Whitehall, OH - July 26, 2021- Heartland BancCorp ("Heartland" and "the company") (OTCQX: HLAN) today reported net income increased 37.8% to $4.2 million, or $2.06 per diluted share in the second quarter of 2021, compared to $3.0 million, or $1.52 per diluted share in the second quarter of 2020. In the first quarter of 2021, the company reported earnings of $4.6 million, or $2.29 per diluted share.  In the first six months of 2021, net income increased 47.9% to $8.8 million, or $4.35 per diluted share, compared to $6.0 million, or $2.95 per diluted share, in the first six months of 2020.

The company announced its board of directors declared a quarterly cash dividend of $0.627 per share. The dividend will be payable October 10, 2021, to shareholders of record as of September 25, 2021. Heartland has paid regular quarterly cash dividends since 1993.

"We delivered solid earnings for the second quarter and first half of 2021, fueled by net interest income generation and controllable operating expenses," stated G. Scott McComb, Chairman, President and Chief Executive Officer." Our franchise is growing as we continue to welcome new clients to the Bank both from organic growth and from the integration of our acquisition of Victory Community Bank last year. With the strength of the economy in our greater Columbus and Northern Kentucky markets, and the team we have in place, I remain hopeful about our growth prospects for the remainder of the year."

Second Quarter Financial Highlights (at or for the period ended June 30, 2021)

• Net income increased 37.8% to $4.2 million, compared to $3.0 million in the second quarter a year ago.
• Earnings per diluted share were $2.06, compared to $1.52 in the second quarter a year ago.
• Provision for loan losses was $480,000, compared to $2.6 million in the second quarter a year ago.
• Net interest margin was 3.38%, compared to 3.36% in the preceding quarter, and 3.81% in the second quarter a year ago.
• Total revenues (net interest income plus noninterest income) increased 4.3% to $15.4 million, compared to $14.8 million in the second quarter a year ago .
• Noninterest income increased 7.9% to $3.2 million, compared to $2.9 million in the second quarter a year ago.
• Annualized return on average assets was 1.09%, compared to 0.91% in the second quarter a year ago.
• Annualized return on average equity was 11.63%, compared to 9.38% in the second quarter a year ago.
• Excluding PPP loans, net loans increased $18.5 million or 1.8% on a linked quarter basis to $1.03 billion and declined $5.4 million or 0.5% compared to a year earlier.
• COVID-19 related loan deferrals declined significantly to 1.7% of total loans (excluding PPP) at the end of the second quarter of 2021 from 3.7% of total loans three months earlier and 14.3% a year ago.
• Noninterest bearing demand deposits increased 12.0% to $441.8 million, compared to $394.5 million a year ago.
• Total deposits increased modestly to $1.30 billion, compared to $1.28 billion a year ago.
• Tangible book value per share increased to $66.65 per share, compared to $60.19 per share a year ago.
• Declared a quarterly cash dividend of $0.627 per share.

Paycheck Protection Program

During the second and third quarters of 2020, Heartland originated 1,075 Paycheck Protection Program {"PPP") loans, for a total of $129 million in PPP loans, and generated total PPP loan fees receivable of approximately $4.9 million. "As of June 30, 2021,we had received forgiveness from the SBA for 670 borrowers totaling $95 million. Approximately $368,000 of the income recognized during the second quarter of 2021 was related to recognizing origination fees for PPP loan payoffs or forgiveness, compared to $860,000 of income recognized during the first quarter of 2021," said McComb.

At the end of December 2020, additional COVID-19 stimulus relief was signed into law that allowed for an additional round of PPP lending. During the first half of 2021, Heartland originated 770 PPP loans, or $70 million in loans, during this new round of funding, with gross fee income of $3.7 million. $369,000 was recognized during the second quarter as deferred origination costs as a reduction of salary and employee benefit expense and $1.2 million was recognized during the first quarter of 2021. The net difference of $2.2 million will be recognized over the life of the associated loans.

Balance Sheet Review

"We are pleased that the team achieved a modest gain in loan portfolio growth this quarter ex-PPP. We remain cautiously optimistic that this trend continues for the second half of 2021," said Ben Babcanec, SVP and Chief Operating Officer. Excluding PPP loans, net loans increased $18.5 million or 1.8% on a linked quarter basis to $1.03 billion and declined $5.4 million or 0.5% compared to a year earlier. Including PPP loans, net loans were $1.13 billion at June 30, 2021, which was a modest decrease compared to $1.16 billion at June 30, 2020, and unchanged compared to three months earlier. PPP loan payoffs totaled $27.6 million during the second quarter of 2021 and contributed to the decrease. Commercial loans decreased 12.1% from year ago levels to $219.4 million and comprise 19.1% of the total loan portfolio at June 30, 2021. Owner occupied commercial real estate loans (CRE) in creased10.3% to $275.7 million at June 30, 2021, compared to a year ago,and comprise 24.0% of the total loan portfolio. Non-owner occupied CRE lo ans increased 6.0% to $293.0 million, compared to a year ago, and comprise 25.5% of the total loan portfolio at June 30, 2021. At June 30, 2021, 1-4 family residential real estate loans decreased 10.1% from year ago levels to $314.6 million and represent 27.4% of total loans. Home equity loans decreased 8.6% from year ago levels to $35.5 million and represent 3.1% of total loans at June 30, 2021. Consumer loans decreased 6.0% from year ago levels to $10.0 million and represent 0.9% of the total loan portfolio at June 30, 2021.

Deposit growth for the year was reflective of federal programs such as the PPP and stimulus checks, which boosted demand deposit balances. Total deposits increased modestly to $1.30 billion at June 30, 2021, compared to $1.28 billion a year earlier and decreased 4.3% compared to $1.36 billion three months earlier. At June 30, 2021, noninterest bearing demand deposit accounts increased 12.0%compared to a year ago and represented 34.0% of total deposits, savings, NOW and money market accounts increased 25.4% compared to a year ago and represented 44.9% of total deposits, and CDs decreased 34.6% compared to a year ago and comprised 21.1% of total deposits.

Total assets werer elatively flat at $1.51billion at June 30, 2021,compared to a year earlier, and decreased 3.9% compared to $1.57 billion three months earlier. The decrease compared to the prior quarter was largely due to a decline in deposits resulting in a reduction of excess cash reserves. Shareholders' equity increased 9.9% to $146.5 million at June 30, 2021, compared to $133.3 million a year earlier. On June 30, 2021, Heartland's tangible book value was $66.65 per share, compared to $60.19 one year earlier.

Operating Results

Heartland's net interest margin was 3.38% in the second quarter of 2021, compared to 3.36% in the preceding quart er and 3.81% in the second quarter of 2020. "There is continued pressure on net interest margin from excess liquidity and low yielding PPP loans, however a decline in excess cash reserves during the second quarter, along with a reduction in interest expense due to the prepayment of $17.9 million in FHLB advances, helped our net interest  margin  expand modestly during the quarter," said Almendinger. In the first six months of 2021, the net interest margin was 3.36%, compared to 3.74% in the first six months of 2020.  Excluding excess cash balances at the Federal Reserve Bank net interest margin was 3.76% for the second quarter of 2021 and 3.78% for the first quarter of 2021. PPP loans had a 0.08% negative effect on net interest margin for the second quarter of 2021 and 0.07% positive effect for the first quarter of 2021.

Total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 4.3% to $15.4 million in the second quarter, compared to $14.8 million in the second quarter a year ago, and decreased compared to $15.8 million in the preceding quarter. In the first six months of 2021, total revenues increased 13.1% to $31.2 million, compared to $27.6 million in the first six months of 2020.

Heartland's net interest income, before the provision for loan losses, increased 3.4% to $12.2 million in the second quarter of 2021, compared to $11.8 million in the second quarter ayear ago, and increased 1.3% compared to $12.1 million in the preceding quarter. Year-to-date, net interest income increased 10.4% to $24.3 million, compared to $22.0 million in the same period a year earlier.

"Noninterest income had solid growth year-over-year, with higher interchange fees from increased debit and credit card transaction volumes, along with increases in title insurance income, income from financial planning services thr ough Heartland Planning Associates, and higher gains on sales of loans, that was part ly offset by lower loan servicing income due to amortization of MSRs resulting from elevated payoffs," said Almendinger. Noninterest income increased 7.9% to $3.2 million in the second quarter, compared to $2.9 million in the second quart er a year ago, and decreased 14.4% compared to $3.7 million in the preceding quarter. The gains on sale of loans and originated mortgage servicing rights decreased 26.8% to $805,000 in the second quarter of 2021, compared to $1.1million in the second quarter a year ago, and decreased 48.1% compared to $1.6 million in the preceding quart er. While sustained low long-term mortgage rates continued to attract mortgage refinancing, the pace has slowed compared to the record setting levels of the third and fourth quarters of 2020 and increased competition has led to tightening gain on sale margins. In the first six months of 2021, noninterest income increased 23.9% to $6.9 million, compared to $5.5 million in the first six months of 2020.

Second quarter noninterest expenses tota led $9.8 million, compared to $9.6 million in the preceding quarter and $8.6 million in the second quarter a year ago. Year-to-date, noninterest expense tota led $19.4 million, compared to $17.3 mill ion in the first six months of 2020. Salary and employee benefit expenses were $5.6 million for the second quarter compared to $5.2 million in the first quarter of 2021, and $3.6 million in the second quarter of 2020. The salary and employee benefit expense reduction was $368,000 during the second quarter, compared to $1.2 million in the prior quart er reflecting expenses associated with the second round of PPP loans, which were originated in the first half of 2021, and the reduction of $2.0 million during the year ago quarter was primarily due to deferred expenses associated with the first round of PPP loans, which were originated in the second quarter of 2020.

Heartland continues to focus on investments in new products, talent and technology. The efficiency ratio for the second quarter of 2021was 63.6%, compared to 61.8% for the preced ing quarter and 57.9% for the second quarter of 2020.

Credit Quality

"Asset quality remained strong, with non-performing assets down 29% from the linked quarter. Despite this positive trend and strong economic recovery in our Central Ohio and Northern Kentucky markets, we continued to add to our allowance due to our conservaitve approach and prospects for longer-term loan growth," said McComb. Heartland booked a $480,000 provision for loan lossesin the second quarter, which was the same amount booked in the preceding quarter. The Company booked a $2.6 million provision for loan losses in the second quarter a year ago. For the first six months of 2021, Heartland's provision for loan losses was $960,000, compared to $3.1 million in the first six months of 2020.

At June 30, 2021, the allowance for loan losses(ALLL)was $13.9 million, or 1.21% of total loans, compared to $14.6 million, or 1.28% of total loans at June 30, 2020, and $11.1 million, or 0.95% of total loans a year ago. Excluding PPP loans, the ALLL was 1.33% of total loans at June 30, 2021, compared to 1.42% of total loans at March 31, 2021, and 1.06% of total loans at June 30, 2020. As of June 30, 2021, the ALLL represented 488.1% of nonaccrual loans, compared to 324.5% three months earlier and 301.8%one year earlier.

Nonaccrual loans decreased 37.1% during the quarter to $2.8 million at June 30, 2021, compared to $4.5 million at March 31, 2021 and decreased 22.9% compared to $3.7 million at June 30, 2020. The decrease in nonaccrual loans during the quarter was primarily the result of net loan charge offs of $1.3 million at June 30, 2021. This compares to $22,000 in net loan recoveries at March 31, 2021, and $682,000 in net loan charge offs at June 30, 2020. There were $359,000 in loans past due 90 days and still accruing at June 30, 2021and $18,000 of loans past due 90 days and still accruing at March 31, 2021, and no loans past due 90 days at June 30, 2020.

Heartland's performing restructured loans, that were not included in nonaccrual loans, decreased to $621,000 at June 30, 2021, compared to $632,000 at March 31, 2021. Borrowers who are in financial difficulty, and who have been granted concessions, including interest rate reductions, term extensions, or payment alterations, are categorizedas restructured loans.

There was $5,000 in other real estate owned (OREO) and other non-perform ing assets on the books at June 30, 2021, and at March 31, 2021, and $316,000 reported at June 30, 2020. Non-performing assets (NPAs), consisting of non-performing loans and loans past due 90 days or more, were $3.2 million, or 0.21% of total assets inclusive of PPP loans, at June 30, 2021, compared to $4.5 million, or 0.29% of total assets, at March 31, 2021 and $4.0 million, or 0.27% of total assets a year ago. NPAs, consisting of non-performing loans and loans past due 90 days or more, were 0.23% of total assets excluding PPP loans, at June 30, 2021.

Northwest Florida Expansion

On July 12, 2021, Heart land announced plans for a Northwest Florida Region Loan and Deposit Production Office led by Ashley Vannoy, Senior Vice President. This new market in Destin, Florida, will allow for a focus on strategic growth for the Bank. Vannoy has a solid background as a financial services professional with 30 years of success in strategic planning, program development, marketing management and direct client engagement. With the majority of her experience in northern Florida, Vannoy's network and professional reach contributes to her anticipated success for Heartland in this new market area.

About Heartland BancCorp

Heart land BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates18 full ­service banking offices and TransCounty Title Agency, LLC. Heartland Bank, founded in 1911, provides full-service commercial, small business, and consumerbanking services; profe ssional financial planning services; and other financial pro ductsand services. Heart land Bank is a member of th e Federal Reserve, a member of th e FDIC, an d an Equal Housing Lender. Heartland BancCorp is currently quoted on the OTCM arkets (OTCQX) under the symbol HLAN. Learn more about Heart land Bank at Heartland.Bank.

In May of 2021, Heartland was ranked 1182 on the American Banker Magazine's list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity as of December 31, 2020.

Safe Harbor Statement

This press release contains forwor-d looking statements within the meaning of the Private Secvrities Litigation Reform Act of 1995. These forward-looking statements inclvde, bvt orenot limited to, stotements obovt /i) the benefits of a merger between Heartland Bank ond Victory Community Bank, inclvding futvre financial and operating resvlts, cast savings enhancements to revenve and accretion to reported earnings that maybe realized from the merger;(ii) Heartland's plans, objectives, expecta tions and intentions  and  other  statements  contained  in this  press  release that  are not  historical  fact s;   and  (iii) other statements identified by words such as"expects, "antidpates,"intends,  "plans, "believes, "seeks, "estimates, "targets, "projects," or words of similar meaning generally intended to identify forward-looking statements . These forward-looking statements ore based vpon the cvrrent beliefs ond expectations of Heartland's management ond ore inherently svbject to significant bvsiness, economic and com petit ive uncertain tie s and contingencies, many of which are beyond the control of Heartland. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward -looking statements because of the following factors, among others: (1) the assumptions and estimates used by Hea rtland' s management include both assumptions as to certain business decisions that are subject to change and, in many respects , subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments, and thus, may not be realized; (2) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which Heartland is engaged; {3} changes in the interest rate environment may adversely affect net interest income; {4} results may be adversely affected by continued diversification of assets and adverse changes to credit qualit y; (5) competition from other financial services companies in Heartland's markets could adversely affect operations; (6) the impact of the coronavirus {COVID-19) pandemic on the employees and customers of Heart land , as well as the resulting effect on the business, financial condition and results of operations on Heartland; and (7) the current economic slowdown could adversely affect credit quality and loan originations.