Press Release

Heartland Financial USA, Inc. Announces Record 2018 Annual Net Income and Solid Fourth Quarter Results

Company Release - 1/28/2019 4:01 PM ET

Highlights

  • Quarterly net income available to common stockholders of $32.1 million, an increase of $18.5 million or 135% from the fourth quarter of 2017
  • Annual net income available to common stockholders of $117.0 million, an increase of $41.7 million or 55% from 2017  
  • Diluted earnings per common share of $0.93 for the quarter, an increase of $0.48 per share or 107% from the fourth quarter of 2017  
  • Diluted earnings per common share of $3.52 for the year, an increase of $0.87 per share or 33% from 2017  
  • Return on average common equity of 9.88% for the quarter and 9.93% for the year  
  • Return on average tangible common equity (non-GAAP)(1) of 15.00% for the quarter and 14.79% for the year 
  • Efficiency ratio, fully tax-equivalent (non-GAAP)(2) of 59.37% for the quarter and 63.54% for the year   
  • Declared and paid a special dividend of $0.05 per common share in December 2018  
  • Announced agreement to acquire Blue Valley Ban Corp. on January 16, 2019
 Quarter Ended
December 31,
 Year Ended
December 31,
 2018 2017 2018 2017
Net income available to common stockholders (in millions)$32.1  $13.7  $117.0  $75.2 
Diluted earnings per common share0.93  0.45  3.52  2.65 
        
Return on average assets1.12% 0.55% 1.09% 0.83%
Return on average common equity9.88  5.50  9.93  8.63 
Return on average tangible common equity (non-GAAP)(1)15.00  7.60  14.79  11.45 
Net interest margin4.28  4.14  4.26  4.04 
Net interest margin, fully tax-equivalent (non-GAAP)(3)4.34  4.30  4.32  4.22 
Efficiency ratio, fully tax-equivalent (non-GAAP)(2)59.37  62.26  63.54  65.40 


"Heartland had record earnings again in 2018. Net income available to common stockholders was $117.0 million, a 55 percent increase over 2017, and diluted earnings per common share increased 33 percent."
Lynn B. Fuller, executive operating chairman, Heartland Financial USA, Inc.

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

DUBUQUE, Iowa, Jan. 28, 2019 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $32.1 million for the quarter ended December 31, 2018, compared to $13.7 million for the fourth quarter of 2017, which was an increase of $18.5 million or 135%. Earnings per diluted common share were $0.93 for the fourth quarter of 2018, which was an increase of $0.48 or 107% from $0.45 per diluted common share for the same quarter of 2017. Return on average common equity was 9.88% and return on average assets was 1.12% for the fourth quarter of 2018, compared to 5.50% and 0.55%, respectively, for the same quarter in 2017.

Net income available to common stockholders for the year 2018 was $117.0 million, an increase of $41.7 million or 55% from $75.2 million recorded for 2017. Earnings per diluted common share for the year ended December 31, 2018, were $3.52 compared to $2.65 per diluted common share for the year 2017, which was an increase of $0.87 or 33%. Return on average common equity was 9.93% and return on average assets was 1.09% for the year 2018, compared to 8.63% and 0.83%, respectively, for the same period in 2017.

Commenting on Heartland’s fourth quarter and annual results, Lynn B. Fuller, Heartland’s executive operating chairman, said, "Heartland had record earnings again in 2018. Net income available to common stockholders was $117.0 million, a 55 percent increase over 2017, and diluted earnings per common share increased 33 percent."

During the fourth quarter of 2018, Heartland entered into an agreement to sell the loan portfolios of its consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co. (collectively, "Citizens"). The loan portfolios had a fair value of $67.2 million and were classified as held for sale as of December 31, 2018. The transaction closed on January 11, 2019.

Heartland continued its branch optimization strategy in the fourth quarter of 2018 with the announcement of two branch sales, which resulted in the reclassification of $13.7 million of loans and $50.6 million of deposits as held for sale. These transactions, in addition to the branch sale announced in the third quarter of 2018, are expected to close in the first half of 2019.

During the fourth quarter of 2018, Heartland entered into arrangements to fully outsource its legacy residential mortgage lending business and has partnered with third party providers to offer residential mortgage loans to customers in many of its markets. PrimeWest Mortgage Corporation, a wholly-owned subsidiary of First Bank & Trust, continues to provide mortgage loans to customers in Texas and has expanded to serve other customers in Heartland's Southwestern markets.

Bruce K. Lee, Heartland's president and chief executive officer, stated, "The decisions to exit the consumer finance business and alter our approach to providing residential mortgage loans were in response to changes in the competitive landscape in these markets. These actions, in addition to our branch optimization strategy, will allow us to focus our resources in areas with higher growth and earnings potential."

On January 16, 2019, Heartland entered into a definitive merger agreement to acquire Blue Valley Ban Corp., and its wholly-owned subsidiary, Bank of Blue Valley, headquartered in Overland Park, Kansas. As of the announcement date, the transaction, in which all of the issued and outstanding shares of the Bank of Blue Valley stock will be exchanged for shares of Heartland common stock, was valued at approximately $93.9 million. Simultaneous with the closing of the transaction, Bank of Blue Valley will merge into Heartland's Kansas-based subsidiary, Morrill & Janes Bank and Trust Company, and the combined entity will operate as Bank of Blue Valley. The transaction is subject to certain potential adjustments and customary closing conditions. The transaction is expected to close in the second quarter of 2019 with a systems conversion planned for the third quarter of 2019. As of September 30, 2018, Bank of Blue Valley had total assets of approximately $725 million, which included approximately $527 million of net loans outstanding, and approximately $608 million of deposits.

Net Interest Margin Increases from Fourth Quarter 2017

Net interest margin, expressed as a percentage of average earning assets, was 4.28% (4.34% on a fully tax-equivalent basis) during the fourth quarter of 2018, compared to 4.32% (4.38% on a fully tax-equivalent basis) during the third quarter of 2018 and 4.14% (4.30% on a fully tax-equivalent basis) during the fourth quarter of 2017.

Lee said, “During this recent period of rising interest rates, we were pleased to see our net interest margin on a fully tax-equivalent basis remain strong at 4.34% for the quarter and 4.32% for the year."

Interest income for the fourth quarter of 2018 was $126.3 million, an increase of $24.2 million or 24%, compared to the $102.1 million recorded in the fourth quarter of 2017. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $1.6 million for the fourth quarter of 2018 and $3.6 million for the fourth quarter of 2017. With these adjustments, interest income on a tax-equivalent basis was $127.9 million for the fourth quarter of 2018, an increase of $22.2 million or 21%, compared to $105.6 million for the fourth quarter of 2017. The increase in interest income on a tax-equivalent basis was primarily due to the increase in average earning assets and the recent increases in market interest rates. Average earning assets totaled $10.23 billion during the fourth quarter of 2018 compared to $8.89 billion during the fourth quarter of 2017, which was a $1.33 billion or 15% increase. The average rate on earning assets increased 25 basis points to 4.96% for the fourth quarter of 2018 compared to 4.71% for the same quarter in 2017.

Interest expense for the fourth quarter of 2018 was $16.0 million, an increase of $6.8 million or 74% from $9.2 million in the fourth quarter of 2017. Average interest bearing deposits for the quarter ended December 31, 2018, totaled $6.16 billion, an increase of $953.1 million or 18% from $5.21 billion in the same quarter in 2017. The average interest rate paid on Heartland's interest bearing deposits increased 36 basis points to 0.76% for the fourth quarter of 2018 compared to 0.40% for the same quarter of 2017. Heartland's average borrowings decreased $59.7 million or 13% to $397.5 million for the fourth quarter of 2018 compared to $457.2 million for the fourth quarter of 2017. The average rate paid on Heartland's average borrowings was 4.19% and 3.38% for the fourth quarter of 2018 and 2017, respectively. The increase of 32 basis points in the average interest rate paid on Heartland's interest bearing liabilities was primarily due to recent increases in market interest rates.

Net interest income increased $17.4 million or 19% to $110.3 million in the fourth quarter of 2018 from the $92.9 million recorded in the fourth quarter of 2017. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $111.8 million during the fourth quarter of 2018, an increase of $15.4 million or 16% from the $96.4 million recorded during the fourth quarter of 2017.

Noninterest Income and Noninterest Expenses Increase from Fourth Quarter 2017

Noninterest income totaled $27.0 million during the fourth quarter of 2018 compared to $25.5 million during the fourth quarter of 2017, an increase of $1.5 million or 6%. Service charges and fees totaled $13.7 million during the fourth quarter of 2018 compared to $9.9 million during the fourth quarter of 2017, an increase of $3.8 million or 38%. Service charges related to credit card income totaled $3.5 million for the fourth quarter of 2018, an increase of $1.5 million or 76% from $2.0 million for the fourth quarter of 2017. The remainder of the increase was primarily attributable to a larger customer base as a result of recent acquisitions. Securities gains, net, totaled $48,000 for the fourth quarter of 2018 compared to $1.4 million for the same quarter of 2017, which was a decrease of $1.4 million or 97%. Gains on sale of loans held for sale totaled $3.2 million during the fourth quarter of 2018 compared to $4.3 million during the fourth quarter of 2017, a decrease of $1.1 million or 26%.

For the fourth quarter of 2018, noninterest expenses totaled $88.8 million compared to $77.9 million during the fourth quarter of 2017, an increase of $10.9 million or 14%. Salaries and employee benefits totaled $46.7 million for the fourth quarter of 2018, which was an increase of $3.4 million or 8% from $43.3 million for the fourth quarter of 2017. Full time equivalent employees totaled 2,045 as of December 31, 2018, compared to 2,008 as of December 31, 2017. Other noninterest expenses increased $5.3 million or 50% to $15.9 million for the fourth quarter of 2018 compared to $10.6 million for the fourth quarter of 2017. Included in other noninterest expenses for the fourth quarter of 2018 were $3.9 million of write-downs on partnership investments that qualify for tax credits.

Heartland's effective tax rate was 17.22% for the fourth quarter of 2018 compared to 61.13% for the fourth quarter of 2017. Exclusive of the increase to income tax expense of $10.4 million recorded as a result of the passage of the Tax Cuts and Jobs Act in December 2017, Heartland's effective tax rate was 31.58% for the fourth quarter of 2017. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $307,000 during both the fourth quarter of 2018 and 2017. Additionally, Heartland's income tax calculation included solar energy tax credits of $2.6 million and $179,000 for the fourth quarter of 2018 and 2017, respectively.

Loans and Deposits Increase Since December 31, 2017

Total assets were $11.41 billion at December 31, 2018, an increase of $1.60 billion or 16% from $9.81 billion at year-end 2017.  Excluding $427.1 million of assets acquired at fair value in the Signature Bancshares, Inc. ("Signature") transaction and $1.12 billion of assets acquired at fair value in the First Bank Lubbock Bancshares, Inc. ("FBLB") transaction, total assets increased $52.8 million or 1% since December 31, 2017. Securities represented 24% of total assets at December 31, 2018, compared to 25% at December 31, 2017.

Total loans held to maturity were $7.41 billion at December 31, 2018, compared to $6.39 billion at year-end 2017, an increase of $1.02 billion or 16%. Excluding $96.0 million of loans that were classified as held for sale in conjunction with the pending branch sales and the Citizens transaction and $1.01 billion of loans acquired in 2018, total loans held to maturity increased $106.7 million or 2% since year-end 2017.

Total deposits were $9.40 billion as of December 31, 2018, compared to $8.15 billion at year-end 2017, an increase of $1.25 billion or 15%. This increase included $1.25 billion of deposits, at fair value, acquired in the Signature and FBLB transactions. As of December 31, 2018, Heartland had $106.4 million of deposits classified as held for sale in conjunction with the pending branch sales. Exclusive of these transactions, total deposits increased $104.8 million or 1% since year-end 2017.

Demand deposits totaled $3.26 billion at December 31, 2018, an increase of $281.6 million or 9% from $2.98 billion at year-end 2017. Excluding $299.0 million of demand deposits acquired in 2018 and $25.5 million of demand deposits classified as held for sale, demand deposits increased $8.1 million or less than 1% since December 31, 2017.

Savings deposits increased $867.6 million or 20% to $5.11 billion at December 31, 2018 from $4.24 billion at year-end 2017. Excluding $619.0 million of savings deposits acquired in 2018 and $70.1 million of savings deposits classified as held for sale, savings deposits increased $318.7 million or 8% since year-end 2017.

Time deposits totaled $1.02 billion at December 31, 2018, which was an increase of $100.3 million or 11% from $923.5 billion at December 31, 2017. Excluding $333.1 million of time deposits acquired in 2018 and $10.9 million of time deposits classified as held for sale, time deposits decreased $222.0 million or 24% since December 31, 2017.

Nonperforming Assets and Provision for Loan Losses Increase Since December 31, 2017

Nonperforming assets were $79.3 million at December 31, 2018, compared to $74.6 million at December 31, 2017. Exclusive of $10.4 million of nonperforming assets, at fair value, acquired in 2018, nonperforming assets decreased $5.8 million or 8% since year-end 2017. Nonperforming loans were $72.7 million or 0.98% of total loans at December 31, 2018, compared to $63.4 million or 0.99% of total loans at December 31, 2017.

The allowance for loan losses at December 31, 2018, was 0.84% of loans and 85.27% of nonperforming loans compared to 0.87% of loans and 87.82% of nonperforming loans at December 31, 2017. The provision for loan losses was $9.7 million and $5.3 million for the fourth quarter of 2018 and 2017, respectively. The increased provision expense in the fourth quarter of 2018 significantly impacted Heartland's net income for the quarter. The increase was primarily due to two impaired commercial loans from acquired portfolios totaling $5.8 million for which provision expense of $4.0 million was required. Net charge-offs for the fourth quarter of 2018 totaled $8.9 million compared to $4.5 million for the fourth quarter of 2017, which was an increase of $4.4 million or 97%. The Citizens' loan portfolios were required to be recorded at fair value due to the held for sale classification, which resulted in a charge-off of $3.1 million in the fourth quarter of 2018.

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 January 27, 2020, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.

Heartland Financial USA, Inc. is a diversified financial services company with assets of $11.4 billion. The company provides banking, mortgage, private client, investment and insurance services to individuals and businesses. Heartland currently has 121 banking locations serving 89 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 press 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 the projected results in Heartland's forward-looking statements. These factors, which are detailed in the risk factors in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, consist of the following: (i) the strength of the national economy and the economies of local communities in which Heartland conducts business; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war; (iii) changes in state and federal banking laws and regulations and governmental policies relating to financial institutions; (iv) changes in interest rates and prepayment rates of Heartland's assets; (v) increased competition in the financial services sector and the inability of Heartland to attract new customers; (vi) changes in technology and Heartland's ability to develop and maintain secure and reliable electronic systems; (vii) the potential impact of acquisitions and Heartland's ability to successfully integrate acquired banks; (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x) unexpected outcomes of existing or new litigation involving Heartland; and (xi) changes in accounting policies and practices. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.

-FINANCIAL TABLES FOLLOW-

 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Quarter Ended For the Year Ended
 December 31, December 31,
 2018 2017 2018 2017
Interest Income       
Interest and fees on loans$105,700  $86,108  $393,871  $304,006 
Interest on securities:       
Taxable15,851  11,119  54,131  38,365 
Nontaxable3,467  4,401  14,120  19,698 
Interest on federal funds sold  5    42 
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments1,285  435  3,698  1,547 
Total Interest Income126,303  102,068  465,820  363,658 
Interest Expense       
Interest on deposits11,826  5,313  35,667  18,279 
Interest on short-term borrowings417  180  1,696  678 
Interest on other borrowings3,777  3,719  14,503  14,393 
Total Interest Expense16,020  9,212  51,866  33,350 
Net Interest Income110,283  92,856  413,954  330,308 
Provision for loan losses9,681  5,328  24,013  15,563 
Net Interest Income After Provision for Loan Losses100,602  87,528  389,941  314,745 
Noninterest Income       
Service charges and fees13,660  9,892  48,706  39,183 
Loan servicing income2,061  1,400  7,292  5,636 
Trust fees4,599  4,336  18,393  15,818 
Brokerage and insurance commissions1,618  1,071  4,513  4,033 
Securities gains/(losses), net48  1,420  1,085  6,973 
Unrealized gain/(loss) on equity securities, net115    212   
Gains on sale of loans held for sale3,189  4,290  21,450  22,251 
Valuation adjustment on servicing rights(58) (8) (46) 21 
Income on bank owned life insurance587  733  2,793  2,772 
Other noninterest income1,226  2,394  4,762  5,335 
Total Noninterest Income27,045  25,528  109,160  102,022 
Noninterest Expense       
Salaries and employee benefits46,729  43,289  196,118  171,407 
Occupancy6,622  5,892  25,328  22,244 
Furniture and equipment3,126  3,148  12,529  11,061 
Professional fees9,723  8,537  39,811  32,879 
FDIC insurance assessments907  985  3,699  3,595 
Advertising2,726  2,088  9,565  7,229 
Core deposit intangibles and customer relationship intangibles amortization2,592  1,825  9,355  6,077 
Other real estate and loan collection expenses574  687  3,038  2,461 
(Gain)/loss on sales/valuations of assets, net(35) 833  2,208  2,475 
Restructuring expenses    2,564   
Other noninterest expenses15,857  10,594  49,673  38,247 
Total Noninterest Expense88,821  77,878  353,888  297,675 
Income Before Income Taxes38,826  35,178  145,213  119,092 
Income taxes6,685  21,506  28,215  43,820 
Net Income32,141  13,672  116,998  75,272 
Preferred dividends  (13) (39) (58)
Interest expense on convertible debt      12 
Net Income Available to Common Stockholders$32,141  $13,659  $116,959  $75,226 
Earnings per common share-diluted$0.93  $0.45  $3.52  $2.65 
Weighted average shares outstanding-diluted34,670,180  30,209,043  33,213,148  28,425,652 
            


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Interest Income         
Interest and fees on loans$105,700  $105,733  $96,787  $85,651  $86,108 
Interest on securities:         
Taxable15,851  14,433  12,270  11,577  11,119 
Nontaxable3,467  3,490  3,584  3,579  4,401 
Interest on federal funds sold        5 
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments1,285  1,238  768  407  435 
Total Interest Income126,303  124,894  113,409  101,214  102,068 
Interest Expense         
Interest on deposits11,826  10,092  7,983  5,766  5,313 
Interest on short-term borrowings417  464  547  268  180 
Interest on other borrowings3,777  3,660  3,470  3,596  3,719 
Total Interest Expense16,020  14,216  12,000  9,630  9,212 
Net Interest Income110,283  110,678  101,409  91,584  92,856 
Provision for loan losses9,681  5,238  4,831  4,263  5,328 
Net Interest Income After Provision for Loan Losses100,602  105,440  96,578  87,321  87,528 
Noninterest Income         
Service charges and fees13,660  12,895  12,072  10,079  9,892 
Loan servicing income2,061  1,670  1,807  1,754  1,400 
Trust fees4,599  4,499  4,615  4,680  4,336 
Brokerage and insurance commissions1,618  1,111  877  907  1,071 
Securities gains/(losses), net48  (145) (259) 1,441  1,420 
Unrealized gain/(loss) on equity securities, net115  54  71  (28)  
Net gains on sale of loans held for sale3,189  7,410  6,800  4,051  4,290 
Valuation adjustment on servicing rights(58) 230  (216) (2) (8)
Income on bank owned life insurance587  892  700  614  733 
Other noninterest income1,226  1,149  1,167  1,220  2,394 
Total Noninterest Income27,045  29,765  27,634  24,716  25,528 
Noninterest Expense         
Salaries and employee benefits46,729  49,921  50,758  48,710  43,289 
Occupancy6,622  6,348  6,315  6,043  5,892 
Furniture and equipment3,126  3,470  3,184  2,749  3,148 
Professional fees9,723  11,681  9,948  8,459  8,537 
FDIC insurance assessments907  1,119  684  989  985 
Advertising2,726  2,754  2,145  1,940  2,088 
Core deposit intangibles and customer relationship intangibles  amortization2,592  2,626  2,274  1,863  1,825 
Other real estate and loan collection expenses574  784  948  732  687 
(Gain)/loss on sales/valuations of assets, net(35) 912  1,528  (197) 833 
Restructuring expenses      2,564   
Other noninterest expenses15,857  12,924  11,098  9,794  10,594 
Total Noninterest Expense88,821  92,539  88,882  83,646  77,878 
Income Before Income Taxes38,826  42,666  35,330  28,391  35,178 
Income taxes6,685  8,956  7,451  5,123  21,506 
Net Income32,141  33,710  27,879  23,268  13,672 
Preferred dividends  (13) (13) (13) (13)
Interest expense on convertible debt         
Net Income Available to Common Stockholders$32,141  $33,697  $27,866  $23,255  $13,659 
Earnings per common share-diluted$0.93  $0.97  $0.85  $0.76  $0.45 
Weighted average shares outstanding-diluted34,670,180  34,644,187  32,830,751  30,645,212  30,209,043 
               


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 As Of
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Assets         
Cash and due from banks$223,135  $196,847  $193,069  $143,071  $168,723 
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments50,495  240,528  194,937  123,275  27,280 
Cash and cash equivalents273,630  437,375  388,006  266,346  196,003 
Time deposits in other financial institutions4,672  5,836  6,803  6,297  9,820 
Securities:         
Carried at fair value2,450,709  2,274,215  2,197,117  2,027,665  2,216,753 
Held to maturity, at cost236,283  239,908  244,271  249,766  253,550 
Other investments, at cost28,396  26,656  26,725  22,982  22,563 
Loans held for sale119,801  77,727  55,684  24,376  44,560 
Loans:         
Held to maturity7,407,697  7,365,493  7,477,697  6,746,015  6,391,464 
 Allowance for loan losses(61,963) (61,221) (61,324) (58,656) (55,686)
Loans, net7,345,734  7,304,272  7,416,373  6,687,359  6,335,778 
Premises, furniture and equipment, net194,676  198,224  199,959  172,862  174,301 
Goodwill391,668  391,668  391,668  270,305  236,615 
Core deposit intangibles and customer relationship intangibles, net47,479  50,071  52,698  41,063  35,203 
Servicing rights, net31,072  32,039  31,996  25,471  25,857 
Cash surrender value on life insurance162,892  162,216  159,302  143,444  142,818 
Other real estate, net6,153  11,908  11,074  11,801  10,777 
Other assets114,841  123,017  120,244  106,126  106,141 
Total Assets$11,408,006  $11,335,132  $11,301,920  $10,055,863  $9,810,739 
Liabilities and Equity         
Liabilities         
Deposits:         
 Demand$3,264,737  $3,427,819  $3,399,598  $3,094,457  $2,983,128 
 Savings5,107,962  4,958,430  4,864,773  4,536,106  4,240,328 
 Time1,023,730  1,125,914  1,224,773  910,977  923,453 
Total deposits9,396,429  9,512,163  9,489,144  8,541,540  8,146,909 
Deposits held for sale106,409  50,312       
Short-term borrowings227,010  131,139  229,890  131,240  324,691 
Other borrowings274,905  277,563  258,708  276,118  285,011 
Accrued expenses and other liabilities78,078  83,562  68,431  55,460  62,671 
Total Liabilities10,082,831  10,054,739  10,046,173  9,004,358  8,819,282 
Stockholders' Equity         
Preferred equity    938  938  938 
Common stockholders' equity1,325,175  1,280,393  1,254,809  1,050,567  990,519 
Total Equity1,325,175  1,280,393  1,255,747  1,051,505  991,457 
Total Liabilities and Equity$11,408,006  $11,335,132  $11,301,920  $10,055,863  $9,810,739 
 


 
HEARTLAND FINANCIAL USA, INC
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Quarter Ended For the Year Ended
 December 31, December 31,
 2018 2017 2018 2017
Average Balances       
Assets$11,371,247  $9,807,621  $10,772,297  $9,009,625 
Loans, net of unearned7,436,497  6,343,923  7,140,239  5,847,061 
Deposits9,596,807  8,293,006  9,104,278  7,590,232 
Earning assets10,225,409  8,891,432  9,718,106  8,181,914 
Interest bearing liabilities6,557,185  5,663,816  6,253,586  5,426,725 
Common stockholders' equity1,290,691  986,026  1,177,346  871,683 
Total stockholders' equity1,290,691  986,964  1,177,955  872,707 
Tangible common stockholders' equity(1)849,851  713,018  790,788  657,020 
        
Key Performance Ratios       
Annualized return on average assets1.12% 0.55% 1.09% 0.83%
Annualized return on average common equity (GAAP)9.88% 5.50% 9.93% 8.63%
Annualized return on average tangible common equity (non-GAAP)(2)15.00% 7.60% 14.79% 11.45%
Annualized ratio of net charge-offs to average loans0.48% 0.28% 0.25% 0.24%
Annualized net interest margin (GAAP)4.28% 4.14% 4.26% 4.04%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)4.34% 4.30% 4.32% 4.22%
Efficiency ratio, fully tax-equivalent (4)59.37% 62.26% 63.54% 65.40%
 
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)       
Net income available to common shareholders (GAAP)$32,141  $13,659  $116,959  $75,226 
        
Average common stockholders' equity (GAAP)$1,290,691  $986,026  $1,177,346  $871,683 
Less average goodwill391,668  236,615  340,352  184,554 
Less average core deposit intangibles and customer relationship intangibles, net49,172  36,393  46,206  30,109 
Average tangible common equity (non-GAAP)$849,851  $713,018  $790,788  $657,020 
Annualized return on average common equity (GAAP)9.88% 5.50% 9.93% 8.63%
Annualized return on average tangible common equity (non-GAAP)15.00% 7.60% 14.79% 11.45%
        
Reconciliation of Annualized Net Interest Margin,
Fully Tax-Equivalent (non-GAAP)(6)
       
Net Interest Income (GAAP)$110,283  $92,856  $413,954  $330,308 
Plus tax-equivalent adjustment(7)1,565  3,558  6,228  15,139 
Net interest income - tax-equivalent (non-GAAP)
$111,848  $96,414  $420,182  $345,447 
        
Average earning assets$10,225,409  $8,891,432  $9,718,106  $8,181,914 
        
Annualized net interest margin (GAAP)4.28% 4.14% 4.26% 4.04%
Annualized net interest margin, fully tax-equivalent (non-GAAP)
4.34% 4.30% 4.32% 4.22%
 
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average tangible common equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer deposit intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Average Balances         
Assets$11,371,247  $11,291,289  $10,643,306  $9,759,936  $9,807,621 
Loans, net of unearned7,436,497  7,462,176  7,123,182  6,525,553  6,343,923 
Deposits9,596,807  9,530,743  9,018,945  8,251,140  8,293,006 
Earning assets10,225,409  10,154,591  9,614,800  8,857,801  8,891,432 
Interest bearing liabilities6,557,185  6,544,949  6,205,187  5,694,337  5,663,816 
Common stockholders' equity1,290,691  1,263,226  1,139,876  1,011,580  986,026 
Total stockholders' equity1,290,691  1,263,795  1,140,814  1,012,518  986,964 
Tangible common stockholders' equity(1)849,851  819,966  767,732  723,898  713,018 
          
Key Performance Ratios         
Annualized return on average assets1.12% 1.18% 1.05% 0.97% 0.55%
Annualized return on average common equity (GAAP)9.88% 10.58% 9.81% 9.32% 5.50%
Annualized return on average tangible common equity (non-GAAP)(2)15.00% 16.30% 14.56% 13.03% 7.60%
Annualized ratio of net charge-offs to average loans0.48% 0.28% 0.12% 0.08% 0.28%
Annualized net interest margin (GAAP)4.28% 4.32% 4.23% 4.19% 4.14%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)4.34% 4.38% 4.30% 4.26% 4.30%
Efficiency ratio, fully tax-equivalent(4)59.37% 62.40% 65.04% 68.21% 62.26%
          
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)         
Net income available to common shareholders (GAAP)$32,141  $33,697  $27,866  $23,255  $13,659 
          
Average common stockholders' equity (GAAP)$1,290,691  $1,263,226  $1,139,876  $1,011,580  $986,026 
Less average goodwill391,668  391,668  325,781  250,172  236,615 
Less average core deposit intangibles and customer relationship intangibles, net49,172  51,592  46,363  37,510  36,393 
Average tangible common equity (non-GAAP)$849,851  $819,966  $767,732  $723,898  $713,018 
Annualized return on average common equity (GAAP)9.88% 10.58% 9.81% 9.32% 5.50%
Annualized return on average tangible common equity (non-GAAP)15.00% 16.30% 14.56% 13.03% 7.60%
          
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)         
Net Interest Income (GAAP)$110,283  $110,678  $101,409  $91,584  $92,856 
Plus tax-equivalent adjustment(7)1,565  1,544  1,575  1,544  3,558 
Net interest income, fully tax-equivalent (non-GAAP)$111,848  $112,222  $102,984  $93,128  $96,414 
          
Average earning assets$10,225,409  $10,154,591  $9,614,800  $8,857,801  $8,891,432 
          
Annualized net interest margin (GAAP)4.28% 4.32% 4.23% 4.19% 4.14%
Annualized net interest margin, fully tax-equivalent (non-GAAP)4.34% 4.38% 4.30% 4.26% 4.30%
          
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average tangible common equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer deposit intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Quarter Ended For the Year Ended
 December 31, December 31,
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)2018 2017 2018 2017
Net interest income$110,283  $92,856  $413,954  $330,308 
Tax-equivalent adjustment(2)1,565  3,558  6,228  15,139 
Fully tax-equivalent net interest income111,848  96,414  420,182  345,447 
Noninterest income27,045  25,528  109,160  102,022 
Securities gains, net(48) (1,420) (1,085) (6,973)
Unrealized gain/loss on equity securities, net(115)   (212)  
Gain on extinguishment of debt  (1,280)   (1,280)
Adjusted income$138,730  $119,242  $528,045  $439,216 
        
Total noninterest expenses$88,821  $77,878  $353,888  $297,675 
Less:       
Core deposit intangibles and customer relationship intangibles amortization2,592  1,825  9,355  6,077 
Partnership investment in tax credit projects3,895  984  4,233  1,860 
(Gain)/loss on sales/valuations of assets, net(35) 833  2,208  2,475 
Restructuring expenses    2,564   
Adjusted noninterest expenses$82,369  $74,236  $335,528  $287,263 
        
Efficiency ratio, fully tax-equivalent (non-GAAP)59.37% 62.26% 63.54% 65.40%
 
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)For the Quarter Ended
12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Net interest income$110,283  $110,678  $101,409  $91,584  $92,856 
Tax-equivalent adjustment(2)1,565  1,544  1,575  1,544  3,558 
Fully tax-equivalent net interest income111,848  112,222  102,984  93,128  96,414 
Noninterest income27,045  29,765  27,634  24,716  25,528 
Securities (gains)/losses, net(48) 145  259  (1,441) (1,420)
Unrealized (gain)/loss on equity securities, net(115) (54) (71) 28   
Gain on extinguishment of debt        (1,280)
Adjusted income$138,730  $142,078  $130,806  $116,431  $119,242 
          
Total noninterest expenses$88,821  $92,539  $88,882  $83,646  $77,878 
Less:         
Core deposit intangibles and customer relationship intangibles amortization2,592  2,626  2,274  1,863  1,825 
Partnership investment in tax credit projects3,895  338      984 
(Gain)/loss on sales/valuation of assets, net(35) 912  1,528  (197) 833 
Restructuring expenses      2,564   
Adjusted noninterest expenses$82,369  $88,663  $85,080  $79,416  $74,236 
          
Efficiency ratio, fully tax-equivalent (non-GAAP)59.37% 62.40% 65.04% 68.21% 62.26%
          
(1) Efficiency ratio, fully tax-equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis, which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, as noted in the table. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(2) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
 As of and for the Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Common Share Data         
Book value per common share$38.44  $37.14  $36.44  $33.81  $33.07 
Tangible book value per common share (non-GAAP)(1)$25.70  $24.33  $23.53  $23.79  $23.99 
Common shares outstanding, net of treasury stock34,477,499  34,473,029  34,438,445  31,068,239  29,953,356 
Tangible common equity ratio (non-GAAP)(2)8.08% 7.70% 7.46% 7.59% 7.53%
          
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(3)         
Common stockholders' equity (GAAP)$1,325,175  $1,280,393  $1,254,809  $1,050,567  $990,518 
Less goodwill391,668  391,668  391,668  270,305  236,615 
Less core deposit intangibles and customer relationship intangibles, net47,479  50,071  52,698  41,063  35,203 
Tangible common stockholders' equity (non-GAAP)$886,028  $838,654  $810,443  $739,199  $718,700 
          
Common shares outstanding, net of treasury stock34,477,499  34,473,029  34,438,445  31,068,239  29,953,356 
Common stockholders' equity (book value) per share (GAAP)$38.44  $37.14  $36.44  $33.81  $33.07 
Tangible book value per common share (non-GAAP)$25.70  $24.33  $23.53  $23.79  $23.99 
          
Reconciliation of Tangible Common Equity Ratio (non-GAAP)(4)         
Total assets (GAAP)$11,408,006  $11,335,132  $11,301,920  $10,055,863  $9,810,739 
Less goodwill391,668  391,668  391,668  270,305  236,615 
Less core deposit intangibles and customer relationship intangibles, net47,479  50,071  52,698  41,063  35,203 
Total tangible assets (non-GAAP)$10,968,859  $10,893,393  $10,857,554  $9,744,495  $9,538,921 
Tangible common equity ratio (non-GAAP)8.08% 7.70% 7.46% 7.59% 7.53%
          
Loan Data         
Loans held to maturity:         
Commercial and commercial real estate$5,731,712  $5,610,953  $5,721,138  $5,129,777  $4,809,875 
Residential mortgage673,603  676,941  683,051  624,725  624,279 
Agricultural and agricultural real estate565,408  574,048  562,353  518,386  511,588 
Consumer440,158  506,181  512,899  474,929  447,484 
Unearned discount and deferred loan fees(3,184) (2,630) (1,744) (1,802) (1,762)
Total loans held to maturity$7,407,697  $7,365,493  $7,477,697  $6,746,015  $6,391,464 
          
Other Selected Trend Information         
Effective tax rate17.22% 20.99% 21.09% 18.04% 61.13%
Full time equivalent employees2,045  2,124  2,216  2,022  2,008 
Total residential mortgage loan applications$107,892  $298,602  $341,978  $234,825  $232,946 
Residential mortgage loans originated$124,600  $262,821  $225,563  $149,768  $185,580 
Residential mortgage loans sold$126,180  $238,684  $201,818  $127,963  $168,527 
Residential mortgage loan servicing portfolio$4,095,025  $4,156,921  $4,158,107  $3,535,988  $3,558,090 
          
(1) Refer to the "Reconciliation of Tangible Book Value Per Common Share (non-GAAP)" table.
(2) Refer to the "Reconciliation of Tangible Common Equity Ratio (non-GAAP)" table.
(3) Tangible book value per common share is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net divided by common shares outstanding, net of treasury. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(4) The tangible common equity ratio is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net divided by total assets less goodwill and core deposit intangibles and customer relationship intangibles, net. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 As of and for the Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Allowance for Loan Losses         
Balance, beginning of period$61,221  $61,324  $58,656  $55,686  $54,885 
Provision for loan losses9,681  5,238  4,831  4,263  5,328 
Charge-offs(9,777) (6,120) (3,164) (2,224) (5,628)
Recoveries838  779  1,001  931  1,101 
Balance, end of period$61,963  $61,221  $61,324  $58,656  $55,686 
          
Asset Quality         
Nonaccrual loans$71,943  $73,060  $69,376  $64,806  $62,581 
Loans past due ninety days or more as to interest or principal payments726  154  54  22  830 
Other real estate owned6,153  11,908  11,074  11,801  10,777 
Other repossessed assets459  495  499  423  411 
Total nonperforming assets$79,281  $85,617  $81,003  $77,052  $74,599 
          
Performing troubled debt restructured loans$4,026  $4,180  $4,012  $3,206  $6,617 
          
Nonperforming Assets Activity         
Balance, beginning of period$85,617  $81,003  $77,052  $74,599  $79,803 
Net loan charge offs(8,939) (5,341) (2,163) (1,293) (4,527)
New nonperforming loans17,332  16,965  16,254  8,546  9,911 
Acquired nonperforming assets    7,973  2,459   
Reduction of nonperforming loans(1)(6,065) (5,085) (15,696) (6,549) (7,177)
OREO/Repossessed assets sales proceeds(8,390) (1,064) (1,541) (657) (2,917)
OREO/Repossessed assets writedowns, net(230) (886) (993) (16) (146)
Net activity at Citizens Finance Co.(44) 25  117  (37) (348)
Balance, end of period$79,281  $85,617  $81,003  $77,052  $74,599 
 
Asset Quality Ratios         
Ratio of nonperforming loans to total loans0.98% 0.99% 0.93% 0.96% 0.99%
Ratio of nonperforming assets to total assets0.69% 0.76% 0.72% 0.77% 0.76%
Annualized ratio of net loan charge-offs to average loans0.48% 0.28% 0.12% 0.08% 0.28%
Allowance for loan losses as a percent of loans0.84% 0.83% 0.82% 0.87% 0.87%
Allowance for loan losses as a percent of nonperforming loans85.27% 83.62% 88.32% 90.48% 87.82%
Loans delinquent 30-89 days as a percent of total loans0.21% 0.62% 0.30% 0.21% 0.27%
          
(1) Includes principal reductions, transfers to performing status and transfers to OREO.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
 For the Quarter Ended
 December 31, 2018 December 31, 2017
 Average
Balance
 Interest Rate Average
Balance
 Interest Rate
Earning Assets           
Securities:           
Taxable$2,184,096  $15,851  2.88% $1,881,708  $11,119  2.34%
Nontaxable(1)427,332  4,388  4.07  555,390  6,771  4.84 
Total securities2,611,428  20,239  3.07  2,437,098  17,890  2.91 
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments238,087  1,285  2.14  162,325  435  1.06 
Federal funds sold309      3,106  5  0.64 
Loans:(2)           
Commercial and commercial real estate(1)5,644,475  77,822  5.47  4,725,572  59,370  4.98 
Residential mortgage704,012  8,682  4.89  658,563  9,750  5.87 
Agricultural and agricultural real estate(1)568,904  7,752  5.41  515,426  6,115  4.71 
Consumer519,106  9,355  7.15  444,362  9,820  8.77 
Fees on loans  2,733      2,241   
Less: allowance for loan losses(60,912)     (55,020)    
Net loans7,375,585  106,344  5.72  6,288,903  87,296  5.51 
Total earning assets10,225,409  127,868  4.96% 8,891,432  105,626  4.71%
Nonearning Assets1,145,838      916,189     
Total Assets$11,371,247      $9,807,621     
Interest Bearing Liabilities(3)           
Savings$5,071,573  $8,817  0.69% $4,244,711  $3,335  0.31%
Time, $100,000 and over558,957  1,568  1.11  399,331  777  0.77 
Other time deposits529,165  1,441  1.08  562,595  1,201  0.85 
Short-term borrowings121,053  417  1.37  161,959  180  0.44 
Other borrowings276,437  3,777  5.42  295,220  3,719  5.00 
Total interest bearing liabilities6,557,185  16,020  0.97% 5,663,816  9,212  0.65%
Noninterest Bearing Liabilities(3)           
Noninterest bearing deposits3,437,112      3,086,369     
Accrued interest and other liabilities86,259      70,472     
Total noninterest bearing liabilities3,523,371      3,156,841     
Stockholders' Equity1,290,691      986,964     
Total Liabilities and Stockholders' Equity$11,371,247      $9,807,621     
Net interest income, fully tax-equivalent (non-GAAP)(1)  $111,848      $96,414   
Net interest spread(1)    3.99%     4.06%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(4)    4.34%     4.30%
Interest bearing liabilities to earning assets64.13%     63.70%    
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(4)           
Net interest income, fully tax-equivalent (non-GAAP)  $111,848      $96,414   
Adjustments for tax-equivalent interest(1)  (1,565)     (3,558)  
Net interest income (GAAP)  $110,283      $92,856   
            
Average earning assets$10,225,409      $8,891,432     
Annualized net interest margin (GAAP)    4.28%     4.14%
Annualized net interest margin, fully tax-equivalent (non-GAAP)    4.34%     4.30%
            
(1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Includes deposits held for sale.
(4) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
 


 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
 For the Year Ended
 December 31, 2018 December 31, 2017
 Average
Balance
 Interest Rate Average
Balance
 Interest Rate
Earning Assets           
Securities:           
Taxable$1,999,321  $54,131  2.71% $1,629,936  $38,365  2.35%
Nontaxable(1)439,894  17,873  4.06  617,267  30,305  4.91 
Total securities2,439,215  72,004  2.95  2,247,203  68,670  3.06 
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments197,562  3,698  1.87  136,555  1,547  1.13 
Federal funds sold430      5,932  42  0.71 
Loans:(2)           
Commercial and commercial real estate(1)5,401,683  289,379  5.36  4,256,158  211,316  4.96 
Residential mortgage692,310  32,047  4.63  655,515  30,242  4.61 
Agricultural and agricultural real estate(1)549,346  28,331  5.16  498,032  23,651  4.75 
Consumer496,900  37,250  7.50  437,356  35,194  8.05 
Fees on loans  9,339      8,135   
Less: allowance for loan losses(59,340)     (54,837)    
Net loans7,080,899  396,346  5.60  5,792,224  308,538  5.33 
Total earning assets9,718,106  472,048  4.86% 8,181,914  378,797  4.63%
Nonearning Assets1,054,191      827,711     
Total Assets$10,772,297      $9,009,625     
Interest Bearing Liabilities(3)           
Savings$4,779,977  $25,123  0.53% $4,044,032  $11,107  0.27%
Time, $100,000 and over499,409  4,789  0.96  377,090  3,016  0.80 
Other time deposits559,360  5,755  1.03  525,165  4,156  0.79 
Short-term borrowings142,295  1,696  1.19  190,040  678  0.36 
Other borrowings272,545  14,503  5.32  290,398  14,393  4.96 
Total interest bearing liabilities6,253,586  51,866  0.83% 5,426,725  33,350  0.61%
Noninterest Bearing Liabilities(3)           
Noninterest bearing deposits3,265,532      2,643,945     
Accrued interest and other liabilities75,224      66,248     
Total noninterest bearing liabilities3,340,756      2,710,193     
Stockholders' Equity1,177,955      872,707     
Total Liabilities and Stockholders' Equity$10,772,297      $9,009,625     
Net interest income, fully tax-equivalent (non-GAAP)(1)  $420,182      $345,447   
Net interest spread(1)