Heartland BancCorp Earns Record $5.8 Million in Fourth Quarter 2020 and Record $14.8 Million for the Year; Increases Quarterly Cash Dividend by 10% to $0.627 per Share

WHITEHALL, Ohio, Jan. 19, 2021 (GLOBE NEWSWIRE) -- Heartland BancCorp (“Heartland” and “the company”) (OTCQX: HLAN) today reported record earnings for the fourth quarter of 2020. Net income increased 89.0% to $5.8 million, or $2.87 per diluted share in the fourth quarter of 2020, compared to $3.1 million, or $1.52 per diluted share in the preceding quarter, and increased 67.2% compared to $3.4 million, or $1.67 per diluted share in the fourth quarter of 2019. For the year 2020, net income increased 11.9% to a record $14.8 million, or $7.33 per diluted share, compared to $13.2 million, or $6.45 per diluted share in 2019.

The company also announced its board of directors increased its quarterly cash dividend by 10% to $0.627 per share. The dividend will be payable April 10, 2021, to shareholders of record as of March 25, 2020. Heartland has paid regular quarterly cash dividends since 1993.

“Our record results for both the fourth quarter and the year were highlighted by higher mortgage loan production as a result of the historically low interest rate environment, strong PPP loans generated during the year and the successful integration of our acquisition of Victory Community Bank,” stated G. Scott McComb, Chairman, President and Chief Executive Officer. “Our operating results benefitted from the larger scale and reach of the combined company, with double digit loan and deposit growth year-over-year, and an annualized return on average assets of 1.50% and an annualized return on average equity of 16.57% for the fourth quarter. I am extremely proud of our team of bankers who under very difficult circumstances rose to the challenge to meet the needs of our client and communities.”

Fourth Quarter Financial Highlights (at or for the period ended December 31, 2020)

• Net income increased 67.2% to $5.8 million, compared to $3.4 million in the fourth quarter a year ago.
• Earnings per diluted share were $2.87, compared to $1.67 in the fourth quarter a year ago.
• Provision for loan losses was $750,000, compared to $375,000 in the fourth quarter a year ago.
• Net interest margin was 3.50%, compared to 3.38% in the preceding quarter, and 3.87% in the fourth quarter a year ago.
• Total revenues (net interest income plus noninterest income) increased 37.1% to $17.2 million, compared to $12.6 million in the fourth quarter a year ago.
• Noninterest income increased 110.8% to $4.8 million, compared to $2.3 million in the fourth quarter a year ago.
• Annualized return on average assets was 1.50%, compared to 1.21% in the fourth quarter a year ago.
• Annualized return on average equity was 16.57%, compared to 10.75% in the fourth quarter a year ago.
• Total assets increased 38.8% to $1.55 billion, compared to $1.11 billion a year ago.
• Net loans increased 26.4% to $1.13 billion, compared to $890.9 million a year ago.
• Noninterest bearing demand deposits increased 66.7% to $426.8 million, compared to $256.0 million a year ago.
• Total deposits increased 39.0% to $1.31 billion, compared to $944.2 million a year ago.
• Tangible book value per share was $63.87 per share, compared to $62.49 per share a year ago.
• Increased its quarterly cash dividend to $0.627 per share.

COVID-19 Response

Heartland has implemented several pandemic preparations to assist its clients with their financial needs, and remains committed to helping its borrowers who have been affected by the declining economic activity. The sectors that have been most heavily impacted in our loan portfolio include hospitality and food services, healthcare, manufacturing, and retail trade loans.

Heartland continues to offer payment and financial relief programs for borrowers impacted by the pandemic. These programs include loan payment deferrals or interest-only payments for up to 90 days. Deferred loans are re-evaluated at the end of the initial deferral period and will either return to the original loan terms or may be eligible for an additional deferral period for up to 90 days. Heartland has deferred payment on 29 loans totaling $51.9 million at December 31, 2020, which includes 13 loans totaling $28.0 million that had received a second deferral. Of the $51.9 million in loans on deferral at December 31, 2020, $44.5 million are for businesses within the accommodation & food industry, $3.8 million are businesses in the RE rental and leasing sector, $2.7 million are in manufacturing and $200,000 are in retail trade.

Paycheck Protection Program

During the second and third quarters of 2020, Heartland originated 1,075 Paycheck Protection Program (“PPP”) loans, for a total of $129 million in PPP loans, and generated total PPP loan fees receivable of approximately $4.9 million. “As of December 31, 2020, we have 517 forgiveness applications outstanding with the SBA and received payment from the SBA for 157 borrowers totaling $28.0 million. Approximately $764,000 of the income recognized during the fourth quarter was related to recognizing origination fees for PPP loan payoffs,” said McComb.

Subordinated Notes Offering

On May 15, 2020, Heartland completed its private placement of $25 million of 5.0% fixed-to-floating rate subordinated notes due 2030 (the “Notes”) to certain qualified institutional buyers and accredited investors, including the exchange of approximately $5.4 million of the Company’s subordinated promissory notes due 2025. The Notes have been structured to qualify as Tier 2 capital for Heartland for regulatory capital purposes. Heartland intends to use the net proceeds of the offering for general corporate operating purposes, including repaying indebtedness, to support organic growth and to fund potential acquisitions.

Victory Community Bank Acquisition

On April 7, 2020, Heartland completed the acquisition of Victory Community Bank. At closing, Victory Community Bank had three banking locations in Boone, Kenton, and Campbell counties in Kentucky. Pursuant to previously announced terms, Victory Mortgage Holding, Inc. (formerly known as Victory Bancorp, Inc.) (as the sole shareholder of Victory Community Bank) received 58,934 shares of Heartland common stock and approximately $35.5 million in cash.

The closed acquisition added approximately $238.3 million in assets, $149.9 million in deposits and $120.2 million in loans to Heartland Bank. Victory Community Bank’s former sister company, Victory Mortgage, LLC, which is affiliated with Fischer Homes, has mortgage lending offices in Louisville, Columbus, Indianapolis, and Atlanta. As part of the merger, Victory Mortgage, LLC entered into a cooperation agreement with Heartland Bank for certain products and services to be provided to Heartland Bank post-closing.

Balance Sheet Review

“The Victory Community Bank acquisition contributed meaningfully to loan growth year-over-year, primarily in the 1-4 family loan segment,” said Carrie Almendinger, EVP and Chief Financial Officer. Net loans increased to $1.13 billion at December 31, 2020, a 26.4% increase compared to $890.9 million at December 31, 2019, and a modest decrease compared to $1.17 billion at September 30, 2020. Owner occupied commercial real estate loans (CRE) increased 1% to $240.2 million at December 31, 2020, compared to a year ago, and comprise 21.3% of the total loan portfolio. Non-owner occupied CRE loans increased 10.7% to $307.1 million, compared to a year ago, and comprise 26.9% of the total loan portfolio at December 31, 2020. At December 31, 2020, 1-4 family residential real estate loans were up 41.2% from year ago levels to $327.6 million and represent 28.7% of total loans. Commercial loans were up 96.8% from year ago levels to $216.1 million, and comprise 18.9% of the total loan portfolio at December 31, 2020. Home equity loans increased 22.0% from year ago levels to $38.2 million and represent 3.1% of total loans at December 31, 2020. Consumer loans increased 3.1% from year ago levels to $11.3 million and represent 1.0% of the total loan portfolio at December 31, 2020.

Total deposits increased 39.0% to $1.31 billion at December 31, 2020, compared to $944.2 million a year earlier and increased 2.0% compared to $1.29 billion three months earlier. Deposit growth for the year was reflective of the Victory Community Bank acquisition, while federal programs such as the PPP and stimulus checks also boosted demand deposit balances. At December 31, 2020, noninterest bearing demand deposit accounts increased 66.7% compared to a year ago and represented 32.5% of total deposits, savings, NOW and money market accounts increased 48.3% compared to a year ago and represented 40.3% of total deposits, and CDs increased 7.7% compared to a year ago and comprised 27.2% of total deposits.

Total assets increased 38.8% to $1.55 billion at December 31, 2020, compared to $1.11 billion a year earlier, and increased 1.9% compared to $1.52 billion three months earlier. The year-over-year increase is largely due to the Victory Community Bank acquisition and PPP loans. Excluding these items, total assets increased 8.4% year-over-year. Shareholders’ equity increased 9.7% to $140.9 million at December 31, 2020, compared to $128.4 million a year earlier. On December 31, 2020, Heartland’s tangible book value was $63.87 per share, compared to $62.49 one year earlier.

Operating Results

Heartland’s net interest margin was 3.50% in the fourth quarter of 2020, compared to 3.38% in the preceding quarter and 3.87% in the fourth quarter of 2019. “Positive tailwinds relating to PPP loan forgiveness and liability repricing were offset slightly by the negative impacts of excess liquidity, leading to a modest net interest margin expansion during the fourth quarter,” said Almendinger. For the year, the net interest margin was 3.63%, compared to 3.94% in 2019.  Excluding PPP loans, net interest margin was 3.49% for the fourth quarter and 3.71% for all of 2020.  

Total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 37.1% to $17.2 million in the fourth quarter, compared to $12.6 million in the fourth quarter a year ago, and increased 10.1% from $15.7 million in the preceding quarter. For the year, total revenues increased 25.3% to $60.5 million, compared to $48.2 million in 2019.

Net interest income, before the provision for loan losses, increased 20.9% to $12.4 million in the fourth quarter of 2020, compared to $10.3 million in the fourth quarter a year ago, and increased 4.6% compared to $11.9 million in the preceding quarter. For the year, net interest income before the provision for loan losses increased 14.8% to $46.4 million, compared to $40.4 million in 2019.

Heartland’s noninterest income increased 110.8% to $4.8 million in the fourth quarter, compared to $2.3 million in the fourth quarter a year ago, and increased 27.6% compared to $3.8 million in the preceding quarter. The net gain and commission on sales and servicing of loans increased 266.4% to $2.8 million in the fourth quarter of 2020, compared to $766,000 in the fourth quarter a year ago, and increased 38.3% compared to $2.0 million in the preceding. Sustained low long-term mortgage rates continued to attract mortgage refinancing, and produced higher loan sales. For the year, noninterest income increased 79.7% to $14.1 million from $7.8 million in 2019.

Fourth quarter noninterest expenses totaled $9.4 million, which was unchanged compared to the preceding quarter. In the fourth quarter a year ago, noninterest expense was $8.0 million. Salary and employee benefit expenses were $5.7 million for the fourth quarter compared to $5.6 million in the third quarter of 2020, and $4.8 million in the fourth quarter a year ago.

For the year, noninterest expense increased to $36.1 million, from $30.6 million in 2019. The year-over-year increase was due to $1.3 million in acquisition costs related to the acquisition of Victory Community Bank that closed in April 2020, in addition to Heartland’s organic expansion, including its new Upper Arlington branch, and investments in new technology. The efficiency ratio for the fourth quarter of 2020 was 55.1%, compared to 60.3% for the preceding quarter and 63.6% for the fourth quarter of 2019.

Credit Quality

“The provision for loan losses during the quarter primarily reflects our current assessment of risks associated with the COVID-19 pandemic, as well as the higher provisions taken during the second and third quarters of the year 2020,” said McComb. Heartland booked a $750,000 provision for loan losses in the fourth quarter, compared to a $2.6 million provision in the preceding quarter and a $375,000 provision for loan losses in the fourth quarter a year ago. For the year, Heartland’s loan loss provision totaled $6.4 million, compared to $1.5 million in 2019.  

At December 31, 2020, the allowance for loan losses (ALLL) increased to $14.1 million, or 1.24% of total loans, compared to $13.8 million, or 1.17% of total loans at September 30, 2020, and $8.8 million, or 0.97% of total loans a year ago. Excluding PPP loans, the ALLL was 1.36% of total loans at December 31, 2020 and 1.31% of total loans at September 30, 2020. As of December 31, 2020, the ALLL represented 476.5% of nonaccrual loans, compared to 329.3% three months earlier and 471.9% one year earlier.

Nonaccrual loans decreased 29.2% during the quarter to $3.0 million at December 31, 2020, compared to $4.2 million at September 30, 2020 and increased compared to $1.9 million at December 31, 2019. There were no loans past due 90 days and still accruing at December 31, 2020. This compared to $132,000 in loans past due 90 days at September 30, 2020, and $491,000 in loans past due 90 days at December 31, 2019.

Heartland’s performing restructured loans that were not included in nonaccrual loans were $285,000 at December 31, 2020, which was unchanged compared to the preceding quarter end. Borrowers who are in financial difficulty, and who have been granted concessions, including interest rate reductions, term extensions, or payment alterations, are categorized as restructured loans.

There was $5,000 in other real estate owned (OREO) and other non-performing assets on the books at December 31, 2020, and at September 30, 2020, and none reported at December 31, 2019. Non-performing assets (NPAs), consisting of non-performing loans and loans past due 90 days or more, were $3.0 million, or 0.19% of total assets inclusive of PPP loans, at December 31, 2020, compared to $4.3 million, or 0.29% of total assets, at September 30, 2020 and $2.3 million, or 0.21% of total assets at December 31, 2019. NPAs, consisting of non-performing loans and loans past due 90 days or more, were 0.21% of total assets excluding PPP loans, at December 31, 2020.

Heartland recorded net loan charge offs of $420,000 in the fourth quarter of 2020. This compares to net loan recoveries of $141,000 in the third quarter of 2020 and net loan charge offs of $142,000 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 19 full-service banking offices and TransCounty Title Agency, LLC. 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 (OTCQX) under the symbol HLAN. Learn more about Heartland Bank at Heartland.Bank.

In May of 2020, Heartland was ranked #58 on the American Banker Magazine’s list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity as of December 31, 2019. In September of 2019, Heartland stock uplisted to the OTCQX Best Market after previously trading on the OTCQB Venture Market.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (i) the benefits of a merger between Heartland Bank and Victory Community Bank, including future financial and operating results, cost savings enhancements to revenue and accretion to reported earnings that may be realized from the merger; (ii) Heartland’s plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” or words of similar meaning generally intended to identify forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations of Heartland’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Heartland. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements because of the following factors, among others: (1) the assumptions and estimates used by Heartland’s management include both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments, and thus, may not be realized; (2) the businesses of Heartland Bank and Victory Community Bank may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected, and the expected growth opportunities or cost savings from the merger may not be fully realized or may take longer to realize than expected;; (3) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which Heartland is engaged; (4) changes in the interest rate environment may adversely affect net interest income; (5) results may be adversely affected by continued diversification of assets and adverse changes to credit quality; (6) competition from other financial services companies in Heartland’s markets could adversely affect operations; (6) the impact of the coronavirus (COVID-19) pandemic on the employees and customers of Heartland, as well as the resulting effect on the business, financial condition and results of operations on Heartland; and (7) the current economic slowdown could adversely affect credit quality and loan originations.

Heartland cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements are expressly qualified in their entirety by the cautionary statements above. Heartland does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

Heartland BancCorp
Consolidated Balance Sheets
Assets		Dec. 31, 2020				Sep. 30, 2020				Dec. 31, 2019
	Cash and cash equivalents	$	189,874			$	114,764			$	19,475
	Interest bearing time deposits		277				276				0
	Available-for-sale securities		144,377				149,513				139,218
	Held-to-maturity securities, fair values of, $202,339, $352,203 and $760,122 respectively		202				351				758
	Commercial		216,108				244,054				109,827
	CRE (Owner occupied)		240,185				239,608				238,129
	CRE (Non Owner occupied)		307,054				289,115				277,425
	1-4 Family		327,555				358,570				231,913
	Home Equity		38,232				40,504				31,330
	Consumer		11,343				10,851				10,998
	Allowance for loan losses		(14,147	)			(13,818	)			(8,767	)
	Net Loans		1,126,329				1,168,884				890,855
	Premises and equipment		30,220				30,501				30,186
	Nonmarketable equity securities		6,017				5,601				4,440
	Foreclosed assets held for sale		5				5				-
	Interest receivable		6,115				7,789				4,835
	Goodwill		12,388				12,388				1,206
	Intangible Assets		1,253				1,321				935
	Deferred income taxes		600				600				600
	Life insurance assets		17,468				17,366				17,057
	Lease - Right of Use Asset		3,051				2,455				2,569
	Other		9,571				7,286				2,723
	Total assets	$	1,547,747			$	1,519,102			$	1,114,857
Liabilities and Shareholders' Equity
Liabilities
	Deposits
	Demand	$	426,795			$	387,107			$	255,971
	Saving, NOW and money market		528,836				506,877				356,484
	Time		357,203				393,435				331,768
	Total deposits		1,312,834				1,287,419				944,223
	Short-term borrowings		10,636				8,707				11,344
	Long-term debt		69,380				73,378				20,460
	Lease Liability		3,051				2,455				2,569
	Interest payable and other liabilities		10,950				11,294				7,871
	Total liabilities		1,406,851				1,383,253				986,467
Shareholders' Equity
	Common stock, without par value; authorized 5,000,000 shares; 2,083,117, 2,082,657 and 2,020,273 shares issued, respectively		60,402				60,267				56,091
	Retained earnings		81,061				76,433				70,853
	Accumulated other comprehensive income (expense)		4,427				4,143				1,446
	Treasury stock at Cost, Common; 90,612, 90,612 and 0 shares held, respectively		(4,994	)			(4,994	)			-
	Total shareholders' equity		140,896				135,849				128,390
	Total liabilities and shareholders' equity	$	1,547,747			$	1,519,102			$	1,114,857
	Book value per share	$	70.71			$	68.20			$	63.55

Heartland BancCorp
Consolidated Statements of Income
		Three Months Ended									Twelve Months Ended
Interest Income		Dec. 31, 2020			Sep. 30, 2020			Dec. 31, 2019			Dec. 31, 2020			Dec. 31, 2019
	Loans	$	13,447		$	13,157		$	12,071		$	51,882		$	46,270
	Securities
	Taxable		363			415			513			1,708			2,722
	Tax-exempt		604			610			490			2,335			1,828
	Other		34			20			164			129			605
	Total interest income		14,448			14,202			13,238			56,054			51,425
Interest Expense
	Deposits		1,476			1,796			2,779			7,952			10,251
	Borrowings		524			504			160			1,732			778
	Total interest expense		2,000			2,300			2,939			9,684			11,029
Net Interest Income			12,448			11,902			10,299			46,370			40,396
Provision for Loan Losses			750			2,550			375			6,350			1,500
Net Interest Income After Provision for Loan Losses			11,698			9,352			9,924			40,020			38,896
Noninterest income
	Service charges		587			571			533			2,168			2,151
	Net gains and commissions on loan sales and servicing		2,807			2,029			766			7,333			2,083
	Title insurance income		400			344			292			1,311			1,109
	Net realized gains on sales of available-for-sale securities		221			29			-			250			-
	(Loss) gain on sale of premises and equipment		10			-			-			5			-
	Increase in cash value of life insurance		102			101			177			411			502
	Other		663			681			504			2,604			1,991
	Total noninterest income		4,790			3,755			2,272			14,082			7,836
Noninterest Expense
	Salaries and employee benefits		5,650			5,645			4,816			20,389			18,485
	Net occupancy and equipment expense		1,269			1,278			1,088			4,856			3,939
	Data processing fees		485			543			361			1,996			1,509
	Professional fees		278			269			213			1,893			956
	Marketing expense		176			85			224			954			951
	Printing and office supplies		102			102			86			387			311
	State financial institution tax		244			256			269			1,012			905
	FDIC insurance premiums		183			146			4			423			106
	Other		984			1,097			934			4,164			3,458
	Total noninterest expense		9,371			9,421			7,995			36,074			30,620
Income before Income Tax			7,117			3,686			4,201			18,028			16,112
Provision for Income Taxes			1,353			636			754			3,260			2,916
Net Income		$	5,764		$	3,050		$	3,447		$	14,768		$	13,196
Basic Earnings Per Share		$	2.89		$	1.53		$	1.71		$	7.39		$	6.54
Diluted Earnings Per Share		$	2.87		$	1.52		$	1.67		$	7.33		$	6.45

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)		Three Months Ended						Twelve Months Ended
		Dec. 31, 2020		Sep. 30, 2020		Dec. 31, 2019		Dec. 31, 2020		Dec. 31, 2019
Performance Ratios:
Return on average assets		1.50%		0.80%		1.21%		1.08%		1.21%
Return on average equity		16.57%		9.01%		10.75%		11.10%		10.81%
Return on average tangible common equity		18.39%		10.02%		10.94%		12.00%		10.82%
Net interest margin		3.50%		3.38%		3.87%		3.63%		3.94%
Efficiency ratio		55.07%		60.28%		63.60%		59.92%		63.48%
Asset Quality Ratios and Data:		As of or for the Three Months Ended
		Dec. 31, 2020		Sep. 30, 2020		Dec. 31, 2019
Nonaccrual loans		$ 2,969		$ 4,196		$ 1,858
Loans past due 90 days and still accruing		-		132		491
Non-performing investment securities		-		-		-
OREO and other non-performing assets		5		5		-
Total non-performing assets		$ 2,974		$ 4,333		$ 2,349
Non-performing assets to total assets		0.19%		0.29%		0.21%
Net charge-offs quarter ending		$ 420		$ (141)		$ 142
Allowance for loan loss		$ 14,147		$ 13,818		$ 8,767
Nonaccrual loans		$ 2,969		$ 4,196		$ 1,858
Allowance for loan loss to non accrual loans		476.49%		329.31%		471.85%
Allowance for loan losses to loans outstanding		1.24%		1.17%		0.97%
Restructured loans included in non-accrual		$ 285		$ 285		$ 289
Performing restructured loans (RC-C)		$ 648		$ 338		$ 341
Book Values:
Total shareholders' equity		$ 140,896		$ 135,849		$ 128,390
Less: goodwill and intangible assets		13,641		13,709		2,141
Shareholders' equity less goodwill and intangible assets		$ 127,255		$ 122,140		$ 126,249
Common shares outstanding		2,083,117		2,082,657		2,020,273
Less: treasury shares		(90,612)		(90,612)		-
Common shares as adjusted		1,992,505		1,992,045		2,020,273
Book value per common share		$ 70.71		$ 68.20		$ 63.55
Tangible book value per common share		$ 63.87		$ 61.31		$ 62.49

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