Parent Company of Heartland Bank
& TransCounty Title Agency
ANNUAL REPORT
Table of
CONTENTS
A Message From Our Chairman, President & CEO . . . . . . . . . . . . . . . . . . . 3
Our Impact: A Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Another Year of Achievement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . .11
Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . .12
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Leadership Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
April 5, 2021
Dear Valued Shareholders,
Amidst the happenings of 2020, I am pleased to report another
successful year for your community bank. The COVID-19 response by
your Heartland community bankers was simply amazing, and some
of the steps taken in this time benefited shareholders. We upgraded
our digital platform, closed on our first acquisition, and completed a
conversion of that client base all while learning to work from home and
socially distance. We’re now in the residential mortgage and servicing
business in a big way as our focus on noninterest income continues.
We were also able to improve our team by adding some key roles and
elevating our associates from within.
It was the start of 2020, and all through the industry capital was high,
delinquency low, and the outlook was rosy. The first quarter was our
best on record, and it seemed as if we were off to another banner
growth year. We completed our digital banking conversion in February
with most of our clients up to speed quickly. During the first quarter, the
commercial group originated $141 million in total commitments, and
we garnered many new relationships very early in the year. All systems
were “go” until everything changed in a matter of days.
COVID-19 arrived on the scene, first with travel restrictions and then
the shutdown of non-essential activities. We had to make important
decisions on how to move forward. The health and safety of our
associates and clients came first as we were able to establish a work-
from-home stance and safe delivery of services within five days. Not
knowing the future, we tapped the capital markets and raised additional
capital to help ensure we were prepared for the unknown. Knowing
that the banking system would be part of the delivery of aid to our
communities, we started to prepare for the governor’s plan on how to
keep commerce closed, but not totally lose the economy in the process.
Unlike the Great Recession of 2008, the Federal Government, via the
regulatory agencies, was the first to offer assistance with guidance for
forbearance and payment deferment for loan clients of all sizes. The
Cares Act was signed and the Payroll Protection Program would be
the main vehicle to deliver aid through the banking system and the
SBA. I’m proud to say that your Heartland community bankers, led by
Laurie Pfeiffer and Donna Baskerville, worked 24-7 for over six weeks.
We established a “put me in coach” system to recruit every able-bodied
community banker. Our efforts were so successful that we were able
to not only help our clients, but many other businesses in need. The
fee income associated with this program enabled the bank to increase
reserves and offset expenses attributed to aid delivery. Overall, your
community bank originated 1,075 PPP loans for $129 million, helping
16,000+ employees. Community bankers across America outpaced
their big bank and credit union competition making 60% of all PPP
loans while only holding 20% of the US banking market share. Even
Jim Cramer from CNBC was quoted as saying, “I should have been
with a community bank.”
Second, we could diversify our balance sheet with the addition of a
mortgage and servicing book to enhance noninterest income. Third
and most important, we could obtain top talent in the mortgage area
along with decades of experience from one of the best sources around,
the Kenkel family. Our conversion team did a great job, and we were
able to open as Heartland Bank in October!
The summer was a challenging time as social unrest and rioting were
prevalent across the country. We have taken special care to look inside
our organization and make sure that we are all fully aware of, and
have respect for, the cultural, racial, and ethnic differences that make
America the melting pot that it is. Diversity and inclusion activities,
conversations and actions will continue so that we can all be aware of
societal discrimination and justice for all.
In September, we made a strategic hire in Matt Booms to help us
streamline and manage the mortgage business. His extensive experience
and leadership have helped manage and grow the Victory asset. The
rate environment also created a tsunami of mortgage refinance activity
which has been a very successful source of revenue and growth. In 2020
alone, the on balance sheet mortgage portfolio grew by $92 million,
or 40%, and the off balance sheet service mortgage portfolio grew by
$341 million, or 1,366%. The mortgage team generated approximately
$5.3 million in noninterest income, up $4.8 million or 963% from 2019.
In October, Ben Babcanec was promoted to SVP, Chief Operating
Officer. With 19 years of experience in our bank starting as a teller
and working his way up, Ben was the best choice for this position. He
is a past board member of many local non-profit organizations and is
currently a board member of the Community Bankers Association of
Ohio. Most importantly, he is a creator and defender of the Heartland
family culture. With this addition, we have weaponized our culture and
will not let anything or anybody pose a threat to it. One of my most
proud moments in banking was to promote Ben to this post.
At the onset of the pandemic, we didn’t think we could have a banner
year; however, the hard work and dedication of your Heartland
community bankers held the day. Record revenue and bottom-line
profits kept the bank in line with past years. Receiving the SBA 2019
Top 10 Lender of the Year Award for the Columbus District Region
and Ranking #58 on the Top 200 Publicly Traded Community Banks
and Thrifts were also honors we received from the industry. However,
the largest and most heartfelt accolades came from our clients and
communities as they sent many notes of thanks and appreciation for
the bank’s efforts during such a trying time in human history.
When life becomes uncertain, there’s one thing understood: we’re here
for you at Heartland Bank, where banking feels good! Thank you for
your continued support and patronage.
We were also in the middle of an acquisition. On
April 7, we closed on our acquisition of Victory
Community Bank
in Northern Kentucky and
welcomed the Kenkel family to ours. John G.
“Jack” Kenkel Jr. joined your board of directors
and Jack’s sons, John and Eric, also joined the
Heartland team. There were three reasons why we
were excited about this match-up. First, we could
enter the vibrant Northern Kentucky market with
locations in Boone, Kenton and Campbell counties.
Sincerely,
G. Scott McComb
Chairman, President & CEO
2
3
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
OUR
IMPACT:
A YEAR IN
REVIEW
153%
Increase y/y
252%
Increase y/y
2019
2020
2019
2020
Total Serviced
Residential RE Loans
$727.4 million
Loan Sales &
Servicing Income
$7.3 million
67%
Increase y/y
22%
Increase y/y
88%
Increase y/y
Demand
Deposits
$426.8 million
Commercial
Loans
$763.3 million
Revenue Growth
Heartland Planning Associates
$1.04 million
25%
Increase y/y
59.9%
Decrease of 3.6%
in 2020
14%
Increase y/y
2%
Increase y/y
Operating Revenue
$60.5 million
Efficiency
Ratio
Diluted EPS
$7.33
Tangible Book Value
$63.85
P P P
Molly Moo
People Portfolio
261
FTE Average
$232,000
revenue per FTE
P P P
Molly Moo
4
Another year of
ACHIEVEMENT
Changes in Financial Condition:
Total assets at December 31, 2020, were $1.55
billion, an increase of 39% compared to $1.11
billion at December 31, 2019. Loans held for
investment increased $237.1 million or 26% to
$1.14 billion at December 31, 2020, compared to
$899.0 million at December 31, 2019. The largest
components of this increase were in Commercial
loans which
increased $106.3 million and
Residential 1-4 Family loans which increased
$91.9 million. The 2020 results were impacted
by Heartland’s participation in the Paycheck
increased
Protection Program
Commercial balances by approximately $101
million. In addition, Heartland acquired Victory
Community Bank in April of 2020 which increased
loan balances by $120.2 million.
(PPP) which
Nonperforming assets consisting of nonaccrual
loans, loans past due 90 days and still accruing,
and Other Real Estate Owned (“OREO”) totaled
$3.0 million, or 0.19% of total assets at December
31, 2020, an increase of $0.6 million from 2019.
Net charge offs increased during 2020 to $0.97
million, which was a $0.69 million increase
compared to 2019. The allowance for loan loss
at December 31, 2020, now covers nonaccrual
loans at 476.5%, up from 471.9% at December
31, 2019.
Heartland BancCorp funds earning asset growth
through
its deposit relationships. Deposits
increased $368.6 million or 39.0% to $1.31 billion
at December 31, 2020. Deposit growth for the
year included $170.8 million in demand deposits
and $172.4 million in savings and money market
deposits. The acquisition of Victory Community
Bank added approximately $149.9 million in
deposit balances in 2020.
due 2030, to certain qualified institutional buyers
and accredited investors, including the exchange
of $5.4 million of the Company’s subordinated
notes due 2025. The notes have been structured
to qualify as Tier 2 capital for regulatory capital
purposes. At December 31, 2020, Heartland
Bank and Heartland BancCorp met all regulatory
capital levels to be considered well-capitalized
(see Note 13 to the Consolidated Financial
Statements). In 2020, Heartland BancCorp paid
dividends of $2.29 per share, representing a yield
of 2.76% on the closing stock price of $82.99 per
share on December 31, 2020.
Earnings Summary:
2020 marked the 4th consecutive year of record
net income with a 33-year history of strong,
consistent growth and financial performance
for Heartland BancCorp. Net income for 2020
increased 12% to $14.8 million, or $7.33, per
diluted share compared to $13.2 million, or
$6.45, per diluted share in 2019. Return on
average assets and equity were 1.08% and
11.10% respectively for 2020, compared to 1.21%
and 10.81% for 2019.
Positive results for 2020 included net loan growth
of $231.7 million, or 26%, and deposit growth of
$368.6 million, or 39%. The mortgage banking
segment contributed significant revenues with
residential real estate loan production of $244.7
million for the year, resulting in $5.8 million
of revenue from gains on sales of mortgage
loans and OMSRs. Heartland’s portfolio of
mortgage loans serviced for others ended the
year at $366.1 million, up from $25.0 million
at December 31, 2019. PPP loan originations
totaled $129.0 million, adding $3.6 million in
pretax preprovision net revenue.
The CARES Act provided for significant consumer
and small business relief due to the impact of
the COVID-19 pandemic. Heartland provided
payment relief to a number of consumer and
small business customers throughout 2020.
Heartland has deferred payment on 29 loans
totaling $51.9 million at December 31, 2020,
which includes 13 loans totaling $28.0 million
that had received a second deferral.
Operating revenue (net interest income plus
noninterest income) was up compared to the
prior year by $12.2 million, or 25.3%. Sustained
low, long-term mortgage rates continued to
attract mortgage refinancing and produced
higher gains on loan sales. Low market rates,
combined with excess liquidity, and PPP loans at
1.0% rates contributed to a 31 basis point decline
in net interest margin to 3.63% for 2020.
compared to $1.5 million in 2019.
Results of Operation:
Net interest income increased 14.8% to $46.4
million compared to $40.4 million in 2019.
Average earning assets increased to $1.27 billion
in 2020 compared to $1.02 billion in 2019, an
increase of $242.4 million, or 23.6%, resulting
from a $202.7 million, or 24%, increase in
average loan balances. The consolidated full year
net interest margin decreased 31 basis points
to 3.63% compared to 3.94% for the full year
of 2019. Amortization of net deferred PPP fees
and costs recognized in interest income during
2020 was $1.4 million. At December 31, 2020, the
balance of unamortized PPP fees, net of costs,
was $1.3 million from Phase I of the PPP program.
Provision for loan loss expense was $6.4 million in
2020 compared to $1.5 million in 2019. For 2020,
net charge offs totaled $0.97 million, or .09%,
of average loans compared to $0.28 million, or
.03%, of average loans in 2019. The allowance as
a percent of loans, including PPP balances, was
1.25% at December 31, 2020, compared to .98%
at December 31, 2019.
Total noninterest
income was $14.1 million
for 2020 compared to $7.8 million for 2019,
representing an increase of $6.2 million, or
79.7% year-over-year. This increase was driven
by an increase of $5.3 million in gains on sales of
residential real estate loans and OMSRs and an
increase of $0.49 million, or 88%, in income from
Heartland’s financial planning division, Heartland
Planning Associates. Trans County Title Agency
contributed $2.3 million in noninterest income
for 2020 compared to $2.1 million in 2019.
Total
full-time
Total noninterest expense was $36.1 million
for 2020 compared to $30.6 million in 2019,
representing a $5.5 million, or 17.8%, increase
year-over-year.
equivalent
employees ended 2020 at 279, an increase of
36 from year-end 2019, resulting from a larger
footprint with the addition of three banking
locations
in Boone, Kenton, and Campbell
counties in Kentucky from the acquisition of
Victory Community Bank plus expansion of the
mortgage team.
Total shareholders’ equity increased $12.5 million
or 9.7% to $140.9 million at December 31, 2020.
Based upon total shares outstanding, the book
value of shareholders’ equity increased 11% to
$70.70 per share at December 31, 2020. On March
13, 2020, Heartland announced the authorization
to repurchase up to $5 million in common shares
of stock. Following this announcement, 90,612
shares at an average price of $55.12 per share
were repurchased and converted to treasury
shares. Additionally, on May 15, 2020, Heartland
completed its private placement of $25 million of
5.0% fixed-to-floating rate subordinated notes,
resulting
Operating expense increased $5.5 million or
17.8% in 2020 due to increased compensation
higher mortgage
cost
from
commissions and
increased costs from the
acquisition of Victory Community Bank.
Operating leverage (growth in revenue divided
by growth in operating expense) was positive 1.4
times.
Net charge offs for 2020 were $0.97 million
compared to $0.28 million in 2019. Economic
impacts from the COVID-19 pandemic resulted
in loan loss provision of $6.4 million for 2020
Salaries and benefits were driven by higher
compensation costs in the mortgage division
and a reduction of $2.1 million from deferred
origination costs on PPP loans. Professional
fees were higher due to
legal,
investment banking and accounting fees from
the acquisition. TransCounty Title Agency
contributed $2.0 million
in operating costs
compared to $1.9 million in 2019. On April 7,
2020, Heartland completed the acquisition of
Victory Community Bank, which added $1.2
million in merger related non-recurring expense.
increased
5
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report Independent Auditor’s Report
Board of Directors and Audit Committee
Heartland BancCorp
Whitehall, Ohio
We have audited the accompanying consolidated financial statements of Heartland BancCorp and its
subsidiaries, which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and
the related consolidated statements of income, comprehensive income, shareholders’ equity and cash
flows for the years then ended, and the related notes to the consolidated financial statements. We also
have audited Heartland BancCorp’s internal control over financial reporting as of December 31, 2020,
based on criteria established in the Internal Control – Integrated Framework (2013), issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management’s Responsibility for the Consolidated Financial Statements and Internal
Control Over Financial Reporting
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation and maintenance of effective internal control over
financial reporting relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error. Management also
is responsible for its assessment about the effectiveness of internal control over financial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements and an opinion
on the entity’s internal control over financial reporting based on our audits. We conducted our audits
in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement and whether effective
internal control over financial reporting was maintained in all material respects.
An audit of consolidated financial statements involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances. An audit of consolidated financial statements also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
Independent Auditor’s Report
and Consolidated Financial Statements
December 31, 2020 and 2019
6
7
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report An audit of internal control over financial reporting involves performing procedures to obtain
evidence about whether a material weakness exists. The procedures selected depend on the auditor’s
judgment, including the assessment of the risk that a material weakness exists. An audit of internal
control over financial reporting also involves obtaining an understanding of internal control over
financial reporting and testing and evaluating the design and operating effectiveness of internal
control over financial reporting based on the assessed risk.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
Definition and Inherent Limitations of Internal Control Over Financial Reporting
An entity’s internal control over financial reporting is a process effected by those charged with
governance, management and other personnel, designed to provide reasonable assurance regarding
the preparation of reliable financial statements in accordance with accounting principles generally
accepted in the United States of America. Because management’s assessment and our audit were
conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance
Corporation Improvement Act (FDICIA), our audit of Heartland BancCorp’s internal control over
financial reporting included controls over the preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America and with
the Preparation of Parent Company Only Financial Statements for Small Holding Companies (Form
FR Y-9SP). An entity’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, and that
receipts and expenditures of the entity are being made only in accordance with authorizations of
management and those charged with governance; and (3) provide reasonable assurance regarding
prevention, or timely detection and correction of unauthorized acquisition, use or disposition of the
entity’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect
and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Opinions
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Heartland BancCorp as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America. Also, in our opinion, Heartland
BancCorp maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2020 based on criteria established in the Internal Control – Integrated Framework
(2013), issued by the COSO.
Indianapolis, Indiana
March 15, 2021
8
Heartland BancCorp
Consolidated Balance Sheets
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Assets
2020
2019
Cash and cash equivalents
Interest bearing time deposits
Available-for-sale securities
Held-to-maturity securities, fair value of $202 and $760 at
December 31, 2020 and 2019, respectively
Loans held for sale
Loans, net of allowance for loan losses of $14,147 and $8,767
at December 31, 2020 and 2019, respectively
Premises and equipment
Nonmarketable equity securities
Mortgage servicing rights, net
Foreclosed assets held for sale
Goodwill
Intangible assets
Deferred income taxes
Life insurance assets
Accrued interest receivable and other assets
$
$
189,874
277
144,377
202
4,382
1,121,947
30,220
6,017
2,662
5
12,389
1,253
955
17,468
15,052
19,475
-
139,218
758
650
890,205
30,186
4,440
226
-
1,206
935
600
17,057
9,901
Total assets
$
1,547,080
$
1,114,857
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Demand
Savings, NOW and money market
Time
Total deposits
Repurchase agreements
Federal Home Loan Bank advances
Subordinated debt
Interest payable and other liabilities
Total liabilities
Shareholders’ Equity
Common stock, without par value; authorized 5,000,000 shares;
issued 2020 - 2,083,487 shares, 2019 - 2,020,273 shares
Retained earnings
Accumulated other comprehensive income
Treasury stock at cost, 2020 - 90,612 and 2019 - 0 shares held
Total shareholders’ equity
$
$
426,795
528,836
357,203
1,312,834
10,632
44,670
24,709
13,339
1,406,184
60,402
81,061
4,427
(4,994)
140,896
255,971
356,484
331,768
944,223
11,344
15,000
5,460
10,440
986,467
56,091
70,853
1,446
-
128,390
Total liabilities and shareholders’ equity
$
1,547,080
$
1,114,857
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
3
9
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
2020
2019
Net Income
$
14,767
$
13,196
Other Comprehensive Income:
Unrealized gain on available-for-sale securities, net of taxes of $845
and $890 for 2020 and 2019, respectively
Less reclassification adjustment for realized gains included in net
income, net of taxes of $53 for 2020
Other comprehensive income
Comprehensive Income
3,178
(197)
2,981
3,353
-
3,353
$
17,748
$
16,549
Heartland BancCorp
Consolidated Statements of Income
Years Ended December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Interest Income
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
Gains on sale of loans and originated mortgage servicing rights
Loan servicing fees, net
Title insurance income
Net realized gain on sales of available-for-sale securities
Net realized gain on sales of premises and equipment
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
2020
2019
$
51,882
$
46,270
1,708
2,335
129
56,054
7,952
1,732
9,684
46,370
6,350
40,020
2,168
6,838
495
1,311
250
5
411
2,604
14,082
20,389
4,856
1,996
1,893
954
387
1,012
423
4,165
36,075
18,027
3,260
14,767
7.39
7.33
$
$
$
2,722
1,828
605
51,425
10,251
778
11,029
40,396
1,500
38,896
2,151
1,135
948
1,109
-
-
502
1,991
7,836
18,485
3,939
1,509
956
951
311
905
106
3,458
30,620
16,112
2,916
13,196
6.54
6.45
$
$
$
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
10
4
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
5
11
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Consolidated Statements of Shareholders’ Equity
Years Ended December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Common Stock
Shares
Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Treasury
Stock
Total
Balance, December 31, 2018
2,015,276
55,080
Net income
Other comprehensive income
Dividends on common stock, $2.08
per share
New stock issued, net of issuance costs
Stock option expense
Stock options exercised
937
4,060
75
661
275
61,855
13,196
(4,198)
(1,907)
-
115,028
3,353
13,196
3,353
(4,198)
75
661
275
Balance, December 31, 2019
2,020,273
$
56,091
$
70,853
$
1,446
$
-
$
128,390
Net income
Other comprehensive income
Dividends on common stock, $2.29
per share
New stock issued, net of issuance costs
Stock option expense
Stock options exercised
Repurchase of common stock
Purchase of treasury shares
58,934
5,090
(810)
(90,612)
3,418
591
360
(58)
14,767
(4,559)
2,981
14,767
2,981
(4,559)
3,418
591
360
(58)
(4,994)
(4,994)
Balance, December 31, 2020
1,992,875
$
60,402
$
81,061
$
4,427
$
(4,994)
$
140,896
Heartland BancCorp
Consolidated Statements of Cash Flows
Years Ended December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Operating Activities
Net income
Items not requiring (providing) cash
Depreciation and amortization
Provision for loan losses
Amortization of premiums and discounts on securities
Amortization of purchase accounting adjustments
Amortization of loan fees, net
Deferred income taxes
Net realized gain on sale of available-for-sale securities
Stock option expense
Tax benefit related to stock options exercised
Gain on sale of premises and equipment
Gain on sale of loans
Increase in cash surrender value
Changes in
Receivables due from loan sales
Interest receivable
Other assets
Interest payable and other liabilities
2020
2019
$
14,767
$
13,196
1,830
6,350
948
(291)
(1,260)
(1,148)
(250)
591
10
(5)
(5,190)
(411)
(3,732)
(1,280)
(1,366)
2,180
1,508
1,500
577
83
287
(55)
-
661
8
-
(648)
(502)
(650)
(666)
(313)
984
Net cash provided by operating activities
11,743
15,970
Investing Activities
Net change in interest bearing time deposits
Purchase of available-for-sale securities
Proceeds from maturities of available-for-sale securities
Proceeds from sales of available-for-sale securities
Proceeds from maturities of held-to-maturity securities
Purchase of nonmarketable equity securities
Net change in loans
Purchase of premises and equipment
Proceeds from sale of foreclosed assets
Cash received (paid) for acquisitions
Net cash used in investing activities
(3)
(61,727)
51,450
8,799
556
(450)
(81,582)
(1,041)
68
31,755
(52,175)
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
12
6
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
-
(42,304)
47,309
-
807
(914)
(74,561)
(3,190)
-
(172)
(73,025)
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
2020
2019
$
237,563
(51,649)
(712)
15,570
19,225
360
-
(58)
(4,994)
(4,474)
210,831
170,399
19,475
58,276
5,507
(18,424)
5,000
-
275
75
-
-
(4,101)
46,608
(10,447)
29,922
189,874
$
19,475
9,423
2,435
$
$
11,125
2,650
Financing Activities
Net increase in demand deposits, money
market, NOW and savings accounts
Net increase/(decrease) in certificates of deposit
Net decrease in repurchase agreements
Proceeds from Federal Home Loan Bank Advances
Proceeds from issuance of subordinated notes, net
Proceeds from stock options exercised
Proceeds from issuance of common stock
Purchase of common stock
Purchase of treasury stock
Dividends paid
Net cash provided by financing activities
Increase/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
Supplemental Cash Flows Information
Interest paid
Income taxes paid (net of refunds)
Supplemental disclosure of noncash investing and financing activities
Right of use asset obtained in exchange for lease liability
In conjunction with Heartland's acquisition of Victory Community Bank in
2020 and an investment book in 2019, liabilities were assumed as follows:
Fair Value of Assets acquired
Cash paid in acquisition
Less: Common stock issued
Liabilities assumed
$
$
$
$
$
$
$
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Note 1: Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Heartland BancCorp (“Company”) is a bank holding company whose principal activity is the
ownership and management of its wholly-owned subsidiaries, Heartland Bank (the “Bank”) and
TransCounty Title Agency, LLC along with the Bank’s wholly-owned subsidiaries, Heartland
Mortgage Corporation (inactive), Heartland Investments, Inc. (inactive) and Heartland Insurance
Services, LLC. The Bank is primarily engaged in providing a full range of banking and financial
services to individual and corporate customers in central Ohio and northern Kentucky. The Bank is
subject to competition from other financial institutions. The Bank is subject to the regulation of
certain federal and state agencies and undergoes examinations by those regulatory authorities on an
18-month cycle.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the Bank,
TransCounty Title Agency, LLC and Heartland Insurance Services, LLC. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Business Combinations
Business combinations are accounted for under the acquisition method of accounting. Under the
acquisition method, assets and liabilities of the business acquired are recorded at their estimated
fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair
value of the net tangible and intangible assets acquired recorded as goodwill. Results of operations
of the acquired business are included in the income statement from the date of acquisition.
701
$
2,722
Use of Estimates
237,113
(35,500)
3,418
198,195
$
$
572
(172)
-
400
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change include the determination
of the allowance for loan losses, valuation of real estate acquired in connection with foreclosures or
in satisfaction of loans, valuation of deferred tax assets, and other-than-temporary impairments
(OTTI) and fair values of financial instruments. The uncertainties related to the COVID-19
pandemic could cause significant changes to these estimates compared to what was known at the
time these consolidated financial statements were prepared.
Cash Equivalents
At December 31, 2020, the Company’s cash accounts exceeded federally insured limits by
approximately $3,505,000.
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
14
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Additionally, approximately $164,741,000 of cash is held by the Federal Reserve Bank of
Cleveland and Federal Home Loan Bank of Cincinnati as of December 31, 2020, which is not
federally insured.
Securities
Available-for-sale debt securities, which include any security for which the Company has no
immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized
gains and losses are recorded, net of related income tax effects, in other comprehensive income.
Held-to-maturity debt securities, which include any security for which the Company has the
positive intent and ability to hold until maturity, are carried at historical cost adjusted for
amortization of premiums and accretion of discounts.
Purchase premiums and discounts are recognized in interest income using the interest method over
the terms of the securities. Realized gains and losses are recorded as net security gains (losses).
Gains and losses on sales of securities are determined on the specific-identification method.
Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a
quarterly basis, and more frequently when economic or market conditions warrant such an
evaluation. For securities in an unrealized loss position, management considers the extent and
duration of the unrealized loss, and the financial condition and near-term prospects of the issuer.
Management also assesses whether it intends to sell, or it is more likely than not that it will be
required to sell, a security in an unrealized loss position before recovery of its amortized cost basis.
If either of the criteria regarding intent or requirement to sell is met, the entire difference between
amortized cost and fair value is recognized as impairment through earnings. For debt securities
that do not meet the aforementioned criteria, the amount of impairment is split into two
components as follows 1) OTTI related to credit loss, which must be recognized in the income
statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is
recognized in other comprehensive income. The credit loss is defined as the difference between
the present value of the cash flows expected to be collected and the amortized cost basis. For
equity securities, the entire amount of impairment is recognized through earnings. The Company
recognized no other-than temporary impairment in 2020 and 2019.
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase represent securities the Company routinely sells to
certain treasury management customers and then repurchases these securities the next day.
Securities sold under repurchase agreements are reflected as secured borrowings in the
consolidated balance sheets at the amount of cash received in connection with each transaction.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due
unless the credit is well-secured and in process of collection. For all loan classes, past due status is
based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off
at an earlier date if collection of principal or interest is considered doubtful.
For all loan classes, all interest accrued but not collected for loans that are placed on nonaccrual or
charged off is reversed against interest income. The interest on these loans is accounted for on the
cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to
accrual status when the principal and interest amounts contractually due are brought current and
future payments are reasonably assured. The Company requires a period of satisfactory
performance of not less than six months before returning a nonaccrual loan to accrual status.
Discounts and premiums on purchased loans are amortized to income using the interest method
over the remaining period to contractual maturity, adjusted for anticipated prepayments.
Loans Acquired in Business Combinations
Loans acquired in business combinations with evidence of credit deterioration since origination and
for which it is probable that all contractually required payments will not be collected are considered
to be purchased credit impaired. Evidence of credit quality deterioration as of purchase dates may
include information such as past-due and nonaccrual status, borrower credit risk grade and recent
loan to value percentages. Purchased credit-impaired loans are accounted for under the accounting
guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30).
These loans are initially measured at fair value based upon expected cash flows without
anticipation of prepayments and includes estimated future credit losses expected to be incurred
over the life of the loans. As a result, related discounts are recognized subsequently through
accretion based on the expected cash flows of the acquired loans. For purposes of applying ASC
310-30, loans acquired in business combinations are individually evaluated for the initial fair value
measurement. Accordingly, allowances for credit losses related to these loans are not carried over
at the acquisition date.
The difference between contractually required payments and the cash flows expected to be
collected at acquisition is referred to as the nonaccretable portion of the fair value discount or
premium. The accretable portion of the fair value discount or premium is the difference between
the expected cash flows and the net present value of expected cash flows, with such difference
accreted into earnings over the term of the loans. Acquired loans not accounted for under ASC 310-
30 are accounted for under ASC 310-20, which allows the fair value adjustment to be accreted into
income over the remaining life of the loans.
Loans
Allowance for Loan Losses
Loans that management has the intent and ability to hold for the foreseeable future or until maturity
or payoff are reported at their outstanding principal balances adjusted for any charge-offs, the
allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums
or discounts on purchased loans
For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan
origination fees, net of certain direct origination costs, as well as premiums and discounts, are
deferred and amortized as a level yield adjustment over the respective term of the loan.
10
16
The allowance for loan losses is established as losses are estimated to have occurred through a
provision for loan losses charged to income. Loan losses are charged against the allowance when
management believes the un-collectability of a loan balance is confirmed. Subsequent recoveries,
if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon
management’s periodic review of the collectability of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to
11
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
repay, estimated value of any underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are susceptible to significant revision
as more information becomes available.
The allowance consists of allocated and general components. The allocated component relates to
loans that are classified as impaired. For those loans that are classified as impaired, an allowance is
established if the discounted cash flows, underlying collateral value or observable market price of
the impaired loan is lower than the carrying value of that loan. The general component covers non-
impaired loans and is based on historical loss experience adjusted for changes in trends, conditions
and other relevant factors that affect repayment of the loans.
A loan is considered impaired when, based on current information and events, it is probable that
the Company will be unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired. Management determines the
significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower, including the length
of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the
shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan
basis for commercial and construction loans by either the present value of expected future cash
flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair
value of the collateral if the loan is collateral dependent. Interest income on impaired loans is
recognized on a cash basis after all past due and current principal payments have been made.
Groups of loans with similar risk characteristics are collectively evaluated for impairment based on
the group’s historical loss experience adjusted for changes in trends, conditions and other relevant
factors that affect repayment of the loans. Accordingly, the Company does not separately identify
individual consumer and residential loans for impairment measurements, unless such loans are the
subject of a restructuring agreement due to financial difficulties of the borrower. In the course of
working with borrowers, the Company may choose to restructure the contractual terms of certain
loans. In this scenario, the Company attempts to work-out an alternative payment schedule with
the borrower in order to optimize collectability of the loan. Any loans that are modified are
reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred, which
is when, for economic or legal reasons related to a borrower’s financial difficulties, the Company
grants a concession to the borrower that it would not otherwise consider. Terms may be modified
to fit the borrower’s ability to repay in line with the borrower’s current financial status, and the
restructuring of the loan may include a transfer of assets from the borrower to satisfy the debt, a
modification of loan terms or a combination of the two. If such efforts by the Company do not
result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure
proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company
may terminate foreclosure proceedings if the borrower is able to work-out a satisfactory payment
plan.
It is the Company’s policy that any restructured loans on nonaccrual status prior to being
restructured remain on nonaccrual status until six months of satisfactory borrower performance, at
which time management would consider its return to accrual status. If a loan is accruing at the time
of restructuring, the Company reviews the loan to determine if it is appropriate to continue the
accrual of interest on the restructured loan.
12
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Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
With regard to determination of the amount of the allowance for credit losses, troubled debt
restructured loans are considered to be impaired. As a result, the method for determining the
amount of impaired loans for each portfolio segment of troubled debt restructurings is the same as
detailed previously.
On March 22, 2020, a statement was issued by banking regulators and titled "Interagency
Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers
Affected by the Coronavirus" (the "Interagency Statement") that encourages financial institutions
to work prudently with borrowers who are or may be unable to meet their contractual payment
obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further
provides that a qualified loan modification is exempt by law from classification as a troubled debt
restructure as defined by GAAP, from the period beginning March 1, 2020 until the earlier of
December 31, 2020 or the date that is 60 days after the date on which the national emergency
concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C. 1601 et seq.)
terminates. The Interagency Statement was subsequently revised on April 7, 2020 to clarify the
interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth
the banking regulators' views on consumer protection considerations.
In accordance with such guidance, the Company has offered short-term modifications made in
response to COVID-19 to borrowers who were current and otherwise not past due. These included
short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers,
extensions of repayment terms, or other delays in payment that are insignificant. On December 27,
2020, a $900 billion COVID-19 relief package, as passed by the U.S. Congress, was signed into
law as part of the 2021 Consolidated Appropriations Act ("CAA") that provides federal
government funding through the end of its 2021 fiscal year. In addition to delivering direct
stimulus payments to certain individuals, an increase in unemployment insurance benefits, an
extension of the eviction moratorium, relief to the healthcare industry, and additional aid to various
other businesses, the COVID-19-related provisions of the CAA provide for (i) an additional $284
billion in funding for the Paycheck Protection Program ("PPP"), through March 31, 2021, (ii) an
extension of the temporary delay for implementation of the CECL accounting standard, and (iii)
further suspension of the troubled debt restructure assessment and reporting requirements for
financial institutions under GAAP.
Mortgage Servicing Rights
When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair
value with the income statement effect recorded in gains on sales of loans. Fair value is based on
market prices for comparable mortgage servicing contracts, when available or alternatively, is
based on a valuation model that calculates the present value of estimated future net servicing
income. All classes of servicing assets are subsequently measured using the amortization method
which requires servicing rights to be amortized into non-interest income in proportion to, and over
the period of, the estimated future net servicing income of the underlying loans.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to
carrying amount. Impairment is determined by stratifying rights into groupings based on
predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is
recognized through a valuation allowance for an individual grouping, to the extent that fair value is
less than the carrying amount. If the Company later determines that all or a portion of the
impairment no longer exists for a particular grouping, a reduction of the allowance may be
13
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
recorded as an increase to income. Changes in valuation allowances are reported with loan
servicing fees on the income statement. The fair values of servicing rights are subject to significant
fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and
losses.
Servicing fee income, which is reported on the income statement as loan servicing fees, is recorded
for fees earned for servicing loans. The fees are based on a contractual percentage of the
outstanding principal; or a fixed amount per loan and are recorded as income when earned. The
amortization of mortgage servicing rights is netted against loan servicing fee income.
Premises and Equipment
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Company-owned Life Insurance
The Company has purchased life insurance policies on certain key executives. Company-owned
life insurance is recorded at the amount that can be realized under the insurance contract at the
balance sheet date, which is the cash surrender value adjusted for other charges or other amounts
due that are probable at settlement.
Stock Options
At December 31, 2020, the Company has a share-based employee compensation plan, which is
described more fully in Note 16.
Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to
expense using the straight-line method over the estimated useful lives of the assets.
Transfers of Financial Assets
Nonmarketable Equity Securities
Nonmarketable equity securities consist of common stock in the Federal Reserve Bank (FRB) and
Federal Home Loan Bank (FHLB). The FRB and FHLB stocks are required investments for
institutions that are members of the FRB and FHLB systems. The required investment in the
common stock is based on a predetermined formula, carried at cost and evaluated for impairment.
Foreclosed Assets Held for Sale
Foreclosed assets are initially recorded at fair value less costs to sell when acquired, establishing a
new cost basis. Physical possession of residential real estate property collateralizing a consumer
mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the
borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu
of foreclosure or through a similar legal agreement. These assets are subsequently accounted for at
lower of cost or fair value less estimated costs to sell. If the fair value declines subsequent to
foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition
are expensed.
Goodwill
Goodwill arises from business combinations and is generally determined as the excess of the fair
value of the consideration transferred, plus the fair value of any noncontrolling interests in the
acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition
date. Goodwill and intangible assets acquired in a purchase business combination and determined
to have an indefinite useful life are not amortized but tested for impairment at least annually. If the
implied fair value of goodwill is lower than the carrying amount, a goodwill impairment is
identified and recorded to expense. Subsequent increases in goodwill value are not recognized in
the financial statements. The Company completed its most recent annual goodwill impairment test
as of December 31, 2020 and concluded goodwill is not impaired. Changes in goodwill are further
described in Note 6, Goodwill and Note 20, Business Combinations.
Transfers of financial assets are accounted for as sales, when control over the assets has been
surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have
been isolated from the Company—put presumptively beyond the reach of the transferor and its
creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of
conditions that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets and (3) the Company does not maintain effective control over the transferred
assets through an agreement to repurchase them before their maturity or the ability to unilaterally
cause the holder to return specific assets.
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance
(ASC 740, Income Taxes). The income tax accounting guidance results in two components of
income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or
refunded for the current period by applying the provisions of the enacted tax law to the taxable
income or excess of deductions over revenues. The Company determines deferred income taxes
using the liability (or balance sheet) method. Under this method, the net deferred tax asset or
liability is based on the tax effects of the differences between the book and tax bases of assets and
liabilities, and enacted changes in tax rates and laws are recognized in the period in which they
occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between
periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of
evidence available, it is more likely than not that some portion or all of a deferred tax asset will not
be realized. Tax positions are recognized if it is more likely than not, based on the technical merits,
that the tax position will be realized or sustained upon examination. The term more likely than not
means a likelihood of more than 50 percent; the terms examined and upon examination also include
resolution of the related appeals or litigation processes, if any. A tax position that meets the more-
likely-than-not recognition threshold is initially and subsequently measured as the largest amount
of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a
taxing authority that has full knowledge of all relevant information. The determination of whether
or not a tax position has met the more-likely-than-not recognition threshold considers the facts,
circumstances and information available at the reporting date and is subject to management’s
20
14
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21
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
judgment. If necessary, the Company recognizes interest and penalties on income taxes as a
component of income tax expense.
The Company files consolidated income tax returns with its subsidiaries in the U.S. federal
jurisdiction. With a few exceptions, the Company is no longer subject to tax authorities for years
before 2017. As of December 31, 2020, the Company had no uncertain income tax positions.
Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the
weighted-average number of common shares outstanding during each period. Diluted earnings per
share reflects additional potential common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to income that would result
from the assumed issuance. Potential common shares that may be issued by the Company relate
solely to outstanding stock options and are determined using the treasury stock method.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income, net of applicable
income taxes. Other comprehensive income includes unrealized gain on available-for-sale
securities.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income consists of unrealized gain on available-for-sale
securities, net of applicable income taxes.
Marketing Costs
Marketing costs are expensed as incurred.
Revenue From Contracts With Customers
The Company records revenue from contracts with customers in accordance with Accounting
Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606). Under
Topic 606, the Company must identify the contract with a customer, identify the performance
obligations in the contract, determine the transaction price, allocate the transaction price to the
performance obligations in the contract, and recognize revenue when (or as) the Company satisfies
a performance obligation. Significant revenue has not been recognized in the current reporting
period that results from performance obligations satisfied in previous periods.
The majority of the Company’s revenues come from interest and dividend income on loans,
investment securities, and other financial instruments that are outside the scope of ASC 606. The
Company has evaluated the nature of its contracts with customers and determined that further
disaggregation of revenue from contracts with customers into more granular categories beyond
what is presented in the consolidated statements of income was not necessary. The Company
generally fully satisfies its performance obligations on its contracts with customers as services are
rendered and the transaction prices are typically fixed; and charged on a periodic basis or based on
16
22
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
activity. Because performance obligations are satisfied as services are rendered and the transaction
prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects
the determination of the amount and timing of revenue from contracts with customers.
Service Charges on Deposit Accounts. The Company generates revenues through fees charged to
depositors related to deposit account maintenance fees, overdrafts, ATM fees, wire transfers and
additional miscellaneous services provided at the request of the depositor. For deposit-related
services, revenue is recognized when performance obligations are satisfied, which is, generally, at a
point in time. This revenue is included in service charges on the consolidated statements of
income.
Financial Planning and Wealth Advisory. The Company offers financial planning, wealth
management, insurance, and investment advisory services through LPL. Payments in connection
with these services are governed by written agreements. Fees paid to The Company by LPL in
accordance with the services provided are recognized when performance obligations are satisfied.
This revenue is included in other income on the consolidated statements of income.
Title Insurance Services. The Company provides residential and commercial title insurance
services through its subsidiary, Trans County Title Agency. The Company’s primary relationships
for title services are with real estate agents, lenders, attorneys and builders. Fees for title insurance
and ancillary services such as closing services, title searches and lien searches are recognized when
services are rendered, and performance obligations are satisfied. This revenue is included in title
insurance income on the consolidated statements of income.
Interchange Income. The Company earns interchange fees from debit and credit cardholder
transactions conducted through the Visa payment network. Interchange fees from cardholder
transactions represent a percentage of the underlying transaction value and are recognized daily,
concurrently with the transaction processing services provided to the cardholder. This revenue is
included in service charges on the consolidated statements of income.
Fair Value of Financial Instruments
The Company has adopted ASU 2016-01 “Financial Instruments”, which requires the use of an exit
price to measure fair value for disclosure purposes and clarifies that entities should not make use of
practicability exception in determining the fair value of loans. Accordingly, the Company
modified the calculation used to determine the disclosed fair value of loans held for investments as
part of adopting this standard.
Leases
On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and subsequent
amendments thereto, which requires the Company to recognize most leases on the balance sheet.
We adopted the standard under a modified retrospective approach as of the date of adoption and
elected to apply several of the available practical expedients, including:
• Carry over of historical lease determination and lease classification conclusions
• Carry over of historical initial direct costs
• Accounting for lease and non-lease components in contracts where the Company is a lessee
as a single lease component
17
23
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
• Exclusion of land easements that were not previously accounted for as leases by the
Company
Adoption of the lease standard resulted in the recognition of operating right-of-use assets of
$2,722,000, and operating lease liabilities of $2,722,000 as of January 1, 2019. These amounts
were determined based on the present value of remaining lease payments, discounted using the
Company’s incremental borrowing rate as of the date of adoption. There was no material impact to
the timing of expense or income recognition in the Company’s Consolidated Statements of Income.
Prior periods were not restated and continue to be presented under legacy GAAP. Disclosures
about the Company’s leasing activities are presented in Note 6 – Leases.
Reclassifications
Certain reclassifications have been made to the 2019 financial statements to conform to the 2020
financial statement presentation. These reclassifications had no effect on net income.
Note 2: Securities
The amortized cost and approximate fair values, together with gross unrealized gains and losses, of
securities are as follows:
Available-for-sale Securities:
December 31, 2020:
U.S. government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate bonds
Totals
December 31, 2019:
U.S. government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate bonds
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair Value
$
14,470
$
278
$
(66)
$
14,682
$
$
22,984
92,816
8,500
542
4,743
197
(46)
(41)
-
23,480
97,518
8,697
138,770
$
5,760
$
(153)
$
144,377
43,391
$
132
$
(85)
$
43,438
19,660
71,337
3,000
182
1,809
63
(125)
(146)
-
19,717
73,000
3,063
Totals
$
137,388
$
2,186
$
(356)
$
139,218
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair Value
Held-to-maturity Securities:
December 31, 2020:
State and political subdivisions
December 31, 2019:
State and political subdivisions
$
$
202
$
-
$
758
$
2
$
-
-
$
$
202
760
The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at
December 31, 2020, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Available-for-sale
Held-to-maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Within one year
One to five years
Five to ten years
After ten years
$
$
$
605
7,438
22,946
84,797
617
7,694
23,742
88,844
115,786
120,897
Mortgage-backed securities of U.S.
Government sponsored entities
22,984
23,480
$
110
92
-
-
202
-
Totals
$
138,770
$
144,377
$
202
$
110
92
-
-
202
-
202
The carrying value, which equals fair value, of securities pledged as collateral, to secure public
deposits and for other purposes, was $92,180,000 at December 31, 2020 and $58,449,000 at
December 31, 2019.
Gross gains of approximately $311,000 and losses of approximately $61,000 resulting from sales
of available-for-sale securities were realized for 2020. No gains or losses resulting from sales of
available-for-sale securities were realized in 2019. The $250,000 net gains from the sales of
available-for-sale securities were a reclassification from accumulated other comprehensive income
(loss) and are included in the net gains on available-for-sale securities in the income statement for
2020. The related tax expense of approximately $53,000 was a reclassification from accumulated
other comprehensive income and included in the provision for income tax in the income statement
for 2020.
Certain investments in debt securities are reported in the financial statements at an amount less than
their historical cost. Total fair value of these investments at December 31, 2020 and 2019 was
$17,017,000 and $32,313,000, which is approximately 12% and 23%, respectively, of the
24
18
19
25
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Company’s available-for-sale and held-to-maturity investment portfolio. These declines resulted
from changes in market interest rates. Management believes the declines in fair value for these
securities are temporary.
The following tables show the gross unrealized losses and fair value of the Company’s investments
with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by
investment category and length of time that individual securities have been in a continuous
unrealized loss position at December 31, 2020 and 2019:
Less than 12 Months
December 31, 2020
12 Months or More
Total
Description of Securities
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Total temporarily
impaired securities
$
6,372
$
(66)
$
5,214
5,431
(46)
(41)
$
17,017
$
(153)
$
-
-
-
-
$
$
-
$
6,372
$
(66)
-
-
5,214
5,431
(46)
(41)
-
$
17,017
$
(153)
Less than 12 Months
December 31, 2019
12 Months or More
Total
Description of Securities
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Total temporarily
impaired securities
$
5,963
$
(34)
$
8,949
$
(51)
$
14,912
$
(85)
777
9,205
(12)
(143)
6,773
646
(113)
(3)
7,550
9,851
(125)
(146)
$
15,945
$
(189)
$
16,368
$
(167)
$
32,313
$
(356)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
U.S. Government Agencies
The unrealized losses on the Company’s investments in direct obligations of U.S. government
agencies were caused by changes in interest rates. The contractual terms of those investments do
not permit the issuer to settle the securities at a price less than amortized cost bases of the
investments. Because the Company does not intend to sell the investments and it is not more likely
than not the Company will be required to sell the investments before recovery of their amortized
cost bases, which may be maturity, the Company does not consider those investments to be other-
than-temporarily impaired at December 31, 2020.
Mortgage-backed Securities of U.S. Government Sponsored Enterprises
The unrealized losses on the Company’s investment in mortgage-backed securities of U.S.
Government sponsored enterprises were caused by changes in interest rates and illiquidity. The
Company expects to recover the amortized cost bases over the term of the securities. Because the
decline in market value is attributable to changes in interest rates and illiquidity, and not credit
quality, and because the Company does not intend to sell the investments and it is not more likely
than not the Company will be required to sell the investments before recovery of their amortized
cost bases, which may be maturity, the Company does not consider those investment to be other-
than-temporarily impaired at December 31, 2020.
State and Political Subdivisions
The unrealized losses on the Company’s investments in securities of state and political subdivisions
were caused by changes in interest rates and illiquidity. The contractual terms of those investments
do not permit the issuer to settle the securities at a price less than the amortized cost bases of the
investments. Because the Company does not intend to sell the investments and it is not more likely
than not the Company will be required to sell the investments before recovery of their amortized
cost bases, which may be maturity, the Company does not consider those investments to be other-
than-temporarily impaired at December 31, 2020.
26
20
21
27
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Note 3: Loans and Allowance for Loan Losses
Classes of loans at December 31, include:
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 Family
Home Equity
Consumer
Total loans
Less
Allowance for loan losses
Net loans
2020
2019
$
216,108
$
109,827
240,185
307,054
323,174
38,232
11,341
1,136,094
238,129
277,425
231,263
31,330
10,998
898,972
(14,147)
(8,767)
$
1,121,947
$
890,205
In March 2020, the COVID-19 coronavirus was identified as a global pandemic and began
affecting the health of large populations around the world. As a result of the spread of COVID-19,
economic uncertainties arose which can ultimately affect the financial position, results of
operations and cash flows of the Company, as well as the Company’s customers. In response to
economic concerns over COVID-19, in March 2020, the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) was passed into law by Congress. The CARES Act included relief for
individual Americans, health care workers, small businesses and certain industries hit hard by the
COVID-19 pandemic. The 2021 Consolidated Appropriations Act, passed by Congress in
December 2020, extended certain provisions of the CARES Act affecting the Company into 2021.
The CARES Act included several provisions designed to help financial institutions in working with
their customers. Section 4013 of the CARES Act, as extended, allows a financial institution to elect
to suspend generally accepted accounting principles and regulatory determinations with respect to
qualifying loan modifications related to COVID-19 that would otherwise be categorized as a
troubled debt restructuring (TDR) until January 1, 2022. The Company has taken advantage of this
provision to extend certain payment modifications to loan customers in need. As of December 31,
2020, the Company has approximately $52,000,000 of outstanding loans that were modified during
2020 under the CARES Act guidance, that remain on modified terms. The Company modified
other loans during 2020 under the guidance that have since returned to normal repayment status as
of December 31, 2020.
The CARES Act also approved the Paycheck Protection Program (PPP), administered by the Small
Business Administration (SBA) with funding provided by financial institutions. The 2021
Consolidated Appropriations Act approved a new round of PPP loans in 2021. The PPP provides
loans to eligible businesses through financial institutions like the Company, with loans being
eligible for forgiveness of some or all of the principal amount by the SBA if the borrower meets
certain requirements. The SBA guarantees repayment of the loans to the Company if the
22
28
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
borrower’s loan is not forgiven and is then not repaid by the customer. The Company earns a 1%
interest rate on PPP loans, plus a processing fee from the SBA for processing and originating a
loan. The Company originated approximately $129,000,000 in PPP loans during 2020, of which
approximately $101,000,000 are still outstanding at December 31, 2020.
The risk characteristics of each loan portfolio segment are as follows:
Commercial (Non-Real Estate)
Commercial loans are based on the identified cash flows of the borrower and on the underlying
collateral provided by the borrower. The cash flows of borrowers, however, may not be as
expected and the collateral securing these loans may fluctuate in value. Most commercial loans are
secured by the assets being financed or other business assets such as accounts receivable or
inventory and may incorporate a personal guarantee. In the case of loans secured by accounts
receivable, the availability of funds for the repayment of these loans may be substantially
dependent on the ability of the borrower to collect amounts due from its customers.
Commercial Real Estate
These loans are viewed as cash flow loans with a significant emphasis on the value of real estate
securing the loan. Commercial real estate lending typically involves higher loan principal amounts
and the repayment of these loans is generally dependent on the successful operation of the property
securing the loan or the business conducted on the property securing the loan. Commercial real
estate loans may be more adversely affected by conditions in the real estate markets or in the
general economy. The properties securing the Company’s commercial real estate portfolio are
diverse in terms of type within the Company’s market area. Management monitors and evaluates
commercial real estate loans based on collateral, market area, risk grade criteria, and
concentrations. As a general rule, the Company avoids financing single purpose projects unless
other underwriting factors are present to help mitigate risk. In addition, management tracks the
level of owner-occupied commercial real estate loans versus higher risk non-owner-occupied loans.
Residential Real Estate and Consumer
With respect to residential loans that are secured by one- to-four family residences and are
generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and
generally requires private mortgage insurance if that maximum is exceeded. Home equity loans are
typically secured by a subordinate interest in one- to-four family residences, and other consumer
loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer
loans are unsecured such as small installment loans and certain lines of credit. Repayment of these
loans is primarily dependent on the personal income of the borrowers, which can be impacted by
economic conditions in their market areas such as unemployment levels. The security value can
also be impacted by changes in property values on residential properties. Risk is mitigated by the
fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
23
29
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The following tables present the balance in the allowance for loan losses and the recorded
investment in loans based on portfolio segment and impairment method as of December 31, 2020
and 2019.
Commercial Real Estate
Owner
NonOwner
Occupied
Occupied
Commercial
2020
Residential Real Estate
1-4 family
Home Equity
Consumer
Total
$
$
$
$
$
$
1,643
2,800
(1,106)
62
3,181
745
-
143
1,876
1,968
-
-
$
1,828
590
-
5
$
$
178
66
(10)
15
$
61
181
(129)
50
8,767
6,350
(1,245)
275
3,399
$
4,069
$
3,844
$
2,423
$
249
$
163
$
14,147
978
$
659
$
-
$
-
$
16
$
10
$
1,663
2,421
$
3,410
$
3,844
$
2,423
$
233
$
153
$
12,484
$
216,108
$
240,185
$
307,054
$
323,174
$
38,232
$
11,341
$ 1,136,094
$
3,255
$
2,920
$
286
$
2,863
$
343
$
33
$
9,700
$
212,853
$
237,265
$
306,768
$
320,311
$
37,889
$
11,308
$ 1,126,394
Commercial Real Estate
Owner
NonOwner
Occupied
Occupied
Commercial
2019
Residential Real Estate
1-4 family
Home Equity
Consumer
Total
$
$
$
$
$
$
1,514
113
(42)
58
2,131
1,041
-
9
1,878
(4)
-
2
$
$
1,875
124
(350)
179
$
107
163
(100)
8
$
42
63
(72)
28
7,547
1,500
(564)
284
1,643
$
3,181
$
1,876
$
1,828
$
178
$
61
$
8,767
363
$
915
$
-
$
172
$
18
$
13
$
1,481
1,279
$
2,266
$
1,876
$
1,656
$
160
$
49
$
7,286
$
109,827
$
238,129
$
277,425
$
231,263
$
31,330
$
10,998
$
898,972
$
4,693
$
3,075
$
302
$
1,185
$
356
$
54
$
9,665
$
105,134
$
235,054
$
277,123
$
230,078
$
30,974
$
10,944
$
889,307
24
December 31, 2020:
Allowance for loan losses:
Balance, beginning of year
Provision charged to expense
Losses charged off
Recoveries
Balance, end of year
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
Loans:
Ending balance
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
December 31, 2019:
Allowance for loan losses:
Balance, beginning of year
Provision charged to expense (credit)
Losses charged off
Recoveries
Balance, end of year
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
Loans:
Ending balance
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
30
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Internal Risk Categories
Loan grades are numbered 1 through 8. Grades 1 through 4 are considered pass grades. The grade
of 5, or Special Mention, represents loans of lower quality and signs of potential weakness. The
grades of 6, or Substandard, and 7, or Doubtful, refer to assets that are classified. The use and
application of these grades by the Company will be uniform and shall conform to the Company’s
policy.
Excellent (1) loans are of superior quality with excellent credit strength and repayment ability
proving a nominal credit risk.
Good (2) loans are of above average credit strength and repayment ability proving only a minimal
credit risk.
Satisfactory (3) loans are of reasonable credit strength and repayment ability proving an average
credit risk due to one or more underlying weaknesses.
Watch (4) borrowers in this grade are still considered acceptable from quality standpoint but have
risk factors more substantial than for the typical satisfactory graded loan. Although identified
weaknesses are present, performance on loans is acceptable with only moderate delinquency.
Special Mention (5) assets have potential weaknesses that deserve management’s close attention.
If left uncorrected, these potential weaknesses may result in deterioration of the repayment
prospects for the asset or in the institution’s credit position at some future date. Special mention
assets are not adversely classified and do not expose an institution to sufficient risk to warrant
adverse classification. Ordinarily, special mention credits have characteristics which corrective
management action would remedy.
Substandard (6) loans are inadequately protected by the current sound worth and paying capacity
of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined
weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the
distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful (7) loans classified as doubtful have all the weaknesses inherent in those classified
Substandard with the added characteristic that the weaknesses make collection or liquidation in
full, on the basis of current known facts, conditions and values, highly questionable and
improbable.
Loss (8) loans classified as loss are considered uncollectible and of such little value that their
continuance as bankable assets is not warranted. This classification does not mean that the loan has
absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off
even though partial recovery may be affected in the future.
25
31
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The following tables present the credit risk profile of the Company’s loan portfolio based on the
Company’s internal rating categories as of December 31, 2020 and 2019:
The following tables present the Company’s loan portfolio aging analysis of the recorded
investment in loans as of December 31, 2020 and 2019:
Pass
Special mention
Substandard
Doubtful
Loss
Commercial
$
208,301
4,551
3,256
-
-
Commercial Real Estate
Owner
Occupied
NonOwner
Occupied
2020
Residential Real Estate
1-4 Family
Home Equity
Consumer
Total
$
222,082
10,155
7,948
-
-
$
290,808
541
15,705
-
-
$
318,546
703
3,925
-
-
$
37,188
704
340
-
-
$
11,300
8
33
-
-
$
1,088,225
16,662
31,207
-
-
Total
$
216,108
$
240,185
$
307,054
$
323,174
$
38,232
$
11,341
$
1,136,094
Pass
Special mention
Substandard
Doubtful
Loss
Commercial
$
103,341
1,793
4,693
-
-
Commercial Real Estate
Owner
Occupied
NonOwner
Occupied
2019
Residential Real Estate
1-4 Family
Home Equity
Consumer
Total
$
224,114
3,956
10,059
-
-
$
268,256
1,774
7,395
-
-
$
227,083
1,512
2,668
-
-
$
30,680
294
356
-
-
$
10,924
20
54
-
-
$
864,398
9,349
25,225
-
-
Total
$
109,827
$
238,129
$
277,425
$
231,263
$
31,330
$
10,998
$
898,972
The Company evaluates the loan risk grading system definitions and allowance for loan loss
methodology on an ongoing basis. No significant changes were made to either during the past
year.
30-59
Days
Past Due
60-89
Days
90 or
More Days
2020
Total
Past Due
Current
Total Loans
Receivable
90 or More
Days Past Due
and Accruing
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
$
161
$
14
$
574
$
749
$
215,359
$
216,108
$
67
-
672
269
51
-
-
310
89
5
457
-
1,186
69
6
524
-
2,168
427
62
239,661
307,054
321,006
37,805
11,279
240,185
307,054
323,174
38,232
11,341
Total
$
1,220
$
418
$
2,292
$
3,930
$
1,132,164
$
1,136,094
$
-
-
-
-
-
-
-
30-59
Days
Past Due
60-89
Days
90 or
More Days
2019
Total
Past Due
Current
Total Loans
Receivable
90 or More
Days Past Due
and Accruing
$
54
$
500
$
707
$
1,261
$
108,566
$
109,827
$
491
1,617
-
127
125
39
-
-
-
-
5
418
-
794
26
-
2,035
-
921
151
44
236,094
277,425
230,342
31,179
10,954
238,129
277,425
231,263
31,330
10,998
-
-
-
-
-
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
Total
$
1,962
$
505
$
1,945
$
4,412
$
894,560
$
898,972
$
491
A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-
10-35-16), when based on current information and events, it is probable the Company will be
unable to collect all amounts due from the borrower in accordance with the contractual terms of the
loan. Impaired loans include nonperforming commercial loans but also include loans modified in
troubled debt restructurings.
32
26
27
33
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The following tables present impaired loans for the years ended December 31, 2020 and 2019:
2020
Recorded
Balance
Unpaid
Principal
Balance
Specific
Allowance
Average
Balance of
Impaired
Loans
Interest
Income
Recognized
Loans without a specific valuation allowance:
Commercial
Commercial real estate:
Owner occupied
NonOwner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Loans with a specific valuation allowance:
Commercial
Commercial real estate:
Owner occupied
NonOwner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Total:
Commercial
Commercial real estate:
Owner occupied
NonOwner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Totals
$
668
$
920
$
1,911
286
2,863
319
5
2,587
1,009
-
-
24
28
3,255
2,920
286
2,863
343
33
1,911
286
2,863
319
5
2,587
1,093
-
-
24
28
3,507
3,004
286
2,863
343
33
-
-
-
-
-
-
978
659
-
-
16
10
978
659
-
-
16
10
$
929
$
1,950
294
2,903
227
5
3,099
1,131
-
-
25
32
4,028
3,081
294
2,903
252
37
$
9,700
$
10,036
$
1,663
$
10,595
$
Loans acquired with deteriorating credit are included with impaired loans.
2
117
13
82
23
1
156
45
-
-
-
2
158
162
13
82
23
3
441
28
34
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
2019
Recorded
Balance
Unpaid
Principal
Balance
Specific
Allowance
Average
Balance of
Impaired
Loans
Interest
Income
Recognized
$
4,343
$
267
Loans without a specific valuation allowance:
Commercial
Commercial real estate:
Owner occupied
NonOwner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Loans with a specific valuation allowance:
Commercial
Commercial real estate:
Owner occupied
NonOwner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Total:
Commercial
Commercial real estate:
Owner occupied
NonOwner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Totals
$
4,092
$
4,324
$
1,266
302
615
330
25
601
1,809
-
570
26
29
4,693
3,075
302
1,185
356
54
1,266
302
615
330
25
601
1,893
-
570
26
29
4,925
3,159
302
1,185
356
54
-
-
-
-
-
-
363
915
-
172
18
13
363
915
-
172
18
13
1,266
315
622
340
29
696
1,920
-
631
26
29
5,039
3,186
315
1,253
366
58
$
9,665
$
9,981
$
1,481
$
10,217
$
Interest income recognized is not materially different than interest income that would have been
recognized on a cash basis.
87
26
14
24
1
43
120
-
28
1
2
310
207
26
42
25
3
613
29
35
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The following table presents information regarding troubled debt restructuring by type of
modification for the year ended December 31, 2020.
2020
Interest Only
Terms
Extension of
Maturity
Combination
Advance Funds
Total Modification
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
$
-
$
316
-
-
-
-
Total
$
316
$
-
-
-
-
-
-
-
$
2,766
$
-
-
-
-
-
$
-
-
-
-
-
-
2,766
316
-
-
-
-
$
2,766
$
-
$
3,082
During the years ended December 31, 2020 and 2019, there were no troubled debt restructurings
that subsequently defaulted within twelve months of the restructuring. The troubled debt
restructurings noted above increased the allowance for loan losses during the year ended December
31, 2020 by approximately $803,000.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The following table presents the Company’s nonaccrual loans at December 31, 2020 and 2019.
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
2020
2019
$
574
$
457
-
1,830
98
10
563
418
-
794
83
-
Total nonaccrual
$
2,969
$
1,858
The following table presents information regarding troubled debt restructurings by class for the
year ended December 31, 2020.
2020
Number of
Loans
Pre-Modification
Recorded Balance
Post-Modification
Recorded
Balance
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
Total
1
1
-
-
-
-
2
$
2,766
$
316
-
-
-
-
2,766
316
-
-
-
-
$
3,082
$
3,082
There were no loans modified as troubled debt restructurings for the year ended December 31,
2019.
36
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Note 4: Mortgage Servicing Rights
The following table summarizes mortgage servicing rights capitalized and related amortization,
along with activity in the related valuation allowance:
Loan servicing rights:
Carrying amount, beginning of year
Mortgage servicing rights capitalized during the year
Mortgage servicing rights amortization during the year
Acquisition of VCB
Net change in valuation allowance
Carrying amount, end of year
Valuation allowance:
Beginning of year
Increase (reduction)
End of year
$
$
2020
2019
$
226
1,662
(859)
1,970
(337)
147
101
(22)
-
-
2,662
$
226
2020
2019
-
337
337
$
$
-
-
-
The fair value of mortgage servicing rights as of December 31, 2020 and 2019 were approximately
$2,662,000 and $226,000. The unpaid principal balance of mortgage loans serviced for others as of
December 31, 2020 and 2019 were approximately $366,064,000 and $24,973,000.
Note 5: Premises and Equipment
Major classifications of premises and equipment, stated at cost, are as follows:
Land and improvements
Building and improvements
Equipment
Total
Less accumulated depreciation
Net premises and equipment
2020
2019
$
6,024
25,721
14,822
46,567
(16,347)
$
6,005
25,036
13,749
44,790
(14,604)
$
30,220
$
30,186
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Note 6: Goodwill
Goodwill is recorded on the acquisition date of an entity. During the one-year measurement
period, the Company may record subsequent adjustments to goodwill for provisional amounts
recorded at the acquisition date. The Victory Community Bank acquisition on April 7, 2020
resulted in $11,183,000 of goodwill. Details regarding the Victory Community Bank acquisition
are discussed in Note 18, Business Combinations. Goodwill at December 31, 2020 and 2019 was
$12,389,000 and $1,206,000 respectively.
The Company reviews goodwill annually for impairment in accordance with ASU No. 2017-04,
Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill, or more
frequently if events or circumstances warrant. The impairment analysis compares the estimated fair
value of the Company with the Company’s net book value, and may include various valuation
considerations including comparable peer data, precedent transaction comparables, discounted cash
flow analysis, overall financial performance, share price of the Company’s common stock and
other factors. At March 31, 2020, June 30, 2020 and September 30, 2020 the Company assessed
the economic impact and market conditions from the COVID-19 pandemic. Additionally, the
Company assessed the general uncertainty as to the full extent of the COVID-19 pandemic and its
effect on economic recovery and concluded goodwill was not impaired in either period.
At December 31, 2020 and 2019 the fair value exceeded the Company’s carrying value; therefore,
it was concluded that goodwill was not impaired.
Note 7: Other Intangible Assets
Core deposit intangibles and other intangibles are recorded on the acquisition date of an entity.
During the one-year measurement period, the Company may record subsequent adjustments to
these intangibles for provisional amounts recorded at the acquisition date. The Victory Community
Bank acquisition on April 7, 2020 resulted in a core deposit intangible of $552,000. Details
regarding the Victory Community Bank acquisition or discussed in Note 20 – Business
Combinations. The carrying basis and accumulated amortization of recognized core deposit and
other intangibles are noted below.
Gross carrying amount
Core deposit intangible acquired
Accumulated amortization
Total core deposit and other intangibles
2020
2019
$
$
$
$
1,018
552
(317)
1,253
$
$
$
$
446
572
(83)
935
The core deposit intangibles and other intangibles are being amortized primarily on an accelerated
basis over their estimated useful lives, generally over a period of five to ten years. Amortization
expense for the years ended December 31, 2020 and 2019 was $234,000 and $68,000 respectively.
38
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Note 8: Lease Arrangements
Lease Obligations
The Company enters into leases in the normal course of business primarily for financial centers,
business development offices, and information technology equipment. The Company’s leases have
remaining terms ranging from .8 to 16.7 years, some of which include renewal or termination
options to extend the lease for up to 10 years. In addition, the Company has entered into subleases
for space in certain vacated locations, the terms of which range from 3 to 5 years. The Company’s
leases do not include residual value guarantees or covenants. The Company includes lease
extension and termination options in the lease term if, after considering relevant economic factors,
it is reasonably certain the Company will exercise the option. In addition, the Company has elected
to account for any non-lease components in its real estate leases as part of the associated lease
component. The Company has also elected not to recognize leases with original lease terms of less
than 12 months (short-term leases) on the balance sheet.
Leases are classified as operating or finance leases at the lease commencement date. Lease
expense for operating leases and short-term leases is recognized on a straight-line basis over the
lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and
lease liabilities represent our obligation to make these lease payments arising from the lease.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on
the estimated present value of lease payments over the lease term.
The Company uses its incremental borrowing rate at lease commencement to calculate the present
value of lease payments when the rate implicit in a lease is not known. The Company’s
incremental borrowing rate is based on the FHLB rate, adjusted for the lease term.
All of the Company’s right-of-use assets and lease liabilities totaling $3,051,000 at December 31,
2020 and $2,569,000 at December 31, 2019 are classified as operating leases.
Lease Expense
The components of total lease cost were as follows for the period ending:
December 31,
2020
December 31,
2019
Operating lease cost
Operating lease cost below capitalization threshold
Short-term lease cost
Variable lease cost
Less: Sublease income
$
$
400
3
3
1
(111)
Total lease cost, net
$
296
$
295
3
7
1
(81)
225
Future undiscounted lease payments for finance and operating leases with initial terms of one year
or more as of December 31, 2020 are as follows:
2021
2022
2023
2024
2025
Thereafter
Total undiscounted lease payments
Less: imputed interest
Net lease liabilities
Operating
Leases
$
$
$
395
345
333
274
272
2,141
3,760
(709)
3,051
Supplemental Lease Information
Operating lease weighted average remaining lease term (years)
Operating lease weighted average discount rate
Cash paid for amounts included in the measurement of lease liabilities
December 31,
2020
December 31,
2019
12.5
3.02%
14.7
3.53%
Operating cash flows from operating leases
$
400
$
231
Note 9: Interest-bearing Time Deposits
Interest-bearing time deposits in denominations of $250,000 or more were $76,568,000 on
December 31, 2020 and $65,817,000 on December 31, 2019.
At December 31, 2020, the scheduled maturities of time deposits are as follows:
2021
2022
2023
2024
2025 and thereafter
$
265,539
61,048
18,121
5,533
6,962
Total time deposits
$
357,203
40
34
35
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Note 10: Repurchase Agreements
Payments over the next five years and thereafter are as follows:
The Company had repurchase agreements on December 31, 2020 and 2019 of $10,632,000 and
$11,344,000 respectively. These agreements are secured by U. S. Government Agency, FHLB,
FHLMC, FNMA, and GNMA securities and such collateral is held in safekeeping with a third
party. The maximum amount of outstanding agreements at any month end during 2020 and 2019
totaled $13,912,000 and $16,861,000 , respectively, and the daily average of such agreements
totaled $9,588,000 and $10,327,000 for 2020 and 2019, respectively. These agreements mature
daily. The following table represents the remaining contractual maturity of repurchase agreements
disaggregated by the class of securities pledged as of December 31.
December 31, 2020:
U.S. government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
Totals
2020
Overnight &
Continuous
$
8,735
$
$
1,897
10,632
Note 11: Borrowings
The Company has Federal Funds Borrowing Line Agreements with US Bank and PNC Bank that
allow the Company to borrow up to $20,000,000 and $5,000,000 in Federal Funds, respectively.
The Company has a cash management advance (CMA) line of credit with the Federal Home Loan
Bank (FHLB) of Cincinnati. FHLB borrowings are collateralized by all shares of FHLB stock
owned by the Bank and by the Bank’s residential mortgage loans. At December 31, 2019, the
Company had $68,741,000, respectively, available on its CMA line of credit. The CMA
application expired on November 6, 2020. The line of credit was subsequently renewed on January
7, 2021. The Company has the option of selecting a variable interest rate set daily for 90 days or a
fixed interest rate for a maximum of thirty days. Variable interest rates are set daily based upon the
FHLB’s published interest rates. Variable interest rate advances are prepayable with no fee. The
fixed rate is not prepayable prior to maturity.
At December 31, 2020, term advances from the Federal Home Loan Bank were $44,670,000 at
fixed rates ranging from .95% to 3.06%, maturing between March 2, 2021 and August 1, 2037.
Each advance is payable either at its maturity date or amortizing over the life of the advance, with a
prepayment penalty for fixed rate advances. The advances were collateralized by approximately
$421,167,000 of residential mortgage assets under a blanket lien arrangement at year-end 2020.
Based on this collateral the Company has additional borrowing capacity of $159,233,000 at
December 31, 2020.
2021
2022
2023
2024
2025
Thereafter
$
1,916
20,153
3,907
985
805
16,904
Total FHLB Advances
$
44,670
On May 15, 2020, the Company completed a private issuance and sale, of subordinated notes at a
5.00% fixed to floating rate, to 21 accredited investors for an aggregate gross amount of
$25,000,000 proceeds, net of related issuance costs of $415,000. The notes are fixed at 5.00% until
June 15, 2025, when they will convert to the three-month term SOFR plus 490.0 basis points,
repricing quarterly. Interest is payable in March and September of each year. The Subordinated
notes will mature on May 15, 2030, and the Company cannot redeem the notes prior to May 15,
2025, subject to approval of the Board of Governors of the Federal Reserve System, as required by
law or regulation. This private placement included $5,360,000 of notes that were issued in
exchange for the Company’s existing subordinated notes, issued on November 12, 2015, for net
cash proceeds of $19,225,000.
Note 12: Income Taxes
The provision for income taxes includes these components:
Taxes currently payable
Deferred income taxes
Income tax expense
2020
2019
$
4,408
(1,148)
$
3,260
$
$
2,971
(55)
2,916
42
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37
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax
expense is shown below:
Note 13: Regulatory Matters
Computed at the statutory rate of 21%
Increase (decrease) resulting from
Tax exempt interest
Cash surrender value, net of premiums
Other
2020
2019
$
3,786
$
3,384
(539)
(75)
88
(437)
(92)
61
Actual tax expense
$
3,260
$
2,916
The tax effects of temporary differences related to deferred taxes shown on the balance sheets
were:
Deferred tax assets
Allowance for loan losses
Deferred compensation
Stock option expense
Right of use lease liability
Deferred loan fees
Other
Total deferred tax assets
Deferred tax liabilities
Depreciation
Purchase accounting adjustments
FHLB stock dividends
Prepaid expenses
Unrealized gains on available-for-sale securities
Right of use lease asset
Other
Total deferred tax liabilities
Net deferred tax asset
2020
2019
$
2,971
624
198
641
485
151
5,070
(1,496)
(98)
(94)
(50)
(1,177)
(641)
(559)
(4,115)
$
1,841
572
159
-
-
54
2,626
(1,432)
-
(94)
(69)
(384)
-
(47)
(2,026)
$
955
$
600
The Company and the Bank are subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Company’s financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Company and the Bank
must meet specific capital guidelines that involve quantitative measures of assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting guidelines. The capital
amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors. Furthermore, the Company’s regulators could
require adjustments to regulatory capital not reflected in these financial statements.
Quantitative measures established by regulation to ensure capital adequacy require the Company
and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and
Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier 1 capital (as
defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets
(as defined). Management believes, as of December 31, 2020, that the Company and the Bank
meet all capital adequacy requirements to which they are subject.
As of December 31, 2020, the most recent notification from the Federal Reserve categorized the
Company and Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well-capitalized, the Company and Bank must maintain capital ratios
as set forth in the table that follows. There are no conditions or events since that notification that
management believes have changed the Company or Bank’s category.
44
38
39
45
2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The Company’s and Bank’s actual capital amounts and ratios are presented in the following table.
Actual
For Capital Adequacy
Purposes
To Be Well Capitalized
Under Prompt
Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
As of December 31, 2020
Total Capital
(to Risk-Weighted Assets)
Consolidated
Bank
Tier I Capital
(to Risk-Weighted Assets)
Consolidated
Bank
Common Equity Tier I Capital
(to Risk-Weighted Assets)
Consolidated
Bank
Tier I Capital
(to Average Assets)
Consolidated
Bank
As of December 31, 2019
Total Capital
(to Risk-Weighted Assets)
Consolidated
Bank
Tier I Capital
(to Risk-Weighted Assets)
Consolidated
Bank
Common Equity Tier I Capital
(to Risk-Weighted Assets)
Consolidated
Bank
Tier I Capital
(to Average Assets)
Consolidated
Bank
$
160,926
152,070
122,822
138,747
122,822
138,747
122,822
138,747
$
139,411
132,203
125,184
123,436
125,184
123,436
125,184
123,436
15.1%
14.3%
11.5%
13.0%
11.5%
13.0%
N/A
85,202
N/A
63,902
N/A
47,926
8.3%
9.3%
N/A
59,389
15.3%
14.5%
13.7%
13.6%
13.7%
13.6%
11.0%
10.9%
N/A
72,806
N/A
54,605
N/A
40,954
N/A
45,312
N/A
8.0%
N/A
106,503
$
N/A
10.0%
N/A
6.0%
N/A
4.5%
N/A
4.0%
N/A
85,202
N/A
69,227
N/A
74,236
N/A
8.0%
N/A
6.5%
N/A
5.0%
N/A
8.0%
N/A
91,008
$
N/A
10.0%
N/A
6.0%
N/A
4.5%
N/A
4.0%
N/A
72,806
N/A
59,155
N/A
56,641
N/A
8.0%
N/A
6.5%
N/A
5.0%
The Bank is subject to certain restrictions on the amount of dividends that it may declare without
prior regulatory approval. Generally, the Bank’s payment of dividends is limited to net income for
the current year plus the two preceding calendar years, less capital distributions paid over the
comparable time period.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
The above minimum capital requirements exclude the 2.50% capital conservation buffer required
to avoid limitations on capital distributions, including dividend payments and certain discretionary
bonus payments to executive officers. The net unrealized gain or loss on available-for-sale
securities is not included in computing regulatory capital.
Note 14: Related Party Transactions
At December 31, 2020 and 2019, the Bank had loans outstanding and lines of credit available to
executive officers, directors, significant shareholders and their affiliates (related parties), in the
amount of approximately $29,356,000 and $41,071,000, respectively.
In management’s opinion, such loans and other extensions of credit and deposits were made in the
ordinary course of business and were made on substantially the same terms (including interest rates
and collateral) as those prevailing at the time for comparable transactions with other persons.
Further, in management’s opinion, these loans did not involve more than normal risk of
collectability or present other unfavorable features.
Deposits from related parties held by the Bank at December 31, 2020 and 2019, totaled
$40,227,000 and $13,153,000, respectively.
Note 15: Employee Benefits
The Company has a retirement savings 401(k) plan covering substantially all employees.
Employees may contribute up to the maximum amount allowable by the Internal Revenue Service
with the Company matching 50% of the employee’s contribution not to exceed 3% of the
employee’s compensation. In addition, the Company may make additional discretionary
contributions allocated to all eligible participants based on compensation. Employee contributions
are always 100% vested. Employer contributions vest annually until the employee becomes fully
vested after six years of participation in the plan. Employer contributions charged to expense for
2020 and 2019, were approximately $425,000 and $326,000, respectively.
The Company has supplemental retirement plans for certain former and current Senior Officers.
Officers in the plans, upon retirement, will receive annually for ten or fifteen years a percentage of
their final annual payroll amount exclusive of incentive and bonus amounts and may be partially
offset by 401(k) or 401(k) and social security retirement benefits. The plans are uniquely designed
for each participant. The charges to expense for 2020 and 2019 were $523,000 and $477,000,
respectively. Such charges reflect the straight-line accrual over the period until full eligibility of
the present value of benefits due each participant on the full eligibility date. For plans executed
before 2016, a 6% discount factor is used. For plans executed after January 1, 2016, the
accumulation period crediting rate was 43% of the prior year Return on Equity of the Company for
2019 and 2020; and the distribution period crediting rate is equal to the 10-Year U.S. Treasury note
on the first day of each year plus 1%. The resulting liability at December 31, 2020 and 2019 was
$2,973,000 and $2,722,000, respectively. The Company purchased life insurance on the
participants.
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The Bank has employment agreements with certain officers of the Bank. Under these agreements,
the officers are employed for rolling one to three-year periods. Unless the Bank serves a
termination notice to the officers before December 31 of each year, the agreements are
automatically extended for one additional year. The Bank’s Board of Directors approve the
officers’ base salaries annually. The agreements prohibit the officers from soliciting banking
business from customers of the Bank for a period of one to three years following the termination of
the employment agreements.
Note 16: Stock Option Plan
The Company has a fixed option plan under which the Company may grant options to selected
directors, Advisory Board Members and employees for up to 249,738 shares of common stock that
vest over two years or immediately if the recipient is 65 years old or older. The Company believes
that such awards align the interests of its employees with those of its shareholders. The exercise
price of each option is intended to equal the fair value of the Company's stock on the date of grant.
An option's maximum term is ten years. The compensation cost for the stock option expense
recognized in 2020 and 2019 totaled $591,000 and $661,000, respectively. As of December 31,
2020, there was $145,383 of total unrecognized compensation cost related to non-vested share-
based compensation arrangements granted under the Plan.
A summary of the status of the plan at December 31, 2020 and changes during the year then ended
is presented below:
Weighted-
Average
Exercise
Price
$
$
$
72.06
-
45.93
77.83
72.15
70.53
Shares
188,890
-
(5,090)
(20,500)
163,300
136,000
Outstanding, beginning of year
Granted
Exercised
Forfeited or expired
Outstanding, end of year
Exercisable, end of year
2020
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Instrinsic Value
6.68
6.33
$
$
1,965
1,880
There were no options granted in 2020. The weighted-average grant-date fair value of options
granted during 2019 was $15.31. The total intrinsic value of options exercised during the year
ended December 31, 2020 and 2019 was $123,000 and $936,000, respectively.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The fair value of each option award granted is estimated on the date of the grant using a Black-
Scholes valuation model that uses the assumptions noted in the following table. Expected volatility
is based on historical volatility of the Company’s stock and other factors. The Company uses the
simplified method to estimate option exercise and employee termination within the valuation
model due to lack of historical data. The expected term of options granted represents the period of
time that options are expected to be outstanding. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Dividend yield
Volatility factors of expected market price of common stock
Risk-free interest rate
Expected life (in years)
Weighted-average fair value of options granted during the year
Note 17: Earnings Per Share
Earnings per share (EPS) were computed as follows:
2020
N/A
N/A
N/A
N/A
N/A
2019
2.58%
20.79%
2.42%
7.30
$15.31
Year Ended December 31, 2020
Weighted-
Average
Shares
Per Share
Amount
Income
Basic earnings per share
Income available to common stockholders
$
14,767
1,999,434
$
7.39
Effect of dilutive securities
Stock options
Diluted earnings per share
assumed conversions
stockholders and assumed
conversions
15,800
$
14,767
2,015,234
$
7.33
Options to purchase 129,550 shares of common stock at a weighted-average exercise price of
$80.41 per share were outstanding at December 31, 2020 but were not included in the computation
of diluted EPS because the options’ exercise price was greater than the average market price of the
common shares.
48
42
43
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Year Ended December 31, 2019
Weighted-
Average
Shares
Per Share
Amount
Income
Basic earnings per share
Income available to common stockholders
$
13,196
2,017,476
$
6.54
Effect of dilutive securities
Stock options
Diluted earnings per share
assumed conversions
stockholders and assumed
conversions
27,032
$
13,196
2,044,508
$
6.45
Options to purchase 89,550 shares of common stock at a weighted-average exercise price of $83.32
per share were outstanding at December 31, 2019 but were not included in the computation of
diluted EPS because the options' exercise price was greater than the average market price of the
common shares.
Note 18: Disclosures about Fair Value of Assets and Liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Fair value measurements
must maximize the use of observable inputs and minimize the use of unobservable inputs. There is
a hierarchy of three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities
Level 3 Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
Recurring Measurements
The following tables present the fair value measurements of assets recognized in the accompanying
balance sheets measured at fair value on a recurring basis and the level within the fair value
hierarchy in which the fair value measurements fall at December 31, 2020 and 2019.
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
$
14,682
$
23,480
97,518
8,697
$
43,438
$
19,717
73,000
3,063
-
-
-
-
-
-
-
-
$
14,682
$
23,480
97,518
8,697
$
43,438
$
19,717
73,000
3,063
-
-
-
-
-
-
-
-
December 31, 2020:
U.S. government agencies
Mortgage-backed securities of
U.S. government sponsored
enterprises
State and political subdivisions
Corporate Bonds
December 31, 2019:
U.S. government agencies
Mortgage-backed securities of
U.S. government sponsored
enterprises
State and political subdivisions
Corporate Bonds
Following is a description of the valuation methodologies and inputs used for assets measured at
fair value on a recurring basis and recognized in the accompanying balance sheets. There have
been no significant changes in the valuation techniques during the year-ended December 31, 2020.
Available-for-Sale Securities
Where quoted market prices are available in an active market, securities are classified within
Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are
estimated by using quoted prices of securities with similar characteristics or independent asset
pricing services and pricing models, the inputs of which are market-based or independently sourced
market parameters, including, but not limited to, yield curves, interest rates, volatilities,
prepayments, defaults, cumulative loss projections and cash flows. Level 2 securities include U.S.
government agencies, Mortgage-backed securities of U.S. government sponsored enterprises, State
and political subdivisions and corporate bonds. In certain cases where Level 1 or Level 2 inputs
are not available, securities are classified within Level 3 of the hierarchy.
50
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Nonrecurring Measurements
The following tables present the fair value measurement of assets measured at fair value on a
nonrecurring basis and the level within the fair value hierarchy in which the fair value
measurements fall at December 31, 2020 and 2019:
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
December 31, 2020:
Collateral-dependent impaired loans
Mortgage servicing rights
$
1,535
2,662
$
$
December 31, 2019:
Collateral-dependent impaired loans
$
394
$
-
-
-
$
$
$
-
-
-
$
$
$
1,535
2,662
394
Following is a description of the valuation methodologies used for assets measured at fair value on
a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general
classification of such assets pursuant to the valuation hierarchy. For assets classified within Level
3 of the fair value hierarchy, the process used to develop the reported fair value is described below.
Collateral-dependent Impaired Loans, Net of ALLL
The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value
of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified
within Level 3 of the fair value hierarchy.
The Company considers the appraisal or evaluation as the starting point for determining fair value
and then considers other factors and events in the environment that may affect the fair value.
Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is
determined to be collateral-dependent and subsequently as deemed necessary by management.
Appraisals are reviewed for accuracy and consistency. Appraisers are selected from the list of
approved appraisers maintained by management. The appraised values are reduced by discounts to
consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is
dependent on the sale of the collateral. These discounts and estimates are developed by
comparison to historical results.
Mortgage servicing rights
MSRs do not trade in an active market with readily observable prices. Accordingly, the fair value
of these assets is classified as Level 3. The Company determines the fair value of MSRs using an
income approach model based upon the Company’s month–end interest rate curve and prepayment
assumptions. The model utilizes assumptions to estimate future net servicing income cash flows,
46
52
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
including estimates of time decay, payoffs and changes in valuation inputs and assumptions. The
Company reviews the valuation assumptions against this market data for reasonableness and
adjusts the assumptions if deemed appropriate. The carrying amount of the MSRs were reduced by
$337,000 in 2020 for the fair value.
Unobservable (Level 3) Inputs
The following table presents quantitative information about unobservable inputs used in
nonrecurring Level 3 fair value measurements at December 31, 2020 and 2019.
Fair Value at
12/31/2020
Valuation
Technique
Unobservable Inputs
Range
(Weighted
Average)
Collateral-dependent impaired loans
Mortgage servicing rights
$
1,535
2,662
Market comparable properties
Discounted cash flow
Marketability discounts
Discount rate
Constant prepayment rate
10-25% (20%)
9.5-10.5% (10%)
8-44% (14%)
Fair Value at
12/31/2019
Valuation
Technique
Unobservable Inputs
Range
(Weighted
Average)
Collateral-dependent impaired loans
$
394
Market comparable properties
Marketability discounts
10-25% (24%)
Sensitivity of Significant Unobservable Inputs
The following is a discussion of the sensitivity of significant unobservable inputs, the
interrelationships between those inputs and other unobservable inputs used in recurring fair value
measurement and of how those inputs might magnify or mitigate the effect of changes in the
unobservable inputs on the fair value measurement.
Collateral-dependent impaired loans
The significant unobservable input used in the fair value measurement of the Company’s collateral-
dependent impaired loans is the marketability discount. Significant increases in this input in
isolation would result in a significantly lower fair value measurement.
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Fair Value of Financial Instruments
The following table presents estimated fair values of the Company’s financial instruments and the
level within the fair value hierarchy in which the fair value measurements fall at December 31,
2020 and 2019.
Fair Value Measurements Using
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
189,874
277
-
-
-
202
-
6,017
6,115
-
-
-
-
-
-
-
-
-
1,316,124
10,632
45,466
23,945
693
$
$
19,475
-
-
-
-
-
-
-
-
-
-
-
760
-
4,440
4,835
947,215
11,330
15,202
5,514
432
$
$
-
-
-
4,382
1,168,052
-
-
-
-
-
-
-
-
-
-
905,588
-
-
-
-
-
-
48
December 31, 2020
Financial assets
Cash and cash equivalents
Interst-bearing time deposits
Held-to-maturity securities
Loans held for sale
Loans, net of allowance for loan
losses
Nonmarketable equity securities
Interest receivable
Financial liabilities
Deposits
Repurchase agreements
FHLB Advances
Subordinated debt
Interest payable
December 31, 2019
Financial assets
Cash and cash equivalents
Interst-bearing time deposits
Held-to-maturity securities
Loans, net of allowance for loan
losses
Nonmarketable equity securities
Interest receivable
Financial liabilities
Deposits
Repurchase agreements
FHLB Advances
Subordinated debt
Interest payable
Carrying
Amount
$
189,874
277
202
4,382
1,121,947
6,017
6,115
1,312,834
10,632
44,670
24,709
693
$
19,475
-
758
890,855
4,440
4,835
944,223
11,344
15,000
5,460
432
54
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Note 19: Commitments and Credit Risk
Letters of Credit
Letters of credit are conditional commitments issued by the Bank to guarantee the performance of a
customer to a third party. These guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing and similar transactions.
The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loans to customers.
The Bank had total outstanding letters of credit amounting to $795,000 and $510,000 at December
31, 2020 and 2019, respectively, with maturities within the next 12 months.
Lines of Credit
Lines of credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Lines of credit generally have fixed expiration dates. Since a
portion of the line may expire without being drawn upon, the total unused lines do not necessarily
represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by
case basis. The amount of collateral obtained, if deemed necessary, is based on management’s
credit evaluation of the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, commercial real estate and residential real estate.
Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet
instruments.
At December 31, 2020, the Bank had granted unused lines of credit to borrowers aggregating
approximately $116,631,000 and $51,612,000 for commercial lines and open-end consumer lines,
respectively. At December 31, 2019, the Bank had granted unused lines of credit to borrowers
aggregating approximately $69,241,000 and $40,693,000 for commercial lines and open-end
consumer lines, respectively.
Commitments to Originate Loans
Commitments to originate loans are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since a portion of
the commitments may expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on
management’s credit evaluation of the counterparty. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, commercial real estate and
residential real estate. At December 31, 2020, and 2019, the Bank had outstanding commitments to
originate variable rate loans aggregating approximately $20,962,000 and $25,101,000, respectively.
The commitments extended over varying periods of time with the majority being disbursed within
a one-year period.
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Note 20: Business Combinations
On April 7, 2020, the Company acquired 100% of the outstanding common shares of Victory
Community Bank from Victory Bancorp, Inc. As the sole shareholder of Victory Community
Bank, Victory Bancorp received purchase consideration consisting of 58,934 shares of Heartland
BancCorp common stock, valued at $3,418,000 and $35,500,000 in cash, for total consideration of
$38,918,000. The fair value of the common shares issued as part of the consideration paid for
Victory Community Bank was determined on the basis of the closing price of the Company’s
common shares on acquisition date.
The acquisition is expected to provide additional revenue growth with enhanced mortgage banking
along with growth in commercial banking services through geographic expansion to Northern
Kentucky. Victory Community Bank results of operations were included in the Company’s income
statement from April 7, 2020 through December 31, 2020. The Company recorded merger-related
expenses of $1,245,000 in 2020 related to the Victory Community Bank acquisition, and are
substantially included in professional fees, data processing, marketing expenses on the income
statement.
Goodwill of $11,183,000 arising from the acquisition consisted largely of synergies and the cost
savings resulting from combining operations of the companies. The goodwill is tax deductible as
the transaction was accounted for as an asset acquisition for tax purposes. The fair value of
intangible assets related to core deposits is $552,000.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
The following table summarizes the consideration paid for Victory Community Bank and the
amounts of the assets acquired and liabilities assumed recognized at the acquisition date:
Consideration
Cash
Equity Instruments
Fair value of total consideration transferred
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Interest bearing time deposits
Securities
Federal Home Loan Bank stock
Loans held for sale
Loans
Premises and equipment
Core deposit intangibles
Real estate owned
Other assets
Total assets acquired
Deposits
Federal Home Loan Bank advances
Other liabilities
Total liabilities assumed
Net identifiable assets
Goodwill
$
$
$
$
2020
35,500
3,418
38,918
67,255
274
605
1,128
14,581
135,704
886
552
5
4,941
225,931
183,436
14,135
624
198,195
27,736
$
11,183
The fair value of net assets acquired includes fair value of adjustments to certain receivables that
were not considered impaired as of the acquisition date. The fair value adjustments were
determined using discounted contractual cash flows. However, the Company believes that all
contractual cash flows related to these financial instruments will be collected. As such, these
receivables were not considered impaired at the acquisition date and were not subject to the
guidance relating to purchased credit impaired loans, which have shown evidence of credit
deterioration since origination. Receivables acquired that were not subject to these requirements
include non-impaired loans and customer receivables with a fair value and gross contractual
amounts receivable of $135,066,000 and $134,399,000 on the date of acquisition.
The fair value of purchased financial assets with credit deterioration was $881,000 on the date of
acquisition. The gross contractual amounts receivable relating to the purchased financial assets
with credit deterioration was $966,000. The Company estimates, on the date of acquisition, that
$85,000 of the contractual cash flows specific to the purchased financial assets with credit
deterioration will not be collected.
56
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Note 21: Condensed Financial Information (Parent Company Only)
Presented below is condensed financial information as to the financial position, results of
operations and cash flows of the Company:
Condensed Balance Sheets
Assets
Cash and cash equivalents
Investment in common stock of subsidiaries
Other assets
Total assets
Liabilities
Subordinated debt
Other liabilities
Total liabilities
Shareholders' Equity
December 31,
2020
2019
$
8,134
157,057
1,917
$
7,309
126,978
682
$
167,108
$
134,969
24,709
1,503
26,212
5,460
1,119
6,579
140,896
128,390
Total liabilities and shareholders' equity
$
167,108
$
134,969
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Condensed Statements of Income and Comprehensive Income
Year Ending December 31,
2020
2019
Income
Dividends from the Bank
Interest income
Total income
Expenses
Interest expense
Other expenses
Total expenses
Income Before Income Tax and Equity in
Undistributed Income of the Bank
Income Tax Benefit
Income Before Equity in Undistributed Income of the Bank
Equity in Undistributed Income of subsidiaries
$
$
6,189
27
6,216
957
404
1,361
4,855
(325)
5,180
9,587
Net Income
Comprehensive Income
$
$
14,767
17,748
$
$
4,474
36
4,510
282
353
635
3,875
(133)
4,008
9,188
13,196
16,549
58
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(Table dollar amounts in thousands, except share data)
Condensed Statements of Cash Flows
Operating Activities
Net income
Stock option expense
Tax benefit related to stock options excercised
Items not providing cash
Year Ending December 31,
2020
2019
$
14,767
591
10
(11,102)
$
13,196
661
8
(10,201)
Board of
DIRECTORS
Heartland BancCorp Directors
Beverly J. Donaldson
President
Jay B. Eggspuehler, Esq.
Partner
Inns Management Group
Isaac, Wiles & Burkholder, LLC
Hirth, Norris & Garrsion, LLP
Net cash provided by operating activities
4,266
3,664
Jodi L. Garrison
CPA, Partner
Investing Activities
Investment in Common Stock of the Bank
Net cash used in investing activities
Financing Activities
Proceeds from subordinated debt, net
Dividends paid
Proceeds from stock options exercised
Repurchase of common stock
Issuance of common stock
Repurchase of treasury stock
Net cash provided (used) in financing activities
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
(13,500)
(13,500)
19,225
(4,474)
360
(58)
-
(4,994)
10,059
825
7,309
-
-
-
(4,101)
275
-
75
-
(3,751)
(87)
7,396
Cash and Cash Equivalents at End of Year
$
8,134
$
7,309
Note 22: Subsequent Events
Subsequent events have been evaluated through March 15, 2021 which is the date the financial
statements were available to be issued.
James R. Heimerl
Owner
Heimerl Farms LTD.
John G. Kenkel, Jr.
Retired, President & CEO
Victory Community Bank & Victory Bancorp
Cheryl L. Krueger
CEO
C. Krueger’s
G. Scott McComb
Chairman, President & CEO
Heartland Bank
Robert C. Overs
Executive Director
Creative Living
Gary D. Paine
CEO
Accurate Companies
William J. Schottenstein
Principal
Arshot Investment Corporation
George R. Smith
Retired, EVP & CFO
Heartland Bank
Gregory M. Ubert
Founder, President & CEO
Crimson Cup Coffee & Tea
Richard A. Vincent
Chief Executive Emeritus, Retired
Osteopathic Heritage Foundation
Heartland BancCorp Directors Emeriti
I. Robert Amerine
American Apex Corporation
Arthur G.H. Bing, M.D.
Plastic & Reconstructive Surgeon
William A. Dodson Jr.
Rhema Christian Center
Jack J. Eggspuehler
Aerosafe, Inc.
John R. Haines
John R. Haines Insurance Agency
Gerald K. McClain
The Jerry McClain Company, Inc.
Tiney M. McComb
Heartland BancCorp
Cheryl C. Poulton
Tech International
Heartland BancCorp Officers
G. Scott McComb
Chairman, President & CEO
Jay B. Eggspuehler, Esq.
Vice Chairman
Jennifer L. Eckert
Secretary
Carrie L. Almendinger
Treasurer
60
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
Senior
TEAM
G. Scott McComb
Chairman, President & CEO
Carrie L. Almendinger
EVP, Chief Financial Officer
Benjamin J. Babcanec
SVP, Chief Operating Officer
Jennifer L. Eckert
SVP, Risk Management & Corporate Secretary
Pamela D. Goetting
SVP, Director of Northern Kentucky Region
Nancy M. Matney
SVP, Director of Treasury Management & Client Services
Laurie A. Pfeiffer
SVP, Director of Commercial Banking
Tarne Tassniyom
SVP, Director of Information Technology
Ashley A. Trout
SVP, Director of Strategy
Patrick T. John
President of TransCounty Title Agency
Alyssa L. Booms
VP, Director of Branch Banking
Matthew H. Booms
VP, Director of Mortgage Banking
Gretchen A. Hof
VP, Director of Marketing
Sarah M. Ketty
VP, Director of People Portfolio
Jessica H. McNamee
VP, Director of Financial Planning
Stuart J. Schloss
VP, Director of Loan Syndication
Taking stock in Y o u r C o m m u n i
t y
HLAN Heartland BancCorp is currently
quoted on the over-the-counter
(OTCQX) 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 at
(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.
Our Communities
are STRONGER when we
invest in EACH OTHER.
The Heartland Bank Community Foundation (HBCF) was formed as a resource to
guide community prosperity through organized philanthropic efforts. The Foundation
places particular emphasis on two specific focus areas established to guide giving and
promote understanding of the objectives of the Foundation.
The two areas of support are:
Early Childhood Development
Family Enrichment
Give back to your community.
Visit us online today for more information.
HeartlandBankCommunityFoundation.org
HBCF@Heartland.Bank
🌎 430 N. Hamilton Rd., Whitehall, OH 43213
BILL
DODSON
EVP/Community Relations
Director
Rhema Christian
Center
BOB
CLARK
Retired, Senior VP
Merrill Lynch
HINDA
MITCHELL
President
Inspire PR Group
62
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2020 Annual Report Heartland BancCorpHeartland BancCorp 2020 Annual Report
ᄙ
ᄙ
Proudly Serving
Central Ohio &
Northern Kentucky!
15 Locations
Franklin, Licking and
Fairfield counties
3 Locations
Kenton, Campbell and
Boone counties
Capitol Square
(614) 416-0244
Gahanna
(614) 337-4605
Hilliard
(614) 710-1640
Pickerington
(614) 321-4919
West Columbus
(614) 351-2100
Ft. Mitchell
(859) 341-2265
Clintonville
(614) 745-0070
West Gahanna
(614) 475-7024
Johnstown
(740) 967-6500
Reynoldsburg
(614) 416-0400
Westerville
(614) 839-2265
Ft. Thomas
(859) 442-8900
Dublin
(614) 798-8818
Grove City
(614) 875-1884
Newark
(740) 349-7888
Upper Arlington
(614) 502-8855
Whitehall
(614) 416-4601
Union
(859) 384-0600
About Heartland BancCorp
Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates eighteen 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 (OTCQX)
under the symbol HLAN.
430 North Hamilton Road
Whitehall, OH 43213
Heartland.Bank
1(800) 697-0049