Highlights and Developments
- Quarterly net income of $20.0 million or $0.54 per diluted common share in comparison with $31.5 million or $0.91 per diluted common share for the first quarter of the prior year
- Net interest margin of 3.81%, fully tax-equivalent net interest margin (non-GAAP)(1) of 3.84%
- Return on average common equity of 4.98% and return on average tangible common equity (non-GAAP)(1) of 8.00%
- Efficiency ratio (non-GAAP)(1) for the first quarter of 2020 of 61.82% compared to 64.93% for the first quarter of 2019
- Tangible common equity ratio (non-GAAP)(1) of 8.29% compared to 8.60% at March 31, 2019
- Total commercial loan growth of $76.5 million and non-time deposit growth of $212.3 million for the first quarter of 2020
- Entered into a definitive merger agreement with AIM Bancshares, Inc.
- Adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)"
| Three Months Ended March 31, | |||||||||
| 2020 | 2019 | ||||||||
| Net income available to common stockholders (in millions) | $ | 20.0 | $ | 31.5 | |||||
| Diluted earnings per common share | 0.54 | 0.91 | |||||||
| Return on average assets | 0.61 | % | 1.13 | % | |||||
| Return on average common equity | 4.98 | 9.56 | |||||||
| Return on average tangible common equity (non-GAAP)(1) | 8.00 | 15.24 | |||||||
| Net interest margin | 3.81 | 4.12 | |||||||
| Net interest margin, fully tax-equivalent (non-GAAP)(1) | 3.84 | 4.18 | |||||||
| Efficiency ratio, fully-tax equivalent (non-GAAP)(1) | 61.82 | 64.93 | |||||||
(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 had a solid first quarter, which included $76.5 million of commercial loan growth, non-time deposit growth of $212.3 million, strong net interest margin, and a significantly improved efficiency ratio compared to the same quarter last year." |
| Bruce K. Lee, president and chief executive officer, Heartland Financial USA, Inc. |
DUBUQUE, Iowa, April 27, 2020 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results:
- net income available to common stockholders of $20.0 million, or $0.54 per diluted common share, for the quarter ended March 31, 2020, compared to $31.5 million, or $0.91 per diluted common share, for the first quarter of 2019.
- excluding provision for credit losses and acquisition, integration and restructuring costs (tax-effected), adjusted net income available to common stockholders (non-GAAP) was $38.1 million, or $1.03 of adjusted earnings per diluted common share (non-GAAP) for the first quarter of 2020, compared to $35.6 million (non-GAAP), or $1.03 per adjusted earnings per diluted common share (non-GAAP), for the first quarter of 2019.
- return on average common equity was 4.98% and return on average assets was 0.61% for the first quarter of 2020, compared to 9.56% and 1.13%, respectively, for the same quarter in 2019.
- return on average tangible common equity (non-GAAP) of 8.00% and adjusted return on average tangible common equity (non-GAAP) of 14.46% for the first quarter of 2020 compared to 15.24% and 17.11%, respectively, for the first quarter of 2019.
Responses to COVID-19
Heartland has implemented its pandemic management plan to protect employees and enable business continuity while providing relief and support to customers and communities facing challenges from the impacts of COVID-19, which included the following:
- enabled approximately 2/3rds of employees to work from home and canceled all in-person events and meetings;
- expanded time off program and enhanced health care coverage for COVID-19 related testing and treatments;
- implemented a 20% wage premium for customer-facing and call center employees;
- closed most bank lobbies and implemented drive-through only for in-person transactions;
- announced a series of relief programs for consumers and small business customers, which include waiving account maintenance fees, ATM fees and early redemption penalties on CDs, and deferrals on loan payments;
- provided direct loans to customers via participation in the Small Business Administration's Paycheck Protection Program ("PPP"), and
- contributed $1.2 million to support non-profit organizations in communities served by Heartland and its subsidiary banks.
"The health and safety of our employees is our top priority. Our customers and communities are relying on us now more than ever, and we are there for them with our full line of products and services to help navigate these unprecedented economic times," Lee said.
The economic disruption resulting from the COVID-19 pandemic will make it difficult for some customers to repay the principal and interest on their loans, and Heartland's subsidiary banks have started working with customers to modify the terms of certain existing loans.
The following table shows the total exposure, which includes loans outstanding and unfunded loan commitments as of March 31, 2020, to customer segment profiles that Heartland believes will be more heavily impacted by COVID-19, dollars in thousands:
| Industry | Total Exposure(1) | % of Gross Exposure(1) | |||||
| Lodging | $ | 498,596 | 4.47 | % | |||
| Multi-family properties | 436,931 | 3.92 | |||||
| Retail real estate | 408,506 | 3.66 | |||||
| Retail trade | 367,764 | 3.30 | |||||
| Restaurants and bars | 247,239 | 2.22 | |||||
| Nursing homes/assisted living | 126,267 | 1.13 | |||||
| Oil and gas | 56,302 | 0.50 | |||||
| Childcare facilities | 48,455 | 0.43 | |||||
| Gaming | 34,790 | 0.31 | |||||
| (1) Total loans outstanding and unfunded commitments | |||||||
As of April 23, 2020, loan modifications have been made on approximately $556.2 million of loans in Heartland's portfolio. Approximately 69% of these modifications are interest only for 90 days, and the remainder are primarily principal and interest deferments for 90 days. Heartland expects modifications to increase in the near term.
Through April 23, 2020, Heartland's subsidiary banks have processed approximately 3,000 PPP applications and disbursed $1.02 billion of PPP loans. Heartland expects to process approximately $300-$500 million of additional loans due to the announced expansion of the PPP on April 24, 2020.
The ultimate impact of the COVID-19 pandemic on Heartland's financial condition and results of operations will depend on risks and uncertainties, such as the severity and duration of the pandemic, related restrictions on business and consumer activity, and the availability of government programs to alleviate the economic stress of the pandemic. See Heartland's "Safe Harbor Statement" below.
Recent Developments
Adoption of ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)"
On January 1, 2020, Heartland adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)," commonly referred to as "CECL." The impact of Heartland's adoption of CECL ("Day 1") resulted in the following:
- an increase of $12.1 million to the allowance for credit losses related to loans, which included a reclassification of $6.0 million of purchased credit impaired loan discount on previously acquired loans, and a cumulative-effect adjustment to retained earnings totaling $4.6 million, net of taxes of $1.5 million;
- an increase of $13.6 million to the allowance for unfunded commitments and a cumulative-effect adjustment to retained earnings totaling $10.2 million, net of taxes of $3.4 million, and
- established an allowance for credit losses for Heartland's held to maturity debt securities of $158,000 and a cumulative-effect adjustment to retained earnings totaling $118,000, net of taxes of $40,000.
The allowance calculation under CECL is an expected loss model, which encompasses expected losses over the life of the portfolio, including expected losses due to changes in economic conditions and forecasts, such as those caused by the COVID-19 pandemic. Heartland recorded $21.5 million of provision for credit losses in the first quarter of 2020, primarily due to a deteriorating economic outlook resulting in an increase in expected credit losses.
Entered into a Definitive Merger Agreement with AIM Bancshares, Inc.
On February 11, 2020, Heartland entered into a definitive merger agreement to acquire AIM Bancshares, Inc. and its wholly-owned subsidiary, AimBank, headquartered in Levelland, Texas. In the transaction, all issued and outstanding shares of AIM Bancshares stock will be exchanged for shares of Heartland common stock and cash. Shareholders of AIM Bancshares will receive 207.0 shares of Heartland common stock and $685.00 of cash for each share of AIM Bancshares. The transaction value will change due to fluctuations in the price of Heartland common stock and is subject to certain potential adjustments as set forth in the merger agreement. Simultaneous with the closing of the transaction, AimBank will merge with and into Heartland's Lubbock, Texas-based subsidiary, First Bank and Trust. The transaction is expected to close in the third quarter of 2020 with a systems conversion planned for the fourth quarter of 2020. As of March 31, 2020, AimBank had total assets of approximately $1.82 billion, which included $1.16 billion of gross loans outstanding, and approximately $1.58 billion of deposits.
"We continue to move forward with our acquisition of AIM Bancshares, Inc., and we are excited to welcome them to the Heartland family in the third quarter," commented Lynn B. Fuller, Heartland's executive operating chairman.
Net Interest Income Increases and Net Interest Margin Decreases from First Quarter of 2019
Net interest margin, expressed as a percentage of average earning assets, was 3.81% (3.84% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2020, compared to 3.86% (3.90% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2019 and 4.12% (4.18% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2019.
Total interest income for the first quarter of 2020 was $131.0 million compared to $120.7 million recorded in the first quarter of 2019, an increase of $10.3 million or 9%. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.1 million for the first quarter of 2020 and $1.4 million for the first quarter of 2019. With these adjustments, total interest income on a tax-equivalent basis was $132.2 million for the first quarter of 2020, an increase of $10.0 million or 8%, compared to total interest income on a tax-equivalent basis of $122.1 million for the first quarter of 2019.
Average earning assets of $11.89 billion increased $1.76 billion or 17% from the first quarter of 2019, which was primarily attributable to recent acquisitions. The average rate on earning assets decreased 42 basis points to 4.47% for the first quarter of 2020 compared to 4.89% for the same quarter in 2019, which was primarily due to recent decreases in market interest rates.
Total interest expense for the first quarter of 2020 was $18.5 million, an increase of $772,000 or 4% from $17.8 million in the first quarter of 2019, which was the result of the increase in average interest bearing liabilities. The average interest rate paid on Heartland's interest bearing liabilities decreased to 0.95% for the first quarter of 2020 compared to 1.09% for the first quarter of 2019, which was primarily due to recent decreases in market interest rates.
Average interest bearing deposits increased $1.27 billion or 21% to $7.42 billion for the quarter ended March 31, 2020, from $6.16 billion in the same quarter in 2019, which was primarily attributable to recent acquisitions. The average interest rate paid on Heartland's interest bearing deposits decreased 8 basis points to 0.79% for the first quarter of 2020 compared to 0.87% for the same quarter in 2019.
Average borrowings decreased $48.4 million or 10% to $417.8 million during the first quarter of 2020 from $466.2 million during the same quarter in 2019. The average interest rate paid on Heartland's borrowings was 3.81% for the first quarter of 2020 compared to 3.96% in the first quarter of 2019.
Net interest income was $112.5 million during the first quarter of 2020 compared to $103.0 million during the first quarter of 2019, an increase of $9.6 million or 9%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $113.6 million during the first quarter of 2020 compared to net interest income on a tax-equivalent basis of $104.4 million during the first quarter of 2019, an increase of $9.3 million or 9%.
Noninterest Income Decreases and Noninterest Expense Increases from First Quarter of 2019
Total noninterest income was $25.8 million during the first quarter of 2020 compared to $26.7 million during the first quarter of 2019, a decrease of $900,000 or 3%. Significant changes by noninterest income category were:
- Loan servicing income totaled $963,000 for the first quarter of 2020 compared to $1.7 million for the first quarter of 2019, which was a decrease of $766,000 or 44%. The decrease was attributable to the sale of the mortgage servicing rights of Dubuque Bank and Trust Company in the second quarter of 2019.
- Net gains on sale of loans held for sale totaled $4.7 million during the first quarter of 2020 compared to $3.2 million during the same quarter in 2019, which was an increase of $1.5 million or 47%, primarily due to an increase in residential mortgage loan refinancing activity in response to the recent declines in mortgage interest rates.
- The valuation adjustment on servicing rights increased $976,000 to $1.6 million in the first quarter of 2020 from $589,000 in the first quarter of 2019, primarily due to recent declines in mortgage interest rates.
For the first quarter of 2020, total noninterest expense was $90.9 million compared to $88.2 million during the first quarter of 2019, an increase of $2.6 million or 3%. Significant changes by noninterest expense category were:
- Professional fees totaled $12.5 million for the first quarter of 2020 compared to $11.0 million for the same quarter of 2019, which was an increase of $1.5 million or 13%, which was primarily due to recent technology upgrades.
- Net loss on sales/valuations of assets increased $3.0 million as losses totaled $16,000 in the first quarter of 2020 compared to gains of $3.0 million in the first quarter of 2019. The gains recorded in 2019 were primarily attributable to the branch sales at Wisconsin Bank & Trust.
- Other noninterest expenses totaled $11.8 million for the first quarter of 2020 compared to $10.7 million for the first quarter of 2019, which was an increase of $1.1 million or 10%, which was primarily attributable to recent acquisitions.
Heartland's effective tax rate was 22.77% for the first quarter of 2020 compared to 20.88% for the first quarter of 2019. The following items impacted Heartland's first quarter 2020 and 2019 tax calculations:
- Solar energy tax credits of $76,000 and $314,000 for the first quarter of 2020 and 2019, respectively.
- Federal low-income housing tax credits of $195,000 and $281,000 for the first quarter of 2020 and 2019, respectively.
- New markets tax credits of $75,000 during the first quarter of 2020 compared to $0 in the first quarter of 2019.
- Tax-exempt interest income as a percentage of pre-tax income increased to 16.40% during the first quarter of 2020 compared to 13.35% for the first quarter of 2019.
- Tax expense of $25,000 in the first quarter of 2020 compared to a tax benefit of $336,000 in the first quarter of 2019 resulting from the vesting of restricted stock unit awards.
Total Assets Increase, Total Loans Remain Flat and Deposits Increase Since December 31, 2019
Total assets were $13.29 billion at March 31, 2020, an increase of $84.9 million or 1% from $13.21 billion at year-end 2019. Securities represented 27% and 26% of total assets at March 31, 2020, and December 31, 2019, respectively.
Total loans held to maturity were $8.37 billion at both March 31, 2020, and December 31, 2019. Loan changes by category were:
- Commercial and business lending, which includes commercial and industrial and owner occupied commercial real estate loans, decreased $22.0 million or 1% to $3.98 billion at March 31, 2020, compared to $4.00 billion at December 31, 2019.
- Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $98.5 million or 4% to $2.62 billion at March 31, 2020 from $2.52 billion at year-end 2019.
- Agricultural and agricultural real estate loans totaled $550.1 million at March 31, 2020, compared to $565.8 million at December 31, 2019, which was a decrease of $15.7 million or 3%.
- Residential mortgage loans decreased $39.7 million or 5% to $792.5 million at March 31, 2020, from $832.3 million at December 31, 2019.
- Consumer loans decreased $14.8 million or 3% to $428.6 million at March 31, 2020, compared to $443.3 million at December 31, 2019.
Total deposits were $11.17 billion as of March 31, 2020, compared to $11.04 billion at year-end 2019, an increase of $129.7 million or 1%. Deposit changes by category were:
- Demand deposits increased $153.1 million or 4% to $3.70 billion at March 31, 2020, compared to $3.54 billion at December 31, 2019.
- Savings deposits increased $59.2 million or 1% to $6.37 billion at March 31, 2020, from $6.31 billion at December 31, 2019.
- Time deposits decreased $82.6 million or 7% to $1.11 billion at March 31, 2020 from $1.19 billion at December 31, 2019.
Provision and Allowance for Credit Losses for Loans Increase Since December 31, 2019
Heartland's allowance for credit losses for loans totaled $82.5 million after adoption of CECL on January 1, 2020, which was an increase of $12.1 million since year-end 2019. Heartland recorded provision for credit losses for loans of $19.9 million in the first quarter of 2020 compared to $1.6 million in the first quarter of 2019. The allowance for credit losses for loans totaled $97.4 million and $70.4 million at March 31, 2020, and December 31, 2019, respectively.
The allowance for credit losses for loans at March 31, 2020, was 1.16% of loans compared to 0.84% of loans at December 31, 2019. Net charge offs for the first quarter of 2020 totaled $5.0 million compared to $959,000 for the first quarter of 2019, which was a $4.0 million increase. The increase was primarily attributable to a $3.2 million charge off on a commercial and industrial loan for which a full reserve had been previously established.
Heartland's allowance for unfunded commitments totaled $13.9 million after the adoption of CECL on January 1, 2020. Prior to January 1, 2020, the allowance for unfunded commitments was immaterial. Heartland recorded $1.6 million of provision for credit losses related to unfunded loan commitments in the first quarter of 2020. At March 31, 2020, the allowance for unfunded commitments was $15.5 million. At March 31, 2020, Heartland had $2.78 billion of unfunded loan commitments.
The total allowance for credit related lending losses was $112.8 million at March 31, 2020, which was 1.35% of loans as of March 31, 2020.
Nonperforming Assets Decrease Since December 31, 2019
Nonperforming assets decreased $2.2 million or 3% to $85.4 million or 0.64% of total assets at March 31, 2020, compared to $87.6 million or 0.66% of total assets at December 31, 2019. Nonperforming loans were $79.3 million or 0.95% of total loans at March 31, 2020, compared to $80.7 million or 0.96% of total loans at December 31, 2019. At March 31, 2020, loans delinquent 30-89 days were 0.38% of total loans compared to 0.33% of total loans at December 31, 2019. Heartland expects that nonperforming assets and delinquent loans will increase through 2020 as customers’ ability to repay loans is adversely impacted by economic disruptions caused by the COVID-19 pandemic.
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 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 use of equity, 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 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 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 financial condition and capital strength.
- Adjusted net income and adjusted diluted earnings per share exclude tax-effected provision for credit losses and acquisition, integration and restructuring costs. Management believes the presentation of these non-GAAP measures are useful to compare net income and earnings per share results excluding the variability of credit loss provisions and acquisition, integration and restructuring costs.
- Annualized adjusted return on average tangible common equity is adjusted net income excluding intangible amortization calculated as (1) net income excluding (A) tax-effected provision for credit losses, (B) tax-effected acquisition, integration and restructuring costs and (C) tax-effected core deposit and customer relationship intangibles amortization, divided by (2) average common 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 use of equity, financial condition and capital strength.
Conference Call Details
Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 866-928-9948 at least five minutes before the 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 April 26, 2021, by logging on to www.htlf.com.
About Heartland Financial USA, Inc.
Heartland Financial USA, Inc. is a diversified financial services company with assets of $13.29 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 114 banking locations serving 83 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.
Safe Harbor Statement
This release, and future oral and written statements of Heartland and its management, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Heartland's financial condition, results of operations, plans, objectives, future performance and business. Although these forward-looking statements are based upon the beliefs, expectations and assumptions of Heartland's management, there are a number of factors, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed below and 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, including to the extent that they are affected by the COVID-19 pandemic and related restrictions on business and consumer activities; (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, including government programs offering relief from the COVID-19 pandemic; (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, including changes resulting from the COVID-19 pandemic; (x) unexpected outcomes of existing or new litigation involving the company, including claims resulting from our participation in and execution of government programs related to the COVID-19 pandemic; and (xi) changes in accounting policies and practices.
The COVID-19 pandemic is adversely affecting Heartland and its customers, counterparties, employees and third-party service providers. The pandemic’s severity, its duration and the extent of its impact on Heartland’s business, financial condition, results of operations, liquidity and prospects remain uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect Heartland’s net income and the value of its assets and liabilities, reduce the availability of funding to Heartland, lead to a tightening of credit and increase stock price volatility. Some economists and investment banks also predict that a recession or depression may result from the continued spread of COVID-19 and the economic consequences.
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 Three Months Ended March 31, | |||||||
| 2020 | 2019 | ||||||
| Interest Income | |||||||
| Interest and fees on loans | $ | 106,414 | $ | 100,456 | |||
| Interest on securities: | |||||||
| Taxable | 21,731 | 15,876 | |||||
| Nontaxable | 2,183 | 3,093 | |||||
| Interest on federal funds sold | — | 4 | |||||
| Interest on deposits with other banks and short-term investments | 721 | 1,292 | |||||
| Total Interest Income | 131,049 | 120,721 | |||||
| Interest Expense | |||||||
| Interest on deposits | 14,582 | 13,213 | |||||
| Interest on short-term borrowings | 296 | 889 | |||||
| Interest on other borrowings | 3,660 | 3,664 | |||||
| Total Interest Expense | 18,538 | 17,766 | |||||
| Net Interest Income | 112,511 | 102,955 | |||||
| Provision for credit losses | 21,520 | 1,635 | |||||
| Net Interest Income After Provision for Credit Losses | 90,991 | 101,320 | |||||
| Noninterest Income | |||||||
| Service charges and fees | 12,021 | 12,794 | |||||
| Loan servicing income | 963 | 1,729 | |||||
| Trust fees | 5,022 | 4,474 | |||||
| Brokerage and insurance commissions | 733 | 734 | |||||
| Securities gains, net | 1,658 | 1,575 | |||||
| Unrealized gain/ (loss) on equity securities, net | (231 | ) | 258 | ||||
| Net gains on sale of loans held for sale | 4,660 | 3,176 | |||||
| Valuation adjustment on servicing rights | (1,565 | ) | (589 | ) | |||
| Income on bank owned life insurance | 498 | 899 | |||||
| Other noninterest income | 2,058 | 1,667 | |||||
| Total Noninterest Income | 25,817 | 26,717 | |||||
| Noninterest Expense | |||||||
| Salaries and employee benefits | 49,957 | 50,285 | |||||
| Occupancy | 6,471 | 6,607 | |||||
| Furniture and equipment | 3,108 | 2,692 | |||||
| Professional fees | 12,473 | 10,995 | |||||
| Advertising | 2,205 | 2,320 | |||||
| Core deposit and customer relationship intangibles amortization | 2,981 | 2,869 | |||||
| Other real estate and loan collection expenses, net | 334 | 701 | |||||
| (Gain)/loss on sales/valuations of assets, net | 16 | (3,004 | ) | ||||
| Acquisition, integration and restructuring costs | 1,376 | 3,614 | |||||
| Partnership investment in tax credit projects | 184 | 475 | |||||
| Other noninterest expenses | 11,754 | 10,676 | |||||
| Total Noninterest Expense | 90,859 | 88,230 | |||||
| Income Before Income Taxes | 25,949 | 39,807 | |||||
| Income taxes | 5,909 | 8,310 | |||||
| Net Income | $ | 20,040 | $ | 31,497 | |||
| Earnings per common share-diluted | $ | 0.54 | $ | 0.91 | |||
| Weighted average shares outstanding-diluted | 36,895,591 | 34,699,839 | |||||
| HEARTLAND FINANCIAL USA, INC. | ||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | ||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | ||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
| Interest Income | ||||||||||||||||||
| Interest and fees on loans | $ | 106,414 | $ | 107,566 | $ | 110,566 | $ | 106,027 | $ | 100,456 | ||||||||
| Interest on securities: | ||||||||||||||||||
| Taxable | 21,731 | 22,581 | 18,567 | 16,123 | 15,876 | |||||||||||||
| Nontaxable | 2,183 | 2,102 | 2,119 | 2,554 | 3,093 | |||||||||||||
| Interest on federal funds sold | — | — | — | — | 4 | |||||||||||||
| Interest on deposits with other banks and short-term investments | 721 | 953 | 2,151 | 2,299 | 1,292 | |||||||||||||
| Total Interest Income | 131,049 | 133,202 | 133,403 | 127,003 | 120,721 | |||||||||||||
| Interest Expense | ||||||||||||||||||
| Interest on deposits | 14,582 | 16,401 | 17,982 | 16,138 | 13,213 | |||||||||||||
| Interest on short-term borrowings | 296 | 271 | 250 | 338 | 889 | |||||||||||||
| Interest on other borrowings | 3,660 | 3,785 | 3,850 | 3,819 | 3,664 | |||||||||||||
| Total Interest Expense | 18,538 | 20,457 | 22,082 | 20,295 | 17,766 | |||||||||||||
| Net Interest Income | 112,511 | 112,745 | 111,321 | 106,708 | 102,955 | |||||||||||||
| Provision for credit losses | 21,520 | 4,903 | 5,201 | 4,918 | 1,635 | |||||||||||||
| Net Interest Income After Provision for Credit Losses | 90,991 | 107,842 | 106,120 | 101,790 | 101,320 | |||||||||||||
| Noninterest Income | ||||||||||||||||||
| Service charges and fees | 12,021 | 12,368 | 12,366 | 14,629 | 12,794 | |||||||||||||
| Loan servicing income | 963 | 955 | 821 | 1,338 | 1,729 | |||||||||||||
| Trust fees | 5,022 | 5,141 | 4,959 | 4,825 | 4,474 | |||||||||||||
| Brokerage and insurance commissions | 733 | 1,062 | 962 | 1,028 | 734 | |||||||||||||
| Securities gains, net | 1,658 | 491 | 2,013 | 3,580 | 1,575 | |||||||||||||
| Unrealized gain/ (loss) on equity securities, net | (231 | ) | 11 | 144 | 112 | 258 | ||||||||||||
| Net gains on sale of loans held for sale | 4,660 | 3,363 | 4,673 | 4,343 | 3,176 | |||||||||||||
| Valuation adjustment on servicing rights | (1,565 | ) | 668 | (626 | ) | (364 | ) | (589 | ) | |||||||||
| Income on bank owned life insurance | 498 | 1,117 | 881 | 888 | 899 | |||||||||||||
| Other noninterest income | 2,058 | 2,854 | 3,207 | 1,682 | 1,667 | |||||||||||||
| Total Noninterest Income | 25,817 | 28,030 | 29,400 | 32,061 | 26,717 | |||||||||||||
| Noninterest Expense | ||||||||||||||||||
| Salaries and employee benefits | 49,957 | 50,234 | 49,927 | 49,895 | 50,285 | |||||||||||||
| Occupancy | 6,471 | 5,802 | 6,594 | 6,426 | 6,607 | |||||||||||||
| Furniture and equipment | 3,108 | 3,323 | 2,862 | 3,136 | 2,692 | |||||||||||||
| Professional fees | 12,473 | 11,082 | 11,276 | 14,344 | 10,995 | |||||||||||||
| Advertising | 2,205 | 2,274 | 2,622 | 2,609 | 2,320 | |||||||||||||
| Core deposit and customer relationship intangibles amortization | 2,981 | 2,918 | 2,899 | 3,313 | 2,869 | |||||||||||||
| Other real estate and loan collection expenses, net | 334 | 261 | (89 | ) | 162 | 701 | ||||||||||||
| (Gain)/loss on sales/valuations of assets, net | 16 | 1,512 | 356 | (18,286 | ) | (3,004 | ) | |||||||||||
| Acquisition, integration and restructuring costs | 1,376 | 537 | 1,500 | 929 | 3,614 | |||||||||||||
| Partnership investment in tax credit projects | 184 | 3,038 | 3,052 | 1,465 | 475 | |||||||||||||
| Other noninterest expenses | 11,754 | 11,885 | 11,968 | 11,105 | 10,676 | |||||||||||||
| Total Noninterest Expense | 90,859 | 92,866 | 92,967 | 75,098 | 88,230 | |||||||||||||
| Income Before Income Taxes | 25,949 | 43,006 | 42,553 | 58,753 | 39,807 | |||||||||||||
| Income taxes | 5,909 | 5,155 | 7,941 | 13,584 | 8,310 | |||||||||||||
| Net Income | $ | 20,040 | $ | 37,851 | $ | 34,612 | $ | 45,169 | $ | 31,497 | ||||||||
| Earnings per common share-diluted | $ | 0.54 | $ | 1.03 | $ | 0.94 | $ | 1.26 | $ | 0.91 | ||||||||
| Weighted average shares outstanding-diluted | 36,895,591 | 36,840,519 | 36,835,191 | 35,879,259 | 34,699,839 | |||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| As of | |||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Assets | |||||||||||||||||||
| Cash and due from banks | $ | 175,587 | $ | 206,607 | $ | 243,395 | $ | 198,664 | $ | 174,198 | |||||||||
| Interest bearing deposits with other banks and short-term investments | 64,156 | 172,127 | 204,372 | 443,475 | 318,303 | ||||||||||||||
| Cash and cash equivalents | 239,743 | 378,734 | 447,767 | 642,139 | 492,501 | ||||||||||||||
| Time deposits in other financial institutions | 3,568 | 3,564 | 3,711 | 4,430 | 4,675 | ||||||||||||||
| Securities: | |||||||||||||||||||
| Carried at fair value | 3,488,621 | 3,312,796 | 3,020,568 | 2,561,887 | 2,400,460 | ||||||||||||||
| Held to maturity, at cost, less allowance for credit losses | 91,875 | 91,324 | 87,965 | 88,166 | 88,089 | ||||||||||||||
| Other investments, at cost | 35,370 | 31,321 | 29,042 | 31,366 | 27,506 | ||||||||||||||
| Loans held for sale | 22,957 | 26,748 | 35,427 | 34,575 | 69,716 | ||||||||||||||
| Loans: | |||||||||||||||||||
| Held to maturity | 8,374,236 | 8,367,917 | 7,971,608 | 7,853,051 | 7,331,544 | ||||||||||||||
| Allowance for credit losses | (97,350 | ) | (70,395 | ) | (66,222 | ) | (63,850 | ) | (62,639 | ) | |||||||||
| Loans, net | 8,276,886 | 8,297,522 | 7,905,386 | 7,789,201 | 7,268,905 | ||||||||||||||
| Premises, furniture and equipment, net | 200,960 | 200,525 | 199,235 | 198,329 | 190,215 | ||||||||||||||
| Goodwill | 446,345 | 446,345 | 427,097 | 427,097 | 391,668 | ||||||||||||||
| Core deposit and customer relationship intangibles, net | 45,707 | 48,688 | 49,819 | 52,718 | 44,637 | ||||||||||||||
| Servicing rights, net | 5,220 | 6,736 | 6,271 | 7,180 | 28,968 | ||||||||||||||
| Cash surrender value on life insurance | 172,140 | 171,625 | 171,471 | 170,421 | 163,764 | ||||||||||||||
| Other real estate, net | 6,074 | 6,914 | 6,425 | 6,646 | 5,391 | ||||||||||||||
| Other assets | 259,043 | 186,755 | 179,078 | 146,135 | 136,000 | ||||||||||||||
| Total Assets | $ | 13,294,509 | $ | 13,209,597 | $ | 12,569,262 | $ | 12,160,290 | $ | 11,312,495 | |||||||||
| Liabilities and Equity | |||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Demand | $ | 3,696,974 | $ | 3,543,863 | $ | 3,581,127 | $ | 3,426,758 | $ | 3,118,909 | |||||||||
| Savings | 6,366,610 | 6,307,425 | 5,770,754 | 5,533,503 | 5,145,929 | ||||||||||||||
| Time | 1,110,441 | 1,193,043 | 1,117,975 | 1,148,296 | 1,088,104 | ||||||||||||||
| Total deposits | 11,174,025 | 11,044,331 | 10,469,856 | 10,108,557 | 9,352,942 | ||||||||||||||
| Deposits held for sale | — | — | — | — | 118,564 | ||||||||||||||
| Short-term borrowings | 121,442 | 182,626 | 107,853 | 107,260 | 104,314 | ||||||||||||||
| Other borrowings | 276,150 | 275,773 | 278,417 | 282,863 | 268,312 | ||||||||||||||
| Accrued expenses and other liabilities | 169,178 | 128,730 | 149,293 | 139,823 | 96,261 | ||||||||||||||
| Total Liabilities | 11,740,795 | 11,631,460 | 11,005,419 | 10,638,503 | 9,940,393 | ||||||||||||||
| Stockholders' Equity | |||||||||||||||||||
| Common stock | 36,807 | 36,704 | 36,696 | 36,690 | 34,604 | ||||||||||||||
| Capital surplus | 842,780 | 839,857 | 838,543 | 837,150 | 745,596 | ||||||||||||||
| Retained earnings | 700,298 | 702,502 | 670,816 | 642,808 | 603,506 | ||||||||||||||
| Accumulated other comprehensive income/(loss) | (26,171 | ) | (926 | ) | 17,788 | 5,139 | (11,604 | ) | |||||||||||
| Total Equity | 1,553,714 | 1,578,137 | 1,563,843 | 1,521,787 | 1,372,102 | ||||||||||||||
| Total Liabilities and Equity | $ | 13,294,509 | $ | 13,209,597 | $ | 12,569,262 | $ | 12,160,290 | $ | 11,312,495 | |||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Average Balances | |||||||||||||||||||
| Assets | $ | 13,148,173 | $ | 12,798,770 | $ | 12,293,332 | $ | 11,708,538 | $ | 11,267,214 | |||||||||
| Loans, net of unearned | 8,364,220 | 8,090,476 | 7,883,678 | 7,648,562 | 7,412,855 | ||||||||||||||
| Deposits | 10,971,193 | 10,704,643 | 10,253,643 | 9,790,756 | 9,356,204 | ||||||||||||||
| Earning assets | 11,891,455 | 11,580,295 | 11,102,581 | 10,552,166 | 10,129,957 | ||||||||||||||
| Interest bearing liabilities | 7,841,941 | 7,513,701 | 7,174,944 | 6,872,449 | 6,622,149 | ||||||||||||||
| Common equity | 1,619,682 | 1,570,258 | 1,541,369 | 1,442,388 | 1,336,250 | ||||||||||||||
| Tangible common equity (non-GAAP) | 1,125,705 | 1,087,495 | 1,062,568 | 981,878 | 898,092 | ||||||||||||||
| Key Performance Ratios | |||||||||||||||||||
| Annualized return on average assets | 0.61 | % | 1.17 | % | 1.12 | % | 1.55 | % | 1.13 | % | |||||||||
| Annualized return on average common equity (GAAP) | 4.98 | 9.56 | 8.91 | 12.56 | 9.56 | ||||||||||||||
| Annualized return on average tangible common equity (non-GAAP)(1) | 8.00 | 14.65 | 13.78 | 19.52 | 15.24 | ||||||||||||||
| Annualized adjusted return on average tangible common equity (non-GAAP) | 14.46 | % | 16.22 | % | 15.76 | % | 21.41 | % | 17.11 | % | |||||||||
| Annualized ratio of net charge-offs to average loans | 0.24 | 0.04 | 0.14 | 0.19 | 0.05 | ||||||||||||||
| Annualized net interest margin (GAAP) | 3.81 | 3.86 | 3.98 | 4.06 | 4.12 | ||||||||||||||
| Annualized net interest margin, fully tax-equivalent (non-GAAP)(1) | 3.84 | 3.90 | 4.02 | 4.10 | 4.18 | ||||||||||||||
| Efficiency ratio, fully tax-equivalent (non-GAAP)(1) | 61.82 | 60.31 | 60.85 | 64.13 | 64.93 | ||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Common Share Data | |||||||||||||||||||
| Book value per common share | $ | 42.21 | $ | 43.00 | $ | 42.62 | $ | 41.48 | $ | 39.65 | |||||||||
| Tangible book value per common share (non-GAAP)(1) | $ | 28.84 | $ | 29.51 | $ | 29.62 | $ | 28.40 | $ | 27.04 | |||||||||
| Common shares outstanding, net of treasury stock | 36,807,217 | 36,704,278 | 36,696,190 | 36,690,061 | 34,603,611 | ||||||||||||||
| Tangible common equity ratio (non-GAAP)(1) | 8.29 | % | 8.52 | % | 8.99 | % | 8.92 | % | 8.60 | % | |||||||||
| Other Selected Trend Information | |||||||||||||||||||
| Effective tax rate | 22.77 | % | 11.99 | % | 18.66 | % | 23.12 | % | 20.88 | % | |||||||||
| Full time equivalent employees | 1,817 | 1,908 | 1,962 | 2,040 | 1,976 | ||||||||||||||
| Loans Held to Maturity(2) | |||||||||||||||||||
| Commercial and industrial | $ | 2,550,490 | $ | 2,530,809 | $ | 2,388,861 | $ | 2,325,025 | $ | 2,158,085 | |||||||||
| Owner occupied commercial real estate | 1,431,038 | 1,472,704 | 1,392,415 | 1,354,996 | 1,278,181 | ||||||||||||||
| Commercial and business lending | 3,981,528 | 4,003,513 | 3,781,276 | 3,680,021 | 3,436,266 | ||||||||||||||
| Non-owner occupied commercial real estate | 1,551,787 | 1,495,877 | 1,378,020 | 1,372,343 | 1,233,525 | ||||||||||||||
| Real estate construction | 1,069,700 | 1,027,081 | 980,298 | 943,109 | 850,844 | ||||||||||||||
| Commercial real estate lending | 2,621,487 | 2,522,958 | 2,358,318 | 2,315,452 | 2,084,369 | ||||||||||||||
| Total commercial lending | 6,603,015 | 6,526,471 | 6,139,594 | 5,995,473 | 5,520,635 | ||||||||||||||
| Agricultural and agricultural real estate | 550,107 | 565,837 | 571,596 | 559,054 | 558,090 | ||||||||||||||
| Residential mortgage | 792,540 | 832,277 | 823,056 | 849,576 | 850,845 | ||||||||||||||
| Consumer | 428,574 | 443,332 | 437,362 | 448,948 | 401,974 | ||||||||||||||
| Total loans held to maturity | $ | 8,374,236 | $ | 8,367,917 | $ | 7,971,608 | $ | 7,853,051 | $ | 7,331,544 | |||||||||
| Total unfunded loan commitments | $ | 2,782,679 | $ | 2,973,732 | $ | 2,659,729 | $ | 2,530,946 | $ | 2,332,174 | |||||||||
| (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. | |||||||||||||||||||
| (2) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted. | |||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Allowance for Credit Losses-Loans | |||||||||||||||||||
| Balance, beginning of period | $ | 70,395 | $ | 66,222 | $ | 63,850 | $ | 62,639 | $ | 61,963 | |||||||||
| Impact of ASU 2016-13 adoption | 12,071 | — | — | — | — | ||||||||||||||
| Provision for credit losses | 19,865 | 4,903 | 5,201 | 4,918 | 1,635 | ||||||||||||||
| Charge-offs | (6,301 | ) | (2,018 | ) | (4,842 | ) | (4,780 | ) | (1,950 | ) | |||||||||
| Recoveries | 1,320 | 1,288 | 2,013 | 1,073 | 991 | ||||||||||||||
| Balance, end of period | $ | 97,350 | $ | 70,395 | $ | 66,222 | $ | 63,850 | $ | 62,639 | |||||||||
| Allowance for Unfunded Commitments(1) | |||||||||||||||||||
| Balance, beginning of period | $ | 248 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Impact of ASU 2016-13 adoption | 13,604 | — | — | — | — | ||||||||||||||
| Provision for credit losses | 1,616 | — | — | — | — | ||||||||||||||
| Balance, end of period | $ | 15,468 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Allowance for lending related credit losses | $ | 112,818 | $ | 70,395 | $ | 66,222 | $ | 63,850 | $ | 62,639 | |||||||||
| Provision for Credit Losses | |||||||||||||||||||
| Provision for credit losses-loans | $ | 19,865 | $ | 4,903 | $ | 5,201 | $ | 4,918 | $ | 1,635 | |||||||||
| Provision for credit losses-unfunded commitments | 1,616 | — | — | — | — | ||||||||||||||
| Provision for credit losses-held to maturity securities(2) | 39 | — | — | — | — | ||||||||||||||
| Total provision for credit losses | $ | 21,520 | $ | 4,903 | $ | 5,201 | $ | 4,918 | $ | 1,635 | |||||||||
| (1) Prior to the adoption of ASU 2016-13, the allowance for unfunded commitments was immaterial and therefore prior periods have not been shown in this table. | |||||||||||||||||||
| (2) Prior to ASU 2016-13, there was no requirement to record provision for credit losses for held to maturity securities. | |||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Asset Quality | |||||||||||||||||||
| Nonaccrual loans | $ | 79,280 | $ | 76,548 | $ | 72,208 | $ | 79,619 | $ | 77,294 | |||||||||
| Loans past due ninety days or more | — | 4,105 | 40 | 285 | 1,706 | ||||||||||||||
| Other real estate owned | 6,074 | 6,914 | 6,425 | 6,646 | 5,391 | ||||||||||||||
| Other repossessed assets | 17 | 11 | 13 | 39 | 8 | ||||||||||||||
| Total nonperforming assets | $ | 85,371 | $ | 87,578 | $ | 78,686 | $ | 86,589 | $ | 84,399 | |||||||||
| Performing troubled debt restructured loans | $ | 2,858 | $ | 3,794 | $ | 3,199 | $ | 3,539 | $ | 3,460 | |||||||||
| Nonperforming Assets Activity | |||||||||||||||||||
| Balance, beginning of period | $ | 87,578 | $ | 78,686 | $ | 86,589 | $ | 84,399 | $ | 79,281 | |||||||||
| Net loan charge offs | (4,981 | ) | (730 | ) | (2,829 | ) | (3,707 | ) | (959 | ) | |||||||||
| New nonperforming loans | 15,796 | 13,751 | 6,818 | 13,688 | 15,314 | ||||||||||||||
| Acquired nonperforming assets | — | 3,262 | — | 230 | — | ||||||||||||||
| Reduction of nonperforming loans(1) | (11,937 | ) | (5,859 | ) | (8,861 | ) | (6,246 | ) | (6,238 | ) | |||||||||
| Net OREO/repossessed assets sales proceeds and losses | (1,085 | ) | (1,532 | ) | (3,031 | ) | (1,775 | ) | (2,999 | ) | |||||||||
| Balance, end of period | $ | 85,371 | $ | 87,578 | $ | 78,686 | $ | 86,589 | $ | 84,399 | |||||||||
| Asset Quality Ratios | |||||||||||||||||||
| Ratio of nonperforming loans to total loans | 0.95 | 0.96 | 0.91 | 1.02 | 1.08 | ||||||||||||||
| Ratio of nonperforming loans and performing trouble debt restructured loans to total loans | 0.98 | 1.01 | 0.95 | 1.06 | 1.12 | ||||||||||||||
| Ratio of nonperforming assets to total assets | 0.64 | 0.66 | 0.63 | 0.71 | 0.75 | ||||||||||||||
| Annualized ratio of net loan charge-offs to average loans | 0.24 | 0.04 | 0.14 | 0.19 | 0.05 | ||||||||||||||
| Allowance for loan credit losses as a percent of loans | 1.16 | 0.84 | 0.83 | 0.81 | 0.85 | ||||||||||||||
| Allowance for lending related credit losses as a percent of loans(2) | 1.35 | 0.84 | 0.83 | 0.81 | 0.85 | ||||||||||||||
| Allowance for loan credit losses as a percent of nonperforming loans | 122.79 | 87.28 | 91.66 | 79.91 | 79.29 | ||||||||||||||
| Loans delinquent 30-89 days as a percent of total loans | 0.38 | 0.33 | 0.28 | 0.31 | 0.47 | ||||||||||||||
| (1) Includes principal reductions, transfers to performing status and transfers to OREO. | |||||||||||||||||||
| (2) Prior to the adoption of ASU 2016-13, the reserve for unfunded commitments was immaterial. | |||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | ||||||||||||||||||||||||||||||||
| DOLLARS IN THOUSANDS | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||||||||||||||||||||||
| Average Balance | Interest | Rate | Average Balance | Interest | Rate | Average Balance | Interest | Rate | ||||||||||||||||||||||||
| Earning Assets | ||||||||||||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||||||||||
| Taxable | $ | 3,132,103 | $ | 21,731 | 2.79 | % | $ | 3,033,480 | $ | 22,581 | 2.95 | % | $ | 2,169,016 | $ | 15,876 | 2.97 | % | ||||||||||||||
| Nontaxable(1) | 288,535 | 2,763 | 3.85 | 271,792 | 2,661 | 3.88 | 391,724 | 3,915 | 4.05 | |||||||||||||||||||||||
| Total securities | 3,420,638 | 24,494 | 2.88 | 3,305,272 | 25,242 | 3.03 | 2,560,740 | 19,791 | 3.13 | |||||||||||||||||||||||
| Interest on deposits with other banks and short-term investments | 181,320 | 721 | 1.60 | 251,599 | 953 | 1.50 | 218,445 | 1,292 | 2.40 | |||||||||||||||||||||||
| Federal funds sold | — | — | — | — | — | — | 560 | 4 | 2.90 | |||||||||||||||||||||||
| Loans:(2)(3) | ||||||||||||||||||||||||||||||||
| Commercial and industrial(1) | 2,607,513 | 32,454 | 5.01 | 2,444,961 | 32,006 | 5.19 | 2,137,168 | 30,389 | 5.77 | |||||||||||||||||||||||
| Owner occupied commercial real estate | 1,433,160 | 18,581 | 5.21 | 1,416,338 | 19,241 | 5.39 | 1,262,567 | 17,531 | 5.63 | |||||||||||||||||||||||
| Non-owner occupied commercial real estate | 1,472,268 | 19,530 | 5.34 | 1,388,677 | 18,952 | 5.41 | 1,326,014 | 17,423 | 5.33 | |||||||||||||||||||||||
| Real estate construction | 1,045,836 | 12,845 | 4.94 | 1,003,797 | 13,645 | 5.39 | 825,634 | 11,871 | 5.83 | |||||||||||||||||||||||
| Agricultural and agricultural real estate | 552,968 | 7,039 | 5.12 | 566,419 | 7,314 | 5.12 | 566,878 | 7,203 | 5.15 | |||||||||||||||||||||||
| Residential mortgage | 819,730 | 10,421 | 5.11 | 830,277 | 10,454 | 5.00 | 880,825 | 10,286 | 4.74 | |||||||||||||||||||||||
| Consumer | 432,745 | 6,095 | 5.66 | 440,007 | 6,504 | 5.86 | 413,769 | 6,343 | 6.22 | |||||||||||||||||||||||
| Less: allowance for loan losses | (74,723 | ) | — | — | (67,052 | ) | — | — | (62,643 | ) | — | — | ||||||||||||||||||||
| Net loans | 8,289,497 | 106,965 | 5.19 | 8,023,424 | 108,116 | 5.35 | 7,350,212 | 101,046 | 5.58 | |||||||||||||||||||||||
| Total earning assets | 11,891,455 | 132,180 | 4.47 | % | 11,580,295 | 134,311 | 4.60 | % | 10,129,957 | 122,133 | 4.89 | % | ||||||||||||||||||||
| Nonearning Assets | 1,256,718 | 1,218,475 | 1,137,257 | |||||||||||||||||||||||||||||
| Total Assets | $ | 13,148,173 | $ | 12,798,770 | $ | 11,267,214 | ||||||||||||||||||||||||||
| Interest Bearing Liabilities(4) | ||||||||||||||||||||||||||||||||
| Savings | $ | 6,277,528 | $ | 10,082 | 0.65 | % | $ | 5,986,007 | $ | 11,790 | 0.78 | % | $ | 5,121,179 | $ | 10,083 | 0.80 | % | ||||||||||||||
| Time deposits | 1,146,619 | 4,500 | 1.58 | 1,135,025 | 4,611 | 1.61 | 1,034,744 | 3,130 | 1.23 | |||||||||||||||||||||||
| Short-term borrowings | 141,807 | 296 | 0.84 | 115,680 | 271 | 0.93 | 195,390 | 889 | 1.85 | |||||||||||||||||||||||
| Other borrowings | 275,987 | 3,660 | 5.33 | 276,989 | 3,785 | 5.42 | 270,836 | 3,664 | 5.49 | |||||||||||||||||||||||
| Total interest bearing liabilities | 7,841,941 | 18,538 | 0.95 | % | 7,513,701 | 20,457 | 1.08 | % | 6,622,149 | 17,766 | 1.09 | |||||||||||||||||||||
| Noninterest Bearing Liabilities(3) | ||||||||||||||||||||||||||||||||
| Noninterest bearing deposits | 3,547,046 | 3,583,611 | 3,200,281 | |||||||||||||||||||||||||||||
| Accrued interest and other liabilities | 139,504 | 131,200 | 108,534 | |||||||||||||||||||||||||||||
| Total noninterest bearing liabilities | 3,686,550 | 3,714,811 | 3,308,815 | |||||||||||||||||||||||||||||
| Common Equity | 1,619,682 | 1,570,258 | 1,336,250 | |||||||||||||||||||||||||||||
| Total Liabilities and Common Equity | $ | 13,148,173 | $ | 12,798,770 | $ | 11,267,214 | ||||||||||||||||||||||||||
| Net interest income, fully tax-equivalent (non-GAAP)(1) | $ | 113,642 | $ | 113,854 | $ | 104,367 | ||||||||||||||||||||||||||
| Net interest spread(1) | 3.52 | % | 3.52 | % | 3.80 | % | ||||||||||||||||||||||||||
| Net interest income, fully tax-equivalent (non-GAAP) to total earning assets | 3.84 | % | 3.90 | % | 4.18 | % | ||||||||||||||||||||||||||
| Interest bearing liabilities to earning assets | 65.95 | 64.88 | 65.37 | |||||||||||||||||||||||||||||
| (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) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted. | ||||||||||||||||||||||||||||||||
| (4) 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 | |||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||
| Total Assets | |||||||||||||||
| Citywide Banks | $ | 2,271,889 | $ | 2,294,512 | $ | 2,335,811 | $ | 2,261,591 | $ | 2,214,105 | |||||
| New Mexico Bank & Trust | 1,670,097 | 1,763,037 | 1,607,498 | 1,534,236 | 1,500,024 | ||||||||||
| Dubuque Bank and Trust Company | 1,591,312 | 1,646,105 | 1,547,014 | 1,680,539 | 1,550,487 | ||||||||||
| Illinois Bank & Trust | 1,295,984 | 1,301,172 | 839,721 | 852,830 | 810,357 | ||||||||||
| Bank of Blue Valley(1) | 1,222,358 | 1,307,688 | 1,346,342 | 1,319,226 | 564,833 | ||||||||||
| First Bank & Trust | 1,163,181 | 1,137,714 | 1,158,320 | 1,088,796 | 1,099,759 | ||||||||||
| Wisconsin Bank & Trust | 1,079,582 | 1,090,412 | 1,032,016 | 1,042,463 | 1,031,305 | ||||||||||
| Premier Valley Bank | 889,280 | 903,220 | 888,401 | 847,076 | 855,473 | ||||||||||
| Arizona Bank & Trust | 866,107 | 784,240 | 695,236 | 732,783 | 669,806 | ||||||||||
| Minnesota Bank & Trust | 778,724 | 718,724 | 718,035 | 631,339 | 657,187 | ||||||||||
| Rocky Mountain Bank | 576,245 | 532,191 | 528,094 | 503,126 | 489,135 | ||||||||||
| Total Deposits(2) | |||||||||||||||
| Citywide Banks | $ | 1,868,404 | $ | 1,829,217 | $ | 1,895,894 | $ | 1,833,259 | $ | 1,802,701 | |||||
| New Mexico Bank & Trust | 1,451,041 | 1,565,070 | 1,413,170 | 1,346,304 | 1,313,708 | ||||||||||
| Dubuque Bank and Trust Company | 1,363,164 | 1,290,756 | 1,275,131 | 1,157,881 | 1,245,553 | ||||||||||
| Illinois Bank & Trust | 1,139,945 | 1,167,905 | 768,267 | 769,577 | 735,101 | ||||||||||
| Bank of Blue Valley(1) | 1,008,362 | 1,016,743 | 1,091,243 | 1,077,183 | 473,712 | ||||||||||
| First Bank & Trust | 900,399 | 893,419 | 903,410 | 844,793 | 857,313 | ||||||||||
| Wisconsin Bank & Trust | 920,168 | 941,109 | 880,217 | 892,020 | 872,090 | ||||||||||
| Premier Valley Bank | 706,479 | 707,814 | 719,141 | 689,384 | 676,849 | ||||||||||
| Arizona Bank & Trust | 754,464 | 693,975 | 578,694 | 646,728 | 593,089 | ||||||||||
| Minnesota Bank & Trust | 648,560 | 574,369 | 600,175 | 515,310 | 546,706 | ||||||||||
| Rocky Mountain Bank | 496,465 | 468,314 | 462,825 | 438,349 | 426,503 | ||||||||||
| (1) Formerly known as Morrill & Janes Bank and Trust Company. | |||||||||||||||
| (2) Includes deposits held for sale. | |||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP) | |||||||||||||||||||
| Net income (GAAP) | $ | 20,040 | $ | 37,851 | $ | 34,612 | $ | 45,169 | $ | 31,497 | |||||||||
| Plus core deposit and customer relationship intangibles amortization, net of tax(1) | 2,355 | 2,305 | 2,291 | 2,617 | 2,245 | ||||||||||||||
| Net income excluding intangible amortization (non-GAAP) | $ | 22,395 | $ | 40,156 | $ | 36,903 | $ | 47,786 | $ | 33,742 | |||||||||
| Average common equity (GAAP) | $ | 1,619,682 | $ | 1,570,258 | $ | 1,541,369 | $ | 1,442,388 | $ | 1,336,250 | |||||||||
| Less average goodwill | 446,345 | 433,374 | 427,097 | 410,642 | 391,668 | ||||||||||||||
| Less average core deposit and customer relationship intangibles, net | 47,632 | 49,389 | 51,704 | 49,868 | 46,490 | ||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 1,125,705 | $ | 1,087,495 | $ | 1,062,568 | $ | 981,878 | $ | 898,092 | |||||||||
| Annualized return on average common equity (GAAP) | 4.98 | % | 9.56 | % | 8.91 | % | 12.56 | % | 9.56 | % | |||||||||
| Annualized return on average tangible common equity (non-GAAP) | 8.00 | % | 14.65 | % | 13.78 | % | 19.52 | % | 15.24 | % | |||||||||
| Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP) | |||||||||||||||||||
| Net Interest Income (GAAP) | $ | 112,511 | $ | 112,745 | $ | 111,321 | $ | 106,708 | $ | 102,955 | |||||||||
| Plus tax-equivalent adjustment(1) | 1,131 | 1,109 | 1,140 | 1,268 | 1,412 | ||||||||||||||
| Net interest income, fully tax-equivalent (non-GAAP) | $ | 113,642 | $ | 113,854 | $ | 112,461 | $ | 107,976 | $ | 104,367 | |||||||||
| Average earning assets | $ | 11,891,455 | $ | 11,580,295 | $ | 11,102,581 | $ | 10,552,166 | $ | 10,129,957 | |||||||||
| Annualized net interest margin (GAAP) | 3.81 | % | 3.86 | % | 3.98 | % | 4.06 | % | 4.12 | % | |||||||||
| Annualized net interest margin, fully tax-equivalent (non-GAAP) | 3.84 | % | 3.90 | % | 4.02 | % | 4.10 | % | 4.18 | % | |||||||||
| Purchase accounting discount amortization on loans included in annualized net interest margin | 0.09 | % | 0.17 | % | 0.23 | % | 0.18 | % | 0.16 | % | |||||||||
| Reconciliation of Tangible Book Value Per Common Share (non-GAAP) | |||||||||||||||||||
| Common equity (GAAP) | $ | 1,553,714 | $ | 1,578,137 | $ | 1,563,843 | $ | 1,521,787 | $ | 1,372,102 | |||||||||
| Less goodwill | 446,345 | 446,345 | 427,097 | 427,097 | 391,668 | ||||||||||||||
| Less core deposit and customer relationship intangibles, net | 45,707 | 48,688 | 49,819 | 52,718 | 44,637 | ||||||||||||||
| Tangible common equity (non-GAAP) | $ | 1,061,662 | $ | 1,083,104 | $ | 1,086,927 | $ | 1,041,972 | $ | 935,797 | |||||||||
| Common shares outstanding, net of treasury stock | 36,807,217 | 36,704,278 | 36,696,190 | 36,690,061 | 34,603,611 | ||||||||||||||
| Common equity (book value) per share (GAAP) | $ | 42.21 | $ | 43.00 | $ | 42.62 | $ | 41.48 | $ | 39.65 | |||||||||
| Tangible book value per common share (non-GAAP) | $ | 28.84 | $ | 29.51 | $ | 29.62 | $ | 28.40 | $ | 27.04 | |||||||||
| Reconciliation of Tangible Common Equity Ratio (non-GAAP) | |||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 1,061,662 | $ | 1,083,104 | $ | 1,086,927 | $ | 1,041,972 | $ | 935,797 | |||||||||
| Total assets (GAAP) | $ | 13,294,509 | $ | 13,209,597 | $ | 12,569,262 | $ | 12,160,290 | $ | 11,312,495 | |||||||||
| Less goodwill | 446,345 | 446,345 | 427,097 | 427,097 | 391,668 | ||||||||||||||
| Less core deposit and customer relationship intangibles, net | 45,707 | 48,688 | 49,819 | 52,718 | 44,637 | ||||||||||||||
| Total tangible assets (non-GAAP) | $ | 12,802,457 | $ | 12,714,564 | $ | 12,092,346 | $ | 11,680,475 | $ | 10,876,190 | |||||||||
| Tangible common equity ratio (non-GAAP) | 8.29 | % | 8.52 | % | 8.99 | % | 8.92 | % | 8.60 | % | |||||||||
| (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 DATA | |||||||||||||||||||
| Reconciliation of Efficiency Ratio (non-GAAP) | For the Quarter Ended | ||||||||||||||||||
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||||
| Net interest income (GAAP) | $ | 112,511 | $ | 112,745 | $ | 111,321 | $ | 106,708 | $ | 102,955 | |||||||||
| Tax-equivalent adjustment(1) | 1,131 | 1,109 | 1,140 | 1,268 | 1,412 | ||||||||||||||
| Fully tax-equivalent net interest income | 113,642 | 113,854 | 112,461 | 107,976 | 104,367 | ||||||||||||||
| Noninterest income | 25,817 | 28,030 | 29,400 | 32,061 | 26,717 | ||||||||||||||
| Securities gains, net | (1,658 | ) | (491 | ) | (2,013 | ) | (3,580 | ) | (1,575 | ) | |||||||||
| Unrealized (gain)/loss on equity securities, net | 231 | (11 | ) | (144 | ) | (112 | ) | (258 | ) | ||||||||||
| Gain on extinguishment of debt | — | — | (375 | ) | — | — | |||||||||||||
| Valuation adjustment on servicing rights | 1,565 | (668 | ) | 626 | 364 | 589 | |||||||||||||
| Adjusted revenue (non-GAAP) | $ | 139,597 | $ | 140,714 | $ | 139,955 | $ | 136,709 | $ | 129,840 | |||||||||
| Total noninterest expenses (GAAP) | $ | 90,859 | $ | 92,866 | $ | 92,967 | $ | 75,098 | $ | 88,230 | |||||||||
| Less: | |||||||||||||||||||
| Core deposit and customer relationship intangibles amortization | 2,981 | 2,918 | 2,899 | 3,313 | 2,842 | ||||||||||||||
| Partnership investment in tax credit projects | 184 | 3,038 | 3,052 | 1,465 | 475 | ||||||||||||||
| (Gain)/loss on sales/valuation of assets, net | 16 | 1,512 | 356 | (18,286 | ) | (3,004 | ) | ||||||||||||
| Acquisition, integration and restructuring costs | 1,376 | 537 | 1,500 | 929 | 3,614 | ||||||||||||||
| Adjusted noninterest expenses (non-GAAP) | $ | 86,302 | $ | 84,861 | $ | 85,160 | $ | 87,677 | $ | 84,303 | |||||||||
| Efficiency ratio, fully tax-equivalent (non-GAAP) | 61.82 | % | 60.31 | % | 60.85 | % | 64.13 | % | 64.93 | % | |||||||||
| Acquisition, integration and restructuring costs | |||||||||||||||||||
| Salaries and employee benefits | $ | 44 | $ | — | $ | 100 | $ | 100 | $ | 616 | |||||||||
| Occupancy | — | 11 | — | 10 | 1,194 | ||||||||||||||
| Furniture and equipment | 24 | 7 | (4 | ) | 84 | — | |||||||||||||
| Professional fees | 996 | 462 | 855 | 624 | 424 | ||||||||||||||
| Advertising | 89 | 31 | 115 | 52 | 5 | ||||||||||||||
| (Gain)/loss on sales/valuations of assets, net | — | — | — | — | 1,003 | ||||||||||||||
| Other noninterest expenses | 223 | 26 | 434 | 59 | 372 | ||||||||||||||
| Total acquisition, integration and restructuring costs | $ | 1,376 | $ | 537 | $ | 1,500 | $ | 929 | $ | 3,614 | |||||||||
| After tax impact on diluted earnings per share(1) | $ | 0.03 | $ | 0.01 | $ | 0.03 | $ | 0.02 | $ | 0.08 | |||||||||
| Reconciliation of Adjusted Net Income and Adjusted Diluted EPS (non-GAAP) | |||||||||||||||||||
| Net income (GAAP) | $ | 20,040 | $ | 37,851 | $ | 34,612 | $ | 45,169 | $ | 31,497 | |||||||||
| Provision for credit losses(1) | 17,001 | 3,873 | 4,109 | 3,885 | 1,292 | ||||||||||||||
| Acquisition, integration and restructuring costs(1) | 1,087 | 424 | 1,185 | 734 | 2,855 | ||||||||||||||
| Adjusted net income (non-GAAP) | $ | 38,128 | $ | 42,148 | $ | 39,906 | $ | 49,788 | $ | 35,644 | |||||||||
| Diluted earnings per share (GAAP) | $ | 0.54 | $ | 1.03 | $ | 0.94 | $ | 1.26 | $ | 0.91 | |||||||||
| Adjusted diluted earnings per share (non-GAAP) | $ | 1.03 | $ | 1.14 | $ | 1.08 | $ | 1.39 | $ | 1.03 | |||||||||
| Reconciliation of Annualized Adjusted Return on Average Tangible Common Equity (non-GAAP) | |||||||||||||||||||
| Adjusted net income (non-GAAP) | $ | 38,128 | $ | 42,148 | $ | 39,906 | $ | 49,788 | $ | 35,644 | |||||||||
| Plus core deposit and customer relationship intangibles amortization, net of tax(1) | 2,355 | 2,305 | 2,291 | 2,617 | 2,245 | ||||||||||||||
| Adjusted net income excluding intangible amortization (non-GAAP) | $ | 40,483 | $ | 44,453 | $ | 42,197 | $ | 52,405 | $ | 37,889 | |||||||||
| Average tangible common equity (non-GAAP) | $ | 1,125,705 | $ | 1,087,495 | $ | 1,062,568 | $ | 981,878 | $ | 898,092 | |||||||||
| Annualized adjusted return on average tangible common equity (non-GAAP) | 14.46 | % | 16.22 | % | 15.76 | % | 21.41 | % | 17.11 | % | |||||||||
| (1) Computed on a tax-equivalent basis using an effective tax rate of 21%. | |||||||||||||||||||
CONTACT:
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
(563) 589-1994
bmckeag@htlf.com