Heartland BancCorp Earns a Record $3.6 million, in Third Quarter 2019, Declares Quarterly Cash Dividend of $0.52 per Share

WHITEHALL, Ohio, Oct. 15, 2019 (GLOBE NEWSWIRE) — Heartland BancCorp (“the company,” and “the bank”) (OTCQX: HLAN), today reported record third quarter 2019 net income of $3.6 million, or $1.77 per diluted share.  This compares to $3.2 million, or $1.55 per diluted share, in the second quarter of 2019, and $3.1 million, or $1.83 per diluted share, in the third quarter of 2018.  In the first nine months of the year, net income increased 17.4% to $9.7 million, compared to $8.3 million in the first nine months of 2018.

The company also announced its board of directors declared a regular quarterly cash dividend of $0.52 per share.  The dividend will be payable January 10, 2020, to shareholders of record as of December 25, 2019. Heartland has paid regular cash dividends since 1993.

“We continued our upward momentum into the third quarter, producing record net income, double-digit loan and deposit growth, an annualized return on average assets of 1.28% and an annualized return on average equity of 11.56%,” stated G. Scott McComb, Chairman and Chief Executive Officer.  “We have achieved top line revenue growth, putting us as a top quartile performer amongst our Ohio bank peers, all while growing our franchise.  We have both the banking talent and infrastructure in place to continue to expand our banking strategy throughout Central Ohio.”

Third Quarter Financial Highlights (at or for the period ended September 30, 2019)

  • Net income increased 18.3% to $3.6 million, compared to $3.1 million in the third quarter a year ago.
  • Earnings per share were $1.77 in the third quarter compared to $1.83 a year ago.
  • Net interest margin was 3.91%, which was unchanged compared to the preceding quarter and a five-basis point increase compared to 3.86% in the third quarter a year ago.
  • Noninterest income increased 39.4% to $2.0 million, compared to the third quarter a year ago.
  • Annualized return on average assets was 1.28%.
  • Annualized return on average equity was 11.56%.
  • Total assets increased 11.2% to $1.14 billion, compared to $1.02 billion a year earlier.
  • Net loans increased 9.8% to $873.3 million from $795.3 million a year ago.
  • Noninterest bearing demand deposits increased 25.1% compared to a year ago.
  • Total deposits increased 11.4% to $975.4 million from $875.4 million a year ago.
  • Tangible book value per share increased 2.2% to $61.31 per share, compared to $60.00 three months earlier, and grew 25.2% from $48.97 per share one year earlier.
  • Declared quarterly cash dividend of $0.52 per share, which represents a 2.48% yield based on the September 30, 2019, stock price ($84.00).

Balance Sheet Review

“The year-over-year double digit growth in the loan portfolio is a result of the excellent work of our lending teams and the diversification across all loan segments. We continue to take a holistic approach to the structure and the rate of new loans, while at the same time remaining competitive,” said Brian T. Mauntel, President and Chief Operating Officer.

Net loans increased 9.8% to $873.3 million at September 30, 2019, compared to $795.3 million at September 30, 2018, and increased 1.5% compared to $860.2 million at June 30, 2019.  Owner occupied commercial real estate loans (CRE) increased 5.2% to $241.0 million at September 30, 2019, compared to a year ago and comprise 27.3% of the total loan portfolio.  Non-owner occupied CRE loans increased 15.4% to $272.8 million compared to a year ago and comprise 30.9% of the total loan portfolio.  1-4 family residential real estate loans were up 8.6% from year ago levels to $221.0 million and represent 25.1% of total loans.  Commercial loans were up 15.3% from year ago levels to $104.9 million, at September 30, 2019, and comprise 11.9% of the total loan portfolio.  Home equity loans increased 1.7% from year ago levels to $30.8 million and represent 3.5% of total loans.  Consumer loans decreased from year ago levels to $11.3 million and represent 1.3% of the total loan portfolio.

“We continue to focus on growing noninterest bearing demand deposits through new product offerings and shifting the deposit mix away from wholesale funding and higher cost CDs.  As a result, noninterest bearing demand deposits accounts increased 25.1% compared to a year ago,” said Mauntel.  Total deposits increased 11.4% to $975.4 million at September 30, 2019, compared to $875.4 million a year earlier and increased 5.3% compared to $925.9 million three months earlier.  Savings, NOW and money market accounts increased modestly compared to a year ago and represented 36.1% of total deposits and CDs increased 13.3% when compared to a year ago and comprised 36.9% of the total deposit portfolio, at September 30, 2019.

Total assets increased 11.2% to $1.14 billion at September 30, 2019, compared to $1.02 billion a year earlier. Shareholders’ equity increased 54.2% to $126.0 million at September 30, 2019, compared to $81.7 million a year earlier, reflecting the capital raise during the fourth quarter of 2018.  At September 30, 2019, Heartland’s tangible book value increased 25.2% to $61.31 per share compared to $48.97 per share one year earlier.

Operating Results

“Our net interest margin remained unchanged compared to the preceding quarter and increased five basis points compared to the third quarter a year ago.  As such, we remain well positioned in both rising and falling interest rate environments and expect to see minimal contraction with these two recent interest rate reductions,” said Carrie Almendinger, EVP and Chief Financial Officer.

Heartland’s net interest margin was 3.91% in the third quarter of 2019, the same as in the preceding quarter.  In the third quarter of 2018, the net interest margin was 3.86%.  In the first nine months of 2019, Heartland’s net interest margin improved 10 basis points to 3.94%, compared to 3.84% in the first nine months of 2018.

Net interest income before the provision for loan loss increased 12.2% to $10.4 million in the third quarter of 2019, compared to $9.2 million in the third quarter a year ago, and increased 4.7% compared to $9.9 million in the preceding quarter.  In the first nine months of 2019, net interest income before the provision for loan losses increased 15.1% to $30.1 million, compared to $26.2 million in the first nine months of 2018.

Heartland’s total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 15.9% to $12.4 million in the third quarter, compared to $10.7 million in the third quarter a year ago, and increased 4.3% from $11.8 million in the preceding quarter.  Year-to-date, revenues increased 19.1% to $35.7 million, compared to $29.9 million in the same period one year earlier.

Noninterest income increased 39.4% to $2.0 million in the third quarter, compared to $1.4 million in the third quarter a year ago, and increased 2.8% compared to the preceding quarter.  The TransCounty Title Agency acquisition contributed $583,000 to noninterest income during the third quarter of 2019.  In the first nine months of 2019, noninterest income increased 47.0% to $5.6 million, compared to $3.8 million in the first nine months of 2018, with the TransCounty Title Agency acquisition contributing $1.6 million to noninterest income year-to-date.

Third quarter noninterest expenses were $7.6 million, which was unchanged from the preceding quarter. In the third quarter a year ago, noninterest expense totaled $6.5 million.  The year-over-year increase was due to costs associated with the company’s branch expansion, including its new Upper Arlington branch, as well as costs associated with the subsidiary TransCounty Title Agency.  In the first nine months of 2019, noninterest expenses totaled $22.6 million, compared to $18.7 million in the first nine months of 2018. The efficiency ratio for the third quarter of 2019 was 61.39%, compared to 63.92% for the preceding quarter and 61.28% for the third quarter of 2018.  

Credit Quality

Nonaccrual loans totaled $2.3 million at September 30, 2019, compared to $1.8 million three months earlier and $4.0 million at September 30, 2018.  There were $997,000 in loans past due 90 days and still accruing at September 30, 2019, compared to $253,000 at June 30, 2019, and $24,000 a year ago.

Performing restructured loans that were not included in nonaccrual loans at September 30, 2019, were $342,000, compared to $344,000 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. 

Heartland had no other real estate owned (OREO) and other non-performing assets on the books at September 30, 2019 or at the preceding quarter end.  Non-performing assets (NPAs), consisting of non-performing loans, OREO, and loans delinquent 90 days or more, were $3.3 million, or 0.29% of assets, at September 30, 2019, compared to $2.1 million, or 0.19% of total assets, three months earlier, and $4.0 million, or 0.39% of assets a year ago.

The third quarter provision for loan losses was $375,000, the same as in both the preceding quarter and the third quarter a year ago.  The allowance for loan losses was $8.5 million, or 0.97% of total loans at September 30, 2019, compared to $8.0 million, or 0.92% of total loans at June 30, 2019, and $7.3 million, or 0.91% of total loans a year ago.  As of September 30, 2019, the allowance for loan losses represented 376.3% of nonaccrual loans compared to 437.3% three months earlier, and 183.7% one year earlier.  Heartland recorded net loan recoveries of $166,000 in the third quarter of 2019.  This compares to net charge-offs of $81,000 in the preceding quarter and $2,000 in the third quarter a year ago. 

Capital

On November 20, 2018, Heartland successfully completed a private placement of its common stock and generated net proceeds of approximately $28.9 million. The Company expects to use the proceeds from the capital raise for general corporate purposes, including but not limited to supporting organic growth, facilitating potential expansion opportunities, expanding products and services and debt repayment. 

About Heartland BancCorp

Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 16 full-service banking offices and TransCounty Title Agency, LLC.  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 (OTCQX) under the symbol HLAN. Learn more about Heartland Bank at Heartland.Bank.

In May of 2019, Heartland was ranked #44 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 12/31/18. In September of 2019, Heartland stock uplisted to the OTCQX® Best Market after previously trading on the OTCQB® Venture Market.

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    
     
                     
  Sep. 30, 2019   Jun. 30, 2019   Sep. 30, 2018    
Assets                          
Cash and cash equivalents $ 57,356     $ 26,482     $ 37,908      
Available-for-sale securities   140,156       147,592       128,886      
Held-to-maturity securities, fair values of, $906,529, $1,551,817 and $3,085,795 respectively   918       1,548       3,085      
                     
Commercial   104,904       108,662       91,008      
CRE (Owner occupied)   241,038       226,906       229,173      
CRE (Non Owner occupied)   272,820       273,751       236,502      
1-4 Family   221,022       210,609       203,547      
Home Equity   30,779       36,449       30,266      
Consumer   11,307       11,717       11,893      
Net deferred loan costs, premiums and discounts   6       50       230      
Allowance for loan losses   (8,534 )     (7,994 )     (7,271 )    
Net Loans   873,342       860,150       795,348      
                     
Premises and equipment   32,442       32,508       27,894      
Nonmarketable equity securities   4,431       4,431       3,527      
Interest receivable   5,266       4,579       4,215      
Goodwill   1,206       1,206       1,069      
Intangible Assets   964       409       442      
Deferred income taxes   1,433       1,433       805      
Life insurance assets   16,880       16,772       16,443      
Lease – Right of Use Asset   2,619       2,655            
Other   1,324       1,263       3,808      
Total assets $ 1,138,337     $ 1,101,028     $ 1,023,430      
                     
Liabilities and Shareholders’ Equity                    
Liabilities                    
Deposits                    
Demand $ 263,604     $ 216,392     $ 210,639      
Saving, NOW and money market   351,821       338,178       347,126      
Time   359,949       371,337       317,613      
Total deposits   975,374       925,907       875,378      
Short-term borrowings   10,111       27,970       49,274      
Long-term debt   15,460       15,460       10,460      
Lease Liability   2,619       2,655            
Interest payable and other liabilities   8,787       6,410       6,610      
Total liabilities   1,012,351       978,402       941,722      
                     
Shareholders’ Equity                    
Common stock, without par value; authorized 5,000,000 shares; 2,019,463, 2,016,913 and 1,637,522 shares issued, respectively   55,775       55,526       25,739      
Retained earnings   68,457       65,885       59,652      
Accumulated other comprehensive income (expense)   1,754       1,215       (3,683 )    
Total shareholders’ equity   125,986       122,626       81,708      
Total liabilities and shareholders’ equity $ 1,138,337     $ 1,101,028     $ 1,023,430      
Book value per share $ 62.39     $ 60.80     $ 49.90      
                     
Heartland BancCorp  
Consolidated Statements of Income  
                               
  Three Months Ended   Nine Months Ended  
  Sep. 30, 2019   Jun. 30, 2019   Sep. 30, 2018   Sep. 30, 2019   Sep. 30, 2018  
Interest Income                                
Loans $ 11,989   $ 11,361   $ 10,185   $ 34,199   $ 28,373    
Securities                      
Taxable   723     745     599     2,209     1,553    
Tax-exempt   465     442     404     1,339     1,238    
Other   242     77     120     441     311    
Total interest income   13,419     12,625     11,308     38,187     31,475    
Interest Expense                              
Deposits   2,900     2,460     1,818     7,472     4,653    
Borrowings   167     274     263     618     662    
Total interest expense   3,067     2,734     2,081     8,090     5,315    
Net Interest Income   10,352     9,891     9,227     30,097     26,160    
Provision for Loan Losses   375     375     375     1,125     1,125    
Net Interest Income After Provision for Loan Losses   9,977     9,516     8,852     28,972     25,035    
Noninterest income                              
Service charges   560     556     555     1,618     1,599    
Net gains and commissions on loan sales and servicing   536     383     416     1,317     1,183    
Title insurance income   331     307     86     817     86    
Net realized gains on sales of available-for-sale securities           2         (64 )  
Net realized gain/(loss) on sales of foreclosed assets                   11    
Increase in cash value of life insurance   108     108     111     325     319    
Other   470     598     268     1,487     652    
Total noninterest income   2,005     1,952     1,438     5,564     3,786    
Noninterest Expense                              
Salaries and employee benefits   4,665     4,380     3,772     13,669     10,631    
Net occupancy and equipment expense   908     981     845     2,850     2,523    
Data processing fees   395     387     361     1,148     1,052    
Professional fees   209     309     241     742     605    
Marketing expense   247     242     213     728     638    
Printing and office supplies   72     79     65     225     217    
State financial institution tax   226     205     156     636     469    
FDIC insurance premiums   2     73     132     102     365    
Other   862     914     749     2,524     2,201    
Total noninterest expense   7,586     7,570     6,534     22,625     18,701    
Income before Income Tax   4,396     3,898     3,756     11,911     10,119    
Provision for Income Taxes   775     737     695     2,162     1,818    
Net Income $ 3,621   $ 3,161   $ 3,062   $ 9,749   $ 8,301    
Basic Earnings Per Share $ 1.79   $ 1.57   $ 1.88   $ 4.83   $ 5.11    
Diluted Earnings Per Share $ 1.77   $ 1.55   $ 1.83   $ 4.77   $ 4.99    
                               
ADDITIONAL FINANCIAL INFORMATION                                
(Dollars in thousands except per share amounts)(Unaudited)   Three Months Ended   Nine Months Ended
    Sep. 30, 2019   Jun. 30, 2019   Sep. 30, 2018   Sep. 30, 2019   Sep. 30, 2018  
Performance Ratios:                                
Return on average assets   1.28 %   1.17 %   1.20 %   1.20 %   1.15 %  
Return on average equity   11.56 %   10.51 %   15.00 %   10.78 %   13.88 %  
Return on average tangible common equity   11.73 %   10.66 %   15.18 %   10.94 %   14.00 %  
Net interest margin   3.91 %   3.91 %   3.86 %   3.94 %   3.84 %  
Efficiency ratio   61.39 %   63.92 %   61.28 %   63.44 %   62.32 %  
                                 
Asset Quality Ratios and Data:   As of or for the Three Months Ended            
    Sep. 30, 2019     Jun. 30, 2019     Sep. 30, 2018                
Nonaccrual loans   $ 2,268     $ 1,828     $ 3,959                
Loans past due 90 days and still accruing   997     253     24                
Non-performing investment securities                          
OREO and other non-performing assets                          
Total non-performing assets   $ 3,265     $ 2,081     $ 3,983                
                                 
Non-performing assets to total assets   0.29 %   0.19 %   0.39 %              
Net charge-offs quarter ending   $ (166)     $ 81     $ 2                
                                 
Allowance for loan loss   $ 8,534     $ 7,994     $ 7,271                
Nonaccrual loans   $ 2,268     $ 1,828     $ 3,959                
Allowance for loan loss to non accrual loans   376.29 %   437.29 %   183.65 %              
Allowance for loan losses to loans outstanding   0.97 %   0.92 %   0.91 %              
                                 
Restructured loans included in non-accrual   $ 289     $ 289     $ 324                
Performing restructured loans (RC-C)   $ 342     $ 344     $ 1,818                
                                 
Book Values:                                
Total shareholders’ equity   $ 125,986     $ 122,626     $ 81,708                
Less: goodwill and intangible assets   2,169     1,615     1,512                
Shareholders’ equity less goodwill and intangible assets   $ 123,816     $ 121,012     $ 80,197                
Common shares outstanding   2,019,463     2,016,913     1,637,522                
Less: treasury shares                          
Common shares as adjusted   2,019,463     2,016,913     1,637,522                
Book value per common share   $ 62.39     $ 60.80     $ 49.90                
                                 
Tangible book value per common share   $ 61.31     $ 60.00     $ 48.97                
                                 
Contacts:   G. Scott McComb, Chairman & CEO
    Heartland BancCorp  614-337-4600     

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