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Horizon Bancorp (HBNC) Enters Definitive Agreement To Acquire Heartland, A Community Bank Serving Central Indiana

|Includes: Horizon Bancorp (IN) (HBNC)

Today, Horizon Bancorp, the locally-owned Indiana-headquartered community bank holding company, reported entry into a definitive agreement to acquire Franklin, Indiana based Heartland Bancshares, Inc. and its wholly-owned subsidiary Heartland Community Bank.

President and CEO of HBNC, Craig M. Dwight, was clearly pleased to be stacking more infrastructure in Central Indiana, a market he characterized as both attractive and growth-oriented. Dwight went on to explain that Heartland has the No. 1 deposit share in all of Johnson County, is well-positioned south of Indianapolis, and would provide the company with a firm footing in Central Indiana that benefits greatly from the corporate culture/core values at Heartland, which are consistent with those HBNC has worked to develop over the years.

Keeping the Heartland name, explained Dwight, will enable HBNC to capitalize on the visibility, goodwill, and reputation developed by Heartland since its inception in 1997. Dwight pledged improved capital strength, earnings strength, and overall operational efficiency for Heartland now that it will be under the HBNC umbrella, giving co-founders Steve Bechman (president and CEO) and Jeffrey Goben (Exec VP) ample reason to stay in high confidence as they stay on to serve operational management roles. Additionally, one of Heartland's Board members will be joining the HNBC Board, while a local board will also be established shortly after closing of the acquisition for the sake of improved localization.

Terms of the definitive agreement call for an issuance of 0.54 shares of HBNC common stock per share of HRTB common stock (subject to adjustment, as per the effective time of merger). The Feb 8, $18.00 closing HBNC share price gives us a $9.72 per share value on HRTB and it looks to be a really good deal with Heartland sitting on $246M in Total Assets, with Total Deposits of $217.9M and Total Loans of $137.7M (unaudited values as of Dec 31, 2011). We have an acquisition price of roughly $14M based on the Feb 8 values (with roughly 1.44M shares of HRTB outstanding) and the merger will reportedly be a tax-free exchange for HRTB shareholders. Additionally, HBNC has agreed to redeem all outstanding Series B & C shares held by US Treasury under their Capital Purchase Program.

The merger agreement effectively calls for HRTB to be merged into HBNC, with the associated banks similarly merged and operating under a single Horizon charter. Heartland will officially operate as "Heartland Community Bank, a Horizon Company."

More and more Americans are turning to trusted local or community banks these days and HBNC is in a prime position to capitalize off this momentum while driving infrastructural growth and shareholder value.

The transaction is still subject to customary closing conditions such as approval by HRTB shareholders, receipt of requisite banking agency approvals, threshold maintenance of extant past due/adversely-classified loans, review by HBNC of the title and environmental status of the facilities, as well as satisfaction of other terms and conditions. Failure to maintain HRTB consolidated common shareholder equity at or above a certain level through closing may result in a decreased exchange ratio (as per merger agreement adjustments). Additionally, the exchange ratio may be adjusted (as per the merger agreement) based on closing of certain commercial loans prior to merger closing and a significant drop in the share price of HBNC.

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