Heartland BancCorp Earnings Grow 5% to $2.0 Million in 3Q16 from 3Q15; Declares Quarterly Cash Dividend of $0.3910 per Share

GAHANNA, Ohio, Oct. 20, 2016 (GLOBE NEWSWIRE) — Heartland BancCorp (“the company,” and “the bank”) (OTCQB:HLAN), today reported that third quarter net income increased to $2.0 million, or $1.26 per diluted share, compared to $1.9 million, or $1.22 per diluted share, in the third quarter of 2015.  In the first nine months of 2016, Heartland’s net income increased 9.5% to $5.8 million, or $3.64 per diluted share, compared to $5.3 million, or $3.36 per diluted share, in the first nine months of 2015. 

The company also announced its board of directors declared its regular quarterly cash dividend of $0.3910 per share.  The dividend will be payable January 10, 2017, to shareholders of record as of December 25, 2016, providing a 2.80% current yield at recent market prices. 

“We continue to execute our strategic growth plan and consistently generate solid results,” said G. Scott McComb, Chairman, President and CEO.  “With 13.5% year-over-year loan growth, our net interest income grew 9% in the first nine months of 2016, compared to the first nine months of 2015.  New client acquisition continues to be an area of strength for us, reflecting our ability to gain market share.  Our consistency in delivery of consultative solutions has also contributed to our solid growth.  Our strong business fundamentals and practicing our employee defined shared values continues to be the foundation for our strength.”

Third Quarter Financial Highlights (at or for the period ended September 30, 2016)

  • Net income was $2.0 million, up from $1.9 million in the third quarter a year ago.
  • Net interest margin remained strong at 3.90% compared to 3.92% in the preceding quarter and 3.96% in the third quarter a year ago.
  • Annualized return on average assets was 1.06%, compared to the average of 0.80% generated by the 604 banks in the SNL MicroCap U.S. Bank Index.
  • Annualized return on average equity was 11.61%, compared to the average of 8.01% generated by the SNL MicroCap U.S. Bank Index.
  • Total deposits increased 9.8% to $667.9 million from a year ago.
  • Net loans increased 13.5% to $601.4 million from a year ago.
  • Non-performing assets were $5.2 million, or 0.66% of total assets, at September 30, 2016, compared to $5.7 million, or 0.75%, three months earlier and $4.1 million, or 0.59%, one year earlier.
  • Tangible book value per share increased 10.7% to $45.21 per share compared to $40.84 per share one year earlier.
  • Declared quarterly cash dividend of $0.3910 per share, which represents a 2.83% yield based on the September 30, 2016 stock price ($55.25).

In November 2015, Heartland completed a $5.4 million private placement to accredited investors of subordinated notes with fixed and variable rates producing a weighted interest rate of 4.986%.  The proceeds give Heartland the opportunity to build out its business plan and meet the growing demand from clients and the marketplace. 

Balance Sheet Review

“Our loan pipeline continues to grow at an annualized double digit pace, with net loans up $24.1 million, or 4.2% during the quarter.  The agricultural, commercial and industrial (C&I) and residential mortgage portfolios continue to show robust growth, increasing 88%, 14% and 18%, respectively compared to a year ago,” said McComb.  Net loans increased 4.2% to $601.4 million at September 30, 2016, compared to $577.4 million at June 30, 2016 and increased 13.5% compared to $529.7 million at September 30, 2015. 

Total deposits increased 9.8% to $667.9 million at quarter end, compared to $608.0 million a year earlier and increased 3.9% compared to $642.7 million three months earlier.  Demand deposit accounts represented 22.6%, savings, NOW and money market accounts represented 36.1%, and CDs comprised 41.3% of the total deposit portfolio, at September 30, 2016. 

Heartland’s total assets increased 12.9% to $790.6 million at September 30, 2016, compared to $700.5 million a year earlier and increased 3.6% compared to $763.3 million three months earlier.  Shareholders’ equity increased 2.0% to $71.9 million at September 30, 2016, compared to $70.5 million at June 30, 2016 and increased 11.9% compared to $64.2 million one year ago.  At quarter end, Heartland’s book value increased 1.5% to $45.48 per share compared to $44.81 per share three months earlier and increased 10.6% from $41.11 per share one year earlier.

Operating Results

Total revenues (net interest income before the provision for loan losses, plus non-interest income) increased 9.1% to $7.9 million in the third quarter, compared to $7.3 million in the third quarter a year ago, and were up 2.8% compared to $7.7 million in the preceding quarter.  Year-to-date, total revenues increased 9.5% to $23.2 million, compared to $21.1 million in the same period one year ago.  Net interest income before the provision for loan loss increased 9.7% to $7.0 million in the third quarter of 2016, compared to $6.4 million in the third quarter a year ago, and increased 3.6% compared to $6.8 million in the preceding quarter.  In the first nine months of the year, net interest income increased 8.6% to $20.5 million, compared to $18.9 million in the first nine months of 2015.

“Our net interest margin came under pressure during the third quarter, due to the low interest rate environment and the tightening spread between long and short yields. Nevertheless, our net interest margin remains healthy,” McComb added.  Heartland’s net interest margin was 3.90% in the third quarter of 2016, compared to 3.92% in the preceding quarter and 3.96% in the third quarter a year ago.  In the first nine months of the year, Heartland’s net interest margin was 3.93% compared to 4.03% in the first nine months of 2015.

Noninterest income increased 4.5% to $914,000 in the third quarter, compared to $874,000 in the third quarter a year ago, and decreased compared to $940,000 in the preceding quarter.  The preceding quarter noninterest income included $133,000 in net realized gains on available-for-sale securities compared to zero in the current quarter.  In the first nine months of 2016, noninterest income increased 17.4% to $2.7 million, compared to $2.3 million in the first nine months of 2015.

Heartland’s third quarter noninterest expenses were $5.0 million, compared to $4.3 million in the third quarter a year ago and $4.8 million in the preceding quarter.  Year-to-date, noninterest expense increased 11.8% to $14.5 million, compared to $13.0 million in the same period one year ago.  The year-over-year increase is primarily attributable to an increase in loan production, along with a management realignment to prepare the company for continued growth.

Credit Quality

Nonaccrual loans decreased 17.6% to $4.3 million at September 30, 2016, compared to $5.2 million three months earlier but increased compared to $3.0 million a year earlier.  Loans past due 90 days and still accruing decreased to $461,000 from $479,000 at the end of the second quarter and $1.1 million a year ago.  There were $815,000 in restructured loans included in nonaccrual loans at September 30, 2016, as compared to $594,000 a year earlier.

Performing restructured loans that were not included in nonaccrual loans at the end of the third quarter of 2016 were $3.2 million, compared to $3.8 million in the preceding quarter and an increase/decrease compared to $3.6 million a year ago.  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.  “It’s not uncommon for community banks to work with their borrowers when borrowers come upon business difficulties.  Providing further detail in this area is something we have added to provide clarity,” added McComb.

There was $400,000 in other real estate owned (OREO) and other non-performing assets on the books at September 30, 2016, compared to no OREO and other non-performing assets both at the preceding quarter end and at September 30, 2015.

Nonperforming assets (NPAs), consisting of nonperforming loans, OREO, and loans delinquent 90 days or more, were $5.2 million, or 0.66% of assets, at September 30, 2016, compared to $5.7 million, or 0.75% of assets, three months earlier, and $4.1 million, or 0.59% of assets a year ago. 

Heartland’s third quarter provision for loan losses was $135,000, the same as in the preceding quarter  The provision for loan losses was $160,000 in the third quarter a year ago.  As of September 30, 2016, the allowance for loan losses represented 135.8% of nonaccrual loans compared to 114.1% three months earlier, and 190.8% one year earlier.

The allowance for loan losses was $5.9 million, or 1.03% of total loans at September 30, 2016, compared to $6.0 million, or 1.03% of total loans at June 30, 2016, and $5.7 million, or 1.06% of total loans a year ago.  Net charge-offs were $251,000 in the third quarter compared to $56,000 in the preceding quarter, and $8,000 in the third quarter a year ago. 

About Heartland BancCorp

Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates thirteen full-service banking offices. Heartland Bank, founded in 1911, provides full service commercial, small business, and consumer banking services; alternative investment services; insurance 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 HeartlandBank.com.  

In May 2016, Heartland was ranked #77 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 12/31/15.

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    Sept. 30, 2016   June 30, 2016   Sept. 30, 2015  
  Cash and cash equivalents   40,463,763   33,727,073   29,736,396  
  Available-for-sale securities   110,158,614   115,496,339   104,061,671  
  Held-to-maturity securities, fair value $6,289,982 and $6,845,100 at September 30, 2016 and 2015, respectively and $6,362,826 at June 30, 2016   5,972,843   5,987,094   6,498,787  
  Loans, net of allowance for loan losses of $5,867,741 and $5,649,773 at September 30, 2016 and 2015, respectively and $5,983,550 at June 30, 2016   601,400,849   577,357,438   529,733,539  
  Premises and equipment   13,921,042   13,930,605   13,458,703  
  Nonmarketable equity securities   2,825,439   2,825,439   2,658,239  
  Interest receivable   2,614,368   2,123,285   2,374,220  
  Goodwill   417,353   417,353   417,353  
  Deferred income taxes   1,765,794   1,765,794   1,881,258  
  Life insurance assets   9,446,365   9,453,665   9,337,159  
  Other   1,639,342   261,743   686,528  
  Total assets $ 790,625,772 $ 763,345,828 $ 700,479,658  
                 
Liabilities and Shareholders’ Equity              
  Liabilities              
  Deposits              
  Demand $ 150,913,820 $ 132,048,433 $ 119,445,210  
  Saving, NOW and money market   241,181,130   230,829,215   217,336,061  
  Time   275,809,945   279,800,706   271,254,619  
  Total deposits   667,904,895   642,678,354   608,035,890  
  Short-term borrowings   27,465,075   24,290,996   23,620,874  
  Long-term debt   15,460,000   15,460,000    
  Interest payable and other liabilities   7,931,744   10,464,687   4,617,893  
  Total liabilities   718,761,714   692,894,037   636,274,657  
                 
  Shareholders’ Equity              
  Common stock, without par value; authorized 5,000,000 shares;  issued 2016 – 1,580,228 shares 2015 – 1,561,781 shares and June 2016 – 1,572,178 shares   24,428,011   24,115,306   23,725,023  
  Retained earnings   46,002,554   44,582,957   39,765,320  
  Accumulated other comprehensive income (expense)   1,433,493   1,753,528   714,658  
  Total shareholders’ equity   71,864,058   70,451,791   64,205,001  
  Total liabilities and shareholders’ equity $ 790,625,772 $ 763,345,828 $ 700,479,658  
  Book value per share $ 45.48 $ 44.81 $ 41.11  
             

 

Heartland BancCorp  
Consolidated Statements of Income  
   
      Three Months Ended,     Nine Months Ended,  
Interest Income   Sept. 30, 2016   June 30, 2016   Sept. 30, 2015     Sept. 30, 2016     Sept. 30, 2015  
  Loans $ 7,198,912 $ 6,908,443 $ 6,497,915   $ 20,909,075   $ 19,130,541  
  Securities                          
  Taxable   417,825   401,212   335,461     1,254,422     952,108  
  Tax-exempt   404,060   422,614   383,968     1,237,644     1,156,269  
  Other   43,559   34,617   15,443     114,387     35,037  
  Total interest income   8,064,356   7,766,886   7,232,787     23,515,528     21,273,955  
Interest Expense                          
  Deposits   952,850   908,841   846,062     2,753,615     2,404,828  
  Borrowings   108,922   99,498   3,291     282,642     10,018  
  Total interest expense   1,061,772   1,008,339   849,353     3,036,257     2,414,846  
Net Interest Income   7,002,584   6,758,547   6,383,434     20,479,271     18,859,109  
Provision for Loan Losses   135,000   135,000   160,000     510,000     640,000  
Net Interest Income After Provision for Loan Losses   6,867,584   6,623,547   6,223,434     19,969,271     18,219,109  
Noninterest income                          
  Service charges   502,355   489,939   500,789     1,446,943     1,447,861  
  Net Gains and commissions on loan sales   158,832   123,727   123,793     405,284     207,121  
  Net realized gains on available-for-sale securities     133,425       197,711     16,934  
  Net realized gain/(loss) on sales of foreclosed assets       5,250         5,308  
  Other   252,411   192,902   244,580     633,409     607,690  
  Total noninterest income   913,598   939,993   874,412     2,683,347     2,284,914  
Noninterest Expense                          
  Salaries and employee benefits   2,790,860   2,792,939   2,501,325     8,518,363     7,531,362  
  Net occupancy and equipment expense   554,864   533,519   478,053     1,562,356     1,386,353  
  Data processing fees   264,328   287,053   270,360     816,917     816,850  
  Professional fees   246,129   129,549   140,972     487,717     433,700  
  Marketing expense   149,349   149,349   135,000     448,047     411,000  
  Printing and office supplies   57,885   51,960   33,805     154,042     127,091  
  State franchise taxes   128,701   139,500   105,982     407,701     317,945  
  FDIC Insurance premiums   100,000   98,000   111,000     296,000     318,000  
  Other   658,006   583,718   564,992     1,849,837     1,667,520  
  Total noninterest expense   4,950,122   4,765,587   4,341,489     14,540,980     13,009,821  
Income before Income Tax   2,831,060   2,797,953   2,756,357     8,111,638     7,494,202  
Provision for Income Taxes   793,593   787,318   813,343     2,285,331     2,175,321  
Net Income $ 2,037,467 $ 2,010,635 $ 1,943,014   $ 5,826,307   $ 5,318,881  
Basic Earnings Per Share $ 1.29 $ 1.28 $ 1.25   $ 3.71   $ 3.42  
Diluted Earnings Per Share $ 1.26 $ 1.26 $ 1.22   $ 3.64   $ 3.36  
                             

 

ADDITIONAL FINANCIAL INFORMATION                    
(Dollars in thousands except per share amounts) (Unaudited) Three Months Ended   Nine Months Ended  
  Sept. 30, 2016   June 30, 2016   Sept. 30, 2015   Sept. 30, 2016   Sept. 30, 2015  
Performance Ratios:                    
Return on average assets   1.06 %     1.07 %     1.14 %     1.02 %     1.01 %  
Return on average equity    11.61 %     11.77 %     12.47 %     11.24 %     10.96 %  
Net interest margin   3.90 %     3.92 %     3.96 %     3.93 %     4.03 %  
Efficiency ratio   62.53 %     62.99 %     59.82 %     63.32 %     61.58 %  
                     
Asset Quality Ratios and Data: As of or for the Three Months Ended          
  Sept. 30, 2016   June 30, 2016   Sept. 30, 2015          
Non accrual loans $   4,321     $   5,246     $   2,991            
Loans past due 90 days and still accruing     461         479         1,126            
Non-performing investment securities     –          –          –             
OREO and other non-performing assets     400         –          –             
Total non-performing assets $   5,182     $   5,725     $   4,117            
                     
Non-performing assets to total assets   0.66 %     0.75 %     0.59 %          
Net charge-offs quarter ending  $   251     $   56     $   8            
                     
Allowance for loan loss $   5,868     $   5,984     $   5,650            
Non accrual loans $   4,321     $   5,246     $   2,962            
Allowance for loan loss to non accrual loans   135.80 %     114.07 %     190.75 %          
Allowance for loan losses to loans outstanding   1.03 %     1.03 %     1.06 %          
                     
Book Values:                    
Total shareholders’ equity $   71,864     $   70,452     $   64,205            
Less, goodwill     417         417         417            
Shareholders’ equity less goodwill $   71,447     $   70,035     $   63,788            
Common shares outstanding     1,580,228         1,572,178         1,561,781            
Less treasury shares     –          –          –             
Common shares as adjusted     1,580,228         1,572,178         1,561,781            
Book value per common share $    45.48     $    44.81     $    41.11            
                     
Tangible book value per common share $    45.21     $    44.55     $    40.84            
                     

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