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MICHIGAN CITY, Ind. (AP) -- Horizon Bancorp said Monday it needs to squirrel away more cash because of deteriorating credit quality in its home and car loan portfolios. The company added that it sees 2007 earnings above those of last year. The bank, which operates about 15 branches in Michigan and Indiana, expects to set aside $1.8 million for the fourth quarter to cover unpaid loans. The provision stems from expectations of decay in the credit quality of two types of loans. The first portfolio, which represents about 19 percent of the bank's $889 million in loans, is indirect auto, or car loans purchased from auto dealers. The bank has had to repossess more cars and more strapped borrowers have voluntarily surrendered their vehicles rather than repay their bills, the bank said. This suggests Horizon needs to save more money to prepare for unpaid loans, the company said. The $8.9 million wholesale mortgage portfolio, or home loans issued through brokers, is also suffering from worse credit, the bank said. Horizon shuttered its brokered loan business this summer. The $1.8 million provision is more than the reserve established for the first nine months of the year combined.
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