2013
Annual Report
Invest in
your
community.
Heartland BancCorp
Mission stateMent
It is Heartland Bank’s mission to provide the best personalized financial services at competitive prices for the
economic growth and well being of individuals and businesses within our communities. This goal shall be
accomplished through well-trained, caring employees with unquestionable integrity, who practice sound and
innovative banking principles, which will maximize bank profits and growth.
Heartland Bank’s sHared Values
• Superior service is our highest priority
• Productivity is an integral part of our corporate strategy
• Team players receive the highest rewards
• Quality is rewarded as well as quantity
• Rewards will include advancement, recognition and/or incentive compensation
• Through access to accurate information, we will strive to keep ourselves and our customers informed
• We will constantly seek to improve how we are perceived by our customers
• We will empower our employees to perform their duties in a responsible manner
• We will seek to know our cost of doing business
• We encourage the exploring of new ideas
• Our business is to provide customer satisfaction profitability
• We value loyalty, honesty and integrity in our relationships
• We are committed to the enrichment of our local communities through our involvement
dear sHareHolders,
yOur Community …. yOur Community Bank
It is with great pride and excitement that we share yOur
success of the last year. This is not a typo! It is simply a
reinforcement that YOU, the shareholders, and WE, the
community bankers have successfully grown the prosperity
of OUR communities as a direct result of our collective
efforts. yOur investment in capital, beliefs, time, hard work
and financial education have lead each of the communities
we serve to strive for better and far reaching success.
Leveraging yOur capital for local success is now “popular,”
however we have been strategically doing it since 1911. This
effort was renewed and is alive today through the guidance,
philosophies and generosity of Tiney M. McComb, our
modern day founder. Rest assured in this changing world,
this will remain the constant that melds our moral fabrics
into one unbreakable bond.
Interest rates changed significantly in the second quarter
as the Fed signaled that they were prepared to ease bond
purchases and begin to unwind their layers of quantitative
easing. This caused long-term interest rates to increase,
sending the 10 year to 3.04% as of 12/31/13 from 1.78% as of
the prior year end. While the effects of this move were not
felt as much by businesses and consumers with short term
borrowing, it did stop the refinance boom as 30-year fixed
mortgages moved into the 4% plus range. This increase in
rates allowed yOur community bank to begin a path of
growth once again as it was economically viable
and most importantly profitable to do so.
The Federal Reserve’s move also signaled an
improving economy. Both nationally and
locally we have seen the economy improve
and begin to return to somewhat normal
levels of production, sales and commerce.
While government spending has been cut,
America’s business community has begun to
add significantly to the GDP. Even with the
Federal Government’s continued suppression of the business
world and banking sector in the form of the Affordable Care
Act, Dodd Frank, and the endless list of Executive orders, the
private economy is still growing. In light of this adversity
and change, yOur community bank posted its second best
earnings in its 102 year existence.
Locally, we find Columbus having one of the fastest growing
job markets in the nation. Housing has rebounded while
construction and development of our city’s core is fast paced.
Through the efforts of our Governor and the Ohio legislature,
the state is once again competitive in attracting businesses
and retaining the talent that is born, raised and educated
right here in Ohio.
yOur continued success could not be made possible without
the dedication and hard work of our talented staff. We strive
to make improvements in execution, focus on growing
talent from within, and look to provide the best relationship
banking experience possible.
Community banking is alive and
well in the Heartland.
Invest in yOur Community.
G. Scott McComb
Chairman, President and CEO
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taking stock in Heartland
Heartland Bank has been invested in your community, its people and its businesses since the bank was founded in
1911. You have the opportunity to invest in us as Heartland BancCorp, the parent company of Heartland Bank.
Interested in becoming a Shareholder?
We invite you to support your community!
To learn more about Heartland BancCorp shares, please contact one of the following
• Greig McDonald at Community Banc Investments, (740) 826-7601
• Your personal broker or Investment Advisor
• Heartland Investment Services, (614) 839-2265
• Scott McComb, Chairman, President and CEO of Heartland Bank or
Linda Miller, Vice President, Corporate Secretary, (614) 337-4600
• Visit us online at ir.HeartlandBank.com
250
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175
150
125
100
75
50
2008
Heartland BancCorp
HLAN Total Return Performance
SNL Bank Pink > $500 M
Heartland BancCorp
SNL Midwest Bank
2009
2010
2011
2012
2013
For Years Ending December 31,
Invest in
your
community.
This graph depicts the yearly percentage change in Heartland BancCorp’s
Heartland BancCorp
cumulative total shareholder return against the cumulative return of the
SNL Bank Pink Sheet index of banking institutions over $500 million in total
Earnings per Share Trend
assets and the SNL Midwest Bank index over the last 5-year fiscal periods.
Calculations include the reinvestment of dividends and are indexed to the
base year measurement point (closing price on the last trading day before the
$3.27
$2.96
beginning of the registrant’s fifth preceding fiscal year).
$3.34
$3.04
$2.59 $2.68
$2.32
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$-
2007 2008 2009 2010 2011 2012 2013
Earnings Per Share
Note: 2012 Earnings exclude life insurance benefit of $1.983 million
Statements made are a reflection of past performance of the bank and holding company and should not be considered a projection of future performance. Investments involve varying degrees
of risk, including possible loss of principal. Funds held in corporate stock are not considered a deposit of the bank or bank holding company, not guaranteed by the bank or holding company and
are not insured by the FDIC or any government agency and may lose value.
keeping your coMMunity sMiling
Hinda Mitchell stated, “Heartland feels like
the banks I grew up with and visited with
my parents (except they haven’t given me
a toaster yet.) But it’s not old-fashioned,
except in its values. All the technologies
I need – online banking, mobile banking,
ATMs and more – are available to me.”
Randy Malloy, Owner and General
Manager of WWCD (CD102.5 FM) stated,
“I decided to entrust my financial future
to them and moved all of my business
accounts to Heartland Bank. Heartland
has a small bank feel with a large bank
capacity. They are locally owned and
operated, just like us. My faith in financial
institutions was reborn.”
Bishop Donald J. Washington, Senior
Pastor of the Mount Hermon Missionary
Baptist Church stated, “By refinancing
with Heartland Bank, and lowering our
interest rate, we were given much needed
‘breathing room’. In my estimation,
Heartland Bank ‘has heart for this
community,’ and I will be eternally grateful
for their very professional but personal and
passionate touch.
Mark Wood, President of The Wood
Companies said, “I am thankful that
Heartland Bank had the confidence in
my company to lend on the speculative
project at a time that most lenders weren’t
providing construction financing. All 10,000
square feet of the office space has now
been pre-leased and residential leasing is
extremely strong.”
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BJ Roach stated, “Heartland feels like a
hometown bank. They care about you, and
you can get your questions answered fast. I
still prefer going personally to the Grove City
office as does my son, Chris.” Chris states,
“We like to come into the bank whenever
possible. We love the staff at Grove City.
I also utilize online banking to check
balances, cleared checks, etc. Although I
don’t use the mobile app much, it’s good
to know it’s there if I need it. My daughter
has her checking account at Heartland and
uses her debit card extensively. She also uses
Heartland’s online banking and mobile app.
My granddaughter comes in with me and
makes deposits to her own savings account.”
2013 Financial reView
Heartland BancCorp once again posted solid earnings in 2013 with
net income topping $5.216 million or $3.34 per share compared
to earnings of $6.699 million or $4.32 per share for the year ended
December 31, 2012. Earnings in 2013 reached the second highest
level of annual earnings historically. Net income for the year ended
December 31, 2013 totaled $5.216 million or $3.34 per share
compared to earnings of $6.699 million or $4.32 per share for
the year ended December 31, 2012. Net interest income, before
provision for loan loss for 2013 of $21.785 million increased $48
thousand, compared to $21.737 million for 2012. Provision for
loan loss of $1.970 million for 2013 declined $1.416 million or 42%
compared to provision expense of $3.386 million for the full year
2012. The decrease in the bank’s loan loss provision resulted from a
continued improvement in credit quality as evidenced by a lower
level of non-performing loans at the end of 2013. Total non-interest
income of $3.647 million in 2013 declined $1.731 million or 32%
compared to $5.378 million for 2012. The higher level of earnings
and non-interest income in 2012 was due to the receipt of $1.983
million of net key man life insurance proceeds from the loss of
Heartland BancCorp’s former chairman during 2012. Non-interest
or operating expense of $16.575 million in 2013 increased 7% from
$15.506 million in 2012.
Earnings for the fourth quarter ending December 31, 2013 totaled
$1.404 million or $0.90 per share up 79% or $619 thousand
compared to earnings of $785 thousand or $0.50 per share for
the fourth quarter of 2012. Net interest income before provision
for loan loss was $5.761 million up 1% or $70 thousand from the
prior year amount of $5.690 million. Provision for loan loss of
$405 thousand for the fourth quarter of 2013 declined $1.575
million or 80% below provision expense of $1.980 million in the
fourth quarter of 2012. Net interest income after the provision
for loan loss totaled $5.356 million for the fourth quarter 2013 up
44% from $3.711 million for the prior year fourth quarter. Non-
interest income for the fourth quarter of 2013 was $783 thousand
down 28% compared to $1.096 million for the same period in
2012. Included in fourth quarter 2012 non-interest income were
gains recorded on the sale of securities totaling $286 thousand.
Operating expense was $4.315 million up 9% from $3.945 million
for the fourth quarter 2012.
Total assets outstanding increased to $580 million at year-end
2013. Net loans outstanding increased to $423 million, up
7% compared to net loans of $396 million at the end of 2012.
Transaction accounts grew $13.4 million or 5% year over year
improving the mix of transaction verses time deposits. A key
element of Heartland’s deposit strategy over the past three
years has been focused on growing our relationships through
our transaction account base while continuing to reduce our
dependence on public funds and large non-core certificates of
deposits. Total shareholders’ equity at the end of 2013 totaled $54.2
million, a decrease of 3% from $55.7 million at year-end 2012. The
year over year decline in shareholders’ equity resulted from a $4.9
million after tax decrease in the bank’s available for sale securities
portfolio as rising interest rates have reduced the fair market value
of these securities. Partially offsetting the market value adjustment
was a $3.2 million or an 11% increase in retained earnings resulting
from current year earnings of $5.2 million reduced by dividends
paid totaling $2.015 million. Based upon shares outstanding the
book value of shareholders’ equity totaled $35.00 as of December
31, 2013 down $1.15 from $36.15 as of year-end 2012. Among
the financial strengths of Heartland BancCorp is its capital position
which exceeds regulatory guidelines and compares favorably
to our peers and other Ohio based banks. Tier 1 Leverage, Tier 1
Risk Based, and Total Risk Based capital ratios were 9.5%, 13.6%
and 14.7% respectively as of December 31, 2013. Regulatory
requirements for a well-capitalized bank are 5%, 6% and 10%
for Tier 1 Leverage, Tier 1 Risk Based and Total Risk Based capital
respectively. During October 2013 Heartland BancCorp increased
its quarterly cash dividend 5% to $0.3378 per share or $1.35
annually. Dividends paid resulted in a dividend payout ratio of 29%
in 2013.
In closing, we believe the local economy will continue to
strengthen in 2014 presenting further growth opportunities for
Heartland and continued benefits for our clients and shareholders.
Thank you for your continued support and investment.
Heartland BancCorp
Consolidated Balance Sheets
December 31, 2013 and 2012
Heartland BancCorp
Consolidated Statements of Income
December 31, 2013 and 2012
Assets
Cash and cash equivalents
Available-for-sale securities
Held-to-maturity securities, fair value
$6,929 and $7,685 at December 31, 2013
and 2012, respectively
Loans, net of allowance for loan losses of
$4,676,231 and $5,425,761 at December 31, 2013
and 2012, respectively
Premises and equipment
Federal Reserve and Federal Home Loan Bank stock
Foreclosed assets held for sale
Interest receivable
Goodwill
Deferred income taxes
Other
Total assets
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Demand
Saving, NOW and money market
Time
Total deposits
Short-term borrowing
Long-term debt
Interest payable and other liabilities
Total liabilities
Shareholders’ Equity
Common stock, without par value; authorized
5,000,000 shares; issued 2013- 1,549,922,
2012- 1,541,507 shares
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity
Book value per share
2013
$ 15,943,266
112,421,722
2012
$ 22,196,209
133,165,503
Interest Income
Loans
Securities
Taxable
Tax-exempt
6,626,777
6,865,393
Other
2013
2012
$ 21,596,152
$ 22,032,899
1,454,271
1,792,899
42,375
2,129,644
1,786,602
41,400
Total interest income
24,885,697
25,990,545
422,967,223
11,969,597
1,889,950
1,616,294
1,807,632
417,353
2,600,821
2,097,943
$ 580,358,578
$ 82,076,014
188,825,641
219,921,798
490,823,453
31,136,220
-
4,152,059
526,111,732
23,355,806
32,287,838
(1,396,798)
54,246,846
$ 580,358,578
$
35.00
395,597,738
11,292,861
1,889,050
2,606,427
1,878,136
417,353
756,631
1,951,232
$ 578,616,533
$ 74,237,342
183,228,633
229,579,340
487,045,315
29,897,750
3,093,000
2,855,547
522,891,612
23,131,730
29,086,743
3,506,448
55,724,921
$ 578,616,533
$
36.15
Interest Expense
Deposits
Borrowings
Total interest expense
Net Interest Income
Provision for Loan Losses
2,868,355
232,171
3,100,526
21,785,171
1,970,000
3,900,074
353,244
4,253,318
21,737,227
3,386,100
Net Interest Income After Provision for Loan Losses
19,815,171
18,351,127
Noninterest income
Service charges
Net Gains and commissions on loan sales
Net realized gains on available-for-sale securities
Net realized gains/(losses) on sales of foreclosed assets
Benefit in excess of life insurance cash value
Other
Total noninterest income
Noninterest Expense
Salaries and employee benefits
Net occupancy and equipment expense
Data processing fees
Professional fees
Marketing expense
Printing and office supplies
State franchise taxes
FDIC Insurance premiums
Other
Total noninterest expense
Income before Income Tax
Provision for Income Taxes
Net Income
Basic Earnings Per Share
Diluted Earnings Per Share
1,949,909
70,045
687,248
(29,129)
-
968,914
3,646,987
8,990,953
1,780,983
926,392
785,666
346,260
161,958
619,566
478,982
2,483,963
16,574,723
6,887,435
1,671,275
$ 5,216,160
$
$
3.38
3.34
1,957,488
53,134
459,201
21,359
1,983,025
903,903
5,378,110
8,503,139
1,784,499
849,418
754,361
395,228
188,775
586,829
466,849
1,976,430
15,505,528
8,223,709
1,524,985
$ 6,698,724
$
$
4.35
4.32
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connecting witH our coMMunities
Heartland Bank Sponsored Events
Creekside Blues & Jazz Festival
Johnstown Fireman’s Festival
Hartford Fair
Reynoldsburg Tomato Festival
Grove City Arts in the Alley
Westerville Music & Arts Festival
North Market’s Columbus Microbrew Festival
Heartland Bank Hosted Events
Annual Economic Forum
Power Breakfast Series
Spotlight Series
Employee Initiatives
Money Matters Free Financial Summit
Johnstown Monroe’s Searfoss Elementary School 4th grade
Financial Literacy Initiative
16th annual Heartland Bank Charity Golf Classic
Silent Auction at Annual Holiday Party to
benefit local food banks
Pelotonia
Digital World
Financial Advice Videos on Heartland Bank
YouTube Channel
Updated look to Online Banking
E-Money Matters monthly newsletters
Updated Mobile App Capability
American Banker Magazine’s 62nd Best
Community Bank in the Country
Bob Crow, Bill Daily, Laurie Pfeiffer and Joe Duffey
Wil Trapp of the Columbus Crew
Annual Economic Forum
WWR Outstanding
Community Partner
Award
Reynoldsburg Farmer’s Market
Columbus Microbrew Festival
Money Matters Free Financial Summit
Creekside Blues & Jazz Festival
Johnstown Monroe’s Searfoss Elementary School
Build out of 101 South High Street
Accolades
62nd Best Community Bank in the Country
WWR Outstanding Community Partner Award
Ohio Statewide Development Corporation
Community Bank of the Year
Ohio Statewide Development Corporation
Lender of the Year, Bob Crow
2014 and Beyond
Columbus Crew partnership development
Build out of 101 South High Street
Hartford Fair
Grove City Arts in the Alley
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Board of Directors
Heartland Banccorp
and Bank directors
Arthur G.H. Bing M.D., Plastic & Reconstructive Surgeon
William A. Dodson, Jr., EVP/Community Relations Director,
Rhema Christian Center
Jay B. Eggspuehler, Esq., Isaac Wiles
Jodi L Garrison, CPA, Partner, Hirth, Norris & Garrsion, LLP
John R. Haines, Retired, John R. Haines Insurance Agency
David C. Kotary, Senior Vice President, Brower Insurance
Gerald K. McClain, President, The Jerry McClain Company, Inc.
G. Scott McComb, Chairman, President and CEO
Robert C. Overs, EVP & COO, Technical Rubber Company, Inc.
Gary D. Paine, Owner, Pilot Freight Services
Richard A. Vincent, President & CEO, Osteopathic Heritage Foundation
and Osteopathic Heritage Foundation of Nelsonville
directors eMeritus
I. Robert Amerine, Chairman, American Apex Corporation
Jack J. Eggspuehler, President, Aerosafe, Inc.
Tiney M. McComb, Founder, Heartland BancCorp
Cheryl C. Poulton, Executive Chairman, Tech International
Heartland Banccorp oFFicers
G. Scott McComb, Chairman, President and CEO
Jay B. Eggspuehler, Esq., Vice Chairman
Jodi L. Garrison, Secretary
George R. Smith, Executive Vice President, Chief Financial Officer
Heartland Bank
senior ManageMent
G. Scott McComb
Chairman, President and CEO
Steven C. Hines
Executive Vice President, Chief Operating Officer
George R. Smith
Executive Vice President, Chief Financial Officer
Carrie L. Almendinger
Senior Vice President, Controller
David P. Curby
Senior Vice President, Mortgage Lending
William A. Daily, Jr.
Senior Vice President, Commercial Lending Manager
Benjamin J. Babcanec
Vice President, Retail Sales Manager
Joseph A. Duffey
Vice President, Director of Credit Administration
Jennifer L. Eckert
Vice President, Compliance Officer
Linda E. Miller
Vice President, Corporate Secretary
Ashley A. Trout
Vice President, Retail Operations Manager
Mindy N. King
AAO, Director of Human Resources
Gretchen A. Hof
Director of Marketing
Heartland inVestMent serVices
Mark J. Posey
VP, Director of Investment Services, Heartland; Investment Executive, Infinex
Heartland insurance serVices, llc.
Agent Representation
Brower Insurance: a Marsh & McLennan Agency, LLC. Company
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Heartland locations to serve you
Corporate Office, Gahanna (614) 337-4600
Newark, 44 West Locust Street (740) 349-7888
Columbus, 101 South High Street (614) 416-0244
Reynoldsburg, 6887 East Main Street (614) 416-0400
Croton, 12 North Main Street (740) 893-2191
Dublin, 6500 Frantz Road (614) 798-8818
West Columbus, 130 North Wilson Road (614) 351-2100
Westerville, 450 South State Street (614) 839-2265
Friendship Village of Dublin, 6000 Riverside Drive (614) 923-0575
Gahanna, 850 North Hamilton Road (614) 337-4605
Gahanna, 67 North Stygler Road (614) 475-7024
Grove City, 2365 Old Stringtown Road (614) 875-1884
Johnstown, 730 West Coshocton Street (740) 967-6500
Heartland Client Services, (614) 416-BANK (2265), (800) 697-0049
Heartland Insurance Services, LLC. (614) 918-2300
Heartland Investment Services, (614) 839-2265
Member FDIC
heartlandbank.com
Central Ohio’s Community Bank®