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Heartland BancCorp Earnings Increase to $2.8 Million, or $1.68 Per Diluted Share, in 3Q17; Declares Quarterly Cash Dividend of $0.4301 per Share

GAHANNA, Ohio, Oct. 17, 2017 (GLOBE NEWSWIRE) -- Heartland BancCorp (“the company,” and “the bank”) (OTCQB:HLAN), today reported third quarter net income increased 23.5% to $2.8 million, or $1.68 per diluted share, compared to $2.2 million, or $1.37 per diluted share, in the preceding quarter and grew 35.1% from $2.0 million, or $1.26 per diluted share, in the third quarter a year ago. In the first nine months of 2017, net income increased 17.0% to $6.8 million, or $4.18 per diluted share, compared to $5.8 million, or $3.64 per diluted share, in the first nine months of 2016.

The company also announced its board of directors declared a regular quarterly cash dividend of $0.4301 per share. The dividend will be payable January 10, 2018, to shareholders of record as of December 25, 2017, providing a 2.30% current yield at recent market prices.

“We reported strong third quarter operating results, delivering steady loan growth and solid revenue with an above average net interest margin. This growth demonstrates the continued success of our business model; to provide value and stability to our clients,” stated G. Scott McComb, Chairman, President and CEO. “Knowing that your local community bank was built to last, not sell, adds a degree of certainty for clients and their desire for focused local management decisions. Additionally, we continue to expand our branch network with a recently opened branch in Clintonville and additional branches in Whitehall and Upper Arlington scheduled to open in 2018.”

Third Quarter Financial Highlights (at or for the period ended September 30, 2017)

  • Net income was $2.8 million, or $1.68 per diluted share, in 3Q17.
  • Net interest margin improved to 4.05% compared to 3.97% in the preceding quarter and 3.86% in the third quarter a year ago.
  • Annualized return on average assets was 1.26% for the third quarter of 2017.
  • Annualized return on average equity was 14.28%.
  • Total assets increased 11.9% to $885.1 million, compared to $790.6 million a year earlier.
  • Total deposits increased 14.5% to $765.0 million from a year ago.
  • Net loans increased 13.3% to $681.4 million from a year ago.
  • Tangible book value per share increased 6.0% to $47.91 per share compared to $45.21 per share one year earlier.
  • Declared quarterly cash dividend of $0.4301 per share, which represents a 2.28% yield based on the September 30, 2017, stock price ($75.50).

Balance Sheet Review

“Loan growth was robust during the quarter, particularly in the agricultural, commercial and industrial (C&I), and residential mortgage sectors,” said McComb. Net loans increased 13.3% to $681.4 million at September 30, 2017, compared to $601.4 million at September 30, 2016 and increased 2.7% compared to $663.4 million at June 30, 2017.

Total deposits increased 14.5% to $765.0 million at September 30, 2017, compared to $667.9 million a year earlier and increased 6.7% compared to $716.8 million three months earlier. Demand deposit accounts represented 23.8%; savings, NOW and money market accounts represented 37.6%; and CDs comprised 38.6% of the total deposit portfolio, at September 30, 2017.

Heartland’s total assets increased 11.9% to $885.1 million at September 30, 2017, compared to $790.6 million a year earlier and shareholders’ equity increased 7.9% to $77.5 million at September 30, 2017, compared to $71.9 million one year ago. At quarter end, Heartland’s tangible book value increased 6.0% to $47.91 per share compared to $45.21 per share one year earlier.

Operating Results

Heartland’s net interest income before the provision for loan loss increased 15.0% to $8.1 million in the third quarter of 2017, compared to $7.0 million in the third quarter a year ago, and increased 6.8% compared to $7.5 million in the preceding quarter. In the first nine months of the year, net interest income before the provision for loan loss increased 10.8% to $22.7 million, compared to $20.5 million in the first nine months of 2016.

Heartland’s total revenues (net interest income before the provision for loan losses, plus non-interest income) increased 19.0% to $9.4 million in the third quarter, compared to $7.9 million in the third quarter a year ago, and increased 7.7% compared to $8.7 million in the preceding quarter. Year-to-date, total revenues increased 13.1% to $26.2 million, compared to $23.2 million in the first nine months of 2016.

Net interest margin improved to 4.05% in the third quarter of 2017, compared to 3.97% in the preceding quarter and 3.86% in the third quarter a year ago. “The eight basis point increase in the net interest margin during the current quarter was primarily due to increased amortization of net loan origination fees. Commercial bankers at Heartland create value for their clients, and they are now better managed and more disciplined in being rewarded for that value. Growth in the construction portfolio along with the addition of SWAP products have enhanced this income category as well,” said McComb. In the first nine months of 2017, the net interest margin was 3.99% compared to 3.93% in the first nine months a year ago.

Noninterest income improved 49.5% to $1.4 million in the third quarter, compared to $914,000 in the third quarter a year ago, and increased 13.3% compared to $1.2 in the preceding quarter. In the first nine months of 2017, noninterest income increased 30.7% to $3.5 million, compared to $2.7 million in the first nine months of 2016.

Heartland’s third quarter noninterest expenses were $5.4 million, the same as in the preceding quarter. Noninterest expense was $5.0 million in the third quarter a year ago. The efficiency ratio for the third quarter of 2017 was 57.35%, compared to 61.43% for the preceding quarter and 62.53% in the third quarter of 2016.

Credit Quality

Nonaccrual loans decreased 25.8% to $3.2 million at September 30, 2017, compared to $4.3 million a year earlier and increased slightly compared to $3.1 million three months earlier. There were $753,000 in loans past due 90 days and still accruing at September 30, 2017, compared to $22,000 at the end of the preceding quarter and $461,000 a year ago. There were $662,000 in restructured loans included in nonaccrual loans at September 30, 2017, as compared to $735,000 three months earlier.

Performing restructured loans that were not included in nonaccrual loans at the end of the third quarter of 2017 were $1.8 million, compared to $1.9 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 September 30, 2017, compared to $400,000 a year ago.

Nonperforming assets (NPAs), consisting of nonperforming loans, OREO, and loans delinquent 90 days or more, were $4.0 million, or 0.45% of assets, at September 30, 2017, compared to $3.2 million, or 0.39% of assets, three months earlier, and decreased 23.6% compared to $5.2 million, or 0.66% of assets, a year ago.

Heartland’s third quarter provision for loan losses was $255,000, the same as in the preceding quarter. This compares to $135,000 in the third quarter a year ago. As of September 30, 2017, the allowance for loan losses represented 199.3% of nonaccrual loans compared to 198.5% three months earlier, and 135.8% one year earlier.

The allowance for loan losses was $6.4 million, or 1.00% of total loans at September 30, 2017, compared to $6.2 million, or 0.97% of total loans at June 30, 2017, and $5.9 million, or 1.03% of total loans a year ago. Net charge-offs were $107,000 in the third quarter, compared to $20,000 in the preceding quarter and $251,000 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 fourteen 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 2017, Heartland was ranked #57 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 12/31/16.

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.

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

The Cereghino Group
IR CONTACT: 206-388-5785

Heartland BancCorp
Consolidated Balance Sheets
Assets Sept 30, 2017 June 30, 2017 Sept 30, 2016
Cash and cash equivalents 30,513,677 26,859,082 40,463,763
Available-for-sale securities 123,636,370 108,841,483 110,158,614
Held-to-maturity securities, fair value $5,170,466 and $6,289,982 at September 30, 2017 and 2016, respectively and $5,608,318 at June 30, 2017 5,070,790 5,464,807 5,972,843
Loans, net of allowance for loan losses of $6,386,109 and $5,867,741 at September 30, 2017 and 2016, respectively and $6,237,997 at June 30, 2017 681,372,890 663,437,938 601,400,849
Premises and equipment 21,523,740 18,078,901 13,921,042
Nonmarketable equity securities 2,830,339 2,830,339 2,825,439
Interest receivable 3,133,047 2,365,999 2,614,368
Goodwill 417,353 417,353 417,353
Deferred income taxes 2,374,481 2,374,481 1,765,794
Life insurance assets 12,793,724 12,909,209 9,446,365
Other 1,436,086 1,476,628 1,639,342
Total assets$ 885,102,497 $ 845,056,220 $ 790,625,772
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand$ 182,342,329 $ 162,886,976 $ 150,913,820
Saving, NOW and money market 287,458,122 257,703,537 241,181,130
Time 295,224,771 296,232,569 275,809,945
Total deposits 765,025,222 716,823,082 667,904,895
Short-term borrowings 20,893,943 16,495,538 27,465,075
Long-term debt 15,460,000 30,960,000 15,460,000
Interest payable and other liabilities 6,195,572 5,426,589 7,931,744
Total liabilities 807,574,737 769,705,209 718,761,714
Shareholders' Equity
Common stock, without par value; authorized 5,000,000 shares; issued 2017 - 1,609,528 shares 2016 - 1,580,228 shares and June 2017 - 1,589,028 shares 25,001,103 24,090,857 24,428,011
Stock issued with notes receivable (727,478) - -
Retained earnings 53,097,717 50,978,591 46,002,554
Accumulated other comprehensive income (expense) 156,418 281,563 1,433,493
Total shareholders' equity 77,527,760 75,351,011 71,864,058
Total liabilities and shareholders' equity$ 885,102,497 $ 845,056,220 $ 790,625,772
Book value per share$48.17 $47.42$45.48

Heartland BancCorp
Consolidated Statements of Income
Three Months Ended, Nine Months Ended
Interest Income Sept 30, 2017 June 30, 2017 Sept 30, 2016 Sept 30, 2017 Sept 30, 2016
Loans$ 8,452,381 $ 7,900,422$ 7,198,912 $ 23,724,071 $ 20,909,075
Securities
Taxable 429,856 390,666 417,825 1,184,686 1,254,422
Tax-exempt 404,840 397,889 404,060 1,196,159 1,237,644
Other 70,291 48,700 43,559 167,156 114,387
Total interest income 9,357,368 8,737,677 8,064,356 26,272,072 23,515,528
Interest Expense
Deposits 1,188,053 1,069,704 952,850 3,220,721 2,753,615
Borrowings 116,829 129,388 108,922 362,921 282,642
Total interest expense 1,304,882 1,199,092 1,061,772 3,583,642 3,036,257
Net Interest Income 8,052,486 7,538,585 7,002,584 22,688,430 20,479,271
Provision for Loan Losses 255,000 255,000 135,000 840,000 510,000
Net Interest Income After Provision for Loan Losses 7,797,486 7,283,585 6,867,584 21,848,430 19,969,271
Noninterest income
Service charges 514,781 509,996 502,355 1,505,619 1,446,943
Net Gains and commissions on loan sales 308,261 307,185 158,832 776,224 405,284
Net realized gains on available-for-sale securities - - - 6,128 197,711
Net realized gain/(loss) on sales of foreclosed assets - 139,497 - 139,497 -
Gain on redemption of life insurance proceeds 301,278 - 301,278
Increase in cash value of life insurance 86,341 84,614 86,090 263,560 212,237
Other 155,396 164,873 166,321 515,115 421,172
Total noninterest income 1,366,057 1,206,165 913,598 3,507,421 2,683,347
Noninterest Expense
Salaries and employee benefits 3,205,006 3,111,741 2,790,860 9,483,003 8,518,363
Net occupancy and equipment expense 585,311 583,230 554,864 1,727,256 1,562,356
Data processing fees 316,111 327,627 264,328 947,512 816,917
Professional fees 163,914 159,584 246,129 448,378 487,717
Marketing expense 141,000 271,000 149,349 553,000 448,047
Printing and office supplies 56,761 49,022 57,885 170,777 154,042
State franchise taxes 141,825 141,825 128,701 425,475 407,701
FDIC Insurance premiums 98,500 80,500 100,000 258,500 296,000
Other 693,455 647,681 658,006 1,948,823 1,849,837
Total noninterest expense 5,401,883 5,372,210 4,950,122 15,962,724 14,540,980
Income before Income Tax 3,761,660 3,117,540 2,831,060 9,393,127 8,111,638
Provision for Income Taxes 1,009,859 888,953 793,593 2,576,177 2,285,331
Net Income$ 2,751,801$ 2,228,587$ 2,037,467 $ 6,816,950 $ 5,826,307
Basic Earnings Per Share$ 1.73$ 1.40$ 1.29 $4.29 $3.71
Diluted Earnings Per Share$ 1.68$ 1.37$ 1.26 $4.18 $3.64

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)Three Months Ended Nine Months Ended
Sept 30, 2017 June 30, 2017 Sept. 30, 2016 Sept 30, 2017 Sept. 30, 2016
Performance Ratios:
Return on average assets 1.26% 1.07% 1.06% 1.09% 1.02%
Return on average equity 14.28% 12.08% 11.61% 12.28% 11.24%
Net interest margin 4.05% 3.97% 3.86% 3.99% 3.93%
Efficiency ratio 57.35% 61.43% 62.53% 60.95% 63.32%
Asset Quality Ratios and Data:As of or for the Three Months Ended
Sept 30, 2017 June 30, 2017 Sept. 30, 2016
Non accrual loans$ 3,205 $ 3,143 $ 4,321
Loans past due 90 days and still accruing 753 22 461
Non-performing investment securities - - -
OREO and other non-performing assets - - 400
Total non-performing assets$ 3,958 $ 3,165 $ 5,182
Non-performing assets to total assets 0.45% 0.39% 0.66%
Net charge-offs quarter ending $ 107 $ 20 $ 251
Allowance for loan loss$ 6,386 $ 6,238 $ 5,868
Non accrual loans$ 3,205 $ 3,143 $ 4,321
Allowance for loan loss to non accrual loans 199.25% 198.47% 135.80%
Allowance for loan losses to loans outstanding 1.00% 0.97% 1.03%
Restructured loans included in non-accrual$ 662 $ 735 $ 815
Performing restructured loans (RC-C)$ 1,814 $ 1,902 $ 3,200
Book Values:
Total shareholders' equity$ 77,528 $ 75,351 $ 71,864
Less, goodwill 417 417 417
Shareholders' equity less goodwill$ 77,111 $ 74,934 $ 71,447
Common shares outstanding 1,609,528 1,589,028 1,580,228
Less treasury shares - - -
Common shares as adjusted 1,609,528 1,589,028 1,580,228
Book value per common share$ 48.17 $ 47.42 $ 45.48
Tangible book value per common share$ 47.91 $ 47.16 $ 45.21


Source:Heartland BancCorp