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

Source:Heartland BancCorp