Parent Company of Heartland Bank &
TransCounty Title Agency
ANNUAL
REPORT
23
A MESSAGE FROM THE CEO
Dear Valued Shareholders,
I am pleased to report another successful year for Heartland BancCorp and its wholly owned subsidiary, Heartland Bank. It was a
historic year for the banking industry as liquidity pressures caused the largest bank failures in U.S. history based on total combined
assets. Balance sheets across the industry experienced liquidity pressures as rates eventually peaked; however, our organic expansion
plans continued to come to fruition. The year was markedly different between the first and second half of 2023 causing a significant
pivot in short-term strategy during the second half. Once again, your community bank achieved record results in 2023 by posting
annual earnings of $19.5 million. In June 2023, Heartland was ranked #119 on the American Banker Magazine’s list of Top Publicly
Traded Community Banks and Thrifts based on three-year average return on equity as of December 31, 2022.
In March 2023, the financial markets were rocked by the largest
combined bank failures in U.S. history. While the purpose of
regulation is to identify and avoid major events and ensure
safety and soundness of financial institutions, I believe it
nonetheless needs to be properly administered. I believe
effectively administered regulation may have prevented at
least one of these large bank failures. Those failures cascaded
through the banking system, causing disruption in deposits
as the heightened interest-rate environment took hold. Stock
prices for banks fell under pressure until mid-fourth quarter,
when they began to rebound. While banks in the Nasdaq Bank
Index saw significant volatility in their stock prices, which fell
34.3% at the low point, HLAN shares dropped 13.7% at their
low, and then rebounded to $87.89 by year end, closing the gap
to -6.30%. Bank stocks remain under pressure
as the rapid rate increases continue to flow
through banks’ balance sheets.
Soon after the bank failures and the
government response, your board of
directors and management
identified a need to shift our
strategic focus to efficiency,
income
non-interest
generation and deposit
gathering. I’m pleased
to report that the focus
and execution of this
new direction was key
to producing positive
net
results
for 2023. Moving into
2024, we will continue
focus given the
this
yield
interest
curve, industry liquidity
income
rate
concerns and geopolitical events that could affect the U.S.
economy. While there has not been a recession as of this date
and some feel we are headed for a soft landing, the fact remains
that, to land this plane, your federal government extended the
runway by pumping trillions of dollars into the economy since
2020. This obviously unsustainable path gives us pause until
there are signs of stability and stronger budgetary constraint.
Our organic geographic expansion continued in 2023 with the
addition of two new locations. Our branch office in Kenwood
was opened in January, being the first location in Greater
Cincinnati on the Ohio side of the river. Our long-awaited
presence in Delaware, Ohio, was opened in October to include a
future Caribou Coffee in the leased space adjacent to our branch
office. Both locations are well positioned to expand our brand of
community banking to Greater Cincinnati and Delaware County.
Once again, I would like to thank our associates for their hard
work and dedication to providing value to you, our shareholders,
as well as the communities we serve. Continued focus on our
culture and setting ourselves apart from the competition in
times like these are invaluable traits to organizations that excel
through adverse times. I would like to thank everyone for their
support of the Heartland Bank Community Foundation. The
contributions from associates, our board and the public have
enabled the Foundation to make a real impact on early childhood
development in Central Ohio and the Greater Cincinnati market
including Northern Kentucky.
Please share your Heartland story with your friends, family and
business associates as this is by far our best source of building
new relationships, and I sincerely thank you for your continued
support and patronage.
Sincerely,
G. Scott McComb
Chairman, President & CEO
3
2023 Annual Report TABLE OF CONTENTS
Our Impacts
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Financial
Statements
Another Year of Achievement . . . . . . . . . . . . . . . . . . . . . . 6
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . 8
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statements of Comprehensive Income . . . . . . . . . . . . . 14
Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . 15
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 18
Our Team
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Senior Management Team . . . . . . . . . . . . . . . . . . . . . . . . 58
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.
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.
Additional information, including analyst reports, can be found here: OTCmarkets.com/Stock/HLAN/Research
FINANCIAL HIGHLIGHTS
2023 Highlights
Your community bank in review - a condensed version of an outstanding 2023 for financial position and
community impact. Financial data as of 12/31/2023 or for the year ending 12/31/2023. All figures in 000s, except share items and %.
Diluted EPS
Total
Assets
Tangible Book
Value per Share
$1,883,215
Net Loans
$9.62
$74.23
Tangible Book
Value Per Share
ROATCE
Heartland
Planning
Associates
Revenue
$1,626
People Portfolio
Revenue per FTE
Core Deposit Growth
$1,443,542
10% Increase in 2023
$1,312,087 in 2022
Efficiency
Ratio
Operating
Revenue
Congratulations
G. Scott McComb
Awarded 2023 Power 100
by Columbus Business First
Bank Ranked #119
Top 200 Publicly Traded
Community Banks & Thrifts in 2023
American Banker Magazine
Congratulations
G. Scott McComb
Awarded Most-Admired
Executives in C-Suite
by Columbus Business First
5
2023 Annual Report
ANOTHER YEAR OF ACHIEVEMENT
Changes in Financial Condition:
Total assets at December 31, 2023, were $1.88 billion, an increase
of 13% compared to $1.66 billion at December 31, 2022. Net
loans held for investment increased $143.4 million, or 10%, to
$1.53 billion at December 31, 2023, compared to $1.39 billion
at December 31, 2022. All lines of business contributed to this
increase, with the largest component in nonowner-occupied
loans, which increased $109.6 million, or 28%, followed by 1-4
family residential loans, which increased $47.2 million, and
commercial and industrial loans, which increased $9.9 million.
Nonperforming assets consisting of nonaccrual loans, loans
past due 90+ days and still accruing, and Other Real Estate
Owned (“OREO”) totaled $2.1 million, or 0.11%, of total assets
at December 31, 2023, an increase of $1.1 million from 2022.
Net charge-offs increased during 2023 to $0.43 million, which
was a $0.13 million increase compared to $0.29 million in
2022. The allowance for credit loss at December 31, 2023, now
covers nonaccrual loans by 1,106.0%, compared to 2,370.1% at
December 31, 2022.
Heartland BancCorp funds earning asset growth through its
deposit relationships. Deposits increased $186.0 million, or 13%,
to $1.64 billion at December 31, 2023, due to strong execution
of deposit growth strategies along with a renewed interest in
certificates of deposits due to increasing market rates. Deposit
balances for the year included a reduction of $35.4 million in
demand deposits, which was replaced with increases of $101.5
million in savings and money market deposits and $119.9 million
in time deposits. Deposit growth included an increase of $99.2
million in brokered funding due to liquidity pressures impacting
the banking industry, which was offset by a reduction of $46.1
million in public fund deposits requiring collateralization. Core
deposits, excluding brokered funds and certificates of deposits
greater than $250,000, increased $131.5 million, or 10%, to end
the year at $1.44 billion.
Total shareholders’ equity increased $18.6 million, or 13.0%, to
$162.5 million at December 31, 2023. Based upon total shares
outstanding, the book value of shareholders’ equity increased
12.6% to $80.66 per share at December 31, 2023. Heartland
Bank and Heartland BancCorp met all regulatory capital levels
to be considered well-capitalized for 2023 and 2022 (see Note
13 to the Consolidated Financial Statements). In 2023, Heartland
BancCorp paid dividends of $3.04 per share, representing a
dividend yield of 3.45% on the closing stock price of $87.89 per
share on December 31, 2023.
6
2023 Annual Report Earnings Summary:
Results of Operation:
Heartland BancCorp has a 30+ year history of strong, consistent
financial performance, and 2023 was no exception. Net income
for 2023 increased 8% to a record $19.5 million, or $9.62 per
diluted share, compared to $18.1 million or $8.90 per diluted
share in 2022. Return on average assets and equity were 1.09%
and 12.93% respectively for 2023, compared to 1.20% and
12.37% respectively for 2022.
Net interest income increased 7% to $61.0 million, compared to
$57.0 million in 2022. Average earning assets increased to $1.7
billion in 2023 compared to $1.4 billion in 2022, resulting from
a $256.90 million, or 21%, increase in average loan balances.
The consolidated full-year net interest margin declined 41 basis
points to 3.62% in 2023, compared to 4.03% for the full year of
2022.
Positive results for 2023 included net loan growth of $143.4
million or 10%. Deposit balances increased by $186.0 million
or 13%, supported by core deposit growth of $131.5 million
or 10%. The mortgage banking segment contributed strong
revenues, with residential real estate loan production of
$147.0 million for the year, resulting in $1.4 million of revenue
from gains on sales of mortgage loans and original mortgage
servicing rights (OMSRs). Heartland’s portfolio of mortgage
loans serviced for others ended 2023 at $376.6 million, up from
$365.3 million at December 31, 2022. Loan servicing portfolios
including residential, commercial and agriculture added a
total of $1.5 million in pretax, pre-provision net revenue. The
commercial segment contributed loan swap referral fees of $1.0
million in 2023.
Operating revenue (net interest income plus noninterest
income) was up compared to the prior year by $5.1 million,
or 7.5%. Deposit funding pressure due to higher market rates
and liquidity constraints led to a 41 basis-point decrease in the
net interest margin to 3.62% for 2023. Increasing market rates
throughout the year led to increased revenue from commercial
loan swap referral fees for 2023.
Operating expense increased $2.8 million, or 6%, in 2023,
due to branch expansion and investment in technology
improvements. Operating leverage (growth in revenue divided
by growth in operating expense) was positive 1.8 times.
Net charge-offs for 2023 were $0.43 million compared to $0.29
million in 2022. Beginning January 1, 2023, Heartland began
accounting for credit losses under CECL which replaced the
former “incurred loss” model for recognizing credit losses with
an “expected loss” model. Credit loss provision was $2.6 million
for 2023, compared to $1.9 million in 2022.
Provision for credit loss expense was $2.6 million for 2023,
compared to $1.9 million in 2022. For 2023, net charge-offs
totaled $0.43 million, or .03% of average loans compared to
$0.29 million, or .02% of average loans in 2022. The allowance
for credit losses as a percent of loans was 1.16% at December
31, 2023, and the allowance for credit losses plus unfunded
commitment liability (ACL + UCL) was $19.4 million, or 1.25% of
total loans, compared to $16.6 million, or 1.18% of total loans, a
year ago. Due to the January 1, 2023, adoption of CECL, an after-
tax decrease of $0.5 million was recorded to retained earnings.
Total noninterest income was $12.4 million for 2023 compared
to $11.4 million for 2022, representing an increase of $1.1
million, or 9%, year-over-year. This increase was driven by
growth of $0.9 million, or 56%, in gains on sales of loans and
OMSRs and $0.4 million in service charges on deposit accounts,
partially offset by a decline of $0.3 million in title insurance
income. TransCounty Title Agency contributed $1.5 million in
noninterest income for 2023, a decrease of $0.5 million, or 24%,
compared to $2.0 million in 2022.
Total noninterest expense was $47.1 million for 2023, compared
to $44.2 million in 2022, representing a $2.8 million, or 6.4%,
increase year-over-year. Total full-time equivalent employees
ended 2023 at 298 compared to 292 at year end 2022.
Salaries and benefits were driven by higher employee
headcount due to our expansion into two new communities,
with the addition of a Kenwood branch in our Greater
Cincinnati market and the new Delaware branch in our
Central Ohio market, along with an increase of $0.7 million
in employee benefit costs, which is partially offset by lower
compensation costs in the commercial and mortgage divisions
due to lower origination volume. Software and data processing
fees increased $0.8 million, or 22%, in 2023 due to continued
investment in technology solutions to enhance efficiency
and improve customer experience. TransCounty Title Agency
contributed $1.4 million in operating costs in 2023, a decrease
of $0.4 million, or 23%, compared to $1.8 million in 2022.
7
2023 Annual Report Independent Auditor’s Report
and Consolidated Financial Statements
December 31, 2023 and 2022
8
2023 Annual Report Independent Auditor’s Report
and Consolidated Financial Statements
December 31, 2023 and 2022
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 consolidated financial statements of Heartland BancCorp, which comprise the balance
sheets as of December 31, 2023 and 2022, and the related statements of income, comprehensive income
(loss), 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,
2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States of America.
We also have audited Heartland BancCorp’s internal control over financial reporting as of December 31,
2023, 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, 2023, 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.
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, in 2023, Heartland BancCorp changed its
method of accounting for credit losses on financial instruments due to the adoption of Accounting Standards
Codification Topic 326: Financial Instruments – Credit Losses. Our opinion is not modified with respect to
this matter.
9
2023 Annual Report
Board of Directors and Audit Committee
Heartland BancCorp
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.
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 consolidated 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 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.
10
2023 Annual Report
Board of Directors and Audit Committee
Heartland BancCorp
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.
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 consolidated 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 instructions to the Consolidated Financial Statements for Bank
Holding Companies (Form FR Y-9-C). 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 consolidated 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 7, 2024
11
2023 Annual Report
Heartland BancCorp
Consolidated Balance Sheets
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Consolidated Statements of Income
Years Ended December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Assets
2023
2022
Cash and cash equivalents
Available-for-sale securities
Held-to-maturity securities, fair value of $5 at December 31, 2022
Loans held for sale
Loans, net of allowance for credit losses of $17,927 and $16,591
at December 31, 2023 and 2022, 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
$
36,682 $
211,130
—
1,145
1,531,280
33,649
6,866
3,373
10
12,389
565
6,448
20,315
19,363
22,883
152,492
5
1,345
1,387,842
30,476
6,627
3,173
5
12,389
765
7,516
19,790
17,818
Total assets
$
1,883,215 $
1,663,126
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand
Savings, NOW and money market
Time
Total deposits
Repurchase agreements
Other borrowed funds
Subordinated debt
Interest payable and other liabilities
Total liabilities
Shareholders' Equity
$
487,631 $
711,198
443,772
1,642,601
4,583
31,000
24,034
18,465
523,036
609,676
323,858
1,456,570
5,213
16,000
24,693
16,742
1,720,683
1,519,218
Common stock, without par value; authorized 20,000,000 shares;
issued 2023 - 2,105,737 shares, 2022 - 2,099,587 shares
Retained earnings
Accumulated other comprehensive loss
Treasury stock at cost, 2023 - 90,612 and 2022 - 90,612 shares
Total shareholders' equity
62,724
120,065
(15,263)
(4,994)
61,998
107,165
(20,261)
(4,994)
162,532
143,908
Total liabilities and shareholders' equity
$
1,883,215 $
1,663,126
Total interest income
92,386
63,097
Interest Income
Loans
Securities
Taxable
Tax-exempt
Other
Interest Expense
Deposits
Borrowings
Total interest expense
Net Interest Income
Provision for Credit Losses
Noninterest Income
Service charges
Net Interest Income After Provision for Credit Losses
Gains on sale of loans and originated mortgage servicing rights
Loan servicing fees, net
Title insurance income
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
2023
2022
$
84,423 $
57,920
4,321
2,441
1,201
28,690
2,662
31,352
61,034
2,600
58,434
4,012
2,372
1,530
892
525
3,108
4,231
4,461
1,021
1,199
353
1,039
1,166
4,022
47,050
23,823
4,307
2,498
2,346
333
4,447
1,659
6,106
56,991
1,920
55,071
3,631
1,520
1,505
1,177
409
3,139
3,920
3,662
1,044
1,012
323
1,129
369
4,423
44,226
22,226
4,155
12,439
11,381
29,558
28,344
$
$
$
19,516 $
18,071
9.69 $
9.62 $
9.00
8.90
12
5
See Notes to Consolidated Financial Statements
6
2023 Annual Report Heartland BancCorp
Consolidated Statements of Income
Years Ended December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Interest Income
Loans
Securities
Taxable
Tax-exempt
Other
Total interest income
Interest Expense
Deposits
Borrowings
Total interest expense
Net Interest Income
Provision for Credit Losses
Net Interest Income After Provision for Credit Losses
Noninterest Income
Service charges
Gains on sale of loans and originated mortgage servicing rights
Loan servicing fees, net
Title insurance income
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
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
2023
2022
$
84,423 $
57,920
4,321
2,441
1,201
2,498
2,346
333
92,386
63,097
28,690
2,662
31,352
61,034
2,600
58,434
4,012
2,372
1,530
892
525
3,108
4,447
1,659
6,106
56,991
1,920
55,071
3,631
1,520
1,505
1,177
409
3,139
12,439
11,381
29,558
4,231
4,461
1,021
1,199
353
1,039
1,166
4,022
47,050
23,823
4,307
28,344
3,920
3,662
1,044
1,012
323
1,129
369
4,423
44,226
22,226
4,155
$
$
$
19,516 $
18,071
9.69 $
9.62 $
9.00
8.90
6
13
2023 Annual Report Heartland BancCorp
Consolidated Statements of Comprehensive Income/(Loss)
Years Ended December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Net Income
Other Comprehensive Income/(Loss):
2023
2022
$
19,516 $
18,071
Unrealized gain/(loss) on available-for-sale securities, net of taxes/(benefit) of
$1,329 and $(5,993) for 2023 and 2022, respectively
Other comprehensive income/(loss)
4,998
(22,544)
4,998
(22,544)
Comprehensive Income/(Loss)
$
24,514 $
(4,473)
See Notes to Consolidated Financial Statements
14
See Notes to Consolidated Financial Statements
7
2023 Annual Report Heartland BancCorp
Consolidated Statements of Shareholders’ Equity
Years Ended December 31, 2023 and 2022
(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, 2021
2,004,175 $
61,231 $
94,638 $
2,283 $
(4,994) $ 153,158
Net income
Other comprehensive loss
Dividends on common stock,
$2.76 per share
Stock option expense
Stock options exercised
4,800
515
252
18,071
(5,544)
(22,544)
18,071
(22,544)
(5,544)
515
252
Balance, December 31, 2022
2,008,975 $
61,998 $ 107,165 $
(20,261) $
(4,994) $ 143,908
Cumulative change for
adoption of ASC 326 (see
note 1)
(500)
(500)
Balance, January 1, 2023
2,008,975 $
61,998 $ 106,665 $
(20,261) $
(4,994) $ 143,408
Net income
Other comprehensive income
Dividends on common stock,
$3.04 per share
Stock option expense
Stock options exercised
6,150
478
248
19,516
(6,116)
4,998
19,516
4,998
(6,116)
478
248
Balance, December 31, 2023
2,015,125 $
62,724 $ 120,065 $
(15,263) $
(4,994) $ 162,532
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
8
15
2023 Annual Report Heartland BancCorp
Consolidated Statements of Cash Flows
Years Ended December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Operating Activities
Net income
Items not requiring (providing) cash
Depreciation and amortization
Provision for credit losses
Amortization of premiums and discounts on securities
Amortization of purchase accounting adjustments
Accretion of loan fees, net
Deferred income taxes
Stock option expense
Tax benefit related to stock options exercised
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
2023
2022
$
19,516 $
18,071
1,932
2,600
787
142
(72)
(102)
478
28
(1,312)
(525)
200
(1,990)
461
128
1,913
1,920
872
236
(299)
(119)
515
30
(1,219)
(409)
3,303
(862)
(3,068)
2,359
Net cash provided by operating activities
22,271
23,243
Investing Activities
Purchase of available-for-sale securities
Proceeds from maturities 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
(58,184)
4,965
5
(239)
(143,955)
(5,168)
104
—
(35,047)
9,652
44
(603)
(230,681)
(2,990)
53
(1,261)
Net cash used in investing activities
(202,472)
(260,833)
See Notes to Consolidated Financial Statements
16
See Notes to Consolidated Financial Statements
9
2023 Annual Report Heartland BancCorp
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
2023
2022
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts
Net increase in certificates of deposit
Net decrease in repurchase agreements
Net change in fed funds
Proceeds/(repayment) of FHLB advances
Repayment of subordinated notes
Proceeds from stock options exercised
Dividends paid
$
66,117 $
119,941
(630)
(10,000)
25,000
(700)
248
(5,976)
64,860
135,710
(3,819)
10,000
(6,000)
—
252
(5,414)
Net cash provided by financing activities
Increase/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
194,000
195,589
13,799
(42,001)
22,883
64,884
Cash and Cash Equivalents, End of Year
$
36,682 $
22,883
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
$
$
$
30,973 $
4,920 $
6,316
4,030
119 $
1,777
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
10
17
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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 Greater Cincinnati. 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 credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of
loans, valuation of deferred tax assets, credit loss on available-for-sale securities, and fair values of financial
instruments.
Cash Equivalents
At December 31, 2023, the Company’s cash accounts exceeded federally insured limits by approximately
$75,000.
Additionally, approximately $21,717,000 of cash is held by the Federal Reserve Bank of Cleveland and Federal
Home Loan Bank of Cincinnati as of December 31, 2023, 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
18
11
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
related income tax effects, in other comprehensive income/(loss). 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.
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely
than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is
affirmative, any previously recognized allowances are charged-off and the security's amortized cost is written
down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether
the decline in fair value has resulted from credit losses or other factors. In making this assessment, management
considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a
rating agency and any adverse conditions specifically related to the security, among other factors. If this
assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the
security are compared to the amortized cost basis of the security. If the present value of cash flows expected to
be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is
recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any
impairment that has not been recorded through an allowance for credit losses is recognized in other
comprehensive income. Adjustments to the allowance are reported in our income statement as a component of
credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance,
written down through income when deemed uncollectible by management or when either of the
aforementioned criteria regarding intent or requirement to sell is met. The company recognized no allowance
for credit losses for AFS securities in 2023.
Prior to the adoption of ASU 2016-13, management evaluated securities for other-than-temporary impairment
(“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warranted such
an evaluation. For securities in an unrealized loss position, management considered the extent and duration of
the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also
assessed whether it intended 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 2022.
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
Loans that management has the intent and ability to hold for the foreseeable future or until maturity are
reported at their outstanding principal balances adjusted for any charge-offs, the allowance for credit losses, any
deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans
12
19
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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.
Purchased Credit Deteriorated (PCD) Loans
The Company has purchased loans, some of which have experienced more than insignificant credit deterioration
since origination. 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. PCD loans are
recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other
loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to
individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes it initial
amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a
noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent
changes to the allowance for credit losses are recorded through credit loss expense.
Upon adoption of ASC 326, the Company elected to maintain pools of loans that were previously accounted for
under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed
from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the allowance for
credit losses was determined for each pool and added to the pool’s carrying amount to establish a new
amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized
cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining
life of the pool. Changes to the allowance for credit losses after adoptions are recorded through credit loss
expense.
Allowance for Credit Losses
On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial
Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments ("ASU
2016-13"). ASU 2016-13 introduces a new credit loss methodology, Current Expected Credit Losses ("CECL"),
which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.
ASU 2016-13 amends guidance on reporting credit losses for financial assets held at amortized cost basis and
available for sale debt securities. ASU 2016-13 eliminates the probable initial recognition threshold previously
required under Generally Accepted Accounting Principles ("GAAP") and instead, requires an entity to reflect its
current estimate of all expected credit losses based on historical experience, current conditions and reasonable
and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the
amortized cost basis of the financial assets to present the net amount expected to be collected. ASU 2016-13
also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for
estimating the reserve for credit losses. Accrued interest receivable on loans totaled $6,397,000 at December 31,
2023 and is excluded from the estimate of credit losses. In addition, entities need to disclose the amortized cost
balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.
20
13
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
The Company adopted Accounting Standards Certification ("ASC") 326 using the modified retrospective method
for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the periods
beginning after January 1, 2023 are presented under Accounting Standards Codification (“ASC”) 326 while prior
period amounts continue to be reported in accordance with previously applicable GAAP. The adoption of CECL
resulted in an decrease to the total allowance for credit losses (“ACL”) on loans held for investment of $0.7
million, an increase in allowance for credit losses on unfunded loan commitments of $1.3 million, and an
increase in deferred tax asset of $0.1 million. The Company also recorded a tax effected net reduction of
retained earnings of $0.5 million upon adoption.
The allowance for credit losses is evaluated on a regular basis and established through charges to earnings in the
form of a provision for credit losses. When a loan or portion of a loan is determined to be uncollectible, the
portion deemed uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to
the allowance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant
revision as more information becomes available.
Portfolio Segmentation
Portfolio segmentation is defined as the pooling of loans based upon similar risk characteristics such that
quantitative methodologies and qualitative adjustment factors for estimating the allowance for credit losses are
constructed for each segment. The Company has identified 16 portfolio segments of loans to align with Federal
Financial Institutions Examination Council’s (“FFIEC”) Call Report definitions.
The allowance for credit losses for Pooled Loans is estimated based upon periodic review of the collectability of
the loans quantitatively correlating historical loan experience with reasonable and supportable forecasts using
forward looking information. The Company primarily utilized a discounted cash flow (DCF) method to estimate
the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. The
Company also utilized a Remaining Life Method (WARM) for Farmland and Agriculture segments. For each
segment, a loss driver analysis (LDA) was performed in order to identify appropriate loss drivers and create a
regression model for use in forecasting cash flows. The LDA utilized the Company’s own FFIEC Call Report data
for all segments. Peer data was incorporated into the analysis for all segments. The Company has established a
two-year reasonable and supportable forecast period with a one-year straight-line reversion to the long-term
historical average. The Company’s policy is to utilize its own data, which includes loan-level loss data from March
31, 2004 through December 31, 2019, whenever possible. Peer data is utilized when there are not sufficient
defaults for a satisfactory sound calculation, or if the Company does not have its own loan-level detail reflecting
similar economic conditions as the forecasted loss drivers.
Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans,
payment structure, loss history, and forecasted loss drivers. The Company uses forecasts from Moody’s
Analytics. Other key assumptions include the probability of default (PD), loss given default (LGD), and
prepayment/curtailment rates. When possible, the Company utilizes its own PDs for the reasonable and
supportable forecast period. When it is not possible to use the Company’s own PDs, the LDA is utilized to
determine PDs based on the forecasted economic factors. In all cases, the LDA is then utilized to determine the
long-term historical average, which is reached over the reversion period. When possible, the Company utilizes
its own LGDs for the reasonable and supportable forecast period. When it is not possible to use the Company’s
own LGDs, the LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a
mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based
on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the
reversion period and long-term historical average. Prepayment and curtailment rates were calculated based on
the Company’s own data utilizing a three-year average. When the discounted cash flow method is used to
determine the allowance for credit losses, management incorporates expected prepayments to determine the
effective interest rate utilized to discount expected cash flow.
Adjustments to the quantitative evaluation may be made to account for differences in current or expected
qualitative risk characteristics such as changes in: underwriting standards, changes in the value of underlying
14
21
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
collateral dependent loans, the existence and effect of portfolio concentration, delinquency level, regulatory
environment, economic conditions, Company management and the status of portfolio administration including
the Company’s loan review function.
Reserve for Unfunded Commitments
The reserve for unfunded commitments (the “Unfunded Commitment Liability” or “UCL”) represents the
expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and
standby letters of credit. No allowance is recognized if the Company has the unconditional right to cancel the
obligation. The Company is defining unconditionally cancellable in its literal sense, meaning that a commitment
may be cancelled by the Company for any, or for no reason whatsoever. However, the Company in its business
dealings, has no practical history of unconditionally canceling commitments. Commitments are not typically
cancelled until a default or a defined condition occurs. The UCL is recognized as a liability (included within other
liabilities in the Consolidated Balance Sheets), with adjustments to the reserve recognized as a provision for
credit loss expense in the Consolidated Statements of Income. The UCL is determined by estimating expected
future fundings, under each segment, and applying the expected loss rates. Expected future fundings over the
estimated life of commitments are based on historical averages of funding rates (i.e., the likelihood of draws
taken). To estimate future fundings on unfunded balances, current funding rates are compared to historical
funding rates. Estimate of credit losses are determined using the same loss rates as funded loans.
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
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.
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
22
15
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
FRB and FHLB systems. The required investment in the common stock is based on a predetermined formula,
carried at cost and evaluated for impairment.
Foreclosed Assets Held for Sale
Foreclosed assets are initially recorded at fair value less costs to sell when acquired, establishing a new cost
basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs
when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the
property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal
agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell.
If the fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.
Operating costs after acquisition are expensed.
Goodwill
Goodwill arises from business combinations and is generally determined as the excess of the fair value of the
consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of
the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets
acquired in a purchase business combination and determined to have an indefinite useful life are not amortized
but tested for impairment at least annually. If the implied fair value of goodwill is lower than the carrying
amount, a goodwill impairment is identified and recorded to expense. Subsequent increases in goodwill value
are not recognized in the financial statements. The Company completed its most recent annual goodwill
impairment test as of December 31, 2023 and concluded goodwill is not impaired. Changes in goodwill are
further described in Note 6, Goodwill.
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, 2023, the Company has a share-based employee compensation plan, which is described more
fully in Note 16.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the
Company—put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other
receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of
that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control
over the transferred assets through an agreement to repurchase them before their maturity or the ability to
unilaterally cause the holder to return specific assets.
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income
Taxes). The income tax accounting guidance results in two components of income tax expense: current and
deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying
the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The
Company determines deferred income taxes using the liability (or balance sheet) method. Under this method,
the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax
16
23
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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 2020. As of December 31,
2023, 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/(Loss)
Comprehensive income/(loss) consists of net income and other comprehensive income/(loss), net of applicable
income taxes. Other comprehensive income/(loss) includes unrealized gains/(losses) on available-for-sale
securities.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of unrealized losses 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.
24
17
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
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 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.
Adoption of New Accounting Standards
On January 1, 2023, the Company adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) (“ASC 326”) as amended. The new
accounting guidance in this ASU replaces the incurred loss methodology with an expected loss methodology,
which is referred to as the current expected credit loss (“CECL”) methodology. The CECL methodology is
applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan
receivables and held-to-maturity (“HTM”) debt securities. It also applies to off-balance sheet credit exposures
(loan commitments, standby letters of credit, financial guarantees, and other similar instruments). The CECL
methodology requires an entity to estimate credit losses over the life of an asset or off-balance sheet credit
exposure.
18
25
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
In addition, CECL made changes to the accounting for available-for-sale debt securities. One such change is to
require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt
securities if management determines that the Company does not intend to sell and it is more likely than not,
that the Company will not be required to sell the securities.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at
amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning on or after
January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance
with previously applicable GAAP. The adoption of CECL resulted in an decrease to our total allowance for credit
losses (“ACL”) on loans held for investment of $0.7 million, an increase in allowance for credit losses on unfunded
loan commitments of $1.3 million, and an increase in deferred tax asset of $0.1 million. The Company also
recorded a tax effected net reduction of retained earnings of $0.5 million upon adoption.
The following table details the impact of the adoption of ASC 326:
December 31,
2022
Impact of ASC
326 Adoption
January 1,
2023
Assets:
Allowance for credit losses
$
16,591 $
(678) $
15,913
Liabilities:
Allowance for unfunded commitments $
— $
1,310 $
1,310
Retained Earnings:
Total pre-tax impact
Tax effect
Decrease to Retained Earnings
Reclassifications
$
$
(632)
132
(500)
Certain reclassifications have been made to the 2022 financial statements to conform to the 2023 financial
statement presentation. These reclassifications had no effect on net income.
26
19
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(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:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair Value
Available-for-sale Securities:
December 31, 2023:
U.S. government agencies
$
55,115 $
49 $
(5,639) $
SBA Loan Pools
Mortgage-backed securities of U.S.
Government sponsored enterprises
State and political subdivisions
Corporate bonds
Totals
December 31, 2022:
U.S. government agencies
Mortgage-backed securities of U.S.
Government sponsored enterprises
State and political subdivisions
Corporate bonds
12,384
43,197
104,727
15,148
277
243
379
—
(40)
(2,793)
(10,404)
(1,513)
49,525
12,621
40,647
94,702
13,635
$
$
230,571 $
948 $
(20,389) $
211,130
39,691 $
— $
(6,680) $
33,011
21,843
101,439
15,165
1
18
—
(3,216)
(14,438)
(1,331)
18,628
87,019
13,834
Totals
$
178,138 $
19 $
(25,665) $
152,492
Held-to-maturity Securities:
December 31, 2022:
State and political subdivisions
$
5 $
— $
— $
5
The amortized cost and fair value of available-for-sale securities at December 31, 2023, 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.
20
27
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Within one year
One to five years
Five to ten years
After ten years
Available-for-sale
Amortized
Cost
Fair
Value
$
2,382 $
14,803
44,426
113,379
2,372
14,756
42,449
98,285
174,990
157,862
SBA Loan Pools
12,384
12,621
Mortgage-backed securities of U.S. Government
sponsored entities
43,197
40,647
Totals
$
230,571 $
211,130
The carrying value, which equals fair value, of securities pledged as collateral, to secure public deposits and for
other purposes, was $60,956,000 at December 31, 2023 and $64,007,000 at December 31, 2022.
There were no sales of available-for-sale securities during the years ending December 31, 2023 and 2022.
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, 2023 and 2022 was $147,640,000 and
$144,029,000, which is approximately 70% and 94%, 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 for which an
allowance for credit losses has not been recorded, aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position at December 31, 2023 and 2022:
Description of Securities
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Less than 12 Months
December 31, 2023
12 Months or More
Total
U.S. Government agencies
SBA Loan Pools
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate Bonds
Total temporarily impaired
securities
$
6,959 $
3,900
(42) $
(40)
34,086 $
—
(5,597) $
—
41,045 $
3,900
(5,639)
(40)
5,653
3,936
613
(47)
(43)
(137)
15,650
63,821
13,022
(2,746)
(10,361)
(1,376)
21,303
67,757
13,635
(2,793)
(10,404)
(1,513)
$
21,061 $
(309) $
126,579 $
(20,080) $
147,640 $
(20,389)
28
21
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Description of Securities
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Less than 12 Months
December 31, 2022
12 Months or More
Total
U.S. Government agencies
SBA Loan Pools
Mortgage-backed securities of
U.S. Government sponsored
enterprises
State and political subdivisions
Corporate Bonds
Total temporarily impaired
securities
U.S. Government Agencies
$
23,161 $
—
(2,087) $
—
9,850 $
—
(4,593) $
—
33,011 $
—
(6,680)
—
6,575
59,990
7,136
(472)
(6,029)
(363)
11,966
19,403
5,948
(2,744)
(8,409)
(968)
18,541
79,393
13,084
(3,216)
(14,438)
(1,331)
$
96,862 $
(8,951) $
47,167 $
(16,714) $
144,029 $
(25,665)
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 has not
recorded an allowance for credit losses at December 31, 2023.
SBA Loan Pools
The unrealized losses on the Company’s investment in SBA loan pools 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 has not recorded an allowance for credit losses at
December 31, 2023.
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. 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 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 has not recorded an allowance for credit losses at
December 31, 2023.
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. 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 has not
recorded an allowance for credit losses at December 31, 2023.
22
29
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Corporate Bonds
The unrealized losses on the Company’s investments in securities of corporations 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 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 has not recorded an allowance for
credit losses at December 31, 2023.
Note 3:
Loans and Allowance for Credit Losses
Classes of loans at December 31, include:
Commercial
Commercial Real Estate:
Owner occupied
Non Owner occupied
Residential Real Estate:
1-4 Family
Home Equity
Consumer
Total loans
Less
Allowance for credit losses
Net loans
2023
2022
$
172,662 $
162,718
296,176
501,030
326,005
391,429
508,648
51,704
18,987
1,549,207
461,491
44,535
18,255
1,404,433
(17,927)
(16,591)
$
1,531,280 $
1,387,842
Loan balances are net of deferred loan fees and costs of $(901,000) and $(587,000) as of December 31, 2023 and
2022, respectively.
The following tables present the balance in the allowance for credit losses and the recorded investment in loans
based on portfolio segment and impairment method as of December 31, 2023 and 2022:
2023
Commercial Real Estate
Non Owner
Occupied
Owner
Occupied
Residential Real Estate
1-4 Family
Home
Equity
Commercial
Consumer
Total
December 31, 2023:
Allowance for credit
losses:
Balance, beginning of
year
Impact of adopting
ASC 326
Provision for credit
losses
Losses charged off
Recoveries
Balance, end of year
$
30
$
3,069 $
5,404 $
4,831 $
3,006 $
193 $
88 $
16,591
(2,223)
(1,021)
(2,017)
4,429
169
(15) $
(678)
1,080
(242)
11
1,695 $
(684)
—
1
3,700 $
2,328
—
—
5,142 $
(403)
—
—
7,032 $
(123)
—
3
242 $
243
(239)
39
116 $
2,441
(481)
54
17,927
23
2023 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Commercial Real Estate
Non Owner
Occupied
Owner
Occupied
Commercial
2022
Residential Real
Estate
1-4
Family
Home
Equity
Consumer
Total
$
2,770 $
4,661 $
4,702 $
2,554 $
214 $
64 $
14,965
466
(173)
6
3,069 $
742
—
1
5,404 $
129
—
—
4,831 $
452
—
—
3,006 $
(33)
—
12
193 $
164
(186)
46
88 $
1,920
(359)
65
16,591
24 $
1,532 $
— $
— $
— $
— $
1,556
3,045 $
3,872 $
4,831 $
3,006 $
193 $
88 $
15,035
December 31, 2022:
Allowance for credit 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
$
162,718 $ 326,005 $
391,429 $ 461,491 $ 44,535 $
18,255 $ 1,404,433
Ending balance: individually
evaluated for impairment $
Ending balance: collectively
612 $
7,738 $
5,235 $
1,517 $
190 $
2 $
15,294
evaluated for impairment $
162,106 $ 318,267 $
386,194 $ 459,974 $ 44,345 $
18,253 $ 1,389,139
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.
24
31
2023 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
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.
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.
32
25
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
The following table presents the credit risk profile of the Company’s loan portfolio based on the Company’s internal
rating categories by year of origination as of December 31, 2023:
December 31, 2023:
Commercial
Pass
Special Mention
Substandard
Doubtful
Loss
Total
Current period
gross charge-offs
$
$
$
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Total
23,020 $
104
—
—
—
23,124 $
36,629 $
567
—
—
—
37,196 $
15,600 $
2,218
173
—
—
17,991 $
4,375 $
210
—
—
—
4,585 $
5,801 $
—
2,382
—
—
8,183 $
10,030 $
1,129
463
—
—
11,622 $
62,787 $ 158,242
9,402
5,018
—
—
69,961 $ 172,662
5,174
2,000
—
—
— $
— $
27 $
215 $
— $
— $
— $
242
Commercial Real Estate Owner Occupied
Pass
Special Mention
Substandard
Doubtful
Loss
Total
Current period
gross charge-offs
$
$
$
20,998 $
399
50
67,514 $
403
273
56,025 $
1,702
—
22,046 $
—
360
32,517 $
—
—
78,938 $
2,593
5,295
6,311 $ 284,349
5,849
5,978
752
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
21,447 $
68,190 $
57,727 $
22,406 $
32,517 $
86,826 $
7,063 $ 296,176
— $
— $
— $
— $
— $
— $
— $
—
Commercial Real Estate Non Owner Occupied
Pass
$
78,376 $ 143,712 $
81,347 $
50,377 $
42,262 $
67,009 $
7,567 $ 470,650
Special Mention
Substandard
Doubtful
Loss
Total
Current period
gross charge-offs
$
$
—
—
—
—
—
—
—
—
1,779
—
—
—
103
—
—
—
6,134
7,936
—
—
7,562
6,866
—
—
—
—
—
—
15,578
14,802
—
—
78,376 $ 143,712 $
83,126 $
50,480 $
56,332 $
81,437 $
7,567 $ 501,030
— $
— $
— $
— $
— $
— $
— $
—
Residential Real Estate 1-4 Family
Pass
$
76,680 $ 187,524 $ 112,468 $
43,965 $
20,430 $
61,851 $
3,618 $ 506,536
Special Mention
Substandard
Doubtful
Loss
Total
Current period
gross charge-offs
$
$
—
—
—
—
238
90
—
—
162
—
—
—
421
170
—
—
—
179
—
—
103
749
—
—
—
—
—
—
924
1,188
—
—
76,680 $ 187,852 $ 112,630 $
44,556 $
20,609 $
62,703 $
3,618 $ 508,648
— $
— $
— $
— $
— $
— $
— $
—
26
33
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
December 31, 2023:
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Total
Residential Real Estate Home Equity
Pass
$
1,196 $
1,550 $
224 $
308 $
534 $
1,174 $
46,169 $
51,155
Special Mention
Substandard
Doubtful
Loss
Total
Current period
gross charge-offs
$
$
350
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
74
125
—
—
424
125
—
—
1,546 $
1,550 $
224 $
308 $
534 $
1,174 $
46,368 $
51,704
— $
— $
— $
— $
— $
— $
— $
—
Consumer
Pass
$
2,238 $
4,191 $
1,639 $
318 $
80 $
2,278 $
8,175 $
18,919
Special Mention
Substandard
Doubtful
Loss
Total
Current period
gross charge-offs
$
$
—
—
—
—
49
9
—
—
—
—
—
—
10
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
59
9
—
—
2,238 $
4,249 $
1,639 $
328 $
80 $
2,278 $
8,175 $
18,987
— $
7 $
— $
— $
— $
11 $
221 $
239
The Company did not have any revolving loans convert to term financing during the year ended December 31, 2023.
The following table presents the credit risk profile of the Company’s loan portfolio based on the Company’s internal
rating categories as of December 31, 2022:
Commercial
Commercial Real Estate
Owner
Occupied
Non Owner
Occupied
2022
Residential Real Estate
Home
Equity
1-4 Family
Consumer
Total
Pass
Special mention
Substandard
Doubtful
Loss
$
149,411 $
12,541
766
—
—
303,658 $
15,294
7,053
—
—
372,643 $
6,090
12,696
—
—
458,539 $
1,851
1,101
—
—
43,911 $
487
137
—
—
18,163 $ 1,346,325
36,353
21,755
—
—
90
2
—
—
Total
$
162,718 $
326,005 $
391,429 $
461,491 $
44,535 $
18,255 $ 1,404,433
The Company evaluates the loan risk grading system definitions on an ongoing basis. No significant changes
were made during the past year.
34
27
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(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, 2023 and 2022:
2023
30-59
Days
Past Due
60-89
Days
90 or
More Days
Total
Past Due
Current
Total Loans
Receivable
Commercial
$
— $
259 $
474 $
733 $
171,929 $
172,662
Commercial Real Estate:
Owner occupied
Non owner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
896
125
2,583
25
83
—
—
1,044
114
22
—
153
938
120
9
896
278
4,565
259
114
295,280
500,752
296,176
501,030
504,083
51,445
18,873
508,648
51,704
18,987
Total
$
3,712 $
1,439 $
1,694 $
6,845 $
1,542,362 $ 1,549,207
2022
30-59
Days
Past Due
60-89
Days
90 or
More Days
Total
Past Due
Current
Total Loans
Receivable
90 or More
Days Past
Due
and
Accruing
Commercial
$
646 $
— $
224 $
870 $
161,848 $
162,718 $
Commercial Real Estate:
Owner occupied
Non owner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
—
—
2,244
16
29
—
—
—
—
26
—
—
305
22
—
—
—
326,005
391,429
326,005
391,429
2,549
38
55
458,942
44,497
18,200
461,491
44,535
18,255
9
—
—
298
2
—
Total
$
2,935 $
26 $
551 $
3,512 $
1,400,921 $ 1,404,433 $
309
Prior to the adoption of ASU 2016-13, a loan was considered impaired 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.
28
35
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
The following table presents impaired loans for the year ended December 31, 2022:
Recorded
Balance
Unpaid
Principal
Balance
2022
Specific
Allowance
Average
Balance of
Impaired
Loans
Interest
Income
Recognized
Loans without a specific valuation
allowance:
Commercial
Commercial real estate:
Owner occupied
Non Owner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Loans with a specific valuation
allowance:
Commercial
Commercial real estate:
Owner occupied
Non Owner occupied
Residential real estate:
1-4 family
Home equity
Consumer
Total:
Commercial
Commercial real estate:
Owner occupied
Non Owner occupied
Residential real estate:
1-4 family
Home equity
Consumer
$
535 $
535 $
— $
535 $
3,588
5,235
1,517
190
2
77
4,150
—
—
—
—
612
7,738
5,235
1,517
190
2
3,588
5,235
1,517
190
2
77
4,150
—
—
—
—
612
7,738
5,235
1,517
190
2
—
—
—
—
—
24
1,532
—
—
—
—
24
1,532
—
—
—
—
3,596
6,260
1,522
197
7
91
4,182
—
—
—
—
626
7,778
6,260
1,522
197
7
17
203
454
68
9
1
6
331
—
—
—
—
23
534
454
68
9
1
Totals
$
15,294 $
15,294 $
1,556 $
16,390 $
1,089
Loans acquired with deteriorating credit are included with impaired loans.
Interest income recognized is not materially different than interest income that would have been recognized on
a cash basis.
36
29
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of
December 31, 2023:
Commercial
Commercial Real Estate:
Owner occupied
Non Owner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
Real Estate
Other
$
— $
1,094
6,931
3,449
1,320
125
—
—
—
—
—
9
Total
$
11,825 $
1,103
The following tables present the Company’s nonaccrual loans at December 31, 2023 and 2022:
2023
Nonaccrual
loans
without a
related ACL
Total
Nonaccrual
Loans
Total Loans
>90 Days &
Accruing
Nonaccrual
loans with a
related ACL
$
143 $
Commercial
Commercial Real Estate:
Owner occupied
Non Owner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
331 $
474 $
210
—
832
5
—
210
—
922
5
9
—
—
90
—
9
Totals
$
242 $
1,378 $
1,620 $
—
—
153
200
114
4
471
2022
$
556
Commercial
Commercial Real Estate:
Owner occupied
Non Owner occupied
Residential Real Estate:
1-4 family
Home equity
Consumer
Total nonaccrual
$
—
—
124
19
—
699
30
37
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
From time to time, the Company may modify certain loans to borrowers who are experiencing financial
difficulty. In some cases, these modifications result in new loans. Loan modifications to borrowers experiencing
financial difficulty may be in the form of principal forgiveness, interest rate reduction, term extension, other-
than-significant payment delay or a combination thereof, among other things. During the year-ended
December 31, 2023 there were no modifications of loans to borrowers experiencing financial difficulty.
There were no new troubled debt restructurings in 2022.
During the year ended December 31, 2022, there were no troubled debt restructurings that subsequently
defaulted within twelve months of the restructuring.
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for
existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of
credit when there is a contractual obligation to extend credit and when this extension of credit is not
unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance
sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of
the likelihood that funding will occur, which is based on a historical funding study derived from internal
information, and an estimate of expected credit losses on commitments expected to be funded over its
estimated life, which are the same loss rates that are used in computing the ACL for loans. The allowance for
credit losses for unfunded loan commitments of $1,469,000 at December 31, 2023 is classified on the balance
sheet within other liabilities.
The following table presents the balance and activity in the ACL for unfunded loan commitments for the twelve
months ended December 31, 2023:
Balance, beginning of period
Adjustment for adoption of ASC 326
Provision for unfunded commitments
Balance, end of period
Twelve
Months Ended
December 31,
2023
$
$
—
1,310
159
1,469
Note 4: Mortgage Servicing Rights
The following table summarizes mortgage servicing rights capitalized and related amortization, along with
activity in the related valuation allowance:
Loan servicing rights:
Carrying amount, beginning of year
Mortgage servicing rights capitalized during the year
Mortgage servicing rights amortization during the year
Net change in valuation allowance
$
3,173 $
587
(387)
—
3,096
460
(524)
141
2023
2022
Carrying amount, end of year
$
3,373 $
3,173
38
31
2023 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Valuation allowance:
Beginning of year
Increase (reduction)
End of year
2023
2022
$
$
— $
—
141
(141)
— $
—
The fair value of mortgage servicing rights as of December 31, 2023 and 2022 were approximately $3,919,000
and $3,919,000. The unpaid principal balance of mortgage loans serviced for others as of December 31, 2023 and
2022 were approximately $373,494,000 and $365,298,000.
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
2023
2022
$
7,642 $
30,616
17,403
55,661
(22,012)
7,019
27,578
15,989
50,586
(20,110)
Net premises and equipment
$
33,649 $
30,476
Note 6:
Goodwill
Goodwill is recorded on the acquisition date of an entity. During the one-year measurement period, the
Company may record subsequent adjustments to goodwill for provisional amounts recorded at the acquisition
date. Goodwill at December 31, 2023 and 2022 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 December 31, 2023 and 2022 the fair value exceeded the Company’s carrying value; therefore, it was
concluded that goodwill was not impaired.
32
39
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
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 carrying basis and accumulated amortization of
recognized core deposit and other intangibles are noted below:
Gross carrying amount
Purchase Adjustment
Accumulated amortization
Total core deposit and other intangibles
2023
2022
$
$
1,570 $
(11)
(994)
1,570
(11)
(794)
565 $
765
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, 2023 and 2022 was $200,000 and $225,000 respectively.
Estimated future amortization expense is summarized as follows:
2024
2025
2026
2027
2028
Amortization
Expense
$
$
174
147
123
91
30
565
Note 8:
Lease Arrangements
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 2 years to 13.7 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 2 years 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.
40
33
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
The Company uses its incremental borrowing rate at lease commencement to calculate the present value of
lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is
based on the FHLB rate, adjusted for the lease term.
All of the Company’s right-of-use assets and lease liabilities totaling $3,927,000 at December 31, 2023 and
$4,251,000 at December 31, 2022 are classified as operating leases.
Lease Expense
The components of total lease cost were as follows for the period ending:
December 31,
2023
December 31,
2022
Operating lease cost
Operating lease cost below capitalization threshold
Short-term lease cost
Variable lease cost
Less: Sublease income
$
674 $
12
1
1
(150)
Total lease cost, net
$
538 $
516
7
43
1
(110)
457
Lease Obligations
Future undiscounted lease payments for finance and operating leases with initial terms of one year or more as of
December 31, 2023 are as follows:
2024
2025
2026
2027
2028
Thereafter
Total undiscounted lease payments
Less: imputed interest
Net lease liabilities
Supplemental Lease Information
Operating
Leases
$
$
$
514
527
485
492
410
2,356
4,784
(857)
3,927
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
Operating cash flows from operating leases
December 31,
2023
December 31,
2022
10.0
3.87 %
10.8
3.79 %
$
674
$
516
34
41
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Note 9:
Interest-bearing Time Deposits
Interest-bearing time deposits in denominations of $250,000 or more were $79,554,000 on December 31, 2023
and $108,587,000 on December 31, 2022. The Company had brokered interest-bearing time deposits of
$102,278,000 and $15,000,000 on December 31, 2023 and 2022, respectively.
At December 31, 2023, the scheduled maturities of time deposits are as follows:
advance, with a prepayment penalty for fixed rate advances. The advances were collateralized by approximately
$602,737,000 of residential mortgage assets under a blanket lien arrangement at year-end 2023.
Based on this collateral the Company has additional borrowing capacity of $206,604,000 at December 31, 2023.
Payments over the next five years and thereafter are as follows:
2024
2025
2026
2027
2028
$
287,576
132,501
5,911
5,277
12,507
2024
2025
2026
2027
2028
Thereafter
$
31,000
—
—
—
—
—
Total time deposits $
443,772
Total FHLB Advances
$
31,000
Note 10: Repurchase Agreements
The Company had repurchase agreements on December 31, 2023 and 2022 of $4,583,000 and $5,213,000
respectively. These agreements are secured by U. S. Government Agency, FHLB, FHLMC, FNMA and GNMA
securities and such collateral is held in safekeeping with a third party. The maximum amount of outstanding
agreements at any month end during 2023 and 2022 totaled $6,346,000 and $9,621,000, respectively, and the
daily average of such agreements totaled $4,421,000 and $7,388,000 for 2023 and 2022, 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, 2023:
U.S. government agencies
Totals
Note 11: Borrowings
2023
Overnight &
Continuous
$
$
4,583
4,583
The Bank has Federal Funds Borrowing Line Agreements with PCBB, US Bank, and PNC Bank that allow the
Company to borrow up to $35,000,000, $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, 2023, the Bank had $206,604,000 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, 2023, advances from the Federal Home Loan Bank were $31,000,000 at a variable rate of 5.47%
maturing by March 28, 2024. Each advance is payable either at its maturity date or amortizing over the life of the
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.
In 2023, the Company paid off $700,000 of subordinated notes.
Note 12:
Income Taxes
The provision for income taxes includes these components:
A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is
shown below:
Taxes currently payable
Deferred income taxes
Income tax expense
Computed at the statutory rate of 21%
Increase (decrease) resulting from
Tax exempt interest
Cash surrender value, net of premiums
Other
2023
2022
$
$
4,409 $
(102)
4,274
(119)
4,307 $
4,155
2023
2022
$
5,002 $
4,668
(692)
(102)
99
(702)
(74)
263
Actual tax expense
$
4,307 $
4,155
42
35
36
2023 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
advance, with a prepayment penalty for fixed rate advances. The advances were collateralized by approximately
$602,737,000 of residential mortgage assets under a blanket lien arrangement at year-end 2023.
Based on this collateral the Company has additional borrowing capacity of $206,604,000 at December 31, 2023.
Payments over the next five years and thereafter are as follows:
2024
2025
2026
2027
2028
Thereafter
Total FHLB Advances
$
$
31,000
—
—
—
—
—
31,000
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.
In 2023, the Company paid off $700,000 of subordinated notes.
Note 12:
Income Taxes
The provision for income taxes includes these components:
Taxes currently payable
Deferred income taxes
Income tax expense
2023
2022
$
$
4,409 $
(102)
4,274
(119)
4,307 $
4,155
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
2023
2022
$
5,002 $
4,668
(692)
(102)
99
(702)
(74)
263
Actual tax expense
$
4,307 $
4,155
36
43
2023 Annual Report
Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:
Deferred tax assets
Allowance for credit losses
Deferred compensation
Stock option expense
Unrealized losses on available-for-sale securities
Right of use lease liability
Deferred loan fees
Unfunded commitment liability
Other
2023
2022
$
3,908 $
759
166
4,083
855
—
320
74
3,617
719
166
5,385
927
4
—
91
Total deferred tax assets
10,165
10,909
Deferred tax liabilities
Depreciation
Purchase accounting adjustments
FHLB stock dividends
Prepaid expenses
Right of use lease asset
Other
Total deferred tax liabilities
Net deferred tax asset
Note 13: Regulatory Matters
(1,483)
(538)
(94)
(12)
(855)
(735)
(1,283)
(385)
(94)
(12)
(927)
(692)
(3,717)
(3,393)
$
6,448 $
7,516
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, 2023, that the Company and the Bank meet all capital adequacy requirements to which they are
subject.
As of December 31, 2023, the most recent notification from the Federal Reserve categorized the Company and
Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-
capitalized, the Company and Bank must maintain capital ratios as set forth in the table that follows. There are
no conditions or events since that notification that management believes have changed the Company or Bank’s
category.
44
37
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
The Company’s and Bank’s actual capital amounts and ratios are presented in the following table:
Actual
For Capital
Adequacy
Purposes
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
As of December 31, 2023
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, 2022
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
$
209,075
198,869
13.5 %
12.8 %
N/A
124,295
N/A
8.0 % $
N/A
155,369
N/A
10.0 %
164,929
179,473
10.6 %
11.6 %
N/A
93,221
N/A
6.0 %
N/A
124,295
164,929
179,473
10.6 %
11.6 %
N/A
69,916
N/A
4.5 %
N/A
100,990
164,929
179,473
9.0 %
9.8 %
N/A
73,573
N/A
4.0 %
N/A
91,967
N/A
8.0 %
N/A
6.5 %
N/A
5.0 %
$
192,353
182,486
13.5 %
12.8 %
N/A
114,172
N/A
8.0 % $
N/A
142,715
N/A
10.0 %
151,012
165,895
10.6 %
11.6 %
N/A
85,629
N/A
6.0 %
N/A
114,172
151,012
165,895
10.6 %
11.6 %
N/A
64,222
151,012
165,895
9.4 %
10.3 %
N/A
64,318
N/A
4.5 %
N/A
4.0 %
N/A
92,765
N/A
80,398
N/A
8.0 %
N/A
6.5 %
N/A
5.0 %
The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior
regulatory approval. Generally, the Bank’s payment of dividends is limited to net income for the current year
plus the two preceding calendar years, less capital distributions paid over the comparable time period.
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.
38
45
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Note 14: Related Party Transactions
At December 31, 2023 and 2022, 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
$22,736,000 and $24,074,000, respectively.
In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary
course of business and were made on substantially the same terms (including interest rates and collateral) as
those prevailing at the time for comparable transactions with other persons.
Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present
other unfavorable features.
Deposits from related parties held by the Bank at December 31, 2023 and 2022, totaled $23,067,000 and
$32,528,000, respectively.
Note 15: Employee Benefits
The Company has a retirement savings 401(k) plan covering substantially all employees. Employees may
contribute up to the maximum amount allowable by the Internal Revenue Service with the Company matching
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 four years of
participation in the plan. Employer contributions charged to expense for 2023 and 2022, were approximately
$770,000 and $796,000, 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
2023 and 2022 were $502,000 and $504,000, 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 2023 and
2022; 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, 2023 and 2022 was $3,483,000 and $3,300,000, respectively.
The Company purchased life insurance on the participants.
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 2023 and 2022 totaled $478,000 and $515,000, respectively. As
46
39
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
of December 31, 2023, there was $654,000 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, 2023 and changes during the year then ended is presented
below:
2023
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Instrinsic
Value
Shares
Outstanding, beginning of year
Granted
Exercised
Forfeited or expired
195,350 $
63,840
(6,150)
(14,650)
81.67
83.36
56.94
77.23
Outstanding, end of year
238,390 $
83.04
6.45 $
1,544
Exercisable, end of year
175,450 $
82.92
5.37 $
1,250
The weighted-average grant-date fair value of options granted during 2023 was $13.83. There were no options
granted in 2022. The total intrinsic value of options exercised during the year ended December 31, 2023 and
2022 was $190,000 and $195,000, respectively.
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
2023
2022
3.66%
20.39%
3.85%
7.0
$13.83
N/A
N/A
N/A
N/A
N/A
40
47
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Note 17: Earnings Per Share
Earnings per share (EPS) were computed as follows:
Basic
Net Income
Weighted average common shares outstanding
Basic earnings per common share
Diluted
Net income
Weighted average common shares outstanding for basic
earnings per common share
Dilutive effects of assumed exercise of stock options
Average shares and dilutive potential common shares
$
$
$
2023
2022
19,516 $
18,071
2,013,381
2,007,574
9.69 $
9.00
19,516 $
18,071
2,013,381
15,750
2,029,131
2,007,574
22,208
2,029,782
Diluted earnings per common share
$
9.62 $
8.90
Options to purchase 144,940 and 88,150 shares of common stock at a weighted-average exercise price of $88.54
and $92.50 per share were outstanding at December 31, 2023 and 2022, respectively, but were not included in
the computation of diluted EPS because the options’ exercise price was greater than the average market price of
the common shares.
Note 18: Disclosures about Fair Value of Assets and Liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair value measurements must maximize the use of
observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs
that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities
48
41
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
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, 2023 and 2022:
Fair Value Measurements Using
Quoted Prices
in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
December 31, 2023:
U.S. government agencies
$
49,525 $
— $
49,525 $
SBA Loan Pools
Mortgage-backed securities of
U.S. government sponsored
enterprises
State and political subdivisions
Corporate Bonds
December 31, 2022:
U.S. government agencies
Mortgage-backed securities of
U.S. government sponsored
enterprises
State and political subdivisions
Corporate Bonds
12,621
40,647
94,702
13,635
—
—
—
—
12,621
40,647
94,702
13,635
$
33,011 $
— $
33,011 $
18,628
87,019
13,834
—
—
—
18,628
87,019
13,834
—
—
—
—
—
—
—
—
—
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, 2023.
Available-for-Sale Securities
Where quoted market prices are available in an active market, securities are classified within Level 1 of the
valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted
prices of securities with similar characteristics or independent asset pricing services and pricing models, the
inputs of which are market-based or independently sourced market parameters, including, but not limited to,
yield curves, interest rates, volatility, 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.
42
49
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(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, 2023 and
2022:
Fair Value Measurements Using
Quoted Prices
in
Active
Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
December 31, 2023:
Collateral-dependent loans
December 31, 2022:
Collateral-dependent impaired loans
Mortgage servicing rights
$
$
3,054 $
— $
— $
3,054
2,404 $
3,919
— $
—
— $
—
2,404
3,919
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 Loans, Net of ACL
The estimated fair value of collateral-dependent loans is based on the appraised fair value of the collateral, less
estimated cost to sell. Collateral-dependent loans are classified within Level 3 of the fair value hierarchy.
The Company considers the appraisal or evaluation as the starting point for determining fair value and then
considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral
underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent
and subsequently as deemed necessary by management. Appraisals are reviewed for accuracy and consistency.
Appraisers are selected from the list of approved appraisers maintained by management. The appraised values
are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction
of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by
comparison to historical results.
Mortgage Servicing Rights
MSRs do not trade in an active market with readily observable prices. Accordingly, the fair value of these assets is
classified as Level 3. The Company determines the fair value of MSRs using an income approach model based
upon the Company’s month–end interest rate curve and prepayment assumptions. The model utilizes
assumptions to estimate future net servicing income cash flows, 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 not increased in 2023 for the fair value.
50
43
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Unobservable (Level 3) Inputs
The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3
fair value measurements at December 31, 2023 and 2022:
Fair Value at
12/31/2023
Valuation
Technique
Unobservable Inputs
(Weighted
Average)
Collateral-dependent loans
$
3,054
Market comparable
properties
Marketability
discounts
20-20% (20%)
Fair Value at
12/31/2022
Valuation
Technique
Unobservable Inputs
Range
(Weighted
Average)
Collateral-dependent impaired
loans
$
Market comparable
properties
Marketability
discounts
2,404
20-20% (20%)
Mortgage servicing rights
3,919 Discounted cash flow Discount rate
9.5-9.5% (9.5%)
Constant prepayment
rate
3-15% (9%)
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 loans
The significant unobservable input used in the fair value measurement of the Company’s collateral-dependent
loans is the marketability discount. Significant increases in this input in isolation would result in a significantly
lower fair value measurement.
Mortgage Servicing Rights
Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair
value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment
speed and default rate. Due to the nature of the valuation inputs, mortgage servicing rights are classified within
Level 3 of the hierarchy.
Mortgage servicing rights are tested for impairment on at least an annual basis. The Controller’s office contracts
with a pricing specialist to generate fair value estimates. The Controller’s office challenges the reasonableness of
the assumptions used and reviews the methodology to ensure the estimated fair value is appropriate.
44
51
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(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, 2023 and 2022:
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Carrying
Amount
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
36,682 $
1,145
1,531,280
6,866
8,101
36,682 $
—
—
—
—
— $
—
—
6,866
8,101
—
1,145
1,429,455
—
—
1,642,601
4,583
31,000
24,034
1,306
—
—
—
—
—
1,641,770
4,583
31,000
19,755
1,306
—
—
—
—
—
22,883 $
5
1,345
1,387,842
6,627
6,111
22,883 $
—
—
—
—
—
— $
5
—
—
6,627
6,111
—
—
1,345
1,332,624
—
—
1,456,570
5,213
16,000
24,693
927
—
—
—
—
—
1,449,548
5,213
16,000
19,504
927
—
—
—
—
—
December 31, 2023
Financial assets
Cash and cash equivalents
Loans held for sale
Loans, net of allowance for credit losses
Nonmarketable equity securities
Interest receivable
Financial liabilities
Deposits
Repurchase agreements
Other borrowed funds
Subordinated debt
Interest payable
December 31, 2022
Financial assets
Cash and cash equivalents
Held-to-maturity securities
Loans held for sale
Loans, net of allowance for credit losses
Nonmarketable equity securities
Interest receivable
Financial liabilities
Deposits
Repurchase agreements
Other borrowed funds
Subordinated debt
Interest payable
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.
52
45
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
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 $540,000 and $203,000 at December 31, 2023 and
2022, 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, 2023, the Bank had granted unused lines of credit to borrowers aggregating approximately
$144,954,000 and $80,438,000 for commercial lines and open-end consumer lines, respectively. At
December 31, 2022, the Bank had granted unused lines of credit to borrowers aggregating approximately
$136,805,000 and $71,861,000 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, 2023, and 2022, the Bank had outstanding commitments to originate variable rate loans
aggregating approximately $50,409,000 and $14,178,000, respectively. The commitments extended over varying
periods of time with the majority being disbursed within a one-year period.
46
53
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Note 20: Condensed Financial Information (Parent Company Only)
Presented below is condensed financial information as to the financial position, results of operations and cash
flows of the Company:
Condensed Balance Sheets
Assets
Cash and cash equivalents
Investment in common stock of subsidiaries
Other assets
Total assets
Liabilities
Subordinated debt
Other liabilities
Total liabilities
Shareholders' Equity
December 31,
2023
2022
$
9,757 $
177,584
1,110
10,227
159,243
884
$
188,451 $
170,354
24,034
1,885
24,693
1,753
25,919
26,446
162,532
143,908
Total liabilities and shareholders' equity
$
188,451 $
170,354
54
47
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Condensed Statements of Income and Comprehensive Income/(Loss)
Income
Dividends from the Bank
Interest income
Other 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
Year Ending December 31,
2023
2022
$
7,366 $
35
21
6,791
21
22
7,422
6,834
1,270
480
1,294
390
1,750
1,684
5,672
5,150
(383)
(375)
Income Before Equity in Undistributed Income of the Bank
6,055
5,525
Equity in Undistributed Income of subsidiaries
Net Income
Comprehensive Income/(Loss)
13,461
12,546
19,516 $
18,071
24,514 $
(4,473)
$
$
48
55
2023 Annual Report Heartland BancCorp
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
(Table dollar amounts in thousands, except share data)
Condensed Statements of Cash Flows
Operating Activities
Net income
Stock option expense
Tax benefit related to stock options exercised
Items not providing cash
Net cash provided by operating activities
Investing Activities
Investment in venture capital fund
Net cash used in investing activities
Financing Activities
Repayment of subordinated debt
Dividends paid
Proceeds from stock options exercised
Net cash used in financing activities
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Year Ending December 31,
2023
2022
$
19,516 $
478
28
(13,890)
18,071
515
30
(12,863)
6,132
5,753
(174)
(174)
(700)
(5,976)
248
(6,428)
(470)
10,227
(110)
(110)
—
(5,414)
252
(5,162)
481
9,746
Cash and Cash Equivalents at End of Year
$
9,757 $
10,227
Note 21: Subsequent Events
Subsequent events have been evaluated through March 7, 2024 which is the date the financial statements were
available to be issued.
56
49
2023 Annual Report THE BOARD OF DIRECTORS
Heartland BancCorp Directors
Thomas L. Campbell
Retired, Partner
Fusion Alliance, LLC
Jay B. Eggspuehler, Esq.
Jodi L. Garrison
James R. Heimerl
Jon A. Husted
John G. Kenkel, Jr.
Cheryl L. Krueger
G. Scott McComb
Robert C. Overs
Gary D. Paine
Of Counsel
CPA, Partner
Owner
Lieutenant Governor
Isaac, Wiles & Burkholder, LLC
Hirth, Norris & Garrsion, LLP
Heimerl Farms Ltd.
State of Ohio
Retired, President & CEO
Victory Community Bank & Victory Bancorp
President & CEO
C. Krueger’s
Chairman, President & CEO
Heartland Bank
Retired, CEO/Executive Director
Creative Living
President & CEO
Accurate Companies
William J. Schottenstein
Principal
Arshot Investment Corporation
Ronnie R. Stokes
Gregory M. Ubert
President & CEO
Three Leaf Productions
Founder, President & CEO
Crimson Cup Coffee & Tea
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
Jack J. Eggspuehler
Aerosafe, Inc.
Carrie L. Almendinger
Secretary
Treasurer
John R. Haines
Gerald K. McClain
Tiney M. McComb
Cheryl C. Poulton
Richard A. Vincent
John R. Haines Insurance Agency
The Jerry McClain Company, Inc.
Heartland BancCorp
Tech International
Osteopathic Heritage Foundation
57
2023 Annual Report SENIOR MANAGEMENT TEAM
G. Scott
McComb
Chairman, President
& CEO
Carrie L.
Almendinger
EVP, Chief Financial
Officer
Benjamin J.
Babcanec
EVP, Chief Operating
Officer
Ryan P.
Arras
SVP, Finance Manager
Alyssa L.
Booms
SVP, Director of Branch
Banking
Matthew H.
Booms
SVP, Director of
Mortgage Banking
Jeff S.
Ciochetto
SVP, Chief Credit
Officer
James W.
Duckro
SVP, Operations
Manager
Jennifer L.
Eckert
SVP, Chief Risk Officer
& Corporate Secretary
Sarah M.
Ketty
SVP, Director of People
Portfolio
Nancy M.
Matney
SVP, Director of
Treasury Management
& Client Services
Jessica H.
McNamee
SVP, Director of
Financial Planning
Laurie A.
Pfeiffer
SVP, Director of
Commercial Banking
Tarne
Tassniyom
SVP, Chief Information
Officer
Ashley A.
Trout
SVP, Director of
Strategy
Aaron A.
Cooke
VP, Controller
Ruth
Floyd
General Manager,
TransCounty Title
Agency
58
2023 Annual Report (614) 337-4600
430 N. Hamilton Road, Whitehall, OH 43213
IR.Heartland.Bank
🕿
🏠
About Heartland BancCorp
Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 20 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 June of 2023, Heartland was ranked #119 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, 2022.
This Annual Report contains statements about future events that constitute forward-looking statements. Forward-looking statements may be identified by reference to a future period
or periods or by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “will,” “should,” “plan,” and other similar terms or expressions. Forward-looking statements
should not be relied on because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties
and other factors may cause the actual results, performance, and achievements of the Company to be materially different from the anticipated future results, performance or achievements
expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to, general economic conditions, changes in interest rates,
regulatory considerations, liquidity pressures, loan demands, competition, and legal and compliance considerations. Any forward-looking statements contained in this Annual Report are
made as of the date hereof, and we undertake no duty, and specifically disclaim any duty, to update or revise any such statements, whether as a result of new information, future events or
otherwise, except as required by applicable law.
Community is the
of Heartland
♥
Heartland Volunteers in Action
HOURS
4582
devoted to the communities served in 2023!