Heartland BancCorp
Annual Report 2017

Plain-text annual report

Heartland BancCorp I Parent Company of Heartland Bank 2017 ANNUAL REPORT ANNUAL REPORT 2017 Published April 4, 2018 Heartland BancCorp 2 I 2017 Year in Review Here We Grow Again! 4 I Performance & Excellence Another Year of Achievement 6 I Partnerships & Relationships Opening the Doors 8 I Caring for Our Communities Investing in the Future 10 I Leadership & Teamwork Senior Management & Directors 12 I Looking to the Future A Timeline for Coming Home Heartland BancCorp - ANNUAL REPORT 2017 1 Dear Valued Shareholder, April 4, 2018 I am pleased to report another banner year for Heartland BancCorp, fueled by its wholly owned subsidiary, Heartland Bank. Heartland improved its standing as one of America’s top performing community banks by moving up the American Banker Top 200 Publicly Traded Community Banks chart 20 positions from #77 to #57, based on 3-year average return on equity. The Ohio economy remains strong and consolidation trends in the banking industry continue to provide tailwinds for those who remain. We consistently enhance our franchise by implementing innovative strategies, expanding our markets to serve more communities, and investing in our team. Needless to say, we’re performing well because all hands are on deck, collectively elevating HLAN to new heights each year. We are growing the franchise and embracing who we are as a company, while providing significant shareholder value and community support. The Tax Cuts and Jobs Act of 2017 is by far the largest boost to the business sector in the last 35 years. Coupled with the Administration’s pro-business and regulatory pullback, we have not seen more fertile ground for business since the modern-day inception of Heartland Bank in 1988. Entwined within our results for 2017 are some required balance sheet adjustments that took our $9.4 million net profit down to $8.9 million for the year. However, these short-term marks will allow our effective tax rate to be lowered from 28% to 18% in the coming years. This lower tax rate affords us the opportunity to build capital via retained earnings, avoiding shareholder dilution, and to fund our investment in future growth, thus allowing us to increase dividends as we did at year-end 2017 with a 10% increase. The passage of Senate Bill 2155 into law will provide substantial regulatory relief to community banks. The impact should reduce regulatory burden allowing us to reallocate employee time and empowering the nation’s community banks to support our communities instead of reporting needless information to Washington, ultimately removing roadblocks to economic expansion. The combination of these two events will be very positive for business and for your community bank. The Ohio economy, specifically the Central Ohio region, is on solid footing, leading in job growth, property appreciation, and business expansion. Unemployment in Central Ohio averages 3.9%, home values have increased by over 6%, and business investment has been steady. This combination has led to a decline in troubled loans, and at year-end 2017, your community bank had their lowest delinquency in the last decade as credit quality and underwriting remained strong. These conditions create a desirable market for outsiders and for built-to-sell banks to get their payday. Clients are now very aware of whether their decision makers are local, and they are weary of dealing with those out-of-town players, which has further positioned Heartland as Central Ohio’s Community Bank. While the balance sheet increased 15% and pre-tax profits grew 16% during 2017, we continue to expand and diversify our internal business model to grow lines of business and non-interest income. In 2017, we welcomed Jessica McNamee, CFP, to our team to lead and retool our wealth management business. Shifting the focus to holistic financial planning from a traditional investment management model allows us to assess the needs of each client, thus selecting the right tools to execute their individual plan, much like we do in our commercial lending division. We rebranded the division, “Heartland Planning Associates,” and Jessica, together with her team, has begun executing this customer centric strategy, making Heartland a leader among community banks in shifting this model. I encourage you to see what they have to offer, as it has been very warmly received by our clientele. In addition, we created a loan syndication unit managed by Stuart Schloss, a longtime Heartland Banker who developed as a commercial banker here, at Heartland. Stuart works participations across the Midwest with our sister banks, enabling Heartland to originate and manage lending relationships exceeding $30 million. We also expanded our Agricultural business team, with two new Agribusiness bankers, allowing us to cover the entire state of Ohio. Our community presence increased in 2017 as we expanded to the community of Clintonville. Surrounded by Columbus, Clintonville has its own identity and unique heritage. Culturally rich, socio-economically diverse, and filled with small businesses, this is a perfect fit for a true community bank to prosper, and we have been welcomed with open arms. We also purchased a prominent corner in Upper Arlington at Lane Avenue and Northwest Boulevard to enter one of Columbus’s most prestigious communities. This location is expected to be open in early 2019 with Heartland Planning Associates to be located on the second floor. We are excited to be part of the Whitehall community with the opening of our new Whitehall branch and Corporate Center in early 2018. My message to you, the shareholder, is that we, at Heartland, have the ability and scope to grow our geographic franchise while continuing to deliver strong financial results, which speaks volumes of the team working for you. We broadened our marketing presence in 2017 with the addition of our new .BANK website and sponsorship of Ohio State Athletics. The new website, www.Heartland.Bank, contains the latest web technology, enhances the online banking and credit card login experience, and serves up a new look and feel which is completely compatible with mobile browsers. As an earlier adopter of .BANK, we believe the security enhancements and extra phishing protections were worth the move to protect you, our clients, from cyber threats. Our partnership with The Ohio State University is one of our largest endeavors to date and provides maximum exposure in our market. The interaction with the college, on-air advertising, and in-stadium/arena exposure has been tremendous. This partnership is opening many doors for Heartland as we begin serving middle market companies with $30 million or more in top-line revenue. We continue to invest in our most important portfolio, the people portfolio, because happy associates equate to happy clients. In this effort, we have made several benefit enhancements. First, we modernized our vacation and sick policy to a Paid Time Off (PTO) platform, allowing our associates the freedom to manage their available time as needed. We also increased our contribution to each associate’s HSA (Health Savings account) by 35%, while driving down health insurance premiums by 9% as we implemented ongoing wellness initiatives. Our HR department, under the direction of Alissa Schierberl, now has 25% of our associates on a career path program with the goal of 40% by 2018. Finally, in December 2017, we established a new Support Staff Incentive. These hard-working associates are not eligible for sales incentives; however, they are the force behind the scenes that makes Heartland great. Without them, we would not be able to achieve the high performing results that set us apart from the competition. This benefit was approved and implemented before passage of the Tax Cuts and Jobs Act, as your board felt it was the right thing to do. To assist with recruiting qualified candidates, we partnered with Columbus State Community College to create a Banking Certificate program. Students receiving this state licensed certificate, will enter the workforce with some of the most important knowledge and skills for the banking profession, such as negotiation, customer service, business ethics, and foundational principles of banking. Heartland has long been known for growing community bankers, and this new partnership will help the banking industry for years to come. I am excited for this opportunity to share the wonderful things that are happening at your community bank. The collective efforts and comradery of our associates, the hard work of your senior management team and the leadership of your board of directors have all been leveraged by our consistent behavior and reputation in the marketplace. Focusing on those that treasure value, seek a relationship with their bank, and want to support the local economy has proven to be a winning strategy. Thank you for your continued investment, support, and referrals as we continue to leverage your capital to create shareholder value and help our local communities prosper. Sincerely, G. Scott McComb Chairman, President and CEO 2 2017 YEAR IN REVIEW 3 Here We Grow Again! Asset Growth R/E Loans 16% Increase in 2017 15.31% Increase in Asset Growth 2017 Assisted 188 families to achieve their home ownership dreams in 2017! $113M 2016 $132M 2017 Agribusiness Growth $96.7M Total Managed Ag Portfolio $100M $80M $60M $40M $20M $0 Farmer Mac II Farmer Mac I Portfolio Balances Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Commercial Loan Growth Demand Deposit Growth Our People Rankings & Honors 12% Increase in 2017 $55M Commercial loan growth in 2017 20.08% Increase in 2017 Average 178 full-time employees in 2017 = = $5.06M Asset Per Full Time Employee $201,498 Revenue Per Full Time Employee Stock Performance Non-Interest Income Location Growth 29% Increase in 2017 Gains & Commissions on Loan Sales & Servicing 65% Increase in 2017 #14 Welcome to Clintonville! Opened 10/03/2017 $64.01 Beginning of 2017 $82.60 End of 2017 $603,849 2016 $996,373 2017 Ongoing construction of new Whitehall HQ and branch #15 Secured property in Upper Arlington for branch #16 Columbus CEO Magazine Best Commercial Mortgage Lender U.S. Small Business Administration Ranked #11 in 7a Loan Amounts with 26 loans totaling $4,345,200 through fiscal year end date 09/30/17 American Banker Magazine Ranked 57 on Top 200 Community Banks & Thrifts list, May 2017 Bauer Financial Highest Rating for financial strength & security Columbus Dispatch Best of CBus Top Picks 2017 Nominee for Best Bank U.S. Department of Agriculture Awarded the Preferred Lending Partner designation by the Farm Service Agency Heartland BancCorp - ANNUAL REPORT 2017 4 PERFORMANCE & EXCELLENCE 5 Another Year of Achievement Solid, consistent and exceptional – these words accurately depict the financial performance of Heartland BancCorp throughout its 29-year history, as supported by compounded annual growth rates of 10% in shareholders’ equity and 12.7% in net income for the 29-year period. 2017 marked another year of solid, consistent and exceptional financial performance for Heartland BancCorp, representing the most profitable year in history. Net income for 2017 was impacted by a one-time write-down of deferred tax assets and liabilities, which resulted in additional tax expense of $541,000 or $0.29 per diluted share, due to enactment of the Tax Cuts and Jobs Act on December 22, 2017. Following this one-time expense, net income increased 11% to $8.9 million or $5.43 per diluted share, compared to earnings of $8.0 million, or $4.97 per diluted share, in 2016. Pre- tax net income increased 16% to $13.0 million, compared to $11.1 million in 2016. Return on average assets and equity were 1.05% and 11.82% respectively for the year, including the one-time tax expense, and compare to 1.05% and 11.49% for 2016. Operating results were driven by an increase in loan sales and servicing revenue from agricultural loans and residential mortgages, up $393 thousand or 65% compared to 2016. A 14% growth in loan balances and 20% growth in demand deposit balances helped drive a $3.3 million, or 12% increase in net interest income. A favorable shift in earning asset mix, producing higher loans-to-deposits, resulted in net interest margin expansion to 4.00% for 2017 compared to 3.94% in 2016. Loan loss provision expense increased $450 thousand to $1.095 million compared to $645 thousand in 2016. Finally, Heartland’s efficiency ratio of 60.66% for 2017, includes the company’s continued investment in talent acquisition and branch expansion to support solid, consistent growth and exceptional financial performance. Heartland BancCorp’s performance reflects the strength and commitment of our board of directors, as well as the caliber of the Heartland team. Overview of Operations Financial Condition Net interest income, before provision for loan loss, for 2017 was $31.0 million, up 12% or $3.3 million compared to 2016. Interest income of $36.0 million for 2017 increased $4.1 million or 13%, and interest expense on deposits and borrowings increased $851 thousand or 21% compared to 2016. Although loan quality improved in 2017 and the economy continues to expand, continued strong loan growth led management to record a provision for loan loss of $1.095 million in 2017. With net loan charge-offs of $569 thousand, this resulted in an increase of $526 thousand to the allowance for loan loss, which ended the year at $6.2 million. The allowance as a percent of loans outstanding was .88% at the end of 2017 representing a decline from .91% at the end of 2016. Net interest income after provision for loan loss was $29.9 million in 2017, up $2.8 million or 10% compared to 2016. Non-Interest income increased $1.1 million or 31% to $4.7 million in 2017, compared to $3.6 million for 2016. Life insurance proceeds totaling $301 thousand contributed to higher 2017 non-interest income. Excluding the life insurance proceeds, non-interest income for 2017 expanded $801 thousand or 23% over prior year, exceeding the 3-year compounded annual growth in net income of 11.37% by 198%. The exceptional year-over-year increase is primarily due to higher gains and commissions on sales and servicing revenue of agriculture and residential mortgage loans, which increased by $392 thousand or 65%. Additionally, income from Heartland Planning Associates increased $84 thousand or 33% to $340 thousand, compared to $256 thousand in 2016. Non-Interest expense was $21.6 million for 2017, up $2.1 million or 11% over 2016. Total salary and employee benefit expense increased $1.5 million or 13% in 2017. The higher employee cost was due to Heartland’s continued investment in the future, with increased staff for the new Clintonville branch and expansion of the team to position the company for future growth, along with higher employee and incentive costs supporting strong 2017 growth. Heartland’s investment in technology and branch expansion resulted in occupancy and equipment expense of $2.4 million in 2017, an increase of $287 thousand or 14%. Total assets increased $119.6 million, or 15%, to $900.9 million at December 31, 2017, compared to $781.3 million in 2016. Net loans outstanding increased to $703.5 million, up $85.7 million or 14% compared to net loans of $617.9 million at the end of 2016. Total commercial loans (excluding agriculture) increased $54 million, up 12% at December 31, 2017, of which commercial (non-real estate) loans grew 3% to $57.0 million, and commercial real estate loans increased 14% to $435.3 million. Due to the continued focus on Agricultural lending, net Agricultural loan balances grew 43% to $36.6 million at December 31, 2017. Retail loans outstanding totaled $180.8 million, an increase of 13% over 2016, with residential real estate loans up 16% to $131.8 million. Asset quality reached unparalleled levels in 2017, with non-performing assets declining to .21% of total assets, down from .59% at December 31, 2016. through funds earning asset growth its deposit Heartland relationships. Total deposits at December 31, 2017, were $776.8 million, up 17% from $664.6 million at December 31, 2016. A key element of Heartland’s deposit strategy is to focus on growing commercial and retail transaction accounts. This strategy is evidenced by the $32.6 million or 20% growth in non-interest demand deposit accounts during 2017. Shareholders Equity Total shareholders’ equity remained strong, growing 10% to $78.5 million in 2017. Based upon shares outstanding, the book value of shareholders’ equity increased 8% from $45.10 at year-end 2016 to $48.77 per share at December 31, 2017. Among the financial strengths of Heartland BancCorp is its capital position, which exceeds regulatory guidelines for a “well-capitalized” institution. Tier 1 leverage, common equity Tier 1, Tier 1 risk-based, and total risk-based capital ratios were 8.70%, 10.80%, 10.80%, and 12.40% respectively as of December 31, 2017. Regulatory requirements, for a “well-capitalized” bank, are 5%, 6.5%, 8%, and 10% respectively for these measurements. In 2017, Heartland BancCorp paid a dividend of $1.72 per share, representing a yield of 2.24% on the weighted average market price of $76.82 per share for 2017. Dividends paid resulted in a payout ratio of 30.17% for 2017. The market value of Heartland BancCorp shares increased 29% to $82.60 per share at December 31, 2017. Heartland BancCorp CONSOLIDATED BALANCE SHEETS December 31, 2017 and 2016 CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 2017 and 2016 Assets 2017 2016 Interest Income 2017 2016 Cash and cash equivalents $ 27,933,990 $ 21,360,328 Interest bearing time deposits 250,000 - 117,226,637 103,040,574 4,672,941 5,570,879 703,542,094 617,861,089 24,686,510 2,830,339 40,000 3,113,862 417,353 804,622 12,970,166 2,446,388 $ 900,934,902 14,055,450 2,825,439 400,000 2,240,709 417,353 2,557,509 9,531,991 1,441,033 $ 781,302,354 Available-for-sale securities Held-to-maturity securities, fair value of $4,739,626 and $5,771,601 at December 31, 2017 and 2016, respectively Loans, net of allowance for loan losses of $6,224,947 and $5,698,631 at December 31, 2017 and 2016, respectively Premises and equipment Nonmarketable equity securities Foreclosed assets held for sale Interest receivable Goodwill Deferred income taxes Life insurance assets Other Total assets Liabilities and Shareholders’ Equity Liabilities Deposits Demand $ 195,365,474 $ 162,690,185 Savings, NOW and money market Time Total deposits Short-term borrowings Long-term debt Interest payable and other liabilities Total liabilities 293,381,666 288,058,814 776,805,954 24,664,767 15,460,000 5,447,731 822,378,452 223,817,354 278,166,617 664,674,156 24,456,241 15,460,000 5,311,789 709,902,186 Shareholders’ Equity Common stock, without par value; authorized 5,000,000 shares; issued 2017 - 1,610,628 shares, 2016 - 1,583,228 shares Retained earnings Accumulated other comprehensive loss Total shareholders’ equity Total liabilities and shareholders’ equity Book value per share 25,107,771 24,595,195 53,667,333 (218,654) 78,556,450 $ 900,934,902 48.77 $ 47,545,465 (740,492) 71,400,168 $ 781,302,354 45.10 $ Loans Securities Taxable Tax-exempt Other Total interest income Interest Expense Deposits Borrowings Total interest expense Net Interest Income Provision for Loan Losses Net Interest Income After Provision for Loan Losses Noninterest Income Service charges Net gains and commissions on loan sales and servicing Net realized gain on sales of available-for-sale securities Net realized gain on sales of foreclosed assets Gain on redemption of life insurance proceeds Increase in cash value of life insurance 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 financial institution tax 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 $ 32,497,823 $ 28,478,204 1,622,856 1,604,436 1,615,048 244,582 35,980,309 1,635,314 137,738 31,855,692 4,439,839 508,751 4,948,590 3,702,300 394,985 4,097,285 31,031,719 27,758,407 1,095,000 645,000 29,936,719 27,113,407 2,022,264 1,944,229 996,373 603,849 6,128 139,497 301,278 440,003 757,316 4,662,859 197,711 - - 272,863 541,140 3,559,792 12,876,116 2,413,454 1,271,395 696,566 675,767 250,175 565,828 355,000 2,544,547 21,648,848 12,950,730 4,077,765 $ 8,872,965 5.56 $ 5.40 $ 11,413,273 2,125,591 1,120,524 681,553 563,381 255,321 531,002 368,000 2,479,506 19,538,151 11,135,048 3,146,789 $ 7,988,259 5.08 $ 4.97 $ Heartland BancCorp - ANNUAL REPORT 2017 6 PARTNERSHIPS & RELATIONSHIPS Heartland BancCorp - ANNUAL REPORT 2017 7 2017 brought an exciting partnership for Heartland Bank as we became a proud sponsor of Ohio State Athletics. Tailgating, balloon flying and picture taking ruled on gameday Saturdays! Heartland also initiated a unique fundraising campaign called Touchdown for the Troops in a joint effort with the USO of Central and Southern Ohio. OSDC Bank of the Year OSDC Lender of the Year The Ohio Statewide Development Corporation (OSDC) awarded Heartland Bank with the OSDC Bank of the Year Award for 2017 at the Annual Meeting and Awards Luncheon, held on March 8, 2018, at The Boat House Restaurant. The OSDC is a private, not-for-profit corporation founded in 1982 to provide financing to Ohio small businesses by acting as an agent or conduit for public financing programs. OSDC is a Certified Development Company (CDC) licensed by the U.S. Small Business Administration to provide low-cost, long-term SBA loans to eligible small businesses in Ohio. OSDC is also an Ohio 166 Regional Loan provider as designated by the Ohio Department of Development. In addition to the Bank of the Year Award, VP Director of Commercial Banking Laurie Pfeiffer received the OSDC Lender of the Year Award. Left to right: Jeffrey Darding, OSDC President; Bob Crow; Marlise Hitchens; Marc Ridgway; Scott McComb, Kelly Law; Natalie Hay; Stuart Schloss; Brian Mauntel; Kemper Allison; Mike Amerine; Jeff Sweeney HLAN Heartland BancCorp is currently quoted on the over-the-counter (OTC) Bulletin Board Service under the symbol HLAN. To learn more about Heartland BancCorp shares, please visit ir.Heartland.Bank or call (614) 337-4600. You may also contact Heartland Planning Associates (614) 392-5303 or consult your financial advisor. 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. 8 CARING FOR OUR COMMUNITIES 9 A Tradition of Giving I Donations to Local Charities Sponsored Events Associate Initiatives 2017 at a Glance • Archie Griffin Scholarship Fund • Masonic Learning Centers for Children • All Ohio Balloon Fest • 104.9 The River’s Mission Backpack • Big Brothers Big Sisters of Licking and Perry County with Dyslexia • Mission Backpack • Clintonville-Beechwold Resources Center • Ohio 4-H Celebration of Youth • CD102.5 For The Kids • Charity Newsies • Croton Food Pantry • Dublin Food Pantry • Earl Bruce Foundation • Gahanna Parks and Recreation • Gahanna Residents in Need (G.R.I.N.) • Girl Scouts of Ohio’s Heartland Council • Grove City Food Pantry Emergency Services, Inc. • Ohio Farm Bureau • PCMA Food Pantry of Pickerington • Pelotonia • Reynoldsburg Helping Hands Food Pantry • Second Chance Humane Society • Simon Kenton Council Boy Scouts • St. Matthew Catholic Church • Steps for Sarcoma • The Open Shelter • Grove City Kid’s Association • United Way of Central Ohio • Grow Licking County • Highland Youth Garden • Hilliard Food Pantry • Hurricane Harvey Relief Fund • March of Dimes - March for Babies • USO of Central and Southern Ohio • Victory Ministries for Children’s Outreach Program • Westerville Area Resource Ministry (W.A.R.M.) • Feel Good Music Series at Notes • 20th Annual Heartland Bank Charity Golf • Gahanna Creekside Blues & Jazz Festival Classic • Grove City Arts in the Alley • Hartford Fair • Hilltop Bean Dinner • Pickerington Economic Outlook • Picktown Palooza • Reynoldsburg Tomato Festival • Summer Jam at Westgate Park • Westerville Music and Arts Festival • Whitehall Food Truck Festival • Johnstown Monroe’s Searfoss Elementary School 4th Grade Financial Literacy • 10th Annual Money Matters Free Financial Summit • Tiney’s Team Pelotonia ride for cancer research • Silent Auction at Annual Holiday Party to benefit local food banks and non-profits • Hurricane Harvey Relief Fund • United Way Donation Campaign New .BANK Website This new site provides a domain extension that allows Heartland Bank to forge a more trusted, verified, secure and easily identifiable internet position. Considered a “best practice,” the .BANK environment is exclusive to the banking industry. Heartland Planning Associates Heartland Investment Services became Heartland Planning Associates in November of 2017. Along with sharing a renewed commitment to our customers, the HPA team embraces their new identity as it more accurately describes their new skills. Clintonville Opening on October 3, 2017, and located at 4476 North High Street, this branch offers easy access, a modern open space with comfortable alcoves, and a dog bowl at the front door welcoming our four-legged friends as they pass by on sidewalk strolls throughout the day. This 1950-square-foot location features the bank’s new style of branch design, a drive-through lane, an auto-accessible ATM machine and a night depository. Certificate of Banking Fundamentals Heartland Bank has partnered with Columbus State Community College and the Community Bankers Association of Ohio to create a Certificate of Banking Fundamentals program. This partnership is designed to train the next generation of community bankers. Heartland BancCorp - ANNUAL REPORT 201710 LEADERSHIP & TEAMWORK 11 Our Senior Management Team Our Senior Management team represents what Heartland Bank is all about: people and the relationships we build as a community bank. Each member not only brings detailed insight, knowledge and expertise to Heartland Bank, but also a passion for helping our customers and communities plan, grow and succeed. G. Scott McComb Chairman, President & CEO Carrie L. Almendinger EVP, Chief Financial Officer Steven C. Hines EVP, Chief Administrative Officer (retired 12/31/17) Brian T. Mauntel EVP, Chief Operating Officer Benjamin J. Babcanec SVP, Head of Retail Administration David P. Curby SVP, Mortgage Lending Jennifer L. Eckert SVP, Compliance & Risk Management Officer, Corporate Secretary Ashley A. Trout SVP, Director of Distribution Strategies Joseph A. Duffey VP, Director of Credit Administration Jessica McNamee VP, Director of Financial Planning Laurie Pfeiffer VP, Director of Commercial Banking Alissa R. Schierberl VP, Director of Human Resources Tarne Tassniyom VP, Director of Information Technology Gretchen A. Hof AVP, Director of Marketing Heartland BancCorp Directors William A. Dodson, Jr. David C. Kotary EVP/Community Relations Director Rhema Christian Center Retired, Senior Vice President Marsh & McLennan Agency, LLC Gary D. Paine Owner Pilot Freight Services Beverly J. Donaldson President Inns Management Group Cheryl Krueger CEO Life Support Jay B. Eggspuehler, Esq. G. Scott McComb Partner Isaac Wiles Jodi L. Garrison CPA, Partner Hirth, Norris & Garrsion, LLP Chairman, President and CEO Heartland Bank Robert C. Overs Retired, EVP & COO Technical Rubber Company, Inc. Heartland BancCorp Directors Emeriti I. Robert Amerine American Apex Corporation Jack J. Eggspuehler Aerosafe, Inc. Tiney M. McComb Heartland BancCorp Cheryl C. Poulton Tech International John R. Haines John R. Haines Insurance Agency Arthur G.H. Bing, M.D. Plastic & Reconstructive Surgeon Gerald K. McClain The Jerry McClain Company, Inc. William J. Schottenstein Principal Arshot Investment Corporation George R. Smith Retired, EVP & CFO Heartland Bank Richard A. Vincent President & CEO Osteopathic Heritage Foundation & Osteopathic Heritage Foundation of Nelsonville Heartland BancCorp Officers G. Scott McComb Chairman, President and CEO Jay B. Eggspuehler, Esq. Vice Chairman Jodi L. Garrison Secretary Carrie L. Almendinger Treasurer Heartland BancCorp - ANNUAL REPORT 201712 LOOKING TO THE FUTURE A Timeline for Coming Home When space and efficiency are challenged, Heartland Bank answers with a bold and innovative state-of-the-art Corporate Center to anchor the strategic demands of the 21st century. Breaking ground with a horse and plow like his father, Scott McComb surrounded himself with his associates as he took the first ceremonial slice into what would become the Heartland Bank Corporate Center. The pictures below represent a very small pictorial diary of a project that was several years in the making. 1 2 4 18 14 3 19 13 17 12 16 INTERSTATE 71 11 9 5 6 15 10 INTERSTATE 270 7 INTERSTATE 70 8 CENTRAL OHIO FOOTPRINT 1. Croton 740-893-2191 9. Capitol Square 614-416-0244 17. Friendship Village of Dublin 2. Johnstown 740-967-6500 10. Grove City 614-875-1884 3. Westerville 614-839-2265 11. Wilson Road 614-351-2100 4. Newark 740-349-7888 5. Gahanna 614-337-4605 12. Hilliard 13. Dublin 614-710-1640 614-798-8818 6. Stygler Road 614-475-7024 14. Clintonville 614-745-0070 7. Reynoldsburg 614-416-0400 15. Whitehall 614-416-4601 8. Pickerington 614-321-4919 16. Upper Arlington Coming Soon! 614-923-0575 18. Worthington Christian Village 614-846-6076 19. Friendship Village of Columbus 614-394-8686 General Info Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates fifteen full-service banking offices. Heartland Bank, founded in 1911, provides full service commercial, small business, and consumer banking services; alternative investment 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. 430 North Hamilton Road Whitehall, OH 43213 Member FDIC NMLS# 440231 Equal Housing Lender Heartland.Bank 1(800) 697-0049 

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