Whitehall, OH – October 28, 2024 – Heartland BancCorp (“Heartland” and “the Company”) (OTCQX: HLAN), parent company of Heartland Bank (“Bank”), today reported net income of $4.4 million, or $2.12 per diluted share, in the third quarter of 2024, compared to $4.9 million, or $2.43 per diluted share, in the third quarter of 2023, and $5.1 million, or $2.50 per diluted share, in the preceding quarter. In the first nine months of 2024, net income increased 2.6% to $14.6 million, or $7.12 per diluted share, compared to $14.2 million, or $7.01 per diluted share, in the first nine months of 2023.

The company also announced that its board of directors declared a quarterly cash dividend of $0.759 per share. The dividend will be payable December 30, 2024, to shareholders of record as of December 13, 2024. Heartland has paid regular quarterly cash dividends since 1993.
On July 29, 2024, Heartland announced that it had entered into a definitive merger agreement with German American Bancorp (“German American”). Upon completion of the transaction, Heartland’s subsidiary bank, Heartland Bank, will be merged into German American’s subsidiary bank, German American Bank, and operate under a co-branded name within the Ohio markets.

Under the terms of the definitive agreement, Heartland shareholders, other than the Heartland retirement plan, will receive 3.90 shares of German American common stock for each share of Heartland common stock in an all-stock, tax-free exchange. The shares held by the Heartland retirement plan will be exchanged for an equivalent cash payment. Based on the number of Heartland common shares expected to be outstanding at closing, German American would issue approximately 7.66 million shares of its common stock. With a $39.84 per share volume-weighted average price for German American common stock over the 10-day trading period ended July 26, 2024, the indicated per share value to Heartland shareholders is $155.37 and the aggregate transaction value, inclusive of cash payments for in-the-money options and in exchange for Heartland shares held through the Heartland retirement plan, would be approximately $330.2 million.

The transaction is expected to close in the first quarter of 2025, subject to regulatory approval, approval by both German American and Heartland shareholders and completion of other customary closing conditions.

“The highlight of the third quarter was our announced merger with German American,” stated G. Scott McComb, Chairman, President and Chief Executive Officer. “This strategic partnership allows us to partner with another like-minded, larger community bank that enables us to continue our strong brand and growth trajectory within the markets we serve. It will also allow us to deepen and broaden our current and prospective customer relationships with enhanced financial service offerings. Strategically and culturally, Heartland and German American are exceptionally well-aligned with a strong commitment to the community banking business model. That model, centered on delivering the exceptional customer experience and willingness to invest in local communities that Ohio has come to know and love from Heartland, will propel our future success.”
“In addition to announcing the definitive agreement with German American, our third quarter operating results were highlighted by continued earnings momentum fueled by moderate loan growth and steady deposit growth generated in our market footprints in Columbus and Greater Cincinnati,” McComb continued. “Now the pending combination with German American provides us with the infrastructure needed to support continued growth and the opportunity to make an even greater impact on the communities we serve.”


Third Quarter 2024 Financial Highlights (at or for the three months ended September 30, 2024)

• Net income was $4.4 million, or $2.12 per diluted share, compared to $4.9 million, or $2.43 per diluted share, in the third quarter of 2023.
• Heartland recorded no provision for credit losses during the third quarter of 2024, compared to $500,000 for the third quarter a year ago.
• Net interest margin was 3.27%, compared to 3.31% in the preceding quarter and 3.52% in the third quarter a year ago.
• Third quarter revenues (net interest income plus noninterest income) were $18.0 million, compared to $18.5 million in the third quarter a year ago.
• Annualized return on average assets was 0.91%, compared to 1.07% in the third quarter of 2023.
• Annualized return on average tangible common equity was 11.10%, compared to 14.01% in the third quarter a year ago.
• Net loans increased modestly during the quarter to $1.54 billion at September 30, 2024, compared to $1.53 billion three months earlier.
• Total deposits increased 3.7% during the quarter to $1.71 billion at September 30, 2024, compared to $1.65 billion three months earlier.
• Credit quality remains pristine with nonperforming loans to gross loans of 0.12% and nonperforming assets to total assets of 0.10% at September 30, 2024.
• Tangible book value increased 18.9% to $80.61 per share, compared to $67.78 per share a year ago.
• Declared a quarterly cash dividend of $0.759 per share.

Balance Sheet Review
Assets
Total assets increased 5.8% to $1.94 billion at September 30, 2024, compared to $1.83 billion a year earlier, and increased 1.1% compared to three months earlier. Heartland’s loan-to-deposit ratio was 90.0% at September 30, 2024, compared to 93.1% at June 30, 2024, and 95.2% at September 30, 2023.

Securities increased 27.9% to $229.9 million at September 30, 2024, compared to $179.8 million a year earlier, and decreased 1.4% compared to $233.3 million three months earlier. Securities comprise 11.8% of total assets at September 30, 2024, compared to 12.1% three months earlier and 9.8% a year ago.

“We continue to prioritize growing the investment portfolio, which has been a strategic focus over the past year to increase our asset based liquidity,” said Carrie Almendinger, EVP and Chief Financial Officer.

Average earning assets increased to $1.82 billion in the third quarter of 2024, compared to $1.80 billion in the second quarter of 2024, and $1.72 billion in the third quarter of 2023. The average yield on interest-earning assets was 5.95% in the third quarter of 2024, up eight basis points from 5.87% in the preceding quarter, and up 36 basis points from 5.59% in the third quarter a year ago.

Loan Portfolio
“We pulled back on loan growth during the quarter, with net loans increasing modestly over the prior quarter end,” said Ben Babcanec, EVP and Chief Operating Officer. “Despite stiff competition in our markets, we continue to remain disciplined on loan pricing, with newly funded loans having a weighted rate of 7.83% during the third quarter.”

Net loans increased modestly to $1.54 billion at September 30, 2024, compared to $1.53 billion at June 30, 2024, and increased 2.1% compared to $1.50 billion at September 30, 2023. Commercial loans increased 8.5% from year ago levels to $183.7 million and comprise 11.8% of the total loan portfolio at September 30, 2024. Owner occupied commercial real estate loans (CRE) increased 3.7% to $287.3 million at September 30, 2024, compared to a year ago, and comprise 18.5% of the total loan portfolio. Nonowner occupied CRE loans decreased 2.5% to $489.5 million, compared to a year ago, and comprise 31.5% of the total loan portfolio at September 30, 2024. 1-4 family residential real estate loans increased 2.1% from year-ago levels to $510.6 million and represent 32.9% of total loans. Home equity loans increased 20.4% from year-ago levels to $63.2 million and represent 4.1% of total loans, while consumer loans decreased 2.1% from year-ago levels to $19.4 million and represent 1.3% of the total loan portfolio at September 30, 2024.

Deposits
Total deposits were $1.71 billion at September 30, 2024, a $60.5 million, or 3.7% increase, compared to $1.65 billion at June 30, 2024, and a $126.4 million, or 8.0% increase, compared to $1.58 billion at September 30, 2023. “Average deposits increased $19.5 million, or 1.2%, to $1.69 billion in the third quarter of 2024 compared to the preceding quarter, with the growth primarily in CD accounts,” said Babcanec. “We are focused on maintaining client relationships while making sure we are being prudent with deposit pricing.”

At September 30, 2024, noninterest bearing demand deposit accounts decreased 5.1% compared to a year ago and represent 25.3% of total deposits; savings, NOW and money market accounts decreased 1.3% compared to a year ago and represent 40.2% of total deposits; and CDs increased 36.9% compared to a year ago and comprise 34.5% of total deposits. The average cost of deposits was 2.75% in the third quarter of 2024, compared to 2.61% in the second quarter of 2024 and 2.05% in the third quarter of 2023.

Shareholders’ Equity
Shareholders’ equity increased 4.8% to $175.9 million at September 30, 2024, compared to $167.7 million three months earlier and increased 17.6% compared to $149.6 million a year earlier. At September 30, 2024, Heartland’s tangible book value was $80.61 per share compared to $76.81 at June 30, 2024, and $67.78 at September 30, 2023.

Heartland continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” with tangible equity to tangible assets of 8.46% at September 30, 2024, compared to 8.12% at June 30, 2024, and 7.50% at September 30, 2023.

Operating Results
In the third quarter of 2024, Heartland generated a ROAA of 0.91% and a ROATCE of 11.10%, compared to 1.08% and 13.47%, respectively, in the second quarter of 2024 and 1.07% and 14.01%, respectively, in the third quarter a year ago.

Net Interest Income/Net Interest Margin
Net interest income, before the provision for credit losses, decreased 2.1% to $14.9 million in the third quarter of 2024, compared to $15.3 million in the third quarter a year ago, and increased 1.1% compared to $14.8 million in the preceding quarter. In the first nine months of 2024, net interest income decreased 2.3% to $44.6 million, compared to $45.6 million in the first nine months of 2023.

Total revenues (net interest income, before the provision for credit losses, plus noninterest income) were $18.0 million in the third quarter of 2024, a 2.8% decrease compared to $18.5 million in the third quarter a year ago, and unchanged compared to the preceding quarter. Year-to-date, total revenues were $53.9 million, compared to $54.9 million in the same period a year earlier.

Heartland’s net interest margin was 3.27% in the third quarter of 2024, compared to 3.31% in the preceding quarter and 3.52% in the third quarter of 2023. “The largest driver in our net interest margin decline during the quarter was the shift in noninterest bearing DDA balances into higher yielding deposit accounts. Fortunately, noninterest DDA balances still comprise a large portion of our total deposit mix, representing 25.3% of total deposits at September 30, 2024,” said Almendinger.

Provision for Credit Losses
Due to pristine credit quality, net loan recoveries, modest loan growth and economic forecast improvement within the CECL model, Heartland recorded no provision for credit losses in the third quarter of 2024. This compared to no provision for credit losses in the second quarter of 2024 and a $500,000 provision for credit losses in the third quarter of 2023. 

Noninterest Income
Noninterest income decreased 6.4% to $3.0 million in the third quarter of 2024, compared to $3.2 million in the third quarter a year ago, and decreased 5.8% compared to $3.2 million in the preceding quarter. Gains on sale of loans and originated mortgage servicing rights decreased 2.7% to $689,000 in the third quarter of 2024, compared to $708,000 in the third quarter a year ago, and increased 6.8% compared to $645,000 in the preceding quarter. In the first nine months of 2024, noninterest income increased 1.5% to $9.4 million, compared to $9.2 million in the first nine months of 2023.

“Serviced mortgage loans had another strong quarter, which was partly offset by lower title insurance income,” said Almendinger.

Noninterest Expense
Noninterest expense was $12.4 million during the third quarter of 2024, compared to $11.8 million in the preceding quarter and $12.0 million in the third quarter a year ago. Salary and employee benefits expense, the largest component of noninterest expense, was $7.2 million in the third quarter of 2024, compared to $7.1 million in the preceding quarter and $7.4 million in the third quarter of 2023. Year-to-date, noninterest expense totaled $35.9 million, compared to $35.4 million in the first nine months of 2023.

“The increase in noninterest expense during the quarter was primarily due to the increase in professional fees resulting from the pending merger with German American,” said Almendinger. One-time merger related expenses totaled $671,000 in the third quarter of 2024 and $242,000 in the second quarter of 2024.

The efficiency ratio for the third quarter of 2024 was 69.1%, compared to 65.3% for the preceding quarter and 64.7% for the third quarter of 2023.

Income Tax Provision
In the third quarter of 2024, Heartland recorded $1.1 million in state and federal income tax expense for an effective tax rate of 20.2%, compared to $1.2 million, or 18.5%, in the second quarter of 2024 and $1.1 million, or 18.1%, in the third quarter a year ago.

Credit Quality
“Our overall credit quality metrics continue to remain pristine with minimal signs of stress in the loan portfolio,” said McComb.

At September 30, 2024, the allowance for credit losses plus unfunded commitment liability (ACL + UCL) was $19.1 million, or 1.23% of total loans, compared to $19.1 million, or 1.23% of total loans, at June 30, 2024, and $19.2 million, or 1.26% of total loans, a year ago. As of September 30, 2024, the ACL represented 949% of nonaccrual loans, compared to 1,135% three months earlier and 883% one year earlier.

Nonaccrual loans were $1.9 million at September 30, 2024, compared to $1.6 million at June 30, 2024, and $1.9 million at September 30, 2023. At September 30, 2024, nonaccrual loans totaled 13 loans with an average balance of approximately $145,000. There was $5,000 in loans past due 90 days and still accruing at September 30, 2024, compared to $513,000 at June 30, 2024, and $146,000 at September 30, 2023. Net loan recoveries totaled $32,000 at September 30, 2024, compared to $291,000 in net loan charge-offs at June 30, 2024, and $47,000 in net loan charge-offs at September 30, 2023.

There were no other real estate owned and other nonperforming assets on the books at September 30, 2024, or at June 30, 2024, or at September 30, 2023. Nonperforming assets (NPAs), consisting of nonperforming loans and loans past due 90 days or more, were $1.9 million, or 0.10% of total assets, at September 30, 2024, compared to $2.1 million, or 0.11%, at June 30, 2024, and $2.1 million, or 0.11% of total assets, at September 30, 2023.

About Heartland BancCorp
Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 20 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.

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) Heartland’s plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts; and (ii) 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) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which Heartland is engaged; (3) changes in the interest rate environment may adversely affect net interest income; (4) results may be adversely affected by continued diversification of assets and adverse changes to credit quality; (5) competition from other financial services companies in Heartland’s markets could adversely affect operations; and (6) 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.

Additional Information
Communications in this press release do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The proposed merger will be submitted to both the German American and Heartland shareholders for their consideration. In connection with the proposed merger, German American will file a Registration Statement on Form S-4 with the U.S. Securities and Exchange Commission (“SEC”) that will include a joint proxy statement for German American and Heartland and a prospectus for German American and other relevant documents concerning the proposed merger. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE CORRESPONDING JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER WHEN IT BECOMES AVAILABLE, AS WELL AS ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS TO THOSE DOCUMENTS, AS THEY WILL CONTAIN IMPORTANT INFORMATION. You will be able to obtain a copy of the joint proxy statement/prospectus once filed, as well as other filings containing information about German American, without charge, at the SEC’s website (http://www.sec.gov) or by accessing German American’s website (http://www.germanamerican.com) under the tab “Investor Relations” and then under the heading “Financial Information”. Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to Bradley C. Arnett, Investor Relations, German American Bancorp, Inc., 711 Main Street, Box 810, Jasper, Indiana 47546, telephone 812-482-1314 or to Jennifer Eckert, Investor Relations, Heartland BancCorp, 430 North Hamilton Road, Whitehall, Ohio 43213, telephone 614-337-4600.

German American and Heartland and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of German American and Heartland in connection with the proposed merger. Information about the directors and executive officers of German American is set forth in the proxy statement for German American’s 2024 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 21, 2024, which information has been updated by German American from time to time in subsequent filings with the SEC. Information about the directors and executive officers of Heartland will be set forth in the joint proxy statement/prospectus relating to the proposed merger. Additional information about the interests of those participants and other persons who may be deemed participants in the transaction may also be obtained by reading the joint proxy statement/prospectus relating to the proposed merger when it becomes available. Free copies of this document may be obtained as described above.