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CST: 21/10/2019 23:56:41   

Heartland Financial USA, Inc. Announces Record 2018 Annual Net Income and Solid Fourth Quarter Results

266 Days ago

Highlights

  • Quarterly net income available to common stockholders of $32.1 million, an increase of $18.5 million or 135% from the fourth quarter of 2017
  • Annual net income available to common stockholders of $117.0 million, an increase of $41.7 million or 55% from 2017  
  • Diluted earnings per common share of $0.93 for the quarter, an increase of $0.48 per share or 107% from the fourth quarter of 2017  
  • Diluted earnings per common share of $3.52 for the year, an increase of $0.87 per share or 33% from 2017  
  • Return on average common equity of 9.88% for the quarter and 9.93% for the year  
  • Return on average tangible common equity (non-GAAP)(1) of 15.00% for the quarter and 14.79% for the year 
  • Efficiency ratio, fully tax-equivalent (non-GAAP)(2) of 59.37% for the quarter and 63.54% for the year   
  • Declared and paid a special dividend of $0.05 per common share in December 2018  
  • Announced agreement to acquire Blue Valley Ban Corp. on January 16, 2019
  Quarter Ended
December 31,
  Year Ended
December 31,
  2018   2017   2018   2017
Net income available to common stockholders (in millions) $ 32.1     $ 13.7     $ 117.0     $ 75.2  
Diluted earnings per common share 0.93     0.45     3.52     2.65  
               
Return on average assets 1.12 %   0.55 %   1.09 %   0.83 %
Return on average common equity 9.88     5.50     9.93     8.63  
Return on average tangible common equity (non-GAAP)(1) 15.00     7.60     14.79     11.45  
Net interest margin 4.28     4.14     4.26     4.04  
Net interest margin, fully tax-equivalent (non-GAAP)(3) 4.34     4.30     4.32     4.22  
Efficiency ratio, fully tax-equivalent (non-GAAP)(2) 59.37     62.26     63.54     65.40  


"Heartland had record earnings again in 2018. Net income available to common stockholders was $117.0 million, a 55 percent increase over 2017, and diluted earnings per common share increased 33 percent. "
Lynn B. Fuller, executive operating chairman, Heartland Financial USA, Inc.

(1) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table included in this earnings release.
(2) Refer to the "Reconciliation of Non-GAAP measure-Efficiency Ratio" table included in this earnings release.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table included in this earnings release.

DUBUQUE, Iowa, Jan. 28, 2019 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $32.1 million for the quarter ended December 31, 2018, compared to $13.7 million for the fourth quarter of 2017, which was an increase of $18.5 million or 135%. Earnings per diluted common share were $0.93 for the fourth quarter of 2018, which was an increase of $0.48 or 107% from $0.45 per diluted common share for the same quarter of 2017. Return on average common equity was 9.88% and return on average assets was 1.12% for the fourth quarter of 2018, compared to 5.50% and 0.55%, respectively, for the same quarter in 2017.

Net income available to common stockholders for the year 2018 was $117.0 million, an increase of $41.7 million or 55% from $75.2 million recorded for 2017. Earnings per diluted common share for the year ended December 31, 2018, were $3.52 compared to $2.65 per diluted common share for the year 2017, which was an increase of $0.87 or 33%. Return on average common equity was 9.93% and return on average assets was 1.09% for the year 2018, compared to 8.63% and 0.83%, respectively, for the same period in 2017.

Commenting on Heartland’s fourth quarter and annual results, Lynn B. Fuller, Heartland’s executive operating chairman, said, "Heartland had record earnings again in 2018. Net income available to common stockholders was $117.0 million, a 55 percent increase over 2017, and diluted earnings per common share increased 33 percent."

During the fourth quarter of 2018, Heartland entered into an agreement to sell the loan portfolios of its consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co. (collectively, "Citizens"). The loan portfolios had a fair value of $67.2 million and were classified as held for sale as of December 31, 2018. The transaction closed on January 11, 2019.

Heartland continued its branch optimization strategy in the fourth quarter of 2018 with the announcement of two branch sales, which resulted in the reclassification of $13.7 million of loans and $50.6 million of deposits as held for sale. These transactions, in addition to the branch sale announced in the third quarter of 2018, are expected to close in the first half of 2019.

During the fourth quarter of 2018, Heartland entered into arrangements to fully outsource its legacy residential mortgage lending business and has partnered with third party providers to offer residential mortgage loans to customers in many of its markets. PrimeWest Mortgage Corporation, a wholly-owned subsidiary of First Bank & Trust, continues to provide mortgage loans to customers in Texas and has expanded to serve other customers in Heartland's Southwestern markets.

Bruce K. Lee, Heartland's president and chief executive officer, stated, "The decisions to exit the consumer finance business and alter our approach to providing residential mortgage loans were in response to changes in the competitive landscape in these markets. These actions, in addition to our branch optimization strategy, will allow us to focus our resources in areas with higher growth and earnings potential."

On January 16, 2019, Heartland entered into a definitive merger agreement to acquire Blue Valley Ban Corp., and its wholly-owned subsidiary, Bank of Blue Valley, headquartered in Overland Park, Kansas. As of the announcement date, the transaction, in which all of the issued and outstanding shares of the Bank of Blue Valley stock will be exchanged for shares of Heartland common stock, was valued at approximately $93.9 million. Simultaneous with the closing of the transaction, Bank of Blue Valley will merge into Heartland's Kansas-based subsidiary, Morrill & Janes Bank and Trust Company, and the combined entity will operate as Bank of Blue Valley. The transaction is subject to certain potential adjustments and customary closing conditions. The transaction is expected to close in the second quarter of 2019 with a systems conversion planned for the third quarter of 2019. As of September 30, 2018, Bank of Blue Valley had total assets of approximately $725 million, which included approximately $527 million of net loans outstanding, and approximately $608 million of deposits.

Net Interest Margin Increases from Fourth Quarter 2017

Net interest margin, expressed as a percentage of average earning assets, was 4.28% (4.34% on a fully tax-equivalent basis) during the fourth quarter of 2018, compared to 4.32% (4.38% on a fully tax-equivalent basis) during the third quarter of 2018 and 4.14% (4.30% on a fully tax-equivalent basis) during the fourth quarter of 2017.

Lee said, “During this recent period of rising interest rates, we were pleased to see our net interest margin on a fully tax-equivalent basis remain strong at 4.34% for the quarter and 4.32% for the year."

Interest income for the fourth quarter of 2018 was $126.3 million, an increase of $24.2 million or 24%, compared to the $102.1 million recorded in the fourth quarter of 2017. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $1.6 million for the fourth quarter of 2018 and $3.6 million for the fourth quarter of 2017. With these adjustments, interest income on a tax-equivalent basis was $127.9 million for the fourth quarter of 2018, an increase of $22.2 million or 21%, compared to $105.6 million for the fourth quarter of 2017. The increase in interest income on a tax-equivalent basis was primarily due to the increase in average earning assets and the recent increases in market interest rates. Average earning assets totaled $10.23 billion during the fourth quarter of 2018 compared to $8.89 billion during the fourth quarter of 2017, which was a $1.33 billion or 15% increase. The average rate on earning assets increased 25 basis points to 4.96% for the fourth quarter of 2018 compared to 4.71% for the same quarter in 2017.

Interest expense for the fourth quarter of 2018 was $16.0 million, an increase of $6.8 million or 74% from $9.2 million in the fourth quarter of 2017. Average interest bearing deposits for the quarter ended December 31, 2018, totaled $6.16 billion, an increase of $953.1 million or 18% from $5.21 billion in the same quarter in 2017. The average interest rate paid on Heartland's interest bearing deposits increased 36 basis points to 0.76% for the fourth quarter of 2018 compared to 0.40% for the same quarter of 2017. Heartland's average borrowings decreased $59.7 million or 13% to $397.5 million for the fourth quarter of 2018 compared to $457.2 million for the fourth quarter of 2017. The average rate paid on Heartland's average borrowings was 4.19% and 3.38% for the fourth quarter of 2018 and 2017, respectively. The increase of 32 basis points in the average interest rate paid on Heartland's interest bearing liabilities was primarily due to recent increases in market interest rates.

Net interest income increased $17.4 million or 19% to $110.3 million in the fourth quarter of 2018 from the $92.9 million recorded in the fourth quarter of 2017. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $111.8 million during the fourth quarter of 2018, an increase of $15.4 million or 16% from the $96.4 million recorded during the fourth quarter of 2017.

Noninterest Income and Noninterest Expenses Increase from Fourth Quarter 2017

Noninterest income totaled $27.0 million during the fourth quarter of 2018 compared to $25.5 million during the fourth quarter of 2017, an increase of $1.5 million or 6%. Service charges and fees totaled $13.7 million during the fourth quarter of 2018 compared to $9.9 million during the fourth quarter of 2017, an increase of $3.8 million or 38%. Service charges related to credit card income totaled $3.5 million for the fourth quarter of 2018, an increase of $1.5 million or 76% from $2.0 million for the fourth quarter of 2017. The remainder of the increase was primarily attributable to a larger customer base as a result of recent acquisitions. Securities gains, net, totaled $48,000 for the fourth quarter of 2018 compared to $1.4 million for the same quarter of 2017, which was a decrease of $1.4 million or 97%. Gains on sale of loans held for sale totaled $3.2 million during the fourth quarter of 2018 compared to $4.3 million during the fourth quarter of 2017, a decrease of $1.1 million or 26%.

For the fourth quarter of 2018, noninterest expenses totaled $88.8 million compared to $77.9 million during the fourth quarter of 2017, an increase of $10.9 million or 14%. Salaries and employee benefits totaled $46.7 million for the fourth quarter of 2018, which was an increase of $3.4 million or 8% from $43.3 million for the fourth quarter of 2017. Full time equivalent employees totaled 2,045 as of December 31, 2018, compared to 2,008 as of December 31, 2017. Other noninterest expenses increased $5.3 million or 50% to $15.9 million for the fourth quarter of 2018 compared to $10.6 million for the fourth quarter of 2017. Included in other noninterest expenses for the fourth quarter of 2018 were $3.9 million of write-downs on partnership investments that qualify for tax credits.

Heartland's effective tax rate was 17.22% for the fourth quarter of 2018 compared to 61.13% for the fourth quarter of 2017. Exclusive of the increase to income tax expense of $10.4 million recorded as a result of the passage of the Tax Cuts and Jobs Act in December 2017, Heartland's effective tax rate was 31.58% for the fourth quarter of 2017. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $307,000 during both the fourth quarter of 2018 and 2017. Additionally, Heartland's income tax calculation included solar energy tax credits of $2.6 million and $179,000 for the fourth quarter of 2018 and 2017, respectively.

Loans and Deposits Increase Since December 31, 2017

Total assets were $11.41 billion at December 31, 2018, an increase of $1.60 billion or 16% from $9.81 billion at year-end 2017.  Excluding $427.1 million of assets acquired at fair value in the Signature Bancshares, Inc. ("Signature") transaction and $1.12 billion of assets acquired at fair value in the First Bank Lubbock Bancshares, Inc. ("FBLB") transaction, total assets increased $52.8 million or 1% since December 31, 2017. Securities represented 24% of total assets at December 31, 2018, compared to 25% at December 31, 2017.

Total loans held to maturity were $7.41 billion at December 31, 2018, compared to $6.39 billion at year-end 2017, an increase of $1.02 billion or 16%. Excluding $96.0 million of loans that were classified as held for sale in conjunction with the pending branch sales and the Citizens transaction and $1.01 billion of loans acquired in 2018, total loans held to maturity increased $106.7 million or 2% since year-end 2017.

Total deposits were $9.40 billion as of December 31, 2018, compared to $8.15 billion at year-end 2017, an increase of $1.25 billion or 15%. This increase included $1.25 billion of deposits, at fair value, acquired in the Signature and FBLB transactions. As of December 31, 2018, Heartland had $106.4 million of deposits classified as held for sale in conjunction with the pending branch sales. Exclusive of these transactions, total deposits increased $104.8 million or 1% since year-end 2017.

Demand deposits totaled $3.26 billion at December 31, 2018, an increase of $281.6 million or 9% from $2.98 billion at year-end 2017. Excluding $299.0 million of demand deposits acquired in 2018 and $25.5 million of demand deposits classified as held for sale, demand deposits increased $8.1 million or less than 1% since December 31, 2017.

Savings deposits increased $867.6 million or 20% to $5.11 billion at December 31, 2018 from $4.24 billion at year-end 2017. Excluding $619.0 million of savings deposits acquired in 2018 and $70.1 million of savings deposits classified as held for sale, savings deposits increased $318.7 million or 8% since year-end 2017.

Time deposits totaled $1.02 billion at December 31, 2018, which was an increase of $100.3 million or 11% from $923.5 billion at December 31, 2017. Excluding $333.1 million of time deposits acquired in 2018 and $10.9 million of time deposits classified as held for sale, time deposits decreased $222.0 million or 24% since December 31, 2017.

Nonperforming Assets and Provision for Loan Losses Increase Since December 31, 2017

Nonperforming assets were $79.3 million at December 31, 2018, compared to $74.6 million at December 31, 2017. Exclusive of $10.4 million of nonperforming assets, at fair value, acquired in 2018, nonperforming assets decreased $5.8 million or 8% since year-end 2017. Nonperforming loans were $72.7 million or 0.98% of total loans at December 31, 2018, compared to $63.4 million or 0.99% of total loans at December 31, 2017.

The allowance for loan losses at December 31, 2018, was 0.84% of loans and 85.27% of nonperforming loans compared to 0.87% of loans and 87.82% of nonperforming loans at December 31, 2017. The provision for loan losses was $9.7 million and $5.3 million for the fourth quarter of 2018 and 2017, respectively. The increased provision expense in the fourth quarter of 2018 significantly impacted Heartland's net income for the quarter. The increase was primarily due to two impaired commercial loans from acquired portfolios totaling $5.8 million for which provision expense of $4.0 million was required. Net charge-offs for the fourth quarter of 2018 totaled $8.9 million compared to $4.5 million for the fourth quarter of 2017, which was an increase of $4.4 million or 97%. The Citizens' loan portfolios were required to be recorded at fair value due to the held for sale classification, which resulted in a charge-off of $3.1 million in the fourth quarter of 2018.

Conference Call Details

Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0782 at least five minutes before start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. A replay will be available until January 27, 2020, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.

Heartland Financial USA, Inc. is a diversified financial services company with assets of $11.4 billion. The company provides banking, mortgage, private client, investment and insurance services to individuals and businesses. Heartland currently has 121 banking locations serving 89 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

Safe Harbor Statement

This press release, and future oral and written statements of Heartland and its management, may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) about Heartland's financial condition, results of operations, plans, objectives, future performance and business. Although these forward-looking statements are based upon the beliefs, expectations and assumptions of Heartland's management, there are a number of factors, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from the projected results in Heartland's forward-looking statements. These factors, which are detailed in the risk factors in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, consist of the following: (i) the strength of the national economy and the economies of local communities in which Heartland conducts business; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war; (iii) changes in state and federal banking laws and regulations and governmental policies relating to financial institutions; (iv) changes in interest rates and prepayment rates of Heartland's assets; (v) increased competition in the financial services sector and the inability of Heartland to attract new customers; (vi) changes in technology and Heartland's ability to develop and maintain secure and reliable electronic systems; (vii) the potential impact of acquisitions and Heartland's ability to successfully integrate acquired banks; (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x) unexpected outcomes of existing or new litigation involving Heartland; and (xi) changes in accounting policies and practices. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.

-FINANCIAL TABLES FOLLOW-

 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended   For the Year Ended
  December 31,   December 31,
  2018   2017   2018   2017
Interest Income              
Interest and fees on loans $ 105,700     $ 86,108     $ 393,871     $ 304,006  
Interest on securities:              
Taxable 15,851     11,119     54,131     38,365  
Nontaxable 3,467     4,401     14,120     19,698  
Interest on federal funds sold     5         42  
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments 1,285     435     3,698     1,547  
Total Interest Income 126,303     102,068     465,820     363,658  
Interest Expense              
Interest on deposits 11,826     5,313     35,667     18,279  
Interest on short-term borrowings 417     180     1,696     678  
Interest on other borrowings 3,777     3,719     14,503     14,393  
Total Interest Expense 16,020     9,212     51,866     33,350  
Net Interest Income 110,283     92,856     413,954     330,308  
Provision for loan losses 9,681     5,328     24,013     15,563  
Net Interest Income After Provision for Loan Losses 100,602     87,528     389,941     314,745  
Noninterest Income              
Service charges and fees 13,660     9,892     48,706     39,183  
Loan servicing income 2,061     1,400     7,292     5,636  
Trust fees 4,599     4,336     18,393     15,818  
Brokerage and insurance commissions 1,618     1,071     4,513     4,033  
Securities gains/(losses), net 48     1,420     1,085     6,973  
Unrealized gain/(loss) on equity securities, net 115         212      
Gains on sale of loans held for sale 3,189     4,290     21,450     22,251  
Valuation adjustment on servicing rights (58 )   (8 )   (46 )   21  
Income on bank owned life insurance 587     733     2,793     2,772  
Other noninterest income 1,226     2,394     4,762     5,335  
Total Noninterest Income 27,045     25,528     109,160     102,022  
Noninterest Expense              
Salaries and employee benefits 46,729     43,289     196,118     171,407  
Occupancy 6,622     5,892     25,328     22,244  
Furniture and equipment 3,126     3,148     12,529     11,061  
Professional fees 9,723     8,537     39,811     32,879  
FDIC insurance assessments 907     985     3,699     3,595  
Advertising 2,726     2,088     9,565     7,229  
Core deposit intangibles and customer relationship intangibles amortization 2,592     1,825     9,355     6,077  
Other real estate and loan collection expenses 574     687     3,038     2,461  
(Gain)/loss on sales/valuations of assets, net (35 )   833     2,208     2,475  
Restructuring expenses         2,564      
Other noninterest expenses 15,857     10,594     49,673     38,247  
Total Noninterest Expense 88,821     77,878     353,888     297,675  
Income Before Income Taxes 38,826     35,178     145,213     119,092  
Income taxes 6,685     21,506     28,215     43,820  
Net Income 32,141     13,672     116,998     75,272  
Preferred dividends     (13 )   (39 )   (58 )
Interest expense on convertible debt             12  
Net Income Available to Common Stockholders $ 32,141     $ 13,659     $ 116,959     $ 75,226  
Earnings per common share-diluted $ 0.93     $ 0.45     $ 3.52     $ 2.65  
Weighted average shares outstanding-diluted 34,670,180     30,209,043     33,213,148     28,425,652  
                       


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
Interest Income                  
Interest and fees on loans $ 105,700     $ 105,733     $ 96,787     $ 85,651     $ 86,108  
Interest on securities:                  
Taxable 15,851     14,433     12,270     11,577     11,119  
Nontaxable 3,467     3,490     3,584     3,579     4,401  
Interest on federal funds sold                 5  
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments 1,285     1,238     768     407     435  
Total Interest Income 126,303     124,894     113,409     101,214     102,068  
Interest Expense                  
Interest on deposits 11,826     10,092     7,983     5,766     5,313  
Interest on short-term borrowings 417     464     547     268     180  
Interest on other borrowings 3,777     3,660     3,470     3,596     3,719  
Total Interest Expense 16,020     14,216     12,000     9,630     9,212  
Net Interest Income 110,283     110,678     101,409     91,584     92,856  
Provision for loan losses 9,681     5,238     4,831     4,263     5,328  
Net Interest Income After Provision for Loan Losses 100,602     105,440     96,578     87,321     87,528  
Noninterest Income                  
Service charges and fees 13,660     12,895     12,072     10,079     9,892  
Loan servicing income 2,061     1,670     1,807     1,754     1,400  
Trust fees 4,599     4,499     4,615     4,680     4,336  
Brokerage and insurance commissions 1,618     1,111     877     907     1,071  
Securities gains/(losses), net 48     (145 )   (259 )   1,441     1,420  
Unrealized gain/(loss) on equity securities, net 115     54     71     (28 )    
Net gains on sale of loans held for sale 3,189     7,410     6,800     4,051     4,290  
Valuation adjustment on servicing rights (58 )   230     (216 )   (2 )   (8 )
Income on bank owned life insurance 587     892     700     614     733  
Other noninterest income 1,226     1,149     1,167     1,220     2,394  
Total Noninterest Income 27,045     29,765     27,634     24,716     25,528  
Noninterest Expense                  
Salaries and employee benefits 46,729     49,921     50,758     48,710     43,289  
Occupancy 6,622     6,348     6,315     6,043     5,892  
Furniture and equipment 3,126     3,470     3,184     2,749     3,148  
Professional fees 9,723     11,681     9,948     8,459     8,537  
FDIC insurance assessments 907     1,119     684     989     985  
Advertising 2,726     2,754     2,145     1,940     2,088  
Core deposit intangibles and customer relationship intangibles  amortization 2,592     2,626     2,274     1,863     1,825  
Other real estate and loan collection expenses 574     784     948     732     687  
(Gain)/loss on sales/valuations of assets, net (35 )   912     1,528     (197 )   833  
Restructuring expenses             2,564      
Other noninterest expenses 15,857     12,924     11,098     9,794     10,594  
Total Noninterest Expense 88,821     92,539     88,882     83,646     77,878  
Income Before Income Taxes 38,826     42,666     35,330     28,391     35,178  
Income taxes 6,685     8,956     7,451     5,123     21,506  
Net Income 32,141     33,710     27,879     23,268     13,672  
Preferred dividends     (13 )   (13 )   (13 )   (13 )
Interest expense on convertible debt                  
Net Income Available to Common Stockholders $ 32,141     $ 33,697     $ 27,866     $ 23,255     $ 13,659  
Earnings per common share-diluted $ 0.93     $ 0.97     $ 0.85     $ 0.76     $ 0.45  
Weighted average shares outstanding-diluted 34,670,180     34,644,187     32,830,751     30,645,212     30,209,043  
                             


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As Of
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
Assets                  
Cash and due from banks $ 223,135     $ 196,847     $ 193,069     $ 143,071     $ 168,723  
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments 50,495     240,528     194,937     123,275     27,280  
Cash and cash equivalents 273,630     437,375     388,006     266,346     196,003  
Time deposits in other financial institutions 4,672     5,836     6,803     6,297     9,820  
Securities:                  
Carried at fair value 2,450,709     2,274,215     2,197,117     2,027,665     2,216,753  
Held to maturity, at cost 236,283     239,908     244,271     249,766     253,550  
Other investments, at cost 28,396     26,656     26,725     22,982     22,563  
Loans held for sale 119,801     77,727     55,684     24,376     44,560  
Loans:                  
Held to maturity 7,407,697     7,365,493     7,477,697     6,746,015     6,391,464  
 Allowance for loan losses (61,963 )   (61,221 )   (61,324 )   (58,656 )   (55,686 )
Loans, net 7,345,734     7,304,272     7,416,373     6,687,359     6,335,778  
Premises, furniture and equipment, net 194,676     198,224     199,959     172,862     174,301  
Goodwill 391,668     391,668     391,668     270,305     236,615  
Core deposit intangibles and customer relationship intangibles, net 47,479     50,071     52,698     41,063     35,203  
Servicing rights, net 31,072     32,039     31,996     25,471     25,857  
Cash surrender value on life insurance 162,892     162,216     159,302     143,444     142,818  
Other real estate, net 6,153     11,908     11,074     11,801     10,777  
Other assets 114,841     123,017     120,244     106,126     106,141  
Total Assets $ 11,408,006     $ 11,335,132     $ 11,301,920     $ 10,055,863     $ 9,810,739  
Liabilities and Equity                  
Liabilities                  
Deposits:                  
 Demand $ 3,264,737     $ 3,427,819     $ 3,399,598     $ 3,094,457     $ 2,983,128  
 Savings 5,107,962     4,958,430     4,864,773     4,536,106     4,240,328  
 Time 1,023,730     1,125,914     1,224,773     910,977     923,453  
Total deposits 9,396,429     9,512,163     9,489,144     8,541,540     8,146,909  
Deposits held for sale 106,409     50,312              
Short-term borrowings 227,010     131,139     229,890     131,240     324,691  
Other borrowings 274,905     277,563     258,708     276,118     285,011  
Accrued expenses and other liabilities 78,078     83,562     68,431     55,460     62,671  
Total Liabilities 10,082,831     10,054,739     10,046,173     9,004,358     8,819,282  
Stockholders' Equity                  
Preferred equity         938     938     938  
Common stockholders' equity 1,325,175     1,280,393     1,254,809     1,050,567     990,519  
Total Equity 1,325,175     1,280,393     1,255,747     1,051,505     991,457  
Total Liabilities and Equity $ 11,408,006     $ 11,335,132     $ 11,301,920     $ 10,055,863     $ 9,810,739  
 


 
HEARTLAND FINANCIAL USA, INC
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended   For the Year Ended
  December 31,   December 31,
  2018   2017   2018   2017
Average Balances              
Assets $ 11,371,247     $ 9,807,621     $ 10,772,297     $ 9,009,625  
Loans, net of unearned 7,436,497     6,343,923     7,140,239     5,847,061  
Deposits 9,596,807     8,293,006     9,104,278     7,590,232  
Earning assets 10,225,409     8,891,432     9,718,106     8,181,914  
Interest bearing liabilities 6,557,185     5,663,816     6,253,586     5,426,725  
Common stockholders' equity 1,290,691     986,026     1,177,346     871,683  
Total stockholders' equity 1,290,691     986,964     1,177,955     872,707  
Tangible common stockholders' equity(1) 849,851     713,018     790,788     657,020  
               
Key Performance Ratios              
Annualized return on average assets 1.12 %   0.55 %   1.09 %   0.83 %
Annualized return on average common equity (GAAP) 9.88 %   5.50 %   9.93 %   8.63 %
Annualized return on average tangible common equity (non-GAAP)(2) 15.00 %   7.60 %   14.79 %   11.45 %
Annualized ratio of net charge-offs to average loans 0.48 %   0.28 %   0.25 %   0.24 %
Annualized net interest margin (GAAP) 4.28 %   4.14 %   4.26 %   4.04 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3) 4.34 %   4.30 %   4.32 %   4.22 %
Efficiency ratio, fully tax-equivalent (4) 59.37 %   62.26 %   63.54 %   65.40 %
 
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)              
Net income available to common shareholders (GAAP) $ 32,141     $ 13,659     $ 116,959     $ 75,226  
               
Average common stockholders' equity (GAAP) $ 1,290,691     $ 986,026     $ 1,177,346     $ 871,683  
Less average goodwill 391,668     236,615     340,352     184,554  
Less average core deposit intangibles and customer relationship intangibles, net 49,172     36,393     46,206     30,109  
Average tangible common equity (non-GAAP) $ 849,851     $ 713,018     $ 790,788     $ 657,020  
Annualized return on average common equity (GAAP) 9.88 %   5.50 %   9.93 %   8.63 %
Annualized return on average tangible common equity (non-GAAP) 15.00 %   7.60 %   14.79 %   11.45 %
               
Reconciliation of Annualized Net Interest Margin,
Fully Tax-Equivalent (non-GAAP)(6)
             
Net Interest Income (GAAP) $ 110,283     $ 92,856     $ 413,954     $ 330,308  
Plus tax-equivalent adjustment(7) 1,565     3,558     6,228     15,139  
Net interest income - tax-equivalent (non-GAAP)
$ 111,848     $ 96,414     $ 420,182     $ 345,447  
               
Average earning assets $ 10,225,409     $ 8,891,432     $ 9,718,106     $ 8,181,914  
               
Annualized net interest margin (GAAP) 4.28 %   4.14 %   4.26 %   4.04 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)
4.34 %   4.30 %   4.32 %   4.22 %
 
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average tangible common equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer deposit intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
Average Balances                  
Assets $ 11,371,247     $ 11,291,289     $ 10,643,306     $ 9,759,936     $ 9,807,621  
Loans, net of unearned 7,436,497     7,462,176     7,123,182     6,525,553     6,343,923  
Deposits 9,596,807     9,530,743     9,018,945     8,251,140     8,293,006  
Earning assets 10,225,409     10,154,591     9,614,800     8,857,801     8,891,432  
Interest bearing liabilities 6,557,185     6,544,949     6,205,187     5,694,337     5,663,816  
Common stockholders' equity 1,290,691     1,263,226     1,139,876     1,011,580     986,026  
Total stockholders' equity 1,290,691     1,263,795     1,140,814     1,012,518     986,964  
Tangible common stockholders' equity(1) 849,851     819,966     767,732     723,898     713,018  
                   
Key Performance Ratios                  
Annualized return on average assets 1.12 %   1.18 %   1.05 %   0.97 %   0.55 %
Annualized return on average common equity (GAAP) 9.88 %   10.58 %   9.81 %   9.32 %   5.50 %
Annualized return on average tangible common equity (non-GAAP)(2) 15.00 %   16.30 %   14.56 %   13.03 %   7.60 %
Annualized ratio of net charge-offs to average loans 0.48 %   0.28 %   0.12 %   0.08 %   0.28 %
Annualized net interest margin (GAAP) 4.28 %   4.32 %   4.23 %   4.19 %   4.14 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3) 4.34 %   4.38 %   4.30 %   4.26 %   4.30 %
Efficiency ratio, fully tax-equivalent(4) 59.37 %   62.40 %   65.04 %   68.21 %   62.26 %
                   
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)                  
Net income available to common shareholders (GAAP) $ 32,141     $ 33,697     $ 27,866     $ 23,255     $ 13,659  
                   
Average common stockholders' equity (GAAP) $ 1,290,691     $ 1,263,226     $ 1,139,876     $ 1,011,580     $ 986,026  
Less average goodwill 391,668     391,668     325,781     250,172     236,615  
Less average core deposit intangibles and customer relationship intangibles, net 49,172     51,592     46,363     37,510     36,393  
Average tangible common equity (non-GAAP) $ 849,851     $ 819,966     $ 767,732     $ 723,898     $ 713,018  
Annualized return on average common equity (GAAP) 9.88 %   10.58 %   9.81 %   9.32 %   5.50 %
Annualized return on average tangible common equity (non-GAAP) 15.00 %   16.30 %   14.56 %   13.03 %   7.60 %
                   
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)                  
Net Interest Income (GAAP) $ 110,283     $ 110,678     $ 101,409     $ 91,584     $ 92,856  
Plus tax-equivalent adjustment(7) 1,565     1,544     1,575     1,544     3,558  
Net interest income, fully tax-equivalent (non-GAAP) $ 111,848     $ 112,222     $ 102,984     $ 93,128     $ 96,414  
                   
Average earning assets $ 10,225,409     $ 10,154,591     $ 9,614,800     $ 8,857,801     $ 8,891,432  
                   
Annualized net interest margin (GAAP) 4.28 %   4.32 %   4.23 %   4.19 %   4.14 %
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.34 %   4.38 %   4.30 %   4.26 %   4.30 %
                   
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average tangible common equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer deposit intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended   For the Year Ended
  December 31,   December 31,
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1) 2018   2017   2018   2017
Net interest income $ 110,283     $ 92,856     $ 413,954     $ 330,308  
Tax-equivalent adjustment(2) 1,565     3,558     6,228     15,139  
Fully tax-equivalent net interest income 111,848     96,414     420,182     345,447  
Noninterest income 27,045     25,528     109,160     102,022  
Securities gains, net (48 )   (1,420 )   (1,085 )   (6,973 )
Unrealized gain/loss on equity securities, net (115 )       (212 )    
Gain on extinguishment of debt     (1,280 )       (1,280 )
Adjusted income $ 138,730     $ 119,242     $ 528,045     $ 439,216  
               
Total noninterest expenses $ 88,821     $ 77,878     $ 353,888     $ 297,675  
Less:              
Core deposit intangibles and customer relationship intangibles amortization 2,592     1,825     9,355     6,077  
Partnership investment in tax credit projects 3,895     984     4,233     1,860  
(Gain)/loss on sales/valuations of assets, net (35 )   833     2,208     2,475  
Restructuring expenses         2,564      
Adjusted noninterest expenses $ 82,369     $ 74,236     $ 335,528     $ 287,263  
               
Efficiency ratio, fully tax-equivalent (non-GAAP) 59.37 %   62.26 %   63.54 %   65.40 %
 
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1) For the Quarter Ended
12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
Net interest income $ 110,283     $ 110,678     $ 101,409     $ 91,584     $ 92,856  
Tax-equivalent adjustment(2) 1,565     1,544     1,575     1,544     3,558  
Fully tax-equivalent net interest income 111,848     112,222     102,984     93,128     96,414  
Noninterest income 27,045     29,765     27,634     24,716     25,528  
Securities (gains)/losses, net (48 )   145     259     (1,441 )   (1,420 )
Unrealized (gain)/loss on equity securities, net (115 )   (54 )   (71 )   28      
Gain on extinguishment of debt                 (1,280 )
Adjusted income $ 138,730     $ 142,078     $ 130,806     $ 116,431     $ 119,242  
                   
Total noninterest expenses $ 88,821     $ 92,539     $ 88,882     $ 83,646     $ 77,878  
Less:                  
Core deposit intangibles and customer relationship intangibles amortization 2,592     2,626     2,274     1,863     1,825  
Partnership investment in tax credit projects 3,895     338             984  
(Gain)/loss on sales/valuation of assets, net (35 )   912     1,528     (197 )   833  
Restructuring expenses             2,564      
Adjusted noninterest expenses $ 82,369     $ 88,663     $ 85,080     $ 79,416     $ 74,236  
                   
Efficiency ratio, fully tax-equivalent (non-GAAP) 59.37 %   62.40 %   65.04 %   68.21 %   62.26 %
                   
(1) Efficiency ratio, fully tax-equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis, which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, as noted in the table. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(2) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
  As of and for the Quarter Ended
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
Common Share Data                  
Book value per common share $ 38.44     $ 37.14     $ 36.44     $ 33.81     $ 33.07  
Tangible book value per common share (non-GAAP)(1) $ 25.70     $ 24.33     $ 23.53     $ 23.79     $ 23.99  
Common shares outstanding, net of treasury stock 34,477,499     34,473,029     34,438,445     31,068,239     29,953,356  
Tangible common equity ratio (non-GAAP)(2) 8.08 %   7.70 %   7.46 %   7.59 %   7.53 %
                   
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(3)                  
Common stockholders' equity (GAAP) $ 1,325,175     $ 1,280,393     $ 1,254,809     $ 1,050,567     $ 990,518  
Less goodwill 391,668     391,668     391,668     270,305     236,615  
Less core deposit intangibles and customer relationship intangibles, net 47,479     50,071     52,698     41,063     35,203  
Tangible common stockholders' equity (non-GAAP) $ 886,028     $ 838,654     $ 810,443     $ 739,199     $ 718,700  
                   
Common shares outstanding, net of treasury stock 34,477,499     34,473,029     34,438,445     31,068,239     29,953,356  
Common stockholders' equity (book value) per share (GAAP) $ 38.44     $ 37.14     $ 36.44     $ 33.81     $ 33.07  
Tangible book value per common share (non-GAAP) $ 25.70     $ 24.33     $ 23.53     $ 23.79     $ 23.99  
                   
Reconciliation of Tangible Common Equity Ratio (non-GAAP)(4)                  
Total assets (GAAP) $ 11,408,006     $ 11,335,132     $ 11,301,920     $ 10,055,863     $ 9,810,739  
Less goodwill 391,668     391,668     391,668     270,305     236,615  
Less core deposit intangibles and customer relationship intangibles, net 47,479     50,071     52,698     41,063     35,203  
Total tangible assets (non-GAAP) $ 10,968,859     $ 10,893,393     $ 10,857,554     $ 9,744,495     $ 9,538,921  
Tangible common equity ratio (non-GAAP) 8.08 %   7.70 %   7.46 %   7.59 %   7.53 %
                   
Loan Data                  
Loans held to maturity:                  
Commercial and commercial real estate $ 5,731,712     $ 5,610,953     $ 5,721,138     $ 5,129,777     $ 4,809,875  
Residential mortgage 673,603     676,941     683,051     624,725     624,279  
Agricultural and agricultural real estate 565,408     574,048     562,353     518,386     511,588  
Consumer 440,158     506,181     512,899     474,929     447,484  
Unearned discount and deferred loan fees (3,184 )   (2,630 )   (1,744 )   (1,802 )   (1,762 )
Total loans held to maturity $ 7,407,697     $ 7,365,493     $ 7,477,697     $ 6,746,015     $ 6,391,464  
                   
Other Selected Trend Information                  
Effective tax rate 17.22 %   20.99 %   21.09 %   18.04 %   61.13 %
Full time equivalent employees 2,045     2,124     2,216     2,022     2,008  
Total residential mortgage loan applications $ 107,892     $ 298,602     $ 341,978     $ 234,825     $ 232,946  
Residential mortgage loans originated $ 124,600     $ 262,821     $ 225,563     $ 149,768     $ 185,580  
Residential mortgage loans sold $ 126,180     $ 238,684     $ 201,818     $ 127,963     $ 168,527  
Residential mortgage loan servicing portfolio $ 4,095,025     $ 4,156,921     $ 4,158,107     $ 3,535,988     $ 3,558,090  
                   
(1) Refer to the "Reconciliation of Tangible Book Value Per Common Share (non-GAAP)" table.
(2) Refer to the "Reconciliation of Tangible Common Equity Ratio (non-GAAP)" table.
(3) Tangible book value per common share is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net divided by common shares outstanding, net of treasury. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(4) The tangible common equity ratio is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net divided by total assets less goodwill and core deposit intangibles and customer relationship intangibles, net. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As of and for the Quarter Ended
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
Allowance for Loan Losses                  
Balance, beginning of period $ 61,221     $ 61,324     $ 58,656     $ 55,686     $ 54,885  
Provision for loan losses 9,681     5,238     4,831     4,263     5,328  
Charge-offs (9,777 )   (6,120 )   (3,164 )   (2,224 )   (5,628 )
Recoveries 838     779     1,001     931     1,101  
Balance, end of period $ 61,963     $ 61,221     $ 61,324     $ 58,656     $ 55,686  
                   
Asset Quality                  
Nonaccrual loans $ 71,943     $ 73,060     $ 69,376     $ 64,806     $ 62,581  
Loans past due ninety days or more as to interest or principal payments 726     154     54     22     830  
Other real estate owned 6,153     11,908     11,074     11,801     10,777  
Other repossessed assets 459     495     499     423     411  
Total nonperforming assets $ 79,281     $ 85,617     $ 81,003     $ 77,052     $ 74,599  
                   
Performing troubled debt restructured loans $ 4,026     $ 4,180     $ 4,012     $ 3,206     $ 6,617  
                   
Nonperforming Assets Activity                  
Balance, beginning of period $ 85,617     $ 81,003     $ 77,052     $ 74,599     $ 79,803  
Net loan charge offs (8,939 )   (5,341 )   (2,163 )   (1,293 )   (4,527 )
New nonperforming loans 17,332     16,965     16,254     8,546     9,911  
Acquired nonperforming assets         7,973     2,459      
Reduction of nonperforming loans(1) (6,065 )   (5,085 )   (15,696 )   (6,549 )   (7,177 )
OREO/Repossessed assets sales proceeds (8,390 )   (1,064 )   (1,541 )   (657 )   (2,917 )
OREO/Repossessed assets writedowns, net (230 )   (886 )   (993 )   (16 )   (146 )
Net activity at Citizens Finance Co. (44 )   25     117     (37 )   (348 )
Balance, end of period $ 79,281     $ 85,617     $ 81,003     $ 77,052     $ 74,599  
 
Asset Quality Ratios                  
Ratio of nonperforming loans to total loans 0.98 %   0.99 %   0.93 %   0.96 %   0.99 %
Ratio of nonperforming assets to total assets 0.69 %   0.76 %   0.72 %   0.77 %   0.76 %
Annualized ratio of net loan charge-offs to average loans 0.48 %   0.28 %   0.12 %   0.08 %   0.28 %
Allowance for loan losses as a percent of loans 0.84 %   0.83 %   0.82 %   0.87 %   0.87 %
Allowance for loan losses as a percent of nonperforming loans 85.27 %   83.62 %   88.32 %   90.48 %   87.82 %
Loans delinquent 30-89 days as a percent of total loans 0.21 %   0.62 %   0.30 %   0.21 %   0.27 %
                   
(1) Includes principal reductions, transfers to performing status and transfers to OREO.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Quarter Ended
  December 31, 2018   December 31, 2017
  Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                      
Securities:                      
Taxable $ 2,184,096     $ 15,851     2.88 %   $ 1,881,708     $ 11,119     2.34 %
Nontaxable(1) 427,332     4,388     4.07     555,390     6,771     4.84  
Total securities 2,611,428     20,239     3.07     2,437,098     17,890     2.91  
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments 238,087     1,285     2.14     162,325     435     1.06  
Federal funds sold 309             3,106     5     0.64  
Loans:(2)                      
Commercial and commercial real estate(1) 5,644,475     77,822     5.47     4,725,572     59,370     4.98  
Residential mortgage 704,012     8,682     4.89     658,563     9,750     5.87  
Agricultural and agricultural real estate(1) 568,904     7,752     5.41     515,426     6,115     4.71  
Consumer 519,106     9,355     7.15     444,362     9,820     8.77  
Fees on loans     2,733             2,241      
Less: allowance for loan losses (60,912 )           (55,020 )        
Net loans 7,375,585     106,344     5.72     6,288,903     87,296     5.51  
Total earning assets 10,225,409     127,868     4.96 %   8,891,432     105,626     4.71 %
Nonearning Assets 1,145,838             916,189          
Total Assets $ 11,371,247             $ 9,807,621          
Interest Bearing Liabilities(3)                      
Savings $ 5,071,573     $ 8,817     0.69 %   $ 4,244,711     $ 3,335     0.31 %
Time, $100,000 and over 558,957     1,568     1.11     399,331     777     0.77  
Other time deposits 529,165     1,441     1.08     562,595     1,201     0.85  
Short-term borrowings 121,053     417     1.37     161,959     180     0.44  
Other borrowings 276,437     3,777     5.42     295,220     3,719     5.00  
Total interest bearing liabilities 6,557,185     16,020     0.97 %   5,663,816     9,212     0.65 %
Noninterest Bearing Liabilities(3)                      
Noninterest bearing deposits 3,437,112             3,086,369          
Accrued interest and other liabilities 86,259             70,472          
Total noninterest bearing liabilities 3,523,371             3,156,841          
Stockholders' Equity 1,290,691             986,964          
Total Liabilities and Stockholders' Equity $ 11,371,247             $ 9,807,621          
Net interest income, fully tax-equivalent (non-GAAP)(1)     $ 111,848             $ 96,414      
Net interest spread(1)         3.99 %           4.06 %
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(4)         4.34 %           4.30 %
Interest bearing liabilities to earning assets 64.13 %           63.70 %        
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(4)                      
Net interest income, fully tax-equivalent (non-GAAP)     $ 111,848             $ 96,414      
Adjustments for tax-equivalent interest(1)     (1,565 )           (3,558 )    
Net interest income (GAAP)     $ 110,283             $ 92,856      
                       
Average earning assets $ 10,225,409             $ 8,891,432          
Annualized net interest margin (GAAP)         4.28 %           4.14 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)         4.34 %           4.30 %
                       
(1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.
(4) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Year Ended
  December 31, 2018   December 31, 2017
  Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                      
Securities:                      
Taxable $ 1,999,321     $ 54,131     2.71 %   $ 1,629,936     $ 38,365     2.35 %
Nontaxable(1) 439,894     17,873     4.06     617,267     30,305     4.91  
Total securities 2,439,215     72,004     2.95     2,247,203     68,670     3.06  
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments 197,562     3,698     1.87     136,555     1,547     1.13  
Federal funds sold 430             5,932     42     0.71  
Loans:(2)                      
Commercial and commercial real estate(1) 5,401,683     289,379     5.36     4,256,158     211,316     4.96  
Residential mortgage 692,310     32,047     4.63     655,515     30,242     4.61  
Agricultural and agricultural real estate(1) 549,346     28,331     5.16     498,032     23,651     4.75  
Consumer 496,900     37,250     7.50     437,356     35,194     8.05  
Fees on loans     9,339             8,135      
Less: allowance for loan losses (59,340 )           (54,837 )        
Net loans 7,080,899     396,346     5.60     5,792,224     308,538     5.33  
Total earning assets 9,718,106     472,048     4.86 %   8,181,914     378,797     4.63 %
Nonearning Assets 1,054,191             827,711          
Total Assets $ 10,772,297             $ 9,009,625          
Interest Bearing Liabilities(3)                      
Savings $ 4,779,977     $ 25,123     0.53 %   $ 4,044,032     $ 11,107     0.27 %
Time, $100,000 and over 499,409     4,789     0.96     377,090     3,016     0.80  
Other time deposits 559,360     5,755     1.03     525,165     4,156     0.79  
Short-term borrowings 142,295     1,696     1.19     190,040     678     0.36  
Other borrowings 272,545     14,503     5.32     290,398     14,393     4.96  
Total interest bearing liabilities 6,253,586     51,866     0.83 %   5,426,725     33,350     0.61 %
Noninterest Bearing Liabilities(3)                      
Noninterest bearing deposits 3,265,532             2,643,945          
Accrued interest and other liabilities 75,224             66,248          
Total noninterest bearing liabilities 3,340,756             2,710,193          
Stockholders' Equity 1,177,955             872,707          
Total Liabilities and Stockholders' Equity $ 10,772,297             $ 9,009,625          
Net interest income, fully tax-equivalent (non-GAAP)(1)     $ 420,182             $ 345,447      
Net interest spread(1)         4.03 %           4.02 %
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(4)         4.32 %           4.22 %
Interest bearing liabilities to earning assets 64.35 %           66.33 %        
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(4)                      
Net interest income, fully tax-equivalent (non-GAAP)     $ 420,182             $ 345,447      
Adjustments for tax-equivalent interest(1)     (6,228 )           (15,139 )    
Net interest income (GAAP)     $ 413,954             $ 330,308      
                       
Average earning assets $ 9,718,106             $ 8,181,914          
Annualized net interest margin (GAAP)         4.26 %           4.04 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)         4.32 %           4.22 %
                       
(1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.
(4) Net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
 


HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
  As of and For the Quarter Ended
  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Total Assets          
Citywide Banks $ 2,307,284   $ 2,300,018   $ 2,295,261   $ 2,299,818   $ 2,289,956  
New Mexico Bank & Trust 1,492,555   1,465,020   1,466,311   1,416,788   1,453,534  
Dubuque Bank and Trust Company 1,480,914   1,523,447   1,500,108   1,490,100   1,443,419  
Wisconsin Bank & Trust 1,114,352   1,051,160   1,034,075   1,017,053   1,079,222  
First Bank & Trust 1,109,929   1,112,464   1,123,559      
Premier Valley Bank 849,696   851,358   846,215   805,014   925,078  
Illinois Bank & Trust 804,907   795,132   815,905   751,371   783,127  
Minnesota Bank & Trust 666,564   649,179   660,469   631,852   210,157  
Arizona Bank & Trust 658,714   650,032   653,596   633,474   602,182  
Morrill & Janes Bank and Trust Company 571,012   592,786   602,630   648,568   654,871  
Rocky Mountain Bank 490,453   492,063   504,243   490,917   487,136  
Total Deposits          
Citywide Banks $ 1,848,373   $ 1,905,830   $ 1,867,626   $ 1,914,726   $ 1,895,540  
New Mexico Bank & Trust 1,307,464   1,267,844   1,242,673   1,202,051   1,229,324  
Dubuque Bank and Trust Company 1,214,541   1,217,976   1,136,431   1,193,271   1,084,415  
Wisconsin Bank & Trust 927,821   891,167   874,035   835,919   890,835  
First Bank & Trust 861,629   875,170   887,181      
Premier Valley Bank 639,194   706,125   696,460   660,070   705,142  
Illinois Bank & Trust 715,482   726,790   753,022   674,391   692,227  
Minnesota Bank & Trust 560,399   544,513   561,257   533,893   178,036  
Arizona Bank & Trust 574,762   550,530   558,895   567,515   522,490  
Morrill & Janes Bank and Trust Company 489,471   511,154   498,798   558,174   563,638  
Rocky Mountain Bank 424,700   429,167   443,359   429,000   424,487  
Net Income (Loss)          
Citywide Banks $ 7,005   $ 7,762   $ 7,018   $ 5,463   $ 1,069  
New Mexico Bank & Trust 6,007   7,104   7,043   6,444   2,954  
Dubuque Bank and Trust Company 6,002   4,458   4,426   3,214   9,027  
Wisconsin Bank & Trust 3,229   3,735   2,470   2,617   2,210  
First Bank & Trust 3,334   3,932   1,925      
Premier Valley Bank 2,930   3,006   2,664   2,373   1,508  
Illinois Bank & Trust 2,180   2,419   2,421   2,712   794  
Minnesota Bank & Trust 1,038   2,167   581   762   106  
Arizona Bank & Trust 1,951   2,660   3,623   2,104   (103 )
Morrill & Janes Bank and Trust Company 324   165   961   1,186   650  
Rocky Mountain Bank 1,230   1,210   1,185   1,172   1,769  
           


 
CONTACT:
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
(563) 589-1994
bmckeag@htlf.com

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