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Heartland Financial USA, Inc. Reports Record Annual Earnings and Strong Fourth Quarter Results as of December 31, 2019

Highlights

  • Record annual net income available to common stockholders of $149.1 million, an increase of $32.2 million or 28% from $117.0 million for 2018

  • Quarterly net income available to common stockholders of $37.9 million or $1.03 per diluted common share in comparison with $32.1 million or $0.93 per diluted common share for the fourth quarter of the prior year

  • Net interest margin of 3.86%, fully tax-equivalent (non-GAAP)(1) of 3.90% for the fourth quarter of 2019

  • Return on average common equity of 9.56% and return on average tangible common equity (non-GAAP)(1) of 14.65% for the fourth quarter of 2019

  • Efficiency ratio (non-GAAP)(1) for the fourth quarter of 2019 of 60.69%

  • Tangible common equity ratio (non-GAAP)(1) of 8.52% at December 31, 2019

  • Organic commercial and commercial real estate loan growth of $96.8 million and organic non-time deposit growth of $225.0 million for the fourth quarter of 2019

  • Completed the acquisition of substantially all of the assets and deposits and certain other liabilities of Rockford Bank and Trust Company

Quarter Ended
December 31,

Year Ended
December 31,

2019

2018

2019

2018

Net income available to common stockholders (in millions)

$

37.9

$

32.1

$

149.1

$

117.0

Diluted earnings per common share

1.03

0.93

4.14

3.52

Return on average assets

1.17

%

1.12

%

1.24

%

1.09

%

Return on average common equity

9.56

9.88

10.12

9.93

Return on average tangible common equity (non-GAAP)(1)

14.65

15.96

15.73

15.72

Net interest margin

3.86

4.28

4.00

4.26

Net interest margin, fully tax-equivalent (non-GAAP)(1)

3.90

4.34

4.04

4.32

Efficiency ratio, fully-tax equivalent (non-GAAP)(1)

60.69

59.35

63.11

63.54

(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 completed a record year with net income available to common stockholders of $149.1 million, which was an increase of $32.2 million or 28 percent over the prior year. Diluted earnings per share for 2019 increased $0.62 or 18 percent to $4.14 from $3.52 for 2018."

Bruce K. Lee, president and chief executive officer, Heartland Financial USA, Inc.

DUBUQUE, Iowa, Jan. 27, 2020 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (HTLF) today reported net income available to common stockholders of $37.9 million, or $1.03 per diluted common share, for the quarter ended December 31, 2019, compared to $32.1 million, or $0.93 per diluted common share, for the fourth quarter of 2018. Return on average common equity was 9.56% and return on average assets was 1.17% for the fourth quarter of 2019, compared to 9.88% and 1.12%, respectively, for the same quarter in 2018.

Net income available to common stockholders for the year ended December 31, 2019, was $149.1 million or $4.14 per diluted common share, compared to $117.0 million or $3.52 per diluted common share for the year ended December 31, 2018. Return on average common equity was 10.12% and return on average assets was 1.24% for the year 2019, compared to 9.93% and 1.09% for the same period in 2018.

Commenting on Heartland’s 2019 results, Bruce K. Lee, Heartland’s president and chief executive officer, said, "Heartland completed a record year with net income available to common stockholders of $149.1 million, which was an increase of $32.2 million or 28 percent over the prior year. Diluted earnings per share for 2019 increased $0.62 or 18 percent to $4.14 from $3.52 for 2018."

Strategic Developments in 2019

In keeping with its focus on core businesses and execution of strategic priorities, Heartland completed the following transactions:

  • In the first quarter of 2019, two branch locations of Wisconsin Bank & Trust and the consumer finance loan portfolios totaling approximately $67 million of Citizens’ Finance Company were sold. 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. 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. Heartland is utilizing a portion of the net gains from these sales transactions, which totaled approximately $24.5 million, 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.

  • 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 was completed on August 23, 2019.

  • On November 30, 2019, Heartland's Illinois Bank & Trust subsidiary completed its acquisition of substantially all of the assets and substantially all of the deposits and certain other liabilities of Rockford Bank and Trust Company ("RB&T"), headquartered in Rockford, Illinois. RB&T is a wholly-owned subsidiary of Moline, Illinois-based QCR Holdings, Inc. As of the closing date, RB&T had, at fair value, total assets of $495.7 million, which included $354.0 million of gross loans held to maturity, and $430.3 million of deposits. RB&T serves the Rockford market from two full-service banking locations. The systems conversion is expected to occur in the first quarter of 2020.

“We are pleased that we have advanced our goal to have two additional charters over $1 billion dollars in assets with the acquisitions in 2019 of Bank of Blue Valley and Rockford Bank & Trust," commented Lynn B. Fuller, Heartland's executive operating chairman.

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

Net interest margin, expressed as a percentage of average earning assets, was 3.86% (3.90% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2019, compared to 3.98% (4.02% on a fully tax-equivalent basis, non-GAAP) during the third quarter of 2019 and 4.28% (4.34% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2018.

Total interest income for the fourth quarter of 2019 was $133.2 million compared to $126.3 million recorded in the fourth quarter of 2018, an increase of $6.9 million or 5%. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.1 million for the fourth quarter of 2019 and $1.6 million for the fourth quarter of 2018. With these adjustments, total interest income on a tax-equivalent basis was $134.3 million for the fourth quarter of 2019, an increase of $6.4 million or 5%, compared to total interest income on a tax-equivalent basis of $127.9 million for the fourth quarter of 2018.

Average earning assets of $11.58 billion increased $1.35 billion or 13% from the fourth quarter of 2018, which was primarily attributable to recent acquisitions. The average rate on earning assets decreased 36 basis points to 4.60% for the fourth quarter of 2019 compared to 4.96% for the same quarter in 2018. In the first quarter of 2019, Heartland sold its higher yielding consumer loan portfolios, which accounted for 10 basis points of margin in the fourth quarter of 2018.

Total interest expense for the fourth quarter of 2019 was $20.5 million, an increase of $4.4 million or 28% from $16.0 million in the fourth quarter of 2018. The average interest rate paid on Heartland's interest bearing liabilities increased to 1.08% for the fourth quarter of 2019 compared to 0.97% for the fourth quarter of 2018.

Average interest bearing deposits increased $961.3 million or 16% to $7.12 billion for the quarter ended December 31, 2019, from $6.16 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 15 basis points to 0.91% for the fourth quarter of 2019 compared to 0.76% for the same quarter in 2018.

Average borrowings decreased $4.8 million or 1% to $392.7 million during the fourth quarter of 2019 from $397.5 million during the same quarter in 2018. The average interest rate paid on Heartland's borrowings was 4.10% for the fourth quarter of 2019 compared to 4.19% in the fourth quarter of 2018.

Net interest income was $112.7 million during the fourth quarter of 2019 compared to $110.3 million during the fourth quarter of 2018, an increase of $2.5 million or 2%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $113.9 million during the fourth quarter of 2019 compared to net interest income on a tax-equivalent basis of $111.8 million during the fourth quarter of 2018, an increase of $2.0 million or 2%.

"While our net interest margin declined during the fourth quarter of 2019, we were able to lower our non-time deposit costs by 16 basis points. The current interest rate environment is very competitive, however, we are actively working to maintain our yield on loans while lowering our funding costs," Lee said.

Noninterest Income and Noninterest Expense Increase from Fourth Quarter of 2018

Total noninterest income was $28.0 million during the fourth quarter of 2019 compared to $27.0 million during the fourth quarter of 2018, an increase of $985,000 or 4%. Significant changes by noninterest income category were:

  • Service charges and fees decreased $1.3 million or 9% to $12.4 million for the fourth quarter of 2019 compared to $13.7 million for the fourth quarter of 2018. Debit card income for the fourth quarter of 2019 totaled $1.6 million compared to $3.7 million for the same quarter in 2018, which was a decrease of $2.2 million or 58%, primarily due to the impact of the Durbin Amendment, which was effective for Heartland on July 1, 2019.

  • Loan servicing income totaled $955,000 for the fourth quarter of 2019 compared to $2.1 million for the fourth quarter of 2018, which was a decrease of $1.1 million or 54%. The decrease was primarily due to the sale of the mortgage servicing rights of Dubuque Bank and Trust Company in the second quarter of 2019.

  • Other noninterest income totaled $2.9 million for the fourth quarter of 2019 compared to $1.2 million for the fourth quarter of 2018, which was an increase of $1.6 million or 133%. Included in other noninterest income for the fourth quarter of 2019 was $891,000 related to proceeds on life insurance policies.

Total noninterest expense for the fourth quarter of 2019 was $92.9 million compared to $88.8 million for the same quarter of 2018, which was an increase of $4.0 million or 5%. Significant changes by noninterest expense category were:

  • Salaries and employee benefits totaled $50.2 million for the fourth quarter of 2019 compared to $46.7 million for the same quarter of 2018, which is an increase of $3.5 million or 8%, which was primarily attributable to higher incentive compensation costs.

  • Professional fees increased $914,000 or 9% to $11.5 million for the fourth quarter of 2019 compared to $10.6 million for the fourth quarter of 2018. This increase was primarily attributable to higher consulting fees related to process improvement and model validations. Consulting fees increased $759,000 or 150% to $1.3 million in the fourth quarter of 2019 from $507,000 in the same quarter of 2018.

  • Net losses on assets totaled $1.5 million for the fourth quarter of 2019 compared to net gains of $35,000 for the fourth quarter of 2018, which was an increase of $1.5 million. Write-downs on fixed assets and buildings held for sale totaling $2.4 million were recorded in the fourth quarter of 2019. An additional gain of $1.2 million was recorded associated with the mortgage servicing rights sale due to the re-evaluation of any remaining contingencies.

Heartland's effective tax rate was 11.99% for the fourth quarter of 2019 compared to 17.22% for the fourth quarter of 2018. The following items impacted Heartland's fourth quarter 2019 and 2018 tax calculations:

  • Solar energy tax credits of $764,000 and $2.6 million for the fourth quarter of 2019 and 2018, respectively.

  • Federal low-income housing tax credits of $281,000 and $307,000 for the fourth quarter of 2019 and 2018, respectively.

  • Tax-exempt interest income as a percentage of pre-tax income declined to 9.79% during the fourth quarter of 2019 from 15.16% during the fourth quarter of 2018.

  • Historic rehabilitation tax credits totaled $1.8 million for the fourth quarter of 2019 compared to $0 for the same quarter of 2018.

  • Included in the fourth quarter 2019 tax calculation were $1.9 million of tax benefits related to the release of valuation allowances on deferred tax assets.

For the years ended December 31, 2019 and 2018, Heartland's effective tax rate was 19.00% and 19.43%, respectively.

Loans and Deposits Increase Since December 31, 2018

Total assets were $13.21 billion at December 31, 2019, an increase of $1.80 billion or 16% from $11.41 billion at year-end 2018. Excluding $766.2 million of assets acquired at fair value in the BVBC transaction and $495.7 million of assets acquired at fair value in the RB&T transaction, total assets increased $539.7 million or 5% since year-end 2018. Securities represented 26% and 24% of total assets at December 31, 2019, and December 31, 2018, respectively.

Total loans held to maturity were $8.37 billion at December 31, 2019, compared to $7.41 billion at year-end 2018, an increase of $960.2 million or 13%. This change includes $896.0 million of total loans held to maturity acquired at fair value in the BVBC and RB&T transactions. 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 and RB&T transactions, total loans held to maturity organically grew $96.3 million or 1% since December 31, 2018. Loan changes by category were:

  • Commercial and commercial real estate loans totaled $6.79 billion at December 31, 2019, compared to $5.73 billion at December 31, 2018, which was an increase of $1.06 billion or 18%. Excluding $14.9 million of commercial and commercial real estate loans classified as held for sale during the first quarter of 2019 and $780.3 million of loans acquired in the BVBC and RB&T transactions, commercial and commercial real estate loans organically grew $293.4 million or 5% December 31, 2018.

  • Agricultural and agricultural real estate loans totaled $533.1 million at December 31, 2019, compared to $565.4 million at December 31, 2018, which was a decrease of $32.3 million or 6%. 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 organically decreased $27.5 million or 5% since December 31, 2018.

  • Residential mortgage loans decreased $75.9 million or 11% to $597.7 million at December 31, 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 $59.3 million of loans acquired in the BVBC and RB&T transactions, residential mortgage loans organically decreased $133.2 million or 20% since December 31, 2018.

  • Consumer loans increased $12.1 million or 3% to $452.2 million at December 31, 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 $54.7 million of loans acquired in the BVBC and RB&T transactions, consumer loans organically decreased $33.9 million or 8% since December 31, 2018.

"We had outstanding organic commercial and commercial real estate loan growth in the fourth quarter of 2019 of $96.8 million and $293.4 million for the year, and we expect this growth to continue in 2020," said Lee.

Total deposits were $11.04 billion as of December 31, 2019, compared to $9.40 billion at year-end, which was an increase of $1.65 billion or 18%. This increase includes $1.05 billion of deposits acquired at fair value in the BVBC and RB&T transactions. 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 and RB&T transactions, total deposits organically increased $677.5 million or 7% since December 31, 2018. Deposit changes by category were:

  • Demand deposits increased $279.1 million or 9% to $3.54 billion at December 31, 2019, compared to $3.26 billion at December 31, 2018. Excluding $235.5 million of demand deposits acquired in the BVBC and RB&T transactions and $17.3 million of demand deposits classified as held for sale in the first quarter of 2019, demand deposits organically increased $60.9 million or 2% since year-end 2018.

  • Savings deposits increased $1.20 billion or 23% to $6.31 billion at December 31, 2019, from $5.11 billion at December 31, 2018. Excluding savings deposits of $550.0 million acquired in the BVBC and RB&T transactions and $47.8 million of savings deposits classified as held for sale in the first quarter of 2019, savings deposits organically increased $697.3 million or 14% since year-end 2018.

  • Time deposits increased $169.3 million or 17% to $1.19 billion at December 31, 2019 from $1.02 billion at December 31, 2018. Excluding time deposits of $261.9 million acquired in the BVBC and RB&T transactions and $11.9 million of time deposits classified as held for sale in the first quarter of 2019, time deposits organically decreased $80.8 million or 8% since year-end 2018.

"We had impressive organic non-time deposit growth of $225.0 million for the fourth quarter of 2019 and $758.2 million for the year. Non-time deposits represented 89 percent of total deposits at December 31, 2019," Lee stated.

Nonperforming Assets Increase Since December 31, 2018

Nonperforming assets increased $8.3 million or 10% to $87.6 million or 0.66% of total assets at December 31, 2019, compared to $79.3 million or 0.69% of total assets at December 31, 2018. Excluding $3.5 million of nonperforming assets acquired in the BVBC and RB&T transactions, nonperforming assets increased $4.8 million or 6%. Nonperforming loans were $80.7 million or 0.96% of total loans at December 31, 2019, compared to $72.7 million or 0.98% of total loans at December 31, 2018. Nonperforming loans past due 90 days or more increased $3.4 million to $4.1 million at December 31, 2019 compared to $726,000 at December 31, 2018, which was primarily attributable to one $2.7 million commercial relationship that has been paid off since December 31, 2019. At December 31, 2019, loans delinquent 30-89 days were 0.33% of total loans compared to 0.21% of total loans at December 31, 2018.

The allowance for loan losses at December 31, 2019, was 0.84% of loans at December 31, 2019, and December 31, 2018. The allowance for loan losses as a percentage of nonperforming loans was 87.28% and 85.27% at December 31, 2019 and December 31, 2018, respectively. Provision expense for the fourth quarter of 2019 was $4.9 million compared to $9.7 million for the fourth quarter of 2018, which was a decrease of $4.8 million or 49%. Provision expense in the fourth quarter of 2018 included $4.0 million of provision expense due to two impaired commercial loans from acquired portfolios.

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, except that organic loan and deposit growth are reconciled to total loan and deposit growth in the preceding narrative discussion.

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.

  • Organic deposit growth is exclusive of deposits obtained through acquisitions and the reclassification of deposits that are held for sale. Management believes that this measure provides a more complete understanding of underlying trends in deposit growth notwithstanding dispositions and acquisitions.

  • Organic loan growth is exclusive of loans obtained through acquisitions and the reclassification of loans that are held for sale. Management believes that this measure provides a more complete understanding of underlying trends in loan growth notwithstanding dispositions and acquisitions.

  • 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 866-928-9948 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 26, 2021, 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 $13.21 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 115 banking locations serving 83 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.


HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Quarter Ended
December 31,

For the Year Ended
December 31,

2019

2018

2019

2018

Interest Income

Interest and fees on loans

$

107,566

$

105,700

$

424,615

$

393,871

Interest on securities:

Taxable

22,581

15,851

73,147

54,131

Nontaxable

2,102

3,467

9,868

14,120

Interest on federal funds sold

4

Interest on deposits with other banks and other short-term investments

953

1,285

6,695

3,698

Total Interest Income

133,202

126,303

514,329

465,820

Interest Expense

Interest on deposits

16,401

11,826

63,734

35,667

Interest on short-term borrowings

271

417

1,748

1,696

Interest on other borrowings

3,785

3,777

15,118

14,503

Total Interest Expense

20,457

16,020

80,600

51,866

Net Interest Income

112,745

110,283

433,729

413,954

Provision for loan losses

4,903

9,681

16,657

24,013

Net Interest Income After Provision for Loan Losses

107,842

100,602

417,072

389,941

Noninterest Income

Service charges and fees

12,368

13,660

52,157

48,706

Loan servicing income

955

2,061

4,843

7,292

Trust fees

5,141

4,599

19,399

18,393

Brokerage and insurance commissions

1,062

1,618

3,786

4,513

Securities gains, net

491

48

7,659

1,085

Unrealized gain on equity securities, net

11

115

525

212

Net gains on sale of loans held for sale

3,363

3,189

15,555

21,450

Valuation adjustment on servicing rights

668

(58

)

(911

)

(46

)

Income on bank owned life insurance

1,117

587

3,785

2,793

Other noninterest income

2,854

1,226

9,410

4,762

Total Noninterest Income

28,030

27,045

116,208

109,160

Noninterest Expense

Salaries and employee benefits

50,234

46,729

200,541

196,118

Occupancy

5,813

6,622

25,450

25,328

Furniture and equipment

3,330

3,126

12,100

12,529

Professional fees

11,544

10,630

50,022

43,510

Advertising

2,305

2,726

10,028

9,565

Core deposit and customer relationship intangibles amortization

2,918

2,592

11,972

9,355

Other real estate and loan collection expenses, net

261

574

1,035

3,038

(Gain)/loss on sales/valuations of assets, net

1,512

(35

)

(19,422

)

2,208

Restructuring expenses

3,227

2,564

Other noninterest expenses

14,949

15,857

54,208

49,673

Total Noninterest Expense

92,866

88,821

349,161

353,888

Income Before Income Taxes

43,006

38,826

184,119

145,213

Income taxes

5,155

6,685

34,990

28,215

Net Income

37,851

32,141

149,129

116,998

Preferred dividends

(39

)

Net Income Available to Common Stockholders

$

37,851

$

32,141

$

149,129

$

116,959

Earnings per common share-diluted

$

1.03

$

0.93

$

4.14

$

3.52

Weighted average shares outstanding-diluted

36,840,519

34,670,180

36,061,908

33,213,148


HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Quarter Ended

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Interest Income

Interest and fees on loans

$

107,566

$

110,566

$

106,027

$

100,456

$

105,700

Interest on securities:

Taxable

22,581

18,567

16,123

15,876

15,851

Nontaxable

2,102

2,119

2,554

3,093

3,467

Interest on federal funds sold

4

Interest on deposits with other banks and other short-term investments

953

2,151

2,299

1,292

1,285

Total Interest Income

133,202

133,403

127,003

120,721

126,303

Interest Expense

Interest on deposits

16,401

17,982

16,138

13,213

11,826

Interest on short-term borrowings

271

250

338

889

417

Interest on other borrowings

3,785

3,850

3,819

3,664

3,777

Total Interest Expense

20,457

22,082

20,295

17,766

16,020

Net Interest Income

112,745

111,321

106,708

102,955

110,283

Provision for loan losses

4,903

5,201

4,918

1,635

9,681

Net Interest Income After Provision for Loan Losses

107,842

106,120

101,790

101,320

100,602

Noninterest Income

Service charges and fees

12,368

12,366

14,629

12,794

13,660

Loan servicing income

955

821

1,338

1,729

2,061

Trust fees

5,141

4,959

4,825

4,474

4,599

Brokerage and insurance commissions

1,062

962

1,028

734

1,618

Securities gains, net

491

2,013

3,580

1,575

48

Unrealized gain on equity securities, net

11

144

112

258

115

Net gains on sale of loans held for sale

3,363

4,673

4,343

3,176

3,189

Valuation adjustment on servicing rights

668

(626

)

(364

)

(589

)

(58

)

Income on bank owned life insurance

1,117

881

888

899

587

Other noninterest income

2,854

3,207

1,682

1,667

1,226

Total Noninterest Income

28,030

29,400

32,061

26,717

27,045

Noninterest Expense

Salaries and employee benefits

50,234

50,027

49,995

50,285

46,729

Occupancy

5,813

6,594

6,436

6,607

6,622

Furniture and equipment

3,330

2,858

3,220

2,692

3,126

Professional fees

11,544

12,131

14,968

11,379

10,630

Advertising

2,305

2,737

2,661

2,325

2,726

Core deposit and customer relationship intangibles amortization

2,918

2,899

3,313

2,842

2,592

Other real estate and loan collection expenses, net

261

(89

)

162

701

574

(Gain)/loss on sales/valuations of assets, net

1,512

356

(18,286

)

(3,004

)

(35

)

Restructuring expenses

3,227

Other noninterest expenses

14,949

15,454

12,629

11,176

15,857

Total Noninterest Expense

92,866

92,967

75,098

88,230

88,821

Income Before Income Taxes

43,006

42,553

58,753

39,807

38,826

Income taxes

5,155

7,941

13,584

8,310

6,685

Net Income

37,851

34,612

45,169

31,497

32,141

Preferred dividends

Net Income Available to Common Stockholders

$

37,851

$

34,612

$

45,169

$

31,497

$

32,141

Earnings per common share-diluted

$

1.03

$

0.94

$

1.26

$

0.91

$

0.93

Weighted average shares outstanding-diluted

36,840,519

36,835,191

35,879,259

34,699,839

34,670,180


HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

As of

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Assets

Cash and due from banks

$

206,607

$

243,395

$

198,664

$

174,198

$

223,135

Interest bearing deposits with other banks and other short-term investments

172,127

204,372

443,475

318,303

50,495

Cash and cash equivalents

378,734

447,767

642,139

492,501

273,630

Time deposits in other financial institutions

3,564

3,711

4,430

4,675

4,672

Securities:

Carried at fair value

3,312,796

3,020,568

2,561,887

2,400,460

2,450,709

Held to maturity, at cost

91,324

87,965

88,166

88,089

236,283

Other investments, at cost

31,321

29,042

31,366

27,506

28,396

Loans held for sale

26,748

35,427

34,575

69,716

119,801

Loans:

Held to maturity

8,367,917

7,971,608

7,853,051

7,331,544

7,407,697

Allowance for loan losses

(70,395

)

(66,222

)

(63,850

)

(62,639

)

(61,963

)

Loans, net

8,297,522

7,905,386

7,789,201

7,268,905

7,345,734

Premises, furniture and equipment, net

200,525

199,235

198,329

190,215

194,676

Goodwill

446,345

427,097

427,097

391,668

391,668

Core deposit and customer relationship intangibles, net

48,688

49,819

52,718

44,637

47,479

Servicing rights, net

6,736

6,271

7,180

28,968

31,072

Cash surrender value on life insurance

171,625

171,471

170,421

163,764

162,892

Other real estate, net

6,914

6,425

6,646

5,391

6,153

Other assets

186,755

179,078

146,135

136,000

114,841

Total Assets

$

13,209,597

$

12,569,262

$

12,160,290

$

11,312,495

$

11,408,006

Liabilities and Equity

Liabilities

Deposits:

Demand

$

3,543,863

$

3,581,127

$

3,426,758

$

3,118,909

$

3,264,737

Savings

6,307,425

5,770,754

5,533,503

5,145,929

5,107,962

Time

1,193,043

1,117,975

1,148,296

1,088,104

1,023,730

Total deposits

11,044,331

10,469,856

10,108,557

9,352,942

9,396,429

Deposits held for sale

118,564

106,409

Short-term borrowings

182,626

107,853

107,260

104,314

227,010

Other borrowings

275,773

278,417

282,863

268,312

274,905

Accrued expenses and other liabilities

128,730

149,293

139,823

96,261

78,078

Total Liabilities

11,631,460

11,005,419

10,638,503

9,940,393

10,082,831

Stockholders' Equity

Common stock

36,704

36,696

36,690

34,604

34,477

Capital surplus

839,857

838,543

837,150

745,596

743,095

Retained earnings

702,502

670,816

642,808

603,506

579,252

Accumulated other comprehensive income/(loss)

(926

)

17,788

5,139

(11,604

)

(31,649

)

Total Equity

1,578,137

1,563,843

1,521,787

1,372,102

1,325,175

Total Liabilities and Equity

$

13,209,597

$

12,569,262

$

12,160,290

$

11,312,495

$

11,408,006


HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Quarter Ended
December 31,

For the Year Ended
December 31,

2019

2018

2019

2018

Average Balances

Assets

$

12,798,770

$

11,371,247

$

12,021,917

$

10,772,297

Loans, net of unearned

8,090,476

7,436,497

7,761,091

7,140,239

Deposits

10,704,643

9,596,807

10,030,629

9,104,278

Earning assets

11,580,295

10,225,409

10,845,940

9,718,106

Interest bearing liabilities

7,513,701

6,557,185

7,048,607

6,253,586

Common stockholders' equity

1,570,258

1,290,691

1,473,396

1,177,346

Total stockholders' equity

1,570,258

1,290,691

1,473,396

1,177,955

Tangible common stockholders' equity (non-GAAP)

1,087,495

849,851

1,008,178

790,788

Key Performance Ratios

Annualized return on average assets

1.17

%

1.12

%

1.24

%

1.09

%

Annualized return on average common equity (GAAP)

9.56

%

9.88

%

10.12

%

9.93

%

Annualized return on average tangible common equity (non-GAAP)(1)

14.65

%

15.96

%

15.73

%

15.72

%

Annualized ratio of net charge-offs to average loans

0.04

%

0.48

%

0.11

%

0.25

%

Annualized net interest margin (GAAP)

3.86

%

4.28

%

4.00

%

4.26

%

Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)

3.90

%

4.34

%

4.04

%

4.32

%

Efficiency ratio, fully tax-equivalent(1)

60.69

%

59.35

%

63.11

%

63.54

%

Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)

Net income available to common stockholders (GAAP)

$

37,851

$

32,141

$

149,129

$

116,959

Plus core deposit and customer relationship intangibles amortization, net of tax(2)

2,305

2,048

9,458

7,391

Adjusted net income available to common stockholders (non-GAAP)

$

40,156

$

34,189

$

158,587

$

124,350

Average common stockholders' equity (GAAP)

$

1,570,258

$

1,290,691

$

1,473,396

$

1,177,346

Less average goodwill

433,374

391,668

415,841

340,352

Less average core deposit and customer relationship intangibles, net

49,389

49,172

49,377

46,206

Average tangible common equity (non-GAAP)

$

1,087,495

$

849,851

$

1,008,178

$

790,788

Annualized return on average common equity (GAAP)

9.56

%

9.88

%

10.12

%

9.93

%

Annualized return on average tangible common equity (non-GAAP)

14.65

%

15.96

%

15.73

%

15.72

%

Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)

Net Interest Income (GAAP)

$

112,745

$

110,283

$

433,729

$

413,954

Plus tax-equivalent adjustment(2)

1,109

1,565

4,929

6,228

Net interest income, tax-equivalent (non-GAAP)

$

113,854

$

111,848

$

438,658

$

420,182

Average earning assets

$

11,580,295

$

10,225,409

$

10,845,940

$

9,718,106

Annualized net interest margin (GAAP)

3.86

%

4.28

%

4.00

%

4.26

%

Annualized net interest margin, fully tax-equivalent (non-GAAP)

3.90

%

4.34

%

4.04

%

4.32

%

(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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Average Balances

Assets

$

12,798,770

$

12,293,332

$

11,708,538

$

11,267,214

$

11,371,247

Loans, net of unearned

8,090,476

7,883,678

7,648,562

7,412,855

7,436,497

Deposits

10,704,643

10,253,643

9,790,756

9,356,204

9,596,807

Earning assets

11,580,295

11,102,581

10,552,166

10,129,957

10,225,409

Interest bearing liabilities

7,513,701

7,174,944

6,872,449

6,622,149

6,557,185

Common stockholders' equity

1,570,258

1,541,369

1,442,388

1,336,250

1,290,691

Total stockholders' equity

1,570,258

1,541,369

1,442,388

1,336,250

1,290,691

Tangible common stockholders' equity (non-GAAP)

1,087,495

1,062,568

981,878

898,092

849,851

Key Performance Ratios

Annualized return on average assets

1.17

%

1.12

%

1.55

%

1.13

%

1.12

%

Annualized return on average common equity (GAAP)

9.56

%

8.91

%

12.56

%

9.56

%

9.88

%

Annualized return on average tangible common equity (non-GAAP)(1)

14.65

%

13.78

%

19.52

%

15.24

%

15.96

%

Annualized ratio of net charge-offs to average loans

0.04

%

0.14

%

0.19

%

0.05

%

0.48

%

Annualized net interest margin (GAAP)

3.86

%

3.98

%

4.06

%

4.12

%

4.28

%

Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)

3.90

%

4.02

%

4.10

%

4.18

%

4.34

%

Efficiency ratio, fully tax-equivalent (non-GAAP)(1)

60.69

%

61.92

%

64.81

%

65.23

%

59.35

%

Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)

Net income available to common stockholders (GAAP)

$

37,851

$

34,612

$

45,169

$

31,497

$

32,141

Plus core deposit and customer relationship intangibles amortization, net of tax(2)

2,305

2,291

2,617

2,245

2,048

Adjusted net income available to common stockholders (non-GAAP)

$

40,156

$

36,903

$

47,786

$

33,742

$

34,189

Average common stockholders' equity (GAAP)

$

1,570,258

$

1,541,369

$

1,442,388

$

1,336,250

$

1,290,691

Less average goodwill

433,374

427,097

410,642

391,668

391,668

Less average core deposit and customer relationship intangibles, net

49,389

51,704

49,868

46,490

49,172

Average tangible common stockholders' equity (non-GAAP)

$

1,087,495

$

1,062,568

$

981,878

$

898,092

$

849,851

Annualized return on average common equity (GAAP)

9.56

%

8.91

%

12.56

%

9.56

%

9.88

%

Annualized return on average tangible common equity (non-GAAP)

14.65

%

13.78

%

19.52

%

15.24

%

15.96

%

Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)

Net Interest Income (GAAP)

$

112,745

$

111,321

$

106,708

$

102,955

$

110,283

Plus tax-equivalent adjustment(2)

1,109

1,140

1,268

1,412

1,565

Net interest income, fully tax-equivalent (non-GAAP)

$

113,854

$

112,461

$

107,976

$

104,367

$

111,848

Average earning assets

$

11,580,295

$

11,102,581

$

10,552,166

$

10,129,957

$

10,225,409

Annualized net interest margin (GAAP)

3.86

%

3.98

%

4.06

%

4.12

%

4.28

%

Annualized net interest margin, fully tax-equivalent (non-GAAP)

3.90

%

4.02

%

4.10

%

4.18

%

4.34

%

(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
December 31,

For the Year Ended
December 31,

Reconciliation of Efficiency Ratio (non-GAAP)

2019

2018

2019

2018

Net interest income (GAAP)

$

112,745

$

110,283

$

433,729

$

413,954

Tax-equivalent adjustment(1)

1,109

1,565

4,929

6,228

Fully tax-equivalent net interest income

113,854

111,848

438,658

420,182

Noninterest income

28,030

27,045

116,208

109,160

Securities gains, net

(491

)

(48

)

(7,659

)

(1,085

)

Unrealized gain on equity securities, net

(11

)

(115

)

(525

)

(212

)

Gain on extinguishment of debt

(375

)

Valuation adjustment on servicing rights

(668

)

58

911

46

Adjusted income (non-GAAP)

$

140,714

$

138,788

$

547,218

$

528,091

Total noninterest expenses (GAAP)

$

92,866

$

88,821

$

349,161

$

353,888

Less:

Core deposit and customer relationship intangibles amortization

2,918

2,592

11,972

9,355

Partnership investment in tax credit projects

3,038

3,895

8,030

4,233

(Gain)/loss on sales/valuations of assets, net

1,512

(35

)

(19,422

)

2,208

Restructuring expenses

3,227

2,564

Adjusted noninterest expenses (non-GAAP)

$

85,398

$

82,369

$

345,354

$

335,528

Efficiency ratio, fully tax-equivalent (non-GAAP)

60.69

%

59.35

%

63.11

%

63.54

%


Reconciliation of Efficiency Ratio (non-GAAP)

For the Quarter Ended

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Net interest income (GAAP)

$

112,745

$

111,321

$

106,708

$

102,955

$

110,283

Tax-equivalent adjustment(1)

1,109

1,140

1,268

1,412

1,565

Fully tax-equivalent net interest income

113,854

112,461

107,976

104,367

111,848

Noninterest income

28,030

29,400

32,061

26,717

27,045

Securities gains, net

(491

)

(2,013

)

(3,580

)

(1,575

)

(48

)

Unrealized gain on equity securities, net

(11

)

(144

)

(112

)

(258

)

(115

)

Gain on extinguishment of debt

(375

)

Valuation adjustment on servicing rights

(668

)

626

364

589

58

Adjusted income (non-GAAP)

$

140,714

$

139,955

$

136,709

$

129,840

$

138,788

Total noninterest expenses (GAAP)

$

92,866

$

92,967

$

75,098

$

88,230

$

88,821

Less:

Core deposit and customer relationship intangibles amortization

2,918

2,899

3,313

2,842

2,592

Partnership investment in tax credit projects

3,038

3,052

1,465

475

3,895

(Gain)/loss on sales/valuation of assets, net

1,512

356

(18,286

)

(3,004

)

(35

)

Restructuring expenses

3,227

Adjusted noninterest expenses (non-GAAP)

$

85,398

$

86,660

$

88,606

$

84,690

$

82,369

Efficiency ratio, fully tax-equivalent (non-GAAP)

60.69

%

61.92

%

64.81

%

65.23

%

59.35

%

(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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Common Share Data

Book value per common share

$

43.00

$

42.62

$

41.48

$

39.65

$

38.44

Tangible book value per common share (non-GAAP)(1)

$

29.51

$

29.62

$

28.40

$

27.04

$

25.70

Common shares outstanding, net of treasury stock

36,704,278

36,696,190

36,690,061

34,603,611

34,477,499

Tangible common equity ratio (non-GAAP)(1)

8.52

%

8.99

%

8.92

%

8.60

%

8.08

%

Reconciliation of Tangible Book Value Per Common Share (non-GAAP)

Common stockholders' equity (GAAP)

$

1,578,137

$

1,563,843

$

1,521,787

$

1,372,102

$

1,325,175

Less goodwill

446,345

427,097

427,097

391,668

391,668

Less core deposit and customer relationship intangibles, net

48,688

49,819

52,718

44,637

47,479

Tangible common stockholders' equity (non-GAAP)

$

1,083,104

$

1,086,927

$

1,041,972

$

935,797

$

886,028

Common shares outstanding, net of treasury stock

36,704,278

36,696,190

36,690,061

34,603,611

34,477,499

Common stockholders' equity (book value) per share (GAAP)

$

43.00

$

42.62

$

41.48

$

39.65

$

38.44

Tangible book value per common share (non-GAAP)

$

29.51

$

29.62

$

28.40

$

27.04

$

25.70

Reconciliation of Tangible Common Equity Ratio (non-GAAP)

Tangible common stockholders' equity (non-GAAP)

$

1,083,104

$

1,086,927

$

1,041,972

$

935,797

$

886,028

Total assets (GAAP)

$

13,209,597

$

12,569,262

$

12,160,290

$

11,312,495

$

11,408,006

Less goodwill

446,345

427,097

427,097

391,668

391,668

Less core deposit and customer relationship intangibles, net

48,688

49,819

52,718

44,637

47,479

Total tangible assets (non-GAAP)

$

12,714,564

$

12,092,346

$

11,680,475

$

10,876,190

$

10,968,859

Tangible common equity ratio (non-GAAP)

8.52

%

8.99

%

8.92

%

8.60

%

8.08

%

Loan Data

Loans held to maturity:

Commercial and commercial real estate

$

6,790,458

$

6,393,596

$

6,230,372

$

5,745,051

$

5,731,712

Residential mortgage

597,742

589,793

613,707

630,433

673,603

Agricultural and agricultural real estate

533,064

545,006

549,404

544,805

565,408

Consumer

452,233

447,718

461,802

412,573

440,158

Unearned discount and deferred loan fees

(5,580

)

(4,505

)

(2,234

)

(1,318

)

(3,184

)

Total loans held to maturity

$

8,367,917

$

7,971,608

$

7,853,051

$

7,331,544

$

7,407,697

Other Selected Trend Information

Effective tax rate

11.99

%

18.66

%

23.12

%

20.88

%

17.22

%

Full time equivalent employees

1,908

1,962

2,040

1,976

2,045

(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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Allowance for Loan Losses

Balance, beginning of period

$

66,222

$

63,850

$

62,639

$

61,963

$

61,221

Provision for loan losses

4,903

5,201

4,918

1,635

9,681

Charge-offs

(2,018

)

(4,842

)

(4,780

)

(1,950

)

(9,777

)

Recoveries

1,288

2,013

1,073

991

838

Balance, end of period

$

70,395

$

66,222

$

63,850

$

62,639

$

61,963

Asset Quality

Nonaccrual loans

$

76,548

$

72,208

$

79,619

$

77,294

$

71,943

Loans past due ninety days or more

4,105

40

285

1,706

726

Other real estate owned

6,914

6,425

6,646

5,391

6,153

Other repossessed assets

11

13

39

8

459

Total nonperforming assets

$

87,578

$

78,686

$

86,589

$

84,399

$

79,281

Performing troubled debt restructured loans

$

3,794

$

3,199

$

3,539

$

3,460

$

4,026

Nonperforming Assets Activity

Balance, beginning of period

$

78,686

$

86,589

$

84,399

$

79,281

$

85,617

Net loan charge offs

(730

)

(2,829

)

(3,707

)

(959

)

(8,939

)

New nonperforming loans

13,751

6,818

13,688

15,314

17,332

Acquired nonperforming assets

3,262

230

Reduction of nonperforming loans(1)

(5,859

)

(8,861

)

(6,246

)

(6,238

)

(6,065

)

OREO/Repossessed assets sales proceeds

(1,399

)

(3,067

)

(1,288

)

(2,092

)

(8,390

)

OREO/Repossessed assets gain/(loss and writedowns), net

(133

)

36

(487

)

(462

)

(230

)

Net activity at Citizens Finance Co.

(445

)

(44

)

Balance, end of period

$

87,578

$

78,686

$

86,589

$

84,399

$

79,281

Asset Quality Ratios

Ratio of nonperforming loans to total loans

0.96

%

0.91

%

1.02

%

1.08

%

0.98

%

Ratio of nonperforming loans and performing trouble debt restructured loans to total loans

1.01

%

0.95

%

1.06

%

1.12

%

1.04

%

Ratio of nonperforming assets to total assets

0.66

%

0.63

%

0.71

%

0.75

%

0.69

%

Annualized ratio of net loan charge-offs to average loans

0.04

%

0.14

%

0.19

%

0.05

%

0.48

%

Allowance for loan losses as a percent of loans

0.84

%

0.83

%

0.81

%

0.85

%

0.84

%

Allowance for loan losses as a percent of nonperforming loans

87.28

%

91.66

%

79.91

%

79.29

%

85.27

%

Loans delinquent 30-89 days as a percent of total loans

0.33

%

0.28

%

0.31

%

0.47

%

0.21

%

(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, 2019

September 30, 2019

December 31, 2018

Average
Balance

Interest

Rate

Average
Balance

Interest

Rate

Average
Balance

Interest

Rate

Earning Assets

Securities:

Taxable

$

3,033,480

$

22,581

2.95

%

$

2,658,107

$

18,567

2.77

%

$

2,184,096

$

15,851

2.88

%

Nontaxable(1)

271,792

2,661

3.88

266,933

2,682

3.99

427,332

4,388

4.07

Total securities

3,305,272

25,242

3.03

2,925,040

21,249

2.88

2,611,428

20,239

3.07

Interest on deposits with other banks and other short-term investments

251,599

953

1.50

358,327

2,151

2.38

238,087

1,285

2.14

Federal funds sold

309

Loans:(2)

Commercial and commercial real estate(1)

6,484,485

85,591

5.24

6,216,133

86,864

5.54

5,644,475

77,822

5.47

Residential mortgage

614,735

7,156

4.62

662,663

7,979

4.78

704,012

8,682

4.89

Agricultural and agricultural real estate(1)

538,029

7,005

5.17

550,441

7,551

5.44

568,904

7,752

5.41

Consumer

453,227

6,109

5.35

454,441

6,697

5.85

519,106

9,355

7.15

Fees on loans

2,255

2,052

2,733

Less: allowance for loan losses

(67,052

)

(64,464

)

(60,912

)

Net loans

8,023,424

108,116

5.35

7,819,214

111,143

5.64

7,375,585

106,344

5.72

Total earning assets

11,580,295

134,311

4.60

%

11,102,581

134,543

4.81

%

10,225,409

127,868

4.96

%

Nonearning Assets

1,218,475

1,190,751

1,145,838

Total Assets

$

12,798,770

$

12,293,332

$

11,371,247

Interest Bearing Liabilities(3)

Savings

$

5,986,007

$

11,790

0.78

%

$

5,643,722

$

13,301

0.94

%

$

5,071,573

$

8,817

0.69

%

Time deposits

1,135,025

4,611

1.61

1,149,064

4,681

1.62

1,088,122

3,009

1.10

Short-term borrowings

115,680

271

0.93

102,440

250

0.97

121,053

417

1.37

Other borrowings

276,989

3,785

5.42

279,718

3,850

5.46

276,437

3,777

5.42

Total interest bearing liabilities

7,513,701

20,457

1.08

%

7,174,944

22,082

1.22

%

6,557,185

16,020

0.97

%

Noninterest Bearing Liabilities(3)

Noninterest bearing deposits

3,583,611

3,460,857

3,437,112

Accrued interest and other liabilities

131,200

116,162

86,259

Total noninterest bearing liabilities

3,714,811

3,577,019

3,523,371

Stockholders' Equity

1,570,258

1,541,369

1,290,691

Total Liabilities and Stockholders' Equity

$

12,798,770

$

12,293,332

$

11,371,247

Net interest income, fully tax-equivalent (non-GAAP)(1)

$

113,854

$

112,461

$

111,848

Net interest spread(1)

3.52

%

3.59

%

3.99

%

Net interest income, fully tax-equivalent (non-GAAP) to total earning assets

3.90

%

4.02

%

4.34

%

(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 Year Ended

December 31, 2019

December 31, 2018

Average
Balance

Interest

Rate

Average
Balance

Interest

Rate

Earning Assets

Securities:

Taxable

$

2,522,365

$

73,147

2.90

%

$

1,999,321

$

54,131

2.71

%

Nontaxable(1)

313,197

12,491

3.99

439,894

17,873

4.06

Total securities

2,835,562

85,638

3.02

2,439,215

72,004

2.95

Interest bearing deposits with other banks and other short-term investments

313,373

6,695

2.14

197,562

3,698

1.87

Federal funds sold

138

4

2.90

430

Loans:(2)

Commercial and commercial real estate(1)

6,105,889

332,866

5.45

5,401,683

289,379

5.36

Residential mortgage

656,741

30,552

4.65

692,310

32,047

4.63

Agricultural and agricultural real estate(1)

550,231

29,438

5.35

549,346

28,331

5.16

Consumer

448,230

25,802

5.76

496,900

37,250

7.50

Fees on loans

8,263

9,339

Less: allowance for loan losses

(64,224

)

(59,340

)

Net loans

7,696,867

426,921

5.55

7,080,899

396,346

5.60

Total earning assets

10,845,940

519,258

4.79

%

9,718,106

472,048

4.86

%

Nonearning Assets

1,175,977

1,054,191

Total Assets

$

12,021,917

$

10,772,297

Interest Bearing Liabilities(3)

Savings

$

5,530,503

$

47,069

0.85

%

$

4,779,977

$

25,123

0.53

%

Time deposits

1,115,785

16,665

1.49

1,058,769

10,544

1.00

Short-term borrowings

126,337

1,748

1.38

142,295

1,696

1.19

Other borrowings

275,982

15,118

5.48

272,545

14,503

5.32

Total interest bearing liabilities

7,048,607

80,600

1.14

%

6,253,586

51,866

0.83

%

Noninterest Bearing Liabilities(3)

Noninterest bearing deposits

3,384,341

3,265,532

Accrued interest and other liabilities

115,573

75,224

Total noninterest bearing liabilities

3,499,914

3,340,756

Stockholders' Equity

1,473,396

1,177,955

Total Liabilities and Stockholders' Equity

$

12,021,917

$

10,772,297

Net interest income, fully tax-equivalent (non-GAAP)(1)

$

438,658

$

420,182

Net interest spread(1)

3.65

%

4.03

%

Net interest income, fully tax-equivalent (non-GAAP) to total earning assets

4.04

%

4.32

%

(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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Total Assets

Citywide Banks

$

2,294,512

$

2,335,811

$

2,261,591

$

2,214,105

$

2,307,284

New Mexico Bank & Trust

1,763,037

1,607,498

1,534,236

1,500,024

1,492,555

Dubuque Bank and Trust Company

1,646,105

1,547,014

1,680,539

1,550,487

1,480,914

Bank of Blue Valley(1)

1,307,688

1,346,342

1,319,226

564,833

571,012

Illinois Bank & Trust

1,301,172

839,721

852,830

810,357

804,907

First Bank & Trust

1,137,714

1,158,320

1,088,796

1,099,759

1,109,929

Wisconsin Bank & Trust

1,090,412

1,032,016

1,042,463

1,031,305

1,114,352

Premier Valley Bank

903,220

888,401

847,076

855,473

849,696

Arizona Bank & Trust

784,240

695,236

732,783

669,806

658,714

Minnesota Bank & Trust

718,724

718,035

631,339

657,187

666,564

Rocky Mountain Bank

532,191

528,094

503,126

489,135

490,453

Total Deposits(2)

Citywide Banks

$

1,829,217

$

1,895,894

$

1,833,259

$

1,802,701

$

1,848,373

New Mexico Bank & Trust

1,565,070

1,413,170

1,346,304

1,313,708

1,307,464

Dubuque Bank and Trust Company

1,290,756

1,275,131

1,157,881

1,245,553

1,214,541

Bank of Blue Valley(1)

1,016,743

1,091,243

1,077,183

473,712

489,471

Illinois Bank & Trust

1,167,905

768,267

769,577

735,101

715,482

First Bank & Trust

893,419

903,410

844,793

857,313

861,629

Wisconsin Bank & Trust

941,109

880,217

892,020

872,090

927,821

Premier Valley Bank

707,814

719,141

689,384

676,849

639,194

Arizona Bank & Trust

693,975

578,694

646,728

593,089

574,762

Minnesota Bank & Trust

574,369

600,175

515,310

546,706

560,399

Rocky Mountain Bank

468,314

462,825

438,349

426,503

424,700

Net Income

Citywide Banks

$

6,963

$

6,030

$

8,120

$

7,283

$

7,005

New Mexico Bank & Trust

6,288

6,404

7,634

7,847

6,007

Dubuque Bank and Trust Company

8,357

5,445

17,353

5,011

6,002

Bank of Blue Valley(1)

3,556

3,550

3,505

1,172

324

Illinois Bank & Trust

1,741

2,223

1,751

2,632

2,180

First Bank & Trust

4,366

2,927

3,099

2,792

3,334

Wisconsin Bank & Trust

3,103

3,195

2,516

4,707

3,229

Premier Valley Bank

3,299

3,301

2,763

2,411

2,930

Arizona Bank & Trust

993

3,222

3,110

2,780

1,951

Minnesota Bank & Trust

2,094

3,250

1,980

1,454

1,038

Rocky Mountain Bank

952

720

779

1,358

1,230

(1) Formerly known as Morrill & Janes Bank and Trust Company.

(2) Includes deposits held for sale.


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