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CORRECTING and REPLACING -- Heartland Financial USA, Inc. Reports 2017 Third Quarter Results

DUBUQUE, Iowa, Oct. 31, 2017 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ:HTLF) issued a press release on October 30, 2017, announcing its 2017 third quarter results. Heartland seeks to clarify that the diluted earnings per common share for the nine-month period ended September 30, 2017, was $2.21, and the weighted average shares outstanding-diluted for the nine-month period ended September 30, 2017, totaled 27,833,924. The information in the body of the October 30, 2017, release, revised to reflect the correct information, is repeated below:

Heartland Financial USA, Inc. Reports 2017 Third Quarter Results

Highlights

  • Quarterly net income available to common stockholders of $21.6 million in comparison with $20.2 million for the third quarter of the prior year
  • Diluted earnings per common share of $0.72 in comparison with $0.81 for the third quarter of the prior year
  • Net interest margin of 4.08%, fully tax-equivalent (non-GAAP)(1) of 4.26%
  • Organic loan growth of $62.9 million and organic non-time deposit growth of $89.3 million during the third quarter of 2017
  • Return on average common equity of 8.99% and return on average tangible common equity (non-GAAP)(2) of 12.41%
  • Tangible common equity ratio (non-GAAP)(3) of 7.46%
  • Purchased Citywide Banks of Colorado, Inc., on July 7, 2017 and completed related systems conversions on October 13, 2017

Quarter Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Net income (in millions)$21.6 $20.2 $61.6 $61.2
Net income available to common stockholders (in millions)21.6 20.2 61.6 61.0
Diluted earnings per common share0.72 0.81 2.21 2.48
Return on average assets0.89% 0.98% 0.94% 1.00%
Return on average common equity8.99 11.64 9.88 12.28
Return on average tangible common equity (non-GAAP)(2)12.41 14.93 12.90 15.87
Net interest margin4.08 3.97 4.00 3.98
Net interest margin, fully tax-equivalent (non-GAAP)(1)4.26 4.14 4.19 4.15


"Heartland reported a very good quarter with net income available to common stockholders of $21.6 million, a seven percent increase over the same quarter last year. We had several accomplishments during the quarter including completion of our largest acquisition to date. We achieved net organic growth in loans and deposits while making improvements in net interest margin.”
Lynn B. Fuller, chairman and chief executive officer, Heartland Financial USA, Inc.

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

Heartland Financial USA, Inc. (NASDAQ:HTLF) today reported net income available to common stockholders of $21.6 million, or $0.72 per diluted common share, for the quarter ended September 30, 2017, compared to $20.2 million, or $0.81 per diluted common share, for the third quarter of 2016. Return on average common equity was 8.99% and return on average assets was 0.89% for the third quarter of 2017, compared to 11.64% and 0.98%, respectively, for the same quarter in 2016.

Net income available to common stockholders for the nine months ended September 30, 2017, was $61.6 million or $2.21 per diluted common share, compared to $61.0 million or $2.48 per diluted common share for the nine months ended September 30, 2016. Return on average common equity was 9.88%, and return on average assets was 0.94% for the first nine months of 2017, compared to 12.28% and 1.00%, respectively, for the same period in 2016.

Commenting on Heartland’s third quarter results, Lynn B. Fuller, Heartland’s chairman and chief executive officer said, "Heartland reported a very good quarter with net income available to common stockholders of $21.6 million, a seven percent increase over the same quarter last year. We had several accomplishments during the quarter including completion of our largest acquisition to date. We achieved net organic growth in loans and deposits while making improvements in net interest margin.”

On February 28, 2017, Heartland completed the acquisition of Founders Bancorp, parent company of Founders Community Bank, based in San Luis Obispo, California. Based on Heartland's closing common stock price of $49.55 per share as of February 28, 2017, the aggregate consideration was $31.0 million, with 30% of the consideration paid in cash and 70% by delivery of Heartland common stock. Simultaneous with the closing of the transaction, Founders Community Bank merged into Heartland's Premier Valley Bank subsidiary. As of the close date, Founders Community Bank had, at fair value, total assets of $213.3 million, total loans of $96.4 million and total deposits of $181.5 million. The systems conversion for this transaction occurred two weeks after the closing.

On July 7, 2017, Heartland completed the acquisition of Citywide Banks of Colorado, Inc., parent company of Citywide Banks, headquartered in Aurora, Colorado. Simultaneous with the close, Citywide Banks merged into Heartland's Centennial Bank and Trust subsidiary. The aggregate consideration was approximately $211.2 million, of which $58.6 million was cash, and the remainder was settled by delivery of 3,216,161 shares of Heartland common stock. The combined entity operates as Citywide Banks. As of the close date, Citywide Banks of Colorado, Inc., had, at fair value, total assets of $1.49 billion, including $985.4 million in net loans outstanding, and $1.21 billion of deposits. The systems conversion for this transaction occurred on October 13, 2017.

During the third quarter, Heartland sold substantially all of its Government National Mortgage Association ("GNMA") loan servicing portfolio, which contained loans with an unpaid principal balance of approximately $773.9 million. The sale reduced the book value of Heartland's servicing rights by approximately $6.9 million. The transaction did not have a significant impact on Heartland's results of operations.

Fully Tax-Equivalent Net Interest Margin Increases

Net interest margin, expressed as a percentage of average earning assets, was 4.08% (4.26% on a fully tax-equivalent basis) during the third quarter of 2017, compared to 3.94% (4.14% on a fully tax-equivalent basis) during the second quarter of 2017 and 3.97% (4.14% on a fully tax-equivalent basis) during the third quarter of 2016.

Fuller said, “We were very pleased to see a solid increase in net interest margin on a fully tax-equivalent basis, which increased by 12 basis points to 4.26 percent from the previous quarter and stands at 4.19 percent year-to-date. The strong margin reflects improved yields on earning assets."

Interest income for the third quarter of 2017 was $99.0 million compared to $81.7 million recorded in the third quarter of 2016. The taxable equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $3.9 million for the third quarter of 2017 and $3.2 million for the third quarter of 2016. With these adjustments, interest income on a tax-equivalent basis was $102.9 million for the third quarter of 2017, an increase of $18.0 million or 21%, compared to $84.9 million for the third quarter of 2016. The increase in interest income on a fully tax-equivalent basis in the third quarter of 2017, as compared to the third quarter of 2016, was primarily due to the acquisitions completed in 2017. Average earning assets acquired in the Founders Bancorp transaction totaled $147.6 million, and the Citywide Banks of Colorado, Inc. transaction added $1.20 billion of average earning assets. Exclusive of these transactions, average earning assets increased $140.2 million or 2% from the third quarter of 2016. The average rate on earning assets increased 10 basis points to 4.68% for the third quarter of 2017 compared to 4.58% for the same quarter in 2016.

Interest expense for the third quarter of 2017 was $9.1 million, an increase of $1.1 million or 14% from $8.0 million in the third quarter of 2016. Average interest bearing deposits increased $520.3 million or 11% to $5.19 billion for the quarter ended September 30, 2017, from $4.67 billion in the same quarter in 2016. Average interest bearing deposits acquired with the Founders Bancorp transaction and the Citywide Banks of Colorado, Inc., transaction totaled $713.3 million. Exclusive of these transactions, average interest bearing deposits decreased $193.0 million or 3%. The average interest rate paid on Heartland's interest bearing deposits increased 5 basis points to 0.39% for the third quarter of 2017 compared to 0.34% for the same quarter in 2016. Average borrowings acquired in the Citywide Banks of Colorado, Inc., transaction totaled $51.8 million, and exclusive of this transaction, average borrowings declined $98.6 million or 18% during the third quarter of 2017 compared to the same quarter in 2016. The average interest rate paid on Heartland's borrowings was 3.16% for the third quarter of 2017 compared to 2.86% in the third quarter of 2016.

Net interest income was $89.8 million during the third quarter of 2017 compared to $73.7 million during the third quarter of 2016, an increase of $16.2 million or 22%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $93.8 million during the third quarter of 2017 compared to $76.9 million during the third quarter of 2016, an increase of $16.9 million or 22%.

Noninterest Income Decreases and Noninterest Expenses Increase From Third Quarter 2016

Noninterest income totaled $25.0 million during the third quarter of 2017 compared to $28.5 million during the third quarter of 2016, a decrease of $3.6 million or 12%. Service charges and fees totaled $10.1 million during the third quarter of 2017 compared to $8.3 million during the third quarter of 2016, an increase of $1.9 million or 22%. This increase was primarily attributable to a larger demand deposit customer base, a portion of which was the result of the Founders Bancorp acquisition completed in the first quarter of 2017, and the recent Citywide Banks of Colorado, Inc., transaction and increased interchange revenue from commercial card activity. Net gains on sale of loans held for sale totaled $5.0 million during the third quarter of 2017 compared to $11.5 million during the third quarter of 2016, a decrease of $6.5 million or 56%, due to lower mortgage loan activity.

For the third quarter of 2017, noninterest expenses totaled $78.8 million compared to $68.4 million during the third quarter of 2016, an increase of $10.3 million or 15%. Salaries and employee benefits increased $4.5 million or 11% to $45.2 million for the third quarter of 2017 compared to $40.7 million for the same quarter in 2016. At September 30, 2017, Heartland had 2,024 full time equivalent employees compared to 1,846 full time equivalent employees at September 30, 2016. Professional fees increased $2.5 million or 41% to $8.5 million for the third quarter of 2017 from $6.0 million in the third quarter of 2016. The noninterest expenses in the third quarter of 2017 included $2.8 million of expenses for staff retention, deconversion, professional fees and write-downs of fixed assets related to the acquisition of Citywide Banks of Colorado, Inc.

"We are also gratified to note significant progress toward lowering Heartland’s efficiency ratio, which has improved over the past two quarters and was 64.5 percent for the third quarter," Fuller stated.

Heartland's effective tax rate was 28.74% for the third quarter of 2017 compared to 29.02% for the third quarter of 2016. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $307,000 during the third quarter of 2017 compared to $304,000 for the third quarter of 2016. Heartland's effective tax rate was also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 24.01% during the third quarter of 2017 compared to 21.01% during the third quarter of 2016.

Loans and Deposits Increase Since December 31, 2016

Total assets were $9.76 billion at September 30, 2017, an increase of $1.51 billion or 18% from $8.25 billion at year-end 2016. Excluding $213.9 million of assets acquired at fair value in the Founders Bancorp transaction and $1.49 billion of assets acquired at fair value in the Citywide Banks of Colorado, Inc., transaction, total assets decreased $199.1 million or 2% since December 31, 2016. Securities represented 24% and 26% of total assets at September 30, 2017, and December 31, 2016, respectively.

Total loans held to maturity were $6.37 billion at September 30, 2017, compared to $5.35 billion at year-end 2016, an increase of $1.02 billion or 19%. This change includes $96.4 million of total loans held to maturity acquired at fair value in the Founders Bancorp transaction and $985.4 million of total loans held to maturity acquired at fair value in the Citywide Banks of Colorado, Inc., transaction. Exclusive of these transactions, total loans held to maturity decreased $60.2 million or 1% since December 31, 2016. Excluding loans acquired in the Citywide Banks of Colorado, Inc., transaction, total loans held to maturity increased $62.9 million during the third quarter of 2017.

Total deposits were $8.23 billion as of September 30, 2017, compared to $6.85 billion at year-end 2016, an increase of $1.38 billion or 20%. This increase included $181.5 million of deposits, at fair value, acquired in the Founders Bancorp transaction and $1.21 billion of deposits, at fair value, acquired in the Citywide Banks of Colorado, Inc., transaction. Exclusive of these transactions, total deposits decreased $7.1 million or less than 1% since December 31, 2016. Demand deposits increased $807.9 million or 37% to $3.01 billion at September 30, 2017 compared to $2.20 billion at December 31, 2016. Excluding $626.7 million of demand deposits attributable to the Founders Bancorp and Citywide Banks of Colorado, Inc., transactions, demand deposits increased $181.2 million or 8% since year-end 2016. Savings deposits increased $439.3 million or 12% to $4.23 billion at September 30, 2017 from $3.79 billion at December 31, 2016. Excluding savings deposits of $619.0 million acquired in the Founders Bancorp and Citywide Banks of Colorado, Inc., transactions, savings deposits decreased $179.7 million or 5% since year-end 2016. Excluding $1.21 billion of deposits acquired in the Citywide Banks of Colorado, Inc., transaction, total deposits increased $91.6 million during the third quarter.

Fuller said, "We are very pleased with organic deposit growth of 5.2 percent annualized for the third quarter and continued improvement in deposit mix. The result of our continued emphasis on non-time deposits is an enviable mix of nearly 37 percent demand deposits and 51 percent savings and money market deposits."

Nonperforming Assets Increase Since December 31, 2016

Nonperforming assets were $79.8 million or 0.82% of total assets at September 30, 2017, compared to $74.8 million or 0.91% of total assets at December 31, 2016. Nonperforming loans were $65.8 million or 1.03% of total loans at September 30, 2017, compared to $64.4 million or 1.20% of total loans at December 31, 2016.

The allowance for loan losses at September 30, 2017, was 0.86% of loans and 83.41% of nonperforming loans, compared to 1.02% of loans and 84.37% of nonperforming loans at December 31, 2016. At September 30, 2017, there were $1.70 billion of acquired loans, which are net of $42.8 million of valuation reserves that are not subject to the allowance. At December 31, 2016, there were $930.7 million of acquired loans, net of $25.3 million of valuation reserves that are not subject to the allowance. Excluding those loans covered by the valuation reserves, the ratio of the allowance for loan losses to outstanding loans was 1.17% at September 30, 2017, and 1.22% at December 31, 2016.

The provision for loan losses was $5.7 million for the third quarter of 2017 compared to $5.3 million for the third quarter of 2016. Provision for loan losses recorded for the third quarter of 2017 included a $2.2 million allowance for impairment recorded on an agribusiness relationship at Dubuque Bank and Trust associated with updated collateral values. Total charge-offs for the third quarter of 2017 were $5.8 million compared to $3.3 million for the third quarter of 2016, and the increase is primarily attributable to $3.0 million of charge-offs related to two commercial and industrial loan relationships at Dubuque Bank and Trust and Arizona Bank & Trust.

Summarizing the quarter and year-to-date, Fuller concluded, “In short, Heartland is demonstrating consistent improvement in its financial performance, while capitalizing on opportunities for profitable growth.”

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 October 29, 2018, 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 $9.8 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 117 banking locations serving 88 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

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

FINANCIAL TABLES FOLLOW

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
September 30,
For the Nine Months Ended
September 30,
2017 2016 2017 2016
Interest Income
Interest and fees on loans$82,906 $70,046 $217,898 $208,280
Interest on securities:
Taxable10,394 7,917 27,246 24,604
Nontaxable5,086 3,717 15,297 10,793
Interest on federal funds sold34 1 37 12
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
558 6 1,112 13
Total Interest Income98,978 81,687 261,590 243,702
Interest Expense
Interest on deposits5,073 4,001 12,966 12,195
Interest on short-term borrowings271 235 498 1,083
Interest on other borrowings3,790 3,770 10,674 10,918
Total Interest Expense9,134 8,006 24,138 24,196
Net Interest Income89,844 73,681 237,452 219,506
Provision for loan losses5,705 5,328 10,235 9,513
Net Interest Income After Provision for Loan Losses84,139 68,353 227,217 209,993
Noninterest Income
Service charges and fees10,138 8,278 29,291 23,462
Loan servicing income1,161 873 4,236 3,433
Trust fees3,872 3,689 11,482 11,127
Brokerage and insurance commissions950 1,006 2,962 2,914
Securities gains, net1,679 1,584 5,553 9,732
Net gains on sale of loans held for sale4,997 11,459 17,961 33,794
Valuation adjustment on commercial servicing rights5 5 29 (41)
Income on bank owned life insurance766 620 2,039 1,733
Other noninterest income1,409 1,028 2,941 2,992
Total Noninterest Income24,977 28,542 76,494 89,146
Noninterest Expense
Salaries and employee benefits45,225 40,733 128,118 124,432
Occupancy6,223 5,099 16,352 15,322
Furniture and equipment2,826 2,746 7,913 7,301
Professional fees8,450 5,985 24,342 20,481
FDIC insurance assessments894 1,180 2,610 3,468
Advertising1,358 1,339 5,141 4,174
Core deposit intangibles and customer relationship intangibles
amortization
1,863 1,291 4,252 4,483
Other real estate and loan collection expenses581 640 1,774 1,871
(Gain)/loss on sales/valuations of assets, net1,342 794 1,642 1,064
Other noninterest expenses9,997 8,620 27,653 27,160
Total Noninterest Expense78,759 68,427 219,797 209,756
Income Before Income Taxes30,357 28,468 83,914 89,383
Income taxes8,725 8,260 22,314 28,196
Net Income21,632 20,208 61,600 61,187
Preferred dividends(13) (53) (45) (273)
Interest expense on convertible preferred debt3 17 12 48
Net Income Available to Common Stockholders$21,622 $20,172 $61,567 $60,962
Earnings per common share-diluted$0.72 $0.81 $2.21 $2.48
Weighted average shares outstanding-diluted29,910,437 24,922,946 27,833,924 24,580,897


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Interest Income
Interest and fees on loans$82,906 $68,094 $66,898 $69,848 $70,046
Interest on securities:
Taxable10,394 8,599 8,253 8,480 7,831
Nontaxable5,086 5,020 5,191 4,292 3,717
Interest on federal funds sold34 3 1
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
558 345 209 157 92
Total Interest Income98,978 82,061 80,551 82,777 81,687
Interest Expense
Interest on deposits5,073 4,163 3,730 3,744 4,001
Interest on short-term borrowings271 90 137 119 235
Interest on other borrowings3,790 3,228 3,656 3,754 3,770
Total Interest Expense9,134 7,481 7,523 7,617 8,006
Net Interest Income89,844 74,580 73,028 75,160 73,681
Provision for loan losses5,705 889 3,641 2,181 5,328
Net Interest Income After Provision for Loan Losses84,139 73,691 69,387 72,979 68,353
Noninterest Income
Service charges and fees10,138 9,696 9,457 8,128 8,278
Loan servicing income1,161 1,351 1,724 1,068 873
Trust fees3,872 3,979 3,631 3,718 3,689
Brokerage and insurance commissions950 976 1,036 955 1,006
Securities gains, net1,679 1,392 2,482 1,608 1,584
Net gains on sale of loans held for sale4,997 6,817 6,147 5,840 11,459
Valuation adjustment on commercial servicing rights5 19 5 8 5
Income on bank owned life insurance766 656 617 542 620
Other noninterest income1,409 738 794 2,588 1,028
Total Noninterest Income24,977 25,624 25,893 24,455 28,542
Noninterest Expense
Salaries and employee benefits45,225 41,126 41,767 39,115 40,733
Occupancy6,223 5,056 5,073 5,076 5,099
Furniture and equipment2,826 2,586 2,501 2,944 2,746
Professional fees8,450 7,583 8,309 7,195 5,985
FDIC insurance assessments894 909 807 717 1,180
Advertising1,358 1,359 2,424 2,274 1,339
Core deposit intangibles and customer relationship intangibles
amortization
1,863 1,218 1,171 1,147 1,291
Other real estate and loan collection expenses581 365 828 572 640
(Gain)/loss on sales/valuations of assets, net1,342 (112) 412 414 794
Other noninterest expenses9,997 9,208 8,448 10,458 8,620
Total Noninterest Expense78,759 69,298 71,740 69,912 68,427
Income Before Income Taxes30,357 30,017 23,540 27,522 28,468
Income taxes8,725 8,059 5,530 8,360 8,260
Net Income21,632 21,958 18,010 19,162 20,208
Preferred dividends(13) (13) (19) (19) (53)
Interest expense on convertible preferred debt3 4 5 3 17
Net Income Available to Common Stockholders$21,622 $21,949 $17,996 $19,146 $20,172
Earnings per common share-diluted$0.72 $0.81 $0.68 $0.74 $0.81
Weighted average shares outstanding-diluted29,910,437 26,972,580 26,627,830 25,800,472 24,922,946


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
As Of
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Assets
Cash and due from banks$180,751 $141,100 $129,386 $151,290 $196,234
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
70,985 40,676 43,765 7,434 5,855
Cash and cash equivalents251,736 181,776 173,151 158,724 202,089
Time deposits in other financial institutions19,793 30,241 41,539 2,105 2,105
Securities:
Available for sale, at fair value2,093,385 1,789,441 1,893,528 1,845,864 1,655,696
Held to maturity, at cost256,355 259,586 260,616 263,662 265,302
Other investments, at cost23,176 21,094 21,557 21,560 22,082
Loans held for sale35,795 48,848 49,009 61,261 78,317
Loans:
Held to maturity6,373,415 5,325,082 5,361,604 5,351,719 5,438,715
Allowance for loan losses(54,885) (54,051) (54,999) (54,324) (54,653)
Loans, net6,318,530 5,271,031 5,306,605 5,297,395 5,384,062
Premises, furniture and equipment, net178,961 163,003 165,425 164,028 165,841
Goodwill236,615 141,461 141,461 127,699 127,699
Core deposit intangibles and customer relationship intangibles, net37,028 22,850 24,068 22,775 23,922
Servicing rights, net26,599 34,736 35,441 35,778 35,906
Cash surrender value on life insurance142,073 120,281 117,613 112,615 112,060
Other real estate, net13,226 9,269 11,188 9,744 10,740
Other assets122,355 111,104 120,644 123,869 116,394
Total Assets$9,755,627 $8,204,721 $8,361,845 $8,247,079 $8,202,215
Liabilities and Equity
Liabilities
Deposits:
Demand$3,009,940 $2,355,410 $2,319,256 $2,202,036 $2,238,736
Savings4,227,340 3,704,579 3,940,146 3,788,089 3,753,300
Time994,604 870,180 830,459 857,286 920,657
Total deposits8,231,884 6,930,169 7,089,861 6,847,411 6,912,693
Short-term borrowings171,871 139,130 155,025 306,459 214,105
Other borrowings301,473 281,096 282,051 288,534 294,493
Accrued expenses and other liabilities68,715 48,356 53,596 63,759 76,536
Total Liabilities8,773,943 7,398,751 7,580,533 7,506,163 7,497,827
Stockholders' Equity
Preferred equity938 938 938 1,357 1,357
Common stock29,946 26,701 26,674 26,120 24,683
Capital surplus503,262 352,500 351,423 328,376 279,316
Retained earnings468,556 450,228 431,219 416,109 402,179
Accumulated other comprehensive loss(21,018) (24,397) (28,942) (31,046) (3,079)
Treasury stock at cost (68)
Total Equity981,684 805,970 781,312 740,916 704,388
Total Liabilities and Equity$9,755,627 $8,204,721 $8,361,845 $8,247,079 $8,202,215


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
September 30,
For the Nine Months Ended
September 30,
2017 2016 2017 2016
Average Balances
Assets$9,639,844 $8,172,683 $8,740,703 $8,136,492
Loans, net of unearned6,286,264 5,538,088 5,679,620 5,493,187
Deposits8,100,028 6,839,334 7,353,399 6,775,103
Earning assets8,726,228 7,382,860 7,942,810 7,368,856
Interest bearing liabilities5,697,713 5,224,172 5,346,826 5,286,708
Common stockholders' equity954,511 689,637 833,150 663,050
Total stockholders' equity955,449 692,404 834,203 687,312
Tangible common stockholders' equity(1)691,464 537,375 638,149 513,031
Key Performance Ratios
Annualized return on average assets0.89% 0.98% 0.94% 1.00%
Annualized return on average common equity (GAAP)8.99% 11.64% 9.88% 12.28%
Annualized return on average tangible common equity (non-GAAP)(2)12.41% 14.93% 12.90% 15.87%
Annualized ratio of net charge-offs to average loans0.31% 0.17% 0.23% 0.09%
Annualized net interest margin (GAAP)4.08% 3.97% 4.00% 3.98%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)4.26% 4.14% 4.19% 4.15%
Efficiency ratio, fully tax-equivalent(4)64.54% 63.88% 66.58% 66.23%
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)
Net income available to common shareholders (GAAP)$21,622 $20,172 $61,567 $60,962
Average common stockholders' equity (GAAP)$954,511 $689,637 $833,150 $663,050
Less average goodwill226,097 127,699 167,009 125,061
Less average core deposit intangibles and customer relationship
intangibles, net
36,950 24,563 27,992 24,958
Average tangible common equity (non-GAAP)$691,464 $537,375 $638,149 $513,031
Annualized return on average common equity (GAAP)8.99% 11.64% 9.88% 12.28%
Annualized return on average tangible common equity (non-GAAP)12.41% 14.93% 12.90% 15.87%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)
Net Interest Income (GAAP)$89,844 $73,681 $237,452 $219,506
Plus tax-equivalent adjustment(7)3,925 3,221 11,581 9,408
Net interest income, tax-equivalent (non-GAAP)

$93,769 $76,902 $249,033 $228,914
Average earning assets$8,726,228 $7,382,860 $7,942,810 $7,368,856
Annualized net interest margin (GAAP)4.08% 3.97% 4.00% 3.98%
Annualized net interest margin, fully tax-equivalent (non-GAAP)

4.26% 4.14% 4.19% 4.15%
(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 35%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Average Balances
Assets$9,639,844 $8,333,301 $8,233,510 $8,280,042 $8,172,683
Loans, net of unearned6,286,264 5,376,826 5,365,654 5,473,001 5,538,088
Deposits8,100,028 7,050,126 6,896,821 6,928,978 6,839,334
Earning assets8,726,228 7,586,256 7,502,496 7,551,997 7,382,860
Interest bearing liabilities5,697,713 5,146,243 5,190,955 5,206,393 5,224,172
Common stockholders' equity954,511 791,039 751,671 726,455 689,637
Total stockholders' equity955,449 791,977 752,958 727,812 692,404
Tangible common stockholders' equity(1)691,464 625,929 596,006 575,412 537,375
Key Performance Ratios
Annualized return on average assets0.89% 1.06% 0.89% 0.92% 0.98%
Annualized return on average common equity (GAAP)8.99% 11.13% 9.71% 10.48% 11.64%
Annualized return on average tangible common equity (non-GAAP)(2)12.41% 14.07% 12.25% 13.24% 14.93%
Annualized ratio of net charge-offs to average loans0.31% 0.14% 0.22% 0.18% 0.17%
Annualized net interest margin (GAAP)4.08% 3.94% 3.95% 3.96% 3.97%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)4.26% 4.14% 4.16% 4.14% 4.14%
Efficiency ratio, fully tax-equivalent(4)64.54% 65.61% 69.95% 66.29% 63.88%
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)
Net income available to common shareholders (GAAP)$21,622 $21,949 $17,996 $19,146 $20,172
Average common stockholders' equity (GAAP)$954,511 $791,039 $751,671 $726,455 $689,637
Less average goodwill226,097 141,461 132,440 127,699 127,699
Less average core deposit intangibles and customer relationship intangibles, net36,950 23,649 23,225 23,344 24,563
Average tangible common equity (non-GAAP)$691,464 $625,929 $596,006 $575,412 $537,375
Annualized return on average common equity (GAAP)8.99% 11.13% 9.71% 10.48% 11.64%
Annualized return on average tangible common equity (non-GAAP)12.41% 14.07% 12.25% 13.24% 14.93%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)
Net Interest Income (GAAP)$89,844 $74,580 $73,028 $75,160 $73,681
Plus tax-equivalent adjustment(7)3,925 3,796 3,860 3,511 3,221
Net interest income, fully tax-equivalent (non-GAAP)$93,769 $78,376 $76,888 $78,671 $76,902
Average earning assets$8,726,228 $7,586,256 $7,502,496 $7,551,997 $7,382,860
Annualized net interest margin (GAAP)4.08% 3.94% 3.95% 3.96% 3.97%
Annualized net interest margin, fully tax-equivalent (non-GAAP)4.26% 4.14% 4.16% 4.14% 4.14%
(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 common tangible equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer relationship 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 35%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
September 30,
For the Nine Months Ended
September 30,
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)2017 2016 2017 2016
Net interest income$89,844 $73,681 $237,452 $219,506
Tax-equivalent adjustment(2)3,925 3,221 11,581 9,408
Fully tax-equivalent net interest income93,769 76,902 249,033 228,914
Noninterest income24,977 28,542 76,494 89,146
Securities gains, net(1,679) (1,584) (5,553) (9,732)
Adjusted income$117,067 $103,860 $319,974 $308,328
Total noninterest expenses$78,759 $68,427 $219,797 $209,756
Less:
Core deposit intangibles and customer relationship intangibles amortization1,863 1,291 4,252 4,483
Partnership investment in tax credit projects 876
(Gain)/loss on sales/valuations of assets, net1,342 794 1,642 1,064
Adjusted noninterest expenses$75,554 $66,342 $213,027 $204,209
Efficiency ratio, fully tax-equivalent (non-GAAP)64.54% 63.88% 66.58% 66.23%


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Net interest income$89,844 $74,580 $73,028 $75,160 $73,681
Tax-equivalent adjustment(2)3,925 3,796 3,860 3,511 3,221
Fully tax-equivalent net interest income93,769 78,376 76,888 78,671 76,902
Noninterest income24,977 25,624 25,893 24,455 28,542
Securities gains, net(1,679) (1,392) (2,482) (1,608) (1,584)
Adjusted income$117,067 $102,608 $100,299 $101,518 $103,860
Total noninterest expenses$78,759 $69,298 $71,740 $69,912 $68,427
Less:
Core deposit intangibles and customer relationship intangibles amortization1,863 1,218 1,171 1,147 1,291
Partnership investment in tax credit projects 876 1,051
(Gain)/loss on sales/valuation of assets, net1,342 (112) 412 414 794
Adjusted noninterest expenses$75,554 $67,316 $70,157 $67,300 $66,342
Efficiency ratio, fully tax-equivalent (non-GAAP)64.54% 65.61% 69.95% 66.29% 63.88%
(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 35%.


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
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Common Share Data
Book value per common share$32.75 $30.15 $29.26 $28.31 $28.48
Tangible book value per common share (non-GAAP)(1)$23.61 $24.00 $23.05 $22.55 $22.34
ASC 320 effect on book value per common share$(0.67) $(0.87) $(1.06) $(1.15) $0.03
Common shares outstanding, net of treasury stock29,946,069 26,701,226 26,674,121 26,119,929 24,681,380
Tangible common equity ratio (non-GAAP)(2)7.46% 7.97% 7.50% 7.28% 6.85%
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(3)
Common stockholders' equity (GAAP)$980,746 $805,032 $780,374 $739,559 $703,031
Less goodwill236,615 141,461 141,461 127,699 127,699
Less core deposit intangibles and customer relationship intangibles, net37,028 22,850 24,068 22,775 23,922
Tangible common stockholders' equity (non-GAAP)$707,103 $640,721 $614,845 $589,085 $551,410
Common shares outstanding, net of treasury stock29,946,069 26,701,226 26,674,121 26,119,929 24,681,380
Common stockholders' equity (book value) per share (GAAP)$32.75 $30.15 $29.26 $28.31 $28.48
Tangible book value per common share (non-GAAP)$23.61 $24.00 $23.05 $22.55 $22.34
Reconciliation of Tangible Common Equity Ratio (non-GAAP)(4)
Total assets (GAAP)$9,755,627 $8,204,721 $8,361,845 $8,247,079 $8,202,215
Less goodwill236,615 141,461 141,461 127,699 127,699
Less core deposit intangibles and customer relationship
intangibles, net
37,028 22,850 24,068 22,775 23,922
Total tangible assets (non-GAAP)$9,481,984 $8,040,410 $8,196,316 $8,096,605 $8,050,594
Tangible common equity ratio (non-GAAP)7.46% 7.97% 7.50% 7.28% 6.85%
Loan Data
Loans held to maturity:
Commercial and commercial real estate$4,777,856 $3,803,011 $3,849,748 $3,825,847 $3,900,612
Residential mortgage635,611 596,385 604,902 617,924 625,965
Agricultural and agricultural real estate511,764 495,243 481,125 489,318 489,387
Consumer450,088 431,052 427,962 420,613 425,582
Unearned discount and deferred loan fees(1,904) (609) (2,133) (1,983) (2,831)
Total loans held to maturity$6,373,415 $5,325,082 $5,361,604 $5,351,719 $5,438,715
Other Selected Trend Information
Effective tax rate28.74% 26.85% 23.49% 30.38% 29.02%
Full time equivalent employees2,024 1,862 1,896 1,864 1,846
Total residential mortgage loan applications$271,476 $308,113 $248,614 $304,018 $445,107
Residential mortgage loans originated$198,911 $216,637 $161,851 $278,065 $324,337
Residential mortgage loans sold$188,501 $180,296 $172,521 $269,333 $315,917
Residential mortgage loan servicing portfolio$3,557,866 $4,340,243 $4,338,311 $4,308,580 $4,259,459
(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
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Allowance for Loan Losses
Balance, beginning of period$54,051 $54,999 $54,324 $54,653 $51,756
Provision for loan losses5,705 889 3,641 2,181 5,328
Charge-offs(5,759) (2,766) (3,718) (3,555) (3,283)
Recoveries888 929 752 1,045 852
Balance, end of period$54,885 $54,051 $54,999 $54,324 $54,653
Asset Quality
Nonaccrual loans$63,456 $65,393 $62,868 $64,299 $57,799
Loans past due ninety days or more as to interest or principal
payments
2,348 698 872 86 105
Other real estate owned13,226 9,269 11,188 9,744 10,740
Other repossessed assets773 675 739 663 821
Total nonperforming assets$79,803 $76,035 $75,667 $74,792 $69,465
Performing troubled debt restructured loans$10,040 $11,157 $11,010 $10,380 $10,281
Nonperforming Assets Activity
Balance, beginning of period$76,035 $75,667 $74,792 $69,465 $68,620
Net loan charge offs(4,871) (1,837) (2,966) (2,510) (2,431)
New nonperforming loans9,117 13,700 14,819 23,035 10,884
Acquired nonperforming assets7,991
Reduction of nonperforming loans(1)(5,183) (7,443) (10,037) (13,707) (6,983)
OREO/Repossessed assets sales proceeds(3,328) (3,734) (715) (1,037) (343)
OREO/Repossessed assets writedowns, net(56) (259) (279) (274) (521)
Net activity at Citizens Finance Co.98 (59) 53 (180) 239
Balance, end of period$79,803 $76,035 $75,667 $74,792 $69,465
Asset Quality Ratios
Ratio of nonperforming loans to total loans1.03% 1.24% 1.19% 1.20% 1.06%
Ratio of nonperforming assets to total assets0.82% 0.93% 0.90% 0.91% 0.85%
Annualized ratio of net loan charge-offs to average loans0.31% 0.14% 0.22% 0.18% 0.17%
Allowance for loan losses as a percent of loans0.86% 1.02% 1.03% 1.02% 1.00%
Allowance for loan losses as a percent of nonperforming loans83.41% 81.78% 86.29% 84.37% 94.39%
Loans delinquent 30-89 days as a percent of total loans0.33% 0.38% 0.44% 0.37% 0.40%
(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
September 30, 2017 September 30, 2016
Average
Balance
Interest Rate Average
Balance
Interest Rate
Earning Assets
Securities:
Taxable$1,667,076 $10,394 2.47% $1,415,446 $7,917 2.23%
Nontaxable(1)643,925 7,825 4.82 473,152 5,719 4.81
Total securities2,311,001 18,219 3.13 1,888,598 13,636 2.87
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
164,809 558 1.34 7,026 6 0.34
Federal funds sold18,874 34 0.71 1,409 1 0.28
Loans:(2)
Commercial and commercial real estate(1)4,647,414 59,121 5.05 3,908,623 48,334 4.92
Residential mortgage683,186 7,300 4.24 717,374 7,248 4.02
Agricultural and agricultural real estate(1)504,970 6,175 4.85 486,008 5,719 4.68
Consumer450,694 9,032 7.95 426,083 8,256 7.71
Fees on loans 2,464 1,708
Less: allowance for loan losses(54,720) (52,261)
Net loans6,231,544 84,092 5.35 5,485,827 71,265 5.17
Total earning assets8,726,228 102,903 4.68% 7,382,860 84,908 4.58%
Nonearning Assets913,616 789,823
Total Assets$9,639,844 $8,172,683
Interest Bearing Liabilities
Savings$4,205,946 $3,162 0.30% $3,697,426 $2,066 0.22%
Time, $100,000 and over408,560 787 0.76 399,498 813 0.81
Other time deposits573,178 1,124 0.78 570,445 1,122 0.78
Short-term borrowings209,795 271 0.51 258,783 235 0.36
Other borrowings300,234 3,790 5.01 298,020 3,770 5.03
Total interest bearing liabilities5,697,713 9,134 0.64% 5,224,172 8,006 0.61%
Noninterest Bearing Liabilities
Noninterest bearing deposits2,912,344 2,171,965
Accrued interest and other liabilities74,338 84,142
Total noninterest bearing liabilities2,986,682 2,256,107
Stockholders' Equity955,449 692,404
Total Liabilities and Stockholders' Equity$9,639,844 $8,172,683
Net interest income, fully tax-equivalent (non-GAAP)(1) $93,769 $76,902
Net interest spread(1) 4.04% 3.97%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(3) 4.26% 4.14%
Interest bearing liabilities to earning assets65.29% 70.76%
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(3)
Net interest income, fully tax-equivalent (non-GAAP) $93,769 $76,902
Adjustments for tax-equivalent interest(1) (3,925) (3,221)
Net interest income (GAAP) $89,844 $73,681
Average earning assets$8,726,228 $7,382,860
Annualized net interest margin (GAAP) 4.08% 3.97%
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.26% 4.14%
(1) Computed on a tax-equivalent basis using an effective tax rate of 35%
(2) Nonaccrual loans are included in the average loans outstanding.
(3) 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 Nine Months Ended
September 30, 2017 September 30, 2016
Average
Balance
Interest Rate Average
Balance
Interest Rate
Earning Assets
Securities:
Taxable$1,545,091 $27,246 2.36% $1,464,080 $24,604 2.24%
Nontaxable(1)638,119 23,534 4.93 440,275 16,605 5.04
Total securities2,183,210 50,780 3.11 1,904,355 41,209 2.89
Interest bearing deposits with the Federal Reserve Bank and other
banks and other short-term investments
127,870 1,112 1.16 9,785 13 0.18
Federal funds sold6,885 37 0.72 12,509 12 0.13
Loans:(2)
Commercial and commercial real estate(1)4,097,967 151,946 4.96 3,840,060 141,977 4.94
Residential mortgage654,488 20,492 4.19 751,694 23,133 4.11
Agricultural and agricultural real estate(1)492,170 17,536 4.76 478,564 16,952 4.73
Consumer434,995 25,374 7.80 422,869 24,452 7.72
Fees on loans 5,894 5,362
Less: allowance for loan losses(54,775) (50,980)
Net loans5,624,845 221,242 5.26 5,442,207 211,876 5.20
Total earning assets7,942,810 273,171 4.60% 7,368,856 253,110 4.59%
Nonearning Assets797,893 767,636
Total Assets$8,740,703 $8,136,492
Interest Bearing Liabilities
Savings$3,976,403 $7,772 0.26% $3,651,370 $5,988 0.22%
Time, $100,000 and over369,595 2,239 0.81 439,609 2,417 0.73
Other time deposits512,551 2,955 0.77 599,745 3,790 0.84
Short-term borrowings199,503 498 0.33 314,367 1,083 0.46
Other borrowings288,774 10,674 4.94 281,617 10,918 5.18
Total interest bearing liabilities5,346,826 24,138 0.60% 5,286,708 24,196 0.61%
Noninterest Bearing Liabilities
Noninterest bearing deposits2,494,850 2,084,379
Accrued interest and other liabilities64,824 78,093
Total noninterest bearing liabilities2,559,674 2,162,472
Stockholders' Equity834,203 687,312
Total Liabilities and Stockholders' Equity$8,740,703 $8,136,492
Net interest income, fully tax-equivalent (non-GAAP)(1) $249,033 $228,914
Net interest spread(1) 4.00% 3.98%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(3) 4.19% 4.15%
Interest bearing liabilities to earning assets67.32% 71.74%
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(3)
Net interest income, fully tax-equivalent (non-GAAP) $249,033 $228,914
Adjustments for tax-equivalent interest(1) (11,581) (9,408)
Net interest income (GAAP) $237,452 $219,506
Average earning assets$7,942,810 $7,368,856
Annualized net interest margin (GAAP) 4.00% 3.98%
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.19% 4.15%
(1) Computed on a tax-equivalent basis using an effective tax rate of 35%.
(2) Nonaccrual loans are included in the average loans outstanding.
(3) 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.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
As of and For the Quarter Ended
9/30/20176/30/20173/31/201712/31/20169/30/2016
Total Assets
Citywide Banks(1)$2,391,727 $817,859 $839,505 $901,782 $892,723
Dubuque Bank and Trust Company1,479,647 1,441,655 1,436,038 1,497,775 1,448,796
New Mexico Bank & Trust1,425,185 1,407,991 1,382,480 1,374,647 1,318,203
Wisconsin Bank & Trust1,030,192 1,035,628 1,033,633 1,065,715 1,068,288
Premier Valley Bank886,495 850,956 854,838 640,684 635,620
Illinois Bank & Trust761,285 740,153 746,669 742,173 748,801
Morrill & Janes Bank and Trust Company719,246 748,286 871,819 863,544 862,767
Arizona Bank & Trust566,951 566,339 578,597 582,266 574,561
Rocky Mountain Bank486,790 476,829 479,121 477,063 481,346
Minnesota Bank & Trust217,246 216,957 213,789 229,114 238,745
Total Portfolio Loans
Citywide Banks(1)$1,540,016 $558,573 $572,254 $609,760 $638,006
Dubuque Bank and Trust Company868,370 884,640 903,617 905,242 906,347
New Mexico Bank & Trust989,367 934,734 906,477 924,249 917,679
Wisconsin Bank & Trust684,530 662,502 644,380 650,254 711,714
Premier Valley Bank458,443 447,148 440,406 348,879 354,610
Illinois Bank & Trust462,150 447,887 469,105 473,008 469,236
Morrill & Janes Bank and Trust Company468,197 515,896 546,123 548,544 538,666
Arizona Bank & Trust401,516 377,358 384,028 384,706 385,926
Rocky Mountain Bank338,305 335,173 330,921 347,839 357,346
Minnesota Bank & Trust142,650 144,112 142,736 144,098 139,581
Total Deposits
Citywide Banks(1)$1,924,605 $682,872 $712,377 $733,449 $767,128
Dubuque Bank and Trust Company1,139,512 1,178,368 1,212,899 1,231,016 1,182,947
New Mexico Bank & Trust1,221,134 1,190,758 1,184,675 1,091,436 1,101,550
Wisconsin Bank & Trust852,489 874,845 868,033 899,676 889,957
Premier Valley Bank714,605 681,298 708,226 510,142 520,814
Illinois Bank & Trust691,680 669,532 641,750 636,419 671,104
Morrill & Janes Bank and Trust Company605,390 627,857 721,075 738,036 676,176
Arizona Bank & Trust500,270 493,419 501,111 477,213 493,331
Rocky Mountain Bank426,405 416,436 420,067 414,344 420,581
Minnesota Bank & Trust189,749 193,365 189,324 194,368 214,651
Net Income
Citywide Banks(1)$4,541 $746 $1,366 $1,572 $925
Dubuque Bank and Trust Company703 3,477 2,056 806 5,112
New Mexico Bank & Trust4,972 5,855 4,419 4,061 3,824
Wisconsin Bank & Trust3,368 3,448 1,968 2,970 3,368
Premier Valley Bank2,907 2,573 1,306 2,969 1,804
Illinois Bank & Trust2,286 1,984 1,991 1,917 2,179
Morrill & Janes Bank and Trust Company1,760 2,210 2,227 2,519 1,707
Arizona Bank & Trust1,451 1,073 1,486 1,305 2,034
Rocky Mountain Bank1,631 1,732 1,521 1,229 1,456
Minnesota Bank & Trust791 563 591 888 675
(1) Formerly known as Centennial Bank and Trust.

CONTACT:
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
(563) 589-1994
bmckeag@htlf.com


Source:Heartland Financial USA, Inc.