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Heartland BancCorp Earns $2.1 Million in 4Q17 and $8.9 Million for the Year 2017 Following Write Down of Deferred Tax Asset; Increases Quarterly Cash Dividend by 10% to $0.4731 per Share

GAHANNA, Ohio, Feb. 02, 2018 (GLOBE NEWSWIRE) -- Heartland BancCorp (“the company,” and “the bank”) (OTCQB:HLAN), today reported that following a one-time write-down of its deferred tax assets and liabilities, which resulted in an additional tax expense of $541,000, or $0.29 per diluted share, net income was $2.1 million, or $1.25 per diluted share in the fourth quarter of 2017. This compares with net income of $2.8 million, or $1.68 per diluted share, in the preceding quarter and $2.2 million, or $1.33 per diluted share, in the fourth quarter a year ago. For the year 2017, Heartland’s net income increased 11.1% to $8.9 million, or $5.43 per diluted share, compared to $8.0 million, or $4.97 per diluted share, in 2016.

The company also announced its board of directors increased its regular quarterly cash dividend by 10% to $0.4731 per share. The dividend will be payable April 10, 2018, to shareholders of record as of March 25, 2018, providing a 2.07% current yield at recent market prices.

“Our 2017 operations remain solid, with strong net interest income and other revenues contributing to record pre-tax earnings for the year,” stated G. Scott McComb, Chairman, President and CEO. “While our fourth quarter earnings were impacted by the write-down of our net deferred tax assets following the passage of the 2017 Tax Cuts and Jobs Act, the tax legislation is expected to have a positive impact on our earnings in future years, lowering our effective tax rate from 28% to 18%. This tax savings will help offset our investments in technology, employee benefits, continued organic expansion and other corporate strategies which we have been successfully executing.”

As a result of the Tax Cuts and Jobs Act enacted December 22, 2017, the company revalued its deferred tax assets and liabilities to account for the future impact of lower corporate tax rates and other provisions of the legislation. Based on its preliminary analysis, Heartland recorded a one-time net tax charge of $541,000, or $0.29 per share. Of this total, $498,000 is related to the write-down of deferred tax assets and liabilities and the remaining $43,000 is related to the market value adjustment on bonds held as available-for-sale. This increase in income tax expense was reflected in Heartland’s operating results for the fourth quarter of 2017 and was in addition to the normal provision for income tax related to pre-tax net operating income.

Fourth Quarter Financial Highlights (at or for the period ended December 31, 2017)

  • Net income was $2.1 million, or $1.25 per diluted share, in 4Q17.
  • Pre-tax income increased 17.7% to $3.6 million, compared to $3.0 million in the fourth quarter of 2016.
  • Net interest margin was 4.03% compared to 4.05% in the preceding quarter and 3.99% in the fourth quarter a year ago.
  • Annualized return on average assets was 0.93%.
  • Annualized return on average equity was 10.68%.
  • Total assets increased 15.2% to $900.1 million, compared to $781.3 million a year earlier.
  • Total deposits increased 16.9% to $776.8 million from a year ago.
  • Net loans increased 13.9% to $703.5 million from a year ago.
  • Tangible book value per share increased 8.2% to $48.51 per share compared to $44.83 per share one year earlier.
  • Declared quarterly cash dividend of $0.4731 per share, which represents a 2.29% yield based on the December 31, 2017, stock price ($82.60).

Balance Sheet Review

“Strong loan growth continued in the fourth quarter resulting in another quarter of double digit year-over-year loan growth, with the largest increase generated in the commercial real estate loan category,” said McComb. Net loans increased 13.9% to $703.5 million at December 31, 2017, compared to $617.9 million at December 31, 2016 and increased 3.3% compared to $681.4 million at September 30, 2017.

Heartland’s total deposits increased 16.9% to $776.8 million at December 31, 2017, compared to $664.7 million a year earlier and increased 1.5% compared to $765.0 million three months earlier. Demand deposit accounts represented 25.1%; savings, NOW and money market accounts represented 37.8%; and CDs comprised 37.1% of the total deposit portfolio, at December 31, 2017.

Assets increased 15.2% to $900.1 million at December 31, 2017, compared to $781.3 million a year earlier and shareholders’ equity increased 10.0% to $78.6 million at December 31, 2017, compared to $71.4 million one year ago. At year end, Heartland’s tangible book value increased 8.2% to $48.51 per share compared to $44.83 per share one year earlier.

Operating Results

Heartland’s net interest income before the provision for loan loss increased 14.6% to $8.3 million in the fourth quarter of 2017, compared to $7.3 million in the fourth quarter a year ago, and increased 3.6% compared to $8.1 million in the preceding quarter. For the full year, net interest income before the provision for loan loss increased 11.8% to $31.0 million, compared to $27.8 million in 2016.

“While the net interest margin contracted two basis points compared to the preceding quarter, it expanded four basis points compared to the year ago quarter, largely due to improved yields on loans,” said McComb. Heartland’s net interest margin was 4.03% in the fourth quarter of 2017, compared to 4.05% in the preceding quarter and 3.99% in the fourth quarter a year ago. For the full year, the net interest margin improved six basis points to 4.00% compared to 3.94% in 2016.

Total revenues (net interest income before the provision for loan losses, plus non-interest income) increased 16.5% to $9.5 million in the fourth quarter, compared to $8.2 million in the fourth quarter a year ago, and increased modestly compared to $9.4 million in the preceding quarter. For the year, total revenues increased 14.0% to $35.7 million, compared to $31.3 million in 2016.

Noninterest income increased 31.8% to $1.2 million in the fourth quarter, compared to $876,000 in the fourth quarter a year ago. Noninterest income was $1.4 million in the preceding quarter, which included $300,000 in proceeds from a gain on redemption of life insurance. For the year 2017, noninterest income increased 31.0% to $4.7 million, compared to $3.6 million for 2016.

Heartland’s fourth quarter noninterest expenses were $5.7 million, compared to $5.4 million in the preceding quarter and $5.0 million in the fourth quarter a year ago. For the year, noninterest expenses were $21.6 million compared to $19.5 million in 2016. The efficiency ratio for the fourth quarter of 2017 was 59.86%, compared to 57.35% for the preceding quarter and 61.27% in the fourth quarter of 2016.

Credit Quality

Nonaccrual loans decreased 56.1% to $1.9 million at December 31, 2017, compared to $4.2 million a year earlier and decreased 42.3% compared to $3.2 million three months earlier. There were no loans past due 90 days and still accruing at December 31, 2017, compared to $753,000 at the end of the preceding quarter and none a year ago.

Performing restructured loans that were not included in nonaccrual loans at December 31, 2018 were $1.7 million, compared to $1.8 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 $40,000 in other real estate owned (OREO) and other non-performing assets on the books at December 31, 2017, compared to $400,000 a year ago.

Nonperforming assets (NPAs), consisting of nonperforming loans, OREO, and loans delinquent 90 days or more, decreased 52.3% to $1.9 million, or 0.21% of assets, at December 31, 2017, compared to $4.0 million, or 0.45% of assets, three months earlier, and decreased 59.1% compared to $4.6 million, or 0.59% of assets, a year ago.

Heartland’s fourth quarter provision for loan losses was $255,000, the same as in the preceding quarter. This compares to $135,000 in the fourth quarter a year ago. The allowance for loan losses was $6.2 million, or 0.88% of total loans at December 31, 2017, compared to $6.4 million, or 1.00% of total loans at September 30, 2017, and $5.7 million, or 0.91% of total loans a year ago. As of December 31, 2017, the allowance for loan losses represented 336.5% of nonaccrual loans compared to 199.3% three months earlier, and 135.2% one year earlier. Net charge-offs were $377,000 in the fourth quarter, compared to $107,000 in the preceding quarter and $304,000 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 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.


Heartland BancCorp
Consolidated Balance Sheets
Assets Dec. 31, 2017 Sept 30, 2017 Dec. 31, 2016
Cash and cash equivalents 27,933,990 30,513,677 21,360,328
Interest bearing time deposits 250,000 - -
Available-for-sale securities 117,226,637 123,636,370 103,040,574
Held-to-maturity securities, fair value $4,739,626 and $5,771,601 at
December 31, 2017 and 2016, respectively and $5,170,466 at September 30, 2017
4,672,941 5,070,790 5,570,879
Loans, net of allowance for loan losses of $6,224,927 and $5,698,631
at December 31, 2017 and 2016, respectively and $6,386,109 at September 30, 2017
703,542,094 681,372,890 617,861,089
Premises and equipment 24,686,510 21,523,740 14,055,450
Nonmarketable equity securities 2,830,339 2,830,339 2,825,439
Foreclosed assets held for sale 40,000 - 400,000
Interest receivable 3,113,862 3,133,047 2,240,709
Goodwill 417,353 417,353 417,353
Deferred income taxes 804,622 2,374,481 1,765,794
Life insurance assets 12,970,166 12,793,724 9,531,991
Other 1,598,824 1,436,086 2,232,748
Total assets$900,087,338 $885,102,497 $781,302,354
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand$195,365,474 $182,342,329 $162,690,185
Saving, NOW and money market 293,381,666 287,458,122 223,817,354
Time 288,058,814 295,224,771 278,166,617
Total deposits 776,805,954 765,025,222 664,674,156
Short-term borrowings 24,664,767 20,893,943 24,456,241
Long-term debt 15,460,000 15,460,000 15,460,000
Interest payable and other liabilities 4,600,167 6,195,572 5,311,787
Total liabilities 821,530,888 807,574,737 709,902,184
Shareholders' Equity
Common stock, without par value; authorized 5,000,000 shares;
issued 2017 - 1,610,628 shares 2016 - 1,583,228 shares and
September 2017 - 1,609,528 shares
25,852,224 25,794,771 24,595,195
Stock issued with notes receivable (744,453) (727,478)
Retained earnings 53,667,333 52,304,049 47,545,465
Accumulated other comprehensive income (expense) (218,654) 156,418 (740,492)
Total shareholders' equity 78,556,450 77,527,760 71,400,168
Total liabilities and shareholders' equity$900,087,338 $885,102,497 $781,302,352
Book value per share$48.77 $48.17 $45.10

Heartland BancCorp
Consolidated Statements of Income
Three Months Ended, Twelve Months Ended
Interest Income Dec 31, 2017 Sept 30, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016
Loans$8,773,752 $8,452,381 $7,569,129 $32,497,823 $28,478,204
Securities
Taxable 438,170 429,856 350,014 1,622,856 1,604,436
Tax-exempt 418,889 404,840 397,670 1,615,048 1,635,314
Other 77,426 70,291 23,351 244,582 137,738
Total interest income 9,708,237 9,357,368 8,340,164 35,980,309 31,855,692
Interest Expense
Deposits 1,219,118 1,188,053 948,685 4,439,839 3,702,300
Borrowings 145,830 116,829 112,343 508,751 394,985
Total interest expense 1,364,948 1,304,882 1,061,028 4,948,590 4,097,285
Net Interest Income 8,343,289 8,052,486 7,279,136 31,031,719 27,758,407
Provision for Loan Losses 255,000 255,000 135,000 1,095,000 645,000
Net Interest Income After Provision for Loan Losses 8,088,289 7,797,486 7,144,136 29,936,719 27,113,407
Noninterest income
Service charges 516,645 514,781 497,286 2,022,264 1,944,229
Net Gains and commissions on loan sales 220,149 308,261 198,565 996,373 603,849
Net realized gains on available-for-sale securities - - - 6,128 197,711
Net realized gain/(loss) on sales of foreclosed assets - - - 139,497 -
(Loss) gain on sale of premises and equipment - - - - -
Gain on redemption of life insurance proceeds - 301,278 - 301,278 -
Increase in cash value of life insurance 176,443 86,341 60,626 440,003 272,863
Other 242,201 155,396 119,968 757,316 541,140
Total noninterest income 1,155,438 1,366,057 876,445 4,662,859 3,559,792
Noninterest Expense
Salaries and employee benefits 3,393,113 3,205,006 2,894,910 12,876,116 11,413,273
Net occupancy and equipment expense 686,198 585,311 563,235 2,413,454 2,125,591
Data processing fees 323,883 316,111 303,607 1,271,395 1,120,524
Professional fees 248,188 163,914 193,836 696,566 681,553
Marketing expense 122,767 141,000 115,334 675,767 563,381
Printing and office supplies 79,398 56,761 101,279 250,175 255,321
State franchise taxes 140,353 141,825 123,301 565,828 531,002
FDIC Insurance premiums 96,500 98,500 72,000 355,000 368,000
Other 595,724 693,455 629,669 2,544,547 2,479,506
Total noninterest expense 5,686,124 5,401,883 4,997,171 21,648,848 19,538,151
Income before Income Tax 3,557,602 3,761,660 3,023,410 12,950,730 11,135,048
Provision for Income Taxes 1,501,588 1,009,859 861,458 4,077,765 3,146,789
Net Income$2,056,014 $2,751,801 $2,161,952 $8,872,964 $7,988,259
Basic Earnings Per Share$1.28 $1.73 $1.37 $5.56 $5.08
Diluted Earnings Per Share$1.25 $1.68 $1.33 $5.43 $4.97

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)Three Months Ended Twelve Months Ended
Dec. 31, 2017 Sept 30, 2017 Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2016
Performance Ratios:
Return on average assets 0.93% 1.26% 1.12% 1.05% 1.05%
Return on average equity 10.68% 14.28% 12.24% 11.82% 11.49%
Net interest margin 4.03% 4.05% 3.99% 4.00% 3.94%
Efficiency ratio 59.86% 57.35% 61.27% 60.66% 62.78%
Asset Quality Ratios and Data:As of or for the Three Months Ended
Dec. 31, 2017 Sept 30, 2017 Dec. 31, 2016
Non accrual loans$ 1,850 $ 3,205 $ 4,216
Loans past due 90 days and still accruing - 753 -
Non-performing investment securities - - -
OREO and other non-performing assets 40 - 400
Total non-performing assets$ 1,890 $ 3,958 $ 4,616
Non-performing assets to total assets 0.21% 0.45% 0.59%
Net charge-offs quarter ending $ 377 $ 107 $ 304
Allowance for loan loss$ 6,225 $ 6,386 $ 5,698
Non accrual loans$ 1,850 $ 3,205 $ 4,216
Allowance for loan loss to non accrual loans 336.49% 199.25% 135.15%
Allowance for loan losses to loans outstanding 0.88% 1.00% 0.91%
Restructured loans included in non-accrual$ 432 $ 662 $ 1,209
Performing restructured loans (RC-C)$ 1,712 $ 1,814 $ 1,903
Book Values:
Total shareholders' equity$ 78,556 $ 77,528 $ 71,400
Less, goodwill 417 417 417
Shareholders' equity less goodwill$ 78,139 $ 77,111 $ 70,983
Common shares outstanding 1,610,628 1,609,528 1,583,228
Less treasury shares - -
Common shares as adjusted 1,610,628 1,609,528 1,583,228
Book value per common share$ 48.77 $ 48.17 $ 45.10
Tangible book value per common share$ 48.51 $ 47.91 $ 44.83

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

The Cereghino Group
IR CONTACT: 206-388-5785

Source:Heartland BancCorp