Horizon Bancorp is reporting a net income of $2.1 million or 52 cents diluted earnings per share in the second quarter of 2009, compared to $3 million or 92 cents diluted earnings per share for the year-ago period.

Net income for the first six months of the year was $4.7 million or $1.22 diluted earnings per share, compared to $5.5 million or $1.70 diluted earnings per share for the year-ago period.

“We continue to be proud of Horizon’s year-to-date performance given the economic challenges confronting the banking industry,” Horizon Bancorp CEO Craig Dwight said in a statement released on Thursday. “Horizon has increased staff to focus on resolution of problem loans and to assist our customers to mitigate the potential for foreclosure. As a community bank we are proud of our record of working with customers during challenging times.”

Diluted earnings per share were reduced by 11 cents in the second quarter and by 21 cents for the first six months, resulting from the preferred stock dividends and the accretion of the discount on the preferred stock, the statement said. The preferred stock was issued in the fourth quarter of 2008 and therefore did not impact the three- or six-month periods.

The provision for loan losses was approximately $3.3 million for the second quarter, compared to $1.5 million in the year-ago period, the statement said. The second-quarter provision is similar to the $3.2 million reserve taken in the first quarter. “Consumer loan charge-offs continue to drive the need for higher quarterly provision for loan losses and appear to be stabilizing as the rate of growth has slowed.”

Non-performing loans increased to $13.5 million in the second quarter from $10.5 million in the first quarter, the statement said. “This increase was primarily in commercial, commercial real estate, and residential real estate loans. We attribute the growth to economic conditions contributing to reduced business revenues and related increase in consumer bankruptcies.”

Residential mortgage loan activity continued to be strong through the second quarter, the statement said, “as evidenced by volumes higher than prior in both the conventional residential mortgage and mortgage warehouse business lines.” The conventional residential mortgage refinancing activity has increased the gain on sale of loans by $2.1 million for the first six months of 2009, compared to the year-ago period.

The primary cost to originate residential mortgage loans is the commissions paid to mortgage originators and this accounted for most of the increase in salary and benefits, the statement said, which were $1.2 million higher for the first six months of 2009 compared to the year-ago period.

During the second quarter of 2009 a special FDIC assessment was required in addition to the higher assessment rates already in place, the statement said. Horizon Bancorp “estimated and recorded an additional FDIC expense in the second quarter of $663,000. For the first three and six months of 2009 the company’s FDIC expense was $1.1 million and $1.4 million respectively, compared to $142,000 and $258,000 in the year-ago periods.

*Net interest margin contract during the second quarter as Horizon Bancorp elected to keep higher money market deposits on its balance sheet as a precaution against future cash needs. The cash balances have returned to normal levels during the month of June, the statement said.

*The company’s non-performing loans to total loans ratio as of June 30 was 1.49 percent, which compares favorably to national and state peer averages, the statement said.

*The company’s “capital ratios continue to be maintained above the regulatory standards for well-capitalized banks,” the statement said.

*Horizon Bancorp opened its 19th full-service branch on June 8, at 10429 Calumet Ave. in Munster. This is the company’s second full-service branch in Lake County.

Horizon Bancorp is a locally owned, independent commercial bank holding company serving Northern Indiana and Southwest Michigan. Its common stock trades on the NASDAQ Global Market under the symbol HBNC. For more information visit www.accesshorizon.com

Posted 7/27/2009