Whitehall, OH – October 25, 2021 – Heartland BancCorp (“Heartland” and “the Company”) (OTCQX: HLAN) today reported net income increased 56.0% to $4.8 million, or $2.34 per diluted share in the third quarter of 2021, compared to $3.1 million, or $1.52 per diluted share in the third quarter of 2020, and increased 13.6% compared to earnings of $4.2 million, or $2.06 per diluted share, in the preceding quarter. In the first nine months of 2021, net income increased 50.7% to $13.6 million, or $6.69 per diluted share, compared to $9.0 million, or $4.46 per diluted share, in the first nine months of 2020.

The company’s board of directors declared a quarterly cash dividend of $0.627 per share. The dividend will be payable January 10, 2022, to shareholders of record as of December 25, 2021. Heartland has paid regular quarterly cash dividends since 1993.

“Third quarter results were strong, delivering robust loan growth (ex. PPP), record net interest income generation and solid net interest margin expansion,” stated G. Scott McComb, Chairman, President and Chief Executive Officer. “Operating revenue increased during the quarter driven by lower cost of funds, stable non-interest-bearing deposits and increased loan balances, primarily in commercial real estate. The investments we have made in our franchise over the last several quarters have built out our infrastructure and grown the company. We are seeing exceptional opportunities in Northern Kentucky after entering into that new market last year with our acquisition of Victory Community Bank. We are now at a point where we can leverage the balance sheet for operational advantage and efficiency. We have the right team in place, together with the strength of the economy in our local markets, to lead the momentum to grow during the remainder of the year and into 2022.”

Third Quarter Financial Highlights (at or for the period ended September 30, 2021)

• Net income increased 56.0% to $4.8 million, compared to $3.1 million in the third quarter a year ago.
• Earnings per diluted share were $2.34, compared to $1.52 in the third quarter a year ago.
• Provision for loan losses was $480,000, compared to $2.6 million in the third quarter a year ago.
• Net interest margin improved 25 basis points to 3.63%, compared to 3.38% in both the preceding quarter and in the third quarter a year ago.
• Total revenues (net interest income plus noninterest income) increased 4.9% to $16.4 million, compared to $15.7 million in the third quarter a year ago.
• Annualized return on average assets was 1.27%, compared to 0.80% in the third quarter a year ago.
• Annualized return on average equity was 12.73%, compared to 9.01% in the third quarter a year ago.
• Excluding Paycheck Protection Program (“PPP”) loans, net loans increased $41.0 million or 4.0% on a linked quarter basis to $1.07 billion and increased $54.9 million or 5.4% compared to a year earlier.
• There were no COVID-19 related loan deferrals (excluding PPP) at the end of the third quarter of 2021, down from 1.7% of total loans three months earlier and 5.1% a year ago.
• Noninterest bearing demand deposits increased 13.8% to $440.5 million, compared to $387.1 million a year ago.
• Total deposits decreased modestly to $1.24 billion, compared to $1.29 billion a year ago.
• Tangible book value per share increased to $68.29 per share, compared to $61.31 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 PPP loans, for a total of $129.0 million in PPP loans, and generated total PPP loan fees receivable of approximately $4.9 million. As of September 30, 2021, Heartland had received forgiveness from the SBA for $119.0 million. Approximately $788,000 of the income recognized during the third quarter of 2021 was related to recognizing origination fees for PPP loan payoffs or forgiveness, compared to $368,000 of income recognized during the second quarter of 2021.

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 and second quarters 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. As of September 30, 2021, Heartland had received forgiveness from the SBA for $19 million. There was $2,000 in deferred origination costs recognized during the third quarter of 2021 for new PPP loan originations, compared to $369,000 recognized in the second quarter of 2021. The
balance of net unamortized PPP fees, remaining to be recognized in fee income over the life of the associated loans, is $1.4 million at September 30, 2021.

Balance Sheet Review
“Our team of lenders did an excellent job of replacing the $41.8 million in PPP loan forgiveness with new loan originations,” said Ben Babcanec, SVP and Chief Operating Officer. “Net loan growth (ex. PPP) during the quarter was robust, increasing $41.0 million, or 4.0% on a linked quarter basis with an uptick in CRE loans. We continue to remain cautiously optimistic that this trend continues for the remainder of 2021.” Excluding PPP loans, net loans increased $41.0 million during the third quarter to $1.09 billion at September 30, 2021, and increased $54.9 million when compared to $1.02 billion a year earlier. Including PPP loans, net loans were $1.13 billion at September 30, 2021, which was a modest decrease compared to $1.15 billion at September 30, 2020, and unchanged compared to three months earlier. PPP loan payoffs totaled $41.8 million during the third quarter of 2021 and contributed to the modest decrease. Commercial loans decreased 26.3% from year ago levels to $179.8 million and comprise 15.8% of the total loan portfolio at September 30, 2021. Owner occupied commercial real estate loans (CRE) increased 14.5% to $274.4 million at September 30, 2021, compared to a year ago, and comprise 24.1% of the total loan portfolio. Non-owner occupied CRE loans increased 13.1% to $326.9 million, compared to a year ago, and comprise 28.8% of the total loan portfolio at September 30, 2021. At September 30, 2021, 1-4 family residential real estate loans decreased 5.0% from year ago levels to $319.7 million and represent 28.1% of total loans. Home equity loans decreased 10.9% from year ago levels to $36.1 million and represent 3.2% of total loans
at September 30, 2021. Consumer loans increased 2.5% from year ago levels to $11.1 million and represent 1.0% of the total loan portfolio at September 30, 2021.

Deposit growth for the year was reflective of federal programs such as PPP and stimulus checks, which boosted demand deposit balances. Total deposits were $1.24 billion at September 30, 2021, compared to $1.29 billion a year earlier and $1.30 billion three months earlier. At September 30, 2021, noninterest bearing demand deposit accounts increased 13.8% compared to a year ago and represented 35.5% of total deposits, savings, NOW and money market accounts increased 14.0% compared to a year ago and represented 46.5% of total deposits, and CDs decreased 43.2% compared to a year ago
and comprised 18.0% of total deposits.

Total assets decreased 4.3% to $1.45 billion at September 30, 2021, compared to $1.52 billion a year earlier, and decreased 3.6% compared to $1.51 billion three months earlier. The decrease compared to the prior quarter was largely due to PPP loan forgiveness and a reduction in excess liquidity. Shareholders’ equity increased 10.5% to $150.1 million at September 30, 2021, compared to $135.8 million a year earlier. On September 30, 2021, Heartland’s tangible book value was $68.29 per share, compared to $61.31 one year earlier.

Operating Results
“The decline in excess cash reserves, as well as PPP loan forgiveness helped our net interest margin expand 25 basis points during the quarter,” said Carrie Almendinger, EVP and Chief Financial Officer. Heartland’s net interest margin improved by 25 basis points to 3.63% in the third quarter of 2021, compared to 3.38% in both the preceding quarter and in the third quarter of 2020. In the first nine months of 2021, the net interest margin was 3.47%, compared to 3.65% in the first nine months of 2020. PPP loan forgiveness had a 7 basis point positive effect on net interest margin for the third quarter of 2021 and a 9 basis point negative effect for the second quarter of 2021. Excluding PPP loans, the net interest margin was 3.56% for the third quarter of 2021 and 3.46% for the second quarter of 2021. Excluding excess cash balances at the Federal Reserve Bank, net interest margin was 3.85% for the third quarter of 2021 and 3.75% for the second quarter of 2021.

Heartland’s total revenues (net interest income before the provision for loan losses, plus noninterest income) increased 4.9% to $16.4 million in the third quarter, compared to $15.7 million in the third quarter a year ago, and increased 6.6% compared to $15.4 million in the preceding quarter. In the first nine months of 2021, total revenues increased 10.1% to $47.6 million, compared to $43.2 million in the first nine months of 2020. Net interest income, before the provision for loan losses, increased 7.4% to $12.8 million in the third quarter of 2021, compared to $11.9 million in the third quarter a year ago, and increased 4.5% compared to $12.2 million in the preceding quarter. Year-to-date, net interest income increased 9.4% to $37.1 million, compared to $33.9 million in the same period a year earlier.

“Noninterest income increased on a linked quarter basis, with increased debit and credit card transaction volumes contributing to higher interchange income, along with increases in title insurance income and higher income from financial planning services through Heartland Planning Associates. The modest decrease in noninterest income compared to the year ago quarter was primarily a result of lower gains on sale of mortgage loans,” said Almendinger. Noninterest income decreased 3.1% to $3.6 million in the third quarter, compared to $3.8 million in the third quarter a year ago, and increased 14.8% compared to $3.2 million in the preceding quarter. The gains on sale of loans and originated mortgage servicing rights decreased 43.1% to $1.0 million in the third quarter of 2021, compared to $1.8 million in the third quarter a year ago, and increased 30.3% compared to $805,000 in the preceding quarter. 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 a tightening gain on sale margins. In the first nine months of 2021, noninterest income increased 13.0% to $10.5 million, compared to $9.3 million in the first nine months of 2020.

Third quarter noninterest expenses totaled $9.9 million, compared to $9.8 million in the preceding quarter and $9.4 million in the third quarter a year ago. Year-to-date, noninterest expense totaled $29.3 million, compared to $26.7 million in the first nine months of 2020. Salary and employee benefit expenses were $6.3 million in the third quarter compared to $5.6 million in both the second quarter of 2021 and in the third quarter of 2020. There was no salary and employee benefit expense reduction during the third quarter of 2021. This compared to a salary and employee benefit expense reduction of $368,000 during the second quarter reflecting expenses associated with the second round of PPP loans, which were originated in the first half of 2021, and the reduction of $120,000 during the year ago quarter which was primarily due to deferred expenses associated with the first round of PPP loans, which were originated in the second and third quarters of 2020. Excluding these benefits from PPP loans, noninterest expense was down compared to the linked quarter and up 3.9% from the year ago quarter.

The efficiency ratio for the third quarter of 2021 was 60.4%, compared to 63.6% for the preceding quarter and 60.3% for the third quarter of 2020.

Credit Quality
“Asset quality remained strong, with non-performing assets down 14.0% from the linked quarter and down 36.4% from a year ago. 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 conservative approach and new loan growth,” said McComb. Heartland recorded a $480,000 provision for loan losses in the third quarter, which was the same amount recorded in the preceding quarter. The Company booked a $2.6 million provision for loan losses in the third quarter a year ago. For the first nine months of 2021, Heartland’s provision for loan losses was $1.4 million, compared to $5.6 million in the first nine months of 2020.

At September 30, 2021, the allowance for loan losses (ALLL) was $14.4 million, or 1.25% of total loans, compared to $13.9 million, or 1.21% of total loans at June 30, 2021, and $13.8 million, or 1.17% of total loans a year ago. Excluding PPP loans, the ALLL was 1.32% of total loans at September 30, 2021, compared to 1.33% of total loans at June 30, 2021, and 1.31% of total loans a year ago. As of September 30, 2021, the ALLL represented 521.9% of nonaccrual loans, compared to 488.1% three months earlier and 329.3% one year earlier.

Nonaccrual loans totaled $2.8 million at September 30, 2021, and at June 30, 2021, and decreased 34.5% compared to $4.2 million at September 30, 2020. Heartland had net loan recoveries of $6,000 at September 30, 2021. This compared to $1.3 million in net loan charge offs at June 30, 2021, and $141,000 in net loan recoveries at September 30, 2020. There were no loans past due 90 days and still accruing at September 30, 2021. This compared to $359,000 in loans past due 90 days and still accruing at June 30, 2021, and $132,000 in loans past due 90 days and still accruing at September 30, 2020.

Heartland’s performing restructured loans, that were not included in nonaccrual loans, decreased to $610,000 at September 30, 2021, compared to $621,000 at June 30, 2021. Borrowers who are in financial difficulty, and who have been granted concessions, including interest rate reductions, term extensions, or payment alterations, are categorized as restructured loans.

There was $5,000 in other real estate owned and other non-performing assets on the books at September 30, 2021, and three months earlier and one year earlier. Non-performing assets (NPAs), consisting of non-performing loans and loans past due 90 days or more, decreased to $2.8 million, or 0.19% of total assets inclusive of PPP loans, at September 30, 2021, compared to $3.2 million, or 0.21% of total assets, at June 30, 2021, and $4.3 million, or 0.29% of total assets a year ago. NPAs, consisting of non-performing loans and loans past due 90 days or more, were 0.20% of total assets excluding PPP loans, at September 30, 2021.

About Heartland BancCorp
Heartland BancCorp is a registered Ohio bank holding company and the parent of Heartland Bank, which operates 18 fullservice banking offices, an LPO/DPO and TransCounty Title Agency, LLC. Heartland Bank, founded in 1911, provides fullservice commercial, small business, and consumer banking services; professional financial planning services; and other financial products and services. Heartland Bank is a member of the Federal Reserve, a member of the FDIC, and an Equal Housing Lender. Heartland BancCorp is currently quoted on the OTC Markets (OTCQX) under the symbol HLAN. Learn
more about Heartland Bank at Heartland.Bank.

In May of 2021, Heartland was ranked #82 on the American Banker Magazine’s list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity as of December 31, 2020.

Safe Harbor Statement
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (i) the benefits of a merger between Heartland Bank and Victory Community Bank, including future financial and operating results, cost savings enhancements to revenue and accretion to reported earnings that may be realized from the merger; (ii) Heartland’s plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” or words of similar meaning generally intended to identify forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations of Heartland’s management and are inherently subject to significant business, economic and competitive uncertainties 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 Heartland’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 quality; (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 Heartland, 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.

Heartland cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements are expressly qualified in their entirety by the cautionary statements above. Heartland does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.