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CST: 21/10/2019 23:22:09   

Heartland Financial USA, Inc. Reports Record Quarterly and Year to Date Results as of June 30, 2019

84 Days ago

Highlights

  • Quarterly net income available to common stockholders of $45.2 million in comparison with $27.9 million for the second quarter of the prior year, an increase of $17.3 million or 62%
  • Diluted earnings per common share of $1.26 in comparison with $0.85 for the second quarter of the prior year, an increase of $0.41 or 48%
  • Net interest margin of 4.06%, fully tax-equivalent (non-GAAP)(1) of 4.10%
  • Return on average common equity of 12.56% and return on average tangible common equity (non-GAAP)(1) of 19.52%
  • Tangible common equity ratio (non-GAAP)(1) of 8.92% in comparison to 7.46% at June 30, 2018
  • Completed the acquisition of Blue Valley Ban Corp. on May 10, 2019
  • Closed on the sale of Dubuque Bank and Trust Company's residential mortgage servicing portfolio
  • Completed the sale of two branches at Dubuque Bank and Trust Company, two branches at Illinois Bank & Trust, and one branch at Citywide Banks
  Quarter Ended
June 30,
  Six Months Ended
June 30,
  2019   2018   2019   2018
Net income available to common stockholders (in millions) $ 45.2     $ 27.9     $ 76.7     $ 51.1  
Diluted earnings per common share 1.26     0.85     2.17     1.61  
               
Return on average assets 1.55 %   1.05 %   1.35 %   1.01 %
Return on average common equity 12.56     9.81     11.13     9.58  
Return on average tangible common equity (non-GAAP)(1) 19.52     15.50     17.49     14.70  
Net interest margin 4.06     4.23     4.09     4.21  
Net interest margin, fully tax-equivalent (non-GAAP)(1) 4.10     4.30     4.14     4.28  
Efficiency ratio, fully-tax equivalent (non-GAAP)(1) 64.81     64.94     65.01     66.48  

(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to the financial tables for reconciliations to the most directly comparable GAAP measures.

"Heartland set new quarterly and year-to-date net income records for the period ended June 30, 2019. Net income of $45.2 million represents a 62 percent increase over the second quarter of 2018, while year-to-date net income of $76.7 million represents a 50 percent increase over the previous year."
Lynn B. Fuller, executive operating chairman, Heartland Financial USA, Inc.

DUBUQUE, Iowa, July 29, 2019 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $45.2 million, or $1.26 per diluted common share, for the quarter ended June 30, 2019, compared to $27.9 million, or $0.85 per diluted common share, for the second quarter of 2018. Return on average common equity was 12.56% and return on average assets was 1.55% for the second quarter of 2019, compared to 9.81% and 1.05%, respectively, for the same quarter in 2018.

Net income available to common stockholders for the six months ended June 30, 2019, was $76.7 million or $2.17 per diluted common share, compared to $51.1 million or $1.61 per diluted common share for the six months ended June 30, 2018. Return on average common equity was 11.13% and return on average assets was 1.35% for the first six months of 2019, compared to 9.58% and 1.01% for the same period in 2018.

Commenting on Heartland’s first quarter results, Lynn B. Fuller, Heartland’s executive operating chairman, said, "Heartland set new quarterly and year-to-date net income records for the period ended June 30, 2019. Net income of $45.2 million represents a 62 percent increase over the second quarter of 2018, while year-to-date net income of $76.7 million represents a 50 percent increase over the previous year."

On May 10, 2019, Heartland completed the acquisition of Blue Valley Ban Corp ("BVBC") and its wholly-owned subsidiary, Bank of Blue Valley, headquartered in Overland Park, Kansas. Based on Heartland's closing common stock price of $44.78 per share on May 10, 2019, the aggregate consideration paid to BVBC common shareholders was $92.3 million, which was paid by delivery of Heartland common stock. Immediately following the closing of the transaction, Bank of Blue Valley was merged with and into Heartland's wholly-owned Kansas subsidiary, Morrill & Janes Bank and Trust Company, and the combined entity operates under the Bank of Blue Valley brand. As of the closing date, BVBC had, at fair value, total assets of $766.2 million, total loans held to maturity of $542.0 million, and total deposits of $617.1 million. Heartland also assumed, at fair value, $16.1 million of trust preferred debt. The systems conversion for this transaction is expected to occur in the third quarter of 2019.

In keeping with its focus on core businesses and execution of strategic priorities, during the second quarter of 2019, Heartland completed the sale of two branches of Dubuque Bank and Trust Company, two branches of Illinois Bank & Trust and one branch of Citywide Banks, which resulted in a reduction of loans of $27.1 million and deposits of $107.8 million. On April 30, 2019, Dubuque Bank and Trust Company closed on the sale of substantially all its mortgage servicing rights to PNC Bank, N.A. The mortgage servicing rights had a book value of $21.0 million and an estimated fair value of $37.1 million as of March 31, 2019. In the agreement, which includes customary terms and conditions, Dubuque Bank and Trust Company is providing interim servicing of the loans until the transfer date, which is expected to be in August 2019.

Heartland is utilizing a portion of the net gains from these sales transactions, which totaled approximately $19.8 million and are recorded in the gain/loss on sales/valuations of assets, net, on the consolidated income statement, to invest in several new technology and process improvement projects. These projects include system upgrades, process automation, and expansion of online and mobile banking capabilities.

"We are excited about the technology and process improvement projects that are currently underway. We believe these projects will allow us to focus on growing our core business, improve our efficiency, and reduce our compliance and operational risks," said Bruce K. Lee, Heartland's president and chief executive officer.

Net Interest Income Increases, Net Interest Margin Decreases, from Second Quarter of 2018

Net interest margin, expressed as a percentage of average earning assets, was 4.06% (4.10% on a fully tax-equivalent basis, non-GAAP) during the second quarter of 2019, compared to 4.12% (4.18% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2019 and 4.23% (4.30% on a fully tax-equivalent basis, non-GAAP) during the second quarter of 2018.

"Our fully tax-equivalent net interest margin declined eight basis points during the second quarter of 2019, compared to the first quarter, primarily due to increased deposit market rates. We will remain competitive, yet disciplined in our deposit pricing strategies as we navigate through the ever-changing interest rate environment," Lee said.

Growth in total interest income on a tax-equivalent basis was primarily due to recent increases in market interest rates and the increase in average earning assets. Total interest income for the second quarter of 2019 was $127.0 million compared to $113.4 million recorded in the second quarter of 2018, an increase of $13.6 million or 12%. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.3 million for the second quarter of 2019 and $1.6 million for the second quarter of 2018. With these adjustments, total interest income on a tax-equivalent basis was $128.3 million for the second quarter of 2019, an increase of $13.3 million or 12%, compared to total interest income on a tax-equivalent basis of $115.0 million for the second quarter of 2018. Average earning assets of $10.55 billion increased $937.4 million or 10% from the second quarter of 2018, which was primarily attributable to recent acquisitions. The average rate on earning assets increased 8 basis points to 4.88% for the second quarter of 2019 compared to 4.80% for the same quarter in 2018.

Increases in total interest expense were primarily due to recent increases in market interest rates and deposit growth from recent acquisitions. Total interest expense for the second quarter of 2019 was $20.3 million, an increase of $8.3 million or 69% from $12.0 million in the second quarter of 2018. The average interest rate paid on Heartland's interest bearing liabilities increased to 1.18% for the second quarter of 2019 compared to 0.78% for the second quarter of 2018, which was primarily due to recent increases in market interest rates. Average interest bearing deposits increased $713.3 million or 12% to $6.50 billion for the quarter ended June 30, 2019, from $5.79 billion in the same quarter in 2018, which was primarily attributable to recent acquisitions. The average interest rate paid on Heartland's interest bearing deposits increased 44 basis points to 0.99% for the second quarter of 2019 compared to 0.55% for the same quarter in 2018. Average borrowings decreased $46.0 million or 11% to $369.3 million during the second quarter of 2019 from $415.3 million during the same quarter in 2018. The average interest rate paid on Heartland's borrowings was 4.52% for the second quarter of 2019 compared to 3.88% in the second quarter of 2018.

Net interest income was $106.7 million during the second quarter of 2019 compared to $101.4 million during the second quarter of 2018, an increase of $5.3 million or 5%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $108.0 million during the second quarter of 2019 compared to net interest income on a tax-equivalent basis of $103.0 million during the second quarter of 2018, an increase of $5.0 million or 5%.

Noninterest Income Increases and Noninterest Expense Decreases from Second Quarter of 2018

Total noninterest income was $32.1 million during the second quarter of 2019 compared to $27.6 million during the second quarter of 2018, an increase of $4.4 million or 16%. Significant changes by noninterest income category were:

  • Service charges and fees increased $2.6 million or 21% to $14.6 million for the second quarter of 2019 compared to $12.1 million for the same quarter of 2018. Service charges related to credit card income increased $1.2 million or 37% to $4.3 million for the second quarter of 2019 from $3.0 million for the same quarter of 2018. The remainder of the increase in service charges was primarily attributable to Heartland's larger customer base as a result of recent acquisitions.
  • Securities gains, net, totaled $3.6 million for the second quarter of 2019 compared to net securities losses of $259,000 in the second quarter of 2018.
  • Net gains on sale of loans held for sale totaled $4.3 million during the second quarter of 2019 compared to $6.8 million during the same quarter in 2018, which was a decrease of $2.5 million or 36%, primarily due to the outsourcing of Heartland's legacy mortgage lending operations in the fourth quarter of 2018.
  • Other noninterest income totaled $1.7 million for the second quarter of 2019 compared to $1.2 million for the second quarter of 2018, which was an increase of $515,000 or 44%. Included in noninterest income for the second quarter of 2019 was a recovery of $266,000 on an acquired loan that was charged off prior to acquisition.

For the second quarter of 2019, total noninterest expense was $75.1 million compared to $88.9 million during the second quarter of 2018, a decrease of $13.8 million or 16%. Significant changes by noninterest expense category were:

  • Professional fees increased $4.3 million or 41% to $15.0 million for the second quarter of 2019 compared to $10.6 million for the same period in 2018. Included in this increase for the second quarter of 2019 was $2.9 million of expenses related to Heartland's technology and process improvement projects.
  • Core deposit and customer relationship intangibles amortization increased $1.0 million to $3.3 million for the second quarter of 2019 compared to $2.3 million for the second quarter of 2018, which was primarily due to recent acquisitions.
  • Net gains on sales/valuations of assets totaled $18.3 million for the second quarter of 2019 compared to net losses on sales/valuations of assets of $1.5 million for the second quarter of 2018. Net gains from the branch sales totaled $6.5 million, and the gain on the sale of the mortgage servicing rights totaled $13.3 million. Excluding these gains, net losses on sales/valuations of assets totaled $1.5 million for the second quarter of 2019.
  • Other noninterest expenses were $12.6 million for the second quarter of 2019 compared to $11.1 million for the second quarter of 2018, which was an increase of $1.5 million or 14%. Included in this increase was a write-down of $1.5 million on a partnership investment that qualifies for solar energy tax credits.

Heartland's effective tax rate was 23.12% for the second quarter of 2019 compared to 21.09% for the second quarter of 2018. Included in Heartland's second quarter 2019 tax calculation were solar energy tax credits of $911,000. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $281,000 for the second quarter of 2019 compared to $307,000 for the second quarter of 2018. Tax-exempt interest income as a percentage of pre-tax income declined to 8.09% during the second quarter of 2019 from 16.77% during the second quarter of 2018.

Loans and Deposits Decrease Since December 31, 2018

Total assets were $12.16 billion at June 30, 2019, an increase of $752.3 million or 7% from $11.41 billion at year-end 2018. Excluding $766.2 million of assets acquired at fair value in the BVBC transaction, total assets decreased $13.9 million or less than 1% since year-end 2018. Securities represented 22% and 24% of total assets at June 30, 2019, and December 31, 2018, respectively.

Total loans held to maturity were $7.85 billion at June 30, 2019, compared to $7.41 billion at year-end 2018, an increase of $445.4 million or 6%. This change includes $542.0 million of total loans held to maturity acquired at fair value in the BVBC transaction. During the first quarter of 2019, Heartland classified $32.1 million of loans as held for sale in conjunction with the branch sales. Excluding the reclassification of loans to held for sale and the BVBC transaction, total loans held to maturity decreased $64.6 million or 1% since December 31, 2018. Loan changes by category were:

  • Commercial and commercial real estate loans totaled $6.23 billion at June 30, 2019, compared to $5.73 billion at December 31, 2018, which was an increase of $498.7 million or 9%. Excluding $14.9 million of commercial and commercial real estate loans classified as held for sale during the first quarter and $480.1 million of loans acquired in the BVBC transaction, commercial and commercial real estate loans increased $33.4 million or 1% since year-end.
  • Agricultural and agricultural real estate loans totaled $549.4 million at June 30, 2019, compared to $565.4 million at December 31, 2018, which was a decrease of $16.0 million or 3%. Excluding $6.6 million of agricultural and agricultural real estate loans classified as held for sale during the first quarter of 2019 and $1.8 million of loans acquired in the BVBC transaction, agricultural and agricultural real estate loans decreased $11.2 million or 2% since December 31, 2018.
  • Residential mortgage loans decreased $59.9 million or 9% to $613.7million at June 30, 2019, from $673.6 million at December 31, 2018. Excluding $2.0 million of residential mortgage loans classified as held for sale during the first quarter of 2019 and $17.2 million of loans acquired in the BVBC transaction, residential mortgage loans decreased $75.1 million or 11% since year-end.
  • Consumer loans increased $21.6 million or 5% to $461.8 million at June 30, 2019, compared to $440.2 million at December 31, 2018. Excluding $8.6 million of loans classified as held for sale during the first quarter of 2019 and $42.9 million of loans acquired in the BVBC transaction, consumer loans decreased $12.6 million or 3% since year-end.

"We were pleased to see growth again in our commercial and commercial real estate loan portfolios. The declines in the residential mortgage and consumer loans continued to be primarily the result of customers refinancing loans due to recent mortgage interest rate decreases," said Lee.

Total deposits were $10.11 billion as of June 30, 2019, compared to $9.40 billion at year-end 2018, an increase of $712.1 million or 8%. This increase includes $617.1 million of deposits acquired at fair value in the BVBC transaction. During the first quarter of 2019, Heartland classified $77.0 million of deposits as held for sale in conjunction with the branch sales. Exclusive of the reclassification of deposits to held for sale and the deposits acquired at fair value in the BVBC transaction, total deposits increased $172.0 million or 2% since December 31, 2018. Deposit changes by category were:

  • Demand deposits increased $162.0 million or 5% to $3.43 billion at June 30, 2019, compared to $3.26 billion at December 31, 2018. Excluding $164.9 million of demand deposits acquired in the BVBC transaction and $17.3 million of demand deposits classified as held for sale in the first quarter of 2019, demand deposits increased $14.4 million or less than 1% since year-end 2018.
  • Savings deposits increased $425.5 million or 8% to $5.53 billion at June 30, 2019, from $5.11 billion at December 31, 2018. Excluding savings deposits of $346.2 million acquired in the BVBC transaction and $47.8 million of savings deposits classified as held for sale in the first quarter of 2019, savings deposits increased $127.2 million or 2% since year-end 2018.
  • Time deposits increased $124.6 million or 12% to $1.15 billion at June 30, 2019 from $1.02 billion at December 31, 2018. Excluding time deposits of $106.0 million acquired in the BVBC transaction and $11.9 million of time deposits classified as held for sale in the first quarter of 2019, time deposits increased $30.4 million or 3% since year-end 2018. The increase in time deposits was primarily due to an increase in brokered time deposits of $30.9 million.

"Organic non-time deposit growth was $141.6 million for the first six months of 2019, which represents a 2 percent increase since year-end 2018. Non-time deposits represented 89 percent of total deposits at June 30, 2019," Lee stated.

Nonperforming Assets Increase Since December 31, 2018

Nonperforming assets increased $7.3 million or 9% to $86.6 million or 0.71% of total assets at June 30, 2019, compared to $79.3 million or 0.69% of total assets at December 31, 2018. Nonperforming loans were $79.9 million or 1.02% of total loans at June 30, 2019, compared to $72.7 million or 0.98% of total loans at December 31, 2018. The increase is primarily related to two agribusiness relationships that were originated in Heartland's Midwestern markets and one commercial relationship that was originated in one of Heartland's Western markets. At June 30, 2019, loans delinquent 30-89 days were 0.31% of total loans compared to 0.21% of total loans at December 31, 2018.

The allowance for loan losses at June 30, 2019, was 0.81% of loans and 79.91% of nonperforming loans, compared to 0.84% of loans and 85.27% of nonperforming loans at December 31, 2018.

Non-GAAP Financial Measures

This press release contains references to financial measures which are not defined by generally accepted accounting principles ("GAAP"). Management believes the non-GAAP measures are helpful for investors to analyze and evaluate Heartland's financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Additionally, because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this press release with other companies' non-GAAP measures. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure may be found in the financial tables in this press release.

Below are the non-GAAP measures included in this press release, management's reason for including each measure and the method of calculating each measure:

  • Annualized return on average tangible common equity is net income available to common stockholders plus  core deposit and customer relationship intangibles amortization, net of tax, divided by average common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
  • Annualized net interest margin, fully tax-equivalent, 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.
  • 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 reconciliation contained in this press release.
  • Tangible book value per common share is total common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
  • Tangible common equity ratio is total common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.

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 July 28, 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 $12.16 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 116 banking locations serving 84 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 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 those in its 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, contained, among others: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war; (iii) changes in state and federal laws, regulations and governmental policies as they impact the company's general business; (iv) changes in interest rates and prepayment rates of the company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the 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 the company; and (xi) changes in accounting policies and practices. All statements in this 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
June 30,
  For the Six Months Ended
June 30,
  2019   2018   2019   2018
Interest Income              
Interest and fees on loans $ 106,027     $ 96,787     $ 206,483     $ 182,438  
Interest on securities:              
Taxable 16,123     12,270     31,999     23,847  
Nontaxable 2,554     3,584     5,647     7,163  
Interest on federal funds sold         4      
Interest on deposits with other banks and other short-term investments

2,299     768     3,591     1,175  
Total Interest Income 127,003     113,409     247,724     214,623  
Interest Expense              
Interest on deposits 16,138     7,983     29,351     13,749  
Interest on short-term borrowings 338     547     1,227     815  
Interest on other borrowings 3,819     3,470     7,483     7,066  
Total Interest Expense 20,295     12,000     38,061     21,630  
Net Interest Income 106,708     101,409     209,663     192,993  
Provision for loan losses 4,918     4,831     6,553     9,094  
Net Interest Income After Provision for Loan Losses 101,790     96,578     203,110     183,899  
Noninterest Income              
Service charges and fees 14,629     12,072     27,423     22,151  
Loan servicing income 1,338     1,807     3,067     3,561  
Trust fees 4,825     4,615     9,299     9,295  
Brokerage and insurance commissions 1,028     877     1,762     1,784  
Securities gains/(losses), net 3,580     (259 )   5,155     1,182  
Unrealized gain on equity securities, net 112     71     370     43  
Net gains on sale of loans held for sale 4,343     6,800     7,519     10,851  
Valuation adjustment on servicing rights (364 )   (216 )   (953 )   (218 )
Income on bank owned life insurance 888     700     1,787     1,314  
Other noninterest income 1,682     1,167     3,349     2,387  
Total Noninterest Income 32,061     27,634     58,778     52,350  
Noninterest Expense              
Salaries and employee benefits 49,995     50,758     100,280     99,468  
Occupancy 6,436     6,315     13,043     12,358  
Furniture and equipment 3,220     3,184     5,912     5,933  
Professional fees 14,968     10,632     26,347     20,080  
Advertising 2,661     2,145     4,986     4,085  
Core deposit and customer relationship intangibles amortization 3,313     2,274     6,155     4,137  
Other real estate and loan collection expenses 162     948     863     1,680  
(Gain)/loss on sales/valuations of assets, net (18,286 )   1,528     (21,290 )   1,331  
Restructuring expenses         3,227     2,564  
Other noninterest expenses 12,629     11,098     23,805     20,892  
Total Noninterest Expense 75,098     88,882     163,328     172,528  
Income Before Income Taxes 58,753     35,330     98,560     63,721  
Income taxes 13,584     7,451     21,894     12,574  
Net Income 45,169     27,879     76,666     51,147  
Preferred dividends     (13 )       (26 )
Net Income Available to Common Stockholders $ 45,169     $ 27,866     $ 76,666     $ 51,121  
Earnings per common share-diluted $ 1.26     $ 0.85     $ 2.17     $ 1.61  
Weighted average shares outstanding-diluted 35,879,259     32,830,751     35,295,407     31,746,126  


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Interest Income                  
Interest and fees on loans $ 106,027     $ 100,456     $ 105,700     $ 105,733     $ 96,787  
Interest on securities:                  
Taxable 16,123     15,876     15,851     14,433     12,270  
Nontaxable 2,554     3,093     3,467     3,490     3,584  
Interest on federal funds sold     4              
Interest on deposits with other banks and other short-term investments

2,299     1,292     1,285     1,238     768  
Total Interest Income 127,003     120,721     126,303     124,894     113,409  
Interest Expense                  
Interest on deposits 16,138     13,213     11,826     10,092     7,983  
Interest on short-term borrowings 338     889     417     464     547  
Interest on other borrowings 3,819     3,664     3,777     3,660     3,470  
Total Interest Expense 20,295     17,766     16,020     14,216     12,000  
Net Interest Income 106,708     102,955     110,283     110,678     101,409  
Provision for loan losses 4,918     1,635     9,681     5,238     4,831  
Net Interest Income After Provision for Loan Losses 101,790     101,320     100,602     105,440     96,578  
Noninterest Income                  
Service charges and fees 14,629     12,794     13,660     12,895     12,072  
Loan servicing income 1,338     1,729     2,061     1,670     1,807  
Trust fees 4,825     4,474     4,599     4,499     4,615  
Brokerage and insurance commissions 1,028     734     1,618     1,111     877  
Securities gains/(losses), net 3,580     1,575     48     (145 )   (259 )
Unrealized gain on equity securities, net 112     258     115     54     71  
Net gains on sale of loans held for sale 4,343     3,176     3,189     7,410     6,800  
Valuation adjustment on servicing rights (364 )   (589 )   (58 )   230     (216 )
Income on bank owned life insurance 888     899     587     892     700  
Other noninterest income 1,682     1,667     1,226     1,149     1,167  
Total Noninterest Income 32,061     26,717     27,045     29,765     27,634  
Noninterest Expense                  
Salaries and employee benefits 49,995     50,285     46,729     49,921     50,758  
Occupancy 6,436     6,607     6,622     6,348     6,315  
Furniture and equipment 3,220     2,692     3,126     3,470     3,184  
Professional fees 14,968     11,379     10,630     12,800     10,632  
Advertising 2,661     2,325     2,726     2,754     2,145  
Core deposit and customer relationship intangibles amortization 3,313     2,842     2,592     2,626     2,274  
Other real estate and loan collection expenses 162     701     574     784     948  
(Gain)/loss on sales/valuations of assets, net (18,286 )   (3,004 )   (35 )   912     1,528  
Restructuring expenses     3,227              
Other noninterest expenses 12,629     11,176     15,857     12,924     11,098  
Total Noninterest Expense 75,098     88,230     88,821     92,539     88,882  
Income Before Income Taxes 58,753     39,807     38,826     42,666     35,330  
Income taxes 13,584     8,310     6,685     8,956     7,451  
Net Income 45,169     31,497     32,141     33,710     27,879  
Preferred dividends             (13 )   (13 )
Net Income Available to Common Stockholders $ 45,169     $ 31,497     $ 32,141     $ 33,697     $ 27,866  
Earnings per common share-diluted $ 1.26     $ 0.91     $ 0.93     $ 0.97     $ 0.85  
Weighted average shares outstanding-diluted 35,879,259     34,699,839     34,670,180     34,644,187     32,830,751  


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As of
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Assets                  
Cash and due from banks $ 198,664     $ 174,198     $ 223,135     $ 196,847     $ 193,069  
Interest bearing deposits with other banks and other short-term investments 443,475     318,303     50,495     240,528     194,937  
Cash and cash equivalents 642,139     492,501     273,630     437,375     388,006  
Time deposits in other financial institutions 4,430     4,675     4,672     5,836     6,803  
Securities:                  
Carried at fair value 2,561,887     2,400,460     2,450,709     2,274,215     2,197,117  
Held to maturity, at cost 88,166     88,089     236,283     239,908     244,271  
Other investments, at cost 31,366     27,506     28,396     26,656     26,725  
Loans held for sale 34,575     69,716     119,801     77,727     55,684  
Loans:                  
Held to maturity 7,853,051     7,331,544     7,407,697     7,365,493     7,477,697  
 Allowance for loan losses (63,850 )   (62,639 )   (61,963 )   (61,221 )   (61,324 )
Loans, net 7,789,201     7,268,905     7,345,734     7,304,272     7,416,373  
Premises, furniture and equipment, net 198,329     190,215     194,676     198,224     199,959  
Goodwill 427,097     391,668     391,668     391,668     391,668  
Core deposit and customer relationship intangibles, net 52,718     44,637     47,479     50,071     52,698  
Servicing rights, net 7,180     28,968     31,072     32,039     31,996  
Cash surrender value on life insurance 170,421     163,764     162,892     162,216     159,302  
Other real estate, net 6,646     5,391     6,153     11,908     11,074  
Other assets 146,135     136,000     114,841     123,017     120,244  
Total Assets $ 12,160,290     $ 11,312,495     $ 11,408,006     $ 11,335,132     $ 11,301,920  
Liabilities and Equity                  
Liabilities                  
Deposits:                  
 Demand $ 3,426,758     $ 3,118,909     $ 3,264,737     $ 3,427,819     $ 3,399,598  
 Savings 5,533,503     5,145,929     5,107,962     4,958,430     4,864,773  
 Time 1,148,296     1,088,104     1,023,730     1,125,914     1,224,773  
Total deposits 10,108,557     9,352,942     9,396,429     9,512,163     9,489,144  
Deposits held for sale     118,564     106,409     50,312      
Short-term borrowings 107,260     104,314     227,010     131,139     229,890  
Other borrowings 282,863     268,312     274,905     277,563     258,708  
Accrued expenses and other liabilities 139,823     96,261     78,078     83,562     68,431  
Total Liabilities 10,638,503     9,940,393     10,082,831     10,054,739     10,046,173  
Stockholders' Equity                  
Preferred equity                 938  
Common stock 36,690     34,604     34,477     34,473     34,438  
Capital surplus 837,150     745,596     743,095     742,080     740,128  
Retained earnings 642,808     603,506     579,252     553,662     524,786  
Accumulated other comprehensive income/(loss) 5,139     (11,604 )   (31,649 )   (49,822 )   (44,543 )
Total Equity 1,521,787     1,372,102     1,325,175     1,280,393     1,255,747  
Total Liabilities and Equity $ 12,160,290     $ 11,312,495     $ 11,408,006     $ 11,335,132     $ 11,301,920  


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
June 30,
  For the Six Months Ended
June 30,
  2019   2018   2019   2018
Average Balances              
Assets $ 11,708,538     $ 10,643,306     $ 11,489,095     $ 10,204,061  
Loans, net of unearned 7,648,562     7,123,182     7,531,360     6,826,018  
Deposits 9,790,756     9,018,945     9,574,680     8,637,165  
Earning assets 10,552,166     9,614,800     10,342,229     9,238,391  
Interest bearing liabilities 6,872,449     6,205,187     6,747,990     5,951,175  
Common stockholders' equity 1,442,388     1,139,876     1,389,612     1,076,083  
Total stockholders' equity 1,442,388     1,140,814     1,389,612     1,077,021  
Tangible common stockholders' equity 981,878     767,732     940,217     745,937  
               
Key Performance Ratios              
Annualized return on average assets 1.55 %   1.05 %   1.35 %   1.01 %
Annualized return on average common equity (GAAP) 12.56 %   9.81 %   11.13 %   9.58 %
Annualized return on average tangible common equity (non-GAAP)(1) 19.52 %   15.50 %   17.49 %   14.70 %
Annualized ratio of net charge-offs to average loans 0.19 %   0.12 %   0.12 %   0.10 %
Annualized net interest margin (GAAP) 4.06 %   4.23 %   4.09 %   4.21 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1) 4.10 %   4.30 %   4.14 %   4.28 %
Efficiency ratio, fully tax-equivalent(1) 64.81 %   64.94 %   65.01 %   66.48 %
               
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)              
Net income available to common stockholders (GAAP) $ 45,169     $ 27,866     $ 76,666     $ 51,121  
Plus core deposit and customer relationship intangibles amortization, net of tax(2) 2,617     1,796     4,862     3,268  
Adjusted net income available to common stockholders (non-GAAP) $ 47,786     $ 29,662     $ 81,528     $ 54,389  
               
Average common stockholders' equity (GAAP) $ 1,442,388     $ 1,139,876     $ 1,389,612     $ 1,076,083  
Less average goodwill 410,642     325,781     401,207     288,185  
Less average core deposit and customer relationship intangibles, net 49,868     46,363     48,188     41,961  
Average tangible common equity (non-GAAP) $ 981,878     767,732     940,217     745,937  
Annualized return on average common equity (GAAP) 12.56 %   9.81 %   11.13 %   9.58 %
Annualized return on average tangible common equity (non-GAAP) 19.52 %   15.50 %   17.49 %   14.70 %
               
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)              
Net Interest Income (GAAP) $ 106,708     $ 101,409     $ 209,663     $ 192,993  
Plus tax-equivalent adjustment(2) 1,268     1,575     2,680     3,119  
Net interest income, tax-equivalent (non-GAAP)

$ 107,976     $ 102,984     $ 212,343     $ 196,112  
               
Average earning assets $ 10,552,166     $ 9,614,800     $ 10,342,229     $ 9,238,391  
               
Annualized net interest margin (GAAP) 4.06 %   4.23 %   4.09 %   4.21 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)

4.10 %   4.30 %   4.14 %   4.28 %
               
(1) Refer to the "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
(2) Computed on a tax-equivalent basis using an effective tax rate of 21%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Average Balances                  
Assets $ 11,708,538     $ 11,267,214     $ 11,371,247     $ 11,291,289     $ 10,643,306  
Loans, net of unearned 7,648,562     7,412,855     7,436,497     7,462,176     7,123,182  
Deposits 9,790,756     9,356,204     9,596,807     9,530,743     9,018,945  
Earning assets 10,552,166     10,129,957     10,225,409     10,154,591     9,614,800  
Interest bearing liabilities 6,872,449     6,622,149     6,557,185     6,544,949     6,205,187  
Common stockholders' equity 1,442,388     1,336,250     1,290,691     1,263,226     1,139,876  
Total stockholders' equity 1,442,388     1,336,250     1,290,691     1,263,795     1,140,814  
Tangible common stockholders' equity (non-GAAP) 981,878     898,092     849,851     819,966     767,732  
                   
Key Performance Ratios                  
Annualized return on average assets 1.55 %   1.13 %   1.12 %   1.18 %   1.05 %
Annualized return on average common equity (GAAP) 12.56 %   9.56 %   9.88 %   10.58 %   9.81 %
Annualized return on average tangible common
equity (non-GAAP)(1)
19.52 %   15.24 %   15.96 %   17.31 %   15.50 %
Annualized ratio of net charge-offs to average loans 0.19 %   0.05 %   0.48 %   0.28 %   0.12 %
Annualized net interest margin (GAAP) 4.06 %   4.12 %   4.28 %   4.32 %   4.23 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1) 4.10 %   4.18 %   4.34 %   4.38 %   4.30 %
Efficiency ratio, fully tax-equivalent (non-GAAP)(1) 64.81 %   65.23 %   59.35 %   62.51 %   64.94 %
                   
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)                  
Net income available to common stockholders (GAAP) $ 45,169     $ 31,497     $ 32,141     $ 33,697     $ 27,866  
Plus core deposit and customer relationship intangibles amortization, net of tax(2) 2,617     2,245     2,048     2,075     1,796  
Adjusted net income available to common stockholders (non-GAAP) $ 47,786     $ 33,742     $ 34,189     $ 35,772     $ 29,662  
                   
Average common stockholders' equity (GAAP) $ 1,442,388     $ 1,336,250     $ 1,290,691     $ 1,263,226     $ 1,139,876  
  Less average goodwill 410,642     391,668     391,668     391,668     325,781  
Less average core deposit and customer relationship intangibles, net 49,868     46,490     49,172     51,592     46,363  
Average tangible common stockholders' equity (non-GAAP) $ 981,878     $ 898,092     $ 849,851     $ 819,966     $ 767,732  
Annualized return on average common equity (GAAP) 12.56 %   9.56 %   9.88 %   10.58 %   9.81 %
Annualized return on average tangible common equity (non-GAAP) 19.52 %   15.24 %   15.96 %   17.31 %   15.50 %
                   
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)                  
Net Interest Income (GAAP) $ 106,708     $ 102,955     $ 110,283     $ 110,678     $ 101,409  
  Plus tax-equivalent adjustment(2) 1,268     1,412     1,565     1,544     1,575  
Net interest income, fully tax-equivalent (non-GAAP) $ 107,976     $ 104,367     $ 111,848     $ 112,222     $ 102,984  
                   
Average earning assets $ 10,552,166     $ 10,129,957     $ 10,225,409     $ 10,154,591     $ 9,614,800  
                   
Annualized net interest margin (GAAP) 4.06 %   4.12 %   4.28 %   4.32 %   4.23 %
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.10 %   4.18 %   4.34 %   4.38 %   4.30 %
 
(1) Refer to the "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
(2) Computed on a tax-equivalent basis using an effective tax rate of 21%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
June 30,
  For the Six Months Ended
June 30,
Reconciliation of Efficiency Ratio (non-GAAP) 2019   2018   2019   2018
Net interest income (GAAP) $ 106,708     $ 101,409     $ 209,663     $ 192,993  
Tax-equivalent adjustment(1) 1,268     1,575     2,680     3,119  
Fully tax-equivalent net interest income 107,976     102,984     212,343     196,112  
Noninterest income 32,061     27,634     58,778     52,350  
Securities (gains)/losses, net (3,580 )   259     (5,155 )   (1,182 )
Unrealized gain on equity securities, net (112 )   (71 )   (370 )   (43 )
Valuation adjustment on servicing rights 364     216     953     218  
Adjusted income (non-GAAP) $ 136,709     $ 131,022     $ 266,549     $ 247,455  
               
Total noninterest expenses (GAAP) $ 75,098     $ 88,882     $ 163,328     $ 172,528  
Less:              
Core deposit and customer relationship intangibles amortization 3,313     2,274     6,155     4,137  
Partnership investment in tax credit projects 1,465         1,940      
(Gain)/loss on sales/valuations of assets, net (18,286 )   1,528     (21,290 )   1,331  
  Restructuring expenses         3,227     2,564  
Adjusted noninterest expenses (non-GAAP) $ 88,606     $ 85,080     $ 173,296     $ 164,496  
               
Efficiency ratio, fully tax-equivalent (non-GAAP) 64.81 %   64.94 %   65.01 %   66.48 %


Reconciliation of Efficiency Ratio (non-GAAP) For the Quarter Ended
6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Net interest income (GAAP) $ 106,708     $ 102,955     $ 110,283     $ 110,678     $ 101,409  
Tax-equivalent adjustment(1) 1,268     1,412     1,565     1,544     1,575  
Fully tax-equivalent net interest income 107,976     104,367     111,848     112,222     102,984  
Noninterest income 32,061     26,717     27,045     29,765     27,634  
Securities (gains)/losses, net (3,580 )   (1,575 )   (48 )   145     259  
Unrealized gain on equity securities, net (112 )   (258 )   (115 )   (54 )   (71 )
Valuation adjustment on servicing rights 364     589     58     (230 )   216  
Adjusted income (non-GAAP) $ 136,709     $ 129,840     $ 138,788     $ 141,848     $ 131,022  
                   
Total noninterest expenses (GAAP) $ 75,098     $ 88,230     $ 88,821     $ 92,539     $ 88,882  
Less:                  
Core deposit and customer relationship intangibles amortization 3,313     2,842     2,592     2,626     2,274  
Partnership investment in tax credit projects 1,465     475     3,895     338      
(Gain)/loss on sales/valuation of assets, net (18,286 )   (3,004 )   (35 )   912     1,528  
Restructuring expenses     3,227              
Adjusted noninterest expenses (non-GAAP) $ 88,606     $ 84,690     $ 82,369     $ 88,663     $ 85,080  
                   
Efficiency ratio, fully tax-equivalent (non-GAAP) 64.81 %   65.23 %   59.35 %   62.51 %   64.94 %
                   
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.


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
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Common Share Data                  
Book value per common share $ 41.48     $ 39.65     $ 38.44     $ 37.14     $ 36.44  
Tangible book value per common share (non-GAAP)(1) $ 28.40     $ 27.04     $ 25.70     $ 24.33     $ 23.53  
Common shares outstanding, net of treasury stock 36,690,061     34,603,611     34,477,499     34,473,029     34,438,445  
Tangible common equity ratio (non-GAAP)(1) 8.92 %   8.60 %   8.08 %   7.70 %   7.46 %
                   
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)                  
Common stockholders' equity (GAAP) $ 1,521,787     $ 1,372,102     $ 1,325,175     $ 1,280,393     $ 1,254,809  
Less goodwill 427,097     391,668     391,668     391,668     391,668  
Less core deposit and customer relationship intangibles, net 52,718     44,637     47,479     50,071     52,698  
Tangible common stockholders' equity (non-GAAP) $ 1,041,972     $ 935,797     $ 886,028     $ 838,654     $ 810,443  
                   
Common shares outstanding, net of treasury stock 36,690,061     34,603,611     34,477,499     34,473,029     34,438,445  
Common stockholders' equity (book value) per share (GAAP) $ 41.48     $ 39.65     $ 38.44     $ 37.14     $ 36.44  
Tangible book value per common share (non-GAAP) $ 28.40     $ 27.04     $ 25.70     $ 24.33     $ 23.53  
                   
Reconciliation of Tangible Common Equity Ratio (non-GAAP)                  
Tangible common stockholders' equity (non-GAAP) $ 1,041,972     $ 935,797     $ 886,028     $ 838,654     $ 810,443  
                   
Total assets (GAAP) $ 12,160,290     $ 11,312,495     $ 11,408,006     $ 11,335,132     $ 11,301,920  
  Less goodwill 427,097     391,668     391,668     391,668     391,668  
 Less core deposit and customer relationship intangibles, net 52,718     44,637     47,479     50,071     52,698  
Total tangible assets (non-GAAP) $ 11,680,475     $ 10,876,190     $ 10,968,859     $ 10,893,393     $ 10,857,554  
Tangible common equity ratio (non-GAAP) 8.92 %   8.60 %   8.08 %   7.70 %   7.46 %
                   
Loan Data                  
Loans held to maturity:                  
Commercial and commercial real estate $ 6,230,372     $ 5,745,051     $ 5,731,712     $ 5,610,953     $ 5,721,138  
Residential mortgage 613,707     630,433     673,603     676,941     683,051  
Agricultural and agricultural real estate 549,404     544,805     565,408     574,048     562,353  
Consumer 461,802     412,573     440,158     506,181     512,899  
Unearned discount and deferred loan fees (2,234 )   (1,318 )   (3,184 )   (2,630 )   (1,744 )
Total loans held to maturity $ 7,853,051     $ 7,331,544     $ 7,407,697     $ 7,365,493     $ 7,477,697  
                   
Other Selected Trend Information                  
Effective tax rate 23.12 %   20.88 %   17.22 %   20.99 %   21.09 %
Full time equivalent employees 2,040     1,976     2,045     2,124     2,216  
                   
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As of and for the Quarter Ended
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Allowance for Loan Losses                  
Balance, beginning of period $ 62,639     $ 61,963     $ 61,221     $ 61,324     $ 58,656  
Provision for loan losses 4,918     1,635     9,681     5,238     4,831  
Charge-offs (4,780 )   (1,950 )   (9,777 )   (6,120 )   (3,164 )
Recoveries 1,073     991     838     779     1,001  
Balance, end of period $ 63,850     $ 62,639     $ 61,963     $ 61,221     $ 61,324  
                   
Asset Quality                  
Nonaccrual loans $ 79,619     $ 77,294     $ 71,943     $ 73,060     $ 69,376  
Loans past due ninety days or more 285     1,706     726     154     54  
Other real estate owned 6,646     5,391     6,153     11,908     11,074  
Other repossessed assets 39     8     459     495     499  
Total nonperforming assets $ 86,589     $ 84,399     $ 79,281     $ 85,617     $ 81,003  
                   
Performing troubled debt restructured loans $ 3,539     $ 3,460     $ 4,026     $ 4,180     $ 4,012  
                   
Nonperforming Assets Activity                  
Balance, beginning of period $ 84,399     $ 79,281     $ 85,617     $ 81,003     $ 77,052  
Net loan charge offs (3,707 )   (959 )   (8,939 )   (5,341 )   (2,163 )
New nonperforming loans 13,688     15,314     17,332     16,965     16,254  
Acquired nonperforming assets 230                 7,973  
Reduction of nonperforming loans(1) (6,246 )   (6,238 )   (6,065 )   (5,085 )   (15,696 )
OREO/Repossessed assets sales proceeds (1,288 )   (2,092 )   (8,390 )   (1,064 )   (1,541 )
OREO/Repossessed assets writedowns, net (487 )   (462 )   (230 )   (886 )   (993 )
Net activity at Citizens Finance Co.     (445 )   (44 )   25     117  
Balance, end of period $ 86,589     $ 84,399     $ 79,281     $ 85,617     $ 81,003  
 
Asset Quality Ratios                  
Ratio of nonperforming loans to total loans 1.02 %   1.08 %   0.98 %   0.99 %   0.93 %
Ratio of nonperforming loans and performing trouble debt restructured loans to total loans 1.06 %   1.12 %   1.04 %   1.05 %   0.98 %
Ratio of nonperforming assets to total assets 0.71 %   0.75 %   0.69 %   0.76 %   0.72 %
Annualized ratio of net loan charge-offs to average loans 0.19 %   0.05 %   0.48 %   0.28 %   0.12 %
Allowance for loan losses as a percent of loans 0.81 %   0.85 %   0.84 %   0.83 %   0.82 %
Allowance for loan losses as a percent of nonperforming loans 79.91 %   79.29 %   85.27 %   83.62 %   88.32 %
Loans delinquent 30-89 days as a percent of total loans 0.31 %   0.47 %   0.21 %   0.62 %   0.30 %
                   
(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
  June 30, 2019   March 31, 2019   June 30, 2018
  Average
Balance
  Interest   Rate   Average Balance   Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                                  
Securities:                                  
Taxable $ 2,217,863     $ 16,123     2.92 %   $ 2,169,016     $ 15,876     2.97 %   $ 1,890,468     $ 12,270     2.60 %
Nontaxable(1) 324,164     3,233     4.00     391,724     3,915     4.05     448,844     4,537     4.05  
Total securities 2,542,027     19,356     3.05     2,560,740     19,791     3.13     2,339,312     16,807     2.88  
Interest on deposits with other banks and other short-term investments 424,262     2,299     2.17     218,445     1,292     2.40     211,414     768     1.46  
Federal funds sold             560     4     2.90              
Loans:(2)                                  
Commercial and commercial real estate(1) 5,968,424     82,328     5.53     5,745,180     78,083     5.51     5,403,447     71,301     5.29  
Residential mortgage 676,465     8,238     4.88     673,682     7,179     4.32     685,005     7,562     4.43  
Agricultural and agricultural real estate(1) 558,128     7,581     5.45     554,506     7,301     5.34     542,249     6,850     5.07  
Consumer 445,545     6,517     5.87     439,487     6,479     5.98     492,481     9,192     7.49  
Fees on loans     1,952             2,004             2,504      
Less: allowance for loan losses (62,685 )           (62,643 )           (59,108 )        
Net loans 7,585,877     106,616     5.64     7,350,212     101,046     5.58     7,064,074     97,409     5.53  
Total earning assets 10,552,166     128,271     4.88 %   10,129,957     122,133     4.89 %   9,614,800     114,984     4.80 %
Nonearning Assets 1,156,372             1,137,257             1,028,506          
Total Assets $ 11,708,538             $ 11,267,214             $ 10,643,306          
Interest Bearing Liabilities(3)                                  
Savings $ 5,360,355     $ 11,895     0.89 %   $ 5,121,179     $ 10,083     0.80 %   $ 4,748,306     $ 5,535     0.47 %
Time deposits 1,142,842     4,243     1.49     1,034,744     3,130     1.23     1,041,590     2,448     0.94  
Short-term borrowings 92,977     338     1.46     195,390     889     1.85     152,576     547     1.44  
Other borrowings 276,275     3,819     5.54     270,836     3,664     5.49     262,715     3,470     5.30  
Total interest bearing liabilities 6,872,449     20,295     1.18 %   6,622,149     17,766     1.09 %   6,205,187     12,000     0.78 %
Noninterest Bearing Liabilities(3)                                  
Noninterest bearing deposits 3,287,559             3,200,281             3,229,049          
Accrued interest and other liabilities 106,142             108,534             68,256          
Total noninterest bearing liabilities 3,393,701             3,308,815             3,297,305          
Stockholders' Equity 1,442,388             1,336,250             1,140,814          
Total Liabilities and Stockholders' Equity $ 11,708,538             $ 11,267,214             $ 10,643,306          
Net interest income, fully tax-equivalent (non-GAAP)(1)     $ 107,976             $ 104,367             $ 102,984      
Net interest spread(1)         3.70 %           3.80 %           4.02 %
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets         4.10 %           4.18 %           4.30 %
                                   
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Six Months Ended
  June 30, 2019   June 30, 2018
  Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                      
Securities:                      
Taxable $ 2,193,576     $ 31,999     2.94 %   $ 1,847,858     $ 23,847     2.60 %
Nontaxable(1) 357,757     7,148     4.03     448,743     9,067     4.07  
Total securities 2,551,333     39,147     3.09     2,296,601     32,914     2.89  
Interest bearing deposits with other banks and other short-term investments 321,922     3,591     2.25     173,349     1,175     1.37  
Federal funds sold 278     4     2.90              
Loans:(2)                      
Commercial and commercial real estate(1) 5,857,419     160,411     5.52     5,158,483     134,114     5.24  
Residential mortgage 675,081     15,417     4.61     663,711     14,413     4.38  
Agricultural and agricultural real estate(1) 556,327     14,882     5.39     528,093     12,854     4.91  
Consumer 442,533     12,996     5.92     475,731     17,852     7.57  
Fees on loans     3,956             4,420      
Less: allowance for loan losses (62,664 )           (57,577 )        
Net loans 7,468,696     207,662     5.61     6,768,441     183,653     5.47  
Total earning assets 10,342,229     250,404     4.88     9,238,391     217,742     4.75  
Nonearning Assets 1,146,866             965,670          
Total Assets $ 11,489,095             $ 10,204,061          
Interest Bearing Liabilities(3)                      
Savings $ 5,241,428     $ 21,978     0.85 %   $ 4,554,484     $ 9,326     0.41 %
Time deposits 1,089,091     7,373     1.37     975,129     4,423     0.91  
Short-term borrowings 143,901     1,227     1.72     150,171     815     1.09  
Other borrowings 273,570     7,483     5.52     271,391     7,066     5.25  
Total interest bearing liabilities 6,747,990     38,061     1.14     5,951,175     21,630     0.73  
Noninterest Bearing Liabilities(3)                      
Noninterest bearing deposits 3,244,161             3,107,552          
Accrued interest and other liabilities 107,332             68,313          
Total noninterest bearing liabilities 3,351,493             3,175,865          
Stockholders' Equity 1,389,612             1,077,021          
Total Liabilities and Stockholders' Equity $ 11,489,095             $ 10,204,061          
Net interest income, fully tax-equivalent (non-GAAP)(1)     $ 212,343             $ 196,112      
Net interest spread(1)         3.74 %           4.02 %
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets         4.14 %           4.28 %
                       
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.


HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
  As of and For the Quarter Ended
  6/30/2019 3/31/2019 12/31/2018 9/30/2018 6/30/2018
Total Assets          
Citywide Banks $ 2,261,591   $ 2,214,105   $ 2,307,284   $ 2,300,018   $ 2,295,261  
Dubuque Bank and Trust Company 1,680,539   1,550,487   1,480,914   1,523,447   1,500,108  
New Mexico Bank & Trust 1,534,236   1,500,024   1,492,555   1,465,020   1,466,311  
Bank of Blue Valley(2) 1,319,226   564,833   571,012   592,786   602,630  
First Bank & Trust 1,088,796   1,099,759   1,109,929   1,112,464   1,123,559  
Wisconsin Bank & Trust 1,042,463   1,031,305   1,114,352   1,051,160   1,034,075  
Illinois Bank & Trust 852,830   810,357   804,907   795,132   815,905  
Premier Valley Bank 847,076   855,473   849,696   851,358   846,215  
Arizona Bank & Trust 732,783   669,806   658,714   650,032   653,596  
Minnesota Bank & Trust 631,339   657,187   666,564   649,179   660,469  
Rocky Mountain Bank 503,126   489,135   490,453   492,063   504,243  
Total Deposits(1)          
Citywide Banks $ 1,833,259   $ 1,802,701   $ 1,848,373   $ 1,905,830   $ 1,867,626  
Dubuque Bank and Trust Company 1,157,881   1,245,553   1,214,541   1,217,976   1,136,431  
New Mexico Bank & Trust 1,346,304   1,313,708   1,307,464   1,267,844   1,242,673  
Bank of Blue Valley(2) 1,077,183   473,712   489,471   511,154   498,798  
First Bank & Trust 844,793   857,313   861,629   875,170   887,181  
Wisconsin Bank & Trust 892,020   872,090   927,821   891,167   874,035  
Illinois Bank & Trust 769,577   735,101   715,482   726,790   753,022  
Premier Valley Bank 689,384   676,849   639,194   706,125   696,460  
Arizona Bank & Trust 646,728   593,089   574,762   550,530   558,895  
Minnesota Bank & Trust 515,310   546,706   560,399   544,513   561,257  
Rocky Mountain Bank 438,349   426,503   424,700   429,167   443,359  
Net Income          
Citywide Banks $ 8,120   $ 7,283   $ 7,005   $ 7,762   $ 7,018  
Dubuque Bank and Trust Company 17,353   5,011   6,002   4,458   4,426  
New Mexico Bank & Trust 7,634   7,847   6,007   7,104   7,043  
Bank of Blue Valley(2) 3,505   1,172   324   165   961  
First Bank & Trust 3,099   2,792   3,334   3,932   1,925  
Wisconsin Bank & Trust 2,516   4,707   3,229   3,735   2,470  
Illinois Bank & Trust 1,751   2,632   2,180   2,419   2,421  
Premier Valley Bank 2,763   2,411   2,930   3,006   2,664  
Arizona Bank & Trust 3,110   2,780   1,951   2,660   3,623  
Minnesota Bank & Trust 1,980   1,454   1,038   2,167   581  
Rocky Mountain Bank 779   1,358   1,230   1,210   1,185  
 
(1) Includes deposits held for sale.
(2) Formerly known as Morrill & Janes Bank and Trust Company.

 

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


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