Heartland BancCorp Earns $4.6 Million, or $2.29 Per Diluted Share, in the First Quarter of 2021; Declares Quarterly Cash Dividend of $0.627 per Share

Rhea-AI Summary

Heartland BancCorp (OTCQX: HLAN) reported a 58.4% increase in net income for Q1 2021, totaling $4.6 million or $2.29 per diluted share, up from $2.9 million or $1.43 per share a year prior. Total revenues rose 23.3% to $15.8 million. The board declared a quarterly cash dividend of $0.627 per share, payable on July 10, 2021. Notably, total assets grew 33.8% to $1.57 billion, largely due to the acquisition of Victory Community Bank. However, the net interest margin declined to 3.36% from 3.81% a year ago.

Positive

• Net income increased 58.4% to $4.6 million.
• Total revenues rose 23.3% to $15.8 million.
• Quarterly cash dividend declared at $0.627 per share.
• Total assets grew 33.8% to $1.57 billion.

Negative

• Net interest margin decreased to 3.36%, down from 3.81% a year ago.

WHITEHALL, Ohio, April 20, 2021 (GLOBE NEWSWIRE) -- Heartland BancCorp (“Heartland” and “the company”) (OTCQX: HLAN) today reported net income increased 58.4% to $4.6 million, or $2.29 per diluted share in the first quarter of 2021, compared to $2.9 million, or $1.43 per diluted share in the first quarter of 2020. In the fourth quarter of 2020, the company reported record earnings of $5.8 million, or $2.87 per diluted share.

The company announced its board of directors declared a quarterly cash dividend of $0.627 per share. The dividend will be payable July 10, 2021, to shareholders of record as of June 25, 2021. Heartland has paid regular quarterly cash dividends since 1993.

“Heartland’s first quarter operating performance continued to reflect the success of our community bank strategy, which produced solid revenue and additional low-cost core deposit growth,” stated G. Scott McComb, Chairman, President and Chief Executive Officer. “Also contributing meaningfully to our earnings growth is the successful integration of our acquisition of Victory Community Bank last year. Our relentless focus on delivering value to our clients, combined with the resilience of the economy in our greater Columbus and Northern Kentucky markets, continues to sustain and build our community banking franchise.”

First Quarter Financial Highlights (at or for the period ended March 31, 2021)

• Net income increased 58.4% to $4.6 million, compared to $2.9 million in the first quarter a year ago.
• Earnings per diluted share were $2.29, compared to $1.43 in the first quarter a year ago.
• Provision for loan losses was $480,000, compared to $500,000 in the first quarter a year ago.
• Net interest margin was 3.36%, compared to 3.50% in the preceding quarter, and 3.81% in the first quarter a year ago.
• Total revenues (net interest income plus noninterest income) increased 23.3% to $15.8 million, compared to $12.8 million in the first quarter a year ago.
• Noninterest income increased 42.0% to $3.7 million, compared to $2.6 million in the first quarter a year ago.
• Annualized return on average assets was 1.20%, compared to 1.02% in the first quarter a year ago.
• Annualized return on average equity was 13.25%, compared to 9.18% in the first quarter a year ago.
• Total assets increased 33.8% to $1.57 billion, compared to $1.17 billion a year ago.
• Net loans increased 20.3% to $1.13 billion, compared to $942.5 million a year ago.
• Noninterest bearing demand deposits increased 75.1% to $447.6 million, compared to $255.7 million a year ago.
• Total deposits increased 37.8% to $1.36 billion, compared to $984.8 million a year ago.
• Tangible book value per share was $64.56 per share, compared to $62.33 per share a year ago.
• Declared a quarterly cash dividend of $0.627 per share.

COVID-19 Response

Heartland has implemented several pandemic preparations to assist its clients with their financial needs, and remains committed to helping its borrowers who have been affected by the declining economic activity.

Heartland continues to offer payment and financial relief programs for its borrowers impacted by the pandemic. These programs include loan payment deferrals or interest-only payments for up to 180 days. Deferred loans are re-evaluated at the end of the initial deferral period and will either return to the original loan terms or may be eligible for an additional deferral period for up to 90 days. Heartland has deferred payment on 17 loans totaling $38.2 million at March 31, 2021, which includes 13 loans totaling $37.5 million that had received a second deferral. Of the $38.2 million in loans on deferral at March 31, 2021, $35.9 million are for businesses within the accommodation & food industry.

Paycheck Protection Program

During the second and third quarters of 2020, Heartland originated 1,075 Paycheck Protection Program (“PPP”) loans, for a total of $129 million in PPP loans, and generated total PPP loan fees receivable of approximately $4.9 million. “As of March 31, 2021, we have 172 forgiveness applications outstanding and received payment from the SBA for 441 borrowers totaling $69 million. Approximately $860,000 of the income recognized during the first quarter of 2021 was related to recognizing origination fees for PPP loan payoffs or forgiveness, compared to $764,000 of income recognized during the fourth quarter of 2020,” said McComb.

At the end of December 2020, additional COVID-19 stimulus relief was signed into law that allowed for an additional round of PPP lending. The program offered new PPP loans for companies that did not receive PPP funds in 2020 in addition to a second draw loan targeted at hard-hit businesses that had already used their initial PPP proceeds. During the first quarter of 2021, Heartland originated 587 PPP loans, or $60 million in loans, during this new round of funding, with gross fee income of $3.0 million. $1.2 million was recognized during the first quarter as deferred origination costs as a reduction of salary and employee benefit expense and the net difference of $1.8 million will be recognized over the life of the associated loans.

Subordinated Notes Offering

On May 15, 2020, Heartland completed its private placement of $25 million of 5.0% fixed-to-floating rate subordinated notes due 2030 (the “Notes”) to certain qualified institutional buyers and accredited investors, including the exchange of approximately $5.4 million of the Company’s subordinated promissory notes due 2025. The Notes have been structured to qualify as Tier 2 capital for Heartland for regulatory capital purposes. Heartland intends to use the net proceeds of the offering for general corporate operating purposes, including repaying indebtedness, to support organic growth and to fund potential acquisitions.

Victory Community Bank Acquisition

On April 7, 2020, Heartland completed the acquisition of Victory Community Bank. At closing, Victory Community Bank had three banking locations in Boone, Kenton, and Campbell counties in Kentucky. Pursuant to previously announced terms, Victory Mortgage Holding, Inc. (formerly known as Victory Bancorp, Inc.) (as the sole shareholder of Victory Community Bank) received 58,934 shares of Heartland common stock and approximately $35.5 million in cash.

The closed acquisition added approximately $238.3 million in assets, $149.9 million in deposits and $120.2 million in loans to Heartland Bank. Victory Community Bank’s former sister company, Victory Mortgage, LLC, which is affiliated with Fischer Homes, has mortgage lending offices in Louisville, Columbus, Indianapolis, and Atlanta. As part of the merger, Victory Mortgage, LLC entered into a cooperation agreement with Heartland Bank for certain products and services to be provided by Heartland Bank post-closing.

Balance Sheet Review

“The Victory Community Bank acquisition contributed meaningfully to loan growth year-over-year, primarily in the 1-4 family loan segment,” said Carrie Almendinger, EVP and Chief Financial Officer. Net loans increased to $1.13 billion at March 31, 2021, a 20.3% increase compared to $942.5 million at March 31, 2020, and a modest increase compared to $1.12 billion at December 31, 2020. Commercial loans were up 74.7% from year ago levels to $237.4 million, and comprise 20.7% of the total loan portfolio at March 31, 2021. Owner occupied commercial real estate loans (CRE) decreased 2.2% to $245.1 million at March 31, 2021, compared to a year ago, and comprise 21.3% of the total loan portfolio. Non-owner occupied CRE loans increased 6.4% to $300.9 million, compared to a year ago, and comprise 26.2% of the total loan portfolio at March 31, 2021. At March 31, 2021, 1-4 family residential real estate loans were up 31.6% from year ago levels to $318.1 million and represent 27.7% of total loans. Home equity loans increased 19.6% from year ago levels to $36.6 million and represent 3.2% of total loans at March 31, 2021. Consumer loans decreased 1.9% from year ago levels to $10.1 million and represent 0.9% of the total loan portfolio at March 31, 2021.

Deposit growth for the year was reflective of the Victory Community Bank acquisition, while federal programs such as the PPP and stimulus checks also boosted demand deposit balances. Total deposits increased 37.8% to $1.36 billion at March 31, 2021, compared to $984.8 million a year earlier and increased 3.4% compared to $1.31 billion three months earlier. At March 31, 2021, noninterest bearing demand deposit accounts increased 75.1% compared to a year ago and represented 33.0% of total deposits, savings, NOW and money market accounts increased 58.8% compared to a year ago and represented 44.4% of total deposits, and CDs decreased 12.1% compared to a year ago and comprised 22.6% of total deposits.

Total assets increased 33.8% to $1.57 billion at March 31, 2021, compared to $1.17 billion a year earlier, and increased 1.5% compared to $1.55 billion three months earlier. The year-over-year increase is largely due to the Victory Community Bank acquisition and PPP loans. Excluding these items, total assets increased 3.3% year-over-year. Shareholders’ equity increased 12.2% to $142.2 million at March 31, 2021, compared to $126.8 million a year earlier.   On March 31, 2021, Heartland’s tangible book value was $64.56 per share, compared to $62.33 one year earlier.

Operating Results

Heartland’s net interest margin was 3.36% in the first quarter of 2021, compared to 3.50% in the preceding quarter and 3.81% in the first quarter of 2020. “The negative impacts of excess liquidity on the balance sheet contributed to net interest margin contraction during the first quarter,” said Almendinger. Excluding excess cash balances at the Federal Reserve Bank, net interest margin was 3.78% for the first quarter of 2021 and 3.77% for the fourth quarter of 2020. PPP loans had a 0.07% positive effect on net interest margin for the first quarter of 2021 and 0.02% positive effect for the fourth quarter of 2020.  

Total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 23.3% to $15.8 million in the first quarter, compared to $12.8 million in the first quarter a year ago, and decreased from record revenue of $17.2 million in the preceding quarter.

Net interest income, before the provision for loan losses, increased 18.6% to $12.1 million in the first quarter of 2021, compared to $10.2 million in the first quarter a year ago, and decreased 3.0% compared to $12.4 million in the preceding quarter.

Heartland’s noninterest income increased 42.0% to $3.7 million in the first quarter, compared to $2.6 million in the first quarter a year ago, and decreased 22.8% compared to $4.8 million in the preceding quarter. The gains on sale of loans and originated mortgage servicing rights increased 75.9% to $1.6 million in the first quarter of 2021, compared to $0.9 million in the first quarter a year ago, and decreased 48.6% compared to $3.0 million in the preceding quarter. Sustained low long-term mortgage rates continued to attract mortgage refinancing, although at a slower pace than the record setting levels during the prior quarter.

First quarter noninterest expenses totaled $9.6 million, compared to $9.4 million in the preceding quarter and $8.7 million in the first quarter a year ago. Salary and employee benefit expenses were $5.2 million for the first quarter compared to $5.7 million in the fourth quarter of 2020, and $5.4 million in the first quarter a year ago.   The reduction was primarily due to deferred expenses associated with the latest round of PPP loans originated in the current quarter.

“During the first quarter, we prepaid $17.9 million in long term FHLB advances near the end of the quarter that impacted other noninterest expense and resulted in a one-time expense of $414,000 pretax, or $327,000 after tax,” said Almendinger. Also impacting noninterest expense compared to the year ago quarter were increased operating costs related to the acquisition of Victory Community Bank that closed in April 2020, in addition to investments in products, talent and technology. The efficiency ratio for the first quarter of 2021 was 61.8%, compared to 55.1% for the preceding quarter and 68.2% for the first quarter of 2020.

Credit Quality

“The provision for loan losses during the quarter primarily reflects growth in the loan portfolio, as well as our current assessment of risks associated with the COVID-19 pandemic,” said McComb. Heartland booked a $480,000 provision for loan losses in the first quarter, compared to a $750,000 provision in the preceding quarter and a $500,000 provision for loan losses in the first quarter a year ago.

At March 31, 2021, the allowance for loan losses (ALLL) increased to $14.6 million, or 1.28% of total loans, compared to $14.1 million, or 1.25% of total loans at December 31, 2020, and $9.3 million, or 0.97% of total loans a year ago. Excluding PPP loans, the ALLL was 1.43% of total loans at March 31, 2021 and 1.36% of total loans at December 31, 2020. As of March 31, 2021, the ALLL represented 324.5% of nonaccrual loans, compared to 476.5% three months earlier and 385.4% one year earlier.

Nonaccrual loans increased during the quarter to $4.5 million at March 31, 2021, compared to $3.0 million at December 31, 2020 and increased compared to $2.4 million at March 31, 2020. The increase in nonaccrual loans during the quarter was primarily the result of one lending relationship for $2.1 million. There were $18,000 in loans past due 90 days and still accruing at March 31, 2021. This compared to no loans past due 90 days at December 31, 2020, and $227,000 in loans past due 90 days at March 31, 2020.

Heartland’s performing restructured loans that were not included in nonaccrual loans decreased to $632,000 at March 31, 2021, compared to $648,000 at December 31, 2020. Borrowers who are in financial difficulty, and who have been granted concessions, including interest rate reductions, term extensions, or payment alterations, are categorized as restructured loans.

There was $5,000 in other real estate owned (OREO) and other non-performing assets on the books at March 31, 2021, and at December 31, 2020, and none reported at March 31, 2020. Non-performing assets (NPAs), consisting of non-performing loans and loans past due 90 days or more, were $4.5 million, or 0.29% of total assets inclusive of PPP loans, at March 31, 2021, compared to $3.0 million, or 0.19% of total assets, at December 31, 2020 and $2.6 million, or 0.22% of total assets at March 31, 2020. NPAs, consisting of non-performing loans and loans past due 90 days or more, were 0.31% of total assets excluding PPP loans, at March 31, 2021.

Heartland recorded net loan recoveries of $22,000 in the first quarter of 2021. This compares to net charge offs of $420,000 in the fourth quarter of 2020 and net charge offs of $11,000 in the first quarter of 2020.

About Heartland BancCorp

Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 19 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 2020, Heartland was ranked #58 on the American Banker Magazine’s list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity as of December 31, 2019.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (i) the benefits of a merger between Heartland Bank and Victory Community Bank, including future financial and operating results, cost savings enhancements to revenue and accretion to reported earnings that may be realized from the merger; (ii) Heartland’s plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” or words of similar meaning generally intended to identify forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations of Heartland’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Heartland. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements because of the following factors, among others: (1) the assumptions and estimates used by Heartland’s management include both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments, and thus, may not be realized; (2) the businesses of Heartland Bank and Victory Community Bank may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected, and the expected growth opportunities or cost savings from the merger may not be fully realized or may take longer to realize than expected;; (3) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which Heartland is engaged; (4) changes in the interest rate environment may adversely affect net interest income; (5) results may be adversely affected by continued diversification of assets and adverse changes to credit quality; (6) competition from other financial services companies in Heartland’s markets could adversely affect operations; (6) the impact of the coronavirus (COVID-19) pandemic on the employees and customers of Heartland, as well as the resulting effect on the business, financial condition and results of operations on Heartland; and (7) the current economic slowdown could adversely affect credit quality and loan originations.

Heartland cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements are expressly qualified in their entirety by the cautionary statements above. Heartland does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

Heartland BancCorp
Consolidated Balance Sheets
Assets		Mar. 31, 2021				Dec. 31, 2020				Mar. 31, 2020
	Cash and cash equivalents	$	197,115			$	189,874			$	19,681
	Interest bearing time deposits		279				277				0
	Available-for-sale securities		151,971				144,377				142,538
	Held-to-maturity securities, fair values of, $202, $202 and $743 respectively		202				202				741
	Loans held for sale		1,025				4,382				3,122
	Commercial		237,419				216,108				135,937
	CRE (Owner occupied)		245,092				240,185				250,567
	CRE (Non Owner occupied)		300,923				307,054				282,778
	1-4 Family		318,068				323,174				241,622
	Home Equity		36,550				38,232				30,548
	Consumer		10,142				11,341				10,342
	Allowance for loan losses		(14,649	)			(14,147	)			(9,257	)
	Net Loans		1,133,545				1,121,947				942,537
	Premises and equipment		30,264				30,220				29,962
	Nonmarketable equity securities		6,024				6,017				4,457
	Mortgage serving rights, net		2,702				2,662				278
	Foreclosed assets held for sale		5				5				0
	Goodwill		12,388				12,389				1,206
	Intangible Assets		1,185				1,253				906
	Deferred income taxes		955				955				600
	Life insurance assets		17,567				17,468				17,162
	Accrued interest recievable and other assets		15,688				15,052				10,656
	Total assets	$	1,570,915			$	1,547,080			$	1,173,846
Liabilities and Shareholders' Equity
Liabilities
	Deposits
	Demand	$	447,646			$	426,795			$	255,695
	Saving, NOW and money market		602,181				528,836				379,145
	Time		307,525				357,203				349,976
	Total deposits		1,357,352				1,312,834				984,816
	Repurchase agreements		9,866				10,632				10,481
	FHLB Advances		24,290				44,670				35,000
	Subordinated debt		24,620				24,709				5,460
	Interest payable and other liabilities		12,554				13,339				11,315
	Total liabilities		1,428,682				1,406,184				1,047,072
Shareholders' Equity
	Common stock, without par value; authorized 5,000,000 shares; 2,083,487, 2,083,487 and 2,021,523 shares issued, respectively		60,529				60,402				56,439
	Retained earnings		84,436				81,061				72,619
	Accumulated other comprehensive income (expense)		2,262				4,427				(1,053	)
	Treasury stock at Cost, Common; 90,612, 90,612 and 21,635 shares held, respectively		(4,994	)			(4,994	)			(1,232	)
	Total shareholders' equity		142,233				140,896				126,774
	Total liabilities and shareholders' equity	$	1,570,915			$	1,547,080			$	1,173,846
	Book value per share	$	71.37			$	70.70			$	63.39

Heartland BancCorp
Consolidated Statements of Income
		Three Months Ended
Interest Income		Mar. 31, 2021			Dec. 31, 2020				Mar. 31, 2020
	Loans	$	12,746		$	13,447			$	11,811
	Securities
	Taxable		324			363				500
	Tax-exempt		601			604				492
	Other		48			34				47
	Total interest income		13,719			14,448				12,850
Interest Expense
	Deposits		1,130			1,476				2,455
	Borrowings		512			524				209
	Total interest expense		1,642			2,000				2,664
Net Interest Income			12,077			12,448				10,186
Provision for Loan Losses			480			750				500
Net Interest Income After Provision for Loan Losses			11,597			11,698				9,686
Noninterest income
	Service charges		573			587				518
	Gains on sale of loans and originated MSR		1,550			3,016				881
	Loan servicing fees, net		205			(209	)			307
	Title insurance income		318			400				260
	Net realized gains on sales of available-for-sale securities		223			221				-
	(Loss) gain on sale of premises and equipment		-			10				-
	Increase in cash value of life insurance		99			102				105
	Other		732			663				535
	Total noninterest income		3,700			4,790				2,606
Noninterest Expense
	Salaries and employee benefits		5,204			5,650				5,447
	Net occupancy and equipment expense		1,330			1,269				1,083
	Data processing fees		448			485				430
	Professional fees		378			278				242
	Marketing expense		276			176				232
	Printing and office supplies		92			102				92
	State financial institution tax		315			244				256
	FDIC insurance premiums		128			183				3
	Other		1,443			984				944
	Total noninterest expense		9,614			9,371				8,729
Income before Income Tax			5,683			7,117				3,563
Provision for Income Taxes			1,059			1,353				644
Net Income		$	4,624		$	5,764			$	2,919
Basic Earnings Per Share		$	2.32		$	2.89			$	1.45
Diluted Earnings Per Share		$	2.29		$	2.87			$	1.43

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)	Three Months Ended
	Mar. 31, 2021				Dec. 31, 2020				Mar. 31, 2020
Performance Ratios:
Return on average assets		1.20	%			1.50	%			1.02	%
Return on average equity		13.25	%			16.57	%			9.18	%
Return on average tangible common equity		14.66	%			18.39	%			9.33	%
Net interest margin		3.36	%			3.50	%			3.81	%
Efficiency ratio		61.81	%			55.07	%			68.24	%
Asset Quality Ratios and Data:	As of or for the Three Months Ended
	Mar. 31, 2021				Dec. 31, 2020				Mar. 31, 2020
Nonaccrual loans	$	4,514			$	2,969			$	2,402
Loans past due 90 days and still accruing	18				-					227
Non-performing investment securities	-				-					-
OREO and other non-performing assets	5				5					-
Total non-performing assets	$	4,537			$	2,974			$	2,629
Non-performing assets to total assets		0.29	%			0.19	%			0.22	%
Net charge-offs quarter ending	$	(22)			$	420			$	11
Allowance for loan loss	$	14,649			$	14,147			$	9,257
Nonaccrual loans	$	4,514			$	2,969			$	2,402
Allowance for loan loss to non accrual loans		324.52	%			476.49	%			385.39%
Allowance for loan losses to loans outstanding		1.28	%			1.25	%			0.97%
Restructured loans included in non-accrual	$	2,405			$	285			$	286
Performing restructured loans (RC-C)	$	632			$	648			$	339
Book Values:
Total shareholders' equity	$	142,233			$	140,896			$	126,774
Less: goodwill and intangible assets	13,573				13,641					2,112
Shareholders' equity less goodwill and intangible assets	$	128,660			$	127,255			$	124,662
Common shares outstanding	2,083,487				2,083,487					2,021,523
Less: treasury shares		(90,612)				(90,612)				(21,635)
Common shares as adjusted	1,992,875				1,992,875					1,999,888
Book value per common share	$	71.37			$	70.70			$	63.39
Tangible book value per common share	$	64.56			$	63.85			$	62.33

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

                                      
       

 

 

FAQ

What are Heartland BancCorp's Q1 2021 earnings results?

Heartland BancCorp reported a net income of $4.6 million, or $2.29 per diluted share, a 58.4% increase from Q1 2020.

When is the next dividend payment for HLAN shareholders?

The next dividend payment of $0.627 per share is payable on July 10, 2021, to shareholders of record as of June 25, 2021.

How much did Heartland BancCorp's assets increase in Q1 2021?

Total assets increased by 33.8% to $1.57 billion compared to the same period last year.

What impact did the Victory Community Bank acquisition have on Heartland's finances?

The acquisition of Victory Community Bank significantly contributed to the increase in total assets and net loan growth.

What was the provision for loan losses reported by Heartland in Q1 2021?

Heartland reported a provision for loan losses of $480,000 for Q1 2021.