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Heartland Financial USA, Inc. Reports 2017 Second Quarter Results

Highlights

  • Quarterly net income available to common stockholders of $21.9 million in comparison with $20.9 million for the second quarter of the prior year
  • Diluted earnings per common share of $0.81 in comparison with $0.84 for the second quarter of the prior year
  • Net interest margin of 3.94%, fully tax-equivalent (non-GAAP)(1) of 4.14%
  • Return on average common equity of 11.13% and return on average tangible common equity (non-GAAP)(2) of 14.07%
  • Tangible common equity ratio (non-GAAP)(3) of 7.97%
  • Efficiency ratio, fully tax-equivalent (non-GAAP)(4) of 65.61% compared to 67.95% for the second quarter of 2016
  • Demand deposits increased $36.2 million during the quarter and represent 34% of total deposits
  • Completed acquisition of Citywide Banks of Colorado, Inc. on July 7, 2017

  Quarter Ended
June 30,
  Six Months Ended
June 30,
  2017   2016   2017   2016
Net income (in millions) $ 22.0     $ 21.0     $ 40.0     $ 41.0  
Net income available to common stockholders (in millions)                                     21.9     20.9     39.9     40.8  
Diluted earnings per common share 0.81     0.84     1.49     1.66  
               
Return on average assets 1.06 %   1.03 %   0.97 %   1.01 %
Return on average common equity 11.13     12.58     10.44     12.63  
Return on average tangible common equity (non-GAAP)(2) 14.07     16.32     13.18     16.38  
Net interest margin 3.94     3.95     3.95     3.98  
Net interest margin, fully tax-equivalent (non-GAAP)(1) 4.14     4.12     4.15     4.15  

/EIN News/ --

"Heartland’s second quarter 2017 financial performance was excellent. Net income available to common stockholders of nearly $22.0 million exceeded the same quarter last year by 5 percent. Results were fueled in part by a solid net interest margin of 4.14 percent on a fully tax-equivalent basis and improvement in our efficiency ratio."
Lynn B. Fuller, chairman and chief executive officer, Heartland Financial USA, Inc.

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

DUBUQUE, Iowa, July 31, 2017 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ:HTLF) today reported net income available to common stockholders of $21.9 million, or $0.81 per diluted common share, for the quarter ended June 30, 2017, compared to $20.9 million, or $0.84 per diluted common share, for the second quarter of 2016. Return on average common equity was 11.13% and return on average assets was 1.06% for the second quarter of 2017, compared to 12.58% and 1.03%, respectively, for the same quarter in 2016.

Net income available to common stockholders for the six months ended June 30, 2017, was $39.9 million or $1.49 per diluted common share, compared to $40.8 million or $1.66 per diluted common share for the six months ended June 30, 2016. Return on average common equity was 10.44%, and return on average assets was 0.97% for the first six months of 2017, compared to 12.63% and 1.01%, respectively, for the same period in 2016.

Commenting on Heartland’s second quarter results, Lynn B. Fuller, Heartland’s chairman and chief executive officer said, "Heartland’s second quarter 2017 financial performance was excellent. Net income available to common stockholders of nearly $22.0 million exceeded the same quarter last year by 5 percent. Results were fueled in part by a solid net interest margin of 4.14 percent on a fully tax-equivalent basis and improvement in our efficiency ratio."

On February 28, 2017, Heartland completed the acquisition of Founders Bancorp, parent company of Founders Community Bank, based in San Luis Obispo, California. Based on Heartland's closing common stock price of $49.55 per share as of February 28, 2017, the aggregate consideration was $31.0 million, with 30% of the consideration paid in cash and 70% by delivery of Heartland common stock. Simultaneous with the closing of the transaction, Founders Community Bank merged into Heartland's Premier Valley Bank subsidiary. As of the close date, Founders Community Bank had, at fair value, total assets of $213.3 million, total loans of $96.4 million and total deposits of $181.5 million. The systems conversion for this transaction occurred two weeks after the closing.

On July 7, 2017, Heartland completed the acquisition of Citywide Banks of Colorado, Inc., parent company of Citywide Banks, headquartered in Aurora, Colorado. Simultaneous with the close, Citywide Banks merged into Heartland's Centennial Bank and Trust subsidiary. The aggregate consideration was approximately $211.2 million, of which $58.6 million was cash, and the remainder was settled by delivery of 3,216,161 shares of Heartland common stock. The combined entity operates as Citywide Banks. As of June 30, 2017, Citywide Banks had total assets of $1.38 billion, including $1.00 billion in net loans outstanding, and $1.20 billion of deposits. The systems conversion for this transaction is scheduled to be completed in the fourth quarter of 2017.

Commenting on merger and acquisition activity, Fuller stated, "Earlier this month, we announced the completion of our acquisition of Citywide Banks of Colorado with $1.4 billion in assets. This transaction represents the largest acquisition in our history and adds sizable market share in Denver, one of America's best growth markets."

Fully Tax-Equivalent Net Interest Margin Remains Above 4.00%

Net interest margin, expressed as a percentage of average earning assets, was 3.94% (4.14% on a fully tax-equivalent basis) during the second quarter of 2017, compared to 3.95% (4.16% on a fully tax-equivalent basis) during the first quarter of 2017 and 3.95% (4.12% on a fully tax-equivalent basis) during the second quarter of 2016.

Fuller said, "We are very pleased to see net interest margin remained strong at 4.14 percent on a fully tax-equivalent basis reflecting reductions in funding costs and improved yields in the securities portfolio."

Interest income for the second quarter of 2017 was $82.1 million compared to $81.3 million recorded in the second quarter of 2016. The taxable equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $3.8 million for the second quarter of 2017 and $3.1 million for the second quarter of 2016. With these adjustments, interest income on a tax-equivalent basis was $85.9 million for the second quarter of 2017, an increase of $1.4 million or 2%, compared to $84.5 million for the second quarter of 2016. The increase in interest income on a fully tax-equivalent basis in the second quarter of 2017, as compared to the second quarter of 2016, was primarily due to an increase in average earning assets, which totaled $7.59 billion during the second quarter of 2017 compared to $7.45 billion during the second quarter of 2016, a $139.4 million or 2% increase.  This growth is attributable to the Founders Bancorp acquisition completed on February 28, 2017, and an increase in the average balance of the securities portfolio.

Interest expense for the second quarter of 2017 was $7.5 million, a decrease of $732,000 or 9% from $8.2 million in the second quarter of 2016. Average interest bearing liabilities decreased $217.2 million or 4% to $5.15 billion for the quarter ended June 30, 2017, from $5.36 billion in the same quarter in 2016, while the average interest rate paid on Heartland's interest bearing deposits and borrowings declined 4 basis points from 0.62% in the second quarter of 2016 to 0.58% in the second quarter of 2017.

Net interest income was $74.6 million during the second quarter of 2017 compared to $73.1 million during the second quarter of 2016, an increase of $1.5 million or 2%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $78.4 million during the second quarter of 2017 compared to $76.3 million during the second quarter of 2016, an increase of $2.1 million or 3%.

Noninterest Income and Noninterest Expenses Decrease From Second Quarter 2016

Noninterest income totaled $25.6 million during the second quarter of 2017 compared to $31.0 million during the second quarter of 2016, a decrease of $5.4 million or 17%. Service charges and fees totaled $9.7 million during the second quarter of 2017 compared to $8.0 million during the second quarter of 2016, an increase of $1.7 million or 21%. This increase was primarily attributable to a larger demand deposit customer base, a portion of which was the result of the CIC Bancshares, Inc. acquisition completed during the first quarter of 2016 and the Founders Bancorp acquisition completed in the first quarter of 2017, and increased interchange revenue from commercial card activity. Securities gains, net, were $1.4 million during the second quarter of 2017 compared to $4.6 million recorded during the same quarter in 2016, a decrease of $3.2 million or 70%. Net gains on sale of loans held for sale totaled $6.8 million during the second quarter of 2017 compared to $11.3 million during the second quarter of 2016, a decrease of $4.5 million or 40%, due to lower mortgage loan activity.

For the second quarter of 2017, noninterest expenses totaled $69.3 million compared to $71.0 million during the second quarter of 2016, a decrease of $1.7 million or 2%. The category with the most significant decrease was salaries and employee benefits, which decreased $859,000 or 2%. At June 30, 2017, Heartland had 1,862 full time equivalent employees compared to 1,888 full time equivalent employees at June 30, 2016.

"Heartland continues to carefully manage noninterest expenses, and we are pleased to see positive results as reflected in our efficiency ratio, which dropped into the 65% range for the quarter," added Fuller.

Heartland's effective tax rate was 26.85% for the second quarter of 2017 compared to 32.37% for the second quarter of 2016. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $310,000 during the second quarter of 2017 compared to $304,000 for the second quarter of 2016. Also included in the second quarter of 2017 tax computation was a state tax credit of $830,000 related to a partnership investment in tax credit projects. Heartland's effective tax rate was also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 23.49% during the second quarter of 2017 compared to 18.86% during the second quarter of 2016.

Loans Decrease and Deposits Increase Since December 31, 2016

Total assets were $8.20 billion at June 30, 2017, a decrease of $42.4 million or 1% from $8.25 billion at year-end 2016. Exclusive of the $213.9 million of assets acquired at fair value in the Founders Bancorp transaction, total assets decreased $256.3 million or 3% since December 31, 2016. Securities represented 25% and 26% of total assets at June 30, 2017, and December 31, 2016, respectively.

Total loans held to maturity were $5.33 billion at June 30, 2017, compared to $5.35 billion at year-end 2016, a decrease of $26.6 million or less than 1%. This change includes $96.4 million of total loans held to maturity acquired at fair value in the Founders Bancorp transaction. Exclusive of this transaction, total loans held to maturity decreased $123.1 million or 2% since December 31, 2016.

Total deposits were $6.93 billion as of June 30, 2017, compared to $6.85 billion at year-end 2016, an increase of $82.8 million or 1%. This increase included $181.5 million of deposits, at fair value, acquired in the Founders Bancorp transaction. Exclusive of this transaction, total deposits decreased $98.7 million since December 31, 2016. Demand deposits totaled $2.36 billion at June 30, 2017, which increased $153.4 million or 7% since year-end 2016, with $94.4 million of the increase attributable to the Founders Bancorp transaction. Savings deposits decreased $83.5 million or 2% to $3.70 billion at June 30, 2017 from $3.79 billion at December 31, 2016. Excluding savings deposits of $63.3 million acquired in the Founders Bancorp transaction, savings deposits decreased $146.8 million since year-end 2016.

Fuller said, "Total deposits eased a bit in the second quarter, though the key category, demand deposits, increased and now represents 34% of total deposits."

Nonperforming Assets Increase Since December 31, 2016

Nonperforming assets were $76.0 million or 0.93% of total assets at June 30, 2017, compared to $74.8 million or 0.91% of total assets at December 31, 2016. Nonperforming loans were $66.1 million or 1.24% of total loans at June 30, 2017, compared to $64.4 million or 1.20% of total loans at December 31, 2016.

The allowance for loan losses at June 30, 2017, was 1.02% of loans and 81.78% of nonperforming loans, compared to 1.02% of loans and 84.37% of nonperforming loans at December 31, 2016. The provision for loan losses was $889,000 for the second quarter of 2017 compared to $2.1 million for the second quarter of 2016. For the six months ended June 30, 2017, provision expense was $4.5 million compared to $4.2 million recorded for the six months ended June 30, 2016.

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 30, 2018, 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 approximately $9.6 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 121 banking locations serving 88 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 included in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, include, 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 concerning 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; (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,
  2017   2016   2017   2016
Interest Income              
Interest and fees on loans $ 68,094     $ 69,809     $ 134,992     $ 138,234  
Interest on securities:              
Taxable 8,599     7,903     16,852     16,547  
Nontaxable 5,020     3,566     10,211     7,076  
Interest on federal funds sold 3     1     3     11  
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments      
345     52     554     147  
Total Interest Income 82,061     81,331     162,612     162,015  
Interest Expense              
Interest on deposits 4,163     4,021     7,893     8,194  
Interest on short-term borrowings 90     519     227     848  
Interest on other borrowings 3,228     3,673     6,884     7,148  
Total Interest Expense 7,481     8,213     15,004     16,190  
Net Interest Income 74,580     73,118     147,608     145,825  
Provision for loan losses 889     2,118     4,530     4,185  
Net Interest Income After Provision for Loan Losses 73,691     71,000     143,078     141,640  
Noninterest Income              
Service charges and fees 9,696     8,022     19,153     15,184  
Loan servicing income 1,351     1,292     3,075     2,560  
Trust fees 3,979     3,625     7,610     7,438  
Brokerage and insurance commissions 976     886     2,012     1,908  
Securities gains, net 1,392     4,622     3,874     8,148  
Net gains on sale of loans held for sale 6,817     11,270     12,964     22,335  
Valuation adjustment on commercial servicing rights 19     (46 )   24     (46 )
Income on bank owned life insurance 656     591     1,273     1,113  
Other noninterest income 738     764     1,532     1,964  
Total Noninterest Income 25,624     31,026     51,517     60,604  
Noninterest Expense              
Salaries and employee benefits 41,126     41,985     82,893     83,699  
Occupancy 5,056     5,220     10,129     10,223  
Furniture and equipment 2,586     2,442     5,087     4,555  
Professional fees 7,583     7,486     15,892     14,496  
FDIC insurance assessments 909     1,120     1,716     2,288  
Advertising 1,359     1,551     3,783     2,835  
Core deposit intangibles and customer relationship intangibles amortization                         1,218     1,297     2,389     3,192  
Other real estate and loan collection expenses 365     659     1,193     1,231  
(Gain)/loss on sales/valuations of assets, net (112 )   (43 )   300     270  
Other noninterest expenses 9,208     9,303     17,656     18,540  
Total Noninterest Expense 69,298     71,020     141,038     141,329  
Income Before Income Taxes 30,017     31,006     53,557     60,915  
Income taxes 8,059     10,036     13,589     19,936  
Net Income 21,958     20,970     39,968     40,979  
Preferred dividends (13 )   (52 )   (32 )   (220 )
Interest expense on convertible preferred debt 4     31     9     31  
Net Income Available to Common Stockholders $ 21,949     $ 20,949     $ 39,945     $ 40,790  
Earnings per common share-diluted $ 0.81     $ 0.84     $ 1.49     $ 1.66  
Weighted average shares outstanding-diluted 26,972,580     24,974,995     26,798,134     24,541,356  


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Interest Income                  
Interest and fees on loans $ 68,094     $ 66,898     $ 69,848     $ 70,046     $ 69,809  
Interest on securities:                  
Taxable 8,599     8,253     8,480     7,831     7,903  
Nontaxable 5,020     5,191     4,292     3,717     3,566  
Interest on federal funds sold 3             1     1  
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments  
345     209     157     92     52  
Total Interest Income 82,061     80,551     82,777     81,687     81,331  
Interest Expense                  
Interest on deposits 4,163     3,730     3,744     4,001     4,021  
Interest on short-term borrowings 90     137     119     235     519  
Interest on other borrowings 3,228     3,656     3,754     3,770     3,673  
Total Interest Expense 7,481     7,523     7,617     8,006     8,213  
Net Interest Income 74,580     73,028     75,160     73,681     73,118  
Provision for loan losses 889     3,641     2,181     5,328     2,118  
Net Interest Income After Provision for Loan Losses 73,691     69,387     72,979     68,353     71,000  
Noninterest Income                  
Service charges and fees 9,696     9,457     8,128     8,278     8,022  
Loan servicing income 1,351     1,724     1,068     873     1,292  
Trust fees 3,979     3,631     3,718     3,689     3,625  
Brokerage and insurance commissions 976     1,036     955     1,006     886  
Securities gains, net 1,392     2,482     1,608     1,584     4,622  
Net gains on sale of loans held for sale 6,817     6,147     5,840     11,459     11,270  
Valuation adjustment on commercial servicing rights 19     5     8     5     (46 )
Income on bank owned life insurance 656     617     542     620     591  
Other noninterest income 738     794     2,588     1,028     764  
Total Noninterest Income 25,624     25,893     24,455     28,542     31,026  
Noninterest Expense                  
Salaries and employee benefits 41,126     41,767     39,115     40,733     41,985  
Occupancy 5,056     5,073     5,076     5,099     5,220  
Furniture and equipment 2,586     2,501     2,944     2,746     2,442  
Professional fees 7,583     8,309     7,195     5,985     7,486  
FDIC insurance assessments 909     807     717     1,180     1,120  
Advertising 1,359     2,424     2,274     1,339     1,551  
Core deposit intangibles and customer relationship intangibles amortization   1,218     1,171     1,147     1,291     1,297  
Other real estate and loan collection expenses 365     828     572     640     659  
(Gain)/loss on sales/valuations of assets, net (112 )   412     414     794     (43 )
Other noninterest expenses 9,208     8,448     10,458     8,620     9,303  
Total Noninterest Expense 69,298     71,740     69,912     68,427     71,020  
Income Before Income Taxes 30,017     23,540     27,522     28,468     31,006  
Income taxes 8,059     5,530     8,360     8,260     10,036  
Net Income 21,958     18,010     19,162     20,208     20,970  
Preferred dividends (13 )   (19 )   (19 )   (53 )   (52 )
Interest expense on convertible preferred debt 4     5     3     17     31  
Net Income Available to Common Stockholders $ 21,949     $ 17,996     $ 19,146     $ 20,172     $ 20,949  
Earnings per common share-diluted $ 0.81     $ 0.68     $ 0.74     $ 0.81     $ 0.84  
Weighted average shares outstanding-diluted 26,972,580     26,627,830     25,800,472     24,922,946     24,974,995  


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As Of
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Assets                  
Cash and due from banks $ 141,100     $ 129,386     $ 151,290     $ 196,234     $ 222,718  
Interest bearing deposits with the Federal Reserve Bank and other          
banks and other short-term investments
40,676     43,765     7,434     5,855     7,232  
Cash and cash equivalents 181,776     173,151     158,724     202,089     229,950  
Time deposits in other financial institutions 30,241     41,539     2,105     2,105     2,105  
Securities:                  
Available for sale, at fair value 1,789,441     1,893,528     1,845,864     1,655,696     1,566,592  
Held to maturity, at cost 259,586     260,616     263,662     265,302     270,423  
Other investments, at cost 21,094     21,557     21,560     22,082     22,680  
Loans held for sale 48,848     49,009     61,261     78,317     82,538  
Loans:                  
Held to maturity 5,325,082     5,361,604     5,351,719     5,438,715     5,482,258  
Allowance for loan losses (54,051 )   (54,999 )   (54,324 )   (54,653 )   (51,756 )
Loans, net 5,271,031     5,306,605     5,297,395     5,384,062     5,430,502  
Premises, furniture and equipment, net 163,003     165,425     164,028     165,841     168,701  
Goodwill 141,461     141,461     127,699     127,699     127,699  
Core deposit intangibles and customer relationship intangibles, net 22,850     24,068     22,775     23,922     25,213  
Servicing rights, net 34,736     35,441     35,778     35,906     35,654  
Cash surrender value on life insurance 120,281     117,613     112,615     112,060     111,425  
Other real estate, net 9,269     11,188     9,744     10,740     11,003  
Other assets 111,104     120,644     123,869     116,394     119,916  
Total Assets $ 8,204,721     $ 8,361,845     $ 8,247,079     $ 8,202,215     $ 8,204,401  
Liabilities and Equity                  
Liabilities                  
Deposits:                  
 Demand $ 2,355,410     $ 2,319,256     $ 2,202,036     $ 2,238,736     $ 2,149,911  
 Savings 3,704,579     3,940,146     3,788,089     3,753,300     3,691,791  
 Time 870,180     830,459     857,286     920,657     995,870  
Total deposits 6,930,169     7,089,861     6,847,411     6,912,693     6,837,572  
Short-term borrowings 139,130     155,025     306,459     214,105     303,707  
Other borrowings 281,096     282,051     288,534     294,493     296,895  
Accrued expenses and other liabilities 48,356     53,596     63,759     76,536     78,264  
Total Liabilities 7,398,751     7,580,533     7,506,163     7,497,827     7,516,438  
Stockholders' Equity                  
Preferred equity 938     938     1,357     1,357     3,777  
Common stock 26,701     26,674     26,120     24,683     24,544  
Capital surplus 352,500     351,423     328,376     279,316     274,682  
Retained earnings 450,228     431,219     416,109     402,179     384,479  
Accumulated other comprehensive income (loss) (24,397 )   (28,942 )   (31,046 )   (3,079 )   513  
Treasury stock at cost             (68 )   (32 )
Total Equity 805,970     781,312     740,916     704,388     687,963  
Total Liabilities and Equity $ 8,204,721     $ 8,361,845     $ 8,247,079     $ 8,202,215     $ 8,204,401  


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,
  2017   2016   2017   2016
Average Balances              
Assets $ 8,333,301     $ 8,211,326     $ 8,283,681     $ 8,118,198  
Loans, net of unearned 5,376,826     5,582,878     5,371,271     5,470,490  
Deposits 7,050,126     6,806,259     6,973,897     6,742,635  
Earning assets 7,586,256     7,446,849     7,544,609     7,361,775  
Interest bearing liabilities 5,146,243     5,363,477     5,168,475     5,318,320  
Common stockholders' equity 791,039     669,930     771,464     649,612  
Total stockholders' equity 791,977     673,707     772,575     684,739  
Tangible common stockholders' equity(1) 625,929     516,347     611,050     500,726  
               
Key Performance Ratios              
Annualized return on average assets 1.06 %   1.03 %   0.97 %   1.01 %
Annualized return on average common equity (GAAP) 11.13 %   12.58 %   10.44 %   12.63 %
Annualized return on average tangible common equity (non-GAAP)(2) 14.07 %   16.32 %   13.18 %   16.38 %
Annualized ratio of net charge-offs to average loans 0.14 %   0.01 %   0.18 %   0.04 %
Annualized net interest margin (GAAP) 3.94 %   3.95 %   3.95 %   3.98 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3) 4.14 %   4.12 %   4.15 %   4.15 %
Efficiency ratio, fully tax-equivalent(4) 65.61 %   67.95 %   67.75 %   67.43 %
               
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)              
Net income available to common shareholders (GAAP) $ 21,949     $ 20,949     $ 39,945     $ 40,790  
               
Average common stockholders' equity (GAAP) $ 791,039     $ 669,930     $ 771,464     $ 649,612  
Less average goodwill 141,461     127,700     136,976     123,727  
  Less average core deposit intangibles and customer relationship
  intangibles,  net
23,649     25,883     23,438     25,159  
Average tangible common equity (non-GAAP) $ 625,929     $ 516,347     $ 611,050     $ 500,726  
Annualized return on average common equity (GAAP) 11.13 %   12.58 %   10.44 %   12.63 %
Annualized return on average tangible common equity (non-GAAP) 14.07 %   16.32 %   13.18 %   16.38 %
               
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)              
Net Interest Income (GAAP) $ 74,580     $ 73,118     $ 147,608     $ 145,825  
Plus tax-equivalent adjustment(7) 3,796     3,146     7,656     6,187  
Net interest income, tax-equivalent (non-GAAP)
$ 78,376     $ 76,264     $ 155,264     $ 152,012  
               
Average earning assets $ 7,586,256     $ 7,446,849     $ 7,544,609     $ 7,361,775  
               
Annualized net interest margin (GAAP) 3.94 %   3.95 %   3.95 %   3.98 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)
4.14 %   4.12 %   4.15 %   4.15 %
               
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average tangible common equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer deposit intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 35%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Average Balances                  
Assets $ 8,333,301     $ 8,233,510     $ 8,280,042     $ 8,172,683     $ 8,211,326  
Loans, net of unearned 5,376,826     5,365,654     5,473,001     5,538,088     5,582,878  
Deposits 7,050,126     6,896,821     6,928,978     6,839,334     6,806,259  
Earning assets 7,586,256     7,502,496     7,551,997     7,382,860     7,446,849  
Interest bearing liabilities 5,146,243     5,190,955     5,206,393     5,224,172     5,363,477  
Common stockholders' equity 791,039     751,671     726,455     689,637     669,930  
Total stockholders' equity 791,977     752,958     727,812     692,404     673,707  
Tangible common stockholders' equity(1) 625,929     596,006     575,412     537,375     516,347  
                   
Key Performance Ratios                  
Annualized return on average assets 1.06 %   0.89 %   0.92 %   0.98 %   1.03 %
Annualized return on average common equity (GAAP) 11.13 %   9.71 %   10.48 %   11.64 %   12.58 %
Annualized return on average tangible common equity (non-GAAP)(2) 14.07 %   12.25 %   13.24 %   14.93 %   16.32 %
Annualized ratio of net charge-offs to average loans 0.14 %   0.22 %   0.18 %   0.17 %   0.01 %
Annualized net interest margin (GAAP) 3.94 %   3.95 %   3.96 %   3.97 %   3.95 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3) 4.14 %   4.16 %   4.14 %   4.14 %   4.12 %
Efficiency ratio, fully tax-equivalent(4) 65.61 %   69.95 %   66.29 %   63.88 %   67.95 %
                   
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)                  
Net income available to common shareholders (GAAP) $ 21,949     $ 17,996     $ 19,146     $ 20,172     $ 20,949  
                   
Average common stockholders' equity (GAAP) $ 791,039     $ 751,671     $ 726,455     $ 689,637     $ 669,930  
   Less average goodwill 141,461     132,440     127,699     127,699     127,699  
Less average core deposit intangibles and customer relationship intangibles, net 23,649     23,225     23,344     24,563     25,884  
Average tangible common equity (non-GAAP) $ 625,929     $ 596,006     $ 575,412     $ 537,375     $ 516,347  
Annualized return on average common equity (GAAP) 11.13 %   9.71 %   10.48 %   11.64 %   12.58 %
Annualized return on average tangible common equity (non-GAAP) 14.07 %   12.25 %   13.24 %   14.93 %   16.32 %
                   
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)                  
Net Interest Income (GAAP) $ 74,580     $ 73,028     $ 75,160     $ 73,681     $ 73,118  
   Plus tax-equivalent adjustment(7) 3,796     3,860     3,511     3,221     3,146  
Net interest income, fully tax-equivalent (non-GAAP) $ 78,376     $ 76,888     $ 78,671     $ 76,902     $ 76,264  
                   
Average earning assets $ 7,586,256     $ 7,502,496     $ 7,551,997     $ 7,382,860     $ 7,446,849  
                   
Annualized net interest margin (GAAP) 3.94 %   3.95 %   3.96 %   3.97 %   3.95 %
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.14 %   4.16 %   4.14 %   4.14 %   4.12 %
 
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average common tangible equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 35%.


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 Non-GAAP Measure-Efficiency Ratio(1) 2017   2016   2017   2016
Net interest income $ 74,580     $ 73,118     $ 147,608     $ 145,825  
Tax-equivalent adjustment(2) 3,796     3,146     7,656     6,187  
Fully tax-equivalent net interest income 78,376     76,264     155,264     152,012  
Noninterest income 25,624     31,026     51,517     60,604  
Securities gains, net (1,392 )   (4,622 )   (3,874 )   (8,148 )
Adjusted income $ 102,608     $ 102,668     $ 202,907     $ 204,468  
               
Total noninterest expenses $ 69,298     $ 71,020     $ 141,038     $ 141,329  
Less:              
Core deposit intangibles and customer relationship intangibles amortization 1,218     1,297     2,389     3,192  
Partnership investment in tax credit projects 876         876      
(Gain)/loss on sales/valuations of assets, net (112 )   (43 )   300     270  
Adjusted noninterest expenses $ 67,316     $ 69,766     $ 137,473     $ 137,867  
               
Efficiency ratio, fully tax-equivalent (non-GAAP) 65.61 %   67.95 %   67.75 %   67.43 %


HEARTLAND FINANCIAL USA, INC.  
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)  
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA  
  For the Quarter Ended
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1) 6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Net interest income $ 74,580     $ 73,028     $ 75,160     $ 73,681     $ 73,118  
Tax-equivalent adjustment(2) 3,796     3,860     3,511     3,221     3,146  
Fully tax-equivalent net interest income 78,376     76,888     78,671     76,902     76,264  
Noninterest income 25,624     25,893     24,455     28,542     31,026  
Securities gains, net (1,392 )   (2,482 )   (1,608 )   (1,584 )   (4,622 )
Adjusted income $ 102,608     $ 100,299     $ 101,518     $ 103,860     $ 102,668  
                   
Total noninterest expenses $ 69,298     $ 71,740     $ 69,912     $ 68,427     $ 71,020  
Less:                  
Core deposit intangibles and customer relationship intangibles amortization 1,218     1,171     1,147     1,291     1,297  
Partnership investment in tax credit projects 876         1,051          
(Gain)/loss on sales/valuation of assets, net (112 )   412     414     794     (43 )
Adjusted noninterest expenses $ 67,316     $ 70,157     $ 67,300     $ 66,342     $ 69,766  
                   
Efficiency ratio, fully tax-equivalent (non-GAAP) 65.61 %   69.95 %   66.29 %   63.88 %   67.95 %
                   
(1) Efficiency ratio, fully tax-equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis, which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, as noted in the table. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(2) Computed on a tax-equivalent basis using an effective tax rate of 35%.


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
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Common Share Data                  
Book value per common share $ 30.15     $ 29.26     $ 28.31     $ 28.48     $ 27.88  
Tangible book value per common share (non-GAAP)(1) $ 24.00     $ 23.05     $ 22.55     $ 22.34     $ 21.65  
ASC 320 effect on book value per common share $ (0.87 )   $ (1.06 )   $ (1.15 )   $ 0.03     $ 0.21  
Common shares outstanding, net of treasury stock 26,701,226     26,674,121     26,119,929     24,681,380     24,543,376  
Tangible common equity ratio (non-GAAP)(2) 7.97 %   7.50 %   7.28 %   6.85 %   6.60 %
                   
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(3)                  
Common stockholders' equity (GAAP) $ 805,032     $ 780,374     $ 739,559     $ 703,031     $ 684,186  
Less goodwill 141,461     141,461     127,699     127,699     127,699  
Less core deposit intangibles and customer relationship intangibles, net 22,850     24,068     22,775     23,922     25,213  
Tangible common stockholders' equity (non-GAAP) $ 640,721     $ 614,845     $ 589,085     $ 551,410     $ 531,274  
                   
Common shares outstanding, net of treasury stock 26,701,226     26,674,121     26,119,929     24,681,380     24,543,376  
Common stockholders' equity (book value) per share (GAAP) $ 30.15     $ 29.26     $ 28.31     $ 28.48     $ 27.88  
Tangible book value per common share (non-GAAP) $ 24.00     $ 23.05     $ 22.55     $ 22.34     $ 21.65  
                   
Reconciliation of Tangible Common Equity Ratio(non-GAAP)(4)                  
Total assets (GAAP) $ 8,204,721     $ 8,361,845     $ 8,247,079     $ 8,202,215     $ 8,204,401  
Less goodwill 141,461     141,461     127,699     127,699     127,699  
Less core deposit intangibles and customer relationship intangibles, net 22,850     24,068     22,775     23,922     25,213  
Total tangible assets (non-GAAP) $ 8,040,410     $ 8,196,316     $ 8,096,605     $ 8,050,594     $ 8,051,489  
Tangible common equity ratio (non-GAAP) 7.97 %   7.50 %   7.28 %   6.85 %   6.60 %
                   
Loan Data                  
Loans held to maturity:                  
Commercial and commercial real estate $ 3,803,011     $ 3,849,748     $ 3,825,847     $ 3,900,612     $ 3,930,879  
Residential mortgage 596,385     604,902     617,924     625,965     644,267  
Agricultural and agricultural real estate 495,243     481,125     489,318     489,387     480,883  
Consumer 431,052     427,962     420,613     425,582     428,730  
Unearned discount and deferred loan fees (609 )   (2,133 )   (1,983 )   (2,831 )   (2,501 )
Total loans held to maturity $ 5,325,082     $ 5,361,604     $ 5,351,719     $ 5,438,715     $ 5,482,258  
                   
Other Selected Trend Information                  
Effective tax rate 26.85 %   23.49 %   30.38 %   29.02 %   32.37 %
Full time equivalent employees 1,862     1,896     1,864     1,846     1,888  
Total residential mortgage loan applications $ 308,113     $ 248,614     $ 304,018     $ 445,107     $ 440,907  
Residential mortgage loans originated $ 216,637     $ 161,851     $ 278,065     $ 324,337     $ 324,633  
Residential mortgage loans sold $ 180,296     $ 172,521     $ 269,333     $ 315,917     $ 302,448  
Residential mortgage loan servicing portfolio $ 4,340,243     $ 4,338,311     $ 4,308,580     $ 4,259,459     $ 4,203,429  
                   
(1) Refer to the "Reconciliation of Tangible Book Value Per Common Share (non-GAAP)" table.
(2) Refer to the "Reconciliation of Tangible Common Equity Ratio (non-GAAP)" table.
(3) Tangible book value per common share is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(4) The tangible common equity ratio is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net, divided by total assets less goodwill and core deposit intangibles and customer relationship intangibles, net. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As of and for the Quarter Ended
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Allowance for Loan Losses                  
Balance, beginning of period $ 54,999     $ 54,324     $ 54,653     $ 51,756     $ 49,738  
Provision for loan losses 889     3,641     2,181     5,328     2,118  
Charge-offs (2,766 )   (3,718 )   (3,555 )   (3,283 )   (2,951 )
Recoveries 929     752     1,045     852     2,851  
Balance, end of period $ 54,051     $ 54,999     $ 54,324     $ 54,653     $ 51,756  
                   
Asset Quality                  
Nonaccrual loans $ 65,393     $ 62,868     $ 64,299     $ 57,799     $ 57,053  
Loans past due ninety days or more as to interest or principal payments 698     872     86     105      
Other real estate owned 9,269     11,188     9,744     10,740     11,003  
Other repossessed assets 675     739     663     821     564  
Total nonperforming assets $ 76,035     $ 75,667     $ 74,792     $ 69,465     $ 68,620  
                   
Performing troubled debt restructured loans $ 11,157     $ 11,010     $ 10,380     $ 10,281     $ 9,923  
                   
Nonperforming Assets Activity                  
Balance, beginning of period $ 75,667     $ 74,792     $ 69,465     $ 68,620     $ 60,153  
Net loan charge offs (1,837 )   (2,966 )   (2,510 )   (2,431 )   (100 )
New nonperforming loans 13,700     14,819     23,035     10,884     19,994  
Reduction of nonperforming loans(1) (7,443 )   (10,037 )   (13,707 )   (6,983 )   (10,313 )
OREO/Repossessed assets sales proceeds (3,734 )   (715 )   (1,037 )   (343 )   (918 )
OREO/Repossessed assets writedowns, net (259 )   (279 )   (274 )   (521 )   (337 )
Net activity at Citizens Finance Co. (59 )   53     (180 )   239     141  
Balance, end of period $ 76,035     $ 75,667     $ 74,792     $ 69,465     $ 68,620  
 
Asset Quality Ratios                  
Ratio of nonperforming loans to total loans 1.24 %   1.19 %   1.20 %   1.06 %   1.04 %
Ratio of nonperforming assets to total assets 0.93 %   0.90 %   0.91 %   0.85 %   0.84 %
Annualized ratio of net loan charge-offs to average loans 0.14 %   0.22 %   0.18 %   0.17 %   0.01 %
Allowance for loan losses as a percent of loans 1.02 %   1.03 %   1.02 %   1.00 %   0.94 %
Allowance for loan losses as a percent of nonperforming loans 81.78 %   86.29 %   84.37 %   94.39 %   90.72 %
Loans delinquent 30-89 days as a percent of total loans 0.38 %   0.44 %   0.37 %   0.40 %   0.73 %
                   
(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, 2017   June 30, 2016
  Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                      
Securities:                      
Taxable $ 1,516,745     $ 8,599     2.27 %   $ 1,468,896     $ 7,903     2.16 %
Nontaxable(1) 624,915     7,723     4.96     430,086     5,486     5.13  
Total securities 2,141,660     16,322     3.06     1,898,982     13,389     2.84  
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
121,778     345     1.14     10,727     52     1.95  
Federal funds sold 1,262     3     0.95     5,114     1     0.08  
Loans:(2)                      
Commercial and commercial real estate(1) 3,824,061     46,912     4.92     3,866,861     46,889     4.88  
Residential mortgage 633,344     6,509     4.12     803,952     8,286     4.15  
Agricultural and agricultural real estate(1) 488,222     5,807     4.77     481,625     5,504     4.60  
Consumer 431,199     8,289     7.71     430,440     8,273     7.73  
Fees on loans     1,670             2,083      
Less: allowance for loan losses (55,270 )           (50,852 )        
Net loans 5,321,556     69,187     5.21     5,532,026     71,035     5.16  
Total earning assets 7,586,256     85,857     4.54 %   7,446,849     84,477     4.56 %
Nonearning Assets 747,045             764,477          
Total Assets $ 8,333,301             $ 8,211,326          
Interest Bearing Liabilities                      
Savings $ 3,881,219     $ 2,505     0.26 %   $ 3,699,971     $ 2,028     0.22 %
Time, $100,000 and over 350,786     727     0.83     421,151     733     0.70  
Other time deposits 479,164     931     0.78     586,810     1,260     0.86  
Short-term borrowings 153,565     90     0.24     373,768     519     0.56  
Other borrowings 281,509     3,228     4.60     281,777     3,673     5.24  
Total interest bearing liabilities 5,146,243     7,481     0.58 %   5,363,477     8,213     0.62 %
Noninterest Bearing Liabilities                      
Noninterest bearing deposits 2,338,957             2,098,327          
Accrued interest and other liabilities 56,124             75,815          
Total noninterest bearing liabilities 2,395,081             2,174,142          
Stockholders' Equity 791,977             673,707          
Total Liabilities and Stockholders' Equity $ 8,333,301             $ 8,211,326          
Net interest income, fully tax-equivalent (non-GAAP)(1)     $ 78,376             $ 76,264      
Net interest spread(1)         3.96 %           3.94 %
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(3)         4.14 %           4.12 %
Interest bearing liabilities to earning assets 67.84 %           72.02 %        
                       
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(3)                      
Net interest income, fully tax-equivalent (non-GAAP)     $ 78,376             $ 76,264      
Adjustments for tax-equivalent interest(1)     (3,796 )           (3,146 )    
Net interest income (GAAP)     $ 74,580             $ 73,118      
                       
Average earning assets $ 7,586,256             $ 7,446,849          
Annualized net interest margin (GAAP)     3.94 %           3.95 %    
Annualized net interest margin, fully tax-equivalent (non-GAAP)     4.14 %           4.12 %    
                       
(1) Computed on a tax-equivalent basis using an effective tax rate of 35%
(2) Nonaccrual loans are included in the average loans outstanding.
(3) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Six Months Ended
  June 30, 2017   June 30, 2016
  Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                      
Securities:                      
Taxable $ 1,483,087     $ 16,852     2.29 %   $ 1,488,664     $ 16,547     2.24 %
Nontaxable(1) 635,168     15,709     4.99     423,655     10,886     5.17  
Total securities 2,118,255     32,561     3.10     1,912,319     27,433     2.88  
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
109,095     554     1.02     11,180     147     2.64  
Federal funds sold 791     3     0.76     18,120     11     0.12  
Loans:(2)                      
Commercial and commercial real estate(1) 3,818,689     92,825     4.90     3,805,401     93,643     4.95  
Residential mortgage 639,902     13,192     4.16     769,043     15,885     4.15  
Agricultural and agricultural real estate(1) 485,665     11,361     4.72     474,801     11,233     4.76  
Consumer 427,015     16,342     7.72     421,245     16,196     7.73  
Fees on loans     3,430             3,654      
Less: allowance for loan losses (54,803 )           (50,334 )        
Net loans 5,316,468     137,150     5.20     5,420,156     140,611     5.22  
Total earning assets 7,544,609     170,268     4.55 %   7,361,775     168,202     4.59 %
Nonearning Assets 739,072             756,423          
Total Assets $ 8,283,681             $ 8,118,198          
Interest Bearing Liabilities                      
Savings $ 3,859,730     $ 4,610     0.24 %   $ 3,628,089     $ 3,922     0.22 %
Time, $100,000 and over 349,789     1,452     0.84     459,885     1,604     0.70  
Other time deposits 481,736     1,831     0.77     614,556     2,668     0.87  
Short-term borrowings 194,272     227     0.24     342,464     848     0.50  
Other borrowings 282,948     6,884     4.91     273,326     7,148     5.26  
Total interest bearing liabilities 5,168,475     15,004     0.59 %   5,318,320     16,190     0.61 %
Noninterest Bearing Liabilities                      
Noninterest bearing deposits 2,282,642             2,040,105          
Accrued interest and other liabilities 59,989             75,034          
Total noninterest bearing liabilities 2,342,631             2,115,139          
Stockholders' Equity 772,575             684,739          
Total Liabilities and Stockholders' Equity $ 8,283,681             $ 8,118,198          
Net interest income, fully tax-equivalent (non-GAAP)(1)     $ 155,264             $ 152,012      
Net interest spread(1)         3.96 %           3.98 %
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(3)         4.15 %           4.15 %
Interest bearing liabilities to earning assets 68.51 %           72.24 %        
                       
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(3)                      
Net interest income, fully tax-equivalent (non-GAAP)     $ 155,264             $ 152,012      
Adjustments for tax-equivalent interest(1)     (7,656 )           (6,187 )    
Net interest income (GAAP)     $ 147,608             $ 145,825      
                       
Average earning assets $ 7,544,609             $ 7,361,775          
Annualized net interest margin (GAAP)     3.95 %           3.98 %    
Annualized net interest margin, fully tax-equivalent (non-GAAP)     4.15 %           4.15 %    
                       
(1) Computed on a tax-equivalent basis using an effective tax rate of 35%.
(2) Nonaccrual loans are included in the average loans outstanding.
(3) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.


HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
  As of and For the Quarter Ended
  6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016
Total Assets          
Dubuque Bank and Trust Company $ 1,441,655   $ 1,436,038   $ 1,497,775   $ 1,448,796   $ 1,473,461  
New Mexico Bank & Trust 1,407,991   1,382,480   1,374,647   1,318,203   1,321,113  
Wisconsin Bank & Trust 1,035,628   1,033,633   1,065,715   1,068,288   1,080,224  
Premier Valley Bank 850,956   854,838   640,684   635,620   629,423  
Centennial Bank and Trust 817,859   839,505   901,782   892,723   909,697  
Morrill & Janes Bank and Trust Company 748,286   871,819   863,544   862,767   843,069  
Illinois Bank & Trust 740,153   746,669   742,173   748,801   742,697  
Arizona Bank & Trust 566,339   578,597   582,266   574,561   577,002  
Rocky Mountain Bank 476,829   479,121   477,063   481,346   473,583  
Minnesota Bank & Trust 216,957   213,789   229,114   238,745   230,004  
Total Portfolio Loans          
Dubuque Bank and Trust Company $ 884,640   $ 903,617   $ 905,242   $ 906,347   $ 928,869  
New Mexico Bank & Trust 934,734   906,477   924,249   917,679   870,109  
Wisconsin Bank & Trust 662,502   644,380   650,254   711,714   732,503  
Premier Valley Bank 447,148   440,406   348,879   354,610   376,275  
Centennial Bank and Trust 558,573   572,254   609,760   638,006   668,547  
Morrill & Janes Bank and Trust Company                           515,896   546,123   548,544   538,666   522,518  
Illinois Bank & Trust 447,887   469,105   473,008   469,236   466,983  
Arizona Bank & Trust 377,358   384,028   384,706   385,926   390,078  
Rocky Mountain Bank 335,173   330,921   347,839   357,346   362,475  
Minnesota Bank & Trust 144,112   142,736   144,098   139,581   144,009  
Total Deposits          
Dubuque Bank and Trust Company $ 1,178,368   $ 1,212,899   $ 1,231,016   $ 1,182,947   $ 1,159,942  
New Mexico Bank & Trust 1,190,758   1,184,675   1,091,436   1,101,550   1,062,410  
Wisconsin Bank & Trust 874,845   868,033   899,676   889,957   911,915  
Premier Valley Bank 681,298   708,226   510,142   520,814   514,522  
Centennial Bank and Trust 682,872   712,377   733,449   767,128   775,417  
Morrill & Janes Bank and Trust Company 627,857   721,075   738,036   676,176   696,073  
Illinois Bank & Trust 669,532   641,750   636,419   671,104   653,582  
Arizona Bank & Trust 493,419   501,111   477,213   493,331   497,599  
Rocky Mountain Bank 416,436   420,067   414,344   420,581   405,888  
Minnesota Bank & Trust 193,365   189,324   194,368   214,651   207,228  
Net Income          
Dubuque Bank and Trust Company $ 3,477   $ 2,056   $ 806   $ 5,112   $ 4,475  
New Mexico Bank & Trust 5,855   4,419   4,061   3,824   5,642  
Wisconsin Bank & Trust 3,448   1,968   2,970   3,368   3,399  
Premier Valley Bank 2,573   1,306   2,969   1,804   1,695  
Centennial Bank and Trust 746   1,366   1,572   925   256  
Morrill & Janes Bank and Trust Company 2,210   2,227   2,519   1,707   2,133  
Illinois Bank & Trust 1,984   1,991   1,917   2,179   2,397  
Arizona Bank & Trust 1,073   1,486   1,305   2,034   2,121  
Rocky Mountain Bank 1,732   1,521   1,229   1,456   1,484  
Minnesota Bank & Trust 563   591   888   675   559  
           
CONTACT:
                    Bryan R. McKeag
                    Executive Vice President
                    Chief Financial Officer
                    (563) 589-1994
                    bmckeag@htlf.com

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