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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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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: 333-67107
|-------------------------- |  | ---------------------------------
|September 30, 2003         |  |                                  



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HEARTLAND BANCSHARES, INC.

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



|Florida                                     |  | 65-0854929         
|------------------------------------------- |  | -------------------
|(State or other jurisdiction of             |  | (I.R.S. Employer   
|incorporation or organization)              |  | 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:



|Class: Common Stock, $0.10 par value |  | Outstanding as of October 27, 2003: 657,030
|------------------------------------ |  | -------------------------------------------



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PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



HEARTLAND BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)



|                                                                                                                           |  | September 30,2003 |             |   | December 31,2002 |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | -
|ASSETS                                                                                                                     |  |                   |             |   |                  |  
|                                                                                                                           |  |                  
|Cash and due from banks                                                                                                    |  | $                 | 4,802,942   |   |                  | $
|Federal funds sold                                                                                                         |  |                   | 6,421,006   |   |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|Total cash and cash equivalents                                                                                            |  |                   | 11,223,948  |   |                  |  
|Securities available for sale                                                                                              |  |                   | 9,177,157   |   |                  |  
|Securities held to maturity                                                                                                |  |                   | 7,014,730   |   |                  |  
|Loans:                                                                                                                     |  |                   |             |   |                  |  
|Commercial, financial and agricultural                                                                                     |  |                   | 18,119,259  |   |                  |  
|Real estatemortgage                                                                                                       |  |                   | 37,901,340  |   |                  |  
|Installment and consumer loans                                                                                             |  |                   | 19,083,280  |   |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|Total loans                                                                                                                |  |                   | 75,103,879  |   |                  |  
|Less: Allowance for loan losses                                                                                            |  |                   | (705,554    | ) |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|Net loans                                                                                                                  |  |                   | 74,398,325  |   |                  |  
|Property and equipment                                                                                                     |  |                   | 2,767,699   |   |                  |  
|Other assets                                                                                                               |  |                   | 974,126     |   |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|TOTAL ASSETS                                                                                                               |  | $                 | 105,555,985 |   |                  | $
|                                                                                                                           |  |                   |             |   |                  |  
|                                                                                                                           |  |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                       |  |                   |             |   |                  |  
|                                                                                                                           |  |                  
|Liabilities                                                                                                                |  |                   |             |   |                  |  
|Deposits:                                                                                                                  |  |                   |             |   |                  |  
|Non-interest bearing demand                                                                                                |  | $                 | 19,357,467  |   |                  | $
|Savings, NOW, and money market                                                                                             |  |                   | 48,266,544  |   |                  |  
|Time deposits under $100,000                                                                                               |  |                   | 19,219,549  |   |                  |  
|Time deposits over $100,000                                                                                                |  |                   | 10,447,493  |   |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|Total deposits                                                                                                             |  |                   | 97,291,053  |   |                  |  
|Securities sold under repurchase agreements                                                                                |  |                   | 627,148     |   |                  |  
|Other borrowings                                                                                                           |  |                   | 225,000     |   |                  |  
|Other liabilities                                                                                                          |  |                   | 605,701     |   |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|Total liabilities                                                                                                          |  |                   | 98,748,902  |   |                  |  
|                                                                                                                           |  |                  
|Shareholders Equity                                                                                                       |  |                   |             |   |                  |  
|Common stock, $.10 par value, 10,000,000 shares authorized, 657,030 and 652,030 shares respectively issued and
outstanding |  |                   | 65,703      |   |                  |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued or outstanding                              |  |                   |            |   |                  |  
|Additional paid-in capital                                                                                                 |  |                   | 6,486,652   |   |                  |  
|Retained earnings (deficit)                                                                                                |  |                   | 302,339     |   |                  |  
|Accumulated other comprehensive income (loss)                                                                              |  |                   | (47,611     | ) |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|Total shareholders equity                                                                                                 |  |                   | 6,807,083   |   |                  |  
|                                                                                                                           |  |                   |             |   |                  |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                 |  | $                 | 105,555,985 |   |                  | $
|                                                                                                                           |  |                   |             |   |                  |  



2



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HEARTLAND BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(unaudited)



|                                                    |  | Quarter Ended September 30,
|--------------------------------------------------- |  | ---------------------------
|                                                    |  | 2003                       
|Interest Income                                     |  |                            
|Interest and fees on loans                          |  | $                          
|Interest on federal funds sold                      |  |                            
|Interest on securities                              |  |                            
|                                                    |  |                            
|Total interest income                               |  |                            
|                                                    |  |                            
|Interest Expense                                    |  |                            
|Interest on deposits                                |  |                            
|Interest on borrowings                              |  |                            
|                                                    |  |                            
|Total interest expense                              |  |                            
|                                                    |  |                            
|Net interest income                                 |  |                            
|Provision for loan losses                           |  |                            
|                                                    |  |                            
|Net interest income after provision for loan losses |  |                            
|                                                    |  |                            
|Noninterest Income                                  |  |                            
|Service charges and fees                            |  |                            
|Gain (loss) on securities sales/calls               |  |                            
|Other income                                        |  |                            
|                                                    |  |                            
|Total noninterest income                            |  |                            
|                                                    |  |                            
|Noninterest Expense                                 |  |                            
|Salaries and employee benefits                      |  |                            
|Occupancy expenses                                  |  |                            
|Furniture and equipment expenses                    |  |                            
|Other operating expenses                            |  |                            
|                                                    |  |                            
|Total noninterest expense                           |  |                            
|                                                    |  |                            
|                                                    |  |                            
|Income before income taxes                          |  |                            
|                                                    |  |                            
|Income taxes                                        |  |                            
|                                                    |  |                            
|                                                    |  |                            
|Net Income                                          |  | $                          
|                                                    |  |                            
|                                                    |  |                            
|Basic Net Income Per Share                          |  | $                          
|                                                    |  |                            
|Fully Diluted Net Income Per Share                  |  | $                          
|                                                    |  |                            



3



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HEARTLAND BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(unaudited)



|                                                    |  | Nine Months Ended September 30,
|--------------------------------------------------- |  | -------------------------------
|                                                    |  | 2003                           
|Interest income                                     |  |                                
|Interest and fees on loans                          |  | $                              
|Interest on federal funds sold                      |  |                                
|Interest on securities                              |  |                                
|                                                    |  |                                
|Total interest income                               |  |                                
|                                                    |  |                                
|Interest expense                                    |  |                                
|Interest on deposits                                |  |                                
|Interest on borrowings                              |  |                                
|                                                    |  |                                
|Total interest expense                              |  |                                
|                                                    |  |                                
|                                                    |  |                                
|Net interest income                                 |  |                                
|Provision for loan losses                           |  |                                
|                                                    |  |                                
|Net interest income after provision for loan losses |  |                                
|                                                    |  |                                
|Noninterest income                                  |  |                                
|Service charges and fees                            |  |                                
|Gain (loss) on securities sales/calls               |  |                                
|Other income                                        |  |                                
|                                                    |  |                                
|Total noninterest income                            |  |                                
|                                                    |  |                                
|NON INTEREST EXPENSE                                |  |                                
|Salaries and employee benefits                      |  |                                
|Occupancy expenses                                  |  |                                
|Furniture and equipment expenses                    |  |                                
|Other operating expenses                            |  |                                
|                                                    |  |                                
|Total noninterest expense                           |  |                                
|                                                    |  |                                
|                                                    |  |                                
|Income before income taxes                          |  |                                
|                                                    |  |                                
|Income taxes                                        |  |                                
|                                                    |  |                                
|                                                    |  |                                
|Net Income                                          |  | $                              
|                                                    |  |                                
|                                                    |  |                                
|Basic Net Income Per Share                          |  | $                              
|                                                    |  |                                
|Fully Diluted Net Income Per Share                  |  | $                              
|                                                    |  |                                



4



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HEARTLAND BANCSHARES, INC.

STATEMENT OF SHAREHOLDERS EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2003
AND 2002

(unaudited)



|                                                           |  |           |        |            |   |           |  |   | Accumulated   |   |  |               |         
|---------------------------------------------------------- |  | --------- | ------ | ---------- | - | --------- |  | - | ------------- | - |  | ------------- | --------
|                                                           |  | Common    |        | Additional |   | Retained  |  |   | Other         |   |  | Total         |         
|                                                           |  | Stock Par |        | Paid-in    |   | Earnings  |  |   | Comprehensive |   |  | Shareholders |         
|                                                           |  | Value     |        | Capital    |   | (Deficit) |  |   | Income (Loss) |   |  | Equity        |         
|                                                           |  |           |        |            |  
|BALANCE, December 31, 2001                                 |  | $         | 65,203 |            | $ | 6,437,152 |  | $ | (690,289      | ) |  | $             | 64,939  
|                                                           |  |           |        |            |  
|Comprehensive Income:                                      |  |           |        |            |   |           |  |   |               |   |  |               |         
|                                                           |  |           |        |            |  
|Net income for the nine months ended September 30, 2002    |  |           |        |            |   |           |  |   | 279,479       |   |  |               |         
|Other comprehensive income:                                |  |           |        |            |   |           |  |   |               |   |  |               |         
|Change in unrealized gain on securities available for sale |  |           |        |            |   |           |  |   |               |   |  |               | 139,931 
|                                                           |  |           |        |            |   |           |  |   |               |   |  |               |         
|Total comprehensive income (loss)                          |  |           |        |            |   |           |  |   |               |   |  |               |         
|                                                           |  |           |        |            |   |           |  |   |               |   |  |               |         
|                                                           |  |           |        |            |  
|BALANCE, September 30, 2002                                |  | $         | 65,203 |            | $ | 6,437,152 |  | $ | (410,810      | ) |  | $             | 204,870 
|                                                           |  |           |        |            |   |           |  |   |               |   |  |               |         
|                                                           |  |           |        |            |  
|BALANCE, December 31, 2002                                 |  | $         | 65,203 |            | $ | 6,437,152 |  | $ | (255,897      | ) |  | $             | 140,655 
|                                                           |  |           |        |            |  
|Stock Options Exercised                                    |  |           | 500    |            |   | 49,500    |  |   |               |   |  |               |         
|                                                           |  |           |        |            |  
|Comprehensive Income:                                      |  |           |        |            |   |           |  |   |               |   |  |               |         
|Net income for the nine months ended September 30, 2003    |  |           |        |            |   |           |  |   | 558,236       |   |  |               |         
|Other comprehensive income:                                |  |           |        |            |   |           |  |   |               |   |  |               |         
|Change in unrealized gain on securities available for sale |  |           |        |            |   |           |  |   |               |   |  |               | (188,266
|                                                           |  |           |        |            |   |           |  |   |               |   |  |               |         
|Total comprehensive income                                 |  |           |        |            |   |           |  |   |               |   |  |               |         
|                                                           |  |           |        |            |   |           |  |   |               |   |  |               |         
|                                                           |  |           |        |            |  
|BALANCE, September 30, 2003                                |  | $         | 65,703 |            | $ | 6,486,652 |  | $ | 302,339       |   |  | $             | (47,611 
|                                                           |  |           |        |            |   |           |  |   |               |   |  |               |         



5



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HEARTLAND BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unauditd)



|                                                                                            |  | Nine Months Ended September 30, |            
|------------------------------------------------------------------------------------------- |  | ------------------------------- | -----------
|                                                                                            |  | 2003                            |            
|Operating Activities                                                                        |  |                                 |            
|Net income                                                                                  |  | $                               | 558,236    
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                                 |            
|Deferred income taxes                                                                       |  |                                 | (26,810    
|Provision for loan losses                                                                   |  |                                 | 113,312    
|Depreciation and amortization                                                               |  |                                 | 181,737    
|Gain (Loss) on called securities                                                            |  |                                 | 2,772      
|Net accretion/amortization on securities available for sale                                 |  |                                 | 181,954    
|Change in balances of:                                                                      |  |                                 |            
|Other assets                                                                                |  |                                 | (457,926   
|Other liabilities                                                                           |  |                                 | (219,932   
|                                                                                            |  |                                 |            
|Net cash provided by (used in) operating activities                                         |  |                                 | 333,343    
|                                                                                            |  |                                 |            
|Investing Activities                                                                        |  |                                 |            
|Net funding of loans                                                                        |  |                                 | (14,856,018
|Purchase of securities                                                                      |  |                                 | (14,199,293
|Principal collections, maturities and calls on securities available for sale                |  |                                 | 11,953,523 
|Acquisition of property and equipment                                                       |  |                                 | (195,456   
|                                                                                            |  |                                 |            
|Net cash used in investing activities                                                       |  |                                 | (17,297,244
|                                                                                            |  |                                 |            
|Financing Activities                                                                        |  |                                 |            
|Net increase in deposits                                                                    |  |                                 | 14,944,225 
|Other borrowings                                                                            |  |                                 | 205,369    
|Sale of stock under stock options                                                           |  |                                 | 50,000     
|                                                                                            |  |                                 |            
|Net cash provided by financing activities                                                   |  |                                 | 15,199,594 
|                                                                                            |  |                                 |            
|                                                                                            |  |                                
|Net decrease in cash and cash equivalents                                                   |  |                                 | (1,764,307 
|                                                                                            |  |                                
|Cash and cash equivalents:                                                                  |  |                                 |            
|Beginning of year                                                                           |  |                                 | 12,988,255 
|                                                                                            |  |                                 |            
|End of quarter                                                                              |  | $                               | 11,223,948 
|                                                                                            |  |                                 |            
|                                                                                            |  |                                
|SUPPLEMENTAL DISCLOSURE                                                                     |  |                                 |            
|                                                                                            |  |                                
|Interest paid                                                                               |  | $                               | 843,276    
|                                                                                            |  |                                 |            
|                                                                                            |  |                                
|Income taxes paid                                                                           |  | $                               | 5,500      
|                                                                                            |  |                                 |            



6



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NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Nine Months Ended September 30, 2003



NOTE 1  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 Florida offices in Sebring, Lake Placid, and Avon
Park. 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



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 events) considered necessary for a fair presentation of the Companys financial results have been made. Operating results for the nine months and quarter ended September 30, 2003, may not be
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 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 nine months
and quarterly periods are as follows:



|                                                   |  | 2003    |  | 2002   
|-------------------------------------------------- |  | ------- |  | -------
|                                                   |  | YTD     |  | Quarter
|Weighted average shares outstanding                |  | 652,414 |  | 653,171
|Dilutive shares from effect of outstanding options |  | 20,093  |  | 20,093 
|                                                   |  |         |  |        
|Shares used for fully diluted computations         |  | 672,507 |  | 673,264
|                                                   |  |         |  |        



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 September 30, 2003, there were options outstanding for 77,500 shares of common stock, compared to 72,500 as of September 30, 2002. No
options were granted or forfeited during the nine months ended September 30, 2003 or 2002. Options totaling 5,000 shares were exercised



7



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during the nine months ended September 30, 2003. No options were exercised during the nine months ended
September 30, 2002.



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



|                                               |  | Nine Months EndedSeptember 30, |          
|---------------------------------------------- |  | ------------------------------ | ---------
|                                               |  | 2003                           |          
|Compensation, as reported                      |  | $                              | 1,167,879
|Pro forma effect of options                    |  |                                | 48,990   
|                                               |  |                                |          
|Pro forma compensation                         |  | $                              | 1,216,869
|                                               |  |                                |          
|                                               |  |                               
|Net income, as reported                        |  | $                              | 558,236  
|Pro forma effect of options                    |  |                                | (39,731  
|                                               |  |                                |          
|Pro forma net income                           |  | $                              | 518,505  
|                                               |  |                                |          
|                                               |  |                               
|Basic earnings per share, as reported          |  | $                              | 0.86     
|Pro forma effect of options                    |  |                                | (0.06    
|                                               |  |                                |          
|Pro forma basic earnings per share             |  | $                              | 0.80     
|                                               |  |                                |          
|                                               |  |                               
|Fully diluted earnings per share, are reported |  | $                              | 0.83     
|Pro forma effect of options                    |  |                                | (0.06    
|                                               |  |                                |          
|Pro forma fully diluted earnings per share     |  | $                              | 0.77     
|                                               |  |                                |          



8



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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 Heartland National Banks 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 0.05% of total assets. 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 may be met either by converting assets to cash or by attracting new deposits. Heartland National Bank had deposits of $97.3 million at September 30, 2003. Below
are the pertinent liquidity balances and ratios at September 30, 2003 and September 30, 2002.



|                                          |  | AtSeptember 30,2003 |            |   | AtSeptember 30,2002 |  
|----------------------------------------- |  | ------------------- | ---------- | - | ------------------- | -
|Cash and cash equivalents                 |  | $                   | 11,223,948 |   |                     | $
|Securities available for sale             |  |                     | 9,177,157  |   |                     |  
|CDs over $100,000 to total deposits ratio |  |                     | 10.7       | % |                     |  
|Loan to deposit ratio                     |  |                     | 77.2       | % |                     |  



Cash and cash
equivalents are the primary source of liquidity. At September 30, 2003, cash and cash equivalents amounted to $11.2 million, representing 10.6% of total assets, as compared to $5.7 million, or 7.1% of total assets at September 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 September 30, 2003, large denomination certificates
accounted for 10.7% of total deposits as compared to 13.5% as of September 30, 2002. Large denomination CDs are generally more volatile



9



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than other deposits. As a result, management continually monitors the competitiveness of the rates its 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 results 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 account 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.



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 CAMELS1.



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



|                                    |  | September 30,2003 |   |  | December 31,2002 |   |  | Minimumregulatoryrequirement |  
|----------------------------------- |  | ----------------- | - |  | ---------------- | - |  | ---------------------------- | -
|Heartland National Bank             |  |                   |   |  |                  |   |  |                              |  
|Tier 1 capital                      |  | 8.4               | % |  | 10.1             | % |  | 4.0                          | %
|Total risk-based capital ratio      |  | 9.3               | % |  | 11.0             | % |  | 8.0                          | %
|Leverage ratio                      |  | 6.7               | % |  | 7.6              | % |  | 4.0                          | %
|                                    |  |                   |  
|Heartland Bancshares  Consolidated |  |                   |   |  |                  |   |  |                              |  
|Tier 1 capital                      |  | 6.5               | % |  | 9.9              | % |  | 4.0                          | %
|Total risk-based capital ratio      |  | 9.1               | % |  | 10.8             | % |  | 8.0                          | %
|Leverage ratio                      |  | 7.2               | % |  | 7.5              | % |  | 4.0                          | %



10



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Off-Balance Sheet Arrangements



Heartland Bank does not have any material off-balance sheet arrangements
other than customary commitments to make advances under loans.



Results of Operations



Heartland Bancshares had
net income of $206,616 in the third quarter of 2003, compared to $103,679 in the third quarter of 2002. For the nine months ended September 30, 2003 and 2002, Heartland Bancshares had net income of $558,236 and $279,479, 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 nine months and quarter ended September 30, 2003, as compared to the comparable periods ended September 30, 2002.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Nine Months Ended September 30,



|                                                   |      | Interest               |        |             |      |            |      |  
|-------------------------------------------------- | ---- | ---------------------- | ------ | ----------- | ---- | ---------- | ---- | -
|Interest EarningAssets/InterestBearing Liabilities |      | Average Balance        |        | Income/Cost |      | Yield/Cost |     
|                                                   | 2003 |                        | 2002   |             | 2003 |            | 2002 |  
|                                                   |      | (dollars in thousands) |        |             |      |            |      |  
|Federal Funds Sold                                 |      | $                      | 11,202 |             | $    | 5,402      |      | $
|Securities                                         |      |                        | 16,075 |             |      | 21,507     |      |  
|Loans                                              |      |                        | 66,992 |             |      | 42,503     |      |  
|                                                   |      |                        |        |             |      |            |      |  
|Total                                              |      | $                      | 94,269 |             | $    | 69,412     |      | $
|                                                   |      |                        |        |             |      |            |      |  
|Deposits                                           |      | $                      | 93,157 |             | $    | 67,692     |      | $
|Borrowings                                         |      |                        | 1,146  |             |      | 1,624      |      |  
|                                                   |      |                        |        |             |      |            |      |  
|Total                                              |      | $                      | 94,303 |             | $    | 69,316     |      | $
|                                                   |      |                        |        |             |      |            |      |  
|Net interest income/spread                         |      |                        |        |             |      |            |      | $
|                                                   |      |                        |        |             |      |            |      |  
|Net yield on earning assets                        |      |                        |        |             |      |            |      |  
|                                                   |      |                        |        |             |      |            |      |  



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Three Months Ended September 30,



|Interest Earning Assets/Interest Bearing Liabilities |      | Average Balance        |        | Interest Income/Cost |      | Yield/Cost |     
|---------------------------------------------------- | ---- | ---------------------- | ------ | -------------------- | ---- | ---------- | ----
|                                                     | 2003 |                        | 2002   |                      | 2003 |            | 2002
|                                                     |      | (dollars in thousands) |        |                      |      |            |     
|Federal Funds Sold                                   |      | $                      | 8,370  |                      | $    | 2,728      |     
|Securities                                           |      |                        | 17,606 |                      |      | 22,358     |     
|Loans                                                |      |                        | 71,442 |                      |      | 46,821     |     
|                                                     |      |                        |        |                      |      |            |     
|Total                                                |      | $                      | 97,418 |                      | $    | 71,907     |     
|                                                     |      |                        |        |                      |      |            |     
|Deposits                                             |      | $                      | 96,580 |                      | $    | 70,552     |     
|Borrowings                                           |      |                        | 969    |                      |      | 950        |     
|                                                     |      |                        |        |                      |      |            |     
|Total                                                |      | $                      | 97,549 |                      | $    | 71,502     |     
|                                                     |      |                        |        |                      |      |            |     
|Net interest income/spread                           |      |                        |        |                      |      |            |     
|                                                     |      |                        |        |                      |      |            |     
|Net yield on earning assets                          |      |                        |        |                      |      |            |     
|                                                     |      |                        |        |                      |      |            |     



|(b) | At December 31, 2002, the allowance for loan losses amounted to $606,971. During the nine months ended September 30, 2003, an additional $113,312 was provided to the allowance for
loan losses. Net charge-offs during the first nine months of 2003 amounted to $14,729, bringing the balance to $705,554 as compared to $606,971 at September 30, 2002. As of September 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 $407,443, or 0.54% of average assets, for the nine months
ended September 30, 2003 and $189,242, or 0.72% of average assets, for the quarter ended September 30, 2003, as compared to $240,414 and $100,501, respectively, for the nine months and quarter ended September 30, 2002. The primary reasons for the
increase in non-interest income were 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 nine months and quarter ended September 30, 2003 amounted to $2,274,007 and $822,408, respectively, as compared to $1,980,929 and $692,225 for the same
periods in 2002. The components of non-interest expense for the nine months and quarter ended September 30, 2003 and September 30, 2002 are set forth below:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                           |  | Nine MonthsEndedSeptember 30,2003 |           | Nine MonthsEndedSeptember 30,2002 |   | Increase/Decrease | 
|-------------------------- |  | --------------------------------- | --------- | --------------------------------- | - | ----------------- | 
|Salaries and benefits      |  | $                                 | 1,167,879 |                                   | $ | 956,591           | 
|Occupancy expenses         |  |                                   | 162,244   |                                   |   | 142,385           | 
|Equipment expenses         |  |                                   | 168,010   |                                   |   | 189,506           | 
|General operating expenses |  |                                   | 775,874   |                                   |   | 692,447           | 
|                           |  |                                   |           |                                   |   |                   | 
|Total non-interest expense |  | $                                 | 2,274,007 |                                   | $ | 1,980,929         | 
|                           |  |                                   |           |                                   |   |                   | 
|                           |  |                                   |          
|                           |  | QuarterEndedSeptember 30,2003     |           | QuarterEndedSeptember 30,2002     |   | Increase/Decrease | 
|Salaries and benefits      |  | $                                 | 410,428   |                                   | $ | 328,214           | 
|Occupancy expenses         |  |                                   | 54,742    |                                   |   | 53,151            | 
|Equipment expenses         |  |                                   | 60,900    |                                   |   | 56,303            | 
|General operating expenses |  |                                   | 296,339   |                                   |   | 254,557           | 
|                           |  |                                   |           |                                   |   |                   | 
|Total non-interest expense |  | $                                 | 822,409   |                                   | $ | 692,225           | 
|                           |  |                                   |           |                                   |   |                   | 



Increases in operating
expenses for the nine months ended September 30, 2003 as compared to the same period in 2002 can be largely attributed to increases in staffing requirements, adoption of the payment of directors fees, advertising, supplies, and correspondent
bank charges, as well as increased charges related to item processing and ATM transactions. Increases in equipment expense can be largely attributed to increased personal property taxes on additional equipment and the addition of another bank-owned
automobile to be depreciated.



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 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.



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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 6. Exhibits and Reports on Form 8-K



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



| |  | Exhibit No. |  | Description                                                                                                           
| |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------
| |  | 31.1        |  | Certification by President & Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act                
| |  |            
| |  | 31.2        |  | Certification by 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. Heartland Bancshares did not file a current report on Form 8-K during the quarter ended September 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.



|Date: November 13, 2003 |  | HEARTLAND BANCSHARES, INC.   By: /s/ James C.
ClinardJames C. Clinard President and Chief Executive
Officer (principal executive officer)
|----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------



|Date: November 13, 2003 |  | By: /s/ Martha J. KelleyMartha J. Kelley Chief Financial Officer (principal financial and
accounting officer)
|----------------------- |  | -------------------------------------------------------------------------------------------------------------



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