing relationships and closely monitoring the portfolio for any challenges to asset quality.

Total deposits have declined $52 million since December 31, 2007. The decrease came in high cost, short-term consumer certificates of deposit (CDs). The decrease in deposits was funded by an increase in borrowed funds and additional capital. Brokered CDs were approximately $50 million at both December 31, 2008 and 2007. The increase in wholesale funding is in part caused by several large regional banks pricing certificates of deposit well above wholesale funding rates. Horizon has maintained its deposit pricing discipline and has not "chased" the large bank pricing strategies.

Stockholders' equity totaled $103.4 million at December 31, 2008 compared to $70.6 million at December 31, 2007. In December of 2008 Horizon received an investment of $25 million through participation in the U.S. Department of Treasury's (Treasury) Capital Purchase Program. Under the program, the Treasury acquired 25,000 Series A shares of Horizon's Fixed Rate Cumulative Perpetual Preferred Stock that will pay a 5% per annum dividend for the first five years of the investment (which will total $1,250,000 a year) and 9% per annum thereafter (which will total $2,250,000 a year) unless Horizon redeems the shares. The preferred shares qualify as Tier I capital and are callable by Horizon after three years. As part of its investment, the Treasury also received a warrant to purchase 212,104 shares of common stock of Horizon, with an exercise price of $17.68 per share. The warrant is expected to give the Treasury the opportunity to benefit from an increase in the common stock price of the company. At December 31, 2008, the ratio of stockholders' equity to total assets was 7.91% compared to 5.61% at December 31, 2007. Tangible equity to tangible assets was 7.37% at December 31, 2008 compared to 5.02% at December 31, 2007. Book value per common share at December 31, 2008 increased to $24.46 compared to $21.72 at December 31, 2007.

Other items

Horizon has received regulatory approval to open a second branch in Elkhart, Indiana. The new branch will be located on the south side of Elkhart and is expected to open in April of 2009. Horizon has acquired land in Munster, Indiana for a full service branch. This branch is expected to open mid-year.

Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern Indiana and Southwest Michigan. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached on the World Wide Web at www.accesshorizon.com. Its common stock is traded on the NASDAQ Global Market under the symbol HBNC.

Statements in this press release which express "belief," "intention," "expectation," and similar expressions, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, such management. Such statements are inherently uncertain and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those contemplated by the forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

(1) National peer group: Consists of all insured commercial banks having assets between $1 Billion and $3 Billion as reported by the Uniform Bank Performance Report as of September 30, 2008

(2) Indiana peer group: Consists of 22 publicly traded banks all head quartered in the State of Indiana as reported by the Uniform Bank Performance Reports as of September 30, 2008.

HORIZON BANCORP Financial Highlights (Unaudited - dollars in thousands except share and per share data and ratios) Three Months Ended: Year Ended: Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2008 2008 2007 2008 2007 End of period balances: Total assets $ 1,306,857 $ 1,188,631 $ 1,258,874 $ 1,306,857 $ 1,258,874 Short term investments 2,679 1,186 35,563 2,679 35,563 Investment securities 303,268 230,837 234,675 303,268 234,675 Commercial loans 310,842 304,997 307,535 310,842 307,535 Mortgage warehouse loans 123,287 101,992 78,225 123,287 78,225 Real estate loans 167,766 168,058 216,019 167,766 216,019 Installment loans 280,072 282,900 287,073 280,072 287,073 Earning assets 1,206,493 1,107,428 1,180,128 1,206,493 1,107,428 Non-interest bearing deposit accounts 83,642 86,093 81,097 83,642 81,949 Interest bearing transaction accounts 428,931 334,121 360,476 428,931 468,624 Time deposits 328,596 329,208 449,091 328,596 449,091 Borrowings 324,383 328,442 258,852 324,383 258,852 Long-term borrowings 27,837 27,837 27,837 27,837 27,837 Stockholders' equity 103,350 75,072 70,645 103,350 70,645 Average balances: Total assets $ 1,196,513 $ 1,179,045 $ 1,182,921 $ 1,202,727 $ 1,180,400 Short term investments 6,687 3,682 8,204 22,534 5,455 Investment securities 240,390 239,304 226,672 241,953 227,000 Commercial loans 309,465 301,810 304,456 305,126 291,656 Mortgage warehouse loans 74,175 85,230 53,599 77,091 70,279 Real estate loans 167,049 167,793 217,731 175,645 222,428 Installment loans 281,708 283,669 281,337 283,098 255,228 Earning assets 1,102,302 1,101,002 1,118,737 1,125,390 1,102,286 Non-interest bearing deposit accounts 79,567 80,762 77,245 77,600 78,654 Interest bearing transaction accounts 354,478 340,012 338,749 361,191 352,587 Time deposits 339,769 351,888 391,817 372,677 402,287 Borrowings 294,574 296,280 283,104 280,451 282,339 Subordinated debentures 27,837 27,837 27,837 27,837 27,837 Stockholders' equity 79,605 76,027 70,151 76,491 66,224 Per share data: Basic earnings per share $ 0.64 $ 0.42 $ 0.63 $ 2.78 $ 2.54 Diluted earnings per share 0.64 0.41 0.62 2.74 2.51 Cash dividends declared per common share 0.17 0.17 0.15 0.66 0.56 Book value per common share 24.46 23.39 21.72 24.46 21.72 Market value - high 24.52 25.87 26.40 25.87 28.10 Market value - low 12.00 16.36 24.40 12.00 24.40 Basic average common shares outstanding 3,209,482 3,209,482 3,204,203 3,208,658 3,177,272 Diluted average common shares outstanding 3,246,664 3,255,409 3,247,331 3,246,351 3,217,050 Key ratios: Return on average assets 0.71 % 0.45 % 0.68 % 0.75 % 0.69 % Return on average equity 10.66 7.01 11.46 11.73 12.29 Net interest margin 3.57 3.45 3.21 3.38 3.03 Loan loss reserve to loans 1.29 1.22 1.10 1.29 1.10 Non-performing loans to loans 0.89 0.77 0.33 0.89 0.33 Average equity to average assets 6.65 6.45 5.93 6.35 5.61 Bank only capital ratios: Tier 1 capital to average assets 9.46 % 7.65 % 7.29 % 9.46 % 7.29 % Tier 1 capital to risk weighted assets 11.83 10.04 9.49 11.83 9.49 Total capital to risk weighted assets 13.04 11.22 10.56 13.04 10.56

Allocation of the Allowance for Loan and Lease Losses (Dollars in Thousands) Dec. 31, 2008 Dec. 31, 2007 Commercial $3,202 $2,656 Real estate 973 779 Mortgage warehousing 1,354 1,309 Installment 5,881 5,047 Unallocated -0- -0- Total $11,410 $9,791

Net Charge-offs (Dollars in Thousands) Three months ended Three months ended Three months ended Year ended Year ended Dec. 31, 2008 Sept. 30, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Commercial $(5 ) $1,276 $(5 ) $1,343 $(48 ) Real estate 26 (50 ) 36 301 36 Mortgage warehousing -0- -0- -0- -0- -0- Installment 1,257 1,198 929 4,305 2,027 Total $1,278 $2,424 $960 $5,949 $2,015

HORIZON BANCORP AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollar Amounts in Thousands) December 31, December 31, 2008 2007 (Unaudited) Assets Cash and due from banks $ 36,000 $ 19,714 Interest-bearing demand deposits 1 1 Federal funds sold - 35,314 Cash and cash equivalents 36,001 55,029 Interest-bearing deposits 2,679 249 Investment securities, available for sale 301,638 234,675 Investment securities, held to maturity 1,630 - Loans held for sale 5,955 8,413 Loans, net of allowance for loan losses of $11,410 and $9,791 870,557 879,061 Premises and equipment 28,280 24,607 Federal Reserve and Federal Home Loan Bank stock 12,625 12,625 Goodwill 5,787 5,787 Other intangible assets 1,751 2,068 Interest receivable 5,708 5,897 Cash value life insurance 22,451 22,384 Deferred tax asset 2,887 2,187 Other assets 8,908 5,892 Total assets $ 1,306,857 $ 1,258,874 Liabilities Deposits Noninterest bearing $ 83,642 $ 84,097 Interest bearing 757,527 809,567 Total deposits 841,169 893,664 Borrowings 324,383 258,852 Subordinated debentures 27,837 27,837 Interest payable 1,910 2,700 Other liabilities 8,208 5,437 Total liabilities 1,203,507 1,188,229 Commitments and Contingent Liabilities Stockholders' Equity Preferred stock, no par value Authorized, 1,000,000 shares Issued, 25,000 and -0- shares 24,405 - Common stock, $.2222 stated value Authorized, 22,500,000 shares Issued, 5,011,656 and 4,998,106 shares 1,114 1,114 Additional paid-in capital 26,551 25,638 Retained earnings 67,804 60,982 Accumulated other comprehensive income (loss) 628 63 Less treasury stock, at cost, 1,759,424 shares (17,152 ) (17,152 ) Total stockholders' equity 103,350 70,645 Total liabilities and stockholders' equity $ 1,306,857 $ 1,258,874

HORIZON BANCORP AND SUBSIDIARIES Condensed Consolidated Statements of Income (Dollar Amounts in Thousands, Except Per Share Data) Three Months Ended Year Ended December 31 December 31 2008 2007 2008 2007 (Unaudited) (Unaudited) Interest Income Loans receivable $ 14,038 $ 16,530 $ 57,801 $ 63,618 Investment securities Taxable 2,177 2,372 9,111 8,389 Tax exempt 833 479 3,323 3,061 Total interest income 17,048 19,381 70,235 75,068 Interest Expense Deposits 3,984 6,765 19,536 28,442 Borrowed funds 2,990 3,231 11,772 11,505 Subordinated debentures 385 513 1,577 2,313 Total interest expense 7,359 10,510 32,885 42,260 Net Interest Income 9,689 8,871 37,350 32,808 Provision for loan losses 2,163 1,928 7,568 3,068 Net Interest Income after Provision for Loan Losses 7,526 6,943 29,782 29,740 Other Income Service charges on deposit accounts 910 954 3,885 3,469 Wire transfer fees 146 91 528 357 Fiduciary activities 896 956 3,713 3,556 Gain on sale of loans 857 758 2,979 2,566 Increase in cash surrender value of Bank owned life insurance 219 224 920 920 Death benefit officer life insurance -- -- 538 -- Gain (loss) on sale of securities -- 2 (15 ) 2 Other income 341 303 1,283 1,401 Total other income 3,369 3,288 13,831 12,271 Other Expenses Salaries and employee benefits 4,051 4,007 16,749 17,154 Net occupancy expenses 656 641 2,600 2,418 Data processing and equipment expenses 866 603 2,611 2,516 Professional fees 330 214 1,133 1,169 Outside services and consultants 326 292 1,147 1,022 Loan expense 552 597 2,223 1,402 Other expenses 1,449 1,218 6,316 5,463 Total other expenses 8,230 7,572 32,779 31,144 Income Before Income Tax 2,665 2,659 10,834 10,867 Income tax expense 543 649 1,862 2,727 Net Income $ 2,122 $ 2,010 $ 8,972 $ 8,140 Basic Earnings Per Share $ .64 $ .63 $ 2.78 $ 2.54 Diluted Earnings Per Share $ .64 $ .62 $ 2.75 $ 2.51

SOURCE: Horizon Bancorp

Horizon Bancorp James H. Foglesong, 219-873-2608 or Mark E. Secor, 219-873-2611 Fax: 219-874-9280