WHITEHALL, Ohio, Jan. 22, 2019 (GLOBE NEWSWIRE) -- Heartland BancCorp (“the company,” and “the bank”) (OTCQB: HLAN), today reported that growing revenues and expanding net interest margin contributed to record fourth quarter net income of $3.1 million, or $1.68 per diluted share. This compares with net income of $2.1 million or $1.25 per diluted share in the fourth quarter of 2017, which includes additional tax expense of $541,000 or $0.29 per diluted share from a one-time write-down of its deferred tax assets and liabilities. In the third quarter of 2018, net income was $3.06 million, or $1.83 per diluted share. For the full year ended December 31, 2018, net income increased to a record $11.4 million, or $6.67 per diluted share, compared to $8.9 million, or $5.40 per diluted share, in 2017.
The company also announced its board of directors increased its regular quarterly cash dividend by 10% to $0.52 per share. The dividend will be payable April 10, 2019, to shareholders of record as of March 25, 2019.
“We are pleased to announce record net income for both the year and the fourth quarter, as we continue to grow our balance sheet and gain market share,” stated G. Scott McComb, Chairman, President and CEO. “Double digit loan and deposit growth combined with net interest margin expansion, higher noninterest income and the lower 18.1% blended effective federal income tax rate contributed to the record financial performance achieved this year. Our focus in the coming year remains on expanding market share in Central Ohio, while continuing to look for growth opportunities in other Ohio markets.”
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.
Fourth Quarter Financial Highlights (at or for the period ended December 31, 2018)
- Achieved record net income of $3.1 million, or $1.68 per diluted share.
- Net interest margin expanded 15 basis points to 4.04%, compared to 3.89% in the preceding quarter.
- Annualized return on average assets was 1.20%.
- Annualized return on average equity was 12.66%.
- Total assets increased 16.2% to $1.05 billion, compared to $900.9 million a year earlier.
- Net loans increased 16.1% to $816.8 million from a year ago.
- Total deposits increased 13.3% to $880.4 million from a year ago.
- Tangible book value per share increased 15.0% to $56.30 per share compared to $48.97 three months earlier and grew 16.1% from $48.51 per share one year earlier.
- Increased quarterly cash dividend by 10% to $0.52 per share, which represents a 2.57% yield based on the December 31, 2018, stock price ($81.00).
Balance Sheet Review
“We grew the loan portfolio $21.7 million, or almost 3%, during the fourth quarter, due to the hard work of our lending teams. The year-over-year increase in the loan portfolio is largely concentrated in residential real estate, owner occupied commercial real estate and agriculture loan segments,” said McComb.
Net loans increased 16.1% to $816.8 million at December 31, 2018, compared to $703.5 million at December 31, 2017, and increased 2.7% compared to $795.3 million at September 30, 2018. Owner occupied commercial real estate loans (CRE) increased 16.8% to $228.5 million at December 31, 2018, compared to a year ago and comprise 27.7% of the total loan portfolio. Non-owner occupied CRE loans increased 13.2% to $247.8 million compared to a year ago and comprises 30.1% of the total loan portfolio. 1-4 family residential real estate loans were up 22.2% from year ago levels to $208.3 million and represent 25.3% of total loans. Commercial loans were up 16.0% from year ago levels to $100.0 million at December 31, 2018 and comprise 12.1% of the total loan portfolio. Home equity loans decreased 2.1% from year ago levels to $27.9 million and represent 3.4% of total loans and consumer loans increased 18.7% from year ago levels to $11.7 million and represent 1.4% of the total loan portfolio.
Total deposits increased 13.3% to $880.4 million at December 31, 2018, compared to $776.8 million a year earlier and increased modestly compared to $875.4 million three months earlier. Noninterest bearing demand deposit accounts increased 19.1% at December 31, 2018, compared to a year ago, and represented 26.4% of total deposits. Savings, NOW and money market accounts increased 9.6% compared to a year ago and represented 36.5% of total deposits and CDs increased 13.3% when compared to a year ago and comprised 37.1% of the total deposit portfolio at December 31, 2018.
Total assets increased 16.2% to $1.05 billion at December 31, 2018, compared to $900.9 million a year earlier. Heartland’s shareholders’ equity increased 46.4% to $115.0 million at December 31, 2018, compared to $78.6 million a year earlier, reflecting the capital raise during the fourth quarter. At year end, Heartland’s tangible book value increased 16.1% to $56.30 per share compared to $48.51 per share one year earlier.
Operating Results
“With the four 25-basis-point rate hikes implemented in 2018, our yields on interest-earning assets expanded faster than our cost of funds. As a result, our net interest margin improved 15 basis points compared to the preceding quarter,” said McComb. Heartland’s net interest margin was 4.04% in the fourth quarter of 2018, compared to 3.89% in the preceding quarter and 3.96% in fourth quarter a year ago. For the full year 2018, Heartland’s net interest margin was 3.90% compared to 3.87% in 2017.
Net interest income before the provision for loan loss increased 17.4% to $9.8 million in the fourth quarter of 2018, compared to $8.3 million in the fourth quarter a year ago, and increased 6.2% compared to $9.2 million in the preceding quarter. For the year, net interest income increased 15.9% to $36.0 million compared to $31.0 million in 2017.
Total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 18.7% to $11.3 million in the fourth quarter, compared to $9.5 million in the fourth quarter a year ago, and increased 5.7% from $10.7 million in the preceding quarter. For the full year, revenues increased 15.5% to $41.2 million, compared to $35.7 million in 2017.
Heartland’s noninterest income increased 28.1% to $1.5 million in the fourth quarter, compared to $1.2 million in the fourth quarter a year ago, and increased 2.9% compared to $1.4 million in the preceding quarter. “Our recent purchase of TransCounty Title Agency in August contributed $316,000 to noninterest income during the fourth quarter. This acquisition complements our strong mortgage operation and strategically expands the financial services we offer in the Ohio markets we serve,” said McComb.
The full year net gains and commissions on loan sales and servicing increased 39.3% to $1.4 million in 2018, compared to $996,000 in the prior year. For the full year, noninterest income increased 12.9% to $5.3 million, compared to $4.7 million in 2017.
Fourth quarter noninterest expenses were $7.1 million, compared to $6.5 million in the preceding quarter and $5.7 million in the fourth quarter a year ago. For the year, noninterest expense totaled $25.8 million, compared to $21.6 million in 2017. The increase was due to costs associated with the company’s branch expansion, including its new corporate headquarters, as well as costs associated with the subsidiary TransCounty Title Agency. The efficiency ratio for the fourth quarter of 2018 was 62.75%, compared to 61.28% for the preceding quarter and 59.86% in the fourth quarter of 2017.
Credit Quality
Nonaccrual loans decreased to $1.8 million at December 31, 2018, compared to $4.0 million three months earlier and $1.9 million at December 31, 2018. There were $97,000 in loans past due 90 days and still accruing at December 31, 2018, compared to $24,000 at September 30, 2018, and no loans past due 90 days and still accruing a year ago.
Performing restructured loans that were not included in nonaccrual loans at December 31, 2018, were reduced to $293,000, compared to $1.8 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 December 31, 2018. Non-performing assets (NPAs), consisting of non-performing loans, OREO, and loans delinquent 90 days or more, were $1.9 million, or 0.18% of assets, at December 31, 2018, compared to $4.0 million, or 0.39% of assets, three months earlier, and $1.9 million, or 0.21% of assets, a year ago.
Heartland’s fourth quarter provision for loan losses was $375,000, the same as in the preceding quarter. In the fourth quarter of 2017 the provision for loan losses was $255,000. The allowance for loan losses was $7.5 million, or 0.92% of total loans at December 31, 2018, compared to $7.3 million, or 0.91% of total loans at September 30, 2018, and $6.2 million, or 0.88% of total loans a year ago. As of December 31, 2018, the allowance for loan losses represented 420.0% of nonaccrual loans compared to 183.7% three months earlier, and 336.5% one year earlier. Net charge-offs were $99,000 in the fourth quarter of 2018. This compares to net charge-offs of $2,000 in the preceding quarter and $416,000 in the fourth 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 | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | |||||||
| Cash and cash equivalents | 29,922 | 37,908 | 27,934 | |||||||
| Interest bearing time deposits | - | - | 250 | |||||||
| Available-for-sale securities | 140,556 | 128,886 | 117,227 | |||||||
| Held-to-maturity securities, fair values of, $1,568,346, $3,085,795 and $4,739,626 respectively | 1,565 | 3,085 | 4,673 | |||||||
| Commercial | 100,028 | 91,008 | 86,235 | |||||||
| Commercial Real Estate: | ||||||||||
| Owner occupied | 228,461 | 229,174 | 195,662 | |||||||
| Non Owner occupied | 247,780 | 236,502 | 218,867 | |||||||
| Residential Real Estate: | ||||||||||
| 1-4 Family | 208,335 | 203,547 | 170,531 | |||||||
| Home Equity | 27,869 | 30,266 | 28,481 | |||||||
| Consumer | 11,660 | 11,893 | 9,822 | |||||||
| Total loans | 824,133 | 802,389 | 709,598 | |||||||
| Net deferred loan costs, premiums and discounts | 197 | 230 | 169 | |||||||
| Allowance for loan losses | (7,547 | ) | (7,271 | ) | (6,225 | ) | ||||
| Net loans | 816,783 | 795,348 | 703,542 | |||||||
| Premises and equipment | 28,504 | 27,894 | 24,687 | |||||||
| Nonmarketable equity securities | 3,526 | 3,527 | 2,830 | |||||||
| Foreclosed assets held for sale | - | - | 40 | |||||||
| Interest receivable | 4,169 | 4,215 | 3,114 | |||||||
| Goodwill | 1,069 | 1,069 | 417 | |||||||
| Intangible Assets | 446 | 442 | - | |||||||
| Deferred income taxes | 805 | 805 | 805 | |||||||
| Life insurance assets | 16,555 | 16,443 | 12,970 | |||||||
| Other | 3,277 | 3,808 | 2,446 | |||||||
| Total assets | $ | 1,047,177 | $ | 1,023,430 | $ | 900,935 | ||||
| Liabilities and Shareholders' Equity | ||||||||||
| Liabilities | ||||||||||
| Deposits | ||||||||||
| Demand | $ | 232,682 | $ | 210,639 | $ | 195,365 | ||||
| Saving, NOW and money market | 321,497 | 347,126 | 293,382 | |||||||
| Time | 326,261 | 317,613 | 288,059 | |||||||
| Total deposits | 880,441 | 875,378 | 776,806 | |||||||
| Short-term borrowings | 34,768 | 49,274 | 24,665 | |||||||
| Long-term debt | 10,460 | 10,460 | 15,460 | |||||||
| Interest payable and other liabilities | 6,523 | 6,610 | 5,448 | |||||||
| Total liabilities | 932,192 | 941,722 | 822,378 | |||||||
| Shareholders' Equity | ||||||||||
| Common stock, without par value; authorized 5,000,000 shares; 2,013,572, 1,637,522 and 1,610,628 shares issued, respectively | 55,080 | 25,739 | 25,108 | |||||||
| Retained earnings | 61,812 | 59,652 | 53,667 | |||||||
| Accumulated other comprehensive income (expense) | (1,907 | ) | (3,683 | ) | (219 | ) | ||||
| Total shareholders' equity | 114,985 | 81,708 | 78,556 | |||||||
| Total liabilities and shareholders' equity | $ | 1,047,177 | $ | 1,023,430 | $ | 900,935 | ||||
| Book value per share | $ | 57.06 | $ | 49.90 | $ | 48.77 | ||||
| Heartland BancCorp | ||||||||||||||
| Consolidated Statements of Income | ||||||||||||||
| Three Months Ended, | Twelve Months Ended | |||||||||||||
| Interest Income | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |||||||||
| Loans | $ | 10,838 | $ | 10,185 | $ | 8,774 | $ | 39,211 | $ | 32,498 | ||||
| Securities | - | - | - | - | - | |||||||||
| Taxable | 666 | 599 | 438 | 2,219 | 1,623 | |||||||||
| Tax-exempt | 404 | 404 | 419 | 1,642 | 1,615 | |||||||||
| Other | 148 | 120 | 77 | 459 | 245 | |||||||||
| Total interest income | 12,056 | 11,308 | 9,708 | 43,531 | 35,980 | |||||||||
| Interest Expense | - | - | - | - | - | |||||||||
| Deposits | 2,009 | 1,817 | 1,219 | 6,662 | 4,440 | |||||||||
| Borrowings | 252 | 263 | 146 | 914 | 509 | |||||||||
| Total interest expense | 2,261 | 2,080 | 1,365 | 7,576 | 4,949 | |||||||||
| Net Interest Income | 9,795 | 9,227 | 8,343 | 35,955 | 31,032 | |||||||||
| Provision for Loan Losses | 375 | 375 | 255 | 1,500 | 1,095 | |||||||||
| Net Interest Income After Provision for Loan Losses | 9,420 | 8,852 | 8,088 | 34,455 | 29,937 | |||||||||
| Noninterest income | - | - | - | - | - | |||||||||
| Service charges | 544 | 555 | 517 | 2,143 | 2,022 | |||||||||
| Net Gains and commissions on loan sales and servicing | 204 | 416 | 220 | 1,387 | 996 | |||||||||
| Title Insurance Income | 195 | 86 | - | 281 | - | |||||||||
| Net realized gains on available-for-sale securities | - | 2 | - | (64 | ) | 6 | ||||||||
| Net realized gain/(loss) on sales of foreclosed assets | - | - | - | 10 | 139 | |||||||||
| Gain on redemption of life insurance proceeds | - | - | - | - | 301 | |||||||||
| Increase in cash value of life insurance | 116 | 111 | 176 | 435 | 440 | |||||||||
| Other | 420 | 268 | 162 | 1,072 | 686 | |||||||||
| Total noninterest income | 1,479 | 1,438 | 1,155 | 5,264 | 4,663 | |||||||||
| Noninterest Expense | - | - | - | - | - | |||||||||
| Salaries and employee benefits | 4,256 | 3,772 | 3,393 | 14,887 | 12,876 | |||||||||
| Net occupancy and equipment expense | 870 | 845 | 686 | 3,393 | 2,413 | |||||||||
| Data processing fees | 340 | 361 | 324 | 1,392 | 1,271 | |||||||||
| Professional fees | 177 | 241 | 248 | 782 | 697 | |||||||||
| Marketing expense | 228 | 213 | 123 | 866 | 676 | |||||||||
| Printing and office supplies | 83 | 65 | 79 | 300 | 250 | |||||||||
| State franchise taxes | 152 | 156 | 140 | 621 | 566 | |||||||||
| FDIC Insurance premiums | 102 | 132 | 97 | 467 | 355 | |||||||||
| Other | 866 | 749 | 596 | 3,067 | 2,545 | |||||||||
| Total noninterest expense | 7,074 | 6,534 | 5,686 | 25,775 | 21,649 | |||||||||
| Income before Income Tax | 3,825 | 3,756 | 3,558 | 13,944 | 12,951 | |||||||||
| Provision for Income Taxes | 711 | 695 | 1,502 | 2,529 | 4,078 | |||||||||
| Net Income | $ | 3,114 | $ | 3,062 | $ | 2,056 | $ | 11,415 | $ | 8,873 | ||||
| Basic Earnings Per Share | $ | 1.71 | $ | 1.88 | $ | 1.28 | $ | 6.82 | $ | 5.56 | ||||
| Diluted Earnings Per Share | $ | 1.68 | $ | 1.83 | $ | 1.25 | $ | 6.67 | $ | 5.40 | ||||
| ADDITIONAL FINANCIAL INFORMATION | |||||||||||||||||
| (Dollars in thousands except per share amounts)(Unaudited) | Three Months Ended | Twelve Months Ended | |||||||||||||||
| Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |||||||||||||
| Performance Ratios: | |||||||||||||||||
| Return on average assets | 1.20 | % | 1.21 | % | 0.92 | % | 1.16 | % | 1.05 | % | |||||||
| Return on average equity | 12.66 | % | 15.12 | % | 10.54 | % | 13.15 | % | 11.82 | % | |||||||
| Net interest margin | 4.04 | % | 3.89 | % | 3.96 | % | 3.90 | % | 3.87 | % | |||||||
| Efficiency ratio | 62.75 | % | 61.28 | % | 59.86 | % | 62.44 | % | 60.66 | % | |||||||
| Asset Quality Ratios and Data: | As of or for the Three Months Ended | ||||||||||||||||
| Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | |||||||||||||||
| Nonaccrual loans | $ | 1,797 | $ | 3,959 | $ | 1,850 | |||||||||||
| Loans past due 90 days and still accruing | 97 | 24 | - | ||||||||||||||
| Non-performing investment securities | - | - | - | ||||||||||||||
| OREO and other non-performing assets | - | - | 40 | ||||||||||||||
| Total non-performing assets | $ | 1,894 | $ | 3,983 | $ | 1,890 | |||||||||||
| Non-performing assets to total assets | 0.18 | % | 0.39 | % | 0.21 | % | |||||||||||
| Net charge-offs quarter ending | $ | 99 | $ | 2 | $ | 416 | |||||||||||
| Allowance for loan loss | $ | 7,547 | $ | 7,271 | $ | 6,225 | |||||||||||
| Nonaccrual loans | $ | 1,797 | $ | 3,959 | $ | 1,850 | |||||||||||
| Allowance for loan loss to non accrual loans | 419.99 | % | 183.65 | % | 336.48 | % | |||||||||||
| Allowance for loan losses to loans outstanding | 0.92 | % | 0.91 | % | 0.88 | % | |||||||||||
| Restructured loans included in non-accrual | $ | 324 | $ | 324 | $ | 432 | |||||||||||
| Performing restructured loans (RC-C) | $ | 293 | $ | 1,818 | $ | 1,712 | |||||||||||
| Book Values: | |||||||||||||||||
| Total shareholders' equity | $ | 114,985 | $ | 81,708 | $ | 78,556 | |||||||||||
| Less, goodwill | 1,515 | 1,512 | 417 | ||||||||||||||
| Shareholders' equity less goodwill and intangible assets | $ | 113,470 | $ | 80,197 | $ | 78,139 | |||||||||||
| Common shares outstanding | 2,013,572 | 1,637,522 | 1,610,628 | ||||||||||||||
| Less treasury shares | - | - | - | ||||||||||||||
| Common shares as adjusted | 2,015,276 | 1,637,522 | 1,610,628 | ||||||||||||||
| Book value per common share | $ | 57.06 | $ | 49.90 | $ | 48.77 | |||||||||||
| Tangible book value per common share | $ | 56.30 | $ | 48.97 | $ | 48.51 | |||||||||||
Contacts: G. Scott McComb, Chairman, President & CEO
Heartland BancCorp 614-337-4600