EX-99.1 2 ex991q22019pressrelease.htm EXHIBIT 99.1 2019 Q2 EARNINGS RELEASE Exhibit


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CONTACT:
FOR IMMEDIATE RELEASE
Bryan R. McKeag
July 29, 2019
Executive Vice President
 
Chief Financial Officer
 
(563) 589-1994
 
bmckeag@htlf.com
 

HEARTLAND FINANCIAL USA, INC. REPORTS RECORD QUARTERLY AND YEAR TO DATE RESULTS AS OF JUNE 30, 2019

Highlights
§
Quarterly net income available to common stockholders of $45.2 million in comparison with $27.9 million for the second quarter of the prior year, an increase of $17.3 million or 62%
§
Diluted earnings per common share of $1.26 in comparison with $0.85 for the second quarter of the prior year, an increase of $0.41 or 48%
§
Net interest margin of 4.06%, fully tax-equivalent (non-GAAP)(1) of 4.10%
§
Return on average common equity of 12.56% and return on average tangible common equity (non-GAAP)(1) of 19.52%
§
Tangible common equity ratio (non-GAAP)(1) of 8.92% in comparison to 7.46% at June 30, 2018
§
Completed the acquisition of Blue Valley Ban Corp. on May 10, 2019
§
Closed on the sale of Dubuque Bank and Trust Company's residential mortgage servicing portfolio
§
Completed the sale of two branches at Dubuque Bank and Trust Company, two branches at Illinois Bank & Trust, and one branch at Citywide Banks
 
Quarter Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net income available to common stockholders (in millions)
$
45.2

 
$
27.9

 
$
76.7

 
$
51.1

Diluted earnings per common share
1.26

 
0.85

 
2.17

 
1.61

 
 
 
 
 
 
 
 
Return on average assets
1.55
%
 
1.05
%
 
1.35
%
 
1.01
%
Return on average common equity
12.56

 
9.81

 
11.13

 
9.58

Return on average tangible common equity (non-GAAP)(1)
19.52

 
15.50

 
17.49

 
14.70

Net interest margin
4.06

 
4.23

 
4.09

 
4.21

Net interest margin, fully tax-equivalent (non-GAAP)(1)
4.10

 
4.30

 
4.14

 
4.28

Efficiency ratio, fully-tax equivalent (non-GAAP)(1)
64.81

 
64.94

 
65.01

 
66.48


(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to the financial tables for reconciliations to the most directly comparable GAAP measures.
"Heartland set new quarterly and year-to-date net income records for the period ended June 30, 2019. Net income of $45.2 million represents a 62 percent increase over the second quarter of 2018, while year-to-date net income of $76.7 million represents a 50 percent increase over the previous year."
Lynn B. Fuller, executive operating chairman, Heartland Financial USA, Inc.




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

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

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

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

In keeping with its focus on core businesses and execution of strategic priorities, during the second quarter of 2019, Heartland completed the sale of two branches of Dubuque Bank and Trust Company, two branches of Illinois Bank & Trust and one branch of Citywide Banks, which resulted in a reduction of loans of $27.1 million and deposits of $107.8 million. On April 30, 2019, Dubuque Bank and Trust Company closed on the sale of substantially all its mortgage servicing rights to PNC Bank, N.A. The mortgage servicing rights had a book value of $21.0 million and an estimated fair value of $37.1 million as of March 31, 2019. In the agreement, which includes customary terms and conditions, Dubuque Bank and Trust Company is providing interim servicing of the loans until the transfer date, which is expected to be in August 2019.
Heartland is utilizing a portion of the net gains from these sales transactions, which totaled approximately $19.8 million and are recorded in the gain/loss on sales/valuations of assets, net, on the consolidated income statement, to invest in several new technology and process improvement projects. These projects include system upgrades, process automation, and expansion of online and mobile banking capabilities.

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

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

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

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

Growth in total interest income on a tax-equivalent basis was primarily due to recent increases in market interest rates and the increase in average earning assets. Total interest income for the second quarter of 2019 was $127.0 million compared to $113.4 million recorded in the second quarter of 2018, an increase of $13.6 million or 12%. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.3




million for the second quarter of 2019 and $1.6 million for the second quarter of 2018. With these adjustments, total interest income on a tax-equivalent basis was $128.3 million for the second quarter of 2019, an increase of $13.3 million or 12%, compared to total interest income on a tax-equivalent basis of $115.0 million for the second quarter of 2018. Average earning assets of $10.55 billion increased $937.4 million or 10% from the second quarter of 2018, which was primarily attributable to recent acquisitions. The average rate on earning assets increased 8 basis points to 4.88% for the second quarter of 2019 compared to 4.80% for the same quarter in 2018.

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

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

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

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

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

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

•
Professional fees increased $4.3 million or 41% to $15.0 million for the second quarter of 2019 compared to $10.6 million for the same period in 2018. Included in this increase for the second quarter of 2019 was $2.9 million of expenses related to Heartland's technology and process improvement projects.
•
Core deposit and customer relationship intangibles amortization increased $1.0 million to $3.3 million for the second quarter of 2019 compared to $2.3 million for the second quarter of 2018, which was primarily due to recent acquisitions.
•
Net gains on sales/valuations of assets totaled $18.3 million for the second quarter of 2019 compared to net losses on sales/valuations of assets of $1.5 million for the second quarter of 2018. Net gains from the branch sales totaled $6.5 million, and the gain on the sale of the mortgage servicing rights totaled $13.3 million.




Excluding these gains, net losses on sales/valuations of assets totaled $1.5 million for the second quarter of 2019.
•
Other noninterest expenses were $12.6 million for the second quarter of 2019 compared to $11.1 million for the second quarter of 2018, which was an increase of $1.5 million or 14%. Included in this increase was a write-down of $1.5 million on a partnership investment that qualifies for solar energy tax credits.

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

Loans and Deposits Decrease Since December 31, 2018

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

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

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

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

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





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

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

Nonperforming Assets Increase Since December 31, 2018

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

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

Non-GAAP Financial Measures

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

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

•
Annualized return on average tangible common equity is net income available to common stockholders plus core deposit and customer relationship intangibles amortization, net of tax, divided by average common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
•
Annualized net interest margin, fully tax-equivalent, adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
•
Efficiency ratio, fully tax equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities, and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items as noted in reconciliation contained in this press release.




•
Tangible book value per common share is total common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
•
Tangible common equity ratio is total common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.

Conference Call Details
Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0782 at least five minutes before start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. A replay will be available until July 28, 2020, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.
Heartland Financial USA, Inc. is a diversified financial services company with assets of $12.16 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 116 banking locations serving 84 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

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


-FINANCIAL TABLES FOLLOW
-###





HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the Quarter Ended
June 30,
 
For the Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Interest Income
 
 
 
 
 
 
 
Interest and fees on loans
$
106,027

 
$
96,787


$
206,483


$
182,438

Interest on securities:

 





Taxable
16,123

 
12,270


31,999


23,847

Nontaxable
2,554

 
3,584


5,647


7,163

Interest on federal funds sold
—

 
—


4


—

Interest on deposits with other banks and other short-term investments
2,299

 
768


3,591


1,175

Total Interest Income
127,003

 
113,409

 
247,724

 
214,623

Interest Expense
 
 
 
 
 
 
 
Interest on deposits
16,138

 
7,983


29,351


13,749

Interest on short-term borrowings
338

 
547


1,227


815

Interest on other borrowings
3,819

 
3,470


7,483


7,066

Total Interest Expense
20,295

 
12,000

 
38,061

 
21,630

Net Interest Income
106,708

 
101,409

 
209,663

 
192,993

Provision for loan losses
4,918

 
4,831


6,553


9,094

Net Interest Income After Provision for Loan Losses
101,790

 
96,578

 
203,110

 
183,899

Noninterest Income
 
 
 
 
 
 
 
Service charges and fees
14,629

 
12,072


27,423


22,151

Loan servicing income
1,338

 
1,807


3,067


3,561

Trust fees
4,825

 
4,615


9,299


9,295

Brokerage and insurance commissions
1,028

 
877


1,762


1,784

Securities gains/(losses), net
3,580

 
(259
)

5,155


1,182

Unrealized gain on equity securities, net
112

 
71


370


43

Net gains on sale of loans held for sale
4,343

 
6,800


7,519


10,851

Valuation adjustment on servicing rights
(364
)
 
(216
)

(953
)

(218
)
Income on bank owned life insurance
888

 
700


1,787


1,314

Other noninterest income
1,682

 
1,167


3,349


2,387

Total Noninterest Income
32,061

 
27,634

 
58,778

 
52,350

Noninterest Expense
 
 
 
 
 
 
 
Salaries and employee benefits
49,995

 
50,758


100,280


99,468

Occupancy
6,436

 
6,315


13,043


12,358

Furniture and equipment
3,220

 
3,184


5,912


5,933

Professional fees
14,968

 
10,632


26,347


20,080

Advertising
2,661

 
2,145


4,986


4,085

Core deposit and customer relationship intangibles amortization
3,313

 
2,274


6,155


4,137

Other real estate and loan collection expenses
162

 
948


863


1,680

(Gain)/loss on sales/valuations of assets, net
(18,286
)
 
1,528


(21,290
)

1,331

Restructuring expenses
—

 
—


3,227


2,564

Other noninterest expenses
12,629

 
11,098


23,805


20,892

Total Noninterest Expense
75,098

 
88,882

 
163,328

 
172,528

Income Before Income Taxes
58,753

 
35,330

 
98,560

 
63,721

Income taxes
13,584

 
7,451


21,894


12,574

Net Income
45,169

 
27,879

 
76,666

 
51,147

Preferred dividends
—

 
(13
)

—


(26
)
Net Income Available to Common Stockholders
$
45,169

 
$
27,866

 
$
76,666

 
$
51,121

Earnings per common share-diluted
$
1.26

 
$
0.85


$
2.17


$
1.61

Weighted average shares outstanding-diluted
35,879,259

 
32,830,751


35,295,407


31,746,126





HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Quarter Ended

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018
Interest Income









Interest and fees on loans
$
106,027


$
100,456


$
105,700


$
105,733


$
96,787

Interest on securities:









Taxable
16,123


15,876


15,851


14,433


12,270

Nontaxable
2,554


3,093


3,467


3,490


3,584

Interest on federal funds sold
—


4


—


—


—

Interest on deposits with other banks and other short-term investments
2,299


1,292


1,285


1,238


768

Total Interest Income
127,003

 
120,721

 
126,303

 
124,894

 
113,409

Interest Expense
 
 
 
 
 
 
 
 
 
Interest on deposits
16,138


13,213


11,826


10,092


7,983

Interest on short-term borrowings
338


889


417


464


547

Interest on other borrowings
3,819


3,664


3,777


3,660


3,470

Total Interest Expense
20,295

 
17,766

 
16,020

 
14,216

 
12,000

Net Interest Income
106,708

 
102,955

 
110,283

 
110,678

 
101,409

Provision for loan losses
4,918


1,635


9,681


5,238


4,831

Net Interest Income After Provision for Loan Losses
101,790

 
101,320

 
100,602

 
105,440

 
96,578

Noninterest Income
 
 
 
 
 
 
 
 
 
Service charges and fees
14,629


12,794


13,660


12,895


12,072

Loan servicing income
1,338


1,729


2,061


1,670


1,807

Trust fees
4,825


4,474


4,599


4,499


4,615

Brokerage and insurance commissions
1,028


734


1,618


1,111


877

Securities gains/(losses), net
3,580


1,575


48


(145
)

(259
)
Unrealized gain on equity securities, net
112


258


115


54


71

Net gains on sale of loans held for sale
4,343


3,176


3,189


7,410


6,800

Valuation adjustment on servicing rights
(364
)

(589
)

(58
)

230


(216
)
Income on bank owned life insurance
888


899


587


892


700

Other noninterest income
1,682


1,667


1,226


1,149


1,167

Total Noninterest Income
32,061

 
26,717

 
27,045

 
29,765

 
27,634

Noninterest Expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
49,995


50,285


46,729


49,921


50,758

Occupancy
6,436


6,607


6,622


6,348


6,315

Furniture and equipment
3,220


2,692


3,126


3,470


3,184

Professional fees
14,968


11,379


10,630


12,800


10,632

Advertising
2,661


2,325


2,726


2,754


2,145

Core deposit and customer relationship intangibles amortization
3,313


2,842


2,592


2,626


2,274

Other real estate and loan collection expenses
162


701


574


784


948

(Gain)/loss on sales/valuations of assets, net
(18,286
)

(3,004
)

(35
)

912


1,528

Restructuring expenses
—


3,227


—


—


—

Other noninterest expenses
12,629


11,176


15,857


12,924


11,098

Total Noninterest Expense
75,098

 
88,230

 
88,821

 
92,539

 
88,882

Income Before Income Taxes
58,753

 
39,807

 
38,826

 
42,666

 
35,330

Income taxes
13,584


8,310


6,685


8,956


7,451

Net Income
45,169

 
31,497

 
32,141

 
33,710

 
27,879

Preferred dividends
—

 
—

 
—

 
(13
)
 
(13
)
Net Income Available to Common Stockholders
$
45,169

 
$
31,497

 
$
32,141

 
$
33,697

 
$
27,866

Earnings per common share-diluted
$
1.26


$
0.91


$
0.93


$
0.97


$
0.85

Weighted average shares outstanding-diluted
35,879,259


34,699,839


34,670,180


34,644,187


32,830,751






HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
As of
 
6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
198,664


$
174,198


$
223,135


$
196,847


$
193,069

Interest bearing deposits with other banks and other short-term investments
443,475


318,303


50,495


240,528


194,937

Cash and cash equivalents
642,139

 
492,501

 
273,630

 
437,375

 
388,006

Time deposits in other financial institutions
4,430


4,675


4,672


5,836


6,803

Securities:










Carried at fair value
2,561,887


2,400,460


2,450,709


2,274,215


2,197,117

Held to maturity, at cost
88,166


88,089


236,283


239,908


244,271

Other investments, at cost
31,366


27,506


28,396


26,656


26,725

Loans held for sale
34,575


69,716


119,801


77,727


55,684

Loans:









Held to maturity
7,853,051


7,331,544


7,407,697


7,365,493


7,477,697

 Allowance for loan losses
(63,850
)

(62,639
)

(61,963
)

(61,221
)

(61,324
)
Loans, net
7,789,201

 
7,268,905

 
7,345,734

 
7,304,272

 
7,416,373

Premises, furniture and equipment, net
198,329


190,215


194,676


198,224


199,959

Goodwill
427,097


391,668


391,668


391,668


391,668

Core deposit and customer relationship intangibles, net
52,718


44,637


47,479


50,071


52,698

Servicing rights, net
7,180


28,968


31,072


32,039


31,996

Cash surrender value on life insurance
170,421


163,764


162,892


162,216


159,302

Other real estate, net
6,646


5,391


6,153


11,908


11,074

Other assets
146,135


136,000


114,841


123,017


120,244

Total Assets
$
12,160,290

 
$
11,312,495

 
$
11,408,006

 
$
11,335,132

 
$
11,301,920

Liabilities and Equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 Demand
$
3,426,758


$
3,118,909


$
3,264,737


$
3,427,819


$
3,399,598

 Savings
5,533,503


5,145,929


5,107,962


4,958,430


4,864,773

 Time
1,148,296


1,088,104


1,023,730


1,125,914


1,224,773

Total deposits
10,108,557

 
9,352,942

 
9,396,429

 
9,512,163

 
9,489,144

Deposits held for sale
—

 
118,564

 
106,409

 
50,312

 
—

Short-term borrowings
107,260

 
104,314

 
227,010

 
131,139

 
229,890

Other borrowings
282,863

 
268,312

 
274,905

 
277,563

 
258,708

Accrued expenses and other liabilities
139,823

 
96,261

 
78,078

 
83,562

 
68,431

Total Liabilities
10,638,503

 
9,940,393

 
10,082,831

 
10,054,739

 
10,046,173

Stockholders' Equity
 
 
 
 
 
 
 
 
 
Preferred equity
—


—


—


—


938

Common stock
36,690


34,604


34,477


34,473


34,438

Capital surplus
837,150


745,596


743,095


742,080


740,128

Retained earnings
642,808


603,506


579,252


553,662


524,786

Accumulated other comprehensive income/(loss)
5,139


(11,604
)

(31,649
)

(49,822
)

(44,543
)
Total Equity
1,521,787

 
1,372,102

 
1,325,175

 
1,280,393

 
1,255,747

Total Liabilities and Equity
$
12,160,290

 
$
11,312,495

 
$
11,408,006

 
$
11,335,132

 
$
11,301,920






HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the Quarter Ended
June 30,
 
For the Six Months Ended
June 30,
 
2019

2018

2019

2018
Average Balances
 
 
 
 
 
 
 
Assets
$
11,708,538


$
10,643,306


$
11,489,095


$
10,204,061

Loans, net of unearned
7,648,562


7,123,182


7,531,360


6,826,018

Deposits
9,790,756


9,018,945


9,574,680


8,637,165

Earning assets
10,552,166


9,614,800


10,342,229


9,238,391

Interest bearing liabilities
6,872,449


6,205,187


6,747,990


5,951,175

Common stockholders' equity
1,442,388


1,139,876


1,389,612


1,076,083

Total stockholders' equity
1,442,388


1,140,814


1,389,612


1,077,021

Tangible common stockholders' equity
981,878


767,732


940,217


745,937


 
 
 
 
 
 
 
Key Performance Ratios
 
 
 
 
 
 
 
Annualized return on average assets
1.55
%

1.05
%

1.35
%

1.01
%
Annualized return on average common equity (GAAP)
12.56
%

9.81
%

11.13
%

9.58
%
Annualized return on average tangible common equity (non-GAAP)(1)
19.52
%

15.50
%

17.49
%

14.70
%
Annualized ratio of net charge-offs to average loans
0.19
%

0.12
%

0.12
%

0.10
%
Annualized net interest margin (GAAP)
4.06
%

4.23
%

4.09
%

4.21
%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)
4.10
%

4.30
%

4.14
%

4.28
%
Efficiency ratio, fully tax-equivalent(1)
64.81
%

64.94
%

65.01
%

66.48
%

 
 
 
 
 
 
 
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
 
 
 
 
 
 
 
Net income available to common stockholders (GAAP)
$
45,169


$
27,866


$
76,666


$
51,121

Plus core deposit and customer relationship intangibles amortization, net of tax(2)
2,617


1,796


4,862


3,268

Adjusted net income available to common stockholders (non-GAAP)
$
47,786

 
$
29,662

 
$
81,528

 
$
54,389









Average common stockholders' equity (GAAP)
$
1,442,388


$
1,139,876


$
1,389,612


$
1,076,083

Less average goodwill
410,642


325,781


401,207


288,185

Less average core deposit and customer relationship intangibles, net
49,868


46,363


48,188


41,961

Average tangible common equity (non-GAAP)
$
981,878


767,732


940,217


745,937

Annualized return on average common equity (GAAP)
12.56
%

9.81
%

11.13
%

9.58
%
Annualized return on average tangible common equity (non-GAAP)
19.52
%

15.50
%

17.49
%

14.70
%

 
 
 
 
 
 
 
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
 
 
 
 
 
 
 
Net Interest Income (GAAP)
$
106,708


$
101,409


$
209,663


$
192,993

Plus tax-equivalent adjustment(2)
1,268


1,575


2,680


3,119

Net interest income, tax-equivalent (non-GAAP)
$
107,976

 
$
102,984

 
$
212,343

 
$
196,112


 
 
 
 
 
 
 
Average earning assets
$
10,552,166


$
9,614,800


$
10,342,229


$
9,238,391


 
 
 
 
 
 
 
Annualized net interest margin (GAAP)
4.06
%

4.23
%

4.09
%

4.21
%
Annualized net interest margin, fully tax-equivalent (non-GAAP)
4.10
%

4.30
%

4.14
%

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







HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the Quarter Ended
 
6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018
Average Balances














Assets
$
11,708,538


$
11,267,214


$
11,371,247


$
11,291,289


$
10,643,306

Loans, net of unearned
7,648,562


7,412,855


7,436,497


7,462,176


7,123,182

Deposits
9,790,756


9,356,204


9,596,807


9,530,743


9,018,945

Earning assets
10,552,166


10,129,957


10,225,409


10,154,591


9,614,800

Interest bearing liabilities
6,872,449


6,622,149


6,557,185


6,544,949


6,205,187

Common stockholders' equity
1,442,388


1,336,250


1,290,691


1,263,226


1,139,876

Total stockholders' equity
1,442,388


1,336,250


1,290,691


1,263,795


1,140,814

Tangible common stockholders' equity (non-GAAP)
981,878


898,092


849,851


819,966


767,732

 
 
 
 
 
 
 
 
 
 
Key Performance Ratios
 
 
 
 
 
 
 
 
 
Annualized return on average assets
1.55
%

1.13
%

1.12
%

1.18
%

1.05
%
Annualized return on average common equity (GAAP)
12.56
%

9.56
%

9.88
%

10.58
%

9.81
%
Annualized return on average tangible common
equity (non-GAAP)(1)
19.52
%

15.24
%

15.96
%

17.31
%

15.50
%
Annualized ratio of net charge-offs to average loans
0.19
%

0.05
%

0.48
%

0.28
%

0.12
%
Annualized net interest margin (GAAP)
4.06
%

4.12
%

4.28
%

4.32
%

4.23
%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)
4.10
%

4.18
%

4.34
%

4.38
%

4.30
%
Efficiency ratio, fully tax-equivalent (non-GAAP)(1)
64.81
%

65.23
%

59.35
%

62.51
%

64.94
%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
 
 
 
 
 
 
 
 
 
Net income available to common stockholders (GAAP)
$
45,169


$
31,497


$
32,141


$
33,697


$
27,866

Plus core deposit and customer relationship intangibles amortization, net of tax(2)
2,617


2,245


2,048


2,075


1,796

Adjusted net income available to common stockholders (non-GAAP)
$
47,786

 
$
33,742

 
$
34,189

 
$
35,772

 
$
29,662

 
 
 
 
 
 
 
 
 
 
Average common stockholders' equity (GAAP)
$
1,442,388


$
1,336,250


$
1,290,691


$
1,263,226


$
1,139,876

   Less average goodwill
410,642


391,668


391,668


391,668


325,781

Less average core deposit and customer relationship intangibles, net
49,868


46,490


49,172


51,592


46,363

Average tangible common stockholders' equity (non-GAAP)
$
981,878

 
$
898,092

 
$
849,851

 
$
819,966

 
$
767,732

Annualized return on average common equity (GAAP)
12.56
%

9.56
%

9.88
%

10.58
%

9.81
%
Annualized return on average tangible common equity (non-GAAP)
19.52
%

15.24
%

15.96
%

17.31
%

15.50
%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
 
 
 
 
 
 
 
 
 
Net Interest Income (GAAP)
$
106,708


$
102,955


$
110,283


$
110,678


$
101,409

    Plus tax-equivalent adjustment(2)
1,268


1,412


1,565


1,544


1,575

Net interest income, fully tax-equivalent (non-GAAP)
$
107,976

 
$
104,367

 
$
111,848

 
$
112,222

 
$
102,984

 
 
 
 
 
 
 
 
 
 
Average earning assets
$
10,552,166


$
10,129,957


$
10,225,409


$
10,154,591


$
9,614,800

 
 
 
 
 
 
 
 
 
 
Annualized net interest margin (GAAP)
4.06
%

4.12
%

4.28
%

4.32
%

4.23
%
Annualized net interest margin, fully tax-equivalent (non-GAAP)
4.10
%

4.18
%

4.34
%

4.38
%

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




HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Quarter Ended
June 30,

For the Six Months Ended
June 30,
Reconciliation of Efficiency Ratio (non-GAAP)
2019

2018

2019

2018
Net interest income (GAAP)
$
106,708


$
101,409


$
209,663


$
192,993

Tax-equivalent adjustment(1)
1,268


1,575


2,680


3,119

Fully tax-equivalent net interest income
107,976


102,984

 
212,343

 
196,112

Noninterest income
32,061


27,634


58,778


52,350

Securities (gains)/losses, net
(3,580
)

259


(5,155
)

(1,182
)
Unrealized gain on equity securities, net
(112
)
 
(71
)
 
(370
)
 
(43
)
Valuation adjustment on servicing rights
364


216


953


218

Adjusted income (non-GAAP)
$
136,709

 
$
131,022

 
$
266,549

 
$
247,455













Total noninterest expenses (GAAP)
$
75,098


$
88,882


$
163,328


$
172,528

Less:










Core deposit and customer relationship intangibles amortization
3,313


2,274


6,155


4,137

Partnership investment in tax credit projects
1,465


—


1,940


—

(Gain)/loss on sales/valuations of assets, net
(18,286
)

1,528


(21,290
)

1,331

   Restructuring expenses
—

 
—

 
3,227

 
2,564

Adjusted noninterest expenses (non-GAAP)
$
88,606

 
$
85,080

 
$
173,296

 
$
164,496









Efficiency ratio, fully tax-equivalent (non-GAAP)
64.81
%
 
64.94
%
 
65.01
%
 
66.48
%
Reconciliation of Efficiency Ratio (non-GAAP)
For the Quarter Ended
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
Net interest income (GAAP)
$
106,708

 
$
102,955

 
$
110,283

 
$
110,678

 
$
101,409

Tax-equivalent adjustment(1)
1,268

 
1,412

 
1,565

 
1,544

 
1,575

Fully tax-equivalent net interest income
107,976

 
104,367

 
111,848

 
112,222

 
102,984

Noninterest income
32,061

 
26,717

 
27,045

 
29,765

 
27,634

Securities (gains)/losses, net
(3,580
)
 
(1,575
)
 
(48
)
 
145

 
259

Unrealized gain on equity securities, net
(112
)
 
(258
)
 
(115
)
 
(54
)
 
(71
)
Valuation adjustment on servicing rights
364

 
589

 
58

 
(230
)
 
216

Adjusted income (non-GAAP)
$
136,709

 
$
129,840

 
$
138,788

 
$
141,848

 
$
131,022

 
 
 
 
 
 
 
 
 
 
Total noninterest expenses (GAAP)
$
75,098

 
$
88,230

 
$
88,821

 
$
92,539

 
$
88,882

Less:
 
 
 
 
 
 
 
 
 
Core deposit and customer relationship intangibles amortization
3,313

 
2,842

 
2,592

 
2,626

 
2,274

Partnership investment in tax credit projects
1,465

 
475

 
3,895

 
338

 
—

(Gain)/loss on sales/valuation of assets, net
(18,286
)
 
(3,004
)
 
(35
)
 
912

 
1,528

Restructuring expenses
—

 
3,227

 
—

 
—

 
—

Adjusted noninterest expenses (non-GAAP)
$
88,606

 
$
84,690

 
$
82,369

 
$
88,663

 
$
85,080

 
 
 
 
 
 
 
 
 
 
Efficiency ratio, fully tax-equivalent (non-GAAP)
64.81
%
 
65.23
%
 
59.35
%
 
62.51
%
 
64.94
%
 
 
 
 
 
 
 
 
 
 
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.





HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
 
As of and for the Quarter Ended
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
Common Share Data
 
 
 
 
 
 
 
 
 
Book value per common share
$
41.48


$
39.65


$
38.44


$
37.14


$
36.44

Tangible book value per common share (non-GAAP)(1)
$
28.40


$
27.04


$
25.70


$
24.33


$
23.53

Common shares outstanding, net of treasury stock
36,690,061


34,603,611


34,477,499


34,473,029


34,438,445

Tangible common equity ratio (non-GAAP)(1)
8.92
%

8.60
%

8.08
%

7.70
%

7.46
%
 














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














Common stockholders' equity (GAAP)
$
1,521,787


$
1,372,102


$
1,325,175


$
1,280,393


$
1,254,809

Less goodwill
427,097


391,668


391,668


391,668


391,668

Less core deposit and customer relationship intangibles, net
52,718


44,637


47,479


50,071


52,698

Tangible common stockholders' equity (non-GAAP)
$
1,041,972

 
$
935,797

 
$
886,028

 
$
838,654

 
$
810,443

 














Common shares outstanding, net of treasury stock
36,690,061


34,603,611


34,477,499


34,473,029


34,438,445

Common stockholders' equity (book value) per share (GAAP)
$
41.48


$
39.65


$
38.44


$
37.14


$
36.44

Tangible book value per common share (non-GAAP)
$
28.40


$
27.04


$
25.70


$
24.33


$
23.53

 














Reconciliation of Tangible Common Equity Ratio (non-GAAP)














Tangible common stockholders' equity (non-GAAP)
$
1,041,972


$
935,797


$
886,028


$
838,654


$
810,443

 














Total assets (GAAP)
$
12,160,290


$
11,312,495


$
11,408,006


$
11,335,132


$
11,301,920

    Less goodwill
427,097


391,668


391,668


391,668


391,668

 Less core deposit and customer relationship intangibles, net
52,718


44,637


47,479


50,071


52,698

Total tangible assets (non-GAAP)
$
11,680,475

 
$
10,876,190

 
$
10,968,859

 
$
10,893,393

 
$
10,857,554

Tangible common equity ratio (non-GAAP)
8.92
%

8.60
%

8.08
%

7.70
%

7.46
%
 
 
 
 
 
 
 
 
 
 
Loan Data
 
 
 
 
 
 
 
 
 
Loans held to maturity:
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate
$
6,230,372

 
$
5,745,051


$
5,731,712


$
5,610,953


$
5,721,138

Residential mortgage
613,707

 
630,433


673,603


676,941


683,051

Agricultural and agricultural real estate
549,404

 
544,805


565,408


574,048


562,353

Consumer
461,802

 
412,573


440,158


506,181


512,899

Unearned discount and deferred loan fees
(2,234
)
 
(1,318
)

(3,184
)

(2,630
)

(1,744
)
Total loans held to maturity
$
7,853,051

 
$
7,331,544

 
$
7,407,697

 
$
7,365,493

 
$
7,477,697

 
 
 
 
 
 
 
 
 
 
Other Selected Trend Information
 
 
 
 
 
 
 
 
 
Effective tax rate
23.12
%

20.88
%

17.22
%

20.99
%

21.09
%
Full time equivalent employees
2,040


1,976


2,045


2,124


2,216

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





HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
As of and for the Quarter Ended
 
6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018
Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
62,639


$
61,963


$
61,221


$
61,324


$
58,656

Provision for loan losses
4,918


1,635


9,681


5,238


4,831

Charge-offs
(4,780
)

(1,950
)

(9,777
)

(6,120
)

(3,164
)
Recoveries
1,073


991


838


779


1,001

Balance, end of period
$
63,850

 
$
62,639

 
$
61,963

 
$
61,221

 
$
61,324

 
 
 
 
 
 
 
 
 
 
Asset Quality
 
 
 
 
 
 
 
 
 
Nonaccrual loans
$
79,619


$
77,294


$
71,943


$
73,060


$
69,376

Loans past due ninety days or more
285


1,706


726


154


54

Other real estate owned
6,646


5,391


6,153


11,908


11,074

Other repossessed assets
39


8


459


495


499

Total nonperforming assets
$
86,589

 
$
84,399

 
$
79,281

 
$
85,617

 
$
81,003

 
 
 
 
 
 
 
 
 
 
Performing troubled debt restructured loans
$
3,539


$
3,460


$
4,026


$
4,180


$
4,012

 
 
 
 
 
 
 
 
 
 
Nonperforming Assets Activity
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
84,399


$
79,281


$
85,617


$
81,003


$
77,052

Net loan charge offs
(3,707
)

(959
)

(8,939
)

(5,341
)

(2,163
)
New nonperforming loans
13,688


15,314


17,332


16,965


16,254

Acquired nonperforming assets
230


—


—


—


7,973

Reduction of nonperforming loans(1)
(6,246
)

(6,238
)

(6,065
)

(5,085
)

(15,696
)
OREO/Repossessed assets sales proceeds
(1,288
)

(2,092
)

(8,390
)

(1,064
)

(1,541
)
OREO/Repossessed assets writedowns, net
(487
)

(462
)

(230
)

(886
)

(993
)
Net activity at Citizens Finance Co.
—


(445
)

(44
)

25


117

Balance, end of period
$
86,589

 
$
84,399

 
$
79,281

 
$
85,617

 
$
81,003

 
Asset Quality Ratios
 
 
 
 
 
 
 
 
 
Ratio of nonperforming loans to total loans
1.02
%

1.08
%

0.98
%

0.99
%

0.93
%
Ratio of nonperforming loans and performing trouble debt restructured loans to total loans
1.06
%

1.12
%

1.04
%

1.05
%

0.98
%
Ratio of nonperforming assets to total assets
0.71
%

0.75
%

0.69
%

0.76
%

0.72
%
Annualized ratio of net loan charge-offs to average loans
0.19
%

0.05
%

0.48
%

0.28
%

0.12
%
Allowance for loan losses as a percent of loans
0.81
%

0.85
%

0.84
%

0.83
%

0.82
%
Allowance for loan losses as a percent of nonperforming loans
79.91
%

79.29
%

85.27
%

83.62
%

88.32
%
Loans delinquent 30-89 days as a percent of total loans
0.31
%

0.47
%

0.21
%

0.62
%

0.30
%
 
 
 
 
 
 
 
 
 
 
(1) Includes principal reductions, transfers to performing status and transfers to OREO.





HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS

For the Quarter Ended

June 30, 2019

March 31, 2019
 
June 30, 2018

Average
Balance

Interest

Rate

Average Balance

Interest

Rate
 
Average
Balance

Interest

Rate
Earning Assets











 





Securities:











 





Taxable
$
2,217,863


$
16,123


2.92
%

$
2,169,016


$
15,876


2.97
%
 
$
1,890,468


$
12,270


2.60
%
Nontaxable(1)
324,164


3,233


4.00


391,724


3,915


4.05

 
448,844


4,537


4.05

Total securities
2,542,027


19,356


3.05


2,560,740


19,791


3.13

 
2,339,312


16,807


2.88

Interest on deposits with other banks and other short-term investments
424,262


2,299


2.17


218,445


1,292


2.40

 
211,414


768


1.46

Federal funds sold
—


—


—


560


4


2.90

 
—


—


—

Loans:(2)











 





Commercial and commercial real estate(1)
5,968,424


82,328


5.53


5,745,180


78,083


5.51

 
5,403,447


71,301


5.29

Residential mortgage
676,465


8,238


4.88


673,682


7,179


4.32

 
685,005


7,562


4.43

Agricultural and agricultural real estate(1)
558,128


7,581


5.45


554,506


7,301


5.34

 
542,249


6,850


5.07

Consumer
445,545


6,517


5.87


439,487


6,479


5.98

 
492,481


9,192


7.49

Fees on loans


1,952


—




2,004


—

 


2,504


—

Less: allowance for loan losses
(62,685
)

—


—


(62,643
)

—


—

 
(59,108
)

—


—

Net loans
7,585,877


106,616


5.64


7,350,212


101,046


5.58

 
7,064,074


97,409


5.53

Total earning assets
10,552,166


128,271


4.88
%

10,129,957


122,133


4.89
%
 
9,614,800


114,984


4.80
%
Nonearning Assets
1,156,372






1,137,257







 
1,028,506





Total Assets
$
11,708,538






$
11,267,214







 
$
10,643,306





Interest Bearing Liabilities(3)











 





Savings
$
5,360,355


$
11,895


0.89
%

$
5,121,179


$
10,083


0.80
%
 
$
4,748,306


$
5,535


0.47
%
Time deposits
1,142,842


4,243


1.49


1,034,744


3,130


1.23

 
1,041,590


2,448


0.94

Short-term borrowings
92,977


338


1.46


195,390


889


1.85

 
152,576


547


1.44

Other borrowings
276,275


3,819


5.54


270,836


3,664


5.49

 
262,715


3,470


5.30

Total interest bearing liabilities
6,872,449


20,295


1.18
%

6,622,149


17,766


1.09
%
 
6,205,187


12,000


0.78
%
Noninterest Bearing Liabilities(3)











 





Noninterest bearing deposits
3,287,559






3,200,281







 
3,229,049





Accrued interest and other liabilities
106,142






108,534







 
68,256





Total noninterest bearing liabilities
3,393,701






3,308,815







 
3,297,305





Stockholders' Equity
1,442,388






1,336,250







 
1,140,814





Total Liabilities and Stockholders' Equity
$
11,708,538






$
11,267,214







 
$
10,643,306





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


$
107,976






$
104,367



 


$
102,984



Net interest spread(1)




3.70
%





3.80
%
 




4.02
%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets




4.10
%





4.18
%
 




4.30
%







 
 
 
 
 
 





(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS

For the Six Months Ended

June 30, 2019

June 30, 2018

Average
Balance

Interest

Rate

Average
Balance

Interest

Rate
Earning Assets











Securities:











Taxable
$
2,193,576


$
31,999


2.94
%

$
1,847,858


$
23,847


2.60
%
Nontaxable(1)
357,757


7,148


4.03


448,743


9,067


4.07

Total securities
2,551,333


39,147


3.09


2,296,601


32,914


2.89

Interest bearing deposits with other banks and other short-term investments
321,922


3,591


2.25


173,349


1,175


1.37

Federal funds sold
278


4


2.90


—


—


—

Loans:(2)











Commercial and commercial real estate(1)
5,857,419


160,411


5.52


5,158,483


134,114


5.24

Residential mortgage
675,081


15,417


4.61


663,711


14,413


4.38

Agricultural and agricultural real estate(1)
556,327


14,882


5.39


528,093


12,854


4.91

Consumer
442,533


12,996


5.92


475,731


17,852


7.57

Fees on loans


3,956


—




4,420


—

Less: allowance for loan losses
(62,664
)

—


—


(57,577
)

—


—

Net loans
7,468,696


207,662


5.61


6,768,441


183,653


5.47

Total earning assets
10,342,229


250,404


4.88


9,238,391


217,742


4.75

Nonearning Assets
1,146,866






965,670





Total Assets
$
11,489,095






$
10,204,061





Interest Bearing Liabilities(3)











Savings
$
5,241,428


$
21,978


0.85
%

$
4,554,484


$
9,326


0.41
%
Time deposits
1,089,091


7,373


1.37


975,129


4,423


0.91

Short-term borrowings
143,901


1,227


1.72


150,171


815


1.09

Other borrowings
273,570


7,483


5.52


271,391


7,066


5.25

Total interest bearing liabilities
6,747,990


38,061


1.14


5,951,175


21,630


0.73

Noninterest Bearing Liabilities(3)











Noninterest bearing deposits
3,244,161






3,107,552





Accrued interest and other liabilities
107,332






68,313





Total noninterest bearing liabilities
3,351,493






3,175,865





Stockholders' Equity
1,389,612






1,077,021





Total Liabilities and Stockholders' Equity
$
11,489,095






$
10,204,061





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


$
212,343






$
196,112



Net interest spread(1)




3.74
%





4.02
%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets




4.14
%





4.28
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.





HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
 
As of and For the Quarter Ended
 
6/30/2019
3/31/2019
12/31/2018
9/30/2018
6/30/2018
Total Assets
 
 
 
 
 
Citywide Banks
$
2,261,591

$
2,214,105

$
2,307,284

$
2,300,018

$
2,295,261

Dubuque Bank and Trust Company
1,680,539

1,550,487

1,480,914

1,523,447

1,500,108

New Mexico Bank & Trust
1,534,236

1,500,024

1,492,555

1,465,020

1,466,311

Bank of Blue Valley(2)
1,319,226

564,833

571,012

592,786

602,630

First Bank & Trust
1,088,796

1,099,759

1,109,929

1,112,464

1,123,559

Wisconsin Bank & Trust
1,042,463

1,031,305

1,114,352

1,051,160

1,034,075

Illinois Bank & Trust
852,830

810,357

804,907

795,132

815,905

Premier Valley Bank
847,076

855,473

849,696

851,358

846,215

Arizona Bank & Trust
732,783

669,806

658,714

650,032

653,596

Minnesota Bank & Trust
631,339

657,187

666,564

649,179

660,469

Rocky Mountain Bank
503,126

489,135

490,453

492,063

504,243

Total Deposits(1)
 
 
 
 
 
Citywide Banks
$
1,833,259

$
1,802,701

$
1,848,373

$
1,905,830

$
1,867,626

Dubuque Bank and Trust Company
1,157,881

1,245,553

1,214,541

1,217,976

1,136,431

New Mexico Bank & Trust
1,346,304

1,313,708

1,307,464

1,267,844

1,242,673

Bank of Blue Valley(2)
1,077,183

473,712

489,471

511,154

498,798

First Bank & Trust
844,793

857,313

861,629

875,170

887,181

Wisconsin Bank & Trust
892,020

872,090

927,821

891,167

874,035

Illinois Bank & Trust
769,577

735,101

715,482

726,790

753,022

Premier Valley Bank
689,384

676,849

639,194

706,125

696,460

Arizona Bank & Trust
646,728

593,089

574,762

550,530

558,895

Minnesota Bank & Trust
515,310

546,706

560,399

544,513

561,257

Rocky Mountain Bank
438,349

426,503

424,700

429,167

443,359

Net Income
 
 
 
 
 
Citywide Banks
$
8,120

$
7,283

$
7,005

$
7,762

$
7,018

Dubuque Bank and Trust Company
17,353

5,011

6,002

4,458

4,426

New Mexico Bank & Trust
7,634

7,847

6,007

7,104

7,043

Bank of Blue Valley(2)
3,505

1,172

324

165

961

First Bank & Trust
3,099

2,792

3,334

3,932

1,925

Wisconsin Bank & Trust
2,516

4,707

3,229

3,735

2,470

Illinois Bank & Trust
1,751

2,632

2,180

2,419

2,421

Premier Valley Bank
2,763

2,411

2,930

3,006

2,664

Arizona Bank & Trust
3,110

2,780

1,951

2,660

3,623

Minnesota Bank & Trust
1,980

1,454

1,038

2,167

581

Rocky Mountain Bank
779

1,358

1,230

1,210

1,185

 
(1) Includes deposits held for sale.
(2) Formerly known as Morrill & Janes Bank and Trust Company.