Heartland Financial USA, Inc. Reports 2017 Fourth Quarter and Annual Results

Highlights

  • Quarterly net income available to common stockholders of $13.7 million, and annual net income available to common stockholders of $75.2 million
  • Diluted earnings per common share of $0.45 for the quarter and $2.65 for the year
  • Recorded a charge to income tax expense of $10.4 million related to the enactment by Congress of the Tax Cuts and Jobs Act, which resulted in a reduction of diluted earnings per common share of $0.35 for the quarter and for the year
  • Net interest margin of 4.14% for the quarter, fully tax-equivalent (non-GAAP)(1) of 4.30%
  • Net interest margin of 4.04% for the year, fully tax-equivalent (non-GAAP)(1) of 4.22%
  • Announced agreement to acquire Signature Bancshares, Inc. of Minnetonka, MN
  • Announced agreement to acquire First Bank Lubbock Bancshares, Inc. of Lubbock, TX
  • Declared and paid a special dividend of $0.07 per common share

Quarter Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016
Net income available to common stockholders (in millions)$13.7 $19.1 $75.2 $80.1
Diluted earnings per common share0.45 0.74 2.65 3.22
Return on average assets0.55% 0.92% 0.83% 0.98%
Return on average common equity5.50 10.48 8.63 11.80
Return on average tangible common equity (non-GAAP)(2)7.60 13.24 11.45 15.15
Net interest margin4.14 3.96 4.04 3.95
Net interest margin, fully tax-equivalent (non-GAAP)(1)4.30 4.14 4.22 4.13


"Excluding the fourth quarter tax charge, 2017 was another banner year for Heartland as we reached new heights in earnings and acquired growth. We enter 2018 with positive momentum, and we are poised for strong performance."



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.


DUBUQUE, Iowa, Jan. 29, 2018 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ:HTLF) today reported net income available to common stockholders of $13.7 million, or $0.45 per diluted common share, for the quarter ended December 31, 2017, compared to $19.1 million, or $0.74 per diluted common share, for the fourth quarter of 2016. Return on average common equity was 5.50% and return on average assets was 0.55% for the fourth quarter of 2017, compared to 10.48% and 0.92%, respectively, for the same quarter in 2016.

Net income available to common stockholders for the year 2017 was $75.2 million, or $2.65 per diluted common share, compared to $80.1 million, or $3.22 per diluted common share, recorded during the year 2016. Return on average common equity was 8.63% and return on average assets was 0.83% for the year 2017, compared to 11.80% and 0.98%, respectively, for the same period in 2016.

In the fourth quarter of 2017, in response to the passage of the Tax Cuts and Jobs Act by Congress, Heartland recorded a reduction in the value of its deferred tax assets, resulting in a one-time non-cash charge of $10.4 million to income tax expense. Excluding this charge to income tax expense, net income available to common stockholders for the fourth quarter of 2017 was $24.1 million or $0.80 per diluted common share, and for the year 2017, net income available to common shareholders was $85.6 million or $3.01 per diluted common share.

Commenting on Heartland’s fourth quarter and annual results, Lynn B. Fuller, Heartland’s chairman and chief executive officer said, "Excluding the fourth quarter tax charge, 2017 was another banner year for Heartland as we reached new heights in earnings and acquired growth. We enter 2018 with positive momentum, and we are poised for strong performance."

On November 13, 2017, Heartland entered into a definitive merger agreement with Signature Bancshares, Inc., parent company of Signature Bank headquartered in Minnetonka, Minnesota. As of the announcement date, the stock and cash transaction was valued at approximately $53.4 million. Simultaneous with the closing of the transaction, Signature Bank will merge into Heartland's Minnesota-based subsidiary, Minnesota Bank & Trust, and the combined entity will operate as Minnesota Bank & Trust. The transaction is subject to certain potential adjustments and customary closing conditions. The transaction is expected to close in the first quarter of 2018 with a systems conversion planned for the second quarter of 2018. As of December 31, 2017, Signature Bank had total assets of $409.1 million, including gross loans held to maturity of $339.1 million, and deposits of $367.8 million.

On December 12, 2017, Heartland entered into a definitive merger agreement with First Bank Lubbock Bancshares, Inc., parent company of FirstBank & Trust Company, headquartered in Lubbock, Texas. As of the announcement date, the aggregate merger consideration, which is comprised of Heartland common stock and cash, was approximately $185.6 million. The transaction is subject to certain potential adjustments and customary closing conditions. Upon closing of the transaction, FirstBank & Trust Company will become a wholly owned subsidiary of Heartland. The transaction is expected to close in the second quarter of 2018 with a systems conversion planned for the third quarter of 2018. As of December 31, 2017, FirstBank & Trust Company had total assets of $929.6 million, including $669.3 million of gross loans held to maturity, and deposits of $821.9 million.

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

Net interest margin, expressed as a percentage of average earning assets, was 4.14% (4.30% on a fully tax-equivalent basis) during the fourth quarter of 2017, compared to 4.08% (4.26% on a fully tax-equivalent basis) during the third quarter of 2017 and 3.96% (4.14% on a fully tax-equivalent basis) during the fourth quarter of 2016.

Fuller said, “Heartland’s strong net interest margin stands out among its peers. Our fully-tax-equivalent margin widened for the quarter and annual periods to 4.30 percent and 4.22 percent, respectively.”

Interest income for the fourth quarter of 2017 was $102.1 million, an increase of $19.3 million or 23%, compared to the $82.8 million recorded in the fourth quarter of 2016. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $3.6 million for the fourth quarter of 2017 and $3.5 million for the fourth quarter of 2016. With these adjustments, interest income on a tax-equivalent basis was $105.6 million for the fourth quarter of 2017, an increase of $19.3 million or 22%, compared to $86.3 million for the fourth quarter of 2016. The increase in interest income in the fourth quarter of 2017, as compared to the fourth quarter of 2016, was primarily due to an increase in average earning assets, which totaled $8.89 billion during the fourth quarter of 2017 compared to $7.55 billion during the fourth quarter of 2016, a $1.34 billion or 18% increase. A majority of this growth was attributable to the acquisitions completed in 2017.

Interest expense for the fourth quarter of 2017 was $9.2 million, an increase of $1.6 million or 21% from $7.6 million in the fourth quarter of 2016. Average interest bearing liabilities for the quarter ended December 31, 2017, totaled $5.66 billion, an increase of $457.4 million or 9% from $5.21 billion in the same quarter in 2016. The average interest rate paid on Heartland's interest bearing deposits and borrowings increased 7 basis points from 0.58% in the fourth quarter of 2016 to 0.65% in the fourth quarter of 2017. The average interest rate paid on savings deposits was 0.31% during the fourth quarter of 2017 compared to 0.21% during the fourth quarter of 2016, and the average interest rate paid on time deposits was 0.82% during the fourth quarter of 2017 compared to 0.77% during the fourth quarter of 2016.

Net interest income increased $17.7 million or 24% to $92.9 million in the fourth quarter of 2017 from the $75.2 million recorded in the fourth quarter of 2016. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $96.4 million during the fourth quarter of 2017, an increase of $17.7 million or 23% from the $78.7 million recorded during the fourth quarter of 2016.

Noninterest Income and Noninterest Expenses Increase From Fourth Quarter 2016

Noninterest income totaled $25.5 million during the fourth quarter of 2017 compared to $24.5 million during the fourth quarter of 2016, an increase of $1.1 million or 4%. Service charges and fees totaled $9.9 million during the fourth quarter of 2017 compared to $8.1 million during the fourth quarter of 2016, an increase of $1.8 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 Citywide Banks of Colorado, Inc., acquisition completed in the third quarter of 2017. Gains on sale of loans held for sale totaled $4.3 million during the fourth quarter of 2017 compared to $5.8 million during the fourth quarter of 2016, a decrease of $1.6 million or 27%. Trust fees increased $618,000 or 17% to $4.3 million in the fourth quarter of 2017 compared to $3.7 million for the same quarter of 2016.

For the fourth quarter of 2017, noninterest expenses totaled $77.9 million compared to $69.9 million during the fourth quarter of 2016, an increase of $8.0 million or 11%. The category with the most significant increase was salaries and employee benefits, which increased $4.2 million or 11%. Full time equivalent employees totaled 2,008 as of December 31, 2017, compared to 1,864 as of December 31, 2016. Professional fees totaled $8.5 million for the fourth quarter of 2017, an increase of $1.3 million or 19% from $7.2 million recorded during the fourth quarter of 2016 primarily due to the recently completed and pending acquisitions.

Heartland's effective tax rate was 61.13% for the fourth quarter of 2017 compared to 30.38% for the fourth quarter of 2016. Exclusive of the charge to income tax expense of $10.4 million recorded as a result of the Tax Cuts and Jobs Act, Heartland's effective tax rate was 31.58% for the fourth quarter of 2017. Heartland's effective tax rate was also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 18.78% during the fourth quarter of 2017 compared to 23.69% during the fourth quarter of 2016.

"The passage of the Tax Cuts and Jobs Act required us to revalue our deferred tax assets at the new federal tax rate of 21%. While the $10.4 million non-cash charge to income tax expense negatively impacted earnings for the fourth quarter of 2017, we expect the new legislation will have a positive impact on our future earnings," stated Fuller.

Loans and Deposits Increase Since December 31, 2016

Total assets were $9.81 billion at December 31, 2017, an increase of $1.56 billion or 19% from $8.25 billion at year-end 2016. Included in this increase, at fair value, were $213.9 million of assets acquired in the Founders Bancorp transaction and $1.49 billion of assets acquired in the Citywide Banks of Colorado, Inc. transaction. Exclusive of these transactions, total assets decreased $144.0 million or 2%. Securities represented 25% of total assets at December 31, 2017, compared to 26% at December 31, 2016.

Total loans held to maturity were $6.39 billion at December 31, 2017, compared to $5.35 billion at year-end 2016, an increase of $1.04 billion or 19%. This increase included $1.08 billion of total loans held to maturity, at fair value, acquired in the Founders Bancorp and Citywide Banks of Colorado, Inc. transactions. Exclusive of these transactions, total loans held to maturity decreased $42.1 million during the year 2017. Loan growth for the fourth quarter of 2017 totaled $18.0 million.

Total deposits were $8.15 billion as of December 31, 2017, compared to $6.85 billion at year-end 2016, an increase of $1.30 billion or 19%. This increase included $1.39 billion of deposits, at fair value, acquired in the Founders Bancorp and Citywide Banks of Colorado, Inc. transactions. Exclusive of these transactions, total deposits decreased $92.0 million. Demand deposits totaled $2.98 billion at December 31, 2017, an increase of $781.2 million or 35% from $2.20 billion at year-end 2016. Excluding $626.7 million of demand deposits attributable to the Founders Bancorp and Citywide Banks of Colorado, Inc. transactions, demand deposits increased $154.5 million or 7% since year-end 2016. Savings deposits increased $452.2 million or 12% to $4.24 billion at December 31, 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 $166.7 million or 4% since year-end 2016. Time deposits totaled $923.5 million as of December 31, 2017, compared to $857.3 million as of December 31, 2016, an increase of $66.2 million. Exclusive of $145.9 million of time deposits acquired during 2017, time deposits decreased $79.7 million or 9% since December 31, 2016.

"Aided by acquisitions, loans and deposits increased by 19 percent over the previous year. Loans and non-time deposits also grew organically during the second half of 2017. These growth trends provide significant momentum for Heartland going into 2018," commented Fuller.

Nonperforming Assets Remain Constant; Provision for Loan Losses Increases Since December 31, 2016

Nonperforming assets were $74.6 million at December 31, 2017, compared to $74.8 million at December 31, 2016. Exclusive of $8.0 million of nonperforming assets, at fair value, acquired in the Citywide Banks of Colorado, Inc. transaction, nonperforming assets decreased $8.2 million or 11% since year-end 2016. Nonperforming loans were $63.4 million or 0.99% of total loans at December 31, 2017, compared to $64.4 million or 1.20% of total loans at December 31, 2016.

The allowance for loan losses at December 31, 2017, was 0.87% of loans and 87.82% of nonperforming loans compared to 1.02% of loans and 84.37% of nonperforming loans at December 31, 2016. The provision for loan losses was $5.3 million and $2.2 million for the fourth quarter of 2017 and 2016, respectively. Given the size of Heartland's loan portfolio, the level of organic loan growth, acquired loans that move out of the purchase accounting pool, changes in credit quality and the variability that can occur in the factors considered when determining the appropriateness of the allowance for loan losses, Heartland's quarterly provision for loan losses will vary from quarter to quarter.

"In 2017, Heartland successfully executed on its strategy to deliver growth and profitability while maintaining assets below the $10 billion threshold. Closing the year at $9.8 billion in assets affords us 18 months to prepare for the adverse revenue impact of the Dodd Frank Act, which will significantly reduce debit card interchange income. In 2018, we will continue to deliver on our growth strategy by adding Signature Bank and FirstBank & Trust Company and expect to finish the year above $11 billion in total assets," Fuller concluded.

Conference Call Details

Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0782 at least five minutes before start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. A replay will be available until January 28, 2019, 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 for the year ended December 31, 2016, filed with the Securities and Exchange Commission, consist of, among others: (i) the strength of the national economy and the local economies in which we operate; (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 our 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 Heartland; 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
December 31,
For the Year Ended
December 31,
2017 2016 2017 2016
Interest Income
Interest and fees on loans$86,108 $69,848 $304,006 $278,128
Interest on securities:
Taxable11,119 8,480 38,365 32,858
Nontaxable4,401 4,292 19,698 15,085
Interest on federal funds sold5 42 12
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments435 157 1,547 396
Total Interest Income102,068 82,777 363,658 326,479
Interest Expense
Interest on deposits5,313 3,744 18,279 15,939
Interest on short-term borrowings180 119 678 1,202
Interest on other borrowings3,719 3,754 14,393 14,672
Total Interest Expense9,212 7,617 33,350 31,813
Net Interest Income92,856 75,160 330,308 294,666
Provision for loan losses5,328 2,181 15,563 11,694
Net Interest Income After Provision for Loan Losses87,528 72,979 314,745 282,972
Noninterest Income
Service charges and fees9,892 8,128 39,183 31,590
Loan servicing income1,400 1,068 5,636 4,501
Trust fees4,336 3,718 15,818 14,845
Brokerage and insurance commissions1,071 955 4,033 3,869
Securities gains, net1,420 1,608 6,973 11,340
Gains on sale of loans held for sale4,290 5,840 22,251 39,634
Valuation adjustment on commercial servicing rights(8) 8 21 (33)
Income on bank owned life insurance733 542 2,772 2,275
Other noninterest income2,394 2,588 5,335 5,580
Total Noninterest Income25,528 24,455 102,022 113,601
Noninterest Expense
Salaries and employee benefits43,289 39,115 171,407 163,547
Occupancy5,892 5,076 22,244 20,398
Furniture and equipment3,148 2,944 11,061 10,245
Professional fees8,537 7,195 32,879 27,676
FDIC insurance assessments985 717 3,595 4,185
Advertising2,088 2,274 7,229 6,448
Core deposit intangibles and customer relationship intangibles amortization1,825 1,147 6,077 5,630
Other real estate and loan collection expenses687 572 2,461 2,443
(Gain)/loss on sales/valuations of assets, net833 414 2,475 1,478
Other noninterest expenses10,594 10,458 38,247 37,618
Total Noninterest Expense77,878 69,912 297,675 279,668
Income Before Income Taxes35,178 27,522 119,092 116,905
Income taxes21,506 8,360 43,820 36,556
Net Income13,672 19,162 75,272 80,349
Preferred dividends(13) (19) (58) (292)
Interest expense on convertible preferred debt 3 12 51
Net Income Available to Common Stockholders$13,659 $19,146 $75,226 $80,108
Earnings per common share-diluted$0.45 $0.74 $2.65 $3.22
Weighted average shares outstanding-diluted30,209,043 25,800,472 28,425,652 24,873,430


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Interest Income
Interest and fees on loans$86,108 $82,906 $68,094 $66,898 $69,848
Interest on securities:
Taxable11,119 10,394 8,599 8,253 8,480
Nontaxable4,401 5,086 5,020 5,191 4,292
Interest on federal funds sold5 34 3
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments435 558 345 209 157
Total Interest Income102,068 98,978 82,061 80,551 82,777
Interest Expense
Interest on deposits5,313 5,073 4,163 3,730 3,744
Interest on short-term borrowings180 271 90 137 119
Interest on other borrowings3,719 3,790 3,228 3,656 3,754
Total Interest Expense9,212 9,134 7,481 7,523 7,617
Net Interest Income92,856 89,844 74,580 73,028 75,160
Provision for loan losses5,328 5,705 889 3,641 2,181
Net Interest Income After Provision for Loan Losses87,528 84,139 73,691 69,387 72,979
Noninterest Income
Service charges and fees9,892 10,138 9,696 9,457 8,128
Loan servicing income1,400 1,161 1,351 1,724 1,068
Trust fees4,336 3,872 3,979 3,631 3,718
Brokerage and insurance commissions1,071 950 976 1,036 955
Securities gains, net1,420 1,679 1,392 2,482 1,608
Net gains on sale of loans held for sale4,290 4,997 6,817 6,147 5,840
Valuation adjustment on commercial servicing rights(8) 5 19 5 8
Income on bank owned life insurance733 766 656 617 542
Other noninterest income2,394 1,409 738 794 2,588
Total Noninterest Income25,528 24,977 25,624 25,893 24,455
Noninterest Expense
Salaries and employee benefits43,289 45,225 41,126 41,767 39,115
Occupancy5,892 6,223 5,056 5,073 5,076
Furniture and equipment3,148 2,826 2,586 2,501 2,944
Professional fees8,537 8,450 7,583 8,309 7,195
FDIC insurance assessments985 894 909 807 717
Advertising2,088 1,358 1,359 2,424 2,274
Core deposit intangibles and customer relationship intangibles amortization1,825 1,863 1,218 1,171 1,147
Other real estate and loan collection expenses687 581 365 828 572
(Gain)/loss on sales/valuations of assets, net833 1,342 (112) 412 414
Other noninterest expenses10,594 9,997 9,208 8,448 10,458
Total Noninterest Expense77,878 78,759 69,298 71,740 69,912
Income Before Income Taxes35,178 30,357 30,017 23,540 27,522
Income taxes21,506 8,725 8,059 5,530 8,360
Net Income13,672 21,632 21,958 18,010 19,162
Preferred dividends(13) (13) (13) (19) (19)
Interest expense on convertible preferred debt 3 4 5 3
Net Income Available to Common Stockholders$13,659 $21,622 $21,949 $17,996 $19,146
Earnings per common share-diluted$0.45 $0.72 $0.81 $0.68 $0.74
Weighted average shares outstanding-diluted30,209,043 29,910,437 26,972,580 26,627,830 25,800,472


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
As Of
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Assets
Cash and due from banks$168,723 $180,751 $141,100 $129,386 $151,290
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments27,280 70,985 40,676 43,765 7,434
Cash and cash equivalents196,003 251,736 181,776 173,151 158,724
Time deposits in other financial institutions9,820 19,793 30,241 41,539 2,105
Securities:
Available for sale, at fair value2,216,753 2,093,385 1,789,441 1,893,528 1,845,864
Held to maturity, at cost253,550 256,355 259,586 260,616 263,662
Other investments, at cost22,563 23,176 21,094 21,557 21,560
Loans held for sale44,560 35,795 48,848 49,009 61,261
Loans:
Held to maturity6,391,464 6,373,415 5,325,082 5,361,604 5,351,719
Allowance for loan losses(55,686) (54,885) (54,051) (54,999) (54,324)
Loans, net6,335,778 6,318,530 5,271,031 5,306,605 5,297,395
Premises, furniture and equipment, net174,301 178,961 163,003 165,425 164,028
Goodwill236,615 236,615 141,461 141,461 127,699
Core deposit intangibles and customer relationship intangibles, net35,203 37,028 22,850 24,068 22,775
Servicing rights, net25,857 26,599 34,736 35,441 35,778
Cash surrender value on life insurance142,818 142,073 120,281 117,613 112,615
Other real estate, net10,777 13,226 9,269 11,188 9,744
Other assets106,141 122,355 111,104 120,644 123,869
Total Assets$9,810,739 $9,755,627 $8,204,721 $8,361,845 $8,247,079
Liabilities and Equity
Liabilities
Deposits:
Demand$2,983,128 $3,009,940 $2,355,410 $2,319,256 $2,202,036
Savings4,240,328 4,227,340 3,704,579 3,940,146 3,788,089
Time923,453 994,604 870,180 830,459 857,286
Total deposits8,146,909 8,231,884 6,930,169 7,089,861 6,847,411
Short-term borrowings324,691 171,871 139,130 155,025 306,459
Other borrowings285,011 301,473 281,096 282,051 288,534
Accrued expenses and other liabilities62,671 68,715 48,356 53,596 63,759
Total Liabilities8,819,282 8,773,943 7,398,751 7,580,533 7,506,163
Stockholders' Equity
Preferred equity938 938 938 938 1,357
Common stockholders' equity990,519 980,746 805,032 780,374 739,559
Total Equity991,457 981,684 805,970 781,312 740,916
Total Liabilities and Equity$9,810,739 $9,755,627 $8,204,721 $8,361,845 $8,247,079


HEARTLAND FINANCIAL USA, INC
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
December 31,
For the Year Ended
December 31,
2017 2016 2017 2016
Average Balances
Assets$9,807,621 $8,280,042 $9,009,625 $8,172,576
Loans, net of unearned6,343,923 5,473,001 5,847,061 5,488,112
Deposits8,293,006 6,928,978 7,590,232 6,813,781
Earning assets8,891,432 7,551,997 8,181,914 7,455,217
Interest bearing liabilities5,663,816 5,206,393 5,426,725 5,266,519
Common stockholders' equity986,026 726,455 871,683 678,989
Total stockholders' equity986,964 727,812 872,707 697,493
Tangible common stockholders' equity(1)713,018 575,412 657,020 528,712
Key Performance Ratios
Annualized return on average assets0.55% 0.92% 0.83% 0.98%
Annualized return on average common equity (GAAP)5.50% 10.48% 8.63% 11.80%
Annualized return on average tangible common equity (non-GAAP)(2)7.60% 13.24% 11.45% 15.15%
Annualized ratio of net charge-offs to average loans0.28% 0.18% 0.24% 0.11%
Annualized net interest margin (GAAP)4.14% 3.96% 4.04% 3.95%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)4.30% 4.14% 4.22% 4.13%
Efficiency ratio, fully tax-equivalent (4)62.26% 66.29% 65.40% 66.25%
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)
Net income available to common shareholders (GAAP)$13,659 $19,146 $75,226 $80,108
Average common stockholders' equity (GAAP)$986,026 $726,455 $871,683 $678,989
Less average goodwill236,615 127,699 184,554 125,724
Less average core deposit intangibles and customer relationship
intangibles, net
36,393 23,344 30,109 24,553
Average tangible common equity (non-GAAP)$713,018 $575,412 $657,020 $528,712
Annualized return on average common equity (GAAP)5.50% 10.48% 8.63% 11.80%
Annualized return on average tangible common equity (non-GAAP)7.60% 13.24% 11.45% 15.15%
Reconciliation of Annualized Net Interest Margin,
Fully Tax-Equivalent (non-GAAP)(6)
Net Interest Income (GAAP)$92,856 $75,160 $330,308 $294,666
Plus tax-equivalent adjustment(7)3,558 3,511 15,139 12,919
Net interest income - tax-equivalent (non-GAAP)

$96,414 $78,671 $345,447 $307,585
Average earning assets$8,891,432 $7,551,997 $8,181,914 $7,455,217
Annualized net interest margin (GAAP)4.14% 3.96% 4.04% 3.95%
Annualized net interest margin, fully tax-equivalent (non-GAAP)

4.30% 4.14% 4.22% 4.13%
(1) Calculated as common stockholders' equity less goodwill and core deposit 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, 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
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Average Balances
Assets$9,807,621 $9,639,844 $8,333,301 $8,233,510 $8,280,042
Loans, net of unearned6,343,923 6,286,264 5,376,826 5,365,654 5,473,001
Deposits8,293,006 8,100,028 7,050,126 6,896,821 6,928,978
Earning assets8,891,432 8,726,228 7,586,256 7,502,496 7,551,997
Interest bearing liabilities5,663,816 5,697,713 5,146,243 5,190,955 5,206,393
Common stockholders' equity986,026 954,511 791,039 751,671 726,455
Total stockholders' equity986,964 955,449 791,977 752,958 727,812
Tangible common stockholders' equity(1)713,018 691,464 625,929 596,006 575,412
Key Performance Ratios
Annualized return on average assets0.55% 0.89% 1.06% 0.89% 0.92%
Annualized return on average common equity (GAAP)5.50% 8.99% 11.13% 9.71% 10.48%
Annualized return on average tangible common equity (non-GAAP)(2)7.60% 12.41% 14.07% 12.25% 13.24%
Annualized ratio of net charge-offs to average loans0.28% 0.31% 0.14% 0.22% 0.18%
Annualized net interest margin (GAAP)4.14% 4.08% 3.94% 3.95% 3.96%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)4.30% 4.26% 4.14% 4.16% 4.14%
Efficiency ratio, fully tax-equivalent(4)62.26% 64.54% 65.61% 69.95% 66.29%
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)
Net income available to common shareholders (GAAP)$13,659 $21,622 $21,949 $17,996 $19,146
Average common stockholders' equity (GAAP)$986,026 $954,511 $791,039 $751,671 $726,455
Less average goodwill236,615 226,097 141,461 132,440 127,699
Less average core deposit intangibles and customer relationship
intangibles, net
36,393 36,950 23,649 23,225 23,344
Average tangible common equity (non-GAAP)$713,018 $691,464 $625,929 $596,006 $575,412
Annualized return on average common equity (GAAP)5.50% 8.99% 11.13% 9.71% 10.48%
Annualized return on average tangible common equity (non-GAAP)7.60% 12.41% 14.07% 12.25% 13.24%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)
Net Interest Income (GAAP)$92,856 $89,844 $74,580 $73,028 $75,160
Plus tax-equivalent adjustment(7)3,558 3,925 3,796 3,860 3,511
Net interest income, fully tax-equivalent (non-GAAP)$96,414 $93,769 $78,376 $76,888 $78,671
Average earning assets$8,891,432 $8,726,228 $7,586,256 $7,502,496 $7,551,997
Annualized net interest margin (GAAP)4.14% 4.08% 3.94% 3.95% 3.96%
Annualized net interest margin, fully tax-equivalent (non-GAAP)4.30% 4.26% 4.14% 4.16% 4.14%
(1) Calculated as common stockholders' equity less goodwill and core deposit 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, 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
December 31,
For the Year Ended
December 31,
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)2017 2016 2017 2016
Net interest income$92,856 $75,160 $330,308 $294,666
Tax-equivalent adjustment(2)3,558 3,511 15,139 12,919
Fully tax-equivalent net interest income96,414 78,671 345,447 307,585
Noninterest income25,528 24,455 102,022 113,601
Securities gains, net(1,420) (1,608) (6,973) (11,340)
Gain on extinguishment of debt(1,280) (1,280)
Adjusted income$119,242 $101,518 $439,216 $409,846
Total noninterest expenses$77,878 $69,912 $297,675 $279,668
Less:
Core deposit intangibles and customer relationship intangibles amortization1,825 1,147 6,077 5,630
Partnership investment in tax credit projects984 1,051 1,860 1,051
(Gain)/loss on sales/valuations of assets, net833 414 2,475 1,478
Adjusted noninterest expenses$74,236 $67,300 $287,263 $271,509
Efficiency ratio, fully tax-equivalent (non-GAAP)62.26% 66.29% 65.40% 66.25%
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)For the Quarter Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Net interest income$92,856 $89,844 $74,580 $73,028 $75,160
Tax-equivalent adjustment(2)3,558 3,925 3,796 3,860 3,511
Fully tax-equivalent net interest income96,414 93,769 78,376 76,888 78,671
Noninterest income25,528 24,977 25,624 25,893 24,455
Securities gains, net(1,420) (1,679) (1,392) (2,482) (1,608)
Gain on extinguishment of debt(1,280)
Adjusted income$119,242 $117,067 $102,608 $100,299 $101,518
Total noninterest expenses$77,878 $78,759 $69,298 $71,740 $69,912
Less:
Core deposit intangibles and customer relationship intangibles amortization1,825 1,863 1,218 1,171 1,147
Partnership investment in tax credit projects984 876 1,051
(Gain)/loss on sales/valuation of assets, net833 1,342 (112) 412 414
Adjusted noninterest expenses$74,236 $75,554 $67,316 $70,157 $67,300
Efficiency ratio, fully tax-equivalent (non-GAAP)62.26% 64.54% 65.61% 69.95% 66.29%
(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 historic rehabilitation tax credits. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, 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
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Common Share Data
Book value per common share$33.07 $32.75 $30.15 $29.26 $28.31
Tangible book value per common share (non-GAAP)(1)$23.99 $23.61 $24.00 $23.05 $22.55
Common shares outstanding, net of treasury stock29,953,356 29,946,069 26,701,226 26,674,121 26,119,929
Tangible common equity ratio (non-GAAP)(2)7.53% 7.46% 7.97% 7.50% 7.28%
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(3)
Common stockholders' equity (GAAP)$990,518 $980,746 $805,032 $780,374 $739,559
Less goodwill236,615 236,615 141,461 141,461 127,699
Less core deposit intangibles and customer relationship
intangibles, net
35,203 37,028 22,850 24,068 22,775
Tangible common stockholders' equity (non-GAAP)$718,700 $707,103 $640,721 $614,845 $589,085
Common shares outstanding, net of treasury stock29,953,356 29,946,069 26,701,226 26,674,121 26,119,929
Common stockholders' equity (book value) per share (GAAP)$33.07 $32.75 $30.15 $29.26 $28.31
Tangible book value per common share (non-GAAP)$23.99 $23.61 $24.00 $23.05 $22.55
Reconciliation of Tangible Common Equity Ratio (non-GAAP)(4)
Total assets (GAAP)$9,810,739 $9,755,627 $8,204,721 $8,361,845 $8,247,079
Less goodwill236,615 236,615 141,461 141,461 127,699
Less core deposit intangibles and customer relationship
intangibles, net
35,203 37,028 22,850 24,068 22,775
Total tangible assets (non-GAAP)$9,538,921 $9,481,984 $8,040,410 $8,196,316 $8,096,605
Tangible common equity ratio (non-GAAP)7.53% 7.46% 7.97% 7.50% 7.28%
Loan Data
Loans held to maturity:
Commercial and commercial real estate$4,809,875 $4,777,856 $3,803,011 $3,849,748 $3,825,847
Residential mortgage624,279 635,611 596,385 604,902 617,924
Agricultural and agricultural real estate511,588 511,764 495,243 481,125 489,318
Consumer447,484 450,088 431,052 427,962 420,613
Unearned discount and deferred loan fees(1,762) (1,904) (609) (2,133) (1,983)
Total loans held to maturity$6,391,464 $6,373,415 $5,325,082 $5,361,604 $5,351,719
Other Selected Trend Information
Effective tax rate61.13% 28.74% 26.85% 23.49% 30.38%
Full time equivalent employees2,008 2,024 1,862 1,896 1,864
Total residential mortgage loan applications$232,946 $271,476 $308,113 $248,614 $304,018
Residential mortgage loans originated$185,580 $198,911 $216,637 $161,851 $278,065
Residential mortgage loans sold$166,346 $188,501 $180,296 $172,521 $269,333
Residential mortgage loan servicing portfolio$3,558,090 $3,557,866 $4,340,243 $4,338,311 $4,308,580
(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, 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, net divided by total assets less goodwill and core deposit intangibles, net. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
As of and for the Quarter Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Allowance for Loan Losses
Balance, beginning of period$54,885 $54,051 $54,999 $54,324 $54,653
Provision for loan losses5,328 5,705 889 3,641 2,181
Charge-offs(5,628) (5,759) (2,766) (3,718) (3,555)
Recoveries1,101 888 929 752 1,045
Balance, end of period$55,686 $54,885 $54,051 $54,999 $54,324
Asset Quality
Nonaccrual loans$62,581 $63,456 $65,393 $62,868 $64,299
Loans past due ninety days or more as to interest or principal payments830 2,348 698 872 86
Other real estate owned10,777 13,226 9,269 11,188 9,744
Other repossessed assets411 773 675 739 663
Total nonperforming assets$74,599 $79,803 $76,035 $75,667 $74,792
Performing troubled debt restructured loans$6,617 $10,040 $11,157 $11,010 $10,380
Nonperforming Assets Activity
Balance, beginning of period$79,803 $76,035 $75,667 $74,792 $69,465
Net loan charge offs(4,527) (4,871) (1,837) (2,966) (2,510)
New nonperforming loans9,911 9,117 13,700 14,819 23,035
Acquired nonperforming assets 7,991
Reduction of nonperforming loans(1)(7,177) (5,183) (7,443) (10,037) (13,707)
OREO/Repossessed assets sales proceeds(2,917) (3,328) (3,734) (715) (1,037)
OREO/Repossessed assets writedowns, net(146) (56) (259) (279) (274)
Net activity at Citizens Finance Co.(348) 98 (59) 53 (180)
Balance, end of period$74,599 $79,803 $76,035 $75,667 $74,792
Asset Quality Ratios
Ratio of nonperforming loans to total loans0.99% 1.03% 1.24% 1.19% 1.20%
Ratio of nonperforming assets to total assets0.76% 0.82% 0.93% 0.90% 0.91%
Annualized ratio of net loan charge-offs to average loans0.28% 0.31% 0.14% 0.22% 0.18%
Allowance for loan losses as a percent of loans0.87% 0.86% 1.02% 1.03% 1.02%
Allowance for loan losses as a percent of nonperforming loans87.82% 83.41% 81.78% 86.29% 84.37%
Loans delinquent 30-89 days as a percent of total loans0.27% 0.33% 0.38% 0.44% 0.37%
(1) Includes principal reductions, transfers to performing status and transfers to OREO.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
For the Quarter Ended
December 31, 2017 December 31, 2016
Average
Balance
Interest Rate Average
Balance
Interest Rate
Earning Assets
Securities:
Taxable$1,881,708 $11,119 2.34% $1,471,966 $8,480 2.29%
Nontaxable(1)555,390 6,771 4.84 539,347 6,603 4.87
Total securities2,437,098 17,890 2.91 2,011,313 15,083 2.98
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments162,325 435 1.06 122,727 157 0.51
Federal funds sold3,106 5 0.64 398
Loans:(2)
Commercial and commercial real estate(1)4,725,572 59,370 4.98 3,864,826 48,124 4.95
Residential mortgage658,563 9,750 5.87 699,739 7,035 4.00
Agricultural and agricultural real estate(1)515,426 6,115 4.71 485,158 5,624 4.61
Consumer444,362 9,820 8.77 423,278 8,184 7.69
Fees on loans 2,241 2,081
Less: allowance for loan losses(55,020) (55,442)
Net loans6,288,903 87,296 5.51 5,417,559 71,048 5.22
Total earning assets8,891,432 105,626 4.71% 7,551,997 86,288 4.55%
Nonearning Assets916,189 728,045
Total Assets$9,807,621 $8,280,042
Interest Bearing Liabilities
Savings$4,244,711 $3,335 0.31% $3,767,398 $2,012 0.21%
Time, $100,000 and over399,331 777 0.77 380,701 761 0.80
Other time deposits562,595 1,201 0.85 512,874 971 0.75
Short-term borrowings161,959 180 0.44 252,175 119 0.19
Other borrowings295,220 3,719 5.00 293,245 3,754 5.09
Total interest bearing liabilities5,663,816 9,212 0.65% 5,206,393 7,617 0.58%
Noninterest Bearing Liabilities
Noninterest bearing deposits3,086,369 2,268,005
Accrued interest and other liabilities70,472 77,832
Total noninterest bearing liabilities3,156,841 2,345,837
Stockholders' Equity986,964 727,812
Total Liabilities and Stockholders' Equity$9,807,621 $8,280,042
Net interest income, fully tax-equivalent (non-GAAP)(1) $96,414 $78,671
Net interest spread(1) 4.06% 3.97%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(3) 4.30% 4.14%
Interest bearing liabilities to earning assets63.70% 68.94%
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(3)
Net interest income, fully tax-equivalent (non-GAAP) $96,414 $78,671
Adjustments for tax-equivalent interest(1) (3,558) (3,511)
Net interest income (GAAP) $92,856 $75,160
Average earning assets$8,891,432 $7,551,997
Annualized net interest margin (GAAP) 4.14% 3.96%
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.30% 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 Year Ended
December 31, 2017 December 31, 2016
Average
Balance
Interest Rate Average
Balance
Interest Rate
Earning Assets
Securities:
Taxable$1,629,936 $38,365 2.35% $1,466,062 $32,858 2.24%
Nontaxable(1)617,267 30,305 4.91 465,178 23,208 4.99
Total securities2,247,203 68,670 3.06 1,931,240 56,066 2.90
Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments136,555 1,547 1.13 78,503 396 0.50
Federal funds sold5,932 42 0.71 9,464 12 0.13
Loans:(2)
Commercial and commercial real estate(1)4,256,158 211,316 4.96 3,846,285 190,101 4.94
Residential mortgage655,515 30,242 4.61 738,634 30,168 4.08
Agricultural and agricultural real estate(1)498,032 23,651 4.75 480,221 22,576 4.70
Consumer437,356 35,194 8.05 422,972 32,636 7.72
Fees on loans 8,135 7,443
Less: allowance for loan losses(54,837) (52,102)
Net loans5,792,224 308,538 5.33 5,436,010 282,924 5.20
Total earning assets8,181,914 378,797 4.63% 7,455,217 339,398 4.55%
Nonearning Assets827,711 717,359
Total Assets$9,009,625 $8,172,576
Interest Bearing Liabilities
Savings$4,044,032 $11,107 0.27% $3,680,535 $8,000 0.22%
Time, $100,000 and over377,090 3,016 0.80 424,802 3,178 0.75
Other time deposits525,165 4,156 0.79 577,908 4,761 0.82
Short-term borrowings190,040 678 0.36 298,734 1,202 0.40
Other borrowings290,398 14,393 4.96 284,540 14,672 5.16
Total interest bearing liabilities5,426,725 33,350 0.61% 5,266,519 31,813 0.60%
Noninterest Bearing Liabilities
Noninterest bearing deposits2,643,945 2,130,536
Accrued interest and other liabilities66,248 78,028
Total noninterest bearing liabilities2,710,193 2,208,564
Stockholders' Equity872,707 697,493
Total Liabilities and Stockholders' Equity$9,009,625 $8,172,576
Net interest income, fully tax-equivalent (non-GAAP)(1) $345,447 $307,585
Net interest spread(1) 4.02% 3.95%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets(3) 4.22% 4.13%
Interest bearing liabilities to earning assets66.33% 70.64%
Reconciliation of annualized net interest margin, fully tax-equivalent (non-GAAP)(3)
Net interest income, fully tax-equivalent (non-GAAP) $345,447 $307,585
Adjustments for tax-equivalent interest(1) (15,139) (12,919)
Net interest income (GAAP) $330,308 $294,666
Average earning assets$8,181,914 $7,455,217
Annualized net interest margin (GAAP) 4.04% 3.95%
Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.22% 4.13%
(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) 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
12/31/20179/30/20176/30/20173/31/201712/31/2016
Total Assets
Citywide Banks(1)$2,289,956 $2,391,727 $817,859 $839,505 $901,782
New Mexico Bank & Trust1,453,534 1,425,185 1,407,991 1,382,480 1,374,647
Dubuque Bank and Trust Company1,443,419 1,479,647 1,441,655 1,436,038 1,497,775
Wisconsin Bank & Trust1,079,222 1,030,192 1,035,628 1,033,633 1,065,715
Premier Valley Bank925,078 886,495 850,956 854,838 640,684
Illinois Bank & Trust783,127 761,285 740,153 746,669 742,173
Morrill & Janes Bank and Trust Company654,871 719,246 748,286 871,819 863,544
Arizona Bank & Trust602,182 566,951 566,339 578,597 582,266
Rocky Mountain Bank487,136 486,790 476,829 479,121 477,063
Minnesota Bank & Trust210,157 217,246 216,957 213,789 229,114
Total Portfolio Loans
Citywide Banks(1)$1,460,111 $1,540,016 $558,573 $572,254 $609,760
New Mexico Bank & Trust1,025,574 989,367 934,734 906,477 924,249
Dubuque Bank and Trust Company887,053 868,370 884,640 903,617 905,242
Wisconsin Bank & Trust687,957 684,530 662,502 644,380 650,254
Premier Valley Bank497,852 458,443 447,148 440,406 348,879
Illinois Bank & Trust472,072 462,150 447,887 469,105 473,008
Morrill & Janes Bank and Trust Company448,711 468,197 515,896 546,123 548,544
Arizona Bank & Trust423,872 401,516 377,358 384,028 384,706
Rocky Mountain Bank335,061 338,305 335,173 330,921 347,839
Minnesota Bank & Trust140,682 142,650 144,112 142,736 144,098
Total Deposits
Citywide Banks(1)$1,895,540 $1,924,605 $682,872 $712,377 $733,449
New Mexico Bank & Trust1,229,324 1,221,134 1,190,758 1,184,675 1,091,436
Dubuque Bank and Trust Company1,084,415 1,139,512 1,178,368 1,212,899 1,231,016
Wisconsin Bank & Trust890,835 852,489 874,845 868,033 899,676
Premier Valley Bank705,142 714,605 681,298 708,226 510,142
Illinois Bank & Trust692,227 691,680 669,532 641,750 636,419
Morrill & Janes Bank and Trust Company563,638 605,390 627,857 721,075 738,036
Arizona Bank & Trust522,490 500,270 493,419 501,111 477,213
Rocky Mountain Bank424,487 426,405 416,436 420,067 414,344
Minnesota Bank & Trust178,036 189,749 193,365 189,324 194,368
Net Income (Loss)
Citywide Banks(1)$1,069 $4,541 $746 $1,366 $1,572
New Mexico Bank & Trust2,954 4,972 5,855 4,419 4,061
Dubuque Bank and Trust Company9,027 703 3,477 2,056 806
Wisconsin Bank & Trust2,210 3,368 3,448 1,968 2,970
Premier Valley Bank1,508 2,907 2,573 1,306 2,969
Illinois Bank & Trust794 2,286 1,984 1,991 1,917
Morrill & Janes Bank and Trust Company650 1,760 2,210 2,227 2,519
Arizona Bank & Trust(103)1,451 1,073 1,486 1,305
Rocky Mountain Bank1,769 1,631 1,732 1,521 1,229
Minnesota Bank & Trust106 791 563 591 888
(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.