Heartland BancCorp Earns Record $3.1 Million in Fourth Quarter and $11.4 Million for the Year, Increases Quarterly Cash Dividend by 10% to $0.52 per Share

WHITEHALL, Ohio, Jan. 22, 2019 (GLOBE NEWSWIRE) — Heartland BancCorp (“the company,” and “the bank”) (OTCQB: HLAN), today reported that growing revenues and expanding net interest margin contributed to record fourth quarter net income of $3.1 million, or $1.68 per diluted share.  This compares with net income of $2.1 million or $1.25 per diluted share in the fourth quarter of 2017, which includes additional tax expense of $541,000 or $0.29 per diluted share from a one-time write-down of its deferred tax assets and liabilities.  In the third quarter of 2018, net income was $3.06 million, or $1.83 per diluted share.  For the full year ended December 31, 2018, net income increased to a record $11.4 million, or $6.67 per diluted share, compared to $8.9 million, or $5.40 per diluted share, in 2017.

The company also announced its board of directors increased its regular quarterly cash dividend by 10% to $0.52 per share.  The dividend will be payable April 10, 2019, to shareholders of record as of March 25, 2019.

“We are pleased to announce record net income for both the year and the fourth quarter, as we continue to grow our balance sheet and gain market share,” stated G. Scott McComb, Chairman, President and CEO.  “Double digit loan and deposit growth combined with net interest margin expansion, higher noninterest income and the lower 18.1% blended effective federal income tax rate contributed to the record financial performance achieved this year.  Our focus in the coming year remains on expanding market share in Central Ohio, while continuing to look for growth opportunities in other Ohio markets.”

On November 20, 2018, Heartland successfully completed a private placement of its common stock and generated net proceeds of approximately $28.9 million. The Company expects to use the proceeds from the capital raise for general corporate purposes, including but not limited to supporting organic growth, facilitating potential expansion opportunities, expanding products and services and debt repayment. 

Fourth Quarter Financial Highlights (at or for the period ended December 31, 2018)

• Achieved record net income of $3.1 million, or $1.68 per diluted share.
• Net interest margin expanded 15 basis points to 4.04%, compared to 3.89% in the preceding quarter.
• Annualized return on average assets was 1.20%.
• Annualized return on average equity was 12.66%.
• Total assets increased 16.2% to $1.05 billion, compared to $900.9 million a year earlier.
• Net loans increased 16.1% to $816.8 million from a year ago.
• Total deposits increased 13.3% to $880.4 million from a year ago.
• Tangible book value per share increased 15.0% to $56.30 per share compared to $48.97 three months earlier and grew 16.1% from $48.51 per share one year earlier.
• Increased quarterly cash dividend by 10% to $0.52 per share, which represents a 2.57% yield based on the December 31, 2018, stock price ($81.00).

Balance Sheet Review

“We grew the loan portfolio $21.7 million, or almost 3%, during the fourth quarter, due to the hard work of our lending teams.  The year-over-year increase in the loan portfolio is largely concentrated in residential real estate, owner occupied commercial real estate and agriculture loan segments,” said McComb. 

Net loans increased 16.1% to $816.8 million at December 31, 2018, compared to $703.5 million at December 31, 2017, and increased 2.7% compared to $795.3 million at September 30, 2018.  Owner occupied commercial real estate loans (CRE) increased 16.8% to $228.5 million at December 31, 2018, compared to a year ago and comprise 27.7% of the total loan portfolio.  Non-owner occupied CRE loans increased 13.2% to $247.8 million compared to a year ago and comprises 30.1% of the total loan portfolio.  1-4 family residential real estate loans were up 22.2% from year ago levels to $208.3 million and represent 25.3% of total loans.  Commercial loans were up 16.0% from year ago levels to $100.0 million at December 31, 2018 and comprise 12.1% of the total loan portfolio.  Home equity loans decreased 2.1% from year ago levels to $27.9 million and represent 3.4% of total loans and consumer loans increased 18.7% from year ago levels to $11.7 million and represent 1.4% of the total loan portfolio.

Total deposits increased 13.3% to $880.4 million at December 31, 2018, compared to $776.8 million a year earlier and increased modestly compared to $875.4 million three months earlier.  Noninterest bearing demand deposit accounts increased 19.1% at December 31, 2018, compared to a year ago, and represented 26.4% of total deposits.  Savings, NOW and money market accounts increased 9.6% compared to a year ago and represented 36.5% of total deposits and CDs increased 13.3% when compared to a year ago and comprised 37.1% of the total deposit portfolio at December 31, 2018.

Total assets increased 16.2% to $1.05 billion at December 31, 2018, compared to $900.9 million a year earlier. Heartland’s shareholders’ equity increased 46.4% to $115.0 million at December 31, 2018, compared to $78.6 million a year earlier, reflecting the capital raise during the fourth quarter.  At year end, Heartland’s tangible book value increased 16.1% to $56.30 per share compared to $48.51 per share one year earlier.

Operating Results

“With the four 25-basis-point rate hikes implemented in 2018, our yields on interest-earning assets expanded faster than our cost of funds.  As a result, our net interest margin improved 15 basis points compared to the preceding quarter,” said McComb.  Heartland’s net interest margin was 4.04% in the fourth quarter of 2018, compared to 3.89% in the preceding quarter and 3.96% in fourth quarter a year ago.  For the full year 2018, Heartland’s net interest margin was 3.90% compared to 3.87% in 2017.

Net interest income before the provision for loan loss increased 17.4% to $9.8 million in the fourth quarter of 2018, compared to $8.3 million in the fourth quarter a year ago, and increased 6.2% compared to $9.2 million in the preceding quarter.  For the year, net interest income increased 15.9% to $36.0 million compared to $31.0 million in 2017.

Total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 18.7% to $11.3 million in the fourth quarter, compared to $9.5 million in the fourth quarter a year ago, and increased 5.7% from $10.7 million in the preceding quarter.  For the full year, revenues increased 15.5% to $41.2 million, compared to $35.7 million in 2017.

Heartland’s noninterest income increased 28.1% to $1.5 million in the fourth quarter, compared to $1.2 million in the fourth quarter a year ago, and increased 2.9% compared to $1.4 million in the preceding quarter.  “Our recent purchase of TransCounty Title Agency in August contributed $316,000 to noninterest income during the fourth quarter.  This acquisition complements our strong mortgage operation and strategically expands the financial services we offer in the Ohio markets we serve,” said McComb. 

The full year net gains and commissions on loan sales and servicing increased 39.3% to $1.4 million in 2018, compared to $996,000 in the prior year.  For the full year, noninterest income increased 12.9% to $5.3 million, compared to $4.7 million in 2017.

Fourth quarter noninterest expenses were $7.1 million, compared to $6.5 million in the preceding quarter and $5.7 million in the fourth quarter a year ago.  For the year, noninterest expense totaled $25.8 million, compared to $21.6 million in 2017.  The increase was due to costs associated with the company’s branch expansion, including its new corporate headquarters, as well as costs associated with the subsidiary TransCounty Title Agency.  The efficiency ratio for the fourth quarter of 2018 was 62.75%, compared to 61.28% for the preceding quarter and 59.86% in the fourth quarter of 2017.  

Credit Quality

Nonaccrual loans decreased to $1.8 million at December 31, 2018, compared to $4.0 million three months earlier and $1.9 million at December 31, 2018.  There were $97,000 in loans past due 90 days and still accruing at December 31, 2018, compared to $24,000 at September 30, 2018, and no loans past due 90 days and still accruing a year ago.

Performing restructured loans that were not included in nonaccrual loans at December 31, 2018, were reduced to $293,000, compared to $1.8 million in the preceding quarter.  Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. 

There was no other real estate owned (OREO) and other non-performing assets on the books at December 31, 2018.  Non-performing assets (NPAs), consisting of non-performing loans, OREO, and loans delinquent 90 days or more, were $1.9 million, or 0.18% of assets, at December 31, 2018, compared to $4.0 million, or 0.39% of assets, three months earlier, and $1.9 million, or 0.21% of assets, a year ago.

Heartland’s fourth quarter provision for loan losses was $375,000, the same as in the preceding quarter.  In the fourth quarter of 2017 the provision for loan losses was $255,000.  The allowance for loan losses was $7.5 million, or 0.92% of total loans at December 31, 2018, compared to $7.3 million, or 0.91% of total loans at September 30, 2018, and $6.2 million, or 0.88% of total loans a year ago.  As of December 31, 2018, the allowance for loan losses represented 420.0% of nonaccrual loans compared to 183.7% three months earlier, and 336.5% one year earlier.  Net charge-offs were $99,000 in the fourth quarter of 2018.  This compares to net charge-offs of $2,000 in the preceding quarter and $416,000 in the fourth quarter a year ago. 

About Heartland BancCorp

Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 15 full-service banking offices.  Heartland Bank, founded in 1911, provides full-service commercial, small business, and consumer banking services; professional financial planning services; and other financial products and services.  Heartland Bank is a member of the Federal Reserve, a member of the FDIC, and an Equal Housing Lender.  Heartland BancCorp is currently quoted on the OTC Markets (OTCQB) under the symbol HLAN. Learn more about Heartland Bank at Heartland.Bank.

In May 2018, Heartland was ranked #37 on the American Banker magazine’s list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity (“ROE”) as of 12/31/17.

Safe Harbor Statement

This release contains forward-looking statements that reflect management’s current views of future events and operations. These forward-looking statements are based on information currently available to the Company as of the date of this release.  It is important to note that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including, but not limited to, the ability of the Company to implement its strategy and expand its lending operations.

Heartland BancCorp
Consolidated Balance Sheets
Assets			Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017
	Cash and cash equivalents		29,922			37,908			27,934
	Interest bearing time deposits		–			–			250
	Available-for-sale securities		140,556			128,886			117,227
	Held-to-maturity securities, fair values of, $1,568,346, $3,085,795 and $4,739,626 respectively		1,565			3,085			4,673
	Commercial		100,028			91,008			86,235
	Commercial Real Estate:
	Owner occupied		228,461			229,174			195,662
	Non Owner occupied		247,780			236,502			218,867
	Residential Real Estate:
	1-4 Family		208,335			203,547			170,531
	Home Equity		27,869			30,266			28,481
	Consumer		11,660			11,893			9,822
	Total loans		824,133			802,389			709,598
	Net deferred loan costs, premiums and discounts		197			230			169
	Allowance for loan losses		(7,547	)		(7,271	)		(6,225	)
	Net loans		816,783			795,348			703,542
	Premises and equipment		28,504			27,894			24,687
	Nonmarketable equity securities		3,526			3,527			2,830
	Foreclosed assets held for sale		–			–			40
	Interest receivable		4,169			4,215			3,114
	Goodwill		1,069			1,069			417
	Intangible Assets		446			442			–
	Deferred income taxes		805			805			805
	Life insurance assets		16,555			16,443			12,970
	Other		3,277			3,808			2,446
	Total assets	$	1,047,177		$	1,023,430		$	900,935
Liabilities and Shareholders’ Equity
Liabilities
	Deposits
	Demand	$	232,682		$	210,639		$	195,365
	Saving, NOW and money market		321,497			347,126			293,382
	Time		326,261			317,613			288,059
	Total deposits		880,441			875,378			776,806
	Short-term borrowings		34,768			49,274			24,665
	Long-term debt		10,460			10,460			15,460
	Interest payable and other liabilities		6,523			6,610			5,448
	Total liabilities		932,192			941,722			822,378
Shareholders’ Equity
	Common stock, without par value; authorized 5,000,000 shares; 2,013,572, 1,637,522 and 1,610,628 shares issued, respectively		55,080			25,739			25,108
	Retained earnings		61,812			59,652			53,667
	Accumulated other comprehensive income (expense)		(1,907	)		(3,683	)		(219	)
	Total shareholders’ equity		114,985			81,708			78,556
	Total liabilities and shareholders’ equity	$	1,047,177		$	1,023,430		$	900,935
	Book value per share	$	57.06		$	49.90		$	48.77

Heartland BancCorp
Consolidated Statements of Income
		Three Months Ended,							Twelve Months Ended
Interest Income			Dec. 31, 2018		Sept. 30, 2018		Dec. 31, 2017			Dec. 31, 2018				Dec. 31, 2017
	Loans	$	10,838	$	10,185	$	8,774		$	39,211			$	32,498
	Securities		–		–		–			–				–
	Taxable		666		599		438			2,219				1,623
	Tax-exempt		404		404		419			1,642				1,615
	Other		148		120		77			459				245
	Total interest income		12,056		11,308		9,708			43,531				35,980
Interest Expense			–		–		–			–				–
	Deposits		2,009		1,817		1,219			6,662				4,440
	Borrowings		252		263		146			914				509
	Total interest expense		2,261		2,080		1,365			7,576				4,949
Net Interest Income			9,795		9,227		8,343			35,955				31,032
Provision for Loan Losses			375		375		255			1,500				1,095
Net Interest Income After Provision for Loan Losses			9,420		8,852		8,088			34,455				29,937
Noninterest income			–		–		–			–				–
	Service charges		544		555		517			2,143				2,022
	Net Gains and commissions on loan sales and servicing		204		416		220			1,387				996
	Title Insurance Income		195		86		–			281				–
	Net realized gains on available-for-sale securities		–		2		–			(64	)			6
	Net realized gain/(loss) on sales of foreclosed assets		–		–		–			10				139
	Gain on redemption of life insurance proceeds		–		–		–			–				301
	Increase in cash value of life insurance		116		111		176			435				440
	Other		420		268		162			1,072				686
	Total noninterest income		1,479		1,438		1,155			5,264				4,663
Noninterest Expense			–		–		–			–				–
	Salaries and employee benefits		4,256		3,772		3,393			14,887				12,876
	Net occupancy and equipment expense		870		845		686			3,393				2,413
	Data processing fees		340		361		324			1,392				1,271
	Professional fees		177		241		248			782				697
	Marketing expense		228		213		123			866				676
	Printing and office supplies		83		65		79			300				250
	State franchise taxes		152		156		140			621				566
	FDIC Insurance premiums		102		132		97			467				355
	Other		866		749		596			3,067				2,545
	Total noninterest expense		7,074		6,534		5,686			25,775				21,649
Income before Income Tax			3,825		3,756		3,558			13,944				12,951
Provision for Income Taxes			711		695		1,502			2,529				4,078
Net Income		$	3,114	$	3,062	$	2,056		$	11,415			$	8,873
Basic Earnings Per Share		$	1.71	$	1.88	$	1.28		$	6.82			$	5.56
Diluted Earnings Per Share		$	1.68	$	1.83	$	1.25		$	6.67			$	5.40

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)	Three Months Ended												Twelve Months Ended
	Dec. 31, 2018				Sept. 30, 2018				Dec. 31, 2017				Dec. 31, 2018			Dec. 31, 2017
Performance Ratios:
Return on average assets		1.20	%			1.21	%			0.92	%		1.16	%		1.05	%
Return on average equity		12.66	%			15.12	%			10.54	%		13.15	%		11.82	%
Net interest margin		4.04	%			3.89	%			3.96	%		3.90	%		3.87	%
Efficiency ratio		62.75	%			61.28	%			59.86	%		62.44	%		60.66	%
Asset Quality Ratios and Data:	As of or for the Three Months Ended
	Dec. 31, 2018				Sept. 30, 2018				Dec. 31, 2017
Nonaccrual loans	$	1,797			$	3,959			$	1,850
Loans past due 90 days and still accruing		97				24				–
Non-performing investment securities		–				–				–
OREO and other non-performing assets		–				–				40
Total non-performing assets	$	1,894			$	3,983			$	1,890
Non-performing assets to total assets		0.18	%			0.39	%			0.21	%
Net charge-offs quarter ending	$	99			$	2			$	416
Allowance for loan loss	$	7,547			$	7,271			$	6,225
Nonaccrual loans	$	1,797			$	3,959			$	1,850
Allowance for loan loss to non accrual loans		419.99	%			183.65	%			336.48	%
Allowance for loan losses to loans outstanding		0.92	%			0.91	%			0.88	%
Restructured loans included in non-accrual	$	324			$	324			$	432
Performing restructured loans (RC-C)	$	293			$	1,818			$	1,712
Book Values:
Total shareholders’ equity	$	114,985			$	81,708			$	78,556
Less, goodwill		1,515				1,512				417
Shareholders’ equity less goodwill and intangible assets	$	113,470			$	80,197			$	78,139
Common shares outstanding		2,013,572				1,637,522				1,610,628
Less treasury shares		–				–				–
Common shares as adjusted		2,015,276				1,637,522				1,610,628
Book value per common share	$	57.06			$	49.90			$	48.77
Tangible book value per common share	$	56.30			$	48.97			$	48.51

Contacts:  G. Scott McComb, Chairman, President & CEO
Heartland BancCorp  614-337-4600