Dubuque, IA, Oct. 26, 2020 (GLOBE NEWSWIRE) -- Highlights and Developments

§	Record quarterly net income available to common stockholders of $45.5 million compared to $34.6 million for the third quarter of 2019, an increase of $10.9 million or 32%
§	Diluted earnings per common share of $1.23 in comparison with $0.94 for the third quarter of the prior year, an increase of $0.29 or 31%
§	Net interest margin of 3.51% (3.55% on a fully tax-equivalent basis, non-GAAP)(1) during the third quarter of 2020, compared to 3.81% (3.85% on a fully tax-equivalent basis, non-GAAP)(1) during the second quarter of 2020 and 3.98% (4.02% on a fully tax-equivalent basis, non-GAAP)(1) during the third quarter of 2019
§	Efficiency ratio (non-GAAP)1 of 54.67% compared to 60.85% for the third quarter of 2019
§	Contributed $1.5 million for the nine months ended September 30, 2020, to support communities served by Heartland and its subsidiary banks, including recent donations of $260,000 to local schools

	Quarter Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Net income available to common stockholders (in millions)	$	45.5			$	34.6			$	95.7			$	111.3
Diluted earnings per common share	1.23				0.94				2.59				3.11
Return on average assets	1.19		%		1.12		%		0.90		%		1.27		%
Return on average common equity	10.90				8.91				7.90				10.33
Return on average tangible common equity (non-GAAP)(1)	16.11				13.78				12.10				16.13
Net interest margin	3.51				3.98				3.70				4.05
Net interest margin, fully tax-equivalent (non-GAAP)(1)	3.55				4.02				3.74				4.10
Efficiency ratio, fully-tax equivalent (non-GAAP)(1)	54.67				60.85				57.28				63.26

(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to the financial tables for reconciliations to the most directly comparable GAAP measures.

"Heartland set a new record of $45.5 million for quarterly net income available to common stockholders during the third quarter of 2020, an increase of $10.9 million or 32% over the same quarter of 2019. Earnings per diluted common share totaled $1.23, an increase of $0.29 or 31% from $0.94 in the third quarter of 2019."

Bruce K. Lee, president and chief executive officer, Heartland Financial USA, Inc.

Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following quarterly results:

1. net income available to common stockholders of $45.5 million, or $1.23 per diluted common share, for the quarter ended September 30, 2020, compared to $34.6 million, or $0.94 per diluted common share, for the third quarter of 2019.
2. excluding tax-effected provision for credit losses of $1.3 million and tax-effected acquisition, integration and restructuring costs of $905,000, adjusted net income available to common stockholders (non-GAAP) was $47.8 million, or $1.29 of adjusted earnings per diluted common share (non-GAAP) for the third quarter of 2020, compared to $39.9 million (non-GAAP) or $1.08 of adjusted earnings per diluted common share (non-GAAP), for the third quarter of 2019, which excluded tax-effected provision for credit losses of $4.1 million and tax-effected acquisition, integration and restructuring costs of $1.2 million.
3. return on average common equity was 10.90% and return on average assets was 1.19% for the third quarter of 2020, compared to 8.91% and 1.12%, respectively, for the same quarter in 2019.
4. return on average tangible common equity (non-GAAP) of 16.11% and adjusted return on average tangible common equity (non-GAAP) of 16.86% for the third quarter of 2020 compared to 13.78% and 15.76%, respectively, for the third quarter of 2019.

Heartland reported the following results for the nine months ended September 30, 2020:

1. net income available to common stockholders of $95.7 million or $2.59 per diluted common share, for the nine months ended September 30, 2020, compared to $111.3 million or $3.11 per diluted common share for the nine months ended September 30, 2019.
2. excluding tax-effected provision for credit losses of $39.5 million and tax-effected acquisition, integration and restructuring costs of $2.5 million, adjusted net income available to common stockholders (non-GAAP) was $137.7 million, or $3.73 of adjusted earnings per diluted common share (non-GAAP), for the nine months ended September 30, 2020, compared to $125.3 million (non-GAAP), or $3.50 of adjusted earnings per diluted common share (non-GAAP), for the nine months ended September 30, 2019, which excluded tax-effected provision for credit losses of $9.3 million and tax-effected acquisition, integration and restructuring costs of $4.8 million.
3. return on average common equity was 7.90% and return on average assets was 0.90% for the first nine months of 2020, compared to 10.33% and 1.27%, respectively, for the same period in 2019.
4. return on average tangible common equity (non-GAAP) of 12.10% and adjusted return on average tangible common equity (non-GAAP) of 17.08% for the nine months ended September 30, 2020, compared to 16.13% and 18.05%, respectively, for the nine months ended September 30, 2019.

"Heartland set a new record of $45.5 million for quarterly net income available to common stockholders during the third quarter of 2020, an increase of $10.9 million or 32% over the same quarter of 2019. Earnings per diluted common share totaled $1.23, an increase of $0.29 or 31% from $0.94 in the third quarter of 2019," said Bruce K. Lee, Heartland's president and chief executive officer.

Responses to COVID-19 

In the first quarter of 2020, Heartland implemented and continues to operate under its pandemic management plan. While the measures described below remain in effect, Heartland’s pandemic management plan continues to evolve in response to the recent developments relating to the COVID-19 pandemic. To assure workplace and employee safety and business resiliency while providing relief and support to customers and communities facing challenges from the impacts of the pandemic, the following measures are in place:

1. employees who can work from home continue to do so, and those employees who are working in bank offices have been placed on rotating teams to limit potential exposure to COVID-19;
2. all in-person events and large meetings are canceled and have transitioned to virtual meetings;
3. employees receive an increase in time off and enhanced health care coverage related to testing and treatments for COVID-19;
4. Heartland has installed and requires the use of personal protective equipment in bank offices;
5. Heartland has implemented and extended a 20% wage premium for certain customer-facing employees,
6. Heartland has provided direct guaranteed loans from the U.S. Small Business Administration (the ‘‘SBA’’) to customers through Heartland’s participation in the Coronavirus Aid, Relief and Economic Security Act (the ‘‘CARES Act’’) and originated $1.2 billion of loans under the Paycheck Protection Program (‘‘PPP’’);
7. Heartland has participated in the CARES Act SBA loan payment and deferral program for existing SBA loans; and
8. Heartland has contributed $1.5 million to support communities served by Heartland and its subsidiary banks, including recent donations of $260,000 to local schools.

"We are proud of our recent contributions to local schools to help teachers and students learn in a safe and healthy environment. We continue to support the communities in which we live and work during this pandemic," Lee said.

The continued economic disruption resulting from the COVID-19 pandemic will make it difficult for some customers to repay the principal and interest on their loans, and Heartland's subsidiary banks have been working with customers to modify the terms of certain existing loans.

The following table shows the total loan exposure as of September 30, 2020, June 30, 2020, and March 31, 2020, to customer segment profiles that Heartland currently believes will be more heavily impacted by COVID-19, dollars in thousands:

	As of September 30, 2020							As of June 30, 2020							As of March 31, 2020
Industry	Total Exposure(1)				% of Gross Exposure(1)			Total Exposure(1)				% of Gross Exposure(1)			Total Exposure(1)				% of Gross Exposure(1)
Lodging	$	495,187			4.52	%		$	490,475			4.38	%		$	498,596			4.47	%
Retail trade	405,118				3.70			407,030				3.64			367,727				3.30
Retail properties	363,457				3.32			369,782				3.31			408,506				3.66
Restaurants and bars	248,053				2.26			255,701				2.29			247,239				2.22
Oil and gas	52,766				0.48			63,973				0.57			56,302				0.50
Total	$	1,564,581			14.28	%		$	1,586,961			14.19	%		$	1,578,370			14.15	%
(1) Total loans outstanding and unfunded commitments excluding PPP loans

As of September 30, 2020, of the approximately $1.11 billion of loans modified under COVID-19 relief programs, $860.0 million of loans have returned to full payment status, $133.0 million of loans remain in the original deferral status, and second loan modifications have been made on approximately $122.0 million of loans in Heartland's portfolio. Approximately 69% of the second loan modifications are principal and interest deferments for 90 days, and the remainder are primarily interest-only payments for 90 days.

The ultimate impact of the COVID-19 pandemic on Heartland's financial condition and results of operations will depend on the severity and duration of the pandemic, related restrictions on business and consumer activity, and the availability of government programs to alleviate the economic stress of the pandemic. See Heartland's "Safe Harbor Statement" below.

2020 Developments

Adoption of ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)"

On January 1, 2020, Heartland adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)," commonly referred to as "CECL." The impact of Heartland's adoption of CECL ("Day 1") resulted in the following:

1. an increase of $12.1 million to the allowance for credit losses related to loans, which included a reclassification of $6.0 million of purchased credit impaired loan discount on previously acquired loans, and a cumulative-effect adjustment to retained earnings totaling $4.6 million, net of taxes of $1.5 million;
2. an increase of $13.6 million to the allowance for unfunded commitments and a cumulative-effect adjustment to retained earnings totaling $10.2 million, net of taxes of $3.4 million, and
3. established an allowance for credit losses for Heartland's held to maturity debt securities of $158,000 and a cumulative-effect adjustment to retained earnings totaling $118,000, net of taxes of $40,000.

Entered into an Amended and Restated Agreement and Plan of Merger with AIM Bancshares, Inc.

On October 19, 2020, Heartland entered into an Amended and Restated Agreement and Plan of Merger (the “amended and restated merger agreement”) relating to the acquisition of AIM Bancshares, Inc. (“AIM”) and its wholly-owned subsidiary, AimBank, headquartered in Levelland, Texas. The amended and restated merger agreement amends and restates the Agreement and Plan of Merger dated February 11, 2020 between Heartland and AIM (the “original merger agreement”). The original merger agreement was amended and restated to address certain regulatory concerns raised by the Federal Reserve Board during its review of the transaction contemplated by the original merger agreement. In response to discussions with the Federal Reserve Board, AIM and Heartland agreed that they could better serve the goals of the transaction and more easily address regulatory concerns if they adopted two sequential mergers described in the next paragraph. AIM and Heartland also agreed to adjust the cash component of the merger consideration based on increases in AIM’s adjusted tangible common equity as a result of gains in AIM’s “available-for-sale” securities portfolio, an increase in AIM’s retained earnings and gains in AIM’s “held-to-maturity” securities portfolio since the date of the original merger agreement. A holdback provision was added to the amended and restated merger agreement as a result of a certain litigation proceedings. Certain other provisions of the original merger agreement were revised to reflect other changes in economic terms and the significantly delayed closing date of the transaction.

In the first merger, AIM will merge with and into AimBank, and holders of shares of AIM common stock will receive one share of AimBank common stock for each share of AIM common stock owned by such holders.  In the second merger, which will occur immediately following the consummation of the AIM/AimBank merger, AimBank will merge with and into Heartland’s wholly owned subsidiary, First Bank & Trust. In the second merger transaction, all issued and outstanding shares of AimBank common stock will be exchanged for shares of Heartland common stock and cash. As a result, each share of AimBank common stock received by shareholders of AIM in the first merger will be exchanged for 207.0 shares of Heartland common stock and $685.00 of cash. The transaction value will change due to fluctuations in the price of Heartland common stock and is subject to certain potential adjustments as set forth in the amended and restated merger agreement, including but not limited to adjustments based on changes in the adjusted tangible common equity of AIM. Heartland expects this transaction to close in the fourth quarter of 2020. As of September 30, 2020, AimBank had total assets of approximately $1.85 billion, which included $1.14 billion of gross loans outstanding, and approximately $1.60 billion of deposits.

Entered into a Purchase and Assumption Agreement with Johnson Financial Group, Inc.

On June 9, 2020, Arizona Bank & Trust (“AB&T”), a wholly-owned subsidiary of Heartland headquartered in Phoenix, Arizona, entered into a purchase and assumption agreement, pursuant to which AB&T will acquire certain assets and will assume substantially all of the deposits and certain other liabilities of Johnson Bank’s Arizona operations, which includes four banking centers. Johnson Bank is a wholly-owned subsidiary of Johnson Financial Group, Inc. headquartered in Racine, Wisconsin. Johnson Insurance Services is not a part of this transaction.

Under the terms of the purchase and assumption agreement, AB&T will acquire Johnson Bank's Arizona banking centers, which had deposits of approximately $392.2 million and loans of approximately $183.8 million as of September 30, 2020. The actual amount of deposits assumed and loans acquired will be determined at closing, which is expected to be in the fourth quarter of 2020 and is subject to certain potential adjustments as set forth in the purchase and assumption agreement.

"We are looking forward to completing the acquisitions of AimBank and four Johnson Bank branches in the fourth quarter," commented Lynn B. Fuller, Heartland's executive operating chairman.

Branch Optimization

In the third quarter of 2020, Heartland's subsidiary banks approved plans to consolidate six branch locations, which included one branch in the Midwest region, four branches in the Western region and one in the Southwestern region and resulted in $1.2 million of fixed asset write-downs. The branch consolidations are expected to be completed in early 2021. Heartland continues to review its branch network for optimization and consolidation opportunities, which may result in additional write-downs of fixed assets in future periods.

Net Interest Income Increases and Net Interest Margin Decreases from Third Quarter of 2019

Net interest margin, expressed as a percentage of average earning assets, was 3.51% (3.55% on a fully tax-equivalent basis, non-GAAP) during the third quarter of 2020, compared to 3.81% (3.85% on a fully tax-equivalent basis, non-GAAP) during the second quarter of 2020 and 3.98% (4.02% on a fully tax-equivalent basis, non-GAAP) during the third quarter of 2019.

Total interest income and average earning asset changes for the third quarter of 2020 compared to the third quarter of 2019 were:

1. Heartland recorded $131.0 million of total interest income, which was a decrease of $2.4 million or 2% from $133.4 million, based on a decrease in the average rate on earning assets, which was partially offset by an increase in average earning assets.
2. Total interest income on a tax-equivalent basis was $132.4 million, which was a decrease of $2.2 million or 2% from $134.5 million. 
3. Average earning assets increased $2.77 billion or 25% to $13.87 billion compared to $11.10 billion for the third quarter of 2019, which was primarily attributable to recent acquisitions and loan growth, including PPP loans.
4. The average rate on earning assets decreased 101 basis points to 3.80% compared to 4.81%, which was primarily due to recent decreases in market interest rates and the lower yield on PPP loans, which was 2.63% for the third quarter of 2020.

Total interest expense and average interest bearing liability changes for the third quarter of 2020 compared to the third quarter of 2019 were:

1. Total interest expense was $8.5 million, a decrease of $13.6 million or 62% from $22.1 million, based on a decrease in the average interest rate paid, which was partially offset by an increase in average interest bearing liabilities.
2. The average interest rate paid on Heartland's interest bearing liabilities decreased to 0.40% compared to 1.22%, which was primarily due to recent decreases in market interest rates.
3. Average interest bearing deposits increased $966.9 million or 14% to $7.76 billion from $6.79 billion which was primarily attributable to recent acquisitions and deposit growth, including deposits from government stimulus payments and other COVID-19 relief programs. 
4. The average interest rate paid on Heartland's interest bearing deposits decreased 80 basis points to 0.25% compared to 1.05%.
5. Average borrowings increased $178.3 million or 47% to $560.4 million from $382.2 million. The average interest rate paid on Heartland's borrowings was 2.49% compared to 4.27%.

Net interest income increased for the third quarter of 2020 compared to the third quarter of 2019:

1. Net interest income totaled $122.5 million compared to $111.3 million, which was an increase of $11.2 million or 10%.
2. Net interest income on a tax-equivalent basis totaled $123.9 million compared to $112.5 million, which was an increase of $11.4 million or 10%. 

Noninterest Income Increases and Noninterest Expense Decreases from Third Quarter of 2019

Total noninterest income was $31.2 million during the third quarter of 2020 compared to $29.4 million during the third quarter of 2019, an increase of $1.8 million or 6%. Significant changes by noninterest income category for the third quarter of 2020 compared to the third quarter of 2019 were:

1. Net gains on sale of loans held for sale totaled $8.9 million compared to $4.7 million, which was an increase of $4.2 million or 90%, primarily due to an increase in residential mortgage loan activity in response to the recent declines in mortgage interest rates.
2. Other noninterest income was $1.7 million compared to $3.2 million, which was a decrease of $1.5 million or 46%. Commercial swap fee income totaled $16,000 compared to $1.6 million.

Total noninterest expense was $90.4 million during the third quarter of 2020 compared to $93.0 million during the third quarter of 2019, which was a decrease of $2.6 million or 3%. Significant changes within the noninterest expense category for the third quarter of 2020 compared to the third quarter of 2019 were:

1. Professional fees increased $1.5 million or 14% to $12.8 million compared to $11.3 million. Included in professional fees for the third quarter of 2020 was $1.6 million of expense for FDIC insurance assessments compared to a benefit of $911,000 in the third quarter of 2019. 
2. Advertising expense decreased $1.7 million or 65% to $928,000 compared to $2.6 million. The decrease was primarily attributable to a reduction of in-person customer events.

1. Net losses on sales/valuations of assets totaled $1.8 million compared to $356,000, which was an increase of $1.4 million. The increase was primarily attributable to losses and writedowns on fixed assets associated with branch optimization activities.
2. Other noninterest expenses totaled $9.8 million compared to $12.0 million, which was a decrease of $2.2 million or 18%. The decrease was primarily attributable to reduced travel expenses and customer entertainment activities because meetings have transitioned to virtual formats.

Heartland's effective tax rate was 22.20% for the third quarter of 2020 compared to 18.66% for the third quarter of 2019. The following items impacted Heartland's third quarter 2020 and 2019 tax calculations:

1. Solar energy tax credits of $965,000 compared to $2.0 million.
2. Federal low-income housing tax credits of $195,000 compared to $281,000.
3. New markets tax credits of $75,000 compared to $0.
4. Tax-exempt interest income as a percentage of pre-tax income of 8.48% compared to 10.08%.

Total Assets Increase, Total Loans Increase and Deposits Increase Since December 31, 2019

Total assets were $15.61 billion at September 30, 2020, an increase of $2.40 billion or 18% from $13.21 billion at year-end 2019. Securities represented 33% and 26% of total assets at September 30, 2020, and December 31, 2019, respectively.

Total loans held to maturity were $9.10 billion at September 30, 2020, and $8.37 billion at December 31, 2019, which was an increase of $731.7 million or 9%. Loan changes by category were:

1. Commercial and business lending, which includes commercial and industrial, Paycheck Protection Program ("PPP"), and owner occupied commercial real estate loans, increased $923.1 million or 23% to $4.93 billion at September 30, 2020, compared to $4.00 billion at December 31, 2019. Excluding $1.13 billion of PPP loans, commercial and business lending decreased $205.0 million or 5% since year-end 2019. 
2. Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $54.5 million or 2% to $2.58 billion at September 30, 2020 from $2.52 billion at year-end 2019. 
3. Agricultural and agricultural real estate loans totaled $508.1 million at September 30, 2020, compared to $565.8 million at December 31, 2019, which was a decrease of $57.8 million or 10%.

1. Residential mortgage loans decreased $130.4 million or 16% to $701.9 million at September 30, 2020, from $832.3 million at December 31, 2019.

1. Consumer loans decreased $57.7 million or 13% to $385.7 million at September 30, 2020, compared to $443.3 million at December 31, 2019.

Total deposits were $12.77 billion as of September 30, 2020, compared to $11.04 billion at year-end 2019, an increase of $1.72 billion or 16%. Deposit changes by category were:

1. Demand deposits increased $1.48 billion or 42% to $5.02 billion at September 30, 2020, compared to $3.54 billion at December 31, 2019.

1. Savings deposits increased $434.7 million or 7% to $6.74 billion at September 30, 2020, from $6.31 billion at December 31, 2019. 

1. Time deposits decreased $190.7 million or 16% to $1.00 billion at September 30, 2020 from $1.19 billion at December 31, 2019. 

Growth in non-time deposits was positively impacted by federal government stimulus payments and other COVID-19 relief programs.

Provision and Allowance

Provision and Allowance for Credit Losses for Loans
Provision expense for credit losses for loans for the third quarter of 2020 was $4.7 million, which was a decrease of $20.3 million from $25.0 million recorded in the prior quarter and a decrease of $460,000 from $5.2 million recorded in the third quarter of 2019. The provision expense for the third quarter of 2020 was impacted by several factors, including:

1. decreases in balances of loans held to maturity of $147.2 million from the prior quarter;
2. modest changes in credit quality marked by delinquencies of 0.17% of total loans and nonpass loans of 8.7% of total loans for the third quarter compared to delinquencies of 0.22% of total loans and nonpass loans of 8.1% of total loans for the second quarter;
3. consistent macroeconomic outlook compared to the second quarter of 2020, and
4. the charge off of one $5.9 million commercial and industrial loan originated in California for which no specific reserve was previously established.

Heartland's allowance for credit losses for loans totaled $103.4 million and $70.4 million at September 30, 2020, and December 31, 2019, respectively. The following items have impacted Heartland's allowance for credit losses for loans for the nine months ended September 30, 2020:

1. The allowance for credit losses for loans increased $12.1 million after the adoption of CECL on January 1, 2020.
2. Provision expense for the nine months ended September 30, 2020, totaled $49.6 million.
3. Net charge offs of $28.7 million have been recorded for the first nine months of 2020, which included $21.3 million of net charge offs for the third quarter. During the third quarter of 2020, Heartland charged off $13.9 million on individually assessed loans with principal balances of $17.1 million that had been specifically reserved in the second quarter of 2020 in addition to the charge off of the $5.9 million loan previously described.

Heartland expects that net charge offs could remain elevated in future periods as customers’ ability to repay loans is adversely impacted by economic disruptions caused by the COVID-19 pandemic.

Provision and Allowance for Credit Losses for Unfunded Commitments
Heartland's allowance for unfunded commitments totaled $13.9 million after the adoption of CECL on January 1, 2020. Unfunded commitments declined $84.8 million or 3% during the quarter to $2.98 billion at September 30, 2020, and as a result, Heartland recorded a benefit to provision for credit losses for unfunded loan commitments of $3.1 million. At September 30, 2020, the allowance for unfunded commitments was $14.3 million.

Total Provision and Allowance for Lending Related Credit Losses
The total provision for lending related credit losses was $1.7 million for the third quarter of 2020. The total allowance for lending related credit losses was $117.7 million at September 30, 2020, which was 1.29% of loans as of September 30, 2020.

Nonperforming Assets and Loan Delinquencies Decrease Since December 31, 2019

Nonperforming assets decreased $1.7 million or 2% to $85.9 million or 0.55% of total assets at September 30, 2020, compared to $87.6 million or 0.66% of total assets at December 31, 2019. Nonperforming loans were $80.7 million or 0.89% of total loans at September 30, 2020, compared to $80.7 million or 0.96% of total loans at December 31, 2019. At September 30, 2020, loans delinquent 30-89 days were 0.17% of total loans compared to 0.33% of total loans at December 31, 2019. COVID-19 payment deferral and loan modification programs could delay the recognition of net charge-offs, delinquencies and nonaccrual status for loans that would have otherwise moved into past due or nonaccrual status.

Non-GAAP Financial Measures

This press release contains references to financial measures which are not defined by generally accepted accounting principles ("GAAP"). Management believes the non-GAAP measures are helpful for investors to analyze and evaluate Heartland's financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Additionally, because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this press release with other companies' non-GAAP measures. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure may be found in the financial tables in this press release.

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

1. Annualized return on average tangible common equity is net income available to common stockholders plus core deposit and customer relationship intangibles amortization, net of tax, divided by average common equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
2. Annualized net interest margin, fully tax-equivalent, adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
3. Efficiency ratio, fully tax equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities, and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items as noted in reconciliation contained in this press release.
4. Net interest income, fully tax equivalent, is net income adjusted for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
5. Tangible book value per common share is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
6. Tangible common equity ratio is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
7. Annualized return on average tangible common equity is net income excluding intangible amortization calculated as (1) net income excluding tax-effected core deposit and customer relationship intangibles amortization, divided by (2) average common equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
8. Adjusted net income, adjusted return on average tangible common equity and adjusted diluted earnings per share exclude tax-effected provision for credit losses and acquisition, integration and restructuring costs. Management believes the presentation of these non-GAAP measures are useful to compare net income, return on average tangible common equity and earnings per share results excluding the variability of credit loss provisions and acquisition, integration and restructuring costs. 

Conference Call Details
Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 866-928-9948 at least five minutes before the start time. A replay will be available until October 25, 2021, 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 $15.61 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 113 banking locations serving 82 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Any statements about Heartland’s expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements include information about possible or assumed future results of Heartland’s operations or performance. These forward-looking statements are generally identified by the use of the words ‘‘believe”, “expect’’, ‘‘intent”, “anticipate’’, ‘‘plan”, “estimate’’, ‘‘project”, ‘‘will”, ‘‘would”, ‘‘could”, ‘‘should’’, “may”, “view”, “opportunity”, “potential”, or similar expressions that are used in this release, and future oral and written statements of Heartland and its management. Although Heartland has made these statements based on management’s experience and best estimate of future events, the ability of Heartland to predict results or the actual effect of plans or strategies is inherently uncertain, and there may be events or factors that management has not anticipated. Therefore, the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed below and in the risk factors in Heartland's reports filed with the Securities and Exchange Commission (“SEC”), include, among others:

1. The impact of the COVID-19 pandemic on Heartland and U.S. and global financial markets;

1. Measures enacted by the U.S. federal and state governments and adopted by private businesses in response to the COVID-19 pandemic;
2. The deterioration of the U.S. economy in general and in the local economies in which Heartland conducts its operations;
3. Increasing credit losses due to deterioration in the financial condition of its borrowers, based on declining oil prices and asset and collateral values, which may continue to increase the provision for credit losses and net charge-offs of Heartland;
4. Civil unrest in the communities that Heartland serves;
5. Levels of unemployment in the geographic areas in which Heartland operates;
6. Real estate market values in these geographic areas;
7. Future natural disasters and increases to flood insurance premiums;
8. The effects of past and any future terrorist threats and attacks, acts of war or threats thereof;
9. The level of prepayments on loans and mortgage-backed securities;
10. Legislative and regulatory changes affecting banking, tax, securities, insurance and monetary and financial matters;
11. Monetary and fiscal policies of the U.S. Government including policies of the U.S. Department of Treasury and the Federal Reserve Board;
12. The quality or composition of the loan and investment portfolios of Heartland;
13. Demand for loan products and financial services, deposit flows and competition in Heartland’s market areas;
14. Changes in accounting principles and guidelines;
15. The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet;
16. The ability of Heartland to implement technological changes as planned and to develop and maintain secure and reliable electronic delivery systems;
17. Heartland’s ability to retain key executives and employees; and
18. The ability of Heartland to successfully consummate acquisitions and integrate acquired operations.

The COVID-19 pandemic is adversely affecting Heartland and its customers, counterparties, employees and third-party service providers. The COVID-19 pandemic’s severity, its duration and the extent of its impact on Heartland’s business, financial condition, results of operations, liquidity and prospects remain uncertain. The deterioration in general business and economic conditions and turbulence in domestic and global financial markets caused by the COVID-19 pandemic have negatively affected Heartland’s net income, total equity and book value per common share, and continued economic deterioration could adversely affect the value of its assets and liabilities, reduce the availability of funding to Heartland, lead to a tightening of credit and increase stock price volatility. Some economists and investment banks believe that a recession or depression may result from the continued spread of COVID-19 and the economic consequences.

These risks and uncertainties should be considered in evaluating forward-looking statements made by Heartland or on its behalf, and undue reliance should not be placed on these statements. There can be no assurance that other factors not currently anticipated by Heartland will not materially and adversely affect Heartland’s business, financial condition and results of operations. In addition, many of these risks and uncertainties are currently amplified by and may continue to be amplified by the recent outbreak of the COVID-19 pandemic and the impact of varying governmental responses that affect Heartland’s customers and the economies where they operate. Please take into account that forward-looking statements speak only as of the date they are made, and except as required by applicable law, Heartland does not undertake any obligation to publicly correct or update any forward-looking statement. Further information concerning Heartland and its business, including additional factors that could materially affect Heartland’s financial results, is included in Heartland’s filings with the SEC.

-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,
	2020				2019				2020				2019
Interest Income
Interest and fees on loans	$	102,657			$	110,566			$	316,076			$	317,049
Interest on securities:
Taxable	25,016				18,567				70,109				50,566
Nontaxable	3,222				2,119				8,749				7,766
Interest on federal funds sold	—				—				—				4
Interest on deposits with other banks and short-term investments	72				2,151				847				5,742
Total Interest Income	130,967				133,403				395,781				381,127
Interest Expense
Interest on deposits	4,962				17,982				25,678				47,333
Interest on short-term borrowings	78				250				435				1,477
Interest on other borrowings	3,430				3,850				10,514				11,333
Total Interest Expense	8,470				22,082				36,627				60,143
Net Interest Income	122,497				111,321				359,154				320,984
Provision for credit losses	1,678				5,201				49,994				11,754
Net Interest Income After Provision for Credit Losses	120,819				106,120				309,160				309,230
Noninterest Income
Service charges and fees	11,749				12,366				34,742				39,789
Loan servicing income	638				821				1,980				3,888
Trust fees	5,357				4,959				15,356				14,258
Brokerage and insurance commissions	649				962				1,977				2,724
Securities gains, net	1,300				2,013				4,964				7,168
Unrealized gain/ (loss) on equity securities, net	155				144				604				514
Net gains on sale of loans held for sale	8,894				4,673				21,411				12,192
Valuation adjustment on servicing rights	(120)				(626)				(1,676)				(1,579)
Income on bank owned life insurance	868				881				2,533				2,668
Other noninterest income	1,726				3,207				5,779				6,556
Total Noninterest Income	31,216				29,400				87,670				88,178
Noninterest Expense
Salaries and employee benefits	50,978				49,927				151,053				150,107
Occupancy	6,732				6,594				19,705				19,627
Furniture and equipment	2,500				2,862				8,601				8,690
Professional fees	12,802				11,276				38,951				36,642
Advertising	928				2,622				4,128				7,551
Core deposit and customer relationship intangibles amortization	2,492				2,899				8,169				9,054
Other real estate and loan collection expenses, net	335				(89)				872				774
(Gain)/loss on sales/valuations of assets, net	1,763				356				2,480				(20,934)
Acquisition, integration and restructuring costs	1,146				1,500				3,195				6,043
Partnership investment in tax credit projects	927				3,052				1,902				4,992
Other noninterest expenses	9,793				11,968				32,638				33,749
Total Noninterest Expense	90,396				92,967				271,694				256,295
Income Before Income Taxes	61,639				42,553				125,136				141,113
Income taxes	13,681				7,941				27,007				29,835
Net Income	47,958				34,612				98,129				111,278
Preferred dividends	(2,437)				—				(2,437)				—
Net Income Available to Common Stockholders	$	45,521			$	34,612			$	95,692			$	111,278
Earnings per common share-diluted	$	1.23			$	0.94			$	2.59			$	3.11
Weighted average shares outstanding-diluted	36,995,572				36,835,191				36,955,970				35,817,899

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Interest Income
Interest and fees on loans	$	102,657			$	107,005			$	106,414			$	107,566			$	110,566
Interest on securities:
Taxable	25,016				23,362				21,731				22,581				18,567
Nontaxable	3,222				3,344				2,183				2,102				2,119
Interest on federal funds sold	—				—				—				—				—
Interest on deposits with other banks and short-term investments	72				54				721				953				2,151
Total Interest Income	130,967				133,765				131,049				133,202				133,403
Interest Expense
Interest on deposits	4,962				6,134				14,582				16,401				17,982
Interest on short-term borrowings	78				61				296				271				250
Interest on other borrowings	3,430				3,424				3,660				3,785				3,850
Total Interest Expense	8,470				9,619				18,538				20,457				22,082
Net Interest Income	122,497				124,146				112,511				112,745				111,321
Provision for credit losses	1,678				26,796				21,520				4,903				5,201
Net Interest Income After Provision for Credit Losses	120,819				97,350				90,991				107,842				106,120
Noninterest Income
Service charges and fees	11,749				10,972				12,021				12,368				12,366
Loan servicing income	638				379				963				955				821
Trust fees	5,357				4,977				5,022				5,141				4,959
Brokerage and insurance commissions	649				595				733				1,062				962
Securities gains, net	1,300				2,006				1,658				491				2,013
Unrealized gain/ (loss) on equity securities, net	155				680				(231)				11				144
Net gains on sale of loans held for sale	8,894				7,857				4,660				3,363				4,673
Valuation adjustment on servicing rights	(120)				9				(1,565)				668				(626)
Income on bank owned life insurance	868				1,167				498				1,117				881
Other noninterest income	1,726				1,995				2,058				2,854				3,207
Total Noninterest Income	31,216				30,637				25,817				28,030				29,400
Noninterest Expense
Salaries and employee benefits	50,978				50,118				49,957				50,234				49,927
Occupancy	6,732				6,502				6,471				5,802				6,594
Furniture and equipment	2,500				2,993				3,108				3,323				2,862
Professional fees	12,802				13,676				12,473				11,082				11,276
Advertising	928				995				2,205				2,274				2,622
Core deposit and customer relationship intangibles amortization	2,492				2,696				2,981				2,918				2,899
Other real estate and loan collection expenses, net	335				203				334				261				(89)
(Gain)/loss on sales/valuations of assets, net	1,763				701				16				1,512				356
Acquisition, integration and restructuring costs	1,146				673				1,376				537				1,500
Partnership investment in tax credit projects	927				791				184				3,038				3,052
Other noninterest expenses	9,793				11,091				11,754				11,885				11,968
Total Noninterest Expense	90,396				90,439				90,859				92,866				92,967
Income Before Income Taxes	61,639				37,548				25,949				43,006				42,553
Income taxes	13,681				7,417				5,909				5,155				7,941
Net Income	47,958				30,131				20,040				37,851				34,612
Preferred dividends	(2,437)				—				—				—				—
Net Income Available to Common Stockholders	$	45,521			$	30,131			$	20,040			$	37,851			$	34,612
Earnings per common share-diluted	$	1.23			$	0.82			$	0.54			$	1.03			$	0.94
Weighted average shares outstanding-diluted	36,995,572				36,915,630				36,895,591				36,840,519				36,835,191

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Assets
Cash and due from banks	$	175,284			$	211,429			$	175,587			$	206,607			$	243,395
Interest bearing deposits with other banks and short-term investments	156,371				242,149				64,156				172,127				204,372
Cash and cash equivalents	331,655				453,578				239,743				378,734				447,767
Time deposits in other financial institutions	3,129				3,128				3,568				3,564				3,711
Securities:
Carried at fair value	4,950,698				4,126,351				3,488,621				3,312,796				3,020,568
Held to maturity, at cost, less allowance for credit losses	88,700				90,579				91,875				91,324				87,965
Other investments, at cost	35,940				35,902				35,370				31,321				29,042
Loans held for sale	65,969				54,382				22,957				26,748				35,427
Loans:
Held to maturity	9,099,646				9,246,830				8,374,236				8,367,917				7,971,608
Allowance for credit losses	(103,377)				(119,937)				(97,350)				(70,395)				(66,222)
Loans, net	8,996,269				9,126,893				8,276,886				8,297,522				7,905,386
Premises, furniture and equipment, net	200,028				198,481				200,960				200,525				199,235
Goodwill	446,345				446,345				446,345				446,345				427,097
Core deposit and customer relationship intangibles, net	40,520				43,011				45,707				48,688				49,819
Servicing rights, net	5,752				5,469				5,220				6,736				6,271
Cash surrender value on life insurance	173,111				172,813				172,140				171,625				171,471
Other real estate, net	5,050				5,539				6,074				6,914				6,425
Other assets	269,498				263,682				259,043				186,755				179,078
Total Assets	$	15,612,664			$	15,026,153			$	13,294,509			$	13,209,597			$	12,569,262
Liabilities and Equity
Liabilities
Deposits:
Demand	$	5,022,567			$	4,831,151			$	3,696,974			$	3,543,863			$	3,581,127
Savings	6,742,151				6,810,296				6,366,610				6,307,425				5,770,754
Time	1,002,392				1,067,252				1,110,441				1,193,043				1,117,975
Total deposits	12,767,110				12,708,699				11,174,025				11,044,331				10,469,856
Short-term borrowings	306,706				88,631				121,442				182,626				107,853
Other borrowings	524,045				306,459				276,150				275,773				278,417
Accrued expenses and other liabilities	203,199				174,987				169,178				128,730				149,293
Total Liabilities	13,801,060				13,278,776				11,740,795				11,631,460				11,005,419
Stockholders' Equity
Preferred equity	110,705				110,705				—				—				—
Common stock	36,885				36,845				36,807				36,704				36,696
Capital surplus	847,377				844,202				842,780				839,857				838,543
Retained earnings	761,211				723,067				700,298				702,502				670,816
Accumulated other comprehensive income/(loss)	55,426				32,558				(26,171)				(926)				17,788
Total Equity	1,811,604				1,747,377				1,553,714				1,578,137				1,563,843
Total Liabilities and Equity	$	15,612,664			$	15,026,153			$	13,294,509			$	13,209,597			$	12,569,262

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
	For the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Average Balances
Assets	$	15,167,225			$	14,391,856			$	13,148,173			$	12,798,770			$	12,293,332
Loans, net of unearned	9,220,666				9,186,913				8,364,220				8,090,476				7,883,678
Deposits	12,650,822				12,288,378				10,971,193				10,704,643				10,253,643
Earning assets	13,868,360				13,103,159				11,891,455				11,580,295				11,102,581
Interest bearing liabilities	8,320,123				8,155,753				7,841,941				7,513,701				7,174,944
Common equity	1,661,381				1,574,902				1,619,682				1,570,258				1,541,369
Total stockholders' equity	1,772,086				1,580,997				1,619,682				1,570,258				1,541,369
Tangible common equity (non-GAAP)(1)	1,172,891				1,083,834				1,125,705				1,087,495				1,062,568
Key Performance Ratios
Annualized return on average assets	1.19		%		0.84		%		0.61		%		1.17		%		1.12		%
Annualized return on average common equity (GAAP)	10.90				7.69				4.98				9.56				8.91
Annualized return on average tangible common equity (non-GAAP)(1)	16.11				11.97				8.00				14.65				13.78
Annualized adjusted return on average tangible common equity (non-GAAP)(1)	16.86				20.02				14.46				16.22				15.76
Annualized ratio of net charge-offs to average loans	0.92				0.11				0.24				0.04				0.14
Annualized net interest margin (GAAP)	3.51				3.81				3.81				3.86				3.98
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.55				3.85				3.84				3.90				4.02
Efficiency ratio, fully tax-equivalent (non-GAAP)(1)	54.67				55.75				61.82				60.31				60.85
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

	For the Quarter Ended September 30,								For the Nine Months Ended September 30,
	2020				2019				2020				2019
Average Balances
Assets	$	15,167,225			$	12,293,332			$	14,239,151			$	11,760,120
Loans, net of unearned	9,220,666				7,883,678				8,925,016				7,650,090
Deposits	12,650,822				10,253,643				11,972,615				9,803,488
Earning assets	13,868,360				11,102,581				12,957,661				10,598,465
Interest bearing liabilities	8,320,123				7,174,944				8,106,721				6,891,871
Common equity	1,661,381				1,541,369				1,618,811				1,440,754
Total stockholders' equity	1,772,086				1,541,369				1,658,006				1,440,754
Tangible common stockholders' equity	1,172,891				1,062,568				1,127,642				981,449
Key Performance Ratios
Annualized return on average assets	1.19		%		1.12		%		0.90		%		1.27		%
Annualized return on average common equity (GAAP)	10.90				8.91				7.90				10.33
Annualized return on average tangible common equity (non-GAAP)(1)	16.11				13.78				12.10				16.13
Annualized adjusted return on average tangible common equity (non-GAAP)(1)	16.86				15.76				17.08				18.05
Annualized ratio of net charge-offs to average loans	0.92				0.14				0.43				0.13
Annualized net interest margin (GAAP)	3.51				3.98				3.70				4.05
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.55				4.02				3.74				4.10
Efficiency ratio, fully tax-equivalent (non-GAAP)(1)	54.67				60.85				57.28				63.26
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
	As of and for the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Common Share Data
Book value per common share	$	46.11			$	44.42			$	42.21			$	43.00			$	42.62
Tangible book value per common share (non-GAAP)(1)	$	32.91			$	31.14			$	28.84			$	29.51			$	29.62
Common shares outstanding, net of treasury stock	36,885,390				36,844,744				36,807,217				36,704,278				36,696,190
Tangible common equity ratio (non-GAAP)(1)	8.03		%		7.89		%		8.29		%		8.52		%		8.99		%
Other Selected Trend Information
Effective tax rate	22.20		%		19.75		%		22.77		%		11.99		%		18.66		%
Full time equivalent employees	1,827				1,821				1,817				1,908				1,962
Loans Held to Maturity(2)
Commercial and industrial	$	2,303,646			$	2,364,400			$	2,550,490			$	2,530,809			$	2,388,861
Paycheck Protection Program ("PPP")	1,128,035				1,124,430				—				—				—
Owner occupied commercial real estate	1,494,902				1,433,271				1,431,038				1,472,704				1,392,415
Commercial and business lending	4,926,583				4,922,101				3,981,528				4,003,513				3,781,276
Non-owner occupied commercial real estate	1,659,683				1,543,623				1,551,787				1,495,877				1,378,020
Real estate construction	917,765				1,115,843				1,069,700				1,027,081				980,298
Commercial real estate lending	2,577,448				2,659,466				2,621,487				2,522,958				2,358,318
Total commercial lending	7,504,031				7,581,567				6,603,015				6,526,471				6,139,594
Agricultural and agricultural real estate	508,058				520,773				550,107				565,837				571,596
Residential mortgage	701,899				735,762				792,540				832,277				823,056
Consumer	385,658				408,728				428,574				443,332				437,362
Total loans held to maturity	$	9,099,646			$	9,246,830			$	8,374,236			$	8,367,917			$	7,971,608
Total unfunded loan commitments	$	2,980,484			$	3,065,283			$	2,782,679			$	2,973,732			$	2,659,729
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
(2) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of and for the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Allowance for Credit Losses-Loans
Balance, beginning of period	$	119,937			$	97,350			$	70,395			$	66,222			$	63,850
Impact of ASU 2016-13 adoption	—				—				12,071				—				—
Provision for credit losses	4,741				25,007				19,865				4,903				5,201
Charge-offs	(21,753)				(3,564)				(6,301)				(2,018)				(4,842)
Recoveries	452				1,144				1,320				1,288				2,013
Balance, end of period	$	103,377			$	119,937			$	97,350			$	70,395			$	66,222
Allowance for Unfunded Commitments(1)
Balance, beginning of period	$	17,392			$	15,468			$	248			$	—			$	—
Impact of ASU 2016-13 adoption	—				—				13,604				—				—
Provision for credit losses	(3,062)				1,924				1,616				—				—
Balance, end of period	$	14,330			$	17,392			$	15,468			$	—			$	—
Allowance for lending related credit losses	$	117,707			$	137,329			$	112,818			$	70,395			$	66,222
Provision for Credit Losses
Provision for credit losses-loans	$	4,741			$	25,007			$	19,865			$	4,903			$	5,201
Provision for credit losses-unfunded commitments	(3,062)				1,924				1,616				—				—
Provision for credit losses-held to maturity securities(2)	(1)				(135)				39				—				—
Total provision for credit losses	$	1,678			$	26,796			$	21,520			$	4,903			$	5,201
(1) Prior to the adoption of ASU 2016-13, the allowance for unfunded commitments was immaterial and therefore prior periods have not been shown in this table.
(2) Prior to ASU 2016-13, there was no requirement to record provision for credit losses for held to maturity securities.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of and for the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Asset Quality
Nonaccrual loans	$	79,040			$	91,609			$	79,280			$	76,548			$	72,208
Loans past due ninety days or more	1,681				1,360				—				4,105				40
Other real estate owned	5,050				5,539				6,074				6,914				6,425
Other repossessed assets	130				29				17				11				13
Total nonperforming assets	$	85,901			$	98,537			$	85,371			$	87,578			$	78,686
Performing troubled debt restructured loans	$	11,818			$	2,636			$	2,858			$	3,794			$	3,199
Nonperforming Assets Activity
Balance, beginning of period	$	98,537			$	85,371			$	87,578			$	78,686			$	86,589
Net loan charge offs	(21,301)				(2,420)				(4,981)				(730)				(2,829)
New nonperforming loans	11,834				26,857				15,796				13,751				6,818
Acquired nonperforming assets	—				—				—				3,262				—
Reduction of nonperforming loans(1)	(1,994)				(9,911)				(11,937)				(5,859)				(8,861)
Net OREO/repossessed assets sales proceeds and losses	(1,175)				(1,360)				(1,085)				(1,532)				(3,031)
Balance, end of period	$	85,901			$	98,537			$	85,371			$	87,578			$	78,686
Asset Quality Ratios
Ratio of nonperforming loans to total loans	0.89		%		1.01		%		0.95		%		0.96		%		0.91		%
Ratio of nonperforming loans and performing trouble debt restructured loans to total loans	1.02				1.03				0.98				1.01				0.95
Ratio of nonperforming assets to total assets	0.55				0.66				0.64				0.66				0.63
Annualized ratio of net loan charge-offs to average loans	0.92				0.11				0.24				0.04				0.14
Allowance for loan credit losses as a percent of loans	1.14				1.30				1.16				0.84				0.83
Allowance for lending related credit losses as a percent of loans(2)	1.29				1.49				1.35				0.84				0.83
Allowance for loan credit losses as a percent of nonperforming loans	128.07				129.01				122.79				87.28				91.66
Loans delinquent 30-89 days as a percent of total loans	0.17				0.22				0.38				0.33				0.28
(1) Includes principal reductions, transfers to performing status and transfers to OREO.
(2) Prior to the adoption of ASU 2016-13, the reserve for unfunded commitments was immaterial.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
	For the Quarter Ended
	September 30, 2020											June 30, 2020											September 30, 2019
	Average Balance				Interest				Rate			Average Balance				Interest				Rate			Average Balance				Interest				Rate
Earning Assets
Securities:
Taxable	$	4,125,700			$	25,016			2.41	%		$	3,375,245			$	23,362			2.78	%		$	2,658,107			$	18,567			2.77	%
Nontaxable(1)	429,710				4,078				3.78			433,329				4,233				3.93			266,933				2,682				3.99
Total securities	4,555,410				29,094				2.54			3,808,574				27,595				2.91			2,925,040				21,249				2.88
Interest on deposits with other banks and short-term investments	215,361				72				0.13			210,347				54				0.10			358,327				2,151				2.38
Federal funds sold	—				—				—			—				—				—			—				—				—
Loans:(2)(3)
Commercial and industrial(1)	2,331,467				27,777				4.74			2,453,066				30,759				5.04			2,469,770				33,410				5.37
PPP loans	1,128,488				7,462				2.63			916,405				6,017				2.64			—				—				—
Owner occupied commercial real estate	1,463,538				17,359				4.72			1,426,019				17,670				4.98			1,364,901				19,422				5.65
Non-owner occupied commercial real estate	1,589,073				18,860				4.72			1,540,958				19,055				4.97			1,217,879				19,009				6.19
Real estate construction	1,023,490				11,628				4.52			1,100,514				12,589				4.60			969,292				13,957				5.71
Agricultural and agricultural real estate	514,442				5,968				4.62			532,668				6,171				4.66			564,729				7,643				5.37
Residential mortgage	774,850				8,915				4.58			795,149				9,586				4.85			859,904				11,007				5.08
Consumer	395,318				5,222				5.26			422,134				5,685				5.42			437,203				6,695				6.08
Less: allowance for loan losses	(123,077)				—				—			(102,675)				—				—			(64,464)				—				—
Net loans	9,097,589				103,191				4.51			9,084,238				107,532				4.76			7,819,214				111,143				5.64
Total earning assets	13,868,360				132,357				3.80	%		13,103,159				135,181				4.15	%		11,102,581				134,543				4.81	%
Nonearning Assets	1,298,865											1,288,697											1,190,751
Total Assets	$	15,167,225										$	14,391,856										$	12,293,332
Interest Bearing Liabilities
Savings	$	6,723,962			$	1,940			0.11	%		$	6,690,504			$	2,372			0.14	%		$	5,643,722			$	13,301			0.94	%
Time deposits	1,035,715				3,022				1.16			1,096,386				3,762				1.38			1,149,064				4,681				1.62
Short-term borrowings	128,451				78				0.24			82,200				61				0.30			102,440				250				0.97
Other borrowings	431,995				3,430				3.16			286,663				3,424				4.80			279,718				3,850				5.46
Total interest bearing liabilities	8,320,123				8,470				0.40	%		8,155,753				9,619				0.47	%		7,174,944				22,082				1.22
Noninterest Bearing Liabilities
Noninterest bearing deposits	4,891,145											4,501,488											3,460,857
Accrued interest and other liabilities	183,871											153,618											116,162
Total noninterest bearing liabilities	5,075,016											4,655,106											3,577,019
Equity	1,772,086											1,580,997											1,541,369
Total Liabilities and Equity	$	15,167,225										$	14,391,856										$	12,293,332
Net interest income, fully tax-equivalent (non-GAAP)(4)					$	123,887										$	125,562										$	112,461
Net interest spread(1)									3.40	%										3.68	%										3.59	%
Net interest income, fully tax-equivalent (non-GAAP)(4) to total earning assets									3.55	%										3.85	%										4.02	%
Interest bearing liabilities to earning assets	59.99		%									62.24		%									64.62		%
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted.
(4) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
	For the Nine Months Ended
	September 30, 2020											September 30, 2019
	Average Balance				Interest				Rate			Average Balance				Interest				Rate
Earning Assets
Securities:
Taxable	$	3,546,471			$	70,109			2.64	%		$	2,350,120			$	50,566			2.88	%
Nontaxable(1)	384,026				11,074				3.85			327,150				9,830				4.02
Total securities	3,930,497				81,183				2.76			2,677,270				60,396				3.02
Interest bearing deposits with other banks and other short-term investments	202,390				847				0.56			334,191				5,742				2.30
Federal funds sold	—				—				—			185				4				2.89
Loans:(2)(3)
Commercial and industrial(1)	2,463,546				90,990				4.93			2,394,412				95,790				5.35
PPP loans	683,262				13,479				2.64			—				—				—
Owner occupied commercial real estate	1,440,981				53,610				4.97			1,309,573				55,612				5.68
Non-owner occupied commercial real estate	1,534,293				57,445				5.00			1,169,295				54,115				6.19
Real estate construction	1,056,493				37,062				4.69			914,911				39,023				5.70
Agricultural and agricultural real estate	533,290				19,178				4.80			562,407				22,311				5.30
Residential mortgage	796,497				28,922				4.85			873,088				32,422				4.96
Consumer	416,654				17,002				5.45			426,404				19,532				6.12
Less: allowance for loan losses	(100,242)				—				—			(63,271)				—				—
Net loans	8,824,774				317,688				4.81			7,586,819				318,805				5.62
Total earning assets	12,957,661				399,718				4.12	%		10,598,465				384,947				4.86	%
Nonearning Assets	1,281,490											1,161,655
Total Assets	$	14,239,151										$	11,760,120
Interest Bearing Liabilities
Savings	$	6,564,582			$	14,394			0.29	%		$	5,376,999			$	35,279			0.88	%
Time deposits	1,092,698				11,284				1.38	%		1,109,302				12,054				1.45
Short-term borrowings	117,526				435				0.49	%		129,928				1,477				1.52
Other borrowings	331,915				10,514				4.23	%		275,642				11,333				5.50
Total interest bearing liabilities	8,106,721				36,627				0.60	%		6,891,871				60,143				1.17	%
Noninterest Bearing Liabilities
Noninterest bearing deposits	4,315,335											3,317,187
Accrued interest and other liabilities	159,089											110,308
Total noninterest bearing liabilities	4,474,424											3,427,495
Stockholders' Equity	1,658,006											1,440,754
Total Liabilities and Stockholders' Equity	$	14,239,151										$	11,760,120
Net interest income, fully tax-equivalent (non-GAAP)(4)					$	363,091										$	324,804
Net interest spread(1)									3.52	%										3.69	%
Net interest income, fully tax-equivalent (non-GAAP)(4) to total earning assets									3.74	%										4.10	%
Interest bearing liabilities to earning assets	62.56		%									65.03		%
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted.
(4) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.

 

HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
	As of and For the Quarter Ended
	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Total Assets
Citywide Banks	$	2,639,516		$	2,546,942		$	2,271,889		$	2,294,512		$	2,335,811
New Mexico Bank & Trust	2,002,663			1,899,194			1,670,097			1,763,037			1,607,498
Dubuque Bank and Trust Company	1,838,260			1,849,035			1,591,312			1,646,105			1,547,014
Illinois Bank & Trust	1,500,012			1,470,000			1,295,984			1,301,172			839,721
Bank of Blue Valley	1,424,261			1,380,159			1,222,358			1,307,688			1,346,342
First Bank & Trust	1,289,187			1,256,710			1,163,181			1,137,714			1,158,320
Wisconsin Bank & Trust	1,262,069			1,203,108			1,079,582			1,090,412			1,032,016
Premier Valley Bank	1,042,437			1,031,899			889,280			903,220			888,401
Arizona Bank & Trust	1,039,253			970,775			866,107			784,240			695,236
Minnesota Bank & Trust	1,007,548			951,236			778,724			718,724			718,035
Rocky Mountain Bank	617,169			590,764			576,245			532,191			528,094
Total Deposits
Citywide Banks	$	2,163,051		$	2,147,642		$	1,868,404		$	1,829,217		$	1,895,894
New Mexico Bank & Trust	1,747,527			1,698,584			1,451,041			1,565,070			1,413,170
Dubuque Bank and Trust Company	1,591,561			1,496,559			1,363,164			1,290,756			1,275,131
Illinois Bank & Trust	1,307,513			1,318,866			1,139,945			1,167,905			768,267
Bank of Blue Valley	1,142,910			1,138,818			1,008,362			1,016,743			1,091,243
First Bank & Trust	936,366			959,886			900,399			893,419			903,410
Wisconsin Bank & Trust	1,011,843			1,050,766			920,168			941,109			880,217
Premier Valley Bank	855,913			869,165			706,479			707,814			719,141
Arizona Bank & Trust	886,174			865,430			754,464			693,975			578,694
Minnesota Bank & Trust	804,045			820,199			648,560			574,369			600,175
Rocky Mountain Bank	533,429			519,029			496,465			468,314			462,825

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
	For the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
Net income available to common stockholders (GAAP)	$	45,521			$	30,131			$	20,040			$	37,851			$	34,612
Plus core deposit and customer relationship intangibles amortization, net of tax(1)	1,969				2,130				2,355				2,305				2,291
Net income available to common stockholders excluding intangible amortization (non-GAAP)	$	47,490			$	32,261			$	22,395			$	40,156			$	36,903
Average common equity (GAAP)	$	1,661,381			$	1,574,902			$	1,619,682			$	1,570,258			$	1,541,369
Less average goodwill	446,345				446,345				446,345				433,374				427,097
Less average core deposit and customer relationship intangibles, net	42,145				44,723				47,632				49,389				51,704
Average tangible common equity (non-GAAP)	$	1,172,891			$	1,083,834			$	1,125,705			$	1,087,495			$	1,062,568
Annualized return on average common equity (GAAP)	10.90		%		7.69		%		4.98		%		9.56		%		8.91		%
Annualized return on average tangible common equity (non-GAAP)	16.11		%		11.97		%		8.00		%		14.65		%		13.78		%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
Net Interest Income (GAAP)	$	122,497			$	124,146			$	112,511			$	112,745			$	111,321
Plus tax-equivalent adjustment(1)	1,390				1,416				1,131				1,109				1,140
Net interest income, fully tax-equivalent (non-GAAP)	$	123,887			$	125,562			$	113,642			$	113,854			$	112,461
Average earning assets	$	13,868,360			$	13,103,159			$	11,891,455			$	11,580,295			$	11,102,581
Annualized net interest margin (GAAP)	3.51		%		3.81		%		3.81		%		3.86		%		3.98		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)	3.55				3.85				3.84				3.90				4.02
Purchase accounting discount amortization on loans included in annualized net interest margin	0.10				0.16				0.09				0.17				0.23

Reconciliation of Tangible Book Value Per Common Share (non-GAAP)
Common equity (GAAP)	$	1,700,899			$	1,636,672			$	1,553,714			$	1,578,137			$	1,563,843
Less goodwill	446,345				446,345				446,345				446,345				427,097
Less core deposit and customer relationship intangibles, net	40,520				43,011				45,707				48,688				49,819
Tangible common equity (non-GAAP)	$	1,214,034			$	1,147,316			$	1,061,662			$	1,083,104			$	1,086,927
Common shares outstanding, net of treasury stock	36,885,390				36,844,744				36,807,217				36,704,278				36,696,190
Common equity (book value) per share (GAAP)	$	46.11			$	44.42			$	42.21			$	43.00			$	42.62
Tangible book value per common share (non-GAAP)	$	32.91			$	31.14			$	28.84			$	29.51			$	29.62
Reconciliation of Tangible Common Equity Ratio (non-GAAP)
Tangible common equity (non-GAAP)	$	1,214,034			$	1,147,316			$	1,061,662			$	1,083,104			$	1,086,927
Total assets (GAAP)	$	15,612,664			$	15,026,153			$	13,294,509			$	13,209,597			$	12,569,262
Less goodwill	446,345				446,345				446,345				446,345				427,097
Less core deposit and customer relationship intangibles, net	40,520				43,011				45,707				48,688				49,819
Total tangible assets (non-GAAP)	$	15,125,799			$	14,536,797			$	12,802,457			$	12,714,564			$	12,092,346
Tangible common equity ratio (non-GAAP)	8.03		%		7.89		%		8.29		%		8.52		%		8.99		%
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
Reconciliation of Efficiency Ratio (non-GAAP)	For the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Net interest income (GAAP)	$	122,497			$	124,146			$	112,511			$	112,745			$	111,321
Tax-equivalent adjustment(1)	1,390				1,416				1,131				1,109				1,140
Fully tax-equivalent net interest income	123,887				125,562				113,642				113,854				112,461
Noninterest income	31,216				30,637				25,817				28,030				29,400
Securities gains, net	(1,300)				(2,006)				(1,658)				(491)				(2,013)
Unrealized (gain)/loss on equity securities, net	(155)				(680)				231				(11)				(144)
Gain on extinguishment of debt	—				—				—				—				(375)
Valuation adjustment on servicing rights	120				(9)				1,565				(668)				626
Adjusted revenue (non-GAAP)	$	153,768			$	153,504			$	139,597			$	140,714			$	139,955
Total noninterest expenses (GAAP)	$	90,396			$	90,439			$	90,859			$	92,866			$	92,967
Less:
Core deposit and customer relationship intangibles amortization	2,492				2,696				2,981				2,918				2,899
Partnership investment in tax credit projects	927				791				184				3,038				3,052
(Gain)/loss on sales/valuation of assets, net	1,763				701				16				1,512				356
Acquisition, integration and restructuring costs	1,146				673				1,376				537				1,500
Adjusted noninterest expenses (non-GAAP)	$	84,068			$	85,578			$	86,302			$	84,861			$	85,160
Efficiency ratio, fully tax-equivalent (non-GAAP)	54.67		%		55.75		%		61.82		%		60.31		%		60.85		%
Acquisition, integration and restructuring costs
Salaries and employee benefits	$	—			$	122			$	44			$	—			$	100
Occupancy	—				—				—				11				—
Furniture and equipment	496				15				24				7				(4)
Professional fees	476				505				996				462				855
Advertising	8				4				89				31				115
(Gain)/loss on sales/valuations of assets, net	—				—				—				—				—
Other noninterest expenses	166				27				223				26				434
Total acquisition, integration and restructuring costs	$	1,146			$	673			$	1,376			$	537			$	1,500
After tax impact on diluted earnings per share(1)	$	0.02			$	0.01			$	0.03			$	0.01			$	0.03
Reconciliation of Adjusted Net Income Available to Common Stockholders and Adjusted Diluted EPS (non-GAAP)
Net income available to common stockholders (GAAP)	$	45,521			$	30,131			$	20,040			$	37,851			$	34,612
Provision for credit losses(1)	1,325				21,169				17,001				3,873				4,109
Acquisition, integration and restructuring costs(1)	905				532				1,087				424				1,185
Adjusted net income available to common stockholders (non-GAAP)	$	47,751			$	51,832			$	38,128			$	42,148			$	39,906
Diluted earnings per common share (GAAP)	$	1.23			$	0.82			$	0.54			$	1.03			$	0.94
Adjusted diluted earnings per common share (non-GAAP)	$	1.29			$	1.40			$	1.03			$	1.14			$	1.08
Reconciliation of Annualized Adjusted Return on Average Tangible Common Equity (non-GAAP)
Adjusted net income available to common stockholders (non-GAAP)	$	47,751			$	51,832			$	38,128			$	42,148			$	39,906
Plus core deposit and customer relationship intangibles amortization, net of tax(1)	1,969				2,130				2,355				2,305				2,291
Adjusted net income available to common stockholders excluding intangible amortization (non-GAAP)	$	49,720			$	53,962			$	40,483			$	44,453			$	42,197
Average tangible common equity (non-GAAP)	$	1,172,891			$	1,083,834			$	1,125,705			$	1,087,495			$	1,062,568
Annualized adjusted return on average tangible common equity (non-GAAP)	16.86		%		20.02		%		14.46		%		16.22		%		15.76		%
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended September 30,								For the Nine Months Ended September 30,
	2020				2019				2020				2019
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
Net income available to common stockholders (GAAP)	$	45,521			$	34,612			$	95,692			$	111,278
Plus core deposit and customer relationship intangibles amortization, net of tax(1)	1,969				2,291				6,454				7,153
Net income available to common stockholders excluding intangible amortization (non-GAAP)	$	47,490			$	36,903			$	102,146			$	118,431
Average common equity (GAAP)	$	1,661,381			$	1,541,369			$	1,618,811			$	1,440,754
Less average goodwill	446,345				427,097				446,345				409,932
Less average core deposit and customer relationship intangibles, net	42,145				51,704				44,824				49,373
Average tangible common equity (non-GAAP)	$	1,172,891			$	1,062,568			$	1,127,642			$	981,449
Annualized return on average common equity (GAAP)	10.90		%		8.91		%		7.90		%		10.33		%
Annualized return on average tangible common equity (non-GAAP)	16.11		%		13.78		%		12.10		%		16.13		%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
Net Interest Income (GAAP)	$	122,497			$	111,321			$	359,154			$	320,984
Plus tax-equivalent adjustment(1)	1,390				1,140				3,937				3,820
Net interest income, fully tax-equivalent (non-GAAP)	$	123,887			$	112,461			$	363,091			$	324,804
Average earning assets	$	13,868,360			$	11,102,581			$	12,957,661			$	10,598,465
Annualized net interest margin (GAAP)	3.51		%		3.98		%		3.70		%		4.05		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)	3.55				4.02				3.74				4.10
Purchase accounting discount amortization on loans included in annualized net interest margin	0.10				0.23				0.12				0.19
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
Reconciliation of Efficiency Ratio (non-GAAP)	For the Quarter Ended September 30,								For the Nine Months Ended September 30,
	2020				2019				2020				2019
Net interest income (GAAP)	$	122,497			$	111,321			$	359,154			$	320,984
Tax-equivalent adjustment(1)	1,390				1,140				3,937				3,820
Fully tax-equivalent net interest income	123,887				112,461				363,091				324,804
Noninterest income	31,216				29,400				87,670				88,178
Securities gains, net	(1,300)				(2,013)				(4,964)				(7,168)
Unrealized (gain)/loss on equity securities, net	(155)				(144)				(604)				(514)
Gain on extinguishment of debt	—				(375)				—				(375)
Valuation adjustment on servicing rights	120				626				1,676				1,579
Adjusted revenue (non-GAAP)	$	153,768			$	139,955			$	446,869			$	406,504
Total noninterest expenses (GAAP)	$	90,396			$	92,967			$	271,694			$	256,295
Less:
Core deposit and customer relationship intangibles amortization	2,492				2,899				8,169				9,054
Partnership investment in tax credit projects	927				3,052				1,902				4,992
(Gain)/loss on sales/valuation of assets, net	1,763				356				2,480				(20,934)
Acquisition, integration and restructuring costs	1,146				1,500				3,195				6,043
Adjusted noninterest expenses (non-GAAP)	$	84,068			$	85,160			$	255,948			$	257,140
Efficiency ratio, fully tax-equivalent (non-GAAP)	54.67		%		60.85		%		57.28		%		63.26		%
Acquisition, integration and restructuring costs
Salaries and employee benefits	$	—			$	100			$	166			$	816
Occupancy	—				—				—				1,204
Furniture and equipment	496				(4)				535				80
Professional fees	476				855				1,977				1,903
Advertising	8				115				101				172
(Gain)/loss on sales/valuations of assets, net	—				—				—				1,003
Other noninterest expenses	166				434				416				865
Total acquisition, integration and restructuring costs	$	1,146			$	1,500			$	3,195			$	6,043
After tax impact on diluted earnings per share(1)	$	0.02			$	0.03			$	0.07			$	0.13
Reconciliation of Adjusted Net Income Available to Common Stockholders and Adjusted Diluted EPS (non-GAAP)
Net income available to common stockholders (GAAP)	$	45,521			$	34,612			$	95,692			$	111,278
Provision for credit losses(1)	1,325				4,109				39,495				9,286
Acquisition, integration and restructuring costs(1)	905				1,185				2,524				4,774
Adjusted net income available common stockholders (non-GAAP)	$	47,751			$	39,906			$	137,711			$	125,338
Diluted earnings per common share (GAAP)	$	1.23			$	0.94			$	2.59			$	3.11
Adjusted diluted earnings per common share (non-GAAP)	$	1.29			$	1.08			$	3.73			$	3.50
Reconciliation of Annualized Adjusted Return on Average Tangible Common Equity (non-GAAP)
Adjusted net income available to common stockholders (non-GAAP)	$	47,751			$	39,906			$	137,711			$	125,338
Plus core deposit and customer relationship intangibles amortization, net of tax(1)	1,969				2,291				6,454				7,153
Adjusted net income available to common stockholders excluding intangible amortization (non-GAAP)	$	49,720			$	42,197			$	144,165			$	132,491
Average tangible common equity (non-GAAP)	$	1,172,891			$	1,062,568			$	1,127,642			$	981,449
Annualized adjusted return on average tangible common equity (non-GAAP)	16.86		%		15.76		%		17.08		%		18.05		%
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
	As of and For the Quarter Ended
	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
PPP loan balances	$	1,128,035			$	1,124,430			$	—			$	—			$	—
Average PPP loan balances	1,128,488				916,405				—				—				—
PPP fee income	$	4,542			$	3,655			$	—			$	—			$	—
PPP interest income	2,920				2,362				—				—				—
Total PPP interest income	$	7,462			$	6,017			$	—			$	—			$	—
Selected ratios excluding PPP loans and interest income
Annualized net interest margin (GAAP)	3.59		%		3.90		%		—		%		—		%		—		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.64				3.95				—				—				—
Ratio of nonperforming loans to total loans	1.01				1.14				—				—				—
Ratio of nonperforming loans and performing trouble debt restructured loans to total loans	1.16				1.18				—				—				—
Ratio of nonperforming assets to total assets	0.59				0.71				—				—				—
Annualized ratio of net loan charge-offs to average loans	1.05				0.12				—				—				—
Allowance for loan credit losses as a percent of loans	1.30				1.48				—				—				—
Allowance for lending related credit losses as a percent of loans	1.48				1.69				—				—				—
Loans delinquent 30-89 days as a percent of total loans	0.19				0.26				—				—				—
After tax impact of PPP interest income on diluted earnings per share(1)	$	0.16			$	0.13			$	—			$	—			$	—

	As of and For the Nine Months Ended
	September 30, 2020				September 30, 2019
PPP loan balances	$	1,128,035			$	—
PPP average loan balances	683,262				—
PPP fee income	$	8,197			$	—
PPP interest income	5,282				—
Total PPP interest income	$	13,479			$	—
Selected ratios excluding PPP loans and interest income
Annualized net interest margin (GAAP)	3.76		%		—		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.80				—
Annualized ratio of net loan charge-offs to average loans	0.47				—
After tax impact of PPP interest income on diluted earnings per share(1)	$	0.29			$	—
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

About Heartland Financial
About Heartland Financial USA, Inc. Heartland is a diversified financial services company with assets of $15.61 billion. The Company provides banking, mortgage, private client, investment, treasury management, card services, and insurance to individuals and businesses. Heartland currently has 113 banking locations serving 82 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Any statements about Heartland’s expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements include information about possible or assumed future results of Heartland’s operations or performance. These forward-looking statements are generally identified by the use of the words ‘‘believe”, “expect’’, ‘‘intent”, “anticipate’’, ‘‘plan”, “estimate’’, ‘‘project”, ‘‘will”, ‘‘would”, ‘‘could”, ‘‘should’’, “may”, “view”, “opportunity”, “potential”, or similar expressions that are used in this release, and future oral and written statements of Heartland and its management. Although Heartland has made these statements based on management’s experience and best estimate of future events, the ability of Heartland to predict results or the actual effect of plans or strategies is inherently uncertain, and there may be events or factors that management has not anticipated. Therefore, the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed below and in the risk factors in Heartland's reports filed with the Securities and Exchange Commission (“SEC”), include, among others:

• The impact of the COVID-19 pandemic on Heartland and U.S. and global financial markets;
• Measures enacted by the U.S. federal and state governments and adopted by private businesses in response to the COVID-19 pandemic;
• The deterioration of the U.S. economy in general and in the local economies in which Heartland conducts its operations; increasing credit losses due to deterioration in the financial condition of its borrowers, based on declining oil prices and asset and collateral values, which may continue to increase the provision for credit losses and net charge-offs of Heartland;
• Civil unrest in the communities that Heartland serves;
• Levels of unemployment in the geographic areas in which Heartland operates;
• Real estate market values in these geographic areas;
• Future natural disasters and increases to flood insurance premiums;
• The effects of past and any future terrorist threats and attacks, acts of war or threats thereof;
• The level of prepayments on loans and mortgage-backed securities;
• Legislative and regulatory changes affecting banking, tax, securities, insurance and monetary and financial matters;
• Monetary and fiscal policies of the U.S. Government including policies of the U.S. Department of Treasury and the Federal Reserve Board;
• The quality or composition of the loan and investment portfolios of Heartland;
• Demand for loan products and financial services, deposit flows and competition in Heartland’s market areas;
• Changes in accounting principles and guidelines;
• The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet;
• The ability of Heartland to implement technological changes as planned and to develop and maintain secure and reliable electronic delivery systems;
• Heartland’s ability to retain key executives and employees; and
• The ability of Heartland to successfully consummate acquisitions and integrate acquired operations.

The COVID-19 pandemic is adversely affecting Heartland and its customers, counterparties, employees and third-party service providers. The COVID-19 pandemic’s severity, its duration and the extent of its impact on Heartland’s business, financial condition, results of operations, liquidity and prospects remain uncertain. The deterioration in general business and economic conditions and turbulence in domestic and global financial markets caused by the COVID-19 pandemic have negatively affected Heartland’s net income, total equity and book value per common share, and continued economic deterioration could adversely affect the value of its assets and liabilities, reduce the availability of funding to Heartland, lead to a tightening of credit and increase stock price volatility. Some economists and investment banks believe that a recession or depression may result from the continued spread of COVID-19 and the economic consequences.

These risks and uncertainties should be considered in evaluating forward-looking statements made by Heartland or on its behalf, and undue reliance should not be placed on these statements. There can be no assurance that other factors not currently anticipated by Heartland will not materially and adversely affect Heartland’s business, financial condition and results of operations. In addition, many of these risks and uncertainties are currently amplified by and may continue to be amplified by the recent outbreak of the COVID-19 pandemic and the impact of varying governmental responses that affect Heartland’s customers and the economies where they operate. Please take into account that forward-looking statements speak only as of the date they are made, and except as required by applicable law, Heartland does not undertake any obligation to publicly correct or update any forward-looking statement. Further information concerning Heartland and its business, including additional factors that could materially affect Heartland’s financial results, is included in Heartland’s filings with the SEC.

###

Contact
EVP, Chief Financial Officer
Bryan R. McKeag
BMcKeag@htlf.com
563.589.1994

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.