Whitehall, OH – July 29, 2024 – Heartland BancCorp (“Heartland” and “the Company”) (OTCQX: HLAN), parent company of Heartland Bank (“Bank”), today reported net income increased 5.0% to $5.1 million, or $2.50 per diluted share, in the second quarter of 2024, compared to $4.8 million, or $2.39 per diluted share, in the second quarter of 2023, and remained relatively unchanged compared to $5.1 million, or $2.51 per diluted share, in the preceding quarter. In the first six months of 2024, net income increased 9.4% to $10.2 million, or $5.01 per diluted share, compared to $9.3 million, or $4.58 per diluted share, in the first six 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 October 10, 2024, to shareholders of record as of September 25, 2024. Heartland has paid regular quarterly cash dividends since 1993.

“Heartland’s second quarter and year-to-date 2024 earnings were strong, fueled by moderate loan and deposit growth generated in our market footprints in Columbus and Greater Cincinnati,” stated G. Scott McComb, Chairman, President and Chief Executive Officer. “Net loan balances increased steadily during the second quarter, largely due to lighter production related to our efforts to slow down loan production near the end of 2023. Despite stiff competition in our markets, we continue to focus on maintaining strong credit quality metrics, while remaining disciplined on loan pricing, with newly funded loans having a weighted rate of 7.74% during the second quarter.”

Second Quarter 2024 Financial Highlights (at or for the three months ended June 30, 2024)

• Net income was $5.1 million, or $2.50 per diluted share, compared to $4.8 million, or $2.39 per diluted share, in the second quarter of 2023.
• Heartland recorded no provision for credit losses during the second quarter of 2024, compared to $800,000 for the second quarter a year ago.
• Net interest margin was 3.31%, compared to 3.37% in the preceding quarter and 3.61% in the second quarter a year ago.
• Second quarter revenues (net interest income plus noninterest income) were $18.0 million, compared to $18.4 million in the second quarter a year ago.
• Annualized return on average assets was 1.08%, compared to 1.10% in the second quarter of 2023.
• Annualized return on average tangible common equity was 13.47%, compared to 14.19% in the second quarter a year ago.
• Net loans increased 1.3% during the quarter to $1.53 billion at June 30, 2024, compared to $1.51 billion three months earlier.
• Total deposits increased 1.0% during the quarter to $1.65 billion at June 30, 2024, compared to $1.63 billion three months earlier.
• Credit quality remains pristine with nonperforming loans to gross loans of 0.13% and nonperforming assets to total assets of 0.11% at June 30, 2024.
• Tangible book value increased 12.1% to $76.81 per share, compared to $68.54 per share a year ago.
• Declared a quarterly cash dividend of $0.759 per share.

Balance Sheet Review
Assets
Total assets increased 6.3% to $1.92 billion at June 30, 2024, compared to $1.81 billion a year earlier, and increased 2.3% compared to three months earlier. Heartland’s loan-to-deposit ratio was 93.1% at June 30, 2024, compared to 92.8% at March 31, 2024, and 95.5% at June 30, 2023.

Securities increased 31.0% to $233.3 million at June 30, 2024, compared to $178.0 million a year earlier, and increased 4.8% compared to $222.6 million three months earlier. Securities comprise 12.1% of total assets at June 30, 2024, compared to 11.9% three months prior and 9.9% a year ago.

“We continue to focus on growing the investment portfolio, increasing our asset based liquidity during the quarter to 10.86% of assets, compared to 6.98% a year earlier, which has been a strategic focus over the past year,” said Carrie Almendinger, EVP and Chief Financial Officer.

Average earning assets increased to $1.80 billion in the second quarter of 2024, compared to $1.78 billion in the first quarter of 2024, and $1.67 billion in the second quarter of 2023. The average yield on interest-earning assets was 5.87% in the second quarter of 2024, up seven basis points from 5.80% in the preceding quarter, and up 48 basis points from 5.39% in the second quarter a year ago.

Loan Portfolio
“Net loan growth picked up modestly during the second quarter, increasing $19.5 million compared to the prior quarter end,” said Ben Babcanec, EVP and Chief Operating Officer. “While loan demand picked up during the second quarter, we remain disciplined with loan pricing which is resulting in controlled slower growth.”

Net loans increased 1.3% to $1.53 billion at June 30, 2024, compared to $1.51 billion at March 31, 2024, and increased 2.9% compared to $1.49 billion at June 30, 2023. Commercial loans increased 1.7% from year ago levels to $180.0 million, and comprise 11.6% of the total loan portfolio at June 30, 2024. Owner occupied commercial real estate loans (CRE) increased 6.4% to $291.1 million at June 30, 2024, compared to a year ago, and comprise 18.8% of the total loan portfolio. Nonowner occupied CRE loans increased modestly to $495.5 million, compared to a year ago, and comprise 32.0% of the total loan portfolio at June 30, 2024. 1-4 family residential real estate loans increased 1.9% from year-ago levels to $505.0 million and represent 32.6% of total loans. Home equity loans increased 21.6% from year-ago levels to $59.0 million and represent 3.8% of total loans, while consumer loans decreased 4.7% from year-ago levels to $18.9 million and represent 1.2% of the total loan portfolio at June 30, 2024.

Deposits
Total deposits were $1.65 billion at June 30, 2024, a 1.0% increase compared to $1.63 billion at March 31, 2024, and an $87.1 million, or 5.6% increase, compared to $1.56 billion at June 30, 2023. “Average deposits increased $30.5 million, or 1.9%, to $1.67 billion in the second 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 selective with deposit pricing.” 

At June 30, 2024, noninterest bearing demand deposit accounts decreased 10.3% compared to a year ago and represented 25.2% of total deposits; savings, NOW and money market accounts decreased modestly compared to a year ago and represented 40.9% of total deposits; and CDs increased 33.2% compared to a year ago and comprised 33.8% of total deposits. The average cost of deposits was 2.61% in the second quarter of 2024, compared to 2.45% in the first quarter of 2024 and 1.76% in the second quarter of 2023.

Shareholders’ Equity
Shareholders’ equity increased 2.4% to $167.7 million at June 30, 2024, compared to $163.8 million three months earlier and increased 11.0% compared to $151.1 million a year earlier. At June 30, 2024, Heartland’s tangible book value was $76.81 per share compared to $74.88 at March 31, 2024, and $68.54 at June 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 8.12% at June 30, 2024, compared to 8.09% at March 31, 2024, and 7.70% at June 30, 2023.

Liquidity
Heartland had ample sources of available liquidity as of June 30, 2024, including a $220 million line of credit at the Federal Home Loan Bank, as well as additional credit lines of $120 million. Nearly 71% of Heartland’s client deposit balances were FDIC insured or collateralized as of June 30, 2024.

Operating Results
In the second quarter of 2024, Heartland generated a ROAA of 1.08% and a ROATCE of 13.47%, compared to 1.09% and 13.59%, respectively, in the first quarter of 2024 and 1.10% and 14.19%, respectively, in the second quarter a year ago.

Net Interest Income/Net Interest Margin
Net interest income, before the provision for credit losses, decreased 1.7% to $14.8 million in the second quarter of 2024, compared to $15.0 million in the second quarter a year ago, and decreased modestly compared to $14.9 million in the preceding quarter. In the first six months of 2024, net interest income decreased 2.4% to $29.6 million, compared to $30.4 million in the first six months of 2023.

Total revenues (net interest income, before the provision for credit losses, plus noninterest income) were $18.0 million in the second quarter of 2024, a 2.4% decrease compared to $18.4 million in the second quarter a year ago, and unchanged compared to the preceding quarter. Year-to-date, total revenues were $36.0 million, compared to $36.4 million in the same period a year earlier.

Heartland’s net interest margin was 3.31% in the second quarter of 2024, compared to 3.37% in the preceding quarter and 3.61% in the second quarter of 2023. “Similar to the prior quarter, 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 25.2% of total deposits at June 30, 2024,” said Almendinger.

Heartland’s net interest margin continues to remain above the peer average posted by the Dow Jones U.S. MicroCap Bank Index with total market capitalization under $250 million as of March 31, 2024.*

Provision for Credit Losses
Due to pristine credit quality, low net loan charge offs, modest loan growth and economic forecast improvement within the CECL model, Heartland recorded no provision for credit losses in the second quarter of 2024. This compared to no provision for credit losses in the first quarter of 2024, and a $800,000 provision for credit losses in the second quarter of 2023.

*As of March 31, 2024, the Dow Jones U.S. MicroCap Bank Index tracked 175 banks with total common market capitalization under $250 million for
the following ratios: NIM* of 3.14%.

Noninterest Income
Noninterest income decreased 5.3% to $3.2 million in the second quarter of 2024, compared to $3.4 million in the second quarter a year ago, and increased 3.0% compared to $3.1 million in the preceding quarter. Gains on sale of loans and originated mortgage servicing rights decreased 8.4% to $645,000 in the second quarter of 2024, compared to $704,000 in the second quarter a year ago, and increased 24.5% compared to $518,000 in the preceding quarter. In the first six months of 2024, noninterest income increased 5.7% to $6.3 million, compared to $6.0 million in the first six months of 2023. “We experienced stabilization on the fee income side during the quarter, and improvement compared to the linked quarter, with serviced mortgage loans reaching an all-time high of $385 million,” said Almendinger.

Noninterest Expense
Noninterest expense was $11.8 million during the second quarter of 2024, unchanged compared to the preceding quarter and a modest increase compared to $11.7 million in the second quarter a year ago. Salary and employee benefits expense decreased to $7.1 million in the second quarter of 2024, compared to $7.3 million in both the preceding quarter and in the second quarter of 2023. Year-to-date, noninterest expense totaled $23.5 million, compared to $23.4 million in the first six months of 2023.

“Salary and employee benefits, the largest component of noninterest expense, were lower in part due to lower incentive compensation from muted loan growth and fewer full-time employees,” said Almendinger.

The efficiency ratio for the second quarter of 2024 was 65.3%, compared to 65.5% for the preceding quarter and 63.5%
for the second quarter of 2023.

Income Tax Provision
In the second quarter of 2024, Heartland recorded $1.2 million in state and federal income tax expense for an effective tax rate of 18.5%, compared to $1.1 million, or 18.1%, in the first quarter of 2024 and $1.1 million, or 18.3%, in the second 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 June 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 $19.4 million, or 1.27% of total loans, at March 31, 2024, and $18.7 million, or 1.24% of total loans, a year ago. As of June 30, 2024, the ACL represented 1,135% of nonaccrual loans, compared to 985% three months earlier and 789% one year earlier.

Nonaccrual loans were $1.6 million at June 30, 2024, compared to $1.8 million at March 31, 2024, and $2.2 million at June 30, 2023. At June 30, 2024, nonaccrual loans totaled 12 loans with an average balance of approximately $131,000. There was $513,000 in loans past due 90 days and still accruing at June 30, 2024, compared to $149,000 at March 31, 2024, and zero at June 30, 2023. Net loan charge-offs totaled $291,000 at June 30, 2024, compared to $30,000 in net loan charge-offs at March 31, 2024, and $43,000 in net loan charge-offs at June 30, 2023.

There were no other real estate owned and other nonperforming assets on the books at June 30, 2024, or at March 31, 2024. This compared to $5,000 in other real estate owned and other nonperforming assets at June 30, 2023. Nonperforming assets (NPAs), consisting of nonperforming loans and loans past due 90 days or more, were $2.1 million, or 0.11% of total assets, at June 30, 2024, compared to $2.0 million, or 0.10%, at March 31, 2024, and $2.2 million, or 0.12% of total assets, at June 30, 2023.

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