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Heartland BancCorp Earnings Grow 10.1% to $2.0 Million in 2Q16 from 2Q15; Declares Quarterly Cash Dividend of $0.3910 per Share

GAHANNA, Ohio, July 19, 2016 (GLOBE NEWSWIRE) -- Heartland BancCorp (“the company,” and “the bank”) (OTCQB:HLAN), today reported that second quarter net income increased 10.1% to $2.0 million, or $1.26 per diluted share, compared to $1.8 million, or $1.15 per diluted share, in the second quarter of 2015. In the first six months of 2016, Heartland’s net income increased 12.2% to $3.8 million, or $2.37 per diluted share, compared to $3.4 million, or $2.13 per diluted share, in the first six 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 October 10, 2016, to shareholders of record as of September 25, 2016, providing a 2.84% current yield at recent market prices.

“We continue to build earnings momentum with solid loan growth and strong profitability metrics both in our commercial and retail segments, generating double digit growth in both the second quarter and first half of 2016,” said G. Scott McComb, Chairman, President and CEO. “Our return on average assets was well above average at 1.07% and return on average equity was 11.7% in the second quarter. Our associates continue to tell their ‘Heartland Story’ as we are sharpening our prospecting and sales skills company wide. The greater Columbus market remains one of the healthiest economies in the country further enhancing our messaging as Central Ohio's Community Bank.”

Second Quarter Financial Highlights (at or for the period ended June 30, 2016)

  • Net income was $2.0 million, up from $1.83 million in the second quarter a year ago.
  • Net interest margin remained strong at 3.92% compared to 4.03% in the preceding quarter and 4.08% in the second quarter a year ago.
  • Annualized return on average assets was 1.07%, compared to the average of 0.77% for the 60 banks in the SNL Bank Index $500M to $1B.
  • Annualized return on average equity was 11.77%, compared to the average of 7.18% for the SNL Bank Index $500M to $1B.
  • Total deposits increased 8.7% to $642.7 million from a year ago.
  • Net loans increased 9.7% to $557.4 million from a year ago.
  • Non-performing assets were $5.7 million, or 0.75% of total assets, at June 30, 2016, compared to $6.1 million, or 0.81%, three months earlier and $3.6 million, or 0.52%, one year earlier.
  • Tangible book value per share increased 12.5% to $44.55 per share compared to $39.60 per share one year earlier.
  • Declared quarterly cash dividend of $0.3910 per share, which represents a 2.84% yield based on the June 30, 2016 stock price ($55.00).

In November 2015, Heartland completed a $5.4 million private placement of subordinated notes to accredited investors 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 a robust pace, due to the hard work of lenders in all 13 of our local markets. As a result, net loans were up $20.4 million, or 3.7% during the quarter. The agricultural and commercial and industrial (C&I) portfolios continue to show strong growth, increasing 76% and 16%, respectively compared to a year ago, In addition, residential loan growth gained momentum, increasing 17.9% which was precipitated by changes to our business model,” said McComb. Net loans increased 3.7% to $577.4 million at June 30, 2016, compared to $557.0 million at March 31, 2016 and increased 9.7% compared to $526.4 million at June 30, 2015.

Heartland’s total deposits increased 8.7% to $642.7 million at quarter end, compared to $591.3 million a year earlier and were down modestly compared to $645.6 million three months earlier. Demand deposit accounts represented 20.6%, savings, NOW and money market accounts represented 35.9%, and CDs comprised 43.5% of the total deposit portfolio, at June 30, 2016.

Total assets increased 11.6% to $763.3 million at June 30, 2016, compared to $683.8 million a year earlier and increased modestly compared to $760.8 million three months earlier. Shareholders’ equity increased 3.4% to $70.5 million at June 30, 2016, compared to $68.2 million at March 31, 2016 and increased 13.3% compared to $62.2 million one year ago. At quarter end, Heartland’s tangible book value increased 2.9% to $44.81 per share compared to $43.56 per share three months earlier and increased 12.4% from $39.87 per share one year earlier.

Operating Results

Total revenues (net interest income before the provision for loan losses, plus non-interest income) increased 8.0% to $7.7 million in the second quarter, compared to $7.1 million in the second quarter a year ago, and were up modestly compared to $7.5 million in the preceding quarter. Year-to-date, total revenues increased 9.8% to $15.2 million, compared to $13.9 million in the same period one year ago. Net interest income before the provision for loan loss increased 5.7% to $6.8 million in the second quarter of 2016, compared to $6.4 million in the second quarter a year ago, and increased slightly compared to $6.7 million in the preceding quarter. In the first six months of the year, net interest income increased 8.0% to $13.5 million, compared to $12.5 million in the first six months of 2015.

“The flattening yield curve has put pressure on the net interest margin for all banks this year, and we are not immune to the effects of the low interest rate environment and the tightening spread between long and short yields. Nevertheless, our net interest margin remains healthy,” McComb noted. Consequently, net interest margin fell 9 basis points to 3.92% in the second quarter and was down 16 basis points from the year ago quarter.” Heartland’s net interest margin was 3.92% in the second quarter of 2016, compared to 4.03% in the preceding quarter and 4.08% in the second quarter a year ago. In the first six months of the year, Heartland’s net interest margin was 3.97% compared to 4.06% in the first six months of 2015.

Heartland’s noninterest income increased 28.5% to $940,000 in the second quarter, compared to $732,000 in the second quarter a year ago, and increased 13.3% compared to $830,000 in the preceding quarter. The year-over-year increase was largely as a result of the net gains and commissions on loan sales and servicing revenue. In the first six months of 2016, noninterest income increased 25.5% to $1.8 million, compared to $1.4 million in the first six months of 2015.

Second quarter noninterest expenses were $4.8 million, which were unchanged from the preceding quarter and an increase of 10.3% compared to $4.3 million in the second quarter a 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 and past due loans still accruing improved moderately during the quarter, as we work with the few individuals that were past due," said McComb. “Nonaccrual loans increased during the quarter as the single large relationship that had been accruing moved into the nonaccrual category. With minimal 90-day past due loans and no foreclosed assets on the books at quarter end, our ratio of nonperforming assets to total assets is 0.75%, compared to 0.81% in the preceding quarter and .52% a year ago.”

Nonaccrual loans were $5.2 million at June 30, 2016, compared to $3.6 million three months earlier and $2.6 million a year earlier. Loans past due 90 days and still accruing decreased substantially to $479,000 from $2.6 million at the end of the first quarter and $872,000 a year ago. There were $795 in restructured loans included in nonaccrual loans at the end of the second quarter of 2016, as compared to $603,000 at June 30, 2015.

Performing restructured loans that were not included in nonaccrual loans at the end of the second quarter of 2016 were $3.8 million, compared to $4.3 million in the preceding quarter and a decrease compared to $5.2 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. “We present restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans,” added McComb.

There was no other real estate owned (OREO) and other non-performing assets on the books at June 30, 2016, the same as at the preceding quarter end. OREO was $127,000 at June 30, 2015.

Nonperforming assets (NPAs), consisting of nonperforming loans, OREO, and loans delinquent 90 days or more, were $5.7 million, or 0.75% of assets, at June 30, 2016, compared to $6.1 million, or 0.81% of assets, three months earlier, and $3.6 million, or 0.52% of assets a year ago.

Heartland’s second quarter provision for loan losses was $135,000, compared to $240,000 in both the preceding quarter and in the second quarter a year ago. As of June 30, 2016, the allowance for loan losses represented 114.1% of nonaccrual loans compared to 165.7% three months earlier, and 214.1% one year earlier.

Net charge-offs were $56,000 in the second quarter compared to $51,000 in the preceding quarter, and $332,000 in the second quarter a year ago. The allowance for loan losses was $6.0 million, or 1.03% of total loans at June 30, 2016, compared to $5.9 million, or 1.05% of total loans at March 31, 2016, and $5.5 million, or 1.02% of total loans 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 June 30, 2016 March 31, 2016 June 30, 2015
Cash and cash equivalents 33,727,073 50,409,176 18,276,394
Available-for-sale securities 115,496,339 116,371,892 102,750,431
Held-to-maturity securities, fair value $6,362,826 and $6,912,732 at June 30, 2016 and 2015, respectively and $6,368,233 at March 31, 2016 5,987,094 5,988,749 6,512,404
Loans, net of allowance for loan losses of $5,983,550 and $5,498,142 at June 30, 2016 and 2015, respectively and $5,904,718 at March 31, 2016 577,357,438 556,966,762 526,378,261
Premises and equipment 13,930,605 13,614,047 13,052,320
Nonmarketable equity securities 2,825,439 2,658,239 2,658,239
Foreclosed assets held for sale - - 127,457
Interest receivable 2,123,285 2,537,113 1,835,510
Goodwill 417,353 417,353 417,353
Deferred income taxes 1,765,794 1,765,794 1,881,258
Life insurance assets 9,453,665 9,392,956 9,270,862
Other 261,743 647,980 686,528
Total assets$763,345,828$760,770,061$683,847,017
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand$132,048,433$127,783,871$110,780,365
Saving, NOW and money market 230,829,215 240,534,031 214,830,174
Time 279,800,706 277,293,146 265,725,425
Total deposits 642,678,354 645,611,048 591,335,964
Short-term borrowings 24,290,996 30,657,576 26,121,461
Long-term debt 15,460,000 5,460,000 -
Interest payable and other liabilities 10,464,687 10,883,276 4,184,678
Total liabilities 692,894,037 692,611,900 621,642,103
Shareholders' Equity
Common stock, without par value; authorized 5,000,000 shares; issued 2016 - 1,572,178 shares 2015 - 1,560,121 shares and March 2016 - 1,564,581 shares 24,115,306 23,913,514 23,646,662
Retained earnings 44,582,957 43,187,045 38,403,912
Accumulated other comprehensive income (expense) 1,753,528 1,057,602 154,340
Treasury stock at Cost, Common; - - -
Total shareholders' equity 70,451,791 68,158,161 62,204,914
Total liabilities and shareholders' equity$763,345,828$760,770,061$683,847,017
Book value per share$44.81$43.56$39.87

Heartland BancCorp
Consolidated Statements of Income
Three Months Ended Six Months Ended
Interest Income June 30, 2016 March 31, 2016 June 30, 2015 June 30, 2016 June 30, 2015
Loans $6,908,443 $6,801,720 $6,492,460 $13,710,163 $12,632,626
Securities
Taxable 401,212 435,385 313,128 836,597 616,647
Tax-exempt 422,614 410,970 386,843 833,584 772,301
Other 34,617 36,211 11,301 70,828 19,594
Total interest income 7,766,886 7,684,286 7,203,732 15,451,172 14,041,168
Interest Expense
Deposits 908,841 891,924 805,249 1,800,765 1,558,766
Borrowings 99,498 74,222 3,050 173,720 6,727
Total interest expense 1,008,339 966,146 808,299 1,974,485 1,565,493
Net Interest Income 6,758,547 6,718,140 6,395,433 13,476,687 12,475,675
Provision for Loan Losses 135,000 240,000 240,000 375,000 480,000
Net Interest Income After Provision for Loan Losses 6,623,547 6,478,140 6,155,433 13,101,687 11,995,675
Noninterest income
Service charges 489,939 454,649 479,553 944,588 947,072
Net Gains and commissions on loan sales 123,727 122,725 43,802 246,452 83,328
Net realized gains on available-for-sale securities 133,425 64,286 8,500 197,711 16,934
Net realized gain/(loss) on sales of foreclosed assets - - - - 58
Other 192,902 188,096 199,914 380,998 363,110
Total noninterest income 939,993 829,756 731,769 1,769,749 1,410,502
Noninterest Expense
Salaries and employee benefits 2,792,939 2,934,564 2,542,268 5,727,503 5,030,037
Net occupancy and equipment expense 533,519 473,973 466,576 1,007,492 908,300
Data processing fees 287,053 265,536 274,407 552,589 546,490
Professional fees 129,549 112,039 122,229 241,588 292,728
Marketing expense 149,349 149,349 135,000 298,698 276,000
Printing and office supplies 51,960 44,197 44,183 96,157 93,286
State franchise taxes 139,500 139,500 105,981 279,000 211,963
FDIC Insurance premiums 98,000 98,000 96,000 196,000 207,000
Other 583,718 608,113 534,157 1,191,831 1,102,528
Total noninterest expense 4,765,587 4,825,271 4,320,801 9,590,858 8,668,332
Income before Income Tax 2,797,953 2,482,625 2,566,401 5,280,578 4,737,845
Provision for Income Taxes 787,318 704,420 740,559 1,491,738 1,361,978
Net Income $2,010,635 $1,778,205 $1,825,842 $3,788,840 $3,375,867
Basic Earnings Per Share $1.28 $1.14 $1.17 $2.42 $2.17
Diluted Earnings Per Share $1.26 $1.12 $1.15 $2.37 $2.13

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited) Three Months Ended Six Months Ended
June 30, 2016 March 31, 2016 June 30, 2015 June 30, 2016 June 30, 2015
Performance Ratios:
Return on average assets 1.07% 0.97% 1.10% 1.01% 1.01%
Return on average equity 11.77% 10.76% 11.93% 11.12% 10.96%
Net interest margin 3.92% 4.03% 4.08% 3.97% 4.06%
Efficiency ratio 62.99% 64.48% 60.70% 63.73% 62.50%
Asset Quality Ratios and Data: As of or for the Three Months Ended
June 30, 2016 March 31, 2015 June 30, 2015
Non accrual loans $5,246 $3,563 $2,567
Loans past due 90 days and still accruing 479 2,564 872
Non-performing investment securities - - -
OREO and other non-performing assets - - 127
Total non-performing assets $5,725 $6,127 $3,566
Non-performing assets to total assets 0.75% 0.81% 0.52%
Net charge-offs quarter ending $56 $51 $332
Allowance for loan loss $5,984 $5,905 $5,498
Non accrual loans $5,246 $3,563 $2,568
Allowance for loan loss to non accrual loans 114.07% 165.73% 214.10%
Allowance for loan losses to loans outstanding 1.03% 1.05% 1.02%
Book Values:
Total shareholders' equity $70,452 $68,158 $62,205
Less, goodwill 417 417 417
Shareholders' equity less goodwill $70,035 $67,741 $61,788
Common shares outstanding 1,572,178 1,564,581 1,560,121
Less treasury shares - - -
Common shares as adjusted 1,572,178 1,564,581 1,560,121
Book value per common share $ 44.81 $ 43.56 $ 39.87
Tangible book value per common share $ 44.55 $ 43.30 $ 39.60

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

Source:Heartland BancCorp