Market Overview

Heartland BancCorp Earns $2.7 Million, or $1.67 Per Share, in Second Quarter, Assets Surpass $1.0 Billion; Declares Quarterly Cash Dividend of $0.4731 per Share

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WHITEHALL, Ohio, July 17, 2018 (GLOBE NEWSWIRE) -- Heartland BancCorp ("the company," and "the bank") (OTCQB:HLAN), today reported net income increased 21.9% to $2.7 million, or $1.63 per diluted share, in the second quarter of 2018, compared to $2.2 million, or $1.37 per diluted share, in the second quarter a year ago.  In the preceding quarter, net income was $2.5 million, or $1.52 per diluted share.  In the first six months of 2018, net income increased 28.9% to $5.2 million, or $3.15 per diluted share, compared to $4.1 million, or $2.50 per diluted share, in the first six months a year ago.

The company also announced its board of directors declared a regular quarterly cash dividend of $0.4731 per share.  The dividend will be payable October 10, 2018, to shareholders of record as of September 25, 2018.

"Heartland's record second quarter operating results were highlighted by robust loan and deposit growth and solid net interest income," stated G. Scott McComb, Chairman, President and CEO.  "Over the past five years, we have expanded our asset base at a compounded annual rate of 12.1% and surpassed the $1 billion milestone this quarter.  We will continue to look for growth opportunities in and around our surrounding markets that benefit both our customers and shareholders."

Second Quarter Financial Highlights (at or for the period ended June 30, 2018)

  • Net income increased 21.9% to $2.7 million, compared to $2.2 million in the second quarter of 2017.
  • Pre-tax income increased 5.6% to $3.3 million, compared to $3.1 million in the second quarter of 2017.
  • Net interest margin was 3.91% compared to 3.93% in the preceding quarter and 3.97% in the second quarter a year ago.
  • Annualized return on average assets was 1.12%.
  • Annualized return on average equity was 13.73%.
  • Total assets increased 18.6% to $1.0 billion, compared to $845.1 million a year earlier.
  • Net loans increased 18.2% to $784.4 million from a year ago.
  • Total deposits increased 17.8% to $844.4 million from a year ago.
  • Tangible book value per share was $48.99 per share compared to $47.97 three months earlier and $47.16 per share one year earlier.
  • Declared quarterly cash dividend of $0.4731 per share, which represents a 2.13% yield based on the June 30, 2018, stock price ($88.85).

Balance Sheet Review

"We have been growing the bank at a robust rate and a highlight of the quarter was surpassing $1.0 billion in assets," said McComb.  "Contributing to this, net loans increased 7.0% during the quarter and 18.2% year over year, with solid production in all loan types, and acquiring targeted client relationships."

Net loans were $784.4 million at June 30, 2018, compared to $733.3 million at March 31, 2018, and increased 18.2% compared to $663.4 million at June 30, 2017. 

Heartland's total deposits increased 17.8% to $844.4 million at June 30, 2018, compared to $716.8 million a year earlier and increased 3.7% compared to $814.2 million three months earlier.  Noninterest bearing demand deposit accounts represented 24.4%; savings, NOW and money market accounts represented 40.2%; and CDs comprised 35.4% of the total deposit portfolio, at June 30, 2018. 

Total assets increased 18.6% to $1.0 billion at June 30, 2018, compared to $845.1 million a year earlier and shareholders' equity increased 6.5% to $80.3 million at June 30, 2018, compared to $75.4 million one year ago.  At quarter end, Heartland's tangible book value increased 3.9% to $48.99 per share compared to $47.16 per share one year earlier.

Operating Results

Heartland's net interest income before the provision for loan loss increased 15.6% to $8.7 million in the second quarter of 2018, compared to $7.5 million in the second quarter a year ago, and increased 6.0% compared to $8.2 million in the preceding quarter.  For the first six months of 2018, net interest income increased 15.7% to $16.9 million compared to $14.6 million in the first six months of 2017.

"Our net interest margin contracted two basis points compared to the preceding quarter, primarily as a result of a slight increase in borrowings to fund loan demand," said McComb.  Heartland's net interest margin was 3.91% in the second quarter of 2018, compared to 3.93% in the preceding quarter and 3.97% in the second quarter a year ago.  In the first six months of 2018, Heartland's net interest margin was 3.91% compared to 3.95% in the first six months of 2017.

Total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 11.6% to $9.8 million in the second quarter, compared to $8.7 million in the second quarter a year ago, and increased 2.5% from $9.5 million in the preceding quarter.  Year-to-date, revenues increased 14.9% to $19.3 million, compared to $16.8 million in the same period one year earlier.

Solid growth in interest income more than offset lower noninterest income, due to fewer SBA loan sales.  Heartland's noninterest income decreased to $1.0 million in the second quarter, compared to $1.2 million in the second quarter a year ago, and $1.3 million in the preceding quarter.  The net gains and commissions on loan sales and servicing was $220,000 in the second quarter of 2018, compared to $547,000 in the preceding quarter and $307,000 in the year ago quarter.  In the first six months of 2018, noninterest income increased 9.6% to $2.3 million, compared to $2.1 million in the first six months of 2017.

Second quarter noninterest expenses were $6.1 million, which was unchanged compared to the preceding quarter.  Noninterest expenses totaled $5.4 million in the second quarter a year ago.  Year-to-date, noninterest expense totaled $12.2 million, compared to $10.6 million in the first six months of 2017, reflecting continued branch and team expansion, as well as Heartland's new Headquarters. The efficiency ratio for the second quarter of 2018 was 62.44%, compared to 63.36% for the preceding quarter and 61.43% in the second quarter of 2017.  

Credit Quality

Nonaccrual loans increased to $6.6 million at June 30, 2018, compared to $3.1 million a year earlier but decreased compared to $6.8 million three months earlier.  The increase compared to a year ago was primarily due to one lending relationship that was placed on nonaccrual during the preceding quarter.  There were $55,000 in loans past due 90 days and still accruing at June 30, 2018, compared to $62,000 at March 31, 2018, and $22,000 at June 30, 2017.

Performing restructured loans that were not included in nonaccrual loans at June 30, 2018, were $1.8 million compared to $1.7 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 no other real estate owned (OREO) and other non-performing assets on the books at June 30, 2018.  Non-performing assets (NPAs), consisting of non-performing loans, OREO, and loans delinquent 90 days or more, were $6.7 million, or 0.67% of assets, at June 30, 2018, compared to $6.9 million, or 0.74% of assets, three months earlier, and $3.2 million, or 0.39% of assets, a year ago.

Heartland's second quarter provision for loan losses was $375,000, the same as in the preceding quarter.  In the second quarter of 2017 the provision for loan losses was $255,000.  The allowance for loan losses was $6.9 million, or 0.87% of total loans at June 30, 2018, compared to $6.6 million, or 0.90% of total loans at March 31, 2018, and $6.2 million, or 0.93% of total loans a year ago.  As of June 30, 2018, the allowance for loan losses represented 104.2% of nonaccrual loans compared to 97.2% three months earlier, and 198.5% one year earlier.  Net charge-offs were $125,000 in the second quarter of 2018.  This compares to net recoveries of $49,000 in the preceding quarter and net charge-offs of $20,000 in the second quarter a year ago. 

About Heartland BancCorp

Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 15 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 2018, Heartland was ranked #37 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 12/31/17.

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   June 30, 2018   March 31, 2018   June 30, 2017  
  Cash and cash equivalents     38,369       30,839       26,859  
  Interest bearing time deposits     -        250       -   
  Available-for-sale securities     121,654       118,440       108,841  
  Held-to-maturity securities, fair value $3,696,526 and $5,608,318 at June 30, 2018 and 2017,                  
  respectively and $4,701,998 at March 31, 2018     3,671       4,655       5,465  
  Loans, net of allowance for loan losses of $6,897,958 and $6,237,997 at June 30, 2018 and 2017,                  
  respectively and $6,648,933 at March 31, 2018     784,379       733,320       663,438  
  Premises and equipment     27,052       26,229       18,079  
  Nonmarketable equity securities     2,836       2,830       2,830  
  Foreclosed assets held for sale     -        -        -   
  Interest receivable     3,593       3,695       2,366  
  Goodwill     417       417       417  
  Deferred income taxes     805       805       2,374  
  Life insurance assets     16,332       13,054       12,909  
  Other      3,003       3,048       1,477  
    Total assets $   1,002,110   $   937,582    $   845,056  
                 
Liabilities and Shareholders' Equity              
  Liabilities              
  Deposits              
  Demand $   206,013   $   208,713    $   162,887  
  Saving, NOW and money market     339,082       311,966       257,704  
  Time     299,331       293,498       296,233  
    Total deposits     844,425       814,177       716,823  
  Short-term borrowings     56,105       24,471       31,996  
  Long-term debt     15,460       15,460  
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