Press Release

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

Company Release - 1/22/2019 4:00 PM ET

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 

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Source: Heartland BancCorp