Parent Company of Heartland Bank
& TransCounty Title Agency
2021 ANNUAL REPORT
Table of Contents
A Message From Our Chairman, President & CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Our Impact: A Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Our People Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Another Year of Achievement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Senior Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Take stock in your community
HLAN Heartland BancCorp is
currently quoted on the
OTCQX market 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.
Additional information, including analyst reports, can be found here:
OTCmarkets.com/Stock/HLAN/Research
Statements made on the OTC website 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. Information provided on these websites is not a part of this annual report and therefore is
not incorporated by reference into this annual report.
Dear Valued Shareholders,
I am pleased to report that 2021 was another banner year for your
community bank. The COVID-19 pandemic remained center focus as
helping any and all clients and businesses remained our priority. The
emergence of vaccines and more education around the transmission of
the virus and those most vulnerable allowed us to push the pendulum
back toward a state of normalcy. In 2021, Heartland celebrated the
110th anniversary of our bank charter, further enhanced our senior
staff and board of directors, ventured into the new and uncharted
world of Name, Image and Likeness (NIL), and crafted a new strategic
plan for the next three years.
I wonder what The Croton Bank’s first president, Mr. Potter, would
think if he could have known that the bank he started with the other
farmers in Croton would still be around more than a century later? I’m
quite certain that he would be as proud of our team as I am today. It
is not by accident that these events occur, very much to the contrary.
Hard work, dedication, risk management, pride, hustle and desire to
be great all have to be perfectly aligned in order for an organization
to persevere for such a long time. I’m proud to say that your Heartland
Team has all of those qualities plus some. This is why we remain in the
American Banker Top 200 Community Banks in 2021 at #82 and have
been in this listing for almost a decade. Your support as shareholders
is a vital component of this success, and we could not thank you more
for your support, business, and introductions as we continue to reach
for new heights. Congratulations to all of you on this monumental
anniversary!
One of the most important disciplines of banking is credit quality and
loan underwriting, and this past year we were able to advance quite
nicely in this area of the bank with the addition of some new talent. Jeff
Ciochetto joined Heartland as SVP, Director of Credit Administration
reporting to the CEO. Jeff’s 30 years of experience in banking and
credit administration along with his can-do attitude and approachable
communicative style has propelled this area of the bank forward. Speed
to market is vital in today’s competitive banking landscape, and the
Credit Administration team has worked hard to wrap up the Paycheck
Protection Program (PPP), but also execute strategies to streamline
the credit function while preserving the bank’s history of strong credit
quality. Best of all, Jeff is a superior mentor and we believe that this
combination with our up-and-coming credit team will be significant
for the institution for years to come.
A bank is only as strong as its board of directors, and this past year we
were able to add two very accomplished professionals to our board.
Tom Campbell and Ron Stokes were voted onto the board in May
and have already made an impact. Mr. Campbell is in the technology
sector bringing decades of expertise in technology consulting and
systems integration. Mr. Stokes is an entrepreneur in the marketing
and contracting area, and also is a color analyst for The Ohio State
University Men’s Basketball broadcasts on WBNS Radio. We continually
seek board candidates who exemplify our Heartland shared values in
order to create shareholder value, and I am pleased to welcome both
to our board ranks. In addition, the board streamlined its committee
structure by narrowing the number and expanding the responsibilities
of each committee. Director Jay B. Eggspuehler, ESQ, was named
lead outside director and chair of the Nominating and Governance
Committee. Your board continues to advance our structure as a public,
non-SEC reporting institution and chooses to run the organization as a
public company from a governance perspective.
NIL has been discussed for a great deal of time in college athletics
and this past year became legal in the state of Ohio and the NCAA.
3
Heartland was the first community bank in the nation to enter into
NIL agreements, and from there, the “Relationships Matter: Bank
ON Community Banking” movement was born. We use the word
movement because we hope it to be never-ending. We could not think
of a better way to showcase the benefits of community banking or the
importance of financial education to today’s youth. E.J. Liddell, Ohio
State Basketball star forward, and Haskell Garrett, Ohio State Football
star defensive tackle, were chosen to be the first carriers of this
message. We believe it has been received very well by the market, and
we plan to continue to use this medium to reach younger consumers
at the most impressionable time in their life to seek value from their
financial institution.
Your board met in October to rewrite our three-year strategic plan.
There was much discussion and deliberation regarding the future
direction of your community bank starting with the fact that, due to
our strong past performance, all options are available to us. To be able
to steer the company in any direction is a gift of hard work, quality
management, and is very unique in and of itself. Seeking a double-
digit return to shareholders remains the standard for performance
of the company. The board determined that if this standard can be
achieved annually, the bank should continue to execute strategies and
initiatives for growth and profitability into the future. Continued focus
on growth of noninterest revenue, organic expansion to the Cincinnati
market area along with continued Central Ohio expansion, obtaining
operational leverage through human and technology systems, and
seeking future acquisitions of like-minded organizations will further
expand offerings and growth markets. We are excited to begin this next
three-year journey, and I hope to write to you about our continued
success each quarter through our shareholder newsletter and press
releases.
Your management team didn’t waste any time in beginning the
execution of the new strategic plan. In December, we announced the
addition of Brian Brockoff, market president Cincinnati region, to our
ranks. A life-long resident of Cincinnati and career-long financial equity
and banking executive, Brian has intimate knowledge of the market,
and his longtime connections and community service should bode
well for the bank’s expansion moving forward. We hope to open three
locations in Cincinnati proper over the next plan cycle to complement
our already successful Northern Kentucky branch network.
Our continued positive financial results are a factor of several things
but really rest on these three guiding principles: You win with people,
and I would stack our team up with the best; independence in this
space is earned through hard work, innovative banking principles
and unquestionable integrity, and we have proven to our markets
that these are true; seek those that treasure value, only then will your
efforts be truly appreciated. I am extremely bullish on our future, and
our board and associates are prepared to execute this next chapter of
our Heartland story.
Thank you for your continued support
and patronage.
Sincerely,
G. Scott McComb
Chairman, President & CEO
Heartland BancCorp
6
7
Another year of Achievement
Changes in Financial Condition:
Earnings Summary:
Total assets at December 31, 2021, were $1.47
billion, a decrease of 5% compared to $1.55
billion at December 31, 2020. Net loans held
for investment increased $35.7 million or 3% to
$1.16 billion at December 31, 2021, compared
to $1.12 billion at December 31, 2020. The
largest components of this increase were in
commercial real estate, owner occupied loans,
which increased $48.4 million and non-owner
occupied loans, which increased $51.6 million.
The 2021 results were impacted by Heartland’s
participation in round two of the Paycheck
Protection Program (PPP) along with PPP
forgiveness from rounds one and two, which
decreased commercial loan balances by a net
total of approximately $74 million. A highlight
for 2021 was core loan growth of $109.4
million, or 11%, excluding PPP loans.
consisting
of
assets
Nonperforming
nonaccrual loans, loans past due 90 days and
still accruing, and Other Real Estate Owned
(“OREO”) totaled $1.6 million, or 0.11% of total
assets at December 31, 2021, a decrease of $1.3
million from 2020. Net charge offs increased
during 2021 to $1.10 million, which was a
$0.13 million increase compared to 2020. The
allowance for loan loss at December 31, 2021,
now covers nonaccrual loans by 924.9%, up
from 476.5% at December 31, 2020.
funds earning asset
Heartland BancCorp
growth through
its deposit relationships.
Deposits decreased $56.8 million or 4.3% to
$1.26 billion at December 31, 2021, due to high
levels of excess liquidity at the start of the year.
Deposit balances for the year included growth
of $52.1 million in demand deposits and $60.1
million in savings and money market deposits.
for significant
The CARES Act provided
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
clients throughout 2020 and the beginning
of 2021. Heartland has no loans with deferred
payments at December 31, 2021.
Total shareholders’ equity
increased $12.3
million or 8.7% to $153.2 million at December
31, 2021. Based upon total shares outstanding,
the book value of shareholders’ equity
increased 8% to $76.42 per share at December
31, 2021.
Heartland Bank and Heartland
BancCorp met all regulatory capital levels to be
considered well-capitalized for 2021 and 2020
(see Note 13 to the Consolidated Financial
Statements). In 2021, Heartland BancCorp paid
dividends of $2.51 per share, representing
a yield of 2.76% on the closing stock price of
$91.00 per share on December 31, 2021.
Heartland BancCorp has a 30+ year history
of strong, consistent financial performance,
and 2021 was no exception. Net income for
2021 increased 26% to $18.6 million or $9.17
per diluted share, compared to $14.8 million
or $7.33 per diluted share in 2020. Return on
average assets and equity were 1.23% and
12.68% respectively for 2021, compared to
1.08% and 11.10% for 2020.
Positive results for 2021 included net loan
growth of $35.7 million or 3%, with core loan
growth excluding PPP loans of $109.4 million
or 11%.
Deposit balances contracted by
$56.8 million or 4%. The mortgage banking
segment contributed significant revenues,
with residential real estate loan production
of $249.3 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 $374.9 million, up from
$366.1 million at December 31, 2020. PPP loan
originations in 2021 of $70.0 million and PPP
loans forgiven totaling $143.5 million, added a
total of $4.4 million in pretax preprovision net
revenue.
Operating revenue (net interest income plus
noninterest income) was up compared to the
prior year by $4.4 million, or 7.2%. Sustained
low long-term mortgage rates continued to
attract mortgage refinance and produced
strong gains on loan sales. Continued low
market rates, combined with excess liquidity
during the first half of the year, and PPP loans at
1.0% rates, contributed a 7 basis point decline
in net interest margin to 3.56% for 2021.
Operating expense increased $3.7 million or
10.1% in 2021, due to increased compensation
cost resulting from mortgage and commercial
lender commissions.
leverage
(growth in revenue divided by growth in
operating expense) was positive 1.2 times.
Operating
Net charge offs for 2021 were $1.10 million
compared to $0.97 million in 2020. Loan loss
provision was $1.9 million for 2021, compared
to $6.4 million in 2020.
Results of Operation:
Net interest income increased 8.9% to $50.5
million, compared to $46.4 million in 2020.
Average earning assets increased to $1.42
billion in 2021 compared to $1.27 billion in
2020, an increase of $151.8 million or 12.0%,
resulting from an $86.0 million, or 8%, increase
in average loan balances and a $53 million,
or 93% increase in average interest earning
cash balances. The consolidated full year net
interest margin decreased 7 basis points to
3.56% compared to 3.63% for the full year of
2020. Amortization of net deferred PPP fees
and costs recognized in interest income during
2021 was $2.9 million. At December 31, 2021,
the balance of unamortized PPP fees, net of
costs, were $0.54 million.
Provision for loan loss expense was $1.9 million
in 2021 compared to $6.4 million in 2020. For
2021, net charge offs totaled $1.10 million
or .10% of average loans compared to $0.97
million or .09% of average loans in 2020. The
allowance as a percent of loans, including PPP
balances, was 1.28% at December 31, 2021,
compared to 1.25% at December 31, 2020.
Total noninterest income was $14.3 million
for 2021 compared to $14.1 million for 2020,
representing an increase of $0.2 million or
1.5% year-over-year. This increase was driven
by increases of $0.86 million or 173% in net
loan servicing fees, $0.54 million or 35% in
card interchange, and $0.36 million or 33% in
income from Heartland’s financial planning
division, Heartland Planning Associates, offset
by a reduction of $2.1 million in gains on sales
of residential real estate loans and OMSRs.
TransCounty Title Agency contributed $2.6
million in noninterest income for 2021, an
increase of $0.32 million or 14% compared to
$2.3 million in 2020.
Total noninterest expense was $39.7 million
for 2021 compared to $36.1 million in 2020,
representing a $3.7 million, or 10.1%, increase
year-over-year.
full-time equivalent
employees ended 2021 at 295, an increase of 16
from year end 2020, resulting from continued
augmentation of the Northern Kentucky and
mortgage banking teams, and expansion into
the Cincinnati market.
Total
in
Salaries and benefits were driven by higher
compensation costs
the commercial
and mortgage divisions due to strong loan
originations and a reduction of $1.5 million
from deferred PPP loan origination costs. The
reduction from deferred PPP origination costs
was $0.6 million lower than the $2.1 million
reduction for 2020. Professional fees were
$0.76 million, or 40% lower in 2021 due to
acquisition related costs for legal, investment
banking and accounting fees in 2020. Other
noninterest expense for 2021 was higher due
to $0.41 million in debt extinguishment costs
from a $17.9 million prepayment of long-term
fixed rate FHLB advances on March 29, 2021.
TransCounty Title Agency contributed $2.2
million in operating costs compared to $1.8
million in 2020. $1.2 million in merger related
non-recurring expense is included in 2020
from the April 7, 2020, acquisition of Victory
Community Bank.
Independent Auditor’s Report
and Consolidated Financial Statements
December 31, 2021 and 2020
2021 Annual ReportHeartland BancCorp Independent Auditor’s Report
Board of Directors and Audit Committee
Heartland BancCorp
Whitehall, Ohio
Opinions on the Consolidated Financial Statements and Internal Control Over Financial
Reporting
We have audited the accompanying consolidated financial statements of Heartland BancCorp, which
comprise the consolidated balance sheets as December 31, 2021 and 2020, 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. In our opinion, the accompanying
consolidated financial statements present fairly, in all material respects, the financial position of
Heartland BancCorp as of December 31, 2021 and 2020, and the related consolidated statements of
income, comprehensive income, shareholders’ equity, and cash flows for the years then ended in
accordance with accounting principles generally accepted in the United States of America.
We also have audited Heartland BancCorp’s internal control over financial reporting as of December 31,
2021 and 2020, based on criteria established in the Internal Control – Integrated Framework (2013),
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our
opinion, Heartland BancCorp maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2021, based on COSO.
Basis for Opinions
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America (GAAS). Our responsibilities under those standards are further described in the “Auditor’s
Responsibilities for the Audits of the Consolidated Financial Statements and Internal Control Over
Financial Reporting” section of our report. We are required to be independent of Heartland BancCorp
and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating
to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinions.
Responsibilities of Management for the Consolidated Financial Statements and Internal
Control Over Financial Reporting
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America
and for 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, included in the accompanying
Management Report. In preparing the consolidated financial statements, management is required to
evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt
about Heartland BancCorp’s ability to continue as a going concern within one year after the date that
these consolidated financial statements are available to be issued.
9
Auditor’s Responsibilities for the Audits of the Consolidated Financial Statements and
Internal Control Over Financial Reporting
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and about whether effective
internal control over financial reporting was maintained in all material respects, and to issue an auditor’s
report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a
guarantee that an audit of consolidated financial statements or an audit of internal control over financial
reporting conducted in accordance with GAAS will always detect a material misstatement or a material
weakness when it exists. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control. Misstatements are considered to be material if
there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment
made by a reasonable user based on the consolidated financial statements.
In performing an audit of financial statements and an audit of internal control over financial reporting in
accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audits.
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to those risks.
Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements.
Obtain an understanding of internal control relevant to the consolidated financial statement audit
in order to design audit procedures that are appropriate in the circumstances.
Obtain an understanding of internal control over financial reporting relevant to the audit of
internal control over financial reporting, assess the risks that a material weakness exists, and test
and evaluate the design and operating effectiveness of internal control over financial reporting
based on the assessed risk.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
consolidated financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about Heartland BancCorp’s ability to continue as a going concern for
a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control-related
matters that we identified during the financial statement audit.
Heartland BancCorp 10
11
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 financial statements in accordance with accounting principles generally accepted
in the United States of America and with the 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.
Indianapolis, Indiana
March 9, 2022
Heartland BancCorp
Consolidated Balance Sheets
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Assets
2021
2020
Cash and cash equivalents
Interest bearing time deposits
Available-for-sale securities
Held-to-maturity securities, fair value of $49 and $202 at
December 31, 2021 and 2020, respectively
Loans held for sale
Loans, net of allowance for loan losses of $14,965 and $14,147
at December 31, 2021 and 2020, 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
$
64,884
-
156,505
49
4,648
1,157,619
29,410
6,024
3,096
5
12,389
990
1,404
18,120
13,966
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
Total assets
$
1,469,109
$
1,547,080
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Demand
Savings, NOW and money market
Time
$
$
478,893
588,959
188,193
426,795
528,836
357,203
Total deposits
1,256,045
1,312,834
Repurchase agreements
Federal Home Loan Bank advances
Subordinated debt
Interest payable and other liabilities
Total liabilities
Shareholders’ Equity
9,032
12,000
24,651
14,223
10,632
44,670
24,709
13,339
1,315,951
1,406,184
Common stock, without par value; authorized 5,000,000 shares;
issued 2021 - 2,094,787 shares, 2020 - 2,083,487 shares
Retained earnings
Accumulated other comprehensive income
Treasury stock at cost, 2021 - 90,612 and 2020 - 90,612 shares held
61,231
94,638
2,283
(4,994)
60,402
81,061
4,427
(4,994)
Total shareholders’ equity
153,158
140,896
Total liabilities and shareholders’ equity
$
1,469,109
$
1,547,080
4
2021 Annual ReportHeartland BancCorp
12
13
Heartland BancCorp
Consolidated Statements of Income
Years Ended December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
2021
2020
Net Income
$
18,593
$
14,767
Other Comprehensive Income/(Loss):
Unrealized gain/(loss) on available-for-sale securities, net of
taxes/(benefit) of ($523) and $845 for 2021 and 2020, respectively
(1,968)
3,178
Less reclassification adjustment for realized gains included in net
income, net of taxes of $47 and $53 for 2021 and 2020,
respectively
(176)
(197)
Other comprehensive income/(loss)
(2,144)
2,981
Comprehensive Income
$
16,449
$
17,748
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
Software and 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
2021
2020
$
51,307
$
51,882
1,676
2,356
169
55,508
3,254
1,748
5,002
50,506
1,920
48,586
2,911
4,743
1,353
1,434
223
-
399
3,235
14,298
23,592
3,916
3,363
1,132
1,049
329
1,104
400
4,841
39,726
23,158
4,565
18,593
9.30
9.17
$
$
$
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
3,776
3,077
1,893
954
387
1,012
423
4,164
36,075
18,027
3,260
14,767
7.39
7.33
$
$
$
See Notes to Consolidated Financial Statements
5
See Notes to Consolidated Financial Statements
6
2021 Annual ReportHeartland BancCorp
14
15
Heartland BancCorp
Consolidated Statements of Shareholders’ Equity
Years Ended December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Consolidated Statements of Cash Flows
Years Ended December 31, 2021 and 2020
(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, 2019
2,020,273
56,091
70,853
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
14,767
(4,559)
58,934
5,090
(810)
(90,612)
3,418
591
360
(58)
1,446
2,981
-
128,390
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
Net income
Other comprehensive loss
Dividends on common stock, $2.51 per share
Stock option expense
Stock options exercised
11,300
138
691
18,593
(5,016)
(2,144)
18,593
(2,144)
(5,016)
138
691
Balance, December 31, 2021
2,004,175
$
61,231
$
94,638
$
2,283
$
(4,994)
$
153,158
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 of life insurance
Changes in
Receivables due from loan sales
Interest receivable
Other assets
Interest payable and other liabilities
2021
2020
$
18,593
$
14,767
1,955
1,920
1,093
129
(2,751)
121
(223)
138
51
-
(3,868)
(399)
(266)
866
(211)
712
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
Net cash provided by operating activities
17,860
11,743
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 premises and equipment
Purchase of life insurance
Cash received for acquisitions
Net cash used in investing activities
277
(48,861)
30,760
2,386
153
(7)
(31,180)
(1,227)
124
(253)
-
(47,828)
(3)
(61,727)
51,450
8,799
556
(450)
(81,582)
(1,041)
68
-
31,755
(52,175)
See Notes to Consolidated Financial Statements
7
See Notes to Consolidated Financial Statements
8
2021 Annual ReportHeartland BancCorp
16
17
Heartland BancCorp
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Financing Activities
Net increase in demand deposits, money
market, NOW and savings accounts
Net decrease in certificates of deposit
Net decrease in repurchase agreements
Proceeds from Federal Home Loan Bank Advances
Repayment of Federal Home Loan Bank Advances
Proceeds from issuance of subordinated notes, net
Repayment of subordinated notes, net
Proceeds from stock options exercised
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
2021
2020
$
112,221
(168,786)
(1,600)
-
(32,553)
-
(100)
691
-
-
(4,895)
(95,022)
(124,990)
189,874
$
237,563
(51,649)
(712)
15,570
-
19,225
-
360
(58)
(4,994)
(4,474)
210,831
170,399
19,475
Cash and Cash Equivalents, End of Year
$
64,884
$
189,874
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, liabilities were assumed as follows:
Fair Value of Assets acquired
Cash paid in acquisition
Less: Common stock issued
Liabilities assumed
$
$
5,212
4,842
$
$
9,423
2,435
$
$
$
-
-
-
-
-
$
$
$
701
237,113
(35,500)
3,418
198,195
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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 (inactive). 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.
Use of Estimates
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, 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.
See Notes to Consolidated Financial Statements
9
10
2021 Annual ReportHeartland BancCorp
18
19
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Cash Equivalents
Loans
At December 31, 2021, the Company’s cash accounts exceeded federally insured limits by
approximately $1,254,000.
Additionally, approximately $54,590,000 of cash is held by the Federal Reserve Bank of Cleveland
and Federal Home Loan Bank of Cincinnati as of December 31, 2021, 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 2021 and 2020.
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.
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. 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
11
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2021 Annual ReportHeartland BancCorp 20
21
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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.
Allowance for Loan Losses
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
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
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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. 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. The interagency statement was
subsequently modified on February 16, 2021 to extend the expiration date to January 1, 2022, or 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.
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
13
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2021 Annual ReportHeartland BancCorp 22
23
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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
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
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, 2021 and concluded goodwill is not impaired. Changes in goodwill are further
described in Note 6, Goodwill and Note 20, Business Combinations.
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, 2021, 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
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.
15
16
2021 Annual ReportHeartland BancCorp 24
25
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Income Taxes
Accumulated Other Comprehensive Income
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 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 2018. As of December 31, 2021, 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/(loss), net of
applicable income taxes. Other comprehensive income includes unrealized gain/(loss) on available-
for-sale securities.
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
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
17
18
2021 Annual ReportHeartland BancCorp 26
27
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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.
Reclassifications
Certain reclassifications have been made to the 2020 financial statements to conform to the 2021
financial statement presentation. These reclassifications had no effect on net income.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
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, 2021:
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
$
16,452
$
48
$
(470)
$
16,030
23,154
99,578
14,431
193
3,624
344
(305)
(256)
(288)
23,042
102,946
14,487
Totals
$
153,615
$
4,209
$
(1,319)
$
156,505
December 31, 2020:
U.S. government agencies
$
14,470
$
278
$
(66)
$
14,682
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate bonds
22,984
92,816
8,500
542
4,743
197
(46)
(41)
-
23,480
97,518
8,697
Totals
$
138,770
$
5,760
$
(153)
$
144,377
19
20
2021 Annual ReportHeartland BancCorp
28
29
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Held-to-maturity Securities:
December 31, 2021:
State and political subdivisions
December 31, 2020:
State and political subdivisions
Amortized Cost
$
$
49
$
202
$
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair Value
-
-
$
$
-
-
$
$
49
202
The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at
December 31, 2021, 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
Within one year
One to five years
Five to ten years
After ten years
$
$
3,147
7,446
25,219
94,649
3,188
7,746
25,687
96,842
$
130,461
133,463
Mortgage-backed securities of U.S.
Government sponsored entities
23,154
23,042
39
10
-
-
49
-
Fair
Value
$
Totals
$
153,615
$
156,505
$
49
$
39
10
-
-
49
-
49
The carrying value, which equals fair value, of securities pledged as collateral, to secure public
deposits and for other purposes, was $105,830,000 at December 31, 2021 and $92,180,000 at
December 31, 2020.
Gross gains of approximately $223,000 and no losses resulting from sales of available-for-sale
securities were realized for 2021. Gross gains of approximately $311,000 and losses of $61,000
resulting from sales of available-for-sale securities were realized for 2020. The $223,000 and
$250,000 net gains from the sales of available-for-sale securities were a reclassification from
accumulated other comprehensive income and are included in the net gains on available-for-sale
securities in the income statement for 2021 and 2020, respectively. The related tax expense of
approximately $47,000 and $53,000 was a reclassification from accumulated other comprehensive
income and included in the provision for income tax in the income statement for 2021 and 2020,
respectively.
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, 2021 and 2020 was
$52,481,000 and $17,017,000, which is approximately 34% and 12%, respectively, of the 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, 2021 and 2020:
Description of Securities
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Less than 12 Months
12 Months or More
Total
December 31, 2021
U.S. Government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate Bonds
Total temporarily
impaired securities
$
6,897
$
(93)
$
5,060
$
(377)
$
11,957
$
(470)
12,957
16,558
6,643
(259)
(237)
(288)
2,103
2,263
-
(46)
(19)
-
15,060
18,821
6,643
(305)
(256)
(288)
$
43,055
$
(877)
$
9,426
$
(442)
$
52,481
$
(1,319)
Description of Securities
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Less than 12 Months
12 Months or More
Total
December 31, 2020
U.S. Government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate Bonds
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)
21
22
2021 Annual ReportHeartland BancCorp
30
31
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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, 2021.
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, 2021.
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, 2021.
Corporate Bonds
The unrealized losses on the Company’s investments in securities of corporations 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, 2021.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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
2021
2020
$
154,046
$
216,108
288,575
358,674
322,396
36,261
12,632
1,172,584
240,185
307,054
323,174
38,232
11,341
1,136,094
(14,965)
(14,147)
$
1,157,619
$
1,121,947
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,
2021, the Company has no outstanding loans that were modified under the CARES Act guidance,
that remain on modified terms.
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 borrower’s
23
24
2021 Annual ReportHeartland BancCorp 32
33
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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 $70,000,000 and $129,000,000 in PPP loans during 2021 and
2020, respectively, of which approximately $27,626,000 are still outstanding at December 31, 2021.
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.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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, 2021
and 2020.
December 31, 2021:
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, 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
Commercial Real Estate
Owner
NonOwner
Occupied
Occupied
Commercial
2021
Residential Real Estate
1-4 Family
Home Equity
Consumer
Total
$
$
$
$
3,399
511
(1,312)
172
$ 4,069
541
-
51
$ 3,844
858
-
-
$ 2,423
119
-
12
2,770
$ 4,661
$ 4,702
$ 2,554
78
$
538
$
-
$
81
2,692
$ 4,123
$ 4,702
$ 2,473
$
$
$
$
$
249
(42)
(1)
8
163
(67)
(74)
42
$ 14,147
1,920
(1,387)
285
214
$
64
$ 14,965
-
$
-
$
697
214
$
64
$ 14,268
$ 154,046
$ 288,575
$ 358,674
$ 322,396
$ 36,261
$ 12,632
$ 1,172,584
$
723
$ 1,565
$ 4,796
$
725
$
178
$
16
$ 8,003
$ 153,323
$ 287,010
$ 353,878
$ 321,671
$ 36,083
$ 12,616
$ 1,164,581
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
3,399
$ 4,069
$ 3,844
$ 2,423
978
$
659
$
-
$
-
2,421
$ 3,410
$ 3,844
$ 2,423
$
$
$
$
$
178
66
(10)
15
61
181
(129)
50
$ 8,767
6,350
(1,245)
275
249
$
163
$ 14,147
16
$
10
$ 1,663
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
25
26
2021 Annual ReportHeartland BancCorp 34
35
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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, 2021 and 2020:
Pass
Special mention
Substandard
Doubtful
Loss
Commercial
$
141,902
11,287
857
-
-
Commercial Real Estate
Owner
Occupied
NonOwner
Occupied
2021
Residential Real Estate
1-4 Family
Home Equity
Consumer
Total
$
268,826
12,891
6,858
-
-
$
337,359
6,398
14,917
-
-
$
319,713
1,132
1,551
-
-
$
35,184
899
178
-
-
$
12,551
65
16
-
-
$
1,115,535
32,672
24,377
-
-
Total
$
154,046
$
288,575
$
358,674
$
322,396
$
36,261
$
12,632
$
1,172,584
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
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.
27
28
2021 Annual ReportHeartland BancCorp
36
37
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
The following tables present the Company’s loan portfolio aging analysis of the recorded
investment in loans as of December 31, 2021 and 2020:
30-59
Days
Past Due
60-89
Days
90 or
More Days
2021
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
$
276
$
262
1,695
895
-
10
-
-
-
323
-
5
$
452
$
728
$
153,318
$
154,046
$
16
394
-
499
54
4
656
1,695
1,717
54
19
287,919
356,979
320,679
36,207
12,613
288,575
358,674
322,396
36,261
12,632
-
-
-
-
-
Total
$
3,138
$
328
$
1,403
$
4,869
$
1,167,715
$
1,172,584
$
16
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
$
-
-
-
-
-
-
-
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.
The following tables present impaired loans for the years ended December 31, 2021 and 2020:
Recorded
Balance
Unpaid
Principal
Balance
2021
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
$
436
$
2,624
$
675
4,796
675
4,796
364
178
16
287
890
-
361
-
-
723
1,565
4,796
725
178
16
364
178
16
287
890
-
361
-
-
2,911
1,565
4,796
725
178
16
-
-
-
-
-
-
78
538
-
81
-
-
78
538
-
81
-
-
$
2,787
$
688
4,804
373
191
22
364
922
-
361
-
-
3,151
1,610
4,804
734
191
22
-
41
258
3
7
1
20
39
-
1
-
-
20
80
258
4
7
1
$
8,003
$
10,191
$
697
$
10,512
$
370
Loans acquired with deteriorating credit are included with impaired loans.
29
30
2021 Annual ReportHeartland BancCorp
38
39
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
The following table presents the Company’s nonaccrual loans at 2021 and 2020.
2021
2020
Commercial
Commercial Real Estate:
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
$
436
$
394
-
730
54
4
574
457
-
1,830
98
10
Total nonaccrual
$
1,618
$
2,969
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Recorded
Balance
Unpaid
Principal
Balance
2020
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
2
117
13
82
23
1
156
45
-
-
-
2
158
162
13
82
23
3
$
9,700
$
10,036
$
1,663
$
10,595
$
441
Interest income recognized is not materially different than interest income that would have been
recognized on a cash basis.
31
32
2021 Annual ReportHeartland BancCorp
40
41
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
The following tables presents information regarding troubled debt restructurings by class for the
years ended December 31, 2021 and 2020.
The following table presents information regarding troubled debt restructuring by type of
modification for the years ended December 31, 2021 and 2020:
Number of
Loans
Pre-Modification
Recorded Balance
Post-Modification
Recorded Balance
2021
-
-
1
-
-
-
1
$
-
$
-
4,521
-
-
-
-
-
4,521
-
-
-
$
4,521
$
4,521
Number of
Loans
Pre-Modification
Recorded Balance
Post-Modification
Recorded Balance
2020
1
1
-
-
-
-
2
$
2,766
$
2,766
316
-
-
-
-
316
-
-
-
-
$
3,082
$
3,082
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
Total
Interest Only
Terms
Extension of
Maturity
Combination
Advance Funds
Total Modification
2021
Commercial
Commercial Real Estate:
$
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
-
$
-
4,521
-
-
-
Total
$
4,521
$
Interest Only
Terms
Extension of
Maturity
Commercial
Commercial Real Estate:
$
Owner occupied
NonOwner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
-
$
316
-
-
-
-
Total
$
316
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
$
-
$
-
-
-
-
-
-
-
-
-
-
-
$
2020
-
-
4,521
-
-
-
$
-
$
4,521
Combination
Advance Funds
Total Modification
$
2,766
$
-
$
2,766
-
-
-
-
-
-
-
-
-
-
316
-
-
-
-
$
2,766
$
-
$
3,082
During the years ended December 31, 2021 and 2020, there were no troubled debt restructurings
that subsequently defaulted within twelve months of the restructuring. The troubled debt
restructurings noted above did not increase the allowance for loan losses during the year ended
December 31, 2021 and increased the allowance for loan losses during the year ended December
31, 2020 by approximately $803,000.
33
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2021 Annual ReportHeartland BancCorp
42
43
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Note 4: Mortgage Servicing Rights
Note 6: Goodwill
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
$
$
2021
2020
$
2,662
1,060
(822)
-
196
3,096
226
1,662
(859)
1,970
(337)
2,662
2021
2020
$
337
(196)
141
-
337
337
The fair value of mortgage servicing rights as of December 31, 2021 and 2020 were approximately
$3,200,000 and $2,662,000. The unpaid principal balance of mortgage loans serviced for others as
of December 31, 2021 and 2020 were approximately $374,863,000 and $366,064,000.
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
2021
2020
$
6,031
26,355
15,281
47,667
(18,257)
$
6,024
25,721
14,822
46,567
(16,347)
$
29,410
$
30,220
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 20, Business Combinations. Goodwill at December 31, 2021 and 2020 was
$12,389,000.
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, 2021, June 30, 2021 and September 30, 2021 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, 2021 and 2020 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 are 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
Purchase Adjustment
Accumulated amortization
2021
2020
$
1,570
-
(11)
(569)
$
1,018
552
-
(317)
Total core deposit and other intangibles
$
990
$
1,253
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, 2021 and 2020 was $252,000 and $234,000 respectively.
35
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2021 Annual ReportHeartland BancCorp
44
45
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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 1.3 to 15.7 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 $2,745,000 at December 31,
2021 and $3,051,000 at December 31, 2020 are classified as operating leases.
Future undiscounted lease payments for finance and operating leases with initial terms of one year
or more as of December 31, 2021 are as follows:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease payments
Less: imputed interest
Net lease liabilities
Operating
Leases
$
$
$
345
333
274
272
282
1,859
3,365
(620)
2,745
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,
2021
December 31,
2020
12.1
3.13%
12.5
3.02%
Operating cash flows from operating leases
$
492
$
400
Lease Expense
Note 9: Interest-bearing Time Deposits
The components of total lease cost were as follows for the period ending:
Operating lease cost
Operating lease cost below capitalization threshold
Short-term lease cost
Variable lease cost
Less: Sublease income
Total lease cost, net
December 31,
2021
December 31,
2020
$
$
492
6
18
1
(88)
429
$
$
400
3
3
1
(111)
296
Interest-bearing time deposits in denominations of $250,000 or more were $29,252,000 on
December 31, 2021 and $76,568,000 on December 31, 2020.
At December 31, 2021, the scheduled maturities of time deposits are as follows:
2022
2023
2024
2025
2026 and thereafter
$
132,651
36,991
6,803
7,148
4,600
Total time deposits
$
188,193
37
38
2021 Annual ReportHeartland BancCorp
46
47
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Note 10: Repurchase Agreements
The Company had repurchase agreements on December 31, 2021 and 2020 of $9,032,000 and
$10,632,000 respectively. These agreements are secured by U. S. Government Agency, FHLB,
FHLMC, FNMA, GNMA and Municipal securities and such collateral is held in safekeeping with a
third party. The maximum amount of outstanding agreements at any month end during 2021 and
2020 totaled $11,075,000 and $13,912,000, respectively, and the daily average of such agreements
totaled $9,305,000 and $9,588,000 for 2021 and 2020, 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, 2021:
U.S. government agencies
Mortgage-backed securities of
U.S. Government sponsored
enterprises
Muncipals
Totals
2021
Overnight &
Continuous
$
5,470
2,104
1,458
$
9,032
Note 11: Borrowings
The Bank 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 Stock Secured Line Agreement with United Banker’s Bank that allows the
Company to borrow up to $10,000,000.
The Bank 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, 2021, the Bank had
$190,713,000, respectively, available on its CMA line of credit. The Bank 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, 2021, term advances from the Federal Home Loan Bank were $12,000,000 at fixed
rates ranging from 1.08% to 2.73%, maturing between February 14, 2022 and March 3, 2022. 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
$388,581,000 of residential mortgage assets under a blanket lien arrangement at year-end 2021.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Based on this collateral the Company has additional borrowing capacity of $190,713,000 at
December 31, 2021.
Payments over the next five years and thereafter are as follows:
2022
2023
2024
2025
2026
Thereafter
$
12,000
-
-
-
-
-
Total FHLB Advances
$
12,000
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.
On January 4, 2021, the Company paid off $100,000 of the remaining subordinated notes issued on
November 12, 2015.
Note 12:
Income Taxes
The provision for income taxes includes these components:
Taxes currently payable
Deferred income taxes
Income tax expense
2021
2020
$
4,444
121
$
4,408
(1,148)
$
4,565
$
3,260
39
40
2021 Annual ReportHeartland BancCorp
48
49
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax
expense is shown below:
Computed at the statutory rate of 21%
Increase (decrease) resulting from
Tax exempt interest
Cash surrender value, net of premiums
Other
2021
2020
$
4,863
$
3,786
(704)
(75)
481
(539)
(75)
88
Actual tax expense
$ 4,565
$ 3,260
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
2021
2020
$
3,262
678
128
598
196
85
4,947
(1,269)
(242)
(94)
(58)
(607)
(598)
(675)
(3,543)
$
2,971
624
198
641
485
151
5,070
(1,496)
(98)
(94)
(50)
(1,177)
(641)
(559)
(4,115)
$
1,404
$
955
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Note 13: Regulatory Matters
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, 2021, that the Company and the Bank
meet all capital adequacy requirements to which they are subject.
As of December 31, 2021, 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.
41
42
2021 Annual ReportHeartland BancCorp
50
51
137,493
152,668
11.7%
13.0%
N/A
53,016
N/A
4.5%
N/A
76,578
N/A
6.5%
Deposits from related parties held by the Bank at December 31, 2021 and 2020, totaled
$30,153,000 and $40,227,000, respectively.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
The Company’s and Bank’s actual capital amounts and ratios are presented in the following table.
Actual
For Capital
Adequacy
Purposes
Amount
Ratio
Amount
Ratio
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
$
176,982
167,397
15.0%
14.2%
N/A
94,250
N/A
8.0%
N/A
117,813
$
N/A
10.0%
137,493
152,668
11.7%
13.0%
N/A
70,688
N/A
6.0%
N/A
94,250
N/A
8.0%
137,493
152,668
9.6%
10.6%
N/A
57,583
N/A
4.0%
N/A
71,979
N/A
5.0%
$
160,926
152,070
15.1%
14.3%
N/A
85,202
N/A
8.0%
N/A
106,503
$
N/A
10.0%
122,822
138,747
11.5%
13.0%
N/A
63,902
N/A
6.0%
N/A
85,202
N/A
8.0%
122,822
138,747
11.5%
13.0%
N/A
47,926
N/A
4.5%
N/A
69,227
N/A
6.5%
122,822
138,747
8.3%
9.3%
N/A
59,389
N/A
4.0%
N/A
74,236
N/A
5.0%
As of December 31, 2021
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, 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
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, 2021 and 2020
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, 2021 and 2020, 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 $25,973,000 and $29,356,000, 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.
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 100% of the first 2% of employee compensation contributed, and 50%
matching of the next 4%, for a maximum match of 4% of employee 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 2021 and 2020, were approximately $709,000 and
$425,000, 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 2021 and 2020 were $495,000 and $523,000,
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 2020 and
2021; 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, 2021 and 2020 was
$3,110,000 and $2,973,000, respectively. The Company purchased life insurance on the
participants.
43
44
2021 Annual ReportHeartland BancCorp 52
53
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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 2021 and 2020 totaled $138,000 and $591,000, respectively. As of December 31,
2021, there was $773,000 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, 2021 and changes during the year then ended
is presented below:
Weighted-
Average
Exercise
Price
$
72.16
92.63
52.29
65.39
Shares
163,500
71,700
(11,300)
(19,250)
Outstanding, beginning of year
Granted
Exercised
Forfeited or expired
2021
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Instrinsic Value
Outstanding, end of year
204,650
$
81.06
7.16
$
2,169
Exercisable, end of year
132,950
$
74.83
5.95
$
2,169
The weighted-average grant-date fair value of options granted during 2021 was $14.00. There
were no options granted in 2020. The total intrinsic value of options exercised during the year
ended December 31, 2021 and 2020 was $437,000 and $123,000, respectively.
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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:
2021
2.64%
21.84%
1.21%
5.0 - 6.9
$14.00
2020
N/A
N/A
N/A
N/A
N/A
Year Ended December 31, 2021
Weighted-
Average
Shares
Per Share
Amount
Income
Basic earnings per share
Income available to common stockholders
$
18,593
1,998,386
$
9.30
Effect of dilutive securities
Stock options
Diluted earnings per share
Income available to common stockholders and
assumed conversions
stockholders and assumed
conversions
29,593
$
18,593
2,027,979
$
9.17
Options to purchase 90,150 shares of common stock at a weighted-average exercise price of $92.50
per share were outstanding at December 31, 2021 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.
45
46
2021 Annual ReportHeartland BancCorp
54
55
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
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
Income available to common stockholders and
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.
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:
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Fair Value Measurements Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
December 31, 2021:
U.S. government agencies
Mortgage-backed securities of
U.S. government sponsored
enterprises
State and political subdivisions
Corporate Bonds
December 31, 2020:
U.S. government agencies
Mortgage-backed securities of
U.S. government sponsored
enterprises
State and political subdivisions
Corporate Bonds
$ 16,030
$
23,042
102,946
14,487
$ 14,682
$
23,480
97,518
8,697
-
-
-
-
-
-
-
-
$ 16,030
$
23,042
102,946
14,487
$ 14,682
$
23,480
97,518
8,697
-
-
-
-
-
-
-
-
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, 2021.
Level 1 Quoted prices in active markets for identical assets or liabilities
Available-for-Sale Securities
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, 2021 and 2020.
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.
47
48
2021 Annual ReportHeartland BancCorp
56
57
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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, 2021 and 2020:
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Fair Value Measurements Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
December 31, 2021:
Collateral-dependent impaired loans
Mortgage servicing rights
$
418
3,200
December 31, 2020:
Collateral-dependent impaired loans
Mortgage servicing rights
$ 1,535
2,662
$
$
-
-
-
-
$
-
-
$
-
-
$
$
418
3,200
1,535
2,662
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
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
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, 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 increased by $196,000 in 2021 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, 2021 and 2020.
Fair Value at
12/31/2021
Valuation
Technique
Unobservable Inputs
(Weighted
Average)
Collateral-dependent impaired loans
Mortgage servicing rights
$
418
Market comparable properties
3,200 Discounted cash flow
Marketability discounts
Discount rate
Constant prepayment rate
20-35% (30%)
9.5-9.5% (9.5%)
10-29% (13%)
Fair Value at
12/31/2020
Valuation
Technique
Unobservable Inputs
Range
(Weighted
Average)
Collateral-dependent impaired loans
Mortgage servicing rights
$
Market comparable properties
1,535
2,662 Discounted cash flow
Marketability discounts
Discount rate
Constant prepayment rate
10-25% (20%)
9.5-10.5% (10%)
8-44% (14%)
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.
49
50
2021 Annual ReportHeartland BancCorp
58
59
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(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, 2021
and 2020.
December 31, 2021
Financial assets
Cash and cash equivalents
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, 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
Carrying
Amount
$
64,884
49
4,648
1,157,619
6,024
5,248
1,256,045
9,032
12,000
24,651
483
$
189,874
277
202
4,382
1,121,947
6,017
6,115
1,312,834
10,632
44,670
24,709
693
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
64,884
-
$
$
-
49
-
-
-
-
-
-
-
-
-
6,024
5,248
-
1,255,805
9,032
12,000
22,954
483
$
$
189,874
277
-
$
-
-
202
-
-
-
-
-
-
-
-
-
6,017
6,115
1,316,124
10,632
45,466
23,945
693
-
-
4,648
1,173,003
-
-
-
-
-
-
-
-
-
-
4,382
1,168,052
-
-
-
-
-
-
-
51
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
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 $625,000 and $795,000 at December
31, 2021 and 2020, 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, 2021, the Bank had granted unused lines of credit to borrowers aggregating
approximately $102,737,000 and $57,832,000 for commercial lines and open-end consumer lines,
respectively. 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.
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, 2021, and 2020, the Bank had outstanding commitments to
originate variable rate loans aggregating approximately $16,586,000 and $20,962,000, respectively.
52
2021 Annual ReportHeartland BancCorp
60
61
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
The commitments extended over varying periods of time with the majority being disbursed within a
one-year period.
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, 2021 and 2020
(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.
53
54
2021 Annual ReportHeartland BancCorp 62
63
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(Table dollar amounts in thousands, except share data)
Note 21: Condensed Financial Information (Parent Company Only)
Condensed Statements of Income and Comprehensive Income
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,
2021
2020
$
9,746
168,725
958
$
8,134
157,057
1,917
$
179,429
$
167,108
24,651
1,620
26,271
24,709
1,503
26,212
153,158
140,896
Total liabilities and shareholders' equity
$
179,429
$
167,108
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
Year Ending December 31,
2021
2020
$
6,262
23
6,285
1,290
432
1,722
4,563
(356)
4,919
13,674
$
6,189
27
6,216
957
404
1,361
4,855
(325)
5,180
9,587
Net Income
Comprehensive Income
$
18,593
$
14,767
$
16,449
$
17,748
55
56
2021 Annual ReportHeartland BancCorp
64
Heartland BancCorp
Schedule of the Status of Prior Audit Findings, Questioned Costs
and Recommendations
Year Ended December 31, 2021
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,
2021
2020
$
18,593
138
51
(12,866)
$
14,767
591
10
(11,102)
Net cash provided by operating activities
5,916
4,266
Investing Activities
Investment in Common Stock of the Bank
Net cash used in investing activities
Financing Activities
Proceeds/(repayment) of 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
-
-
(100)
(4,895)
691
-
-
-
(4,304)
1,612
8,134
(13,500)
(13,500)
19,225
(4,474)
360
(58)
-
(4,994)
10,059
8,134
-
Cash and Cash Equivalents at End of Year
$
9,746
$
8,134
Note 22:
Subsequent Events
Subsequent events have been evaluated through March 9, 2022 which is the date the financial
statements were available to be issued.
57
Heartland BancCorp Directors
Thomas L. Campbell
Jay B. Eggspuehler, Esq.
Partner
Partner
Jodi L. Garrison
CPA, Partner
James R. Heimerl
Owner
Fusion Alliance, LLC
Isaac, Wiles & Burkholder, LLC
Hirth, Norris & Garrsion, LLP
Heimerl Farms Ltd.
John G. Kenkel, Jr.
Retired, President & CEO
Victory Community Bank & Victory Bancorp
Cheryl L. Krueger
President & CEO
G. Scott McComb
Chairman, President & CEO
Robert C. Overs
Gary D. Paine
CEO/Executive Director
President & CEO
William J. Schottenstein
Principal
C. Krueger’s
Heartland Bank
Creative Living
Accurate Companies
Arshot Investment Corporation
Ronnie R. Stokes
President & CEO
Three Leaf Productions
Gregory M. Ubert
Founder, President & CEO
Crimson Cup Coffee & Tea
Richard A. Vincent
Chief Executive Emeritus, Retired
Osteopathic Heritage Foundation
Heartland BancCorp Directors Emeriti
Heartland BancCorp Officers
I. Robert Amerine
American Apex Corporation
G. Scott McComb
Chairman, President & CEO
Arthur G.H. Bing, M.D.
Plastic & Reconstructive Surgeon
Jay B. Eggspuehler, Esq.
Vice Chairman & Lead Director
William A. Dodson Jr.
Rhema Christian Center
Jennifer L. Eckert
Secretary
Jack J. Eggspuehler
Aerosafe, Inc.
Carrie L. Almendinger
Treasurer
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
2021 Annual Report
66
Senior Management Team
Our NIL Partners
Heartland Bank was proud to announce two Name, Image and Likeness
(NIL) partnerships in August of 2021. Haskell Garrett, Ohio State
University Football team, and E.J. Liddell, Ohio State University Men’s
basketball team, were commissioned to represent Heartland Bank at
visits and events in the Central Ohio area.
Using two campaigns, #RelationshipsMatter and Bank On Community
Banking, these players’ bank-coordinated activities were designed
to give purpose to their NIL partnerships with Heartland. Financial
education with messaging for underbanked Central Ohio young adults
was the objective in order to reach a generation that may not view
banking and financial awareness as a priority in life.
#92
Haskell Garrett
Defensive Tackle
#32
E.J. Liddell
Forward
G. Scott McComb
Chairman, President & CEO
Carrie L. Almendinger
EVP, Chief Financial Officer
Benjamin J. Babcanec
EVP, Chief Operating Officer
Matthew H. Booms
SVP, Director of
Mortgage Banking
Jeff S. Ciochetto
SVP, Director of
Credit Administration
Jennifer L. Eckert
SVP, Chief Risk Officer &
Corporate Secretary
Pamela D. Goetting
SVP, Director of
Northern Kentucky Region
Sarah M. Ketty
SVP, Director of
People Portfolio
Nancy M. Matney
SVP, Director of Treasury
Management & Client Services
Laurie A. Pfeiffer
SVP, Director of
Commercial Banking
Tarne Tassniyom
SVP, Director of Technology &
Information Security
Ashley A. Trout
SVP, Director of Strategy
T. Brian Brockhoff
Market President
Cincinnati Region
Patrick T. John
President of
TransCounty Title Agency
Ryan P. Arras
VP, Finance Manager
Alyssa L. Booms
VP, Director of
Branch Banking
Aaron A. Cooke
VP, Controller
James W. Duckro
VP, Operations Manager
Jessica H. McNamee
VP, Director of
Financial Planning
Stuart J. Schloss
VP, Director of
Loan Syndication
Jill L. Taylor
VP, Accounting Manager
2021 Annual Report About Heartland BancCorp
Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which
operates 18 full-service banking offices and TransCounty Title Agency, LLC. Heartland Bank, founded in 1911,
provides full-service commercial, small business, and consumer banking services; professional financial
planning services; and other financial products and services. Heartland Bank is a member of the Federal
Reserve, a member of the FDIC, and an Equal Housing Lender. Heartland BancCorp is currently quoted on
the OTC Markets (OTCQX) under the symbol HLAN. Learn more about Heartland Bank at Heartland.Bank.
In May of 2021, Heartland was ranked #82 on the American Banker Magazine’s list of Top 200 Publicly Traded
Community Banks and Thrifts based on three-year average return on equity as of December 31, 2020.
(614) 337-4600 • 430 N. Hamilton Rd., Whitehall, OH 43213 • IR.Heartland.Bank