##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


|                           |  |                         |  |          
|-------------------------- |  | ----------------------- |  | ---------
|For Quarterly Period Ended |  | Commission File Number: |  |          
|June 30, 2003              |  |                         |  | 333-67107

HEARTLAND BANCSHARES, INC.

(Exact name of small business issuer as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 65-0854929                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

|                                            |  |           
|------------------------------------------- |  | ----------
|320 U.S. Highway 27 North, Sebring, Florida |  | 33870     
|                                            |  |           
|(Address of principal executive offices)    |  | (Zip Code)

|                                          |  | 
|----------------------------------------- |  | 
|Issuers telephone number: (863) 386-1300

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date:

|                              |  |                                
|----------------------------- |  | -------------------------------
|Common Stock, $0.10 par value |  | 652,030                        
|                              |  |                                
|Class                         |  | Outstanding as of July 31, 2003

Transitional Small Business Disclosure
Format: Yes  [  ]  No  [X]





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TABLE OF CONTENTS



|                                               |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                 
|                                               | Item 1. Financial Statements                                                                 
|                                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                               | Item 3. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                    
|                                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                    
|EXHIBIT INDEX                                 
|EX-31.1 SECTION 302 CERTIFICATION OF CEO      
|EX-31.2 SECTION 302 CERTIFICATION OF CFO      
|EX-32.1 SECTION 906 CERTIFICATION OF CEO & CFO



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

HEARTLAND BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                   |            |            |            | 
|------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------------------------------- | ------------------------------- | ------------------------------------------ | ---------- | ------------- | ----------- | ----------------- | ---------- | ---------- | ---------- | 
|                                            |                                                                                                   |                                        |                                 |                                            |            | June 30, 2003 |             | December 31, 2002
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|ASSETS                                      |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|Cash and due from banks                     |                                                                                                   | $                                      | 5,474,668                       |                                            |            | $             | 4,279,543   |                  
|Federal funds sold                          |                                                                                                   |                                        | 10,877,421                      |                                            |            |               | 8,708,712   |                  
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        | Total cash and cash equivalents |                                            |            | 16,352,089    |             |                   |            | 12,988,255 |           
|Securities available for sale               |                                                                                                   |                                        | 13,696,030                      |                                            |            |               | 14,361,599  |                  
|Securities held to maturity                 |                                                                                                   |                                        | 4,021,871                       |                                            |            |               |            |                  
|Loans:                                      |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   | Commercial, financial and agricultural |                                 |                                            | 17,624,616 |               |             |                   | 18,071,569 |           
|                                            |                                                                                                   | Real estate - mortgage                 |                                 |                                            | 32,749,461 |               |             |                   | 27,295,228 |           
|                                            |                                                                                                   | Installment and consumer loans         |                                 |                                            | 18,036,576 |               |             |                   | 14,895,343 |           
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        | Total loans                     |                                            |            | 68,410,653    |             |                   |            | 60,262,140 |           
|Less: Allowance for loan losses             |                                                                                                   |                                        | (660,944                        | )                                          |            |               | (606,971    | )                
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        |                                 | Net loans                                  |            |               | 67,749,709  |                   |            |            | 59,655,169 | 
|Property and equipment                      |                                                                                                   |                                        | 2,811,183                       |                                            |            |               | 2,753,980   |                  
|Other assets                                |                                                                                                   |                                        | 369,877                         |                                            |            |               | 652,720     |                  
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        |                                 | TOTAL ASSETS                               |            | $             | 105,000,759 |                   |            | $          | 90,411,723 | 
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|LIABILITIES AND SHAREHOLDERS EQUITY        |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|Liabilities                                 |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            | Deposits:                                                                                         |                                        |                                 |                                            |            |               |             |                   |           
|                                            |                                                                                                   |                                        | Non-interest bearing demand     |                                            | $          | 21,238,292    |             |                   | $          | 17,366,253 |           
|                                            |                                                                                                   |                                        | Savings, NOW, and money market  |                                            |            | 44,957,380    |             |                   |            | 37,327,928 |           
|                                            |                                                                                                   |                                        | Time deposits under $100,000    |                                            |            | 19,065,739    |             |                   |            | 17,506,373 |           
|                                            |                                                                                                   |                                        | Time deposits over $100,000     |                                            |            | 11,030,360    |             |                   |            | 10,146,274 |           
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        |                                 | Total deposits                             |            |               | 96,291,771  |                   |            |            | 82,346,828 | 
|Securities sold under repurchase agreements |                                                                                                   |                                        | 1,590,359                       |                                            |            |               | 1,218,990   |                  
|Other liabilities                           |                                                                                                   |                                        | 446,040                         |                                            |            |               | 458,792     |                  
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        |                                 | Total liabilities                          |            |               | 98,328,170  |                   |            |            | 84,024,610 | 
|Shareholders Equity                        |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            | Common stock, $.10 par value, 10,000,000 shares
authorized, 652,030 shares issued and outstanding |                                        |                                 | 65,203                                     |            |               |             | 65,203            |           
|                                            | Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued or outstanding     |                                        |                                 |                                           |            |               |             |                  |           
|                                            | Additional paid-in capital                                                                        |                                        |                                 | 6,437,152                                  |            |               |             | 6,437,152         |           
|                                            | Retained earnings (deficit)                                                                       |                                        |                                 | 95,723                                     |            |               |             | (255,897          | )         
|                                            | Accumulated other comprehensive income                                                            |                                        |                                 | 74,511                                     |            |               |             | 140,655           |           
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        |                                 | Total shareholders equity                 |            |               | 6,672,589   |                   |            |            | 6,387,113  | 
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  
|                                            |                                                                                                   |                                        |                                 | TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY |            | $             | 105,000,759 |                   |            | $          | 90,411,723 | 
|                                            |                                                                                                   |                                        |                                 |                                            |            |               |             |                  





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##### Table of Contents



HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

|                          |                                  |  |                                                     |           |   |                        |        |         |   |           |  | 
|------------------------- | -------------------------------- |  | --------------------------------------------------- | --------- | - | ---------------------- | ------ | ------- | - | --------- |  | 
|                          |                                  |  |                                                     |           |   | Quarter Ended June 30,
|                          |                                  |  |                                                     |           |   | 2003                   |        | 2002   
|                          |                                  |  |                                                     |           |   |                        |        |        
|Interest Income           |                                  |  |                                                     |           |   |                        |        |        
|                          | Interest and fees on loans       |  | $                                                   | 1,104,691 |   |                        | $      | 775,988 |  
|                          | Interest on federal funds sold   |  |                                                     | 40,577    |   |                        |        | 26,927  |  
|                          | Interest on securities           |  |                                                     | 116,030   |   |                        |        | 286,552 |  
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Total interest income                               |           |   | 1,261,298              |        |         |   | 1,089,467 | 
|Interest Expense          |                                  |  |                                                     |           |   |                        |        |        
|                          | Interest on deposits             |  |                                                     | 284,866   |   |                        |        | 264,475 |  
|                          | Interest on borrowings           |  |                                                     | 3,837     |   |                        |        | 4,914   |  
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Total interest expense                              |           |   | 288,703                |        |         |   | 269,389   | 
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Net interest income                                 |           |   | 972,595                |        |         |   | 820,078   | 
|Provision for loan losses |                                  |  | 17,721                                              |           |   |                        | 42,710 |        
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Net interest income
after provision for loan losses |           |   | 954,874                |        |         |   | 777,368   | 
|Noninterest Income        |                                  |  |                                                     |           |   |                        |        |        
|                          | Service charges and fees         |  |                                                     | 76,525    |   |                        |        | 58,446  |  
|                          | Other income                     |  |                                                     | 31,595    |   |                        |        | 17,310  |  
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Total noninterest income                            |           |   | 108,120                |        |         |   | 75,756    | 
|Noninterest Expense       |                                  |  |                                                     |           |   |                        |        |        
|                          | Salaries and employee benefits   |  |                                                     | 379,723   |   |                        |        | 314,523 |  
|                          | Occupancy expenses               |  |                                                     | 58,198    |   |                        |        | 47,153  |  
|                          | Furniture and equipment expenses |  |                                                     | 60,549    |   |                        |        | 71,081  |  
|                          | Other operating expenses         |  |                                                     | 260,502   |   |                        |        | 211,490 |  
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Total noninterest expense                           |           |   | 758,972                |        |         |   | 644,247   | 
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Income before income taxes                          |           |   | 304,022                |        |         |   | 208,877   | 
|                          |                                  |  | Income taxes                                        |           |   | 126,181                |        |         | $ | 85,207    | 
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Net Income                                          |           | $ | 177,841                |        |         | $ | 123,670   | 
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Basic Net Income Per Share                          |           | $ | 0.27                   |        |         | $ | 0.19      | 
|                          |                                  |  |                                                     |           |   |                        |        |        
|                          |                                  |  | Fully Diluted Net Income Per Share                  |           | $ | 0.26                   |        |         | $ | 0.18      | 
|                          |                                  |  |                                                     |           |   |                        |        |        





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##### Table of Contents



HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

|                          |                                       |                                                     |        |           |                           |  |        |           |           |  | 
|------------------------- | ------------------------------------- | --------------------------------------------------- | ------ | --------- | ------------------------- |  | ------ | --------- | --------- |  | 
|                          |                                       |                                                     |        |           | Six Months Ended June 30,
|                          |                                       |                                                     |        |           | 2003                      |  | 2002  
|                          |                                       |                                                     |        |           |                           |  |       
|Interest income           |                                       |                                                     |        |           |                           |  |        |          
|                          | Interest and fees on loans            |                                                     | $      | 2,154,655 |                           |  | $      | 1,486,499 |          
|                          | Interest on federal funds sold        |                                                     |        | 71,882    |                           |  |        | 56,524    |          
|                          | Interest on securities                |                                                     |        | 233,200   |                           |  |        | 523,945   |          
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Total interest income                               |        |           | 2,459,737                 |  |        |           | 2,066,968 | 
|Interest expense          |                                       |                                                     |        |           |                           |  |        |          
|                          | Interest on deposits                  |                                                     |        | 567,685   |                           |  |        | 537,471   |          
|                          | Interest on borrowings                |                                                     |        | 7,123     |                           |  |        | 9,062     |          
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Total interest expense                              |        |           | 574,808                   |  |        |           | 546,533   | 
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Net interest income                                 |        |           | 1,884,929                 |  |        |           | 1,520,435 | 
|Provision for loan losses |                                       |                                                     | 65,280 |           |                           |  | 80,391 |          
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Net interest income
after provision for loan losses |        |           | 1,819,649                 |  |        |           | 1,440,044 | 
|Noninterest income        |                                       |                                                     |        |           |                           |  |        |          
|                          | Service charges and fees              |                                                     |        | 160,337   |                           |  |        | 106,285   |          
|                          | Gain (loss) on securities sales/calls |                                                     |        | (9,801    | )                         |  |        |          |          
|                          | Other income                          |                                                     |        | 67,664    |                           |  |        | 33,628    |          
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Total noninterest income                            |        |           | 218,200                   |  |        |           | 139,913   | 
|NON INTEREST EXPENSE      |                                       |                                                     |        |           |                           |  |        |          
|                          | Salaries and employee benefits        |                                                     |        | 757,451   |                           |  |        | 628,377   |          
|                          | Occupancy expenses                    |                                                     |        | 107,502   |                           |  |        | 95,436    |          
|                          | Furniture and equipment expenses      |                                                     |        | 107,110   |                           |  |        | 125,079   |          
|                          | Other operating expenses              |                                                     |        | 479,535   |                           |  |        | 439,813   |          
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Total noninterest expense                           |        |           | 1,451,598                 |  |        |           | 1,288,705 | 
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Income before income taxes                          |        |           | 586,251                   |  |        |           | 291,252   | 
|                          |                                       | Income taxes                                        |        | $         | 234,631                   |  |        | $         | 116,282   | 
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Net Income                                          |        | $         | 351,620                   |  |        | $         | 174,970   | 
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Basic Net Income Per Share                          |        | $         | 0.54                      |  |        | $         | 0.27      | 
|                          |                                       |                                                     |        |           |                           |  |        |          
|                          |                                       | Fully Diluted Net Income Per Share                  |        | $         | 0.52                      |  |        | $         | 0.26      | 
|                          |                                       |                                                     |        |           |                           |  |        |          





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##### Table of Contents



HEARTLAND BANCSHARES, INC.
STATEMENTS OF SHAREHOLDERS EQUITY
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(unaudited)

|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |         |         |  
|-------------------------- | ------------------------------------------------- | ---------------------------------------------------------- | ------ | --------- |  | ---------- | --------- | --------- |  | ------------- | -------- | ------------- |  | - | ------- | ----------- | ------- | - | --------- | ------- | ------- | -
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         | Accumulated |         |   |           |        
|                           |                                                   |                                                            |        | Common    |  | Additional |           | Retained  |  | Other         |          | Total        
|                           |                                                   |                                                            |        | Stock Par |  | Paid-in    |           | Earnings  |  | Comprehensive |          | Shareholders
|                           |                                                   |                                                            |        | Value     |  | Capital    |           | (Deficit) |  | Income        |          | Equity       
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |              
|BALANCE, December 31, 2001 |                                                   | $                                                          | 65,203 |           |  | $          | 6,437,152 |           |  | $             | (690,289 | )             |  | $ | 64,939  |             |         | $ | 5,877,005 |        
|Comprehensive Income:      |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|                           | Net income for the six months ended
June 30, 2002 |                                                            |        |           |  |            |           |           |  |               |          | 174,970       |  |   |         |             |         |   |           | 174,970 |        
|                           | Other comprehensive income:                       |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |         |        
|                           |                                                   | Change in unrealized gain on
securities available for sale |        |           |  |            |           |           |  |               |          |               |  |   |         |             | 57,506  |   |           |         | 57,506  |  
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|                           | Total comprehensive income                        |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           | 232,476 |        
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|BALANCE, June 30, 2002     |                                                   | $                                                          | 65,203 |           |  | $          | 6,437,152 |           |  | $             | (515,319 | )             |  | $ | 122,445 |             |         | $ | 6,109,481 |        
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|BALANCE, December 31, 2002 |                                                   | $                                                          | 65,203 |           |  | $          | 6,437,152 |           |  | $             | (255,897 | )             |  | $ | 140,655 |             |         | $ | 6,387,113 |        
|Comprehensive Income:      |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|                           | Net income for the six months ended
June 30, 2003 |                                                            |        |           |  |            |           |           |  |               |          | 351,620       |  |   |         |             |         |   |           | 351,620 |        
|                           | Other comprehensive income:                       |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |         |        
|                           |                                                   | Change in unrealized gain on
securities available for sale |        |           |  |            |           |           |  |               |          |               |  |   |         |             | (66,144 | ) |           |         | (66,144 | )
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|                           | Total comprehensive income                        |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           | 285,476 |        
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        
|BALANCE, June 30, 2003     |                                                   | $                                                          | 65,203 |           |  | $          | 6,437,152 |           |  | $             | 95,723   |               |  | $ | 74,511  |             |         | $ | 6,672,589 |        
|                           |                                                   |                                                            |        |           |  |            |           |           |  |               |          |               |  |   |         |             |         |   |           |        





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##### Table of Contents



HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |             |   |         |             |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------- | ----------------------------------------- | - | ------------------------- | ----------- | ----------- | - | ------- | ----------- | -
|                                                     |                                                                                             |  |                                                             |                                           |   | Six Months Ended June 30,
|                                                     |                                                                                             |  |                                                             |                                           |   | 2003                      |             | 2002       
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|Operating Activities                                 |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | Net income                                                                                  |  | $                                                           | 351,620                                   |   |                           | $           | 174,970     |  
|                                                     | Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |  |                                                             |                                           |   |                           |             |             |  
|                                                     |                                                                                             |  | Deferred income taxes                                       |                                           |   |                          |             |             |   | 116,282 |            
|                                                     |                                                                                             |  | Provision for loan losses                                   |                                           |   | 65,280                    |             |             |   | 80,391  |            
|                                                     |                                                                                             |  | Depreciation and amortization                               |                                           |   | 119,607                   |             |             |   | 113,044 |            
|                                                     |                                                                                             |  | Gain (Loss) on called securities                            |                                           |   | 9,801                     |             |             |   |        |            
|                                                     |                                                                                             |  | Net accretion/amortization on securities available for sale |                                           |   | 122,749                   |             |             |   | 46,378  |            
|                                                     | Change in balances of:                                                                      |  |                                                             |                                           |   |                           |             |             |  
|                                                     |                                                                                             |  | Other assets                                                |                                           |   | 316,900                   |             |             |   | 15,881  |            
|                                                     |                                                                                             |  | Other liabilities                                           |                                           |   | (12,753                   | )           |             |   | 183,271 |            
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     |                                                                                             |  |                                                             | Net cash provided by operating activities |   |                           | 973,204     |             |   |         | 730,217     |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|Investing Activities                                 |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | Net funding of loans                                                                        |  |                                                             | (8,159,820                                | ) |                           |             | (7,978,594  | )
|                                                     | Purchase of securities                                                                      |  |                                                             | (11,272,193                               | ) |                           |             | (14,372,034 | )
|                                                     | Principal collections, maturities and calls on securities                                   |  |                                                             | 7,674,822                                 |   |                           |             | 7,331,431   |  
|                                                     | Acquisition of property and equipment                                                       |  |                                                             | (168,491                                  | ) |                           |             | (25,347     | )
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     |                                                                                             |  |                                                             | Net cash used in investing activities     |   |                           | (11,925,682 | )           |   |         | (15,044,544 | )
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|Financing Activities                                 |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | Net increase in deposits                                                                    |  |                                                             | 13,944,943                                |   |                           |             | 9,622,733   |  
|                                                     | Other borrowings                                                                            |  |                                                             | 371,369                                   |   |                           |             | 1,143,654   |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     |                                                                                             |  |                                                             | Net cash provided by financing activities |   |                           | 14,316,312  |             |   |         | 10,766,387  |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|Net increase (decrease) in cash and cash equivalents |                                                                                             |  | 3,363,834                                                   |                                           |   |                           | (3,547,940  | )          
|Cash and cash equivalents:                           |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | Beginning of year                                                                           |  |                                                             | 12,988,255                                |   |                           |             | 9,203,797   |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | End of quarter                                                                              |  | $                                                           | 16,352,089                                |   |                           | $           | 5,655,857   |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|SUPPLEMENTAL DISCLOSURE                              |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | Interest paid                                                                               |  | $                                                           | 579,230                                   |   |                           | $           | 557,934     |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            
|                                                     | Income taxes paid                                                                           |  | $                                                           | 4,500                                     |   |                           | $           |            |  
|                                                     |                                                                                             |  |                                                             |                                           |   |                           |             |            





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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
(unaudited)
Six Months Ended June 30, 2003

NOTE 1 - ORGANIZATION



| |  |  | Organization:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Heartland Bancshares, Inc. is a Florida corporation with headquarters in Sebring, Florida.
The company was formed to organize and own 100% of the capital stock of Heartland
National Bank. Heartland National Bank is a nationally chartered full service institution with
an office in Sebring, Florida, an office in Lake Placid, Florida, and an office in Avon Park,
Florida. The Bank opened for business on September 7,
1999.
The accompanying consolidated financial statements include the accounts of Heartland
Bancshares, Inc. and Heartland National Bank. All significant inter-company accounts and
balances have been eliminated.

NOTE 2 - BASIS OF PRESENTATION



| |  |  | Basis of Presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions of Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring entries) considered necessary for a fair presentation of the Companys
financial results have been made. Operating results for the six months and quarter ended
June 30, 2003, are not necessarily indicative of the results that may be expected for the year ending
December 31, 2003.

NOTE 3 - EARNINGS PER SHARE



| |  |  | Basic earnings per share have been computed using the weighted average number of shares outstanding
during the respective periods. Fully diluted earnings per share have been computed using the
weighted average number of shares used for basic earnings per share, adjusted for the dilutive
effect of stock options outstanding, assuming use of the treasury stock method. The amounts
for the respective six month periods are as follows:
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   |  |      |         |      |  |  |         | 
|-------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                                   |  | 2003 |         | 2002
|                                                   |  |      |         |     
|Weighted average shares outstanding                |  |      | 652,030 |      |  |  | 652,030 | 
|Dilutive shares from effect of outstanding options |  |      | 19,039  |      |  |  | 9,015   | 
|                                                   |  |      |         |      |  |  |         | 
|Shares used for fully diluted computations         |  |      | 671,069 |      |  |  | 661,045 | 
|                                                   |  |      |         |      |  |  |         | 

NOTE 4 - PRO FORMA EFFECT OF STOCK OPTIONS



| |  |  | As permitted by applicable accounting principles, management has elected to disclose rather
than to record the compensatory effect of stock options granted to employees and directors. The
pro forma effect has been estimated by use of the Black  Scholes option pricing model, assuming
no volatility, no dividends and average lives and exercise probability by option class. At June
30, 2003, there were options outstanding for 82,500 shares of common stock, compared to
72,500 as of June 30, 2002. No options were granted, exercised or forfeited during the six
months ended June 30, 2003 or 2002.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
(unaudited)
Six Months Ended June 30, 2003

NOTE 4 - PRO FORMA EFFECT OF STOCK OPTIONS (continued)

Had the effect of these options been recorded by Heartland Bancshares, compensation and
net income on a consolidated basis would have been as follows:

|                                              |                                            |   |                           |         |      |   |         |         | 
|--------------------------------------------- | ------------------------------------------ | - | ------------------------- | ------- | ---- | - | ------- | ------- | 
|                                              |                                            |   | Six Months Ended June 30,
|                                              |                                            |   |                          
|                                              |                                            |   | 2003                      |         | 2002
|                                              |                                            |   |                           |         |     
|Compensation, as reported                     |                                            | $ | 757,451                   |         |      | $ | 628,377 |        
|Pro forma effect of option                    |                                            |   | 32,660                    |         |      |   | 32,660  |        
|                                              |                                            |   |                           |         |      |   |         |        
|                                              | Pro forma compensation                     |   | $                         | 790,111 |      |   | $       | 661,037 | 
|                                              |                                            |   |                           |         |      |   |         |        
|Net income, as reported                       |                                            | $ | 351,620                   |         |      | $ | 174,970 |        
|Pro forma effect of options                   |                                            |   | (26,454                   | )       |      |   | (26,454 | )      
|                                              |                                            |   |                           |         |      |   |         |        
|                                              | Pro forma Net income                       |   | $                         | 325,166 |      |   | $       | 148,515 | 
|                                              |                                            |   |                           |         |      |   |         |        
|Basic earnings per share, as reported         |                                            | $ | 0.54                      |         |      | $ | 0.27    |        
|Pro forma effect of options                   |                                            |   | (0.04                     | )       |      |   | (0.04   | )      
|                                              |                                            |   |                           |         |      |   |         |        
|                                              | Pro forma basic earnings per share         |   | $                         | 0.50    |      |   | $       | 0.23    | 
|                                              |                                            |   |                           |         |      |   |         |        
|Fully diluted earnings per share, as reported |                                            | $ | 0.52                      |         |      | $ | 0.26    |        
|Pro forma effect of options                   |                                            |   | (0.04                     | )       |      |   | (0.04   | )      
|                                              |                                            |   |                           |         |      |   |         |        
|                                              | Pro forma fully diluted earnings per share |   | $                         | 0.48    |      |   | $       | 0.22    | 
|                                              |                                            |   |                           |         |      |   |         |        





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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Heartland Bancshares operations are conducted through its sole subsidiary, Heartland National Bank,
which commenced operations in September 1999.

Financial Condition

Management continuously monitors the financial condition of Heartland National Bank in order to
maintain sufficient capital to support the operations of Heartland National Bank and Heartland Bancshares and to
protect the depositors of Heartland National Bank. Significant items affecting Heartland National Banks
financial condition are discussed below.
Asset Quality

A major key to long-term earning growth is the maintenance of a high-quality loan portfolio. Heartland
National Banks directive in this regard is carried out through its policies and procedures for extending credit to
its customers. The goal of these policies and procedures is to provide a sound basis for new credit extensions
and an early recognition of problem assets to allow the most flexibility in their timely disposition.

Management has identified non-performing assets at less than .05% of total assets at June 30, 2003. Additions to the allowance
Additions to the allowance for loan losses are made periodically to maintain the allowance at an appropriate level
based upon managements analysis of potential risk in the loan portfolio. The amount of the loan loss provision
will generally be determined by an evaluation of the level of loans outstanding, the level of non-performing loans,
historical loan loss experience, delinquency trends, the amount of actual losses charged to the reserve in a
given period, and assessment of present and anticipated economic conditions.

Liquidity

Liquidity represents the ability to provide steady sources of funds for loan commitments and
investment activities, as well as to maintain sufficient funds to cover deposit withdrawals and payment of
operating obligations. Liquidity needs are met either by converting assets to cash or by attracting new
deposits. Heartland National Bank had deposits of $96.3 million at June 30, 2003. Below are the pertinent
liquidity balances and ratios at June 30, 2003 and June 30, 2002.

|                                          |  |               |            |               |  |   |            |  
|----------------------------------------- |  | ------------- | ---------- | ------------- |  | - | ---------- | -
|                                          |  | At            |            | At           
|                                          |  | June 30, 2003 |            | June 30, 2002
|                                          |  |               |            |              
|Cash and cash equivalents                 |  | $             | 16,352,089 |               |  | $ | 5,655,857  |  
|Securities available for sale             |  | $             | 13,696,030 |               |  | $ | 24,321,809 |  
|CDs over $100,000 to total deposits ratio |  |               | 11.5       | %             |  |   | 14.0       | %
|Loan to deposit ratio                     |  |               | 71.0       | %             |  |   | 63.8       | %

Cash and cash equivalents are the primary source of liquidity. At June 30, 2003, cash and cash
equivalents amounted to $16.4 million, representing 15.6% of total assets, as compared to $5.7 million, or 7.3%
of total assets at June 30, 2002. Securities available for sale provide a secondary source of liquidity.
Management believes it is likely that some U. S. Government Agency securities will be called prior to their
contractual maturity dates, thus providing additional sources of liquidity.

At June 30, 2003, large denomination certificates accounted for 11.5% of total deposits as compared
to 14.0% as of June 30, 2002. Large denominations CDs are generally more volatile than other deposits. As
a result, management continually monitors the competitiveness of the rates it pays on its large denomination CDs
and periodically adjusts its rates in accordance with market demands. Significant withdrawals of large denomination
CDs could have a material adverse effect on Heartland National Banks liquidity. Management believes that since a
majority of the above certificates were obtained from Heartland National Bank customers residing in Highlands
County, Florida, the volatility of such deposits is lower than if such deposits were obtained from depositors
residing outside of Highlands County, as outside depositors are generally considered to be more likely to be
interest rate sensitive.

Management knows of no trends, demands, commitments, events or uncertainties that should result
in or are reasonably likely to result in Heartland Bancshares liquidity increasing or decreasing in any material
way in the foreseeable future.

Capital Adequacy

There are two primary measures of capital adequacy for banks and bank holding companies:
(i) risk-based capital guidelines and (ii) the leverage ratio.

The risk-based capital guidelines measure the amount of a banks required capital in relation to the
degree of risk perceived in its assets and its off-balance sheet items. Under the risk-based capital guidelines,
capital is divided into two tiers. Tier 1 capital consists of common shareholders equity, non-cumulative
perpetual preferred stock and any related surplus and minority interest in the equity accounts of consolidated
subsidiaries. Goodwill is subtracted from the total. Tier 2 capital consists of the allowance for loan losses,
hybrid capital instruments, term subordinated debt and intermediate term preferred stock. Banks are required to
maintain a minimum risk-based capital ratio of 8.0%, with at least 4.0% consisting of Tier 1 capital.





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##### Table of Contents



The second measure of capital adequacy is the leverage ratio, which is computed by dividing Tier 1
capital by average total assets during the most recent quarter. The OCC has established a 4.0% minimum
leverage ratio requirement for all banks that are not rated CAMELS 1.

The table below illustrates Heartland National Banks and Heartland Bancshares regulatory capital
ratios at June 30, 2003 and December 31, 2002:

|                                    |  |          |      |              |  |             |      |   |  |         |     |  
|----------------------------------- |  | -------- | ---- | ------------ |  | ----------- | ---- | - |  | ------- | --- | -
|                                    |  |          |      |              |  |             |      |   |  | Minimum
|                                    |  | June 30, |      | December 31, |  | regulatory 
|                                    |  | 2003     |      | 2002         |  | requirement
|                                    |  |          |      |              |  |            
|Heartland National Bank             |  |          |      |              |  |             |      |   |  |         |     |  
|Tier 1 capital                      |  |          | 9.3  | %            |  |             | 10.1 | % |  |         | 4.0 | %
|Total risk-based capital ratio      |  |          | 10.2 | %            |  |             | 11.0 | % |  |         | 8.0 | %
|Leverage ratio                      |  |          | 6.5  | %            |  |             | 7.6  | % |  |         | 4.0 | %
|Heartland Bancshares - Consolidated |  |          |      |              |  |             |      |   |  |         |     |  
|Tier 1 capital                      |  |          | 9.1  | %            |  |             | 9.9  | % |  |         | 4.0 | %
|Total risk-based capital ratio      |  |          | 10.0 | %            |  |             | 10.8 | % |  |         | 8.0 | %
|Leverage ratio                      |  |          | 6.5  | %            |  |             | 7.5  | % |  |         | 4.0 | %

Results of Operations

Heartland Bancshares had net income of $177,841 in the second quarter of 2003, compared to
$123,670 in the second quarter of 2002. For the six months ended June 30, 2003 and 2002, Heartland Bancshares
had a net income of $351,620 and $174,970, respectively. The following is a brief discussion of the more
significant components of net income:



| | (a) |  | Net interest income represents the difference between interest received on interest
earning assets and interest paid on interest bearing liabilities. The following table
sets forth the main components of interest earning assets and interest bearing
liabilities for the six months and quarter ended June 30, 2003, as compared to the
comparable periods ended June 30, 2002.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Six Months Ended June 30,

|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|--------------------------- |  | ---------------------- | ------ | ------- |  | ------ | ------ | ---- |  | -------- | ----- | ---- |  | - | ----- |  |  |  | ---- | - |  |  | ---- | -
|                            |  |                        |        |         |  |        |        |      |  | Interest |       |      |  |   |       |  |  | 
|                            |  | Average                |        | Income/ |  | Yield/
|Interest Earning            |  | Balance                |        | Cost    |  | Cost  
|Assets/Interest             |  |                        |        |         |  |       
|Bearing Liabilities         |  | 2003                   |        | 2002    |  | 2003   |        | 2002 |  | 2003     |       | 2002
|                            |  |                        |        |         |  |        |        |      |  |          |       |     
|                            |  | (dollars in thousands)
|Federal funds sold          |  | $                      | 12,642 |         |  | $      | 6,681  |      |  | $        | 72    |      |  | $ | 57    |  |  |  | 1.14 | % |  |  | 1.71 | %
|Securities                  |  |                        | 15,297 |         |  |        | 21,075 |      |  |          | 233   |      |  |   | 524   |  |  |  | 3.05 | % |  |  | 4.97 | %
|Loans                       |  |                        | 64,731 |         |  |        | 40,308 |      |  |          | 2,155 |      |  |   | 1,486 |  |  |  | 6.66 | % |  |  | 7.37 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Total                       |  | $                      | 92,670 |         |  | $      | 68,064 |      |  |          | 2,460 |      |  |   | 2,067 |  |  |  | 5.31 | % |  |  | 6.07 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Deposits                    |  | $                      | 91,435 |         |  | $      | 66,238 |      |  |          | 568   |      |  |   | 537   |  |  |  | 1.24 | % |  |  | 1.62 | %
|Borrowings                  |  |                        | 1,350  |         |  |        | 2,043  |      |  |          | 7     |      |  |   | 9     |  |  |  | 1.04 | % |  |  | 0.88 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Total                       |  | $                      | 92,785 |         |  | $      | 68,281 |      |  |          | 575   |      |  |   | 546   |  |  |  | 1.24 | % |  |  | 1.60 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Net interest income/spread  |  |                        |        |         |  |        |        |      |  | $        | 1,885 |      |  | $ | 1,521 |  |  |  | 4.07 | % |  |  | 4.47 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Net yield on earning assets |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  | 4.07 | % |  |  | 4.47 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  





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##### Table of Contents



Three Months Ended June 30,

|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|--------------------------- |  | ---------------------- | ------ | ------- |  | ------ | ------ | ---- |  | -------- | ----- | ---- |  | - | ----- |  |  |  | ---- | - |  |  | ---- | -
|                            |  |                        |        |         |  |        |        |      |  | Interest |       |      |  |   |       |  |  | 
|                            |  | Average                |        | Income/ |  | Yield/
|Interest Earning            |  | Balance                |        | Cost    |  | Cost  
|Assets/Interest             |  |                        |        |         |  |       
|Bearing Liabilities         |  | 2003                   |        | 2002    |  | 2003   |        | 2002 |  | 2003     |       | 2002
|                            |  |                        |        |         |  |        |        |      |  |          |       |     
|                            |  | (dollars in thousands) |        |         |  |        |        |      |  |         
|Federal funds sold          |  | $                      | 14,293 |         |  | $      | 6,074  |      |  | $        | 41    |      |  | $ | 27    |  |  |  | 1.15 | % |  |  | 1.78 | %
|Securities                  |  |                        | 15,987 |         |  |        | 23,801 |      |  |          | 116   |      |  |   | 287   |  |  |  | 2.90 | % |  |  | 4.82 | %
|Loans                       |  |                        | 66,938 |         |  |        | 42,093 |      |  |          | 1,105 |      |  |   | 776   |  |  |  | 6.60 | % |  |  | 7.37 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Total                       |  | $                      | 97,218 |         |  | $      | 71,968 |      |  |          | 1,262 |      |  |   | 1,090 |  |  |  | 5.19 | % |  |  | 6.06 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Deposits                    |  | $                      | 95,063 |         |  | $      | 69,851 |      |  |          | 285   |      |  |   | 264   |  |  |  | 1.20 | % |  |  | 1.51 | %
|Borrowings                  |  |                        | 1,774  |         |  |        | 2,228  |      |  |          | 4     |      |  |   | 5     |  |  |  | 0.90 | % |  |  | 0.90 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Total                       |  | $                      | 96,837 |         |  | $      | 72,079 |      |  |          | 289   |      |  |   | 269   |  |  |  | 1.19 | % |  |  | 1.49 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Net interest income/spread  |  |                        |        |         |  |        |        |      |  | $        | 973   |      |  | $ | 821   |  |  |  | 4.00 | % |  |  | 4.57 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  
|Net yield on earning assets |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  | 4.00 | % |  |  | 4.56 | %
|                            |  |                        |        |         |  |        |        |      |  |          |       |      |  |   |       |  |  |  |      |   |  |  |      |  



| | (b) |  | At December 31, 2002, the allowance for loan losses amounted to $606,971. During
the six months ended June 30, 2003, an additional $65,280 was provided to the allowance
for loan losses. Net charge-offs during the first six months of 2003 amounted to $11,307,
bringing the balance to $660,944 as compared to $469,558 at June 30, 2002. There
have been net charge-offs of $30,437 since the opening of Heartland National Bank. As
of June 30, 2003, management considers the allowance for loan losses to be adequate
to absorb expected future losses. However, there can be no assurance that charge-offs
in future periods will not exceed the allowance for loan losses or that additional provisions
will not be required.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | Non-interest income, which consists primarily of service fees on deposit accounts and other
miscellaneous fees, amounted to $218,200, or 0.44% of average assets, for the six months
ended June 30, 2003 and $108,120, or 0.42% of average assets, for the quarter ended
June 30, 2003, as compared to $139,913 and $75,756 respectively for the six months and
the quarter ended June 30, 2002. The primary reason for the increase in non-interest
income was the growth of deposits, resulting in increased deposit service fees and an
increase in real estate loan servicing fee income.                                                                                                                                          
|
| | (d) |  | Non-interest expense for the six months and quarter ended June 30, 2003 amounted to
$1,451,598 and $758,972, respectively, as compared to $1,288,705 and $644,247 for
the same periods in 2002. The components of non-interest expense for the six months
and quarter ended June 30, 2003 and June 30, 2002 are set forth below:                                                                                                                                                                                                                                                                                                                                                                                                       

|                           |  |                  |           |                  |  |           |           |  |  |   |         |  
|-------------------------- |  | ---------------- | --------- | ---------------- |  | --------- | --------- |  |  | - | ------- | -
|                           |  | Six Months Ended |           | Six Months Ended |  | Increase/
|                           |  | June 30, 2003    |           | June 30, 2002    |  | Decrease 
|                           |  |                  |           |                  |  |          
|Salaries and benefits      |  | $                | 757,451   |                  |  | $         | 628,377   |  |  | $ | 129,074 |  
|Occupancy expenses         |  |                  | 107,502   |                  |  |           | 95,436    |  |  |   | 12,066  |  
|Equipment expenses         |  |                  | 107,110   |                  |  |           | 125,079   |  |  |   | (17,969 | )
|General operating expenses |  |                  | 479,535   |                  |  |           | 439,813   |  |  |   | 39,722  |  
|                           |  |                  |           |                  |  |           |           |  |  |   |         |  
|Total non-interest expense |  | $                | 1,451,598 |                  |  | $         | 1,288,705 |  |  | $ | 162,893 |  
|                           |  |                  |           |                  |  |           |           |  |  |   |         |  

|                           |  |               |         |               |  |           |         |  |  |   |         |  
|-------------------------- |  | ------------- | ------- | ------------- |  | --------- | ------- |  |  | - | ------- | -
|                           |  | Quarter Ended |         | Quarter Ended |  | Increase/
|                           |  | June 30, 2003 |         | June 30, 2002 |  | Decrease 
|                           |  |               |         |               |  |          
|Salaries and benefits      |  | $             | 379,723 |               |  | $         | 314,523 |  |  | $ | 65,200  |  
|Occupancy expenses         |  |               | 58,198  |               |  |           | 47,153  |  |  |   | 11,045  |  
|Equipment expenses         |  |               | 56,302  |               |  |           | 71,081  |  |  |   | (14,779 | )
|General operating expenses |  |               | 264,749 |               |  |           | 211,490 |  |  |   | 53,259  |  
|                           |  |               |         |               |  |           |         |  |  |   |         |  
|Total non-interest expense |  | $             | 758,972 |               |  | $         | 644,247 |  |  | $ | 114,725 |  
|                           |  |               |         |               |  |           |         |  |  |   |         |  



|Increases in operating expenses for the six months ended June 30, 2003 as compared to June
30, 2002 can be largely attributed to increases in staffing requirements.                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                               
|Heartland Bancshares is not aware of any current recommendation by any regulatory authority
which, if implemented, would have a material effect on Heartland Bancshares liquidity, capital
resources or results of operations.

Cautionary Note Regarding Forward-Looking Statements

Heartland Bancshares may, from time to time, make written or oral forward-looking statements,
including statements included in Heartland Bancshares filings with the Securities and Exchange Commission
and its reports to stockholders. Such forward-looking statements are made based on managements pursuant
belief as well as assumptions made by, and information currently available to, management pursuant to





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safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Heartland Bancshares
actual results may differ materially from the results anticipated in these forward-looking statements due to
a variety of factors, including governmental monetary and fiscal policies, deposit levels, loan demand, loan
collateral values, securities portfolio values and interest rate risk management; the effects of competition in
the banking business from other commercial banks, savings and loan associations, mortgage banking firms,
consumer finance companies, credit unions, securities brokerage firms, insurance companies, money
market mutual funds and other financial institutions operating in Heartland Bancshares market area and
elsewhere, including institutions operating through the Internet; changes in government regulations
relating to the banking industry, including regulations relating to branching and acquisitions; failure of
assumptions underlying the establishment of reserves for loan losses, including the value of collateral
underlying delinquent loans, and other factors. Heartland Bancshares cautions that such factors are not
exclusive. Heartland Bancshares does not undertake to update any forward-looking statements that may
be made from time to time by, or on behalf of, Heartland Bancshares.




Item 3.    Controls and Procedures

Heartland Bancshares Chief Executive Officer and Chief Financial Officer have evaluated
Heartland Bancshares disclosure controls and procedures as of a date within 90 days prior to the date of
this filing, and they concluded that these controls and procedures are effective. There have been no
significant changes in internal controls or in other factors that could significantly affect these controls
subsequent to the date of this evaluation.

Disclosure controls and procedures are Heartland Bancshares controls and other procedures
that are designed to ensure that information it is required to disclose in the reports it files under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures
included, without limitation, controls and procedures designed to ensure that information Heartland
Bancshares is required to disclose in the reports that it files under the Exchange Act is accumulated
and communicated to management, including the principal executive and
financial officers, as
appropriate, to allow timely decisions regarding required disclosure.




PART II. OTHER INFORMATION




Item 4.    Submission of Matters to a Vote of Security Holders

The 2003 Annual Meeting of Shareholders of Heartland Bancshares was held on April 17,
2003. The following table sets forth the name of each individual elected at the 2003 Annual Meeting and
the results of voting with respect to each director:

|                        |  |       |  |           |         |               |  |  |   |  |  | 
|----------------------- |  | ----- |  | --------- | ------- | ------------- |  |  | - |  |  | 
|Director                |  | Class |  | Votes For |         | Votes Against
|                        |  |       |  |           |         |              
|Issac G. Nagib          |  | II    |  |           | 483,987 |               |  |  | 0 | 
|Robert P. Palmer        |  | II    |  |           | 483,987 |               |  |  | 0 | 
|S. Allen Skipper        |  | II    |  |           | 483,987 |               |  |  | 0 | 
|Malcolm C. Watters, Jr. |  | II    |  |           | 483,987 |               |  |  | 0 | 

The term of each of the following directors of Heartland Bancshares continued after the 2003
Annual Meeting: James B. Belflower, James C. Clinard, Roger D. Gurganus, William R. Handley, Bert J.
Harris III, Edward L. Smoak, Lawrence B. Wells, and Stanley H. Wells. No other matters were submitted
to a vote of the shareholders at the 2003 Annual Meeting.




Item 6.    Exhibits and Reports on Form 8-K

(a) Exhibits. The following exhibits are filed with this report:

| |  |             |      |             |  |                                                                                                                       
| |  | ----------- | ---- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------
| |  | Exhibit No. |      | Description
| |  |             | 31.1 |             |  | Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act                            
| |  |             |      |             |  |                                                                                                                       
| |  |             | 31.2 |             |  | Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act                            
| |  |             |      |             |  |                                                                                                                       
| |  |             | 32   |             |  | Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act

(b) Reports on Form 8-K. No report on Form 8-K was filed during the quarter ended June 30, 2003.





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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                      |  |                            |  |                                             
|--------------------- |  | -------------------------- |  | --------------------------------------------
|                      |  | HEARTLAND BANCSHARES, INC.
|                      |  |                            |  |                                             
|Date: August 14, 2003 |  | By:                        |  | /s/ James C. Clinard                        
|                      |  |                            |  |                                             
|                      |  |                            |  | James C. Clinard                            
|                      |  |                            |  | President and Chief Executive Officer       
|                      |  |                            |  | (principal executive officer)               
|                      |  |                            |  |                                             
|Date: August 14, 2003 |  | By:                        |  | /s/ Martha J. Kelley                        
|                      |  |                            |  |                                             
|                      |  |                            |  | Martha J. Kelley                            
|                      |  |                            |  | Chief Financial Officer                     
|                      |  |                            |  | (principal financial and accounting officer)





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EXHIBIT INDEX

|             |  |                                                                                                               |  |  |  | 
|------------ |  | ------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit No.  |  | Description of Exhibit                                                                                        |  |  |  | 
|             |  |                                                                                                               |  |  |  | 
|Exhibit 31.1 |  | Certification of President and Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
|             |  |                                                                                                              
|Exhibit 31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.              
|             |  |                                                                                                              
|Exhibit 32.1 |  | Certification Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.