LaPorte Bancorp : Announces First Quarter 2016 Earnings

1Q16 Earnings Release FOR IMMEDIATE RELEASE‌‌‌‌

Contact: Michele M. Thompson

President and Chief Financial Officer

Phone: [phone]

Fax: [phone]

LAPORTE BANCORP, INC. ANNOUNCES EARNINGS FOR THE FIRST QUARTER OF 2016 LaPorte, Indiana, April 27, 2016 - LaPorte Bancorp, Inc. (the "Company") (Nasdaq: LPSB), the holding company for The LaPorte Savings Bank (the "Bank"), reported net income of $595,000, or $0.11 per diluted share, for the three months ended March 31, 2016, compared to $1.0 million, or $0.18 per diluted share, for the three months ended March 31, 2015.

Lee A. Brady, Chief Executive Officer of LaPorte Bancorp, Inc. commented, "Our earnings were down considerably during the first quarter of 2016 from the prior year quarter due to $641,000 in expenses related to our recently announced merger with LaPorte, Indiana-based Horizon Bancorp. We are pleased with the opportunity to join the Horizon Bank family and the increased opportunities we believe this will provide our customers, employees, and the communities we serve."

Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015

Net interest income increased to $4.2 million for the three months ended March 31, 2016 from $3.9 million for the comparable 2015 period. Net interest margin increased 13 basis points to 3.49% for the three months ended March 31, 2016 compared to 3.36% for the prior year period. Interest income increased $454,000 for the three months ended March 31, 2016 as the average balance of interest earning assets increased $24.9 million, or 5.40%, and the average yield earned on these assets increased 18 basis points from the comparable 2015 period. Partially offsetting this increase was a $91,000 increase in interest expense as the average balance of interest-bearing liabilities increased

$15.5 million, or 4.3%, and the average cost of interest-bearing liabilities increased by seven basis points for the three months ended March 31, 2016 as compared to the prior year period.

Interest income increased $454,000, or 10.1%, to $4.9 million for the three months ended March 31, 2016 compared to the prior year period. During the first quarter of 2016, interest income from loans increased $523,000 from the prior year period to $4.1 million primarily due to a 10.2% increase in the average balance of loans outstanding to $326.0 million for the three months ended March 31, 2016 from $295.7 million for the prior year period. The average yield earned on loans also increased to 5.06% for the three months ended March 31, 2016 from 4.87% for the prior year period.

Interest income on commercial real estate loans increased $176,000, or 18.2%, during the first quarter of 2016 due to a $19.4 million, or 25.7%, increase in the average balance of these loans and was partially offset by a 31 basis point decrease in the average yield earned. The increase in the average balance was due to the higher level of originations during 2015. The average yield decreased due to competition within the lending markets that we serve.

Interest income on mortgage warehouse loans increased $123,000, or 8.3%, during the first quarter of 2016 primarily due to an increase in fees earned on loans funded as overall warehouse activity has increased as a result of the 2015 addition of the mortgage warehouse participant program. The average yield earned on mortgage warehouse loans increased 87 basis points to 5.81% for the first quarter of 2016 from 4.94% for the prior year period. These increases were partially offset by a $9.6 million, or 8.0%, decrease in the average balance of these loans during the first quarter of 2016 when compared to the prior year period. Overall, the number of transactions and activity increased from the prior year period due to an increase in the number of warehouse lines as well as the funding capacity added by the mortgage warehouse participants. We continue to receive fee income related to all warehouse transactions in addition to servicing income on the participated balances.

Interest income on commercial construction loans increased $81,000, or 172.3%, during the first quarter of 2016 primarily due to a $7.5 million, or 176.9%, increase in the average balance of these loans from the prior year period primarily as a result of construction draws on existing construction loans.

Interest income on five or more family commercial real estate loans increased $69,000, or 33.8%, during the first quarter of 2016 primarily due to a $6.3 million, or 38.5%, increase in the average balances on these loans when compared to the prior year period. The increase was partially offset by a 17 basis point decrease in the average yield earned on these loans during the first quarter of 2016.

Interest income on securities available for sale decreased $123,000, or 15.0%, to $695,000 during the first quarter of 2016 compared to the same 2015 period primarily due to a decrease of $26.7 million, or 17.9%, in the average balance of these securities to $122.2 million for the first quarter of 2016 from $148.9 million for the prior year period. The decrease in securities was primarily used to fund the increase in loan balances and to shift a portion of these funds to interest earning time deposits. Interest income on fed funds sold and other interest-earning deposits increased $54,000 primarily due to a $15.2 million, or 300%, increase in the average balance of fed funds sold combined with the reinvestment of proceeds from investment securities and paydowns into interest earning time deposits. In addition, the average yield earned on these funds increased 25 basis points due to the 25 basis point increase in the federal funds interest rate in December 2015.

Interest expense increased $91,000, or 15.0%, to $696,000 for the three months ended March 31, 2016 from

$605,000 for the prior year period. Interest expense on deposit accounts increased $46,000, or 15.6%, to $340,000 for the first quarter of 2016 when compared to the prior year period primarily due to interest expense on interest-bearing checking deposits. The average balance of interest-bearing deposit accounts increased by $41.5 million, or 72.5%, during the first quarter of 2016 as a result of an increase in public funds and mortgage warehouse participant accounts. The average cost paid on these deposits increased eight basis points due to rates paid on public fund accounts and the impact of the higher rates paid on our reward checking product that was implemented in the fourth quarter of 2015.

In addition, interest expense on borrowings increased $45,000 during the first quarter of 2016 from the prior year period. Interest expense related to Federal Home Loan Bank ("FHLB") advances increased $41,000 during the first quarter of 2016 primarily due to a 74 basis point increase in the average cost of these borrowings and the impact of the Bank's three interest rate swaps that began in March and June 2015 and March 2016. The fixed interest rates associated with these swaps are 2.09%, 2.23%, and 2.82% with the Bank receiving one month LIBOR. These swaps mature in five years from issuance in March and June 2020 and March 2021. Partially offsetting the increase in the cost of FHLB advances was a $18.6 million decrease in the average balance of these FHLB borrowings when compared to the prior year period.

The Company did not record a provision for loan losses during the first quarter of 2016, which was a decrease of $105,000 from the prior year period due to lower charge-offs and improving credit quality trends during the current quarter.

Noninterest income increased $64,000, or 10.6%, to $666,000 for the three months ended March 31, 2016 from $602,000 for the prior year period. Loan servicing fees increased by $85,000 due to $84,000 of servicing fees recorded on mortgage warehouse loan participations combined with $6,000 of lower provisions for mortgage servicing rights during the first quarter of 2016 when compared to the prior year period. Wire transfer fees increased $40,000 during the first quarter of 2016 due to the increase in mortgage warehouse activity when compared to the prior year period. Gains on mortgage banking activities increased $26,000 as mortgage originations from purchase activity and associated sales were higher during the first quarter of 2016 when compared to the prior year period. Partially offsetting these increases was a decrease of $50,000 of net gains on the sales of securities when compared to the prior year period. In addition, net gains on other assets decreased $40,000 during the first quarter of 2016, primarily due to a $30,000 write-down on a commercial other real estate owned property based on a recent purchase offer.

Noninterest expense increased $894,000, or 27.4%, to $4.2 million for the three months ended March 31, 2016 when compared to the prior year period primarily due to an increase of $638,000 in legal and other consulting expenses. During the first quarter of 2016, legal and investment banking costs associated with the pending merger with Horizon Bancorp totaled $641,000. Salaries and employee benefits expense increased $216,000 when compared to the prior year period due to an increase in payroll expense related to annual merit increases, mortgage warehouse bonuses, and new positions since the first quarter of 2015. The expense related to the Company's employee stock ownership plan also increased $26,000 in the first quarter of 2016 due to the increase in our stock price. Group insurance costs increased

$21,000 due to higher health care costs in 2016. In addition, deferred lending costs decreased by $57,000 due to lower commercial and residential mortgage loan originations during the first quarter of 2016 when compared to the prior year period. Collection and other real estate owned expenses increased $67,000 during the first quarter of 2016 due to increased legal and collection costs related to one commercial real estate loan relationship and the land parcels held in other real estate owned. Data processing expense increased $25,000 during the first quarter of 2016 due to higher core processing costs combined with upgrades to our disaster recovery and back up systems.

Partially offsetting the above increases, advertising expenses decreased $40,000 during the first quarter of 2016 due to lower costs incurred for advertising campaigns for our loan production office in St. Joe, Michigan, and other promotional items. Occupancy and equipment costs decreased $39,000 primarily due to lower utilities, snow removal, and maintenance items during the first quarter of 2016 as compared to the prior year quarter.

Income before income taxes decreased $362,000, or 32.7%, to $746,000 for the three months ended March 31, 2016 from $1.1 million for the prior year period, which led to a decrease in income tax expense for the three months ended March 31, 2016 to $151,000 from $156,000 for the prior year period. The Company's effective tax rate for the three months ended March 31, 2016 was 20.2%, an increase from 14.1% for the comparable 2015 period. The increase in the effective tax rate was primarily due to the nondeductible expenses associated with the merger that were incurred during the first quarter of 2016.

Asset Quality

Total nonperforming assets increased $42,000, or 0.9%, to $4.6 million at March 31, 2016 from $4.5 million at December 31, 2015. The nonperforming assets to total assets ratio increased to 0.87% at March 31, 2016 from 0.84% at December 31, 2015.

During the first quarter of 2016, nonperforming loans increased $72,000 to $2.4 million at March 31, 2016 from $2.3 million at December 31, 2015 primarily due to a $94,000 residential mortgage loan that is past due 90 days and still accruing as the borrower was waiting to receive payment assistance through a government program. The loan was subsequently brought current as the payments were received by the Bank in April. In addition, the Bank transferred a $40,000 residential mortgage loan to nonaccrual status during the first quarter of 2016. These increases were partially offset by payments received on nonaccrual commercial real estate, construction, and home equity loans. At March 31, 2016, our nonperforming loans to total loans ratio increased to 0.71% from 0.68% at December 31, 2015 as a result of the increase in nonperforming loans and a decrease in total loans outstanding.

Other real estate owned totaled $2.2 million at March 31, 2016 and December 31, 2015. During the first quarter of 2016, we recorded a $30,000 write-down on one commercial real estate property. There was no other activity during the first quarter of 2016.

The Company's analysis for the allowance for loan losses for the first quarter of 2016 reflected continued improvement in several asset quality metrics and trends, including charge-offs, classified assets, troubled debt restructurings, delinquencies, and current economic conditions. As such, no provision for the allowance for loan losses was recorded during the first quarter of 2016. Net recoveries for the three months ended March 31, 2016 totaled $2,000, compared to $25,000 in net charge-offs for the prior year period.

The allowance for loan losses totaled $3.6 million at March 31, 2016 and December 31, 2015. The allowance for loan losses to nonperforming loans ratio decreased to 150.2% at March 31, 2016 compared to 154.7% at December 31, 2015 primarily due to the increase in nonperforming loans. The allowance for loan losses to total loans ratio increased to 1.07% at March 31, 2016 from 1.05% at December 31, 2015 primarily due to the decrease in total loans at March 31, 2016 from December 31, 2015.

Balance Sheet Highlights

Total assets at March 31, 2016 decreased by $14.3 million, or 2.6%, to $528.9 million compared to $543.2 million at December 31, 2015, primarily due to decreases in cash and due from financial institutions, outstanding mortgage warehouse loan balances, and loans held for sale.

At March 31, 2016, loans totaled $341.1 million, a $4.1 million, or 1.2%, decrease from $345.2 million at December 31, 2015. The decrease was primarily due to a $6.6 million, or 5.1%, decrease in mortgage warehouse loans to $122.3 million at March 31, 2016 from $128.9 million at December 31, 2015. The decease in mortgage warehouse loans was primarily due to a three day faster turn time during the first quarter of 2016 compared to the last few months of 2015 as mortgage companies were able to comply more efficiently with new regulations on mortgage loans. We continue to utilize the warehouse participation program to provide additional availability to our customers when their demand increases, primarily at month end, or when there are backlogs in the secondary markets. The participation program allows us to utilize our liquidity to fund commercial loan growth while retaining processing, servicing, and wire transfer fees related to the mortgage warehouse loans.

Partially offsetting the decrease in mortgage warehouse loans was a $3.4 million, or 2.2%, increase in commercial loans to $158.3 million at March 31, 2016 from $154.8 million at December 31, 2015. The increase was primarily due to new originations as well as fundings of commercial real estate and commercial construction loans during 2015. The Company originated $5.4 million in commercial real estate loans during the first quarter of 2016 with an additional $1.0 million moving into permanent financing from commercial construction loans. During the first quarter of 2016, the Company funded $2.0 million on previously originated or purchased commercial construction loans.

Total deposits at March 31, 2016 decreased $29.8 million, or 7.6%, to $361.2 million from $391.0 million at December 31, 2015. Interest checking deposits decreased $15.2 million, or 14.3%, primarily due to decreases in mortgage warehouse participant accounts which will fluctuate due to funding needs in mortgage warehouse lending. Certificates of deposit and IRAs decreased $12.0 million, or 12.1%, due to maturities in brokered deposits that were not renewed. Money market accounts decreased $8.2 million, or 14.1%, primarily due to a decrease in one large public fund account.

Borrowings totaled $74.3 million at March 31, 2016, an increase of $14.1 million, or 23.5%, from $60.2 million at December 31, 2015. The increase in borrowings was primarily related to a $10.0 million advance entered into related to the start of the third forward-starting swap during March 2016 combined with the utilization of our short-term lines of credit to fund the decrease in deposits.