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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 of 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
April 30, 2018


Heartland Financial USA, Inc.
(Exact name of Registrant as specified in its charter)

Commission File Number:
001-15393

Delaware
 
42-1405748
(State or other jurisdiction of incorporation)
 
(I.R.S. Employer Identification Number)

1398 Central Avenue
Dubuque, Iowa 52001
(Address of principal executive offices)

(563) 589-2100
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o








Item 2.02 Results of Operation and Financial Condition

On April 30, 2018, Heartland Financial USA, Inc. issued a press release announcing its earnings for the quarter ended March 31, 2018. A copy of the press release is attached as Exhibit 99.1.

Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits

(a)
Financial Statements of Business Acquired.

None.

(b)
Pro Forma Financial Information.

None.

(c)
Exhibits.

99.1 Press Release dated April 30, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 30, 2018
 
HEARTLAND FINANCIAL USA, INC.
 
 
 
 
 
 
By:
/s/ Bryan R. McKeag
 
 
 
Executive Vice President
 
 
 
Chief Financial Officer





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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


393256854_htlfforworkiva.jpg
 
393256854_newslogoa44.jpg

CONTACT:
FOR IMMEDIATE RELEASE
Bryan R. McKeag
April 30, 2018
Executive Vice President
 
Chief Financial Officer
 
(563) 589-1994
 
 

HEARTLAND FINANCIAL USA, INC. REPORTS FIRST QUARTER 2018 RESULTS

Highlights
§
Total assets exceed $10.0 billion for the first time in company history
§
Quarterly net income available to common stockholders of $23.3 million in comparison with $18.0 million for the first quarter of the prior year
§
Diluted earnings per common share of $0.76 in comparison with $0.68 for the first quarter of the prior year
§
Net interest margin of 4.19%, fully tax-equivalent (non-GAAP)(1) of 4.26%
§
Organic loan growth of $30.1 million and organic non-time deposit growth of $106.4 million
§
Return on average common equity of 9.32% and return on average tangible common equity (non-GAAP)(2) of 13.03%
§
Tangible common equity ratio (non-GAAP)(3) of 7.59%
§
Completed the acquisition of Signature Bancshares, Inc. with systems integrated in April
 
Quarter Ended
March 31,
 
2018
 
2017
Net income (in millions)
$
23.3

 
$
18.0

Net income available to common stockholders (in millions)
23.3

 
18.0

Diluted earnings per common share
0.76

 
0.68

 
 
 
 
Return on average assets
0.97
%
 
0.89
%
Return on average common equity
9.32

 
9.71

Return on average tangible common equity (non-GAAP)(2)
13.03

 
12.25

Net interest margin
4.19

 
3.95

Net interest margin, fully tax-equivalent (non-GAAP)(1)
4.26

 
4.16

"Heartland reported another solid quarter with net income available to common stockholders of $23.3 million, a nearly thirty percent increase over the same quarter last year. For the first time in company history, our total assets exceeded $10 billion, and total stockholders' equity exceeded $1 billion."
Lynn B. Fuller, chairman and chief executive officer, Heartland Financial USA, Inc.

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






Dubuque, Iowa, Monday, April 30, 2018-Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $23.3 million, or $0.76 per diluted common share, for the quarter ended March 31, 2018, compared to $18.0 million, or $0.68 per diluted common share, for the first quarter of 2017. Return on average common equity was 9.32% and return on average assets was 0.97% for the first quarter of 2018, compared to 9.71% and 0.89%, respectively, for the same quarter in 2017.

Commenting on Heartland’s first quarter results, Lynn B. Fuller, Heartland’s chairman and chief executive officer said, "Heartland reported another solid quarter with net income available to common stockholders of $23.3 million, a nearly thirty percent increase over the same quarter last year. For the first time in company history, our total assets exceeded $10 billion, and total stockholders' equity exceeded $1 billion."

On February 23, 2018, Heartland completed the acquisition of Signature Bancshares, Inc., parent company of Signature Bank, based in Minnetonka, Minnesota. Based on Heartland's closing common stock price of $53.55 per share as of February 23, 2018, the aggregate consideration was $61.4 million, with approximately 10% of the consideration paid in cash and 90% paid by delivery of Heartland common stock. Simultaneous with the closing of the transaction, Signature Bank merged into Heartland's Minnesota Bank & Trust subsidiary. As of the close date, Signature Bank had, at fair value, total assets of $426.5 million, total loans of $324.5 million and total deposits of $357.3 million. The systems conversion for this transaction occurred on April 20, 2018.

In the first quarter of 2018, Heartland recorded $2.6 million of restructuring expenses related to its mortgage lending operation. The restructuring projects are primarily related to outsourcing the loan application processing, underwriting and loan closing functions. These changes will improve the customer experience, streamline operations and reduce the volatility and cost of originating mortgage loans. The restructuring is expected to be substantially completed by the end of the second quarter of 2018 and will result in a workforce reduction of approximately 100 employees and the discontinued use of several current systems.
Fully Tax-Equivalent Net Interest Margin Increases from First Quarter of 2017

Net interest margin, expressed as a percentage of average earning assets, was 4.19% (4.26% on a fully tax-equivalent basis) during the first quarter of 2018, compared to 4.14% (4.30% on a fully tax-equivalent basis) during the fourth quarter of 2017 and 3.95% (4.16% on a fully tax-equivalent basis) during the first quarter of 2017.

Fuller said, “We were pleased to see net interest margin remained solid at 4.26 percent on a fully tax-equivalent basis, which is an increase of 10 basis points from the first quarter of 2017. The strong margin reflects improved yields on earning assets."

Interest income for the first quarter of 2018 was $101.2 million compared to $80.6 million recorded in the first quarter of 2017. The taxable equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.5 million for the first quarter of 2018 and $3.9 million for the first quarter of 2017. With these adjustments, interest income on a tax-equivalent basis was $102.8 million for the first quarter of 2018, an increase of $18.3 million or 22%, compared to $84.4 million for the first quarter of 2017. Average earning assets acquired in the Signature Bancshares, Inc. transaction totaled $148.9 million. Exclusive of this transaction, average earning assets increased $1.21 billion or 16% from the first quarter of 2017. The average rate on earning assets increased 14 basis points to 4.70% for the first quarter of 2018 compared to 4.56% for the same quarter in 2017. The increase in interest income on a tax-equivalent basis was primarily due to recent increases in market interest rates and the increase in average earning assets.

Interest expense on deposits and borrowings for the first quarter of 2018 was $9.6 million, an increase of $2.1 million or 28% from $7.5 million in the first quarter of 2017. Average interest bearing deposits increased $595.3 million or 13% to $5.27 billion for the quarter ended March 31, 2018, from $4.67 billion in the same quarter in 2017. Average interest bearing deposits acquired with the Signature Bancshares Inc. transaction totaled $100.7 million. Exclusive of this transaction, average interest bearing deposits increased $494.6 million or 11%. The average interest rate paid on Heartland's interest bearing deposits increased 12 basis points to 0.44% for the first quarter of 2018 compared to 0.32% for the same quarter in 2017. Average borrowings declined $91.9 million or 18% to $427.9 million during the first quarter of 2018 from $519.8 million during the same quarter in 2017. The average interest rate paid on Heartland's borrowings was 3.66% for the first quarter of 2018 compared to 2.96% in the first quarter of 2017. The increase in the average interest rate paid on Heartland's interest bearing liabilities is primarily due to recent increases in market interest rates.






Net interest income was $91.6 million during the first quarter of 2018 compared to $73.0 million during the first quarter of 2017, an increase of $18.6 million or 25%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $93.1 million during the first quarter of 2018 compared to $76.9 million during the first quarter of 2017, an increase of $16.2 million or 21%.

Noninterest Income Decreases and Noninterest Expenses Increase from First Quarter of 2017

Noninterest income totaled $24.7 million during the first quarter of 2018 compared to $25.9 million during the first quarter of 2017, a decrease of $1.2 million or 5%. Trust fees, which are based on the market value of managed assets, increased $1.0 million or 29% to $4.7 million recorded in the first quarter of 2018 compared to $3.6 million recorded in the same quarter of 2017. Securities gains, net, decreased $1.0 million or 42% to $1.4 million for the first quarter of 2018 compared to $2.5 million for the first quarter of 2017. Net gains on sale of loans held for sale totaled $4.1 million during the first quarter of 2018 compared to $6.1 million during the first quarter of 2017, a decrease of $2.1 million or 34%, primarily due to lower residential mortgage loan activity.

For the first quarter of 2018, noninterest expenses totaled $83.6 million compared to $71.7 million during the first quarter of 2017, an increase of $11.9 million or 17%. Salaries and employee benefits increased $6.9 million or 17% to $48.7 million for the first quarter of 2018 compared to $41.8 million for the same quarter in 2017, which is primarily due to the increase in full time equivalent employees. Heartland had 2,022 full time equivalent employees at March 31, 2018, compared to 1,896 full time equivalent employees at March 31, 2017. As previously discussed, Heartland recorded $2.6 million of restructuring expenses related to its mortgage lending operation during the first quarter of 2018.

Heartland's effective tax rate was 18.04% for the first quarter of 2018 compared to 23.49% for the first quarter of 2017. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $307,000 during the first quarter of 2018 compared to $304,000 for the first quarter of 2017. Heartland's effective tax rate was also affected by the passage of the Tax Cuts and Jobs Act in December 2017, which reduced the federal income tax rate from a maximum of 35% to 21% beginning January 1, 2018. The level of tax-exempt interest income as a percentage of pre-tax income was 20.46% during the first quarter of 2018 compared to 30.46% during the first quarter of 2017.

Loans and Deposits Increase Since December 31, 2017

Total assets were $10.06 billion at March 31, 2018, an increase of $245.1 million or 2% from $9.81 billion at year-end 2017. Excluding $427.1 million of assets acquired at fair value in the Signature Bancshares Inc. transaction, total assets decreased $181.9 million or 2% since December 31, 2017. The decrease in assets was primarily due to a reduction in the securities portfolio, which represented 23% and 25% of total assets at March 31, 2018, and December 31, 2017, respectively.

Total loans held to maturity were $6.75 billion at March 31, 2018, compared to $6.39 billion at year-end 2017, an increase of $354.6 million or 6%. This change includes $324.5 million of total loans held to maturity acquired at fair value in the Signature Bancshares, Inc. transaction. Exclusive of this transaction, total loans held to maturity increased $30.1 million or less than 1% since December 31, 2017.

Total deposits were $8.54 billion as of March 31, 2018, compared to $8.15 billion at year-end 2017, an increase of $394.6 million or 5%. This increase included $357.3 million of deposits, at fair value, acquired in the Signature Bancshares, Inc. transaction. Exclusive of this transaction, total deposits increased $37.3 million or less than 1% since December 31, 2017. Demand deposits increased $111.3 million or 4% to $3.09 billion at March 31, 2018 compared to $2.98 billion at December 31, 2017. Excluding $105.5 million of demand deposits attributable to the Signature Bancshares, Inc. transaction, demand deposits increased $5.8 million or less than 1% since year-end 2017. Savings deposits increased $295.8 million or 7% to $4.54 billion at March 31, 2018, from $4.24 billion at December 31, 2017. Excluding savings deposits of $195.2 million acquired in the Signature Bancshares, Inc. transaction, savings deposits increased $100.6 million or 2% since year-end 2017.

Bruce K. Lee, Heartland's president, said, "We are pleased to see organic loan growth for the third consecutive quarter, which was fueled by growth in the commercial and agricultural loan portfolios. Organic non-time deposit growth was over $106 million during the first quarter of 2018, and demand deposits now represent 36 percent of our total deposit mix."





Nonperforming Assets Increase Since December 31, 2017

Nonperforming assets were $77.1 million or 0.77% of total assets at March 31, 2018, compared to $74.6 million or 0.76% of total assets at December 31, 2017. Excluding $2.5 million of nonperforming assets acquired in the Signature Bancshares, Inc. transaction, nonperforming assets totaled $74.6 million at March 31, 2018, which is unchanged from year-end 2017. Nonperforming loans were $64.8 million or 0.96% of total loans at March 31, 2018, compared to $63.4 million or 0.99% of total loans at December 31, 2017.

The allowance for loan losses at March 31, 2018, was 0.87% of loans and 90.48% of nonperforming loans, compared to 0.87% of loans and 87.82% of nonperforming loans at December 31, 2017. The provision for loan losses increased $622,000 or 17% to $4.3 million for the first quarter of 2018 compared to $3.6 million for the same quarter in 2017. 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 expense will vary from quarter to quarter.



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 April 29, 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 $10.1 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 118 banking locations serving 89 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

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


-FINANCIAL TABLES FOLLOW
-###






HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the Three Months Ended
March 31,
 
2018
 
2017
Interest Income
 
 
 
Interest and fees on loans
$
85,651

 
$
66,898

Interest on securities:
 
 
 
Taxable
11,577

 
8,253

Nontaxable
3,579

 
5,191

Interest on federal funds sold

 

Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments
407

 
209

Total Interest Income
101,214

 
80,551

Interest Expense
 
 
 
Interest on deposits
5,766

 
3,730

Interest on short-term borrowings
268

 
137

Interest on other borrowings
3,596

 
3,656

Total Interest Expense
9,630

 
7,523

Net Interest Income
91,584

 
73,028

Provision for loan losses
4,263

 
3,641

Net Interest Income After Provision for Loan Losses
87,321

 
69,387

Noninterest Income
 
 
 
Service charges and fees
10,079

 
9,457

Loan servicing income
1,754

 
1,724

Trust fees
4,680

 
3,631

Brokerage and insurance commissions
907

 
1,036

Securities gains, net
1,441

 
2,482

Unrealized loss on equity securities, net
(28
)
 

Net gains on sale of loans held for sale
4,051

 
6,147

Valuation adjustment on commercial servicing rights
(2
)
 
5

Income on bank owned life insurance
614

 
617

Other noninterest income
1,220

 
794

Total Noninterest Income
24,716

 
25,893

Noninterest Expense
 
 
 
Salaries and employee benefits
48,710

 
41,767

Occupancy
6,043

 
5,073

Furniture and equipment
2,749

 
2,501

Professional fees
8,459

 
8,309

FDIC insurance assessments
989

 
807

Advertising
1,940

 
2,424

Core deposit intangibles and customer relationship intangibles amortization
1,863

 
1,171

Other real estate and loan collection expenses
732

 
828

(Gain)/loss on sales/valuations of assets, net
(197
)
 
412

Restructuring expenses
2,564

 

Other noninterest expenses
9,794

 
8,448

Total Noninterest Expense
83,646

 
71,740

Income Before Income Taxes
28,391

 
23,540

Income taxes
5,123

 
5,530

Net Income
23,268

 
18,010

Preferred dividends
(13
)
 
(19
)
Interest expense on convertible preferred debt

 
5

Net Income Available to Common Stockholders
$
23,255

 
$
17,996

Earnings per common share-diluted
$
0.76

 
$
0.68

Weighted average shares outstanding-diluted
30,645,212

 
26,627,830






HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the Quarter Ended
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Interest Income
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
85,651

 
$
86,108

 
$
82,906

 
$
68,094

 
$
66,898

Interest on securities:
 
 
 
 
 
 
 
 
 
Taxable
11,577

 
11,119

 
10,394

 
8,599

 
8,253

Nontaxable
3,579

 
4,401

 
5,086

 
5,020

 
5,191

Interest on federal funds sold

 
5

 
34

 
3

 

Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments
407

 
435

 
558

 
345

 
209

Total Interest Income
101,214

 
102,068

 
98,978

 
82,061

 
80,551

Interest Expense
 
 
 
 
 
 
 
 
 
Interest on deposits
5,766

 
5,313

 
5,073

 
4,163

 
3,730

Interest on short-term borrowings
268

 
180

 
271

 
90

 
137

Interest on other borrowings
3,596

 
3,719

 
3,790

 
3,228

 
3,656

Total Interest Expense
9,630

 
9,212

 
9,134

 
7,481

 
7,523

Net Interest Income
91,584

 
92,856

 
89,844

 
74,580

 
73,028

Provision for loan losses
4,263

 
5,328

 
5,705

 
889

 
3,641

Net Interest Income After Provision for Loan Losses
87,321

 
87,528

 
84,139

 
73,691

 
69,387

Noninterest Income
 
 
 
 
 
 
 
 
 
Service charges and fees
10,079

 
9,892

 
10,138

 
9,696

 
9,457

Loan servicing income
1,754

 
1,400

 
1,161

 
1,351

 
1,724

Trust fees
4,680

 
4,336

 
3,872

 
3,979

 
3,631

Brokerage and insurance commissions
907

 
1,071

 
950

 
976

 
1,036

Securities gains, net
1,441

 
1,420

 
1,679

 
1,392

 
2,482

Unrealized loss on equity securities, net
(28
)
 

 

 

 

Net gains on sale of loans held for sale
4,051

 
4,290

 
4,997

 
6,817

 
6,147

Valuation adjustment on commercial servicing rights
(2
)
 
(8
)
 
5

 
19

 
5

Income on bank owned life insurance
614

 
733

 
766

 
656

 
617

Other noninterest income
1,220

 
2,394

 
1,409

 
738

 
794

Total Noninterest Income
24,716

 
25,528

 
24,977

 
25,624

 
25,893

Noninterest Expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
48,710

 
43,289

 
45,225

 
41,126

 
41,767

Occupancy
6,043

 
5,892

 
6,223

 
5,056

 
5,073

Furniture and equipment
2,749

 
3,148

 
2,826

 
2,586

 
2,501

Professional fees
8,459

 
8,537

 
8,450

 
7,583

 
8,309

FDIC insurance assessments
989

 
985

 
894

 
909

 
807

Advertising
1,940

 
2,088

 
1,358

 
1,359

 
2,424

Core deposit intangibles and customer relationship intangibles amortization
1,863

 
1,825

 
1,863

 
1,218

 
1,171

Other real estate and loan collection expenses
732

 
687

 
581

 
365

 
828

(Gain)/loss on sales/valuations of assets, net
(197
)
 
833

 
1,342

 
(112
)
 
412

Restructuring expenses
2,564

 

 

 

 

Other noninterest expenses
9,794

 
10,594

 
9,997

 
9,208

 
8,448

Total Noninterest Expense
83,646

 
77,878

 
78,759

 
69,298

 
71,740

Income Before Income Taxes
28,391

 
35,178

 
30,357

 
30,017

 
23,540

Income taxes
5,123

 
21,506

 
8,725

 
8,059

 
5,530

Net Income
23,268

 
13,672

 
21,632

 
21,958

 
18,010

Preferred dividends
(13
)
 
(13
)
 
(13
)
 
(13
)
 
(19
)
Interest expense on convertible preferred debt

 

 
3

 
4

 
5

Net Income Available to Common Stockholders
$
23,255

 
$
13,659

 
$
21,622

 
$
21,949

 
$
17,996

Earnings per common share-diluted
$
0.76

 
$
0.45

 
$
0.72

 
$
0.81

 
$
0.68

Weighted average shares outstanding-diluted
30,645,212

 
30,209,043

 
29,910,437

 
26,972,580

 
26,627,830







HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
As Of
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
143,071

 
$
168,723

 
$
180,751

 
$
141,100

 
$
129,386

Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments
123,275

 
27,280

 
70,985

 
40,676

 
43,765

Cash and cash equivalents
266,346

 
196,003

 
251,736

 
181,776

 
173,151

Time deposits in other financial institutions
6,297

 
9,820

 
19,793

 
30,241

 
41,539

Securities:
 
 
 
 
 
 
 
 
 
Available for sale, at fair value
2,027,665

 
2,216,753

 
2,093,385

 
1,789,441

 
1,893,528

Held to maturity, at cost
249,766

 
253,550

 
256,355

 
259,586

 
260,616

Other investments, at cost
22,982

 
22,563

 
23,176

 
21,094

 
21,557

Loans held for sale
24,376

 
44,560

 
35,795

 
48,848

 
49,009

Loans:
 
 
 
 
 
 
 
 
 
Held to maturity
6,746,015

 
6,391,464

 
6,373,415

 
5,325,082

 
5,361,604

 Allowance for loan losses
(58,656
)
 
(55,686
)
 
(54,885
)
 
(54,051
)
 
(54,999
)
Loans, net
6,687,359

 
6,335,778

 
6,318,530

 
5,271,031

 
5,306,605

Premises, furniture and equipment, net
172,862

 
174,301

 
178,961

 
163,003

 
165,425

Goodwill
270,305

 
236,615

 
236,615

 
141,461

 
141,461

Core deposit intangibles and customer relationship intangibles, net
41,063

 
35,203

 
37,028

 
22,850

 
24,068

Servicing rights, net
25,471

 
25,857

 
26,599

 
34,736

 
35,441

Cash surrender value on life insurance
143,444

 
142,818

 
142,073

 
120,281

 
117,613

Other real estate, net
11,801

 
10,777

 
13,226

 
9,269

 
11,188

Other assets
106,126

 
106,141

 
122,355

 
111,104

 
120,644

Total Assets
$
10,055,863

 
$
9,810,739

 
$
9,755,627

 
$
8,204,721

 
$
8,361,845

Liabilities and Equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 Demand
$
3,094,457

 
$
2,983,128

 
$
3,009,940

 
$
2,355,410

 
$
2,319,256

 Savings
4,536,106

 
4,240,328

 
4,227,340

 
3,704,579

 
3,940,146

 Time
910,977

 
923,453

 
994,604

 
870,180

 
830,459

Total deposits
8,541,540

 
8,146,909

 
8,231,884

 
6,930,169

 
7,089,861

Short-term borrowings
131,240

 
324,691

 
171,871

 
139,130

 
155,025

Other borrowings
276,118

 
285,011

 
301,473

 
281,096

 
282,051

Accrued expenses and other liabilities
55,460

 
62,671

 
68,715

 
48,356

 
53,596

Total Liabilities
9,004,358

 
8,819,282

 
8,773,943

 
7,398,751

 
7,580,533

Stockholders' Equity
 
 
 
 
 
 
 
 
 
Preferred equity
938

 
938

 
938

 
938

 
938

Common stock
31,068

 
29,953

 
29,946

 
26,701

 
26,674

Capital surplus
557,990

 
503,709

 
503,262

 
352,500

 
351,423

Retained earnings
500,959

 
481,331

 
468,556

 
450,228

 
431,219

Accumulated other comprehensive loss
(39,450
)
 
(24,474
)
 
(21,018
)
 
(24,397
)
 
(28,942
)
Total Equity
1,051,505

 
991,457

 
981,684

 
805,970

 
781,312

Total Liabilities and Equity
$
10,055,863

 
$
9,810,739

 
$
9,755,627

 
$
8,204,721

 
$
8,361,845







HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
For the Quarter Ended
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Average Balances
 
 
 
 
 
 
 
 
 
Assets
$
9,759,936

 
$
9,807,621

 
$
9,639,844

 
$
8,333,301

 
$
8,233,510

Loans, net of unearned
6,525,553

 
6,343,923

 
6,286,264

 
5,376,826

 
5,365,654

Deposits
8,251,140

 
8,293,006

 
8,100,028

 
7,050,126

 
6,896,821

Earning assets
8,857,801

 
8,891,432

 
8,726,228

 
7,586,256

 
7,502,496

Interest bearing liabilities
5,694,337

 
5,663,816

 
5,697,713

 
5,146,243

 
5,190,955

Common stockholders' equity
1,011,580

 
986,026

 
954,511

 
791,039

 
751,671

Total stockholders' equity
1,012,518

 
986,964

 
955,449

 
791,977

 
752,958

Tangible common stockholders' equity(1)
723,898

 
713,018

 
691,464

 
625,929

 
596,006

 
 
 
 
 
 
 
 
 
 
Key Performance Ratios
 
 
 
 
 
 
 
 
 
Annualized return on average assets
0.97
%
 
0.55
%
 
0.89
%
 
1.06
%
 
0.89
%
Annualized return on average common equity (GAAP)
9.32
%
 
5.50
%
 
8.99
%
 
11.13
%
 
9.71
%
Annualized return on average tangible common equity (non-GAAP)(2)
13.03
%
 
7.60
%
 
12.41
%
 
14.07
%
 
12.25
%
Annualized ratio of net charge-offs to average loans
0.08
%
 
0.28
%
 
0.31
%
 
0.14
%
 
0.22
%
Annualized net interest margin (GAAP)
4.19
%
 
4.14
%
 
4.08
%
 
3.94
%
 
3.95
%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(3)
4.26
%
 
4.30
%
 
4.26
%
 
4.14
%
 
4.16
%
Efficiency ratio, fully tax-equivalent(4)
68.21
%
 
62.26
%
 
64.54
%
 
65.61
%
 
69.95
%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)(5)
 
 
 
 
 
 
 
 
 
Net income available to common shareholders (GAAP)
$
23,255

 
$
13,659

 
$
21,622

 
$
21,949

 
$
17,996

 
 
 
 
 
 
 
 
 
 
Average common stockholders' equity (GAAP)
$
1,011,580

 
$
986,026

 
$
954,511

 
$
791,039

 
$
751,671

   Less average goodwill
250,172

 
236,615

 
226,097

 
141,461

 
132,440

Less average core deposit intangibles and customer relationship intangibles, net
37,510

 
36,393

 
36,950

 
23,649

 
23,225

Average tangible common equity (non-GAAP)
$
723,898

 
$
713,018

 
$
691,464

 
$
625,929

 
$
596,006

Annualized return on average common equity (GAAP)
9.32
%
 
5.50
%
 
8.99
%
 
11.13
%
 
9.71
%
Annualized return on average tangible common equity (non-GAAP)
13.03
%
 
7.60
%
 
12.41
%
 
14.07
%
 
12.25
%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)(6)
 
 
 
 
 
 
 
 
 
Net Interest Income (GAAP)
$
91,584

 
$
92,856

 
$
89,844

 
$
74,580

 
$
73,028

    Plus tax-equivalent adjustment(7)
1,544

 
3,558

 
3,925

 
3,796

 
3,860

Net interest income, fully tax-equivalent (non-GAAP)
$
93,128

 
$
96,414

 
$
93,769

 
$
78,376

 
$
76,888

 
 
 
 
 
 
 
 
 
 
Average earning assets
$
8,857,801

 
$
8,891,432

 
$
8,726,228

 
$
7,586,256

 
$
7,502,496

 
 
 
 
 
 
 
 
 
 
Annualized net interest margin (GAAP)
4.19
%
 
4.14
%
 
4.08
%
 
3.94
%
 
3.95
%
Annualized net interest margin, fully tax-equivalent (non-GAAP)
4.26
%
 
4.30
%
 
4.26
%
 
4.14
%
 
4.16
%
 
(1) Calculated as common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net.
(2) Refer to the "Reconciliation of Return on Average Tangible Common Equity (non-GAAP)" table.
(3) Refer to the "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" table.
(4) Refer to the "Reconciliation of Non-GAAP Measure-Efficiency Ratio" table that follows for details of this non-GAAP measure.
(5) Return on average common tangible equity is net income available to common stockholders divided by average common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(6) Annualized net interest margin, fully tax-equivalent is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(7) Computed on a tax-equivalent basis using an effective tax rate of 21% for the quarter ended March 31, 2018, and 35% for all prior quarters.






HEARTLAND FINANCIAL USA, INC.
 
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
 
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
Reconciliation of Non-GAAP Measure-Efficiency Ratio(1)
For the Quarter Ended
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Net interest income
$
91,584

 
$
92,856

 
$
89,844

 
$
74,580

 
$
73,028

Tax-equivalent adjustment(2)
1,544

 
3,558

 
3,925

 
3,796

 
3,860

Fully tax-equivalent net interest income
93,128

 
96,414

 
93,769

 
78,376

 
76,888

Noninterest income
24,716

 
25,528

 
24,977

 
25,624

 
25,893

Securities gains, net
(1,441
)
 
(1,420
)
 
(1,679
)
 
(1,392
)
 
(2,482
)
Unrealized loss on equity securities
28

 

 

 

 

Gain on extinguishment of debt

 
(1,280
)
 

 

 

Adjusted income
$
116,431

 
$
119,242

 
$
117,067

 
$
102,608

 
$
100,299

 
 
 
 
 
 
 
 
 
 
Total noninterest expenses
$
83,646

 
$
77,878

 
$
78,759

 
$
69,298

 
$
71,740

Less:
 
 
 
 
 
 
 
 
 
Core deposit intangibles and customer relationship intangibles amortization
1,863

 
1,825

 
1,863

 
1,218

 
1,171

Partnership investment in tax credit projects

 
984

 

 
876

 

(Gain)/loss on sales/valuation of assets, net
(197
)
 
833

 
1,342

 
(112
)
 
412

   Restructuring expenses
2,564

 

 

 

 

Adjusted noninterest expenses
$
79,416

 
$
74,236

 
$
75,554

 
$
67,316

 
$
70,157

 
 
 
 
 
 
 
 
 
 
Efficiency ratio, fully tax-equivalent (non-GAAP)
68.21
%
 
62.26
%
 
64.54
%
 
65.61
%
 
69.95
%
 
 
 
 
 
 
 
 
 
 
(1) Efficiency ratio, fully tax-equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis, which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, as noted in the table. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(2) Computed on a tax-equivalent basis using an effective tax rate of 21% for the quarter ended March 31, 2018, and 35% for all prior quarters.






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
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Common Share Data
 
 
 
 
 
 
 
 
 
Book value per common share
$
33.81

 
$
33.07

 
$
32.75

 
$
30.15

 
$
29.26

Tangible book value per common share (non-GAAP)(1)
$
23.79

 
$
23.99

 
$
23.61

 
$
24.00

 
$
23.05

Common shares outstanding, net of treasury stock
31,068,239

 
29,953,356

 
29,946,069

 
26,701,226

 
26,674,121

Tangible common equity ratio (non-GAAP)(2)
7.59
%
 
7.53
%
 
7.46
%
 
7.97
%
 
7.50
%
 
 
 
 
 
 
 
 
 
 
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)(3)
 
 
 
 
 
 
 
 
 
Common stockholders' equity (GAAP)
$
1,050,567

 
$
990,518

 
$
980,746

 
$
805,032

 
$
780,374

Less goodwill
270,305

 
236,615

 
236,615

 
141,461

 
141,461

Less core deposit intangibles and customer relationship intangibles, net
41,063

 
35,203

 
37,028

 
22,850

 
24,068

Tangible common stockholders' equity (non-GAAP)
$
739,199

 
$
718,700

 
$
707,103

 
$
640,721

 
$
614,845

 
 
 
 
 
 
 
 
 
 
Common shares outstanding, net of treasury stock
31,068,239

 
29,953,356

 
29,946,069

 
26,701,226

 
26,674,121

Common stockholders' equity (book value) per share (GAAP)
$
33.81

 
$
33.07

 
$
32.75

 
$
30.15

 
$
29.26

Tangible book value per common share (non-GAAP)
$
23.79

 
$
23.99

 
$
23.61

 
$
24.00

 
$
23.05

 
 
 
 
 
 
 
 
 
 
Reconciliation of Tangible Common Equity Ratio (non-GAAP)(4)
 
 
 
 
 
 
 
 
 
Total assets (GAAP)
$
10,055,863

 
$
9,810,739

 
$
9,755,627

 
$
8,204,721

 
$
8,361,845

    Less goodwill
270,305

 
236,615

 
236,615

 
141,461

 
141,461

 Less core deposit intangibles and customer relationship
 intangibles, net
41,063

 
35,203

 
37,028

 
22,850

 
24,068

Total tangible assets (non-GAAP)
$
9,744,495

 
$
9,538,921

 
$
9,481,984

 
$
8,040,410

 
$
8,196,316

Tangible common equity ratio (non-GAAP)
7.59
%
 
7.53
%
 
7.46
%
 
7.97
%
 
7.50
%
 
 
 
 
 
 
 
 
 
 
Loan Data
 
 
 
 
 
 
 
 
 
Loans held to maturity:
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate
$
5,129,777

 
$
4,809,875

 
$
4,777,856

 
$
3,803,011

 
$
3,849,748

Residential mortgage
624,725

 
624,279

 
635,611

 
596,385

 
604,902

Agricultural and agricultural real estate
518,386

 
511,588

 
511,764

 
495,243

 
481,125

Consumer
474,929

 
447,484

 
450,088

 
431,052

 
427,962

Unearned discount and deferred loan fees
(1,802
)
 
(1,762
)
 
(1,904
)
 
(609
)
 
(2,133
)
Total loans held to maturity
$
6,746,015

 
$
6,391,464

 
$
6,373,415

 
$
5,325,082

 
$
5,361,604

 
 
 
 
 
 
 
 
 
 
Other Selected Trend Information
 
 
 
 
 
 
 
 
 
Effective tax rate
18.04
%
 
61.13
%
 
28.74
%
 
26.85
%
 
23.49
%
Full time equivalent employees
2,022

 
2,008

 
2,024

 
1,862

 
1,896

Total residential mortgage loan applications
$
234,825

 
$
232,946

 
$
271,476

 
$
308,113

 
$
248,614

Residential mortgage loans originated
$
149,768

 
$
185,580

 
$
198,911

 
$
216,637

 
$
161,851

Residential mortgage loans sold
$
127,963

 
$
168,527

 
$
188,501

 
$
180,296

 
$
172,521

Residential mortgage loan servicing portfolio
$
3,535,988

 
$
3,558,090

 
$
3,557,866

 
$
4,340,243

 
$
4,338,311

 
 
 
 
 
 
 
 
 
 
(1) Refer to the "Reconciliation of Tangible Book Value Per Common Share (non-GAAP)" table.
(2) Refer to the "Reconciliation of Tangible Common Equity Ratio (non-GAAP)" table.
(3) Tangible book value per common share is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
(4) The tangible common equity ratio is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net, divided by total assets less goodwill and core deposit intangibles and customer relationship intangibles, net. This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. This measure should not be considered a substitute for operating results determined in accordance with GAAP.






HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 
As of and for the Quarter Ended
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
55,686

 
$
54,885

 
$
54,051

 
$
54,999

 
$
54,324

Provision for loan losses
4,263

 
5,328

 
5,705

 
889

 
3,641

Charge-offs
(2,224
)
 
(5,628
)
 
(5,759
)
 
(2,766
)
 
(3,718
)
Recoveries
931

 
1,101

 
888

 
929

 
752

Balance, end of period
$
58,656

 
$
55,686

 
$
54,885

 
$
54,051

 
$
54,999

 
 
 
 
 
 
 
 
 
 
Asset Quality
 
 
 
 
 
 
 
 
 
Nonaccrual loans
$
64,806

 
$
62,581

 
$
63,456

 
$
65,393

 
$
62,868

Loans past due ninety days or more as to interest or principal payments
22

 
830

 
2,348

 
698

 
872

Other real estate owned
11,801

 
10,777

 
13,226

 
9,269

 
11,188

Other repossessed assets
423

 
411

 
773

 
675

 
739

Total nonperforming assets
$
77,052

 
$
74,599

 
$
79,803

 
$
76,035

 
$
75,667

 
 
 
 
 
 
 
 
 
 
Performing troubled debt restructured loans
$
3,206

 
$
6,617

 
$
10,040

 
$
11,157

 
$
11,010

 
 
 
 
 
 
 
 
 
 
Nonperforming Assets Activity
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
74,599

 
$
79,803

 
$
76,035

 
$
75,667

 
$
74,792

Net loan charge offs
(1,293
)
 
(4,527
)
 
(4,871
)
 
(1,837
)
 
(2,966
)
New nonperforming loans
8,546

 
9,911

 
9,117

 
13,700

 
14,819

Acquired nonperforming assets
2,459

 

 
7,991

 

 

Reduction of nonperforming loans(1)
(6,549
)
 
(7,177
)
 
(5,183
)
 
(7,443
)
 
(10,037
)
OREO/Repossessed assets sales proceeds
(657
)
 
(2,917
)
 
(3,328
)
 
(3,734
)
 
(715
)
OREO/Repossessed assets writedowns, net
(16
)
 
(146
)
 
(56
)
 
(259
)
 
(279
)
Net activity at Citizens Finance Co.
(37
)
 
(348
)
 
98

 
(59
)
 
53

Balance, end of period
$
77,052

 
$
74,599

 
$
79,803

 
$
76,035

 
$
75,667

 
Asset Quality Ratios
 
 
 
 
 
 
 
 
 
Ratio of nonperforming loans to total loans
0.96
%
 
0.99
%
 
1.03
%
 
1.24
%
 
1.19
%
Ratio of nonperforming assets to total assets
0.77
%
 
0.76
%
 
0.82
%
 
0.93
%
 
0.90
%
Annualized ratio of net loan charge-offs to average loans
0.08
%
 
0.28
%
 
0.31
%
 
0.14
%
 
0.22
%
Allowance for loan losses as a percent of loans
0.87
%
 
0.87
%
 
0.86
%
 
1.02
%
 
1.03
%
Allowance for loan losses as a percent of nonperforming loans
90.48
%
 
87.82
%
 
83.41
%
 
81.78
%
 
86.29
%
Loans delinquent 30-89 days as a percent of total loans
0.21
%
 
0.27
%
 
0.33
%
 
0.38
%
 
0.44
%
 
 
 
 
 
 
 
 
 
 
(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

March 31, 2018

March 31, 2017

Average
Balance

Interest

Rate

Average
Balance

Interest

Rate
Earning Assets











Securities:











Taxable
$
1,827,611


$
11,577


2.57
%

$
1,449,054


$
8,253


2.31
%
Nontaxable(1)
448,641


4,530


4.09


645,534


7,986


5.02

Total securities
2,276,252


16,107


2.87


2,094,588


16,239


3.14

Interest bearing deposits with the Federal Reserve Bank and other banks and other short-term investments
112,024


407


1.47


96,270


209


0.88

Federal funds sold






314





Loans:(2)











Commercial and commercial real estate(1)
4,910,797


62,813


5.19


3,813,258


45,913


4.88

Residential mortgage
642,181


6,851


4.33


646,532


6,683


4.19

Agricultural and agricultural real estate(1)
513,780


6,004


4.74


483,079


5,554


4.66

Consumer
458,795


8,660


7.66


422,785


8,053


7.72

Fees on loans


1,916






1,760



Less: allowance for loan losses
(56,028
)





(54,330
)




Net loans
6,469,525


86,244


5.41


5,311,324


67,963


5.19

Total earning assets
8,857,801


102,758


4.70
%

7,502,496


84,411


4.56
%
Nonearning Assets
902,135






731,014





Total Assets
$
9,759,936






$
8,233,510





Interest Bearing Liabilities











Savings
$
4,358,508


$
3,791


0.35
%

$
3,838,001


$
2,105


0.22
%
Time, $100,000 and over
377,443


776


0.83


348,782


725


0.84

Other time deposits
530,485


1,199


0.92


484,336


900


0.75

Short-term borrowings
147,738


268


0.74


235,432


137


0.24

Other borrowings
280,163


3,596


5.21


284,404


3,656


5.21

Total interest bearing liabilities
5,694,337


9,630


0.69
%

5,190,955


7,523


0.59
%
Noninterest Bearing Liabilities











Noninterest bearing deposits
2,984,704






2,225,702





Accrued interest and other liabilities
68,377