Heartland Financial USA, Inc. Reports 2016 First Quarter Results

DUBUQUE, Iowa--()--Heartland Financial USA, Inc. (NASDAQ: HTLF):

Highlights

  • Record quarterly net income available to common stockholders of $19.8 million, a 28% increase from first quarter of prior year
  • Diluted earnings per common share of $0.82
  • Net interest margin of 4.19%
  • Total assets reached $8.25 billion, a $1.75 billion or 27% increase over March 31, 2015
  • Return on average tangible common equity of 16.45%
  • Completed acquisition of CIC Bancshares, Inc. in Denver, Colorado
  • Completed systems conversion of Premier Valley Bank in Fresno, California
  • Terminated participation in the SBLF program in full with redemption of $81.7 million of Series C Preferred Stock issued to the United States Department of the Treasury
   
Quarter Ended
March 31,
2016   2015
Net income (in millions) $ 20.0 $ 15.7
Net income available to common stockholders (in millions) 19.8 15.5
Diluted earnings per common share 0.82 0.76
 
Return on average assets 0.99 % 0.97 %
Return on average common equity 12.68 13.58
Return on average tangible common equity 16.45 15.67
Net interest margin 4.19 3.90
 
 

"Heartland set several quarterly earnings records in the first quarter of 2016, producing diluted earnings per common share of $0.82 and net income available to common stockholders of $19.8 million, which represents an increase of 28 percent over the first quarter of last year."

 

Lynn B. Fuller, chairman and chief executive officer, Heartland Financial USA, Inc.

 

Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $19.8 million, or $0.82 per diluted common share, for the quarter ended March 31, 2016, compared to $15.5 million, or $0.76 per diluted common share, for the first quarter of 2015. Return on average common equity was 12.68% and return on average assets was 0.99% for the first quarter of 2016, compared to 13.58% and 0.97%, respectively, for the same quarter in 2015.

Commenting on Heartland’s results for the first quarter of 2016, Lynn B. Fuller, Heartland’s chairman and chief executive officer said, “Heartland set several quarterly earnings records in the first quarter of 2016, producing diluted earnings per common share of $0.82 and net income available to common stockholders of $19.8 million, which represents an increase of 28 percent over the first quarter of last year.”

On February 5, 2016, Heartland completed the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, headquartered in Denver, Colorado, in a transaction valued at approximately $82.3 million. Of this amount, $15.7 million was paid in cash and the remainder of the consideration was provided by the issuance of Heartland common stock and a new series of convertible preferred stock and the assumption of convertible notes and subordinated debt. Simultaneous with closing of the transaction, Centennial Bank merged into Heartland’s Summit Bank & Trust subsidiary, with the resulting institution operating under the name, Centennial Bank and Trust. As of the close date, Centennial Bank had, at fair value, total assets of $769.7 million, total loans of $581.5 million and total deposits of $648.1 million. The systems conversion for this transaction is expected to occur during the second quarter of 2016.

Net Interest Margin As a Percentage of Average Earning Assets and In Dollars Increases

Net interest margin, expressed as a percentage of average earning assets, was 4.19% during the first quarter of 2016, compared to 3.99% during the fourth quarter of 2015 and 3.90% during the first quarter of 2015.

Fuller said, “Heartland’s net interest margin expanded significantly in the first quarter of 2016 to 4.19%, a 20 basis point increase over the fourth quarter of 2015. This is a margin level we haven’t seen in five years; it reflects benefits from our acquisitions, enhancement in asset yields and continued improvement in funding costs. Net interest income in dollars was also up, with a significant increase over prior quarters.”

Interest income for the first quarter of 2016 was $80.7 million, an increase of $17.6 million or 28%, compared to the $63.1 million recorded in the first quarter of 2015. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $3.0 million for the first quarter of 2016 and $2.4 million for the first quarter of 2015. With these adjustments, interest income on a tax-equivalent basis was $83.7 million for the first quarter of 2016, an increase of $18.2 million or 28%, compared to $65.5 million for the first quarter of 2015. The increase in interest income in the first quarter of 2016, as compared to the first quarter of 2015, was primarily due to an increase in average earning assets, which totaled $7.28 billion during the first quarter of 2016 compared to $5.86 billion during the first quarter of 2015, a $1.42 billion or 24% increase. A majority of this growth was attributable to the three acquisitions completed during last half of 2015, in addition to the most recent acquisition completed this February.

Interest expense for the first quarter of 2016 was $8.0 million, a decrease of $1.2 million or 13% from $9.2 million in the first quarter of 2015. Average interest bearing liabilities increased $875.0 million or 20% for the quarter ended March 31, 2016, as compared to the same quarter in 2015, while the average interest rate paid on Heartland's interest bearing deposits and borrowings declined 24 basis points from 0.85% in the first quarter of 2015 to 0.61% in the first quarter of 2016. The average interest rate paid on savings deposits was 0.21% during the first quarter of 2016 compared to 0.26% during the first quarter of 2015, and the average interest rate paid on time deposits was 0.80% during the first quarter of 2016 compared to 1.09% during the first quarter of 2015.

Fuller said, “We continue to experience a favorable shift in our deposit mix, with sustained growth in no-cost demand deposits, which now exceed 30 percent of total deposits. Non-time categories represent 83 percent of total deposits.”

Net interest income increased $18.8 million or 35% to $72.7 million in the first quarter of 2016 from the $53.9 million recorded in the first quarter of 2015. Net interest income on a tax-equivalent basis totaled $75.7 million during the first quarter of 2016, an increase of $19.4 million or 34% from the $56.3 million recorded during the first quarter of 2015.

Noninterest Income Decreases; Noninterest Expenses Increase

Noninterest income totaled $29.6 million during the first quarter of 2016 compared to $30.7 million during the first quarter of 2015, a decrease of $1.1 million or 4%. Service charges and fees totaled $7.2 million during the first quarter of 2016 compared to $5.4 million during the first quarter of 2015, an increase of $1.8 million or 33%. This increase was primarily attributable to a larger demand deposit customer base, a portion of which is attributable to the acquisitions completed during the last half of 2015 and first quarter of 2016. Net securities gains totaled $3.5 million during the first quarter of 2016 compared to $4.4 million during the first quarter of 2015, a decrease of $827,000 or 20%. Gains on sale of loans held for sale totaled $11.1 million during the first quarter of 2016 compared to $13.7 million during the first quarter of 2015, a decrease of $2.6 million or 19%.

For the first quarter of 2016, noninterest expenses totaled $70.3 million compared to $59.6 million during the first quarter of 2015, an increase of $10.7 million or 18%. The categories with the most significant increases were salaries and employee benefits, which increased $5.1 million or 14%; professional fees, which increased $966,000 or 16%; intangible assets amortization, which increased $1.3 million or 200%; and other noninterest expenses, which increased $2.3 million or 32%. These increases were primarily attributable to the recent acquisitions.

Fuller commented on Heartland’s residential real estate division. “We continue to refine our strategy with regard to the mortgage business and have closed several out-of-footprint loan production offices in favor of building out the business within our current service areas. We expect this process to channel resources toward our most promising in-footprint opportunities while reducing overhead.”

Heartland's effective tax rate was 33.10% for the first quarter of 2016 compared to 32.60% for the first quarter of 2015. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $304,000 during the first quarter of 2016 compared to $145,000 during the first quarter of 2015. Heartland's effective tax rate was also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 18.88% during the first quarter of 2016 compared to 19.07% during the first quarter of 2015.

Loans and Deposits Increase

Total assets were $8.25 billion at March 31, 2016, an increase of $559.0 million or 7% since year-end 2015. Included in this growth, at fair value, were $769.7 million of assets acquired in the CIC Bancshares, Inc. transaction. Securities represented 24% of total assets at both March 31, 2016, and December 31, 2015.

Total loans and leases held to maturity were $5.50 billion at March 31, 2016, compared to $5.00 billion at year-end 2015, an increase of $501.5 million or 10%. This increase includes $581.5 million of total loans and leases held to maturity, at fair value, acquired in the CIC Bancshares, Inc. transaction.

Total deposits were $6.92 billion as of March 31, 2016, compared to $6.41 billion at year-end 2015, an increase of $518.5 million or 8%. This increase includes $648.1 million of deposits, at fair value, acquired in the CIC Bancshares, Inc. acquisition. Demand deposits totaled $2.08 billion at March 31, 2016, an increase of $165.4 million or 9% since year-end 2015, with $164.3 million of the increase attributable to the CIC Bancshares, Inc. transaction.

Fuller stated, “Among our top priorities for 2016, we are focused on achieving sustained growth in both loans and deposits. We experienced year-over-year loan growth of 30 percent, and 31 percent growth in deposits.”

Nonperforming Assets and Provision for Loan Losses Increase

Nonperforming assets were $60.2 million or 0.73% of total assets at March 31, 2016, compared to $51.7 million or 0.67% of total assets at December 31, 2015. Exclusive of $3.5 million of nonperforming assets, at fair value, acquired in the CIC Bancshares, Inc. transaction, nonperforming assets increased $5.0 million or 10% since year-end 2015. Nonperforming loans were $48.5 million or 0.88% of total loans and leases at March 31, 2016, compared to $39.7 million or 0.79% of total loans and leases at December 31, 2015.

The allowance for loan and lease losses at March 31, 2016, was 0.90% of loans and leases and 102.79% of nonperforming loans compared to 0.97% of loans and leases and 122.77% of nonperforming loans at December 31, 2015. The provision for loan losses was $2.1 million for the first quarter of 2016 compared to $1.7 million for the first quarter of 2015.

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 April 24, 2017, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.
Heartland Financial USA, Inc. is a diversified financial services company with assets exceeding $8 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 108 banking locations serving 85 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

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

 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
March 31,
      2016   2015
Interest Income  
Interest and fees on loans and leases $ 68,425 $ 53,049
Interest on securities:
Taxable 8,735 7,132
Nontaxable 3,510 2,916
Interest on federal funds sold 10 1
Interest on deposits in other financial institutions   4     4  
Total Interest Income   80,684     63,102  
Interest Expense
Interest on deposits 4,173 4,172
Interest on short-term borrowings 329 198
Interest on other borrowings   3,475     4,802  
Total Interest Expense   7,977     9,172  
Net Interest Income 72,707 53,930
Provision for loan and lease losses   2,067     1,671  
Net Interest Income After Provision for Loan and Lease Losses   70,640     52,259  
Noninterest Income
Service charges and fees 7,162 5,404
Loan servicing income 1,268 1,041
Trust fees 3,813 3,631
Brokerage and insurance commissions 1,022 1,087
Securities gains, net 3,526 4,353
Gains on sale of loans held for sale 11,065 13,742
Income on bank owned life insurance 522 524
Other noninterest income   1,200     881  
Total Noninterest Income   29,578     30,663  
Noninterest Expense
Salaries and employee benefits 41,714 36,638
Occupancy 5,003 4,259
Furniture and equipment 2,113 2,106
Professional fees 7,010 6,044
FDIC insurance assessments 1,168 956
Advertising 1,284 1,181
Intangible assets amortization 1,895 631
Other real estate and loan collection expenses 572 465
Loss on sales/valuations of assets, net 313 353
Other noninterest expenses   9,237     6,981  
Total Noninterest Expense   70,309     59,614  
Income Before Income Taxes 29,909 23,308
Income taxes   9,900     7,599  
Net Income 20,009 15,709
Preferred dividends   (168 )   (204 )
Net Income Available to Common Stockholders $ 19,841   $ 15,505  
Earnings per common share-diluted $ 0.82 $ 0.76
Weighted average shares outstanding-diluted 24,117,384 20,493,266
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
      3/31/2016     12/31/2015     9/30/2015     6/30/2015     3/31/2015
Interest Income                
Interest and fees on loans and leases $ 68,425 $ 59,905 $ 58,328 $ 55,824 $ 53,049
Interest on securities:
Taxable 8,735 6,917 5,858 6,739 7,132
Nontaxable 3,510 3,311 3,077 2,874 2,916
Interest on federal funds sold 10 21 1 1 1
Interest on deposits in other financial institutions   4     3     4     3     4  
Total Interest Income   80,684     70,157     67,268     65,441     63,102  
Interest Expense
Interest on deposits 4,173 3,772 3,767 3,819 4,172
Interest on short-term borrowings 329 200 228 212 198
Interest on other borrowings   3,475     3,485     3,549     3,766     4,802  
Total Interest Expense   7,977     7,457     7,544     7,797     9,172  
Net Interest Income 72,707 62,700 59,724 57,644 53,930
Provision for loan and lease losses   2,067     2,171     3,181     5,674     1,671  
Net Interest Income After Provision for Loan and Lease Losses   70,640     60,529     56,543     51,970     52,259  
Noninterest Income
Service charges and fees 7,162 6,654 6,350 5,900 5,404
Loan servicing income 1,268 1,704 1,368 1,163 1,041
Trust fees 3,813 3,230 3,507 3,913 3,631
Brokerage and insurance commissions 1,022 917 869 916 1,087
Securities gains, net 3,526 3,913 1,767 3,110 4,353
Impairment loss on securities (769 )
Gains on sale of loans held for sale 11,065 7,085 9,823 14,599 13,742
Income on bank owned life insurance 522 644 372 459 524
Other noninterest income   1,200     1,003     924     601     881  
Total Noninterest Income   29,578     24,381     24,980     30,661     30,663  
Noninterest Expense
Salaries and employee benefits 41,714 33,583 37,033 36,851 36,638
Occupancy 5,003 4,334 4,307 4,028 4,259
Furniture and equipment 2,113 2,344 2,121 2,176 2,106
Professional fees 7,010 6,503 5,251 5,249 6,044
FDIC insurance assessments 1,168 886 1,018 899 956
Advertising 1,284 1,624 1,327 1,333 1,181
Intangible assets amortization 1,895 898 734 715 631
Other real estate and loan collection expenses 572 723 496 753 465
Loss on sales/valuations of assets, net 313 4,238 721 1,509 353
Other noninterest expenses   9,237     10,821     8,988     9,969     6,981  
Total Noninterest Expense   70,309     65,954     61,996     63,482     59,614  
Income Before Income Taxes 29,909 18,956 19,527 19,149 23,308
Income taxes   9,900     4,365     4,945     3,989     7,599  
Net Income 20,009 14,591 14,582 15,160 15,709
Preferred dividends   (168 )   (204 )   (205 )   (204 )   (204 )
Net Income Available to Common Stockholders $ 19,841   $ 14,387   $ 14,377   $ 14,956   $ 15,505  
Earnings per common share-diluted $ 0.82 $ 0.67 $ 0.69 $ 0.72 $ 0.76
Weighted average shares outstanding-diluted 24,117,384 21,491,699 20,893,312 20,877,236 20,493,266
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As Of
      3/31/2016     12/31/2015     9/30/2015     6/30/2015     3/31/2015
Assets                
Cash and due from banks $ 124,060 $ 237,841 $ 76,954 $ 111,909 $ 104,475
Federal funds sold and other short-term investments   9,168     20,958     14,151     7,813     7,257  
Cash and cash equivalents 133,228 258,799 91,105 119,722 111,732
Time deposits in other financial institutions 2,355 2,355 2,355 2,355 2,605
Securities:
Available for sale, at fair value 1,690,516 1,578,434 1,261,687 1,315,699 1,353,537
Held to maturity, at cost 271,300 279,117 282,200 283,258 284,030
Other investments, at cost 22,325 21,443 19,292 20,455 18,297
Loans held for sale 76,565 74,783 102,569 105,898 105,670
Loans and leases:
Held to maturity 5,503,005 5,001,486 4,642,523 4,449,823 4,243,689
Allowance for loan and lease losses   (49,738 )   (48,685 )   (47,105 )   (45,614 )   (41,854 )
Loans and leases, net 5,453,267 4,952,801 4,595,418 4,404,209 4,201,835
Premises, furniture and equipment, net 164,788 150,148 147,486 143,423 145,132
Other real estate, net 11,338 11,524 17,041 16,983 19,097
Goodwill 127,699 97,852 56,828 54,162 51,073
Other intangible assets, net 61,420 56,945 48,695 45,226 44,024
Cash surrender value on life insurance 110,834 110,297 99,564 96,693 95,118
Other assets   128,144     100,256     81,644     108,924     74,126  
Total Assets $ 8,253,779   $ 7,694,754   $ 6,805,884   $ 6,717,007   $ 6,506,276  
Liabilities and Equity
Liabilities
Deposits:
Demand $ 2,079,521 $ 1,914,141 $ 1,632,005 $ 1,536,355 $ 1,515,004
Savings 3,702,431 3,367,479 2,936,611 2,816,666 2,863,744
Time   1,142,368     1,124,203     938,621     964,248     887,650  
Total deposits 6,924,320 6,405,823 5,507,237 5,317,269 5,266,398
Short-term borrowings 325,741 293,898 335,845 477,918 259,335
Other borrowings 265,760 263,214 302,086 296,594 361,300
Accrued expenses and other liabilities   68,415     68,646     69,707     46,020     51,896  
Total Liabilities 7,584,236 7,031,581 6,214,875 6,137,801 5,938,929
Stockholders' Equity
Preferred equity 3,777 81,698 81,698 81,698 81,698
Common stock 24,520 22,436 20,640 20,616 20,586
Capital surplus 273,310 216,436 149,613 148,789 147,642
Retained earnings 366,014 348,630 337,421 325,106 312,212
Accumulated other comprehensive income (loss) 1,924 (6,027 ) 1,731 3,059 5,255
Treasury stock at cost   (2 )       (94 )   (62 )   (46 )
Total Equity   669,543     663,173     591,009     579,206     567,347  
Total Liabilities and Equity $ 8,253,779   $ 7,694,754   $ 6,805,884   $ 6,717,007   $ 6,506,276  
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
      3/31/2016     12/31/2015     9/30/2015     6/30/2015     3/31/2015
Average Balances                
Assets $ 8,025,070 $ 7,241,104 $ 6,726,196 $ 6,625,797 $ 6,454,271
Loans and leases, net of unearned 5,358,102 4,827,844 4,654,179 4,447,124 4,267,593
Deposits 6,679,010 5,938,905 5,423,418 5,302,235 5,161,782
Earning assets 7,276,703 6,512,565 6,161,495 6,069,844 5,857,204
Interest bearing liabilities 5,273,164 4,781,797 4,491,089 4,451,200 4,398,184
Common stockholders' equity 629,294 533,845 500,399 489,394 463,048
Total stockholders' equity 695,771 615,543 582,097 571,092 544,746
Tangible common stockholders' equity 485,108 446,370 431,304 424,245 401,294
 
Key Performance Ratios
Annualized return on average assets 0.99 % 0.79 % 0.85 % 0.91 % 0.97 %
Annualized return on average common equity 12.68 % 10.69 % 11.40 % 12.26 % 13.58 %
Annualized return on average common tangible equity 16.45 % 12.79 % 13.22 % 14.14 % 15.67 %
Annualized ratio of net charge-offs to average loans and leases 0.08 % 0.05 % 0.14 % 0.17 % 0.12 %
Annualized net interest margin(1) 4.19 % 3.99 % 4.01 % 3.97 % 3.90 %
Efficiency ratio, fully taxable equivalent(2) 66.90 % 68.53 % 69.85 % 67.43 % 70.95 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%.
(2) Refer to the "Non-GAAP Reconciliation-Efficiency Ratio" table that follows for details of this non-GAAP measure.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
      For the Quarter Ended
    3/31/2016     12/31/2015     9/30/2015     6/30/2015     3/31/2015
Reconciliation of Non-GAAP Measure-Efficiency Ratio                
Net interest income $ 72,707 $ 62,700 $ 59,724 $ 57,644 $ 53,930
Taxable equivalent adjustment(1)   3,041         2,827         2,588         2,408         2,393  
Fully taxable equivalent net interest income 75,748 65,527 62,312 60,052 56,323
Noninterest income 29,578 24,381 24,980 30,661 30,663
Securities gains, net (3,526 ) (3,913 ) (1,767 ) (3,110 ) (4,353 )
Impairment loss on securities       769              
Adjusted income $ 101,800   $ 86,764   $ 85,525   $ 87,603   $ 82,633  
 
Total noninterest expenses $ 70,309 $ 65,954 $ 61,996 $ 63,482 $ 59,614
Less:
Intangible assets amortization 1,895 898 734 715 631
Partnership investment in historic rehabilitation tax credits 1,362 805 2,190
Loss on sales/valuation of assets, net   313         4,238         721         1,509         353  
Adjusted noninterest expenses $ 68,101       $ 59,456       $ 59,736       $ 59,068       $ 58,630  
 
Efficiency ratio, fully taxable equivalent(2) 66.90 % 68.53 % 69.85 % 67.43 % 70.95 %
 

(1) Computed on a tax equivalent basis using an effective tax rate of 35%.

(2) Efficiency ratio, fully taxable equivalent, expresses noninterest expenses as a percentage of fully taxable 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 historic rehabilitation tax credits. 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, such as securities gains, net, impairment loss on securities and losses on sales/valuations of assets, net. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
    As of and for the Quarter Ended
      3/31/2016     12/31/2015     9/30/15     6/30/2015     3/31/2015
Common Share Data                
Book value per common share $ 27.15 $ 25.92 $ 24.68 $ 24.13 $ 23.59
Tangible book value per common share(1) $ 20.86 $ 20.60 $ 21.20 $ 20.84 $ 20.41
ASC 320 effect on book value per common share $ 0.23 $ (0.18 ) $ 0.22 $ 0.21 $ 0.38
Common shares outstanding, net of treasury stock 24,519,928 22,435,693 20,637,321 20,614,325 20,585,072
Tangible capital ratio(2) 6.32 % 6.10 % 6.50 % 6.46 % 6.52 %
 
Loan and Lease Data
Loans held to maturity:
Commercial and commercial real estate $ 3,850,772 $ 3,605,574 $ 3,303,098 $ 3,199,717 $ 3,067,315
Residential mortgage 753,666 539,555 491,667 443,026 413,938
Agricultural and agricultural real estate 471,271 471,870 469,381 444,110 411,732
Consumer 430,699 386,867 379,903 364,441 351,981
Unearned discount and deferred loan fees   (3,403 )   (2,380 )   (1,526 )   (1,471 )   (1,277 )
Total loans and leases held to maturity $ 5,503,005   $ 5,001,486   $ 4,642,523   $ 4,449,823   $ 4,243,689  
 
Other Selected Trend Information
Effective tax rate 33.10 % 23.03 % 25.32 % 20.83 % 32.60 %
Full time equivalent employees 1,907 1,799 1,736 1,788 1,776
Total Residential Mortgage Loan Applications $ 406,999 $ 307,163 $ 443,294 $ 615,463 $ 647,487
Residential Mortgage Loans Originated $ 238,266 $ 258,939 $ 370,956 $ 421,798 $ 319,581
Residential Mortgage Loans Sold $ 220,381 $ 260,189 $ 360,172 $ 402,151 $ 268,786
Residential Mortgage Loan Servicing Portfolio $ 4,112,519 $ 4,057,861 $ 3,963,677 $ 3,785,794 $ 3,578,409
 

(1) Total common stockholders' equity less goodwill and intangible assets (excluding servicing rights) divided by common shares outstanding, net of treasury. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength.

(2) Total common stockholders' equity less goodwill and intangible assets (excluding servicing rights) divided by total assets less intangible assets (excluding mortgage servicing rights). This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As of and for the Quarter Ended
      3/31/2016     12/31/2015     9/30/2015     6/30/2015     3/31/2015
Allowance for Loan and Lease Losses                
Balance, beginning of period $ 48,685 $ 47,105 $ 45,614 $ 41,854 $ 41,449
Provision for loan and lease losses 2,067 2,171 3,181 5,674 1,671
Charge-offs (1,605 ) (1,837 ) (2,439 ) (2,734 ) (2,004 )
Recoveries   591     1,246     749     820     738  
Balance, end of period $ 49,738   $ 48,685   $ 47,105   $ 45,614   $ 41,854  
 
Asset Quality
Nonaccrual loans $ 47,750 $ 39,655 $ 32,577 $ 26,710 $ 27,023
Loans and leases past due ninety days or more as to interest or principal payments 639 1,181 9
Other real estate owned 11,338 11,524 17,041 16,983 19,097
Other repossessed assets   426     485     626     544     404  
Total nonperforming assets $ 60,153   $ 51,664   $ 51,425   $ 44,237   $ 46,533  
 
Performing troubled debt restructured loans $ 10,711 $ 10,968 $ 10,154 $ 10,903 $ 10,904
 
Nonperforming Assets Activity
Balance, beginning of period $ 51,664 $ 51,425 $ 44,237 $ 46,533 $ 44,809
Net loan charge offs (1,014 ) (591 ) (1,690 ) (1,914 ) (1,266 )
New nonperforming loans 12,171 9,686 7,996 4,676 4,059
Acquired nonperforming assets 3,516 4,956 5,328 6,101
Reduction of nonperforming loans(1) (3,563 ) (6,768 ) (2,758 ) (1,409 ) (4,493 )
OREO/Repossessed assets sales proceeds (2,411 ) (2,980 ) (1,074 ) (3,202 ) (2,312 )
OREO/Repossessed assets writedowns, net (182 ) (3,909 ) (756 ) (565 ) (319 )
Net activity at Citizens Finance Co.   (28 )   (155 )   142     118     (46 )
Balance, end of period $ 60,153   $ 51,664   $ 51,425   $ 44,237   $ 46,533  
 
Asset Quality Ratios
Ratio of nonperforming loans and leases to total loans and leases 0.88 % 0.79 % 0.73 % 0.60 % 0.64 %
Ratio of nonperforming assets to total assets 0.73 % 0.67 % 0.76 % 0.66 % 0.72 %
Annualized ratio of net loan charge-offs to average loans and leases 0.08 % 0.05 % 0.14 % 0.17 % 0.12 %
Allowance for loan and lease losses as a percent of loans and leases 0.90 % 0.97 % 1.01 % 1.03 % 0.99 %
Allowance for loan and lease losses as a percent of nonperforming loans and leases 102.79 % 122.77 % 139.54 % 170.78 % 154.83 %
Loans delinquent 30-89 days as a percent of total loans 0.45 % 0.31 % 0.40 % 0.31 % 0.42 %
 
(1) Includes principal reductions and transfers to performing status
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
    For the Quarter Ended
March 31, 2016     March 31, 2015
Average         Average        
Balance Interest Rate Balance Interest Rate
Earning Assets
Securities:
Taxable $ 1,508,432 $ 8,735 2.33 % $ 1,283,509 $ 7,132 2.25 %
Nontaxable(1)   417,224     5,400 5.21     331,339     4,486 5.49  
Total securities   1,925,656     14,135 2.95     1,614,848     11,618 2.92  
Interest bearing deposits 11,634 4 0.14 9,194 4 0.18
Federal funds sold   31,126     10 0.13     7,617     1 0.05  
Loans and leases:(2)
Commercial and commercial real estate(1) 3,743,940 46,754 5.02 3,023,204 35,875 4.81
Residential mortgage 734,134 7,599 4.16 478,948 4,883 4.13
Agricultural and agricultural real estate(1) 467,978 5,729 4.92 418,251 5,030 4.88
Consumer 412,050 7,923 7.73 347,190 6,888 8.05
Fees on loans 1,571 1,196
Less: allowance for loan and lease losses   (49,815 )       (42,048 )    
Net loans and leases   5,308,287     69,576 5.27     4,225,545     53,872 5.17  
Total earning assets   7,276,703     83,725 4.63 %   5,857,204     65,495 4.53 %
Nonearning Assets   748,367     597,067  
Total Assets $ 8,025,070   $ 6,454,271  
Interest Bearing Liabilities
Savings $ 3,556,207 $ 1,894 0.21 % $ 2,830,961 $ 1,795 0.26 %
Time, $100,000 and over 498,620 871 0.70 344,360 838 0.99
Other time deposits 642,301 1,408 0.88 536,170 1,539 1.16
Short-term borrowings 311,161 329 0.43 294,756 198 0.27
Other borrowings   264,875     3,475 5.28     391,937     4,802 4.97  
Total interest bearing liabilities   5,273,164     7,977 0.61 %   4,398,184     9,172 0.85 %
Noninterest Bearing Liabilities
Noninterest bearing deposits 1,981,882 1,450,291
Accrued interest and other liabilities   74,253     61,050  
Total noninterest bearing liabilities   2,056,135     1,511,341  
Stockholders' Equity   695,771     544,746  
Total Liabilities and Stockholders' Equity $ 8,025,070   $ 6,454,271  
Net interest income(1) $ 75,748 $ 56,323
Net interest spread(1) 4.02 % 3.68 %
Net interest income to total earning assets(1) 4.19 % 3.90 %
Interest bearing liabilities to earning assets 72.47 % 75.09 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%
(2) Nonaccrual loans are included in the average loans outstanding.
 
 
HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
    As of and For the Quarter Ended
      3/31/2016     12/31/2015     9/30/2015     6/30/2015     3/31/2015
Total Assets                
Dubuque Bank and Trust Company $ 1,498,771 $ 1,617,322 $ 1,431,767 $ 1,541,610 $ 1,413,772
New Mexico Bank & Trust 1,304,886 1,336,004 1,282,784 1,141,575 1,113,031
Wisconsin Bank & Trust 1,094,872 1,139,337 1,098,405 1,150,867 1,128,104
Centennial Bank and Trust(1) 927,040 161,806 155,114 152,672 140,868
Morrill & Janes Bank and Trust Company 872,274 902,918 845,067 860,781 888,321
Premier Valley Bank 751,137 765,451
Illinois Bank & Trust 718,074 757,478 769,170 784,162 748,937
Arizona Bank & Trust 558,369 591,066 599,119 510,838 487,059
Rocky Mountain Bank 479,010 491,522 501,093 508,262 477,799
Minnesota Bank & Trust       220,955       214,303       188,633         195,201         169,254
Total Portfolio Loans
Dubuque Bank and Trust Company $ 941,683 $ 956,517 $ 953,273 $ 945,574 $ 907,956
New Mexico Bank & Trust 815,739 794,744 777,433 658,543 635,843
Wisconsin Bank & Trust 758,789 793,508 844,557 876,321 865,323
Centennial Bank and Trust(1) 683,085 101,449 94,127 95,275 87,913
Morrill & Janes Bank and Trust Company 536,738 539,198 527,217 520,978 475,295
Premier Valley Bank 376,840 383,929
Illinois Bank & Trust 465,783 465,937 473,859 455,247 439,757
Arizona Bank & Trust 402,431 444,501 444,916 383,588 355,986
Rocky Mountain Bank 364,189 370,440 380,304 375,860 343,008
Minnesota Bank & Trust       137,412       134,137       128,700         127,172         114,477
Total Deposits
Dubuque Bank and Trust Company $ 1,144,470 $ 1,209,074 $ 1,120,999 $ 1,144,932 $ 1,166,070
New Mexico Bank & Trust 1,066,076 1,085,052 1,047,358 891,003 880,422
Wisconsin Bank & Trust 921,071 974,001 904,803 985,804 939,157
Centennial Bank and Trust(1) 779,607 128,759 139,826 122,928 124,113
Morrill & Janes Bank and Trust Company 698,365 713,589 650,123 662,524 696,606
Premier Valley Bank 635,188 647,022
Illinois Bank & Trust 629,235 631,010 641,024 645,354 625,885
Arizona Bank & Trust 468,312 500,490 491,254 405,680 378,422
Rocky Mountain Bank 409,787 417,426 428,234 417,647 407,958
Minnesota Bank & Trust       200,343       194,373       163,291         172,547         148,773
Net Income (Loss)
Dubuque Bank and Trust Company $ 6,073 $ 3,587 $ 4,477 $ 7,416 $ 6,016
New Mexico Bank & Trust 4,094 2,576 3,220 3,658 4,164
Wisconsin Bank & Trust 3,379 2,443 3,886 2,950 2,181
Centennial Bank and Trust(1) 824 62 (6 ) (81 ) 305
Morrill & Janes Bank and Trust Company 2,525 1,096 2,024 1,566 1,656
Premier Valley Bank 1,960 1,008
Illinois Bank & Trust 2,027 574 1,877 1,309 2,482
Arizona Bank & Trust 1,841 968 1,254 998 677
Rocky Mountain Bank 1,064 1,506 1,471 1,196 1,156
Minnesota Bank & Trust 531 166 411 223 162
 
(1) Formerly known as Summit Bank & Trust.
 

Contacts

Heartland Financial USA, Inc.
Bryan R. McKeag, 563-589-1994
Executive Vice President
Chief Financial Officer
bmckeag@htlf.com

Contacts

Heartland Financial USA, Inc.
Bryan R. McKeag, 563-589-1994
Executive Vice President
Chief Financial Officer
bmckeag@htlf.com