Heartland Financial USA, Inc. (“HTLF”) Reports Quarterly and Year to Date Results as of June 30, 2023

Company Release - 7/31/2023 4:01 PM ET

Highlights and Developments

  • Quarterly net income available to common stockholders of $47.4 million
  • Quarterly diluted earnings per common share of $1.11
  • Total revenue growth of $2.6 million or 1% from the second quarter of 2022, and $15.6 million or 5% from the first six months of 2022
  • Quarterly loan growth of $222.6 million or 2%
  • Nearly 1,300 net new commercial deposit accounts and over 1,400 net new consumer deposit accounts opened in the quarter
  • Completed the consolidation of two bank charters during the quarter, and one charter consolidation completed subsequent to the end of the quarter
    Quarter Ended
June 30,
  Six Months Ended
June 30,
      2023       2022       2023       2022  
Net income available to common stockholders (in millions)   $ 47.4     $ 49.9     $ 98.2     $ 90.9  
Diluted earnings per common share     1.11       1.17       2.30       2.14  
                 
Return on average assets     0.98 %     1.06 %     1.02 %     0.99 %
Return on average common equity     11.01       11.55       11.70       9.82  
Return on average tangible common equity (non-GAAP)(1)     17.33       18.35       18.63       15.08  
Net interest margin     3.19       3.18       3.27       3.13  
Net interest margin, fully tax-equivalent (non-GAAP)(1)     3.24       3.22       3.32       3.17  
Efficiency ratio     60.93       60.16       60.94       62.75  
Adjusted efficiency ratio, fully-tax equivalent (non-GAAP)(1)     59.82       57.66       58.48       61.02  

(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.

"HTLF's strength and diverse geography enabled us to continue executing on our strategic priorities despite recent industry challenges. We were pleased with our strong loan growth and new customer relationships. Our stable deposit base and growth strategies give us momentum heading into the second half of the year. "
Bruce K. Lee, President and Chief Executive Officer, HTLF


DENVER, July 31, 2023 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022:

  • Net income available to common stockholders of $47.4 million compared to $49.9 million, a decrease of $2.5 million or 5%.
  • Earnings per diluted common share of $1.11 compared to $1.17, a decrease of $0.06 or 5%.
  • Net interest income of $147.1 million compared to $142.5 million, an increase of $4.7 million or 3%.
  • Total revenue growth of $2.6 million or 1% to $179.6 million compared to $177.0 million.
  • Return on average assets was 0.98% compared to 1.06%.
  • Return on average common equity was 11.01% compared to 11.55%.
  • Return on average tangible common equity (non-GAAP) was 17.33% compared to 18.35%.

"HTLF's strength and diverse geography enabled us to continue executing on our strategic priorities despite recent industry challenges. We were pleased with our strong loan growth and new customer relationships. Our stable deposit base and growth strategies give us momentum heading into the second half of the year," said Bruce K. Lee, president and chief executive officer of HTLF.

HTLF report the following results for the six months ended June 30, 2023, compared to the six months ended June 30, 2022:

  • Net income available to common stockholders of $98.2 million compared to $90.9 million, an increase of $7.2 million or 8%.
  • Earnings per diluted common share of $2.30 compared to $2.14, an increase of $0.16 or 7%.
  • Net interest income of $299.3 million compared to $277.1 million, an increase of $22.2 million or 8%.
  • Total revenue of $361.8 million compared to $346.2 million, an increase of $15.6 million or 5%.
  • Return on average assets was 1.02% compared to 0.99%.
  • Return on average common equity was 11.70% compared to 9.82%.
  • Return on average tangible common equity (non-GAAP) was 18.63% compared to 15.08%.

Charter Consolidation Update

During the second quarter of 2023, Bank of Blue Valley and First Bank & Trust were consolidated into HTLF Bank. Subsequent to June 30, 2023, Rocky Mountain Bank was consolidated into HTLF Bank. Citywide Banks, Premier Valley Bank, Minnesota Bank & Trust, Arizona Bank & Trust, Illinois Bank & Trust, Wisconsin Bank & Trust, Bank of Blue Valley, First Bank & Trust and Rocky Mountain Bank are now operating as divisions of HTLF Bank. The two remaining charters are expected to be consolidated by the end of October 2023. Charter consolidation follows a template that retains the current brands, local leadership and local decision making.

Total consolidation restructuring costs are projected to be $19-$20 million with approximately $6-$7 million of expenses remaining to be incurred in 2023. Charter consolidation is designed to eliminate redundancies and improve HTLF’s operating efficiency and capacity to support ongoing product and service enhancements, as well as current and future growth. HTLF realized some operating efficiency and financial benefits in the second half of 2022 and first half of 2023 with the completion of nine charter consolidations, and total benefits are estimated to be approximately $20 million annually after the project is completed.

Recent Developments

As of March 29, 2023, HTLF's subsidiary, Dubuque Bank & Trust, entered into an agreement to sell and transfer the recordkeeping and administration services component of HTLF’s Retirement Plan Services business to July Business Services ("July"). Through the new partnership with July, HTLF will augment the comprehensive retirement plan solutions offered to clients with enhanced technology and an expanded suite of product offerings that clients expect from a top retirement services provider. The transaction was completed and recordkeeping and administration services were transferred in the second quarter of 2023. The transaction resulted in a gain of $4.3 million.

On March 31, 2023, HTLF's division, First Bank & Trust, closed on the sale of its mortgage servicing rights portfolio, which consisted of approximately 4,500 loans serviced for others with an unpaid principal balance of approximately $700 million. In the agreement, which includes customary terms and conditions, First Bank & Trust provided interim servicing of the loans until the transfer date in May 2023.

Net Interest Income and Net Interest Margin

Net interest margin, expressed as a percentage of average earning assets, was 3.19% (3.24% on a fully tax-equivalent basis, non-GAAP) for the second quarter of 2023 compared to 3.36% (3.40% on a fully tax-equivalent basis, non-GAAP) for the first quarter of 2023, and 3.18% (3.22% on a fully tax-equivalent basis, non-GAAP) for the second quarter of 2022.

Total interest income and average earning asset changes for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Total interest income was $235.5 million compared to $152.9 million, an increase of $82.6 million or 54% primarily attributable to an increase in average earning assets and higher yields.
  • Total interest income on a tax-equivalent basis (non-GAAP) was $237.8 million, an increase of $83.0 million or 54% from $154.9 million.
  • Average earning assets increased $535.8 million or 3% to $18.52 billion compared to $17.99 billion.
  • The average rate on earning assets increased 170 basis points to 5.15% from 3.45%, primarily due to recent interest rate increases.

Total interest expense and average interest bearing liability changes for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Total interest expense was $88.4 million, an increase of $77.9 million from $10.4 million, due to increases in the average interest rate paid and average interest bearing liabilities.
  • The average interest rate paid on interest bearing liabilities increased 232 basis points to 2.68% compared to 0.36%.
  • Average interest bearing deposits increased $1.66 billion or 15% to $12.75 billion from $11.08 billion, primarily due to an increase of $1.94 billion in wholesale deposits.
  • The average interest rate paid on interest bearing deposits increased 234 basis points to 2.58% compared to 0.24%.
  • Average borrowings decreased $29.4 million or 6% to $461.7 million from $491.1 million, and the average interest rate paid on borrowings was 5.55% compared to 3.18%.

Net interest income changes for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Net interest income totaled $147.1 million compared to $142.5 million, an increase of $4.7 million or 3%.
  • Net interest income on a tax-equivalent basis (non-GAAP) totaled $149.4 million compared to $144.4 million, an increase of $5.0 million or 3%.

Noninterest Income and Noninterest Expense

Total noninterest income was $32.5 million during the second quarter of 2023 compared to $34.5 million during the second quarter of 2022, a decrease of $2.0 million or 6%. Significant changes within the noninterest income category for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Service charges and fees increased $1.6 million or 9% to $19.6 million from $18.1 million.
  • Net security losses totaled $314,000 compared to net losses of $2.1 million.
  • Net gains on sales of loans held for sale decreased $1.9 million or 64% to $1.1 million from $2.9 million, primarily attributable to a decrease in loans sold to the secondary market.
  • Other noninterest income decreased $2.6 million or 87% to $407,000 compared to $3.0 million. Included in other noninterest income for the second quarter of 2022 was a gain of $1.9 million on the sale of VISA Class B shares.

Total noninterest expense was $109.4 million during the second quarter of 2023 compared to $106.5 million during the second quarter of 2022, which was an increase of $3.0 million or 3%. Significant changes within the noninterest expense category for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Salaries and employee benefits totaled $62.1 million compared to $64.0 million, a decrease of $1.9 million or 3%. The decrease was primarily due to a reduction of full-time equivalent employees and lower incentive compensation expense. Full-time equivalent employees totaled 1,966 compared to 2,087, a decrease of 121 or 6%.
  • Other noninterest expenses totaled $15.6 million compared to $13.0 million, an increase of $2.6 million or 20%. Credit card expenses increased $909,000 or 27% to $4.3 million from $3.4 million. Fraud losses increased $739,000 to $948,000 from $209,000.
  • FDIC insurance assessments totaled $3.0 million compared to $1.5 million, an increase of $1.5 million due to assessment rate changes that were effective with the first quarter 2023 assessment.
  • Acquisition, integration and restructuring costs totaled $1.9 million compared to $2.4 million, a decrease of $520,000 primarily due to reduced charter consolidation expenses.

The effective tax rate was 23.74% for the second quarter of 2023 compared to 22.89% for the second quarter of 2022. The following items impacted the second quarter 2023 and 2022 tax calculations:

  • Various tax credits of $568,000 compared to $975,000.
  • Tax expense of $1,086,000 compared to $109,000 resulting from the disallowed interest expense related to tax-exempt loans and securities, aligning with increases in total interest expense.
  • Tax-exempt interest income as a percentage of pre-tax income of 12.40% compared to 11.05%.

Total Assets, Total Loans and Total Deposits

Total assets were $20.22 billion at June 30, 2023, a decrease of $19.5 million or less than 1% from $20.24 billion at year-end 2022. Securities represented 33% and 35% of total assets at June 30, 2023, and December 31, 2022, respectively.

Total loans held to maturity were $11.72 billion at June 30, 2023, compared to $11.50 billion at March 31, 2023, and $11.43 billion at December 31, 2022, representing increases of $222.6 million or 2%, and $289.6 million or 3%, respectively.

Significant changes by loan category at June 30, 2023 compared to March 31, 2023 included:

  • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $174.4 million or 3% to $5.99 billion compared to $5.82 billion.
  • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $20.3 million or 1% to $3.54 billion compared to $3.52 billion.
  • Agricultural and agricultural real estate loans increased $29.6 million or 4% to $839.8 million from $810.2 million.

Significant changes by loan category at June 30, 2023 compared to December 31, 2022 included:

  • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $252.8 million or 4% to $5.99 billion compared to $5.74 billion.
  • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $136.8 million or 4% to $3.54 billion compared to $3.41 billion.
  • Agricultural and agricultural real estate loans decreased $80.7 million or 9% to $839.8 million compared to $920.5 million.
  • Residential real estate loans decreased $24.9 million or 3% to $828.4 million compared to $853.4 million.

Total deposits were $17.66 billion as of June 30, 2023, compared to $17.68 billion at March 31, 2023, which was a decrease of $17.8 million or less than 1%. Total deposits were $17.66 billion as of June 30, 2023, compared to $17.51 billion at December 31, 2022, an increase of $150.5 million or 1%.

Total customer deposits were $14.65 billion as of June 30, 2023 compared to $14.69 billion at March 31, 2023, which was a decrease of $47.1 million or less than 1%. During the second quarter of 2023, nearly 1,300 net new commercial deposit accounts and over 1,400 net new consumer deposit accounts were opened. Significant deposit changes by category at June 30, 2023, compared to March 31, 2023, included:

  • Customer demand deposits decreased $221.7 million or 4% to $4.90 billion compared to $5.12 billion.
  • Customer savings deposits decreased $351.7 million or 4% to $8.15 billion compared to $8.50 billion.
  • Customer time deposits increased $526.4 million or 49% to $1.60 billion compared to $1.07 billion.

Total customer deposits were $14.65 billion at June 30, 2023 compared to $15.22 billion at December 31, 2022, which was a decrease of $578.5 million or 4%. Significant deposit changes by category at June 30, 2023 compared to December 31, 2022, included:

  • Customer demand deposits decreased $803.5 million or 14% to $4.90 billion compared to $5.70 billion.
  • Customer savings deposits decreased $521.3 million or 6% to $8.15 billion compared to $8.67 billion.
  • Customer time deposits increased $746.3 million or 88% to $1.60 billion compared to $851.5 million.

Total wholesale and institutional deposits were $3.02 billion as of June 30, 2023, which was an increase of $29.3 million or 1% from $2.99 billion at March 31, 2023. Significant deposit changes by category at June 30, 2023, compared to March 31, 2023, included:

  • Wholesale and institutional savings deposits decreased $132.3 million or 18% to $623.0 million compared to $755.3 million.
  • Wholesale time deposits increased $161.5 million or 7% to $2.40 billion compared to $2.23 billion.

Total wholesale deposits were $3.02 billion as of June 30, 2023, which was an increase of $729.0 million or 32% from $2.29 billion at December 31, 2022. Significant deposit changes by category at June 30, 2023 compared to December 31, 2022 included:

  • Wholesale and institutional savings deposits decreased $700.5 million or 53% to $623.0 million compared to $1.32 billion.
  • Wholesale time deposits increased $1.43 billion to $2.40 billion compared to $965.7 million.

Provision and Allowance

Provision and Allowance for Credit Losses for Loans
Provision for credit losses for loans for the second quarter of 2023 was $7.8 million, which was an increase of $6.3 million from $1.5 million recorded in the second quarter of 2022. The provision expense for the second quarter of 2023 was impacted by a $5.3 million charge-off related to an overdraft, the result of a fraud incident impacting the account of a single long-term customer.

The allowance for credit losses for loans totaled $111.2 million and $109.5 million at June 30, 2023, and December 31, 2022, respectively. Management continued to utilize a macroeconomic outlook which anticipated a moderate recession developing within the next twelve months. The following items impacted the allowance for credit losses for loans at June 30, 2023:

  • Provision expense for the six months ended June 30, 2023, totaled $10.0 million.
  • Net charge-offs of $8.3 million were recorded for the first six months of 2023.

Provision and Allowance for Credit Losses for Unfunded Commitments
The allowance for unfunded commitments decreased $1.6 million or 8% to $18.6 million at June 30, 2023, from $20.2 million at December 31, 2022, primarily due to a reduction of $164.2 million in unfunded commitments for construction loans, which carry the highest loss rate. Total unfunded commitments increased $175.5 million or 4% to $4.91 billion at June 30, 2023 compared to $4.73 billion at December 31, 2022.

Total Provision and Allowance for Lending Related Credit Losses
The total provision expense for lending related credit losses was $5.4 million for the second quarter of 2023 compared to $3.2 million for the second quarter of 2022. The total allowance for lending related credit losses was $129.8 million or 1.11% of total loans at June 30, 2023, compared to $129.7 million or 1.13% of total loans as of December 31, 2022.

Nonperforming Assets

Nonperforming assets decreased $834,000 or 1% to $66.1 million or 0.33% of total assets at June 30, 2023, compared to $66.9 million or 0.33% of total assets at December 31, 2022. Nonperforming loans were $63.4 million or 0.54% of total loans at June 30, 2023, compared to $58.5 million or 0.51% of total loans at December 31, 2022. At June 30, 2023, loans delinquent 30-89 days were 0.12% of total loans compared to 0.04% of total loans at December 31, 2022.

Non-GAAP Financial Measures
This earnings 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 the company'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. Because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this earnings 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 earnings release.

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

  • 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.
  • Adjusted 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 earnings release.
  • Net interest income, fully tax equivalent, is net income adjusted 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.
  • 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 tangible common equity ratio is total common equity less goodwill, core deposit and customer relationship intangibles, net, and accumulated other comprehensive loss 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 excluding the variability of accumulated other comprehensive income (loss).
  • Annualized return on average tangible common equity is net income excluding intangible amortization calculated as (1) net income excluding 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.
  • Annualized ratio of core expenses to average assets adjusts noninterest expenses to exclude specific items noted in the reconciliation. Management includes this measure as it is considered to be a critical metric to analyze and evaluate controllable expenses related to primary business operations.

Conference Call Details
HTLF will host a conference call for shareholders, analysts and other interested parties at 5:00 p.m. EDT today. To join via webcast, please visit https://ir.htlf.com/news-and-events/event-calendar/default.aspx 10 minutes prior to the call. A replay will be available until July 30, 2024, by logging on to www.htlf.com.

About HTLF
Heartland Financial USA, Inc., is a Denver, Colorado-based bank holding company operating under the brand name HTLF, with assets of $20.22 billion as of June 30, 2023. HTLF's banks serves communities in Arizona, California, Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, New Mexico, Texas and Wisconsin. HTLF is committed to its core commercial business, supported by a strong retail operation, and provides a diversified line of financial services including treasury management, wealth management, investments and residential mortgage. Additional information is available at www.htlf.com.

Safe Harbor Statement
This release (including any information incorporated herein by reference) and future oral and written statements of HTLF and its management, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, financial condition, results of operations, plans, objectives and future performance of HTLF.

Any statements about HTLF's expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Forward-looking statements may include information about possible or assumed future results of HTLF's operations or performance, and may be based upon beliefs, expectations and assumptions of HTLF's management. These forward-looking statements are generally identified by the use of the words such as "believe", "expect", "anticipate", "plan", "intend", "estimate", "project", "may", "will", "would", "could", "should", "view", "opportunity", "potential", or similar or negative expressions of these words or phrases that are used in this release, and future oral and written statements of HTLF and its management. Although HTLF may make these statements based on management’s experience, beliefs, expectations, assumptions and best estimate of future events, the ability of HTLF to predict results or the actual effect or outcomes of plans or strategies is inherently uncertain, and there may be events or factors that management has not anticipated. Therefore, the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, 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 HTLF currently believes could have a material effect on its operations and future prospects, are detailed below and in the risk factors in HTLF's reports filed with the Securities and Exchange Commission ("SEC"), including the "Risk Factors" section under Item 1A of Part I of HTLF’s Annual Report on Form 10-K for the year ended December 31, 2022, include, among others:

  • Economic and Market Conditions Risks, including risks related to the deterioration of the U.S. economy in general and in the local economies in which HTLF conducts its operations and future civil unrest, natural disasters, pandemics, such as the COVID-19 pandemic or future pandemics and governmental measures addressing them, climate change and climate-related regulations, persistent inflation, higher interest rates, recession, supply chain issues, labor shortages, terrorist threats or acts of war;
  • Credit Risks, including risks of increasing credit losses due to deterioration in the financial condition of HTLF's borrowers, changes in asset and collateral values and climate and other borrower industry risks which may impact the provision for credit losses and net charge-offs;
  • Liquidity and Interest Rate Risks, including the impact of capital market conditions, rising interest rates and changes in monetary policy on our borrowings and net interest income;
  • Operational Risks, including processing, information systems, cybersecurity, vendor, business interruption, and fraud risks;
  • Strategic and External Risks, including economic, political and competitive forces impacting our business;
  • Legal, Compliance and Reputational Risks, including regulatory and litigation risks; and
  • Risks of Owning Stock in HTLF, including stock price volatility and dilution as a result of future equity offerings and acquisitions.

There can be no assurance that other factors not currently anticipated by HTLF will not materially and adversely affect HTLF's business, financial condition and results of operations. Additionally, all statements in this release, including forward-looking statements speak only as of the date they are made. HTLF does not undertake and specifically disclaims any obligation to publicly release the results of any revisions which may be made to any forward-looking statement to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events or to otherwise update any statement in light of new information or future events. Further information concerning HTLF and its business, including additional factors that could materially affect HTLF’s financial results, is included in HTLF's filings with the Securities and Exchange Commission (the "SEC").

-FINANCIAL TABLES FOLLOW-

 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
June 30,
  For the Six Months Ended
June 30,
      2023       2022       2023       2022  
Interest Income                
Interest and fees on loans   $ 168,899     $ 108,718     $ 322,742     $ 211,087  
Interest on securities:                
Taxable     58,172       38,098       114,148       70,718  
Nontaxable     6,378       5,508       12,406       11,710  
Interest on federal funds sold                        
Interest on deposits with other banks and short-term investments     2,051       563       3,182       634  
Total Interest Income     235,500       152,887       452,478       294,149  
Interest Expense                
Interest on deposits     81,975       6,530       138,873       9,507  
Interest on short-term borrowings     848       88       3,270       134  
Interest on other borrowings     5,545       3,808       10,991       7,368  
Total Interest Expense     88,368       10,426       153,134       17,009  
Net Interest Income     147,132       142,461       299,344       277,140  
Provision for credit losses     5,379       3,246       8,453       6,491  
Net Interest Income After Provision for Credit Losses     141,753       139,215       290,891       270,649  
Noninterest Income                
Service charges and fees     19,627       18,066       36,763       33,317  
Loan servicing income     411       834       1,125       1,120  
Trust fees     5,419       5,679       11,076       11,758  
Brokerage and insurance commissions     677       839       1,373       1,708  
Capital markets fees     4,037       4,871       6,486       7,910  
Securities gains/(losses), net     (314 )     (2,089 )     (1,418 )     783  
Unrealized gain/(loss) on equity securities, net     (41 )     (121 )     152       (404 )
Net gains on sale of loans held for sale     1,050       2,901       2,881       6,312  
Valuation adjustment on servicing rights                       1,658  
Income on bank owned life insurance     1,220       523       2,184       1,047  
Other noninterest income     407       3,036       1,870       3,899  
Total Noninterest Income     32,493       34,539       62,492       69,108  
Noninterest Expense                
Salaries and employee benefits     62,099       64,032       124,248       130,206  
Occupancy     6,691       7,094       13,900       14,456  
Furniture and equipment     3,063       3,033       5,978       6,552  
Professional fees     15,194       14,457       27,991       27,997  
FDIC insurance assessments     3,035       1,530       6,314       3,146  
Advertising     3,052       1,283       5,037       2,838  
Core deposit and customer relationship intangibles amortization     1,715       2,083       3,503       4,137  
Other real estate and loan collection expenses, net     348       78       503       273  
(Gain)/loss on sales/valuations of assets, net     (3,372 )     (3,230 )     (2,257 )     (3,184 )
Acquisition, integration and restructuring costs     1,892       2,412       3,565       2,988  
Partnership investment in tax credit projects     154       737       692       814  
Other noninterest expenses     15,575       12,970       31,015       27,053  
Total Noninterest Expense     109,446       106,479       220,489       217,276  
Income Before Income Taxes     64,800       67,275       132,894       122,481  
Income taxes     15,384       15,402       30,702       27,519  
Net Income     49,416       51,873       102,192       94,962  
Preferred dividends     (2,012 )     (2,012 )     (4,025 )     (4,025 )
Net Income Available to Common Stockholders   $ 47,404     $ 49,861     $ 98,167     $ 90,937  
Earnings per common share-diluted   $ 1.11     $ 1.17     $ 2.30     $ 2.14  
Weighted average shares outstanding-diluted     42,757,603       42,565,391       42,753,197       42,562,639  

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
    6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Interest Income                    
Interest and fees on loans   $ 168,899     $ 153,843     $ 143,970     $ 122,913     $ 108,718  
Interest on securities:                    
Taxable     58,172       55,976       53,178       45,648       38,098  
Nontaxable     6,378       6,028       6,132       6,164       5,508  
Interest on federal funds sold                 11              
Interest on deposits with other banks and short-term investments     2,051       1,131       1,410       1,081       563  
Total Interest Income     235,500       216,978       204,701       175,806       152,887  
Interest Expense                    
Interest on deposits     81,975       56,898       32,215       15,158       6,530  
Interest on short-term borrowings     848       2,422       2,223       360       88  
Interest on other borrowings     5,545       5,446       5,043       4,412       3,808  
Total Interest Expense     88,368       64,766       39,481       19,930       10,426  
Net Interest Income     147,132       152,212       165,220       155,876       142,461  
Provision for credit losses     5,379       3,074       3,387       5,492       3,246  
Net Interest Income After Provision for Credit Losses     141,753       149,138       161,833       150,384       139,215  
Noninterest Income                    
Service charges and fees     19,627       17,136       17,432       17,282       18,066  
Loan servicing income     411       714       790       831       834  
Trust fees     5,419       5,657       5,440       5,372       5,679  
Brokerage and insurance commissions     677       696       629       649       839  
Capital markets fees     4,037       2,449       1,824       1,809       4,871  
Securities gains/(losses), net     (314 )     (1,104 )     (153 )     (1,055 )     (2,089 )
Unrealized gain/(loss) on equity securities, net     (41 )     193       (7 )     (211 )     (121 )
Net gains on sale of loans held for sale     1,050       1,831       888       1,832       2,901  
Valuation adjustment on servicing rights                              
Income on bank owned life insurance     1,220       964       600       694       523  
Other noninterest income     407       1,463       2,532       1,978       3,036  
Total Noninterest Income     32,493       29,999       29,975       29,181       34,539  
Noninterest Expense                    
Salaries and employee benefits     62,099       62,149       61,611       62,661       64,032  
Occupancy     6,691       7,209       6,905       6,794       7,094  
Furniture and equipment     3,063       2,915       3,019       2,928       3,033  
Professional fees     15,194       12,797       16,320       14,289       14,457  
FDIC insurance assessments     3,035       3,279       1,866       1,988       1,530  
Advertising     3,052       1,985       1,829       1,554       1,283  
Core deposit and customer relationship intangibles amortization     1,715       1,788       1,841       1,856       2,083  
Other real estate and loan collection expenses, net     348       155       373       304       78  
(Gain)/loss on sales/valuations of assets, net     (3,372 )     1,115       2,388       (251 )     (3,230 )
Acquisition, integration and restructuring costs     1,892       1,673       2,442       2,156       2,412  
Partnership investment in tax credit projects     154       538       3,247       979       737  
Other noninterest expenses     15,575       15,440       15,377       13,625       12,970  
Total Noninterest Expense     109,446       111,043       117,218       108,883       106,479  
Income Before Income Taxes     64,800       68,094       74,590       70,682       67,275  
Income taxes     15,384       15,318       13,936       14,118       15,402  
Net Income     49,416       52,776       60,654       56,564       51,873  
Preferred dividends     (2,012 )     (2,013 )     (2,012 )     (2,013 )     (2,012 )
Net Income Available to Common Stockholders   $ 47,404     $ 50,763     $ 58,642     $ 54,551     $ 49,861  
Earnings per common share-diluted   $ 1.11     $ 1.19     $ 1.37     $ 1.28     $ 1.17  
Weighted average shares outstanding-diluted     42,757,603       42,742,878       42,699,752       42,643,940       42,565,391  

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As of
    6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Assets                    
Cash and due from banks   $ 317,303     $ 274,354     $ 309,045     $ 250,394     $ 221,077  
Interest bearing deposits with other banks and short-term investments     82,884       87,757       54,042       149,466       163,717  
Cash and cash equivalents     400,187       362,111       363,087       399,860       384,794  
Time deposits in other financial institutions     1,490       1,740       1,740       1,740       1,855  
Securities:                    
Carried at fair value     5,798,041       6,096,657       6,147,144       6,060,331       7,106,218  
Held to maturity, at cost, less allowance for credit losses     834,673       832,098       829,403       830,247       81,939  
Other investments, at cost     72,291       72,364       74,567       80,286       85,899  
Loans held for sale     14,353       10,425       5,277       9,570       18,803  
Loans:                    
Held to maturity     11,717,974       11,495,353       11,428,352       10,923,532       10,678,218  
Allowance for credit losses     (111,198 )     (112,707 )     (109,483 )     (105,715 )     (101,353 )
Loans, net     11,606,776       11,382,646       11,318,869       10,817,817       10,576,865  
Premises, furniture and equipment, net     190,420       191,267       197,330       203,585       206,818  
Goodwill     576,005       576,005       576,005       576,005       576,005  
Core deposit and customer relationship intangibles, net     21,651       23,366       25,154       26,995       28,851  
Servicing rights, net                 7,840       8,379       8,288  
Cash surrender value on life insurance     195,793       194,419       193,403       193,184       192,474  
Other real estate, net     2,677       7,438       8,401       8,030       4,528  
Other assets     510,359       432,008       496,008       466,921       385,062  
Total Assets   $ 20,224,716     $ 20,182,544     $ 20,244,228     $ 19,682,950     $ 19,658,399  
Liabilities and Equity                    
Liabilities                    
Deposits:                    
Demand   $ 4,897,858     $ 5,119,554     $ 5,701,340     $ 6,083,563     $ 6,087,304  
Savings     8,772,596       9,256,609       9,994,391       10,060,523       10,059,678  
Time     3,993,089       3,305,183       1,817,278       1,123,035       1,078,568  
Total deposits     17,663,543       17,681,346       17,513,009       17,267,121       17,225,550  
Short-term borrowings     44,364       92,337       376,117       147,000       97,749  
Other borrowings     372,403       372,097       371,753       371,446       372,538  
Accrued expenses and other liabilities     285,416       207,359       248,294       241,425       188,494  
Total Liabilities     18,365,726       18,353,139       18,509,173       18,026,992       17,884,331  
Stockholders' Equity                    
Preferred equity     110,705       110,705       110,705       110,705       110,705  
Common stock     42,645       42,559       42,467       42,444       42,439  
Capital surplus     1,087,358       1,084,112       1,080,964       1,079,277       1,076,766  
Retained earnings     1,193,522       1,158,948       1,120,925       1,074,168       1,031,076  
Accumulated other comprehensive loss     (575,240 )     (566,919 )     (620,006 )     (650,636 )     (486,918 )
Total Equity     1,858,990       1,829,405       1,735,055       1,655,958       1,774,068  
Total Liabilities and Equity   $ 20,224,716     $ 20,182,544     $ 20,244,228     $ 19,682,950     $ 19,658,399  

 

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
    6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Average Balances                    
Assets   $ 20,221,511     $ 20,118,005     $ 19,913,849     $ 19,775,341     $ 19,559,091  
Loans, net of unearned     11,625,442       11,378,078       11,117,513       10,783,135       10,477,368  
Deposits     17,689,138       17,505,867       17,319,218       17,282,289       17,044,479  
Earning assets     18,523,552       18,392,649       18,175,838       18,157,795       17,987,734  
Interest bearing liabilities     13,209,794       12,582,234       11,980,032       11,723,026       11,575,319  
Common equity     1,727,013       1,655,860       1,548,739       1,674,306       1,731,393  
Total stockholders' equity     1,837,718       1,766,565       1,659,444       1,785,011       1,842,098  
Tangible common equity (non-GAAP)(1)     1,128,527       1,055,617       946,688       1,070,399       1,125,543  
                     
Key Performance Ratios                    
Annualized return on average assets     0.98 %     1.06 %     1.21 %     1.13 %     1.06 %
Annualized return on average common equity (GAAP)     11.01       12.43       15.02       12.93       11.55  
Annualized return on average tangible common equity (non-GAAP)(1)     17.33       20.05       25.19       20.76       18.35  
Annualized ratio of net charge-offs/(recoveries) to average loans     0.32       (0.04 )     (0.06 )     0.00       0.03  
Annualized net interest margin (GAAP)     3.19       3.36       3.61       3.41       3.18  
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)     3.24       3.40       3.65       3.45       3.22  
Efficiency ratio (GAAP)     60.93       60.94       60.05       58.84       60.16  
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)(1)     59.82       57.16       54.33       55.26       57.66  
Annualized ratio of total noninterest expenses to average assets (GAAP)     2.17       2.24       2.34       2.18       2.18  
Annualized ratio of core expenses to average assets (non-GAAP)(1)     2.16       2.14       2.14       2.09       2.14  
                     
(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.

 

    For the Quarter Ended
June 30,
  For the Six Months Ended
June 30,
      2023       2022       2023       2022  
Average Balances                
Assets   $ 20,221,511     $ 19,559,091     $ 20,170,044     $ 19,395,391  
Loans, net of unearned     11,625,442       10,477,368       11,502,443       10,261,679  
Deposits     17,689,138       17,044,479       17,598,009       16,753,544  
Earning assets     18,523,552       17,987,734       18,458,462       17,873,037  
Interest bearing liabilities     13,209,794       11,575,319       12,897,747       11,017,459  
Common equity     1,727,013       1,731,393       1,691,633       1,866,657  
Total stockholders' equity     1,837,718       1,842,098       1,802,338       1,977,362  
Tangible common stockholders' equity     1,128,527       1,125,543       1,092,273       1,259,769  
                 
Key Performance Ratios                
Annualized return on average assets     0.98 %     1.06 %     1.02 %     0.99 %
Annualized return on average common equity (GAAP)     11.01       11.55       11.70       9.82  
Annualized return on average tangible common equity (non-GAAP)(1)     17.33       18.35       18.63       15.08  
Annualized ratio of net charge-offs/(recoveries) to average loans     0.32       0.03       0.15       0.25  
Annualized net interest margin (GAAP)     3.19       3.18       3.27       3.13  
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)     3.24       3.22       3.32       3.17  
Efficiency ratio (GAAP)     60.93       60.16       60.94       62.75  
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)(1)     59.82       57.66       58.48       61.02  
Total noninterest expenses to average assets (GAAP)     2.17       2.18       2.20       2.26  
Core expenses to average assets (non-GAAP)(1)     2.16       2.14       2.15       2.21  
                 
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
    As of and for the Quarter Ended
    6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Common Share Data                    
Book value per common share   $ 41.00     $ 40.38     $ 38.25     $ 36.41     $ 39.19  
Tangible book value per common share (non-GAAP)(1)   $ 26.98     $ 26.30     $ 24.09     $ 22.20     $ 24.94  
ASC 320 effect on book value per common share   $ (14.04 )   $ (13.35 )   $ (14.58 )   $ (15.31 )   $ (11.43 )
Common shares outstanding, net of treasury stock     42,644,544       42,558,726       42,467,394       42,444,106       42,439,439  
Tangible common equity ratio (non-GAAP)(1)     5.86 %     5.72 %     5.21 %     4.94 %     5.56 %
Adjusted tangible common equity ratio (non-GAAP)(1)     8.79 %     8.61 %     8.37 %     8.35 %     8.11 %
                     
Other Selected Trend Information                    
Effective tax rate     23.74 %     22.50 %     18.68 %     19.97 %     22.89 %
Full time equivalent employees     1,966       1,991       2,002       2,020       2,087  
                     
Loans Held to Maturity                    
Commercial and industrial   $ 3,590,680     $ 3,498,345     $ 3,464,414     $ 3,278,703     $ 3,059,519  
Paycheck Protection Program ("PPP")     4,139       8,258       11,025       13,506       23,031  
Owner occupied commercial real estate     2,398,698       2,312,538       2,265,307       2,285,973       2,282,833  
Commercial and business lending     5,993,517       5,819,141       5,740,746       5,578,182       5,365,383  
Non-owner occupied commercial real estate     2,530,736       2,421,341       2,330,940       2,219,542       2,321,718  
Real estate construction     1,013,134       1,102,186       1,076,082       996,017       845,045  
Commercial real estate lending     3,543,870       3,523,527       3,407,022       3,215,559       3,166,763  
Total commercial lending     9,537,387       9,342,668       9,147,768       8,793,741       8,532,146  
Agricultural and agricultural real estate     839,817       810,183       920,510       781,354       836,703  
Residential mortgage     828,437       841,084       853,361       852,928       845,270  
Consumer     512,333       501,418       506,713       495,509       464,099  
Total loans held to maturity   $ 11,717,974     $ 11,495,353     $ 11,428,352     $ 10,923,532     $ 10,678,218  
                     
Total unfunded loan commitments   $ 4,905,147     $ 4,867,925     $ 4,729,677     $ 4,664,379     $ 4,458,874  
                     
Deposits                    
Demand-customer   $ 4,897,858     $ 5,119,554     $ 5,701,340     $ 6,083,563     $ 6,087,304  
Savings-customer     8,149,596       8,501,337       8,670,898       8,691,545       8,852,602  
Savings-wholesale and institutional     623,000       755,272       1,323,493       1,368,978       1,207,076  
Total savings     8,772,596       9,256,609       9,994,391       10,060,523       10,059,678  
Time-customer     1,597,849       1,071,476       851,539       973,035       1,003,568  
Time-wholesale     2,395,240       2,233,707       965,739       150,000       75,000  
Total time     3,993,089       3,305,183       1,817,278       1,123,035       1,078,568  
Total deposits   $ 17,663,543     $ 17,681,346     $ 17,513,009     $ 17,267,121     $ 17,225,550  
                     
Total customer deposits   $ 14,645,303     $ 14,692,367     $ 15,223,777     $ 15,748,143     $ 15,943,474  
Total wholesale and institutional deposits     3,018,240       2,988,979       2,289,232       1,518,978       1,282,076  
Total deposits   $ 17,663,543     $ 17,681,346     $ 17,513,009     $ 17,267,121     $ 17,225,550  
                     
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As of and for the Quarter Ended
    6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Allowance for Credit Losses-Loans                    
Balance, beginning of period   $ 112,707     $ 109,483     $ 105,715     $ 101,353     $ 100,522  
Provision for credit losses     7,829       2,184       2,075       4,388       1,545  
Charge-offs     (9,613 )     (2,151 )     (2,668 )     (938 )     (1,473 )
Recoveries     275       3,191       4,361       912       759  
Balance, end of period   $ 111,198     $ 112,707     $ 109,483     $ 105,715     $ 101,353  
                     
Allowance for Unfunded Commitments                    
Balance, beginning of period   $ 21,086     $ 20,196     $ 18,884     $ 17,780     $ 16,079  
Provision for credit losses     (2,450 )     890       1,312       1,104       1,701  
Balance, end of period   $ 18,636     $ 21,086     $ 20,196     $ 18,884     $ 17,780  
                     
Allowance for lending related credit losses   $ 129,834     $ 133,793     $ 129,679     $ 124,599     $ 119,133  
                     
Provision for Credit Losses                    
Provision for credit losses-loans   $ 7,829     $ 2,184     $ 2,075     $ 4,388     $ 1,545  
Provision (benefit) for credit losses-unfunded commitments     (2,450 )     890       1,312       1,104       1,701  
Total provision for credit losses   $ 5,379     $ 3,074     $ 3,387     $ 5,492     $ 3,246  
                     
Asset Quality                    
Nonaccrual loans   $ 61,956     $ 58,066     $ 58,231     $ 64,560     $ 62,909  
Loans past due ninety days or more     1,459       174       273       678       95  
Other real estate owned     2,677       7,438       8,401       8,030       4,528  
Other repossessed assets     5       24       26              
Total nonperforming assets   $ 66,097     $ 65,702     $ 66,931     $ 73,268     $ 67,532  
                     
Nonperforming Assets Activity                    
Balance, beginning of period   $ 65,702     $ 66,931     $ 73,268     $ 67,532     $ 65,876  
Net loan (charge-offs)/recoveries     (9,338 )     1,040       1,693       (26 )     (714 )
New nonperforming loans     19,805       4,626       1,439       8,388       8,590  
Reduction of nonperforming loans(1)     (5,253 )     (5,711 )     (8,875 )     (2,015 )     (5,244 )
Net OREO/repossessed assets sales proceeds and losses     (4,819 )     (1,184 )     (594 )     (611 )     (976 )
Balance, end of period   $ 66,097     $ 65,702     $ 66,931     $ 73,268     $ 67,532  
                     
Asset Quality Ratios                    
Ratio of nonperforming loans to total loans     0.54 %     0.51 %     0.51 %     0.60 %     0.59 %
Ratio of nonperforming assets to total assets     0.33       0.33       0.33       0.37       0.34  
Annualized ratio of net loan charge-offs/(recoveries) to average loans     0.32       (0.04 )     (0.06 )     0.00       0.03  
Allowance for loan credit losses as a percent of loans     0.95       0.98       0.96       0.97       0.95  
Allowance for lending related credit losses as a percent of loans     1.11       1.16       1.13       1.14       1.12  
Allowance for loan credit losses as a percent of nonperforming loans     175.35       193.52       187.14       162.05       160.87  
Loans delinquent 30-89 days as a percent of total loans     0.12       0.10       0.04       0.10       0.06  
                     
(1) Includes principal reductions, transfers to performing status and transfers to OREO.

 

HEARTLAND FINANCIAL USA, INC.    
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
    For the Quarter Ended
    June 30, 2023   March 31, 2023   June 30, 2022
    Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                                    
Securities:                                    
Taxable   $ 5,962,207     $ 58,172   3.91 %   $ 6,096,888     $ 55,976   3.72 %   $ 6,419,615     $ 38,098   2.38 %
Nontaxable(1)     895,458       8,074   3.62       922,676       7,630   3.35       915,880       6,972   3.05  
Total securities     6,857,665       66,246   3.87       7,019,564       63,606   3.67       7,335,495       45,070   2.46  
Interest on deposits with other banks and short-term investments     153,622       2,051   5.41       105,400       1,131   4.35       277,773       563   0.81  
Federal funds sold                                          
Loans:(2)                                    
Commercial and industrial(1)     3,565,449       56,644   6.37       3,459,317       49,907   5.85       3,002,822       30,441   4.07  
PPP loans     6,302       24   1.53       9,970       26   1.06       41,370       1,801   17.46  
Owner occupied commercial real estate     2,366,107       28,031   4.75       2,289,002       26,769   4.74       2,294,524       22,863   4.00  
Non-owner occupied commercial real estate     2,462,098       35,583   5.80       2,331,318       30,749   5.35       2,179,048       22,871   4.21  
Real estate construction     1,028,109       18,528   7.23       1,099,026       18,131   6.69       878,555       10,015   4.57  
Agricultural and agricultural real estate     848,554       12,256   5.79       835,648       11,353   5.51       782,610       7,933   4.07  
Residential mortgage     840,741       9,383   4.48       852,561       9,273   4.41       849,174       8,358   3.95  
Consumer     508,082       9,068   7.16       501,236       8,242   6.67       449,265       4,949   4.42  
Less: allowance for credit losses-loans     (113,177 )             (110,393 )             (102,902 )        
Net loans     11,512,265       169,517   5.91       11,267,685       154,450   5.56       10,374,466       109,231   4.22  
Total earning assets     18,523,552       237,814   5.15 %     18,392,649       219,187   4.83 %     17,987,734       154,864   3.45 %
Nonearning Assets     1,697,959               1,725,356               1,571,357          
Total Assets   $ 20,221,511             $ 20,118,005             $ 19,559,091          
Interest Bearing Liabilities                                    
Savings   $ 8,935,775     $ 41,284   1.85 %   $ 9,730,494     $ 37,893   1.58 %   $ 9,995,497     $ 5,372   0.22 %
Time deposits     3,812,330       40,691   4.28       2,257,047       19,005   3.41       1,088,765       1,158   0.43  
Short-term borrowings     89,441       848   3.80       222,772       2,422   4.41       118,646       88   0.30  
Other borrowings     372,248       5,545   5.97       371,921       5,446   5.94       372,411       3,808   4.10  
Total interest bearing liabilities     13,209,794       88,368   2.68 %     12,582,234       64,766   2.09 %     11,575,319       10,426   0.36 %
Noninterest Bearing Liabilities                                    
Noninterest bearing deposits     4,941,033               5,518,326               5,960,217          
Accrued interest and other liabilities     232,966               250,880               181,457          
Total noninterest bearing liabilities     5,173,999               5,769,206               6,141,674          
Equity     1,837,718               1,766,565               1,842,098          
Total Liabilities and Equity   $ 20,221,511             $ 20,118,005             $ 19,559,091          
Net interest income, fully tax-equivalent (non-GAAP) (1)(3)       $ 149,446           $ 154,421           $ 144,438    
Net interest spread (1)           2.47 %           2.74 %           3.09 %
Net interest income, fully tax-equivalent (non-GAAP )(1)(3) to total earning assets           3.24 %           3.40 %           3.22 %
Interest bearing liabilities to earning assets     71.31 %             68.41 %             64.35 %        
                                     
(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) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
    For the Six Months Ended
    June 30, 2023   June 30, 2022
    Average
Balance
  Interest   Rate   Average
Balance
  Interest   Rate
Earning Assets                        
Securities:                        
Taxable   $ 6,029,175     $ 114,148     3.82 %   $ 6,460,412     $ 70,718     2.21 %
Nontaxable(1)     908,992       15,704     3.48       1,010,888       14,823     2.96  
Total securities     6,938,167       129,852     3.77       7,471,300       85,541     2.31 %
Interest bearing deposits with other banks and other short-term investments     129,645       3,182     4.95       247,281       634     0.52  
Federal funds sold                     6            
Loans:(2)                        
Commercial and industrial(1)     3,512,807       106,551     6.12 %     2,874,694       57,494     4.03  
PPP loans     8,126       50     1.24       86,460       6,124     14.28  
Owner occupied commercial real estate     2,327,702       54,800     4.75       2,268,963       44,141     3.92  
Non-owner occupied commercial real estate     2,397,004       66,332     5.58       2,119,925       44,034     4.19  
Real estate construction     1,063,372       36,659     6.95       862,989       19,291     4.51  
Agricultural and agricultural real estate     842,136       23,609     5.65       764,082       14,939     3.94  
Residential mortgage     846,618       18,656     4.44       846,542       16,443     3.92  
Consumer     504,678       17,310     6.92       438,024       9,604     4.42  
Less: allowance for credit losses-loans     (111,793 )               (107,229 )          
Net loans     11,390,650       323,967     5.74       10,154,450       212,070     4.21  
Total earning assets     18,458,462       457,001     4.99 %     17,873,037       298,245     3.37 %
Nonearning Assets     1,711,582               1,522,354          
Total Assets   $ 20,170,044             $ 19,395,391          
Interest Bearing Liabilities                        
Savings   $ 9,330,939     $ 79,177     1.71 %   $ 9,445,778     $ 7,766     0.17 %
Time deposits     3,038,985       59,696     3.96       1,080,267       1,741     0.32  
Short-term borrowings     155,738       3,270     4.23       119,115       134     0.23  
Other borrowings     372,085       10,991     5.96       372,299       7,368     3.99  
Total interest bearing liabilities     12,897,747       153,134     2.39 %     11,017,459       17,009     0.31 %
Noninterest Bearing Liabilities                        
Noninterest bearing deposits     5,228,085               6,227,499          
Accrued interest and other liabilities     241,874               173,071          
Total noninterest bearing liabilities     5,469,959               6,400,570          
Stockholders' Equity     1,802,338               1,977,362          
Total Liabilities and Stockholders' Equity   $ 20,170,044             $ 19,395,391          
Net interest income, fully tax-equivalent (non-GAAP) (1)(3)       $ 303,867             $ 281,236      
Net interest spread (1)           2.60 %           3.06 %
Net interest income, fully tax-equivalent (non-GAAP) (1)(3) to total earning assets           3.32 %           3.17 %
Interest bearing liabilities to earning assets     69.87 %             61.64 %        
                         
(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) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
    For the Quarter Ended
    6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)                    
Net income available to common stockholders (GAAP)   $ 47,404     $ 50,763     $ 58,642     $ 54,551     $ 49,861  
Plus core deposit and customer relationship intangibles amortization, net of tax(1)     1,354       1,413       1,455       1,466       1,645  
Net income available to common stockholders excluding intangible amortization (non-GAAP)   $ 48,758     $ 52,176     $ 60,097     $ 56,017     $ 51,506  
                     
Average common equity (GAAP)   $ 1,727,013     $ 1,655,860     $ 1,548,739     $ 1,674,306     $ 1,731,393  
Less average goodwill     576,005       576,005       576,005       576,005       576,005  
Less average core deposit and customer relationship intangibles, net     22,481       24,238       26,046       27,902       29,845  
Average tangible common equity (non-GAAP)   $ 1,128,527     $ 1,055,617     $ 946,688     $ 1,070,399     $ 1,125,543  
Annualized return on average common equity (GAAP)     11.01 %     12.43 %     15.02 %     12.93 %     11.55 %
Annualized return on average tangible common equity (non-GAAP)     17.33 %     20.05 %     25.19 %     20.76 %     18.35 %
                     
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)                    
Net Interest Income (GAAP)   $ 147,132     $ 152,212     $ 165,220     $ 155,876     $ 142,461  
Plus tax-equivalent adjustment(1)     2,314       2,209       2,152       2,151       1,977  
Net interest income, fully tax-equivalent (non-GAAP)   $ 149,446     $ 154,421     $ 167,372     $ 158,027     $ 144,438  
Average earning assets   $ 18,523,552     $ 18,392,649     $ 18,175,838     $ 18,157,795     $ 17,987,734  
                     
Annualized net interest margin (GAAP)     3.19 %     3.36 %     3.61 %     3.41 %     3.18 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)     3.24       3.40       3.65       3.45       3.22  
Net purchase accounting discount amortization on loans included in annualized net interest margin     0.03       0.02       0.03       0.03       0.07  

 

Reconciliation of Tangible Book Value Per Common Share (non-GAAP)                    
Common equity (GAAP)   $ 1,748,285     $ 1,718,700     $ 1,624,350     $ 1,545,253     $ 1,663,363  
Less goodwill     576,005       576,005       576,005       576,005       576,005  
Less core deposit and customer relationship intangibles, net     21,651       23,366       25,154       26,995       28,851  
Tangible common equity (non-GAAP)   $ 1,150,629     $ 1,119,329     $ 1,023,191     $ 942,253     $ 1,058,507  
                     
Common shares outstanding, net of treasury stock     42,644,544       42,558,726       42,467,394       42,444,106       42,439,439  
Common equity (book value) per share (GAAP)   $ 41.00     $ 40.38     $ 38.25     $ 36.41     $ 39.19  
Tangible book value per common share (non-GAAP)   $ 26.98     $ 26.30     $ 24.09     $ 22.20     $ 24.94  
                     
Reconciliation of Tangible Common Equity Ratio (non-GAAP)                    
Tangible common equity (non-GAAP)   $ 1,150,629     $ 1,119,329     $ 1,023,191     $ 942,253     $ 1,058,507  
                     
Total assets (GAAP)   $ 20,224,716     $ 20,182,544     $ 20,244,228     $ 19,682,950     $ 19,658,399  
Less goodwill     576,005       576,005       576,005       576,005       576,005  
Less core deposit and customer relationship intangibles, net     21,651       23,366       25,154       26,995       28,851  
Total tangible assets (non-GAAP)   $ 19,627,060     $ 19,583,173     $ 19,643,069     $ 19,079,950     $ 19,053,543  
Tangible common equity ratio (non-GAAP)     5.86 %     5.72 %     5.21 %     4.94 %     5.56 %
                     
Reconciliation of Adjusted Tangible Common Equity Ratio (non-GAAP)                    
Tangible common equity (non-GAAP)   $ 1,150,629     $ 1,119,329     $ 1,023,191     $ 942,253     $ 1,058,507  
Accumulated other comprehensive loss     575,240       566,919       620,006       650,636       486,918  
Adjusted tangible common equity (non-GAAP)   $ 1,725,869     $ 1,686,248     $ 1,643,197     $ 1,592,889     $ 1,545,425  
Total tangible assets (non-GAAP)   $ 19,627,060     $ 19,583,173     $ 19,643,069     $ 19,079,950     $ 19,053,543  
Adjusted tangible common equity ratio (non-GAAP)     8.79 %     8.61 %     8.37 %     8.35 %     8.11 %
                     
(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 Adjusted Efficiency Ratio, fully tax-equivalent (non-GAAP)
  For the Quarter Ended
  6/30/2023   3/31/2023   12/31/2022   9/30/2022   6/30/2022
Net interest income (GAAP)   $ 147,132     $ 152,212     $ 165,220     $ 155,876     $ 142,461  
Tax-equivalent adjustment(1)     2,314       2,209       2,152       2,151       1,977  
Fully tax-equivalent net interest income     149,446       154,421       167,372       158,027       144,438  
Noninterest income (GAAP)     32,493       29,999       29,975       29,181       34,539  
Securities (gains)/losses, net     314       1,104       153       1,055       2,089  
Unrealized (gain)/loss on equity securities, net     41       (193 )     7       211       121  
Valuation adjustment on servicing rights                              
Adjusted revenue (non-GAAP)   $ 182,294     $ 185,331     $ 197,507     $ 188,474     $ 181,187  
                     
Total noninterest expenses (GAAP)   $ 109,446     $ 111,043     $ 117,218     $ 108,883     $ 106,479  
Less:                    
Core deposit and customer relationship intangibles amortization     1,715       1,788       1,841       1,856       2,083  
Partnership investment in tax credit projects     154       538       3,247       979       737  
(Gain)/loss on sales/valuation of assets, net     (3,372 )     1,115       2,388       (251 )     (3,230 )
Acquisition, integration and restructuring costs     1,892       1,673       2,442       2,156       2,412  
Core expenses (non-GAAP)   $ 109,057     $ 105,929     $ 107,300     $ 104,143     $ 104,477  
                     
Efficiency ratio (GAAP)     60.93 %     60.94 %     60.05 %     58.84 %     60.16 %
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)     59.82 %     57.16 %     54.33 %     55.26 %     57.66 %
                     
Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP)                    
Total noninterest expenses (GAAP)   $ 109,446     $ 111,043     $ 117,218     $ 108,883     $ 106,479  
Core expenses (non-GAAP)     109,057       105,929       107,300       104,143       104,477  
                     
Average assets   $ 20,221,511     $ 20,118,005     $ 19,913,849     $ 19,775,341     $ 19,559,091  
Total noninterest expenses to average assets (GAAP)     2.17 %     2.24 %     2.34 %     2.18 %     2.18 %
Core expenses to average assets (non-GAAP)     2.16 %     2.14 %     2.14 %     2.09 %     2.14 %
                     
Acquisition, integration and restructuring costs                    
Salaries and employee benefits   $ 93     $ 74     $ 424     $ 365     $ 275  
Professional fees     1,068       934       1,587       1,480       1,779  
Advertising     222       122       95       131       156  
Other noninterest expenses     509       543       336       180       202  
Total acquisition, integration and restructuring costs   $ 1,892     $ 1,673     $ 2,442     $ 2,156     $ 2,412  
After tax impact on diluted earnings per common share(1)   $ 0.03     $ 0.03     $ 0.05     $ 0.04     $ 0.04  
                     
(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
    For the Quarter Ended
June 30,
  For the Six Months Ended
June 30,
      2023       2022       2023       2022  
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)                
Net income available to common stockholders (GAAP)   $ 47,404     $ 49,861     $ 98,167     $ 90,937  
Plus core deposit and customer relationship intangibles amortization, net of tax(1)     1,354       1,645       2,767       3,268  
Net income available to common stockholders excluding intangible amortization (non-GAAP)   $ 48,758     $ 51,506     $ 100,934     $ 94,205  
                 
Average common equity (GAAP)   $ 1,727,013     $ 1,731,393     $ 1,691,633     $ 1,866,657  
Less average goodwill     576,005       576,005       576,005       576,005  
Less average core deposit and customer relationship intangibles, net     22,481       29,845       23,355       30,883  
Average tangible common equity (non-GAAP)   $ 1,128,527     $ 1,125,543     $ 1,092,273     $ 1,259,769  
Annualized return on average common equity (GAAP)     11.01 %     11.55 %     11.70 %     9.82 %
Annualized return on average tangible common equity (non-GAAP)     17.33 %     18.35 %     18.63 %     15.08 %
                 
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)                
Net Interest Income (GAAP)   $ 147,132     $ 142,461     $ 299,344     $ 277,140  
Plus tax-equivalent adjustment(1)     2,314       1,977       4,523       4,096  
Net interest income, fully tax-equivalent (non-GAAP)   $ 149,446     $ 144,438     $ 303,867     $ 281,236  
                 
Average earning assets   $ 18,523,552     $ 17,987,734     $ 18,458,462     $ 17,873,037  
                 
Annualized net interest margin (GAAP)     3.19 %     3.18 %     3.27 %     3.13 %
Annualized net interest margin, fully tax-equivalent (non-GAAP)     3.24       3.22       3.32       3.17  
Purchase accounting discount amortization on loans included in annualized net interest margin     0.03       0.07       0.02       0.06  
                 
(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 Adjusted Efficiency Ratio, fully tax-equivalent (non-GAAP)
  For the Quarter Ended
June 30,
  For the Six Months Ended
June 30,
    2023       2022       2023       2022  
Net interest income (GAAP)   $ 147,132     $ 142,461     $ 299,344     $ 277,140  
Tax-equivalent adjustment(1)     2,314       1,977       4,523       4,096  
Fully tax-equivalent net interest income     149,446       144,438       303,867       281,236  
Noninterest income (GAAP)     32,493       34,539       62,492       69,108  
Securities (gains)/losses, net     314       2,089       1,418       (783 )
Unrealized (gain)/loss on equity securities, net     41       121       (152 )     404  
Valuation adjustment on servicing rights                       (1,658 )
Adjusted revenue (non-GAAP)   $ 182,294     $ 181,187     $ 367,625     $ 348,307  
                 
Total noninterest expenses (GAAP)   $ 109,446     $ 106,479     $ 220,489     $ 217,276  
Less:                
Core deposit and customer relationship intangibles amortization     1,715       2,083       3,503       4,137  
Partnership investment in tax credit projects     154       737       692       814  
(Gain)/loss on sales/valuation of assets, net     (3,372 )     (3,230 )     (2,257 )     (3,184 )
Acquisition, integration and restructuring costs     1,892       2,412       3,565       2,988  
Core expenses (non-GAAP)   $ 109,057     $ 104,477     $ 214,986     $