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Section 1: 8-K (8-K)

htlf-20200731
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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)July 31, 2020

Heartland Financial USA, Inc.
(Exact name of Registrant as specified in its charter)
Commission File Number: 001-15393

Delaware42-1405748
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification Number)

1398 Central Avenue
Dubuque,Iowa52001
(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):

 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 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 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company

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.
Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per shareHTLFNasdaq Stock Market
Depositary Shares., each representing 1/400th interest in a share of 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series EHTLFPNasdaq Stock Market

Item 7.01 Regulation FD Disclosure

Heartland Financial USA, Inc. ("Heartland") has prepared presentation materials (the “Presentation Materials”) that management intends to use from time to time on and after July 31, 2020 in presentations about Heartland’s operations and performance. Heartland may use the Presentation Materials in presentations to current and potential investors, lenders, creditors, insurers, vendors, customers, employees and others with an interest in Heartland and its business. The Presentation Materials are furnished as Exhibit 99.1 to this Current Report on Form 8-K and will also be posted in the Investor Relations section of Heartland’s website www.htlf.com.

The information contained in the Presentation Materials is summary information that should be considered within the context of Heartland’s filings with the Securities and Exchange Commission and other public announcements that Heartland may make by press release or otherwise from time to time. The Presentation Materials are as of the date of this Current Report on Form 8-K. While Heartland may elect to update the Presentation Materials in the future or reflect events and circumstances occurring or existing after the date of this Current Report on Form 8-K, Heartland specifically disclaims any obligation to do so.

The information furnished in Item 7.01 and Exhibit 99.1 to this Current Report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

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 Presentation Materials
104 The cover page from this Current Report on Form 8-K, formatted as Inline XBRL.



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: July 31, 2020HEARTLAND FINANCIAL USA, INC.
By:/s/ Bryan R. McKeag
Bryan R. McKeag
Executive Vice President
Chief Financial Officer



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Section 2: EX-99.1 (EX-99.1)

a2q2020irdeck
PRESENTATION CAN BE UP TO THREE LINES CAN BE UP TO THREE LINESHeartland Financial USA, Inc. 2nd Quarter 2020 Financials Presentation Subtitle 1


 
Safe Harbor This presentation, 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 below and in the risk factors in Heartland's reports filed with the Securities and Exchange Commission, contained, among others: the impact of the COVID-19 pandemic on Heartland and U.S. and global financial markets; containment measures enacted by the U.S. federal and state governments and 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 Heartland’s provision for credit losses and net charge-offs; civil unrest in the communities that Heartland serves; levels of unemployment in the subsidiary banks’ lending areas; real estate market values in the subsidiary banks’ lending 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/regulatory changes affecting banking, taxes, securities, insurance and monetary and financial matters; monetary and fiscal policies of the U.S. Government including policies of the United States Department of the Treasury (the “U.S. Treasury”) and the Federal Reserve; the quality or composition of Heartland’s loan or investment portfolios; 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; Heartland’s ability to implement technological changes as anticipated 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 and its subsidiaries 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 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. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect Heartland’s net income and 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 also predict that a recession or depression may result from the continued spread of COVID-19 and the economic consequences. All statements in this presentation, 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. Notes Regarding the Use of Non-GAAP Financial Measures This presentation contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management uses these “non-GAAP” measures in its analysis of the Heartland’s performance. Management believes these non-GAAP financial measures allow for better comparability of period to period operating performance. Additionally, Heartland believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. A reconciliation of the non-GAAP measures used in this presentation to the most directly comparable GAAP measures is provided in the Appendix to this presentation 2


 
PRESENTATION CAN BE UP TO THREE LINES CAN BE UP TO THREE LINES About Heartland Financial USA, Inc. Presentation Subtitle 3


 
Heartland: 3 Year Growth in Assets and Total Shareholder Return 3 Year Asset Growth 3 Year Total Shareholder Returns 12/31/2016 – 6/30/2020 12/31/2016 – 6/30/2020 Heartland 82.2% Heartland -26.9% Proxy Peer 41.1% HP Peer -27.0% 100% 45% 30% 80% 15% 60% 0% 40% -15% 20% -30% 0% -45% 12/31/16 12/31/17 12/31/18 12/31/19 12/31/16 12/31/17 12/31/18 12/31/19 Source: S&P Global Market Intelligence As of June 30, 2020 / Peer Groups as of March 31, 2020 4


 
Heartland’s Stock Performance Price Return (%) From 12/31/2016 - 6/30/2020 60% 40% 20% 0% -20% -40% -60% 12/31/16 12/31/17 12/31/18 12/31/19 HTLF S&P 500 SNL Mid Cap U.S. Bank KBW Regional Bank Index Source: S&P Global Market Intelligence 5


 
Company Overview Company Overview – NASDAQ: HTLF Fiscal 2Q 2020 Financial Highlights • Headquartered in Dubuque, IA Dollars in millions • Holding company established in 1981 Total Assets $15,026 • Total assets of $15.0 billion, as of June 30, 2020 1 Total Loans Held for Investment $9,247 • Company conducts community banking business through 11 Balance Total Deposits $12,709 independently chartered community banks 1 Sheet Loan / Deposit Ratio 72.76% • 114 full-service branches located across 12 states in the Midwest, Tangible Common Equity 2 $1,147 Southwest and Western regions of the country 1 Total Equity $1,637 Total Equity / Total Assets 10.89% Tang. Common Equity / Tang. Assets 2 7.89% Tier 1 Leverage Ratio 9.95% Capital CET1 Ratio 10.87% Tier 1 Capital Ratio 13.34% Total RBC Ratio 15.16% Net Interest Margin 2 3.81% Cost of Interest Bearing Deposits 0.32% Profitability Adj. Return on Avg. Assets 2 1.32% Adj. Return on Avg. Tangible Common Equity 2 20.02% Efficiency Ratio FTE 2 55.75% NPAs / Assets 0.66% HTLF, AIM Bancshares, Inc. & Asset Quality Johnson Bank’s AZ Branches (143) NCOs / Avg. Loans 0.11% (1) Excludes Heartland’s acquisition of AIM Bancshares, Inc. announced February 11, 2020; anticipated closing in Q3 2020; & Arizona Branch Transaction announced June 9, 2020; anticipated close Q4 2020 (2) See Appendix for reconciliation of non-GAAP financial measures to most directly comparable GAAP financial measures Note: Financial metrics as of or for the quarter ended June 30, 2020 6


 
Corporate Structure Subsidiary Banks by Region HTLF West HTLF Southwest HTLF Midwest Rocky Mountain Bank - MT Arizona Bank & Trust - AZ Minnesota Bank & Trust - MN • Total Assets: $590,764 • Total Assets: $970,775 • Total Assets: $951,236 • Total Deposits: $519,029 • Total Deposits: $865,430 • Total Deposits: $820,199 • No. of Branch Offices: 9 • No. of Branch Offices: 6 • No. of Branch Offices: 2 • % of Franchise Assets: 3.5% • % of Franchise Assets: 5.7% • % of Franchise Assets: 5.6% Premier Valley Bank - CA AZ Branches - AZ (Pending) 1 Wisconsin Bank & Trust - WI • Total Assets: $1,031,899 • Total Loans: $168,144 • Total Assets: $1,203,108 • Total Deposits: $869,165 • Total Deposits: $415,349 • Total Deposits: $1,050,766 • No. of Branch Offices: 8 • No. of Branch Offices: 4 • No. of Branch Offices: 14 • % of Franchise Assets: 6.0% • % of Franchise Assets: 7.0% Citywide Banks - CO New Mexico Bank & Trust - NM Dubuque Bank & Trust - IA • Total Assets: $2,546,942 • Total Assets: $1,899,194 • Total Assets: $1,849,035 • Total Deposits: $2,147,642 • Total Deposits: $1,698,584 • Total Deposits: $1,496,559 • No. of Branch Offices: 23 • No. of Branch Offices: 17 • No. of Branch Offices: 6 • % of Franchise Assets: 14.9% • % of Franchise Assets: 11.1% • % of Franchise Assets: 10.8% First Bank & Trust - TX Illinois Bank & Trust - IL 3 Regional Summary (Pro-Forma) H T LF West HTLF Southwest HTLF M idwest • Total Assets: $1,256,710 • Total Assets: $1,470,000 • Total Deposits: $959,886 • Total Deposits: $1,318,866 4 Total Assets : $4,169,605 $6,072,846 $6,853,538 • No. of Branch Offices: 7 • No. of Branch Offices: 10 • % of Franchise Assets: 7.4% • % of Franchise Assets: 8.6% Total Deposits: $3,535,836 $5,213,615 $5,825,208 AimBank - TX (Pending) 2 Bank of Blue Valley – KS/MO No. of Branch Offices 4 : 40 55 44 4 • Total Assets: $1,946,167 • Total Assets: $1,380,159 % of Franchise Assets : 24.4% 35.5% 40.1% • Total Deposits: $1,689,715 • Total Deposits: $1,138,818 • No. of Branch Offices: 25 • No. of Branch Offices: 12 Projected 5yr Population Change 5 : 3.7% 6.2% 1.2% • % of Franchise Assets: 11.4% • % of Franchise Assets: 8.1% (1) Heartland’s Arizona Branch Transaction announced June 9, 2020; anticipated close Q4 2020 (2) Heartland’s acquisition of AIM Bancshares, Inc. announced February 11, 2020; anticipated close Q3 2020 (3) Includes Heartland’s acquisition of AIM Bancshares, Inc. (4) Excludes contribution of Arizona Branch Transaction (5) Source: S&P Global Market Intelligence Note: Financial information as of June 30, 2020 7


 
A Steadfast and Highly Disciplined Growth Strategy Heartland has a long history of growth, stability and geographic diversity… $15.0B Total assets as of 2Q 2020 39 / 17 39 year old holding company; 17 years on NASDAQ 11 11 independent bank brands 12 / 114 12 states; 114 banking offices 17.0% 3 year compound annual asset growth rate (through 12/31/19) …driving consistent earnings, impressive returns and significant value creation 0 Never an annual loss 2x History of doubling earnings and assets every 5 to 7 years 14.5% 3 year average annual ROATCE, non-GAAP 1 (as of 12/31/19) 8.7% 3 year compound annual EPS growth rate (as of 12/31/19) 39 39 consecutive years of level or increased cash dividends to common shareholders $1.13B Market capitalization 2 6.5% Beneficial ownership by the Board and executive officers (as of 1/31/20) (1) See Appendix for reconciliation of non-GAAP financial measures to most directly comparable GAAP financial measures (2) As of July 27, 2020 Note: Financial information as of June 30, 2020 unless otherwise specified 8


 
Heartland Asset and Earnings Growth $200 $16.0 $15.0B $149.1 $150 $12.0 $117.0 $100 $8.0 $85.7 $80.3 $6.1B $60.0 $50.2 $50 $4.0 $0 $0.0 2015 2016 2017 2018 2019 2020 YTD Net Income Deferred Tax Charge Assets 9


 
Heartland Diluted EPS and Dividends $4.14 $3.52 $3.22 $3.01 $2.83 $2.65 $1.36 $0.59 $0.45 $0.50 $0.51 $0.68 $0.54 $0.40 $0.40 $0.40 $0.44 2015 2016 2017 2018 2019 2020 YTD Deferred Tax Charge Special Dividend Diluted EPS Regular Dividends 10


 
M&A – Core Competency and Strategy • A Core Competency (11 transactions completed in last 5 years) – Dedicated corporate development and conversion/integration staff – Sophisticated internally developed financial model – Detailed conversion/integration playbook – Efficient regulatory application, SEC filing and close process – avg. 125 days post announcement – All new entities convert to our core systems platform – avg. 75 days post deal close • Focused on In-Footprint Transactions – Opportunities abound across entire footprint – deep active pipeline of opportunities, providing selectivity – Focus on expanding existing markets >= $1 Billion in assets • Deal Size “Sweet Spot” is Increasing Modestly – Targets of $1 to $3 Billion in Assets – Strong core deposits – Clean credit quality – Market overlap – Attractive risk attributes • Must Meet Conservatively Modeled Financial Benchmarks – Accretive to EPS immediately after conversion – Demonstrate an IRR > 15% – Conservative tangible book value per share dilution earn-back periods 11


 
Heartland M&A Transaction Summary Date Date Date Announced Organization Transaction Announced Closed Converted Deal Value PxTBV Assets Johnson Financial Group, Inc. (4 Branches) 6/9/2020 TBD TBD - - $415 1 Aim Bancshares, Inc. 2/11/2020 TBD TBD $280.4 2.02x $1,946 Rockford Bank and Trust Co. 8/13/2019 11/30/2019 2/7/2020 $59.2 1.35x $485 Blue Valley Ban Corp. 1/16/2019 5/10/2019 8/23/2019 $93.9 1.88x $728 FirstBank Lubbock Bancshares, Inc. 12/12/2017 5/18/2018 8/17/2018 $185.6 2.22x $930 Signature Bancshares, Inc. 11/13/2017 2/23/2018 4/20/2018 $53.4 1.82x $390 Citywide Banks of Colorado, Inc. 2/13/2017 7/7/2017 10/13/2017 $202.7 1.82x $1,377 Founders Bancorp 10/31/2016 2/28/2017 3/17/2017 $29.1 1.52x $198 CIC Bancshares, Inc. 10/23/2015 2/5/2016 6/10/2016 $83.5 1.47x $727 Premier Valley Bank 5/29/2015 11/30/2015 3/11/2016 $95.1 1.66x $647 First Scottsdale Bank, N.A. 5/15/2015 9/11/2015 9/11/2015 $17.7 1.05x $106 Community Bancorporation of New Mexico, Inc. 4/16/2015 8/21/2015 11/6/2015 $11.3 1.52x $181 Community Banc-Corp. of Sheyboygan, Inc. 10/23/2014 1/16/2015 5/15/2015 $52.0 1.58x $525 (1) Total deposits assumed in transaction as of June 30, 2020; actual amount of deposits assumed and loans acquired will be determined at anticipated close Q4 2020 Note: Total Assets based on MRQ prior to announcement & provided in millions 12


 
Acquisition AIM Bancshares, Inc. – Lubbock, TX . Announced February 11, 2020 – anticipated close 3Q 2020 – anticipated systems integration 4Q 2020 . Assets approximately $1.9 billion, loans approximately $1.2 billion, and deposits approximately $1.7 billion . AimBank combined with FB&T creates HTLF’s largest member bank with approximately $3 billion in assets . Transaction results in FB&T being the #5 largest bank headquartered in West Texas – ranking #3 deposit market share in Lubbock MSA . Headquarters will remain in Lubbock, Texas . 90% stock / 10% cash transaction valued at announcement approximately $280.4 million (1) . ~10% Accretive to EPS in 2021. IRR in excess of 20%. Tangible book value earn back ~3.6 years . Barry Orr continues as Chairman and CEO and retained Scott Wade as Vice Chairman and President of the South Division of FirstBank & Trust (1) The price at announcement was based on HTLF closing stock price of $49.88 on February 10, 2020 13


 
Branch Purchase Johnson Financial Group On June 9 2020, Heartland announced Arizona Bank & Trust entered into a purchase and assumption agreement to acquire certain assets and assume substantially all deposits and other liabilities of Johnson Bank’s Arizona operations. . Anticipated close and systems integration in December . Loans approximately $168 million, and deposits approximately $415 million . Johnson Bank’s four Arizona office locations are a natural fit with the geographic footprint and culture of Arizona Bank & Trust . At close, Arizona Bank & Trust will have approximately $1.1 billion in assets . Arizona Bank & Trust will be Heartland’s ninth bank with more than $1 billion in assets 14


 
Key Factors Driving Business Strategy • Broad geographic footprint provides significant risk diversification benefits – Expands opportunities for new client acquisition – Credit exposure is not geographically concentrated – spread over 12 state footprint • Goal of achieving $1+ billion in total assets within each market meant to ensure critical mass of operating scale across the franchise – Top 10 deposit share in 26 of the 38 MSAs in which we operate1 – Top 5 deposit share in 13 of those MSAs1 • Cost of maintaining a decentralized operating structure is offset by the benefits of increased responsiveness to clients and local market conditions – Local leadership facilitates development and retention of new client deposit/loan relationships – Centralization of “back office” operations maximizes operating efficiency – Centralization of credit risk management functions support credit oversight functions – Improving efficiency ratio by leveraging centralized costs and growth (1) Deposit information as of June 30, 2019 15


 
COVID-19 Response Customers & Community Employees & Operations • Loan Payment Deferrals and Modifications1 • Enabled approximately two thirds of all employees to – $1.1 billion, or 14% of total loans work from home and canceled all in-person events and – Approximately 58% are interest only modifications, and have transitioned to virtual meetings remainder are principal and interest modifications • Expanded time off program and enhanced health care – Loan modifications are predominately 90 day coverage for COVID-19 related testing and treatments modifications • Implemented a 20 percent wage premium for certain 2 • Paycheck Protection Program customer-facing retail and call center employees – Approximately 4,800 loans approved – Approximately $1.2 billion funded • Closed bank lobbies and implemented drive-through – Helped preserve over 112,000 jobs only for in-person transactions – 100% of PPP loans were to existing customers • Established alternating weekly staffing schedule for in- branch employees to limit potential cross-infection • Waived Consumer and Small Business Charges – Deposit account maintenance fees and consumer • Engaged with our employees, providing information loan late fees and resources through enriched communications and – ATM fees wellness programs – Early redemption penalties on CDs • Donated $1.2 million to organizations responding to COVID-19 needs in the communities we serve (1) Loan Payment Deferrals and Modifications data as of June 30, 2020 (2) Paycheck Protection Program data as of June 30, 2020 Note: Consumer and small business waivers expired as of May 31, 2020 16


 
Customer Segment Profiles Affected by COVID-19 Total Exposure % of Gross Exposure Total Exposure % of Gross Exposure Industry 06/30/20 1 06/30/20 1 03/31/20 03/31/20 Lodging $490,475 4.38% $498,596 4.47% Multi-Family Properties $474,610 4.24% $436,931 3.92% Retail Properties $407,030 3.64% $367,727 3.30% Retail Trade $369,782 3.31% $408,506 3.66% Restaurants and Bars $255,701 2.29% $247,239 2.22% Nursing Homes / Assisted Living $130,103 1.16% $126,267 1.13% Oil & Gas $63,973 0.57% $56,302 0.50% Childcare Facilities $44,968 0.40% $48,455 0.43% Gaming $34,618 0.31% $34,790 0.31% Total $2,271,260 20.30% $2,224,813 19.94% Industry segments most effected were determined considering the following: • Impact of Federal/State stay at home or shelter in place directives • Impact of State mandated business closures and restrictions • Significant increase in unemployment – reduction in consumer spending and ability to continue to pay rent • Implementation of corporate travel restrictions coupled with decline in leisure travel • Cancellation of events of all types and sizes • Cancellation of schools coupled with a sudden rise in telecommuting • Residents within nursing homes/assisted living centers are deemed an at-risk population • The total amount of PPP loans in the profiled categories is $187 million, which was excluded from above figures (1) Outstanding exposure + undisbursed commitments, Excluding PPP Loans Note: Dollars in thousands 17


 
COVID Related Loan Modifications Modification Types Balances of % of Total Loans Category Interest Only P&I Payments Loan Category Modified 1 Loans 2 Payment Deferred Other Commercial $1,017,948 16% 60% 39% 1% Agriculture $31,836 6% 83% 12% 5% Residential $43,545 6% 0% 100% 0% Consumer $9,532 2% 0% 100% 0% Total Modifications $1,102,862 14% 58% 41% 1% Balances of % of Total High Exposure Commercial Loans Segment % of Total Loan Segments Modified 1 Loans 2 Modifications 1 Lodging $250,447 51% 23% Multi-Family $86,419 18% 8% Restaurants & Bars $120,723 47% 11% Retail Real Estate $88,094 24% 8% Retail Trade $27,868 7% 3% Comments: • Payment modifications are for 90 days with some local exceptions granted • Commercial modifications represent 92% of all modifications • As of July 23, 2020, approximately $347.7 million or 32% of the $1.1 billion of COVID Loan modifications as of June 30, 2020 have returned to normal payment status (1) Balances of Loans Modified are as of June 30, 2020 (2) Total Loans used for base of calculation are as of June 30, 2020, Excluding PPP Loans Note: Dollars in thousands 18


 
Current Participation Level In PPP Program Percentage of Total Loans Fee Income Loan Bucket Number of Loans Loans Originated ($millions) ($millions) $150 thousand or less 3,247 67.1% $164 $8 Greater than $150k & less than $2M 1,513 31.2% $727 $25 $2M and more 84 1.7% $305 $3 Total 4,844 $1,196 $36 Comments: • Helped preserve over 112,000 jobs • Average Loan size = $247,000 Note: Data as of June 30, 2020 19


 
PRESENTATION CAN BE UP TO THREE LINES CAN BE UP TO THREE LINES Financial Summary Presentation Subtitle 20


 
Summary Balance Sheet Items Total Assets ($B) Total Deposits ($B) 1 15.0 12.7 13.2 11.0 11.4 9.4 1 9.8 8.1 8.2 7.7 6.4 6.8 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 2019 2Q20 Loans Held to Maturity ($B) Loans / Deposits (%) 9.2 78.1 78.2 78.5 78.8 8.4 75.8 7.4 6.4 72.8 5.4 5.0 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 2019 2Q20 (1) Includes deposits held for sale in 2018 of $0.106B 21


 
Summary Profitability Items Return on Average Assets (%)1 Return on Average Tangible Common Equity (%)1 ROAA Adj. ROAA ROATCE Adj. ROATCE 1.50 18.88 17.43 17.98 17.55 1.32 1.39 17.19 1.12 14.64 1.07 1.02 1.31 1.24 14.36 15.84 15.72 15.73 0.98 1.09 12.05 0.88 0.83 9.95 2015 2016 2017 2018 2019 2020 YTD 2015 2016 2017 2018 2019 2020 YTD Net Interest Margin (%)1 Efficiency Ratio FTE (non-GAAP) (%)1 NIM NIM FTE 68.03 4.32 65.61 4.22 64.05 4.13 62.59 4.04 62.50 3.97 3.85 58.64 4.26 4.04 3.95 4.00 3.80 3.81 2015 2016 2017 2018 2019 2020 YTD 2015 2016 2017 2018 2019 2020 YTD (1) See Appendix for reconciliation of non-GAAP financial measures to most directly comparable GAAP financial measures 22


 
Net Interest Margin (non-GAAP) Breakdown 1 Annual Quarterly 4.50% 4.32% 4.22% 4.25% 0.13% 4.13% 4.10% 0.17% 4.04% 0.22% 4.02% 3.97% 0.20% 2 4.00% 0.18% 3.95% 0.18% 0.18% 3.90% 0.23% 3.84% 3.85% 0.23% 0.15% 0.16% 0.17% 0.09% 3.75% 0.16% 0.13% 3.50% 3.97% 3.92% 3.87% 3.86% 3.78% 3.79% 3.75% 3.79% 3.73% 3.69% 3.61% 3.25% 3.00% 2015 2016 2017 2018 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 2Q X PPP Core Business Purchase Accounting Citizens (1) On a fully tax equivalent basis; See Appendix for reconciliation of non-GAAP financial measures to most directly comparable GAAP financial measures (2) 2Q X PPP excludes balances and interest income on PPP loans Note: Assets of divested consumer finance company sold in early Q1 2019 23


 
Non Interest Income Breakdown Commercial Services Other Non- Revenue Interest 30% Income Net Interest 34% Income before Non Interest provision Income 82% 18% Retail Services Revenue 36% Noninterest income exclusive of security gains Other Non-Interest Income includes: Loan Service Fees, Gain on Sale of Loans, BOLI, and Other Misc. As of June 30, 2020 24


 
Commercial Services Revenues Trends Annual Quarterly 40.0 10.0 $8.2 $8.0 $7.8 $30.4 $7.4 $7.5 8.0 30.0 $1.4 $1.3 $1.3 $5.2 $25.2 $1.3 $1.4 6.0 $4.6 $20.3 20.0 $3.5 $3.4 $3.4 $16.8 $3.9 $12.8 $3.0 $2.8 $9.5 4.0 $3.8 $11.7 $6.3 $3.9 10.0 $3.3 $1.8 2.0 $3.3 $3.4 $3.3 $11.1 $12.4 $3.1 $3.1 $9.2 $10.1 $6.6 0.0 0.0 2015 2016 2017 2018 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 CML Service Charges CML Card Solutions Retirement Plan Services Note: Dollars in millions 25


 
Consumer Services Revenues Trends Annual Quarterly 50.0 15.0 $46.4 $44.9 $13.1 $38.8 40.0 12.0 $18.3 $10.5 $10.3 $33.5 $17.9 $4.6 $9.7 $30.3 $9.1 30.0 $16.0 9.0 $4.6 $14.9 $4.8 $4.5 $14.8 $4.2 $12.7 $10.8 $3.9 20.0 6.0 $10.8 $1.9 $1.6 $1.6 $8.6 $1.5 $7.1 10.0 3.0 $15.4 $16.2 $4.6 $4.0 $4.0 $12.0 $3.7 $3.4 $8.4 $9.9 0.0 0.0 2015 2016 2017 2018 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 Consumer Service Charges Debit Interchange Private Client - Includes: Wealth Management, Broakerage, & Insurance Fees Note: Dollars in millions 26


 
Operating Efficiency Improving Efficiency Through Leveraging Core Costs 4.0% 3.84% $16.0 0.12% 3.62% 0.04% 0.04% 3.48% 3.48% 3.5% 0.07% 0.09% 0.11% 3.26% $14.0 0.63% 0.07% 0.09% $13.8 0.60% 0.12% 0.10% 3.0% in Avg Assets Billions 0.61% 0.62% 2.80% 0.01% $12.0 0.61% 0.08% 2.5% 0.56% $10.0 2.0% 3.05% 2.90% Expense as % of Avg AssetsAvg of %asExpense 2.66% 2.72% 2.43% 2.14% $8.0 1.5% $6.8 1.0% $6.0 2015 2016 2017 2018 2019 2020 YTD Core Expenses Professional Services CDI Amortization Other Non-Core Expense Average Assets & Software Costs (M&A, Tax Credits, Restructuring) Note: Excludes loss on sale of assets, net As of June 30, 2020 27


 
Consolidated Capital Ratios TCE/TA (%) 1 Tier 1 Leverage Ratio (%) 8.52 8.08 7.89 7.28 7.53 9.73 10.10 9.95 9.58 9.28 9.20 6.09 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 2019 2Q20 CET1 and Tier 1 Capital Ratio (%) Total Risk Based Capital Ratio (%) 15.16 Common Equity Tier 1 Ratio Tier 1 Capital Ratio 13.74 14.01 13.45 13.72 13.75 13.34 12.31 11.56 11.93 11.70 12.16 10.09 10.07 10.66 10.88 10.87 8.23 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 2019 2Q20 (1) See Appendix for reconciliation of non-GAAP financial measures to most directly comparable GAAP financial measures 28


 
Commercial RE and ADC Concentration Ratios Well Managed Commercial RE and Acquisition, Development & Construction (“ADC”) Exposure 350% 313% 300% 292% 250% 193% 200% 185% 188% 188% 178% 179% 150% 100% 79% 71% 76% 68% 63% 65% 50% 0% 2015 2016 2017 2018 2019 2Q 2020 Total Commercial RE/Total RBC (Investor Comm RE + Const & Land)/Total RBC (Const & Land)/Total RBC Note: As of June 30, 2020 29


 
PRESENTATION CAN BE UP TO THREE LINES CAN BE UP TO THREE LINES Loan Portfolio and Asset Quality Presentation Subtitle 30


 
Diversified Loan Portfolio Loan Composition by Product Type C&I and CRE Loan Composition by Industry Type Educational Real Estate Agricultural Loans Manufacturing Services Rental Residential Wholesale 6% 6.2% 4.9% 4.8% Trade Mortgages 4.4% Health Care 8% 3.9% Other Construction Commercial RE Consumer Loans Trade 17% 3.1% 4% Finance 2.7% Warehousing 2.2% Retail Trade 2.2% Construction All Other Commercial RE Real Estate 7.9% Hotel & Food 12% Investments 1.8% Owner Occupied 55.9% 16% Commercial RE Loan Composition PPP Multi-family 12% Hotel / 7.3% C&I Hospitality 25% 9.0% Warehousing 7.3% Retail 17.9% Health Services 7.1% Total Loans - $9.25 Billion Food and 1 Beverage Yield on Loans: 4.97% 4.8% Office Educational 19.5% 2.0% Other RE Industrial / Investments Manufacturing 4.2% 20.9% (1) Based on average loans YTD as of June 30, 2020 and includes loans available for sale and nonaccrual loans; includes purchase accounting accretion of -0.10% Note: Financial information as of June 30, 2020 31


 
Lodging Portfolio Overview Analyzed population included loans with greater than $1 million in exposure Lodging Portfolio Detail, 06/30/20 Portfolio Highlights Outstanding Loans $425,374 • Pre-Covid Statistics: Unfunded Commitments $65,101 • Analyzed population represents 97.3% of Total Lodging Portfolio $490,475 total portfolio Average Exposure per Loan $2,568 % of HTLF Exposure 4.38% • $174 million of analyzed population is under development with 55% drawn Geographic Distribution of Analyzed Portfolio • 76% of exposure represents flagged CA properties 10.2% NM KS/MO • Disciplined underwriting 11.1% 10.0% – Weighted Average DSCR of 1.64 TX 7.7% IA – Weighted Average LTV of 70% 12.1% IL • Exposure well dispersed across 11 state 7.6% footprint WI AZ • $250.5 million of loan modifications processed 13.0% 3.9% as of 6/30/20 MT 1.7% • $35.4 million have returned to regular payment CO MN 21.2% 1.5% schedules as of 7/23/20 Note: Dollars in thousands, Excluding PPP Loans 32


 
Multi-Family Portfolio Overview Analyzed population included loans with greater than $1 million in exposure Multi-Family Portfolio Detail, 06/30/20 Portfolio Highlights Outstanding Loans $353,878 • Pre-Covid Statistics: Unfunded Commitments $120,732 Total Multi-Family Portfolio $474,610 • Analyzed population represents 77.4% of total portfolio Average Exposure per Loan $1,368 % of HTLF Exposure 4.24% • Disciplined underwriting Geographic Distribution of Analyzed Portfolio – Weighted average DSCR of 1.35 – Weighed average of LTV of 65% IA TX 9.1% 9.6% • Exposure well dispersed across 11 state IL footprint 8.6% WI 10.4% • Granular population - average loan amount of CA $1.4 million 8.4% • $86.4 million of loan modifications processed AZ as of 6/30/2020 NM 5.1% 17.9% MN • $18.3 million have returned to regular payment 3.0% schedules as of 7/23/20 KS/MO 2.3% CO MT 23.4% 2.2% Note: Dollars in thousands, Excluding PPP Loans 33


 
Restaurants & Bars Portfolio Overview Analyzed population included loans with greater than $1 million in exposure Restaurants & Bars Portfolio Detail, 06/30/20 Portfolio Highlights Outstanding Loans $237,949 • Pre-Covid Statistics: Unfunded Commitments $17,752 • Analyzed population represents 77.6% of Total Restaurants & Bars Portfolio $255,701 total portfolio Average Exposure per Loan $386 % of HTLF Exposure 2.29% • Disciplined underwriting Geographic Distribution of Analyzed Portfolio ‒ Weighted average DSCR of 2.46 • 22% of analyzed exposure represents IL CA franchised restaurants 10.7% 9.8% WI • Exposure well dispersed across 11 state 8.8% footprint TX 15.7% MN • Granular population - average loan amount of 5.7% $386 Thousand IA 5.3% • $120.7 million of loan modifications processed as of 6/30/2020 AZ NM 4.7% 17.5% • $50.7 million have returned to regular payment KS/MO schedules as of 7/23/20 CO 3.0% 17.6% Note: Dollars in thousands, Excluding PPP Loans 34


 
Retail Real Estate Portfolio Overview Analyzed population included loans with greater than $1 million in exposure Real Estate Portfolio Detail, 06/30/20 Portfolio Highlights Outstanding Loans $344,173 • Pre-Covid Statistics: Unfunded Commitments $25,609 • Analyzed population represents 79.9% of Total Retail RE Portfolio $369,782 total portfolio Average Exposure per Loan $1,091 % of HTLF Exposure 3.31% • Disciplined underwriting Geographic Distribution of Analyzed Portfolio – Weighted average DSCR of 1.89 – Weighted average LTV of 59% MN CA 12.0% • Exposure well dispersed across 11 state 12.5% footprint KS/MO 7.8% • Average loan amount of $1.1 million CO TX 14.5% 7.4% • $88.1 million of loan modifications processed to date as of 6/30/20 AZ 4.7% • $34.1 million have returned to regular payment MT schedules as of 7/23/20 3.7% IL 15.0% WI 2.1% IA NM 1.9% 18.4% Note: Dollars in thousands, Excluding PPP Loans 35


 
Retail Trade Portfolio Overview Analyzed population included loans with greater than $1 million in exposure Retail Trade Portfolio Detail, 06/30/20 Portfolio Highlights Outstanding Loans $307,951 • Pre-Covid Statistics: Unfunded Commitments $99,079 • Analyzed population represents 69.4% of Total Retail Trade Portfolio $407,030 total portfolio Average Exposure per Loan $474 % of HTLF Exposure 3.64% • Disciplined underwriting Geographic Distribution of Analyzed Portfolio – Weighted average DSCR of 8.98 TX CA • Exposure well dispersed across 11 state 5.4% 5.6% MT footprint NM 5.8% 13.7% • Average loan amount of $474 Thousand AZ 7.7% • $27.9 million of loan modifications processed to date as of 6/30/20 KS/MO CO • $5.8 million have returned to regular payment 16.3% 8.9% schedules as of 7/23/20 WI 4.8% IL 9.0% MN 3.1% IA 19.7% Note: Dollars in thousands, Excluding PPP Loans 36


 
Agriculture Portfolio Overview Agriculture Portfolio Detail, 06/30/20 Portfolio Highlights Dairy Cattle Wheat • Ag portfolio represents 6.4% of total loans and Milk Farming Production 6.7% • 7.6% or $45.5 million of total portfolio is FSA 21.2% Hog and Pig Farming guaranteed Beef Production 5.1% • 80% of Ag loans have a Pass rating 22.8% Other • 22% of HTLF Sub-Standard loans are from the 12.7% Ag Portfolio Corn and Cotton Farming • Crop insurance is required on credit exposures Soybeans 4.1% 27.4% greater than $500,000 Geographic Distribution Agriculture Loans Outstanding Agriculture Loans Outstandings MT 14.0% $590,000 IA NM $570,000 26.7% 8.0% $550,000 KS/MO $530,000 7.3% $510,000 TX $490,000 6.8% WI Dollars Dollars Thousands in $470,000 32.7% Other HTLF $450,000 Markets 2Q19 3Q19 4Q19 1Q20 2Q20 4.5% Note: Dollars in thousands 37


 
Construction Portfolio Overview Construction Portfolio by Type, 06/30/20 Construction Portfolio by Market, 06/30/20 IL Land Healthcare 9% 8% AZ Development KS/MO 7% 9% 12% All Other 9% IA Land Only 7% 13% Industrial TX CA 8% 12% 7% Mini- Multi-Family Warehousing MN 13% 5% 6% Retail NM 4% 12% MT 3% Office Hotel WI 1-4 Family 3% 13% 3% 14% CO 23% Comments: • Well distributed over geographic footprint • Diversified by property type Note: Balances of Loans as of June 30, 2020 38


 
CECL Adjustment Reconciliation of Lending Related Allowance for Credit Losses Allowance for Credit Losses Allowance for Unfunded Commitments Note: Dollars in thousands, as of June 30, 2020 39


 
Summary Asset Quality Non-Performing Assets Non-Performing Loans NPAs ($000) NPAs / Assets (%) NPLs ($000) NPLs / Gross Loans (%) 120,000 3.00 100,000 92,969 4.00 98,537 80,653 87,578 72,669 90,000 74,792 74,599 79,281 75,000 64,385 63,411 3.00 2.00 60,000 51,664 50,000 39,655 2.00 0.91 1.20 0.76 0.99 0.98 0.96 1.01 0.67 0.69 0.66 0.66 1.00 0.76 30,000 25,000 1.00 0 0.00 0 0.00 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 2019 2Q20 Net Charge-offs Allowance for Credit Losses 119,937 NCOs ($000) NCOs / Avg Loans (%) 125,000 5.00 20,000 17,736 3.00 100,000 4.00 14,201 70,395 15,000 75,000 3.00 2.00 61,963 54,324 55,686 48,685 10,000 8,225 50,000 2.00 7,401 1.30 5,461 6,055 1.00 0.97 1.02 0.87 0.84 0.84 5,000 0.25 25,000 1.00 0.12 0.11 0.24 0.11 0.17 0 0.00 0 0.00 2015 2016 2017 2018 2019 YTD 2015 2016 2017 2018 2019 2Q20 Note: CECL adopted January 1, 2020 Note: Non-performing loans defined as nonaccrual loans + loans 90 days past due; non-performing assets defined as nonperforming loans + other real estate owned + other repossessed assets 40


 
PRESENTATION CAN BE UP TO THREE LINES CAN BE UP TO THREE LINES Investments, Liquidity, Funding and Capital Presentation Subtitle 41


 
High Performing Securities Portfolio Portfolio Detail as of June 30, 2020 ($000) Allowance for CMBS - Sector Book Value Unrealized G/L Credit Loss Agency 1.3% CMBS - Non- US Treasury $ 4,492 $ 54 $ - Agency 9.8% ABS US Agency 1,254 41 - 19.9% US Treasury Municipal 1,010,307 57,931 (62) 0.1% US Agency MBS - Agency 745,522 28,862 - 0.0% MBS - Non- MBS - Non-Agency 1,081,752 814 - Agency CMBS - Agency 52,688 3,108 - 25.8% Municipal CMBS - Non-Agency 411,105 (7,692) - 25.3% ABS 834,362 (21,257) - Equities with a readily determinable value 19,391 - - Other securities 35,902 - - MBS - Agency 17.8% Total $ 4,196,775 $ 61,861 $ (62) Investment Portfolio 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 Average Book Value ($in millions) $2,542 $2,925 $3,305 $3,421 $3,809 Book Yield 3.05% 2.88% 3.03% 2.88% 2.91% Mod. Duration 4.71 5.63 6.17 5.84 5.69 • 65.4% of Non-Agency CMBS investments have AAA rating • 94.1% of Municipal holdings are rated A or better • 76.0% of Non-Agency MBS are rated AAA balance • ABS portfolio consists of the following – 66.9% of Government/FFELP Student Loan Securities – 14.6% of SBA Loans 42


 
Conservative Liquidity Profile Holding Company Detail Additional Sources of Bank Funding Amount Available Amount Available Type Outstanding ($000) ($000) Type Outstanding ($000) ($000) Cash & Due from Banks $169,640 FHLB Advances $2,777 $1,594,373 Revolving Credit Line w ith Unaffiliated Bank $0 $45,000 Federal Funds Purchased $4,800 $427,000 Non-Revolvoing Credit Line w ith Unaffiliated Bank $47,917 $6,500 Securities Sold Under Agreement to Repurchase $69,338 $0 Subordinated Debt $74,527 $0 Federal Reserve Discount Window $0 $1,529,278 Trust Preferred $145,915 $0 PPP Loan Program $31,820 $1,124,217 Preferred Stock $110,705 $0 Other Short-term Borrow ings $14,494 $0 Total $379,064 $221,140 Total $123,229 $4,674,868 Liquidity Metrics Capital Instruments FY 2017 FY 2018 FY 2019 2Q 2020 Amount Loans / Deposits 78.45% 78.84% 75.77% 72.76% Outsanding Current Investments / Assets 25.41% 23.80% 26.01% 28.30% Outstanding Debt ($000) Maturity Date Rate (%) Total Borrow ings / Assets 6.21% 4.40% 3.47% 2.63% Subsidiary Trust Preferred Securities $145,915 4.16% • Monthly cash flow from Investments for 2Q20: $37 million Subordinated Notes $74,527 December 30, 2024 5.75% Subtotal of debt $220,442 4.70% Preferred Stock $110,705 7.00% (1) Refers to weighted average rate of trust preferred securities Note: As of June 30, 2020 Note: All subsidiary trust preferred debt callable; currently outstanding subordinated notes mature December 30, 2024; 43


 
Deposit Mix Deposit Composition Cost of Interest Bearing Deposits (%) Time > $100K 1.20 Time < $100K 4.4% 0.96 4.0% 1.00 0.80 0.61 0.64 0.60 0.40 0.37 0.39 Non 0.34 0.32 Money 0.40 0.28 0.24 Market Interest 0.23 0.20 19.3% Bearing 0.20 38.0% 0.00 2015 2016 2017 2018 2019 2Q 2020 Savings 8.6% Cost of Interest Bearing Deposits Cost of Total Deposits Interest 1 Bearing Brokered Deposits ($000) Checking 25.7% 250,000 190,721 200,000 6/30/2020 Portfolio % 150,000 Non Interest Bearing $4,831,151 38.0% 100,000 Interest Bearing Checking $3,261,096 25.7% 75,620 57,168 Savings $1,090,892 8.6% 50,000 25,055 12,089 Money Market $2,458,308 19.3% 0 Time < $100K $505,019 4.0% 0 2015 2016 2017 2018 2019 2Q 2020 Time > $100K $562,233 4.4% Total Deposits $12,708,699 100.0% (1) Excludes reciprocal deposits Note: Financial data as of June 30, 2020; dollars in thousands 44


 
Investment Summary Diversification across geographies reduces risk and enhances growth potential Consistent earnings profile, leveraging infrastructure to drive efficiency Disciplined and proven acquirer Low cost core deposit base, significant capacity to continue to fuel organic growth Strong net interest margin Solid credit metrics over many decades and through many credit cycles Conservative liquidity risk profile, conservative loan/deposit ratio Healthy capital levels, highly conservative approach to bank level capitalization 45


 
PRESENTATION CAN BE UP TO THREE LINES CAN BE UP TO THREE LINES Appendix Presentation Subtitle 46


 
Analyst Ratings July 2020 Coverage Rating Price Target D.A. DAVIDSON Neutral $35.00 Jeff Rulis PIPER SANDLER CO Overweight $38.00 Andrew Liesch KEEFE, BRUYETTE & WOODS Market Perform $40.00 Damon DelMonte RAYMOND JAMES Market Perform Not Established David Long STEPHENS Equal Weight $32.00 Terry McEvoy 47


 
Contact Information 48


 
Non-GAAP Financial Measures Annualized adjusted return on average assets is net income available to common stockholders plus provision for credit losses and acquisition, integration and restructuring costs, net of tax, divided by average total assets. This measure shows how efficiently a company is utilizing its assets and is also useful when assessing peer companies in the same industry. 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 stockholders' equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength. Annualized 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. 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 presentation. Tangible book value per common share is total common stockholders' equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength. Tangible common equity ratio is total common stockholders' 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. 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. 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. 49


 
Non-GAAP Reconciliations Full Yr 2019 Full Yr 2018 Full Yr 2017 Full Yr 2016 Full Yr 2015 Reconciliation of Tangible Book Value Per Common Share (non-GAAP) Common equity (GAAP) $ 1,578,137 $ 1,325,175 $ 990,519 $ 739,559 $ 581,475 Less goodwill 446,345 391,668 236,615 127,699 97,852 Less core deposit and customer relationship intangibles, net 48,688 47,479 35,203 22,775 22,020 Tangible common equity (non-GAAP) $ 1,083,104 $ 886,028 $ 718,701 $ 589,085 $ 461,603 Common shares outstanding, net of treasury stock 36,704,278 34,477,499 29,953,356 26,119,929 22,435,693 Common equity (book value) per share (GAAP) $ 43.00 $ 38.44 $ 33.07 $ 28.31 $ 25.92 Tangible book value per common share (non-GAAP) $ 29.51 $ 25.70 $ 23.99 $ 22.55 $ 20.57 Reconciliation of Tangible Common Equity Ratio (non-GAAP) Total assets (GAAP) $ 13,209,597 $ 11,408,006 $ 9,810,739 $ 8,247,079 $ 7,694,754 Less goodwill 446,345 391,668 236,615 127,699 97,852 Less core deposit and customer relationship intangibles, net 48,688 47,479 35,203 22,775 22,020 Total tangible assets (non-GAAP) $ 12,714,564 $ 10,968,859 $ 9,538,921 $ 8,096,605 $ 7,574,882 Tangible common equity ratio (non-GAAP) 8.52% 8.08% 7.53% 7.28% 6.09% Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP) Net Interest Income (GAAP) $ 433,729 $ 413,954 $ 330,308 $ 294,666 $ 233,998 Plus tax-equivalent adjustment(1) 4,929 6,228 15,139 12,919 10,216 Net interest income, fully tax-equivalent (non-GAAP) $ 438,658 $ 420,182 $ 345,447 $ 307,585 $ 244,214 Average earning assets $ 10,845,940 $ 9,718,106 $ 8,181,914 $ 7,455,217 $ 6,152,090 Annualized net interest margin (GAAP) 4.00% 4.26% 4.04% 3.95% 3.80% Annualized net interest margin, fully tax-equivalent (non-GAAP) 4.04% 4.32% 4.22% 4.13% 3.97% Purchase accounting discount amortization on loans included in annualized net interest margin 0.18% 0.22% 0.18% 0.15% 0.13% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods. 50


 
Non-GAAP Reconciliations (cont.) Full Yr 2019 Full Yr 2018 Full Yr 2017 Full Yr 2016 Full Yr 2015 Reconciliation of Efficiency Ratio (non-GAAP) Net Interest Income (GAAP) $ 433,729 $ 413,954 $ 330,308 $ 294,666 $ 233,998 Plus tax-equivalent adjustment(1) 4,929 6,228 15,139 12,919 10,216 Net interest income, fully tax-equivalent (non-GAAP) 438,658 420,182 345,447 307,585 244,214 Noninterest income 116,208 109,160 102,022 113,601 110,685 Securities gains, net (7,659) (1,085) (6,973) (11,340) (13,143) Unrealized (gain)/loss on equity securities, net (525) (212) - - 769 Gain on extinguishment of debt (375) - (1,280) - - Valuation adjustment on servicing rights 911 46 (21) 33 - Adjusted revenue (non-GAAP) $ 547,218 $ 528,091 $ 439,195 $ 409,879 $ 342,525 Total noninterest expenses (GAAP) $ 349,161 $ 353,888 $ 297,675 $ 279,668 $ 251,046 Less: Core deposit and customer relationship intangibles amortization 11,972 9,355 6,077 5,630 2,978 Partnership investment in tax credit projects 8,030 4,233 1,860 1,051 4,357 (Gain)/loss on sales/valuation of assets, net (19,422) 2,208 2,475 1,478 6,821 Acquisition, integration and restructuring costs 6,580 7,564 5,975 2,571 3,871 Adjusted noninterest expenses (non-GAAP) $ 342,001 $ 330,528 $ 281,288 $ 268,938 $ 233,019 Efficiency ratio, fully tax-equivalent (non-GAAP) 62.50% 62.59% 64.05% 65.61% 68.03% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods. 51


 
Non-GAAP Reconciliations (cont.) Full Yr 2019 Full Yr 2018 Full Yr 2017 Full Yr 2016 Full Yr 2015 Reconciliation of Return on Average Tangible Common Equity (non-GAAP) Net income (GAAP) $ 149,129 $ 116,959 $ 75,226 $ 80,108 $ 59,225 Plus core deposit and customer relationship intangibles amortization, net of tax (1) 9,458 7,391 3,950 3,660 1,936 Net income excluding intangible amortization (non-GAAP) $ 158,587 $ 124,350 $ 79,176 $ 83,768 $ 61,161 Average common equity (GAAP) $ 1,473,396 $ 1,177,346 $ 871,683 $ 678,989 $ 496,877 Less average goodwill 415,841 340,352 184,554 125,724 56,781 Less average core deposit and customer relationship intangibles, net 49,377 46,206 30,109 24,553 14,153 Average tangible common equity (non-GAAP) $ 1,008,178 $ 790,788 $ 657,020 $ 528,712 $ 425,943 Annualized return on average common equity (GAAP) 10.12% 9.93% 8.63% 11.80% 11.92% Annualized return on average tangible common equity (non-GAAP) 15.73% 15.72% 12.05% 15.84% 14.36% Reconciliation of Adjusted Return on Average Assets (non-GAAP) Net income (GAAP) $ 149,129 $ 116,959 $ 75,226 $ 80,108 $ 59,225 Provision for credit losses(1) 13,159 18,970 10,116 7,601 8,253 Acquisition, integration and restructuring costs(1) 5,198 5,976 3,884 1,671 2,516 Adjusted net income (non-GAAP) $ 167,486 $ 141,905 $ 89,226 $ 89,380 $ 69,994 Average assets (GAAP) $ 12,021,917 $ 10,772,297 $ 9,009,625 $ 8,172,576 $ 6,763,901 Adjusted return on average assets (non-GAAP) 1.39% 1.32% 0.99% 1.09% 1.03% Reconciliation of Adjusted Return on Average Tangible Common Equity (non- GAAP) Adjusted net income (non-GAAP) $ 167,486 $ 141,905 $ 89,226 $ 89,380 $ 69,994 Plus core deposit and customer relationship intangibles amortization, net of tax (1) 9,458 7,391 3,950 3,660 1,936 Adjusted net income excluding intangible amortization (non-GAAP) $ 176,944 $ 149,296 $ 93,176 $ 93,040 $ 71,930 Average tangible common equity (non-GAAP) $ 1,008,178 $ 790,788 $ 657,020 $ 528,712 $ 425,943 Annualized adjusted return on average tangible common equity (non-GAAP) 17.55% 18.88% 14.18% 17.60% 16.89% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods. 52


 
Non-GAAP Reconciliations (cont.) 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 Reconciliation of Tangible Book Value Per Common Share (non-GAAP) Common equity (GAAP) $ 1,636,672 $ 1,553,714 $ 1,578,137 $ 1,563,843 $ 1,521,787 Less goodwill 446,345 446,345 446,345 427,097 427,097 Less core deposit and customer relationship intangibles, net 43,011 45,707 48,688 49,819 52,718 Tangible common equity (non-GAAP) $ 1,147,316 $ 1,061,662 $ 1,083,104 $ 1,086,927 $ 1,041,972 Common shares outstanding, net of treasury stock 36,844,744 36,807,217 36,704,278 36,696,190 36,690,061 Common equity (book value) per share (GAAP) $ 44.42 $ 42.21 $ 43.00 $ 42.62 $ 41.48 Tangible book value per common share (non-GAAP) $ 31.14 $ 28.84 $ 29.51 $ 29.62 $ 28.40 Reconciliation of Tangible Common Equity Ratio (non-GAAP) Total assets (GAAP) $ 15,026,153 $ 13,294,509 $ 13,209,597 $ 12,569,262 $ 12,160,290 Less goodwill 446,345 446,345 446,345 427,097 427,097 Less core deposit and customer relationship intangibles, net 43,011 45,707 48,688 49,819 52,718 Total tangible assets (non-GAAP) $ 14,536,797 $ 12,802,457 $ 12,714,564 $ 12,092,346 $ 11,680,475 Tangible common equity ratio (non-GAAP) 7.89% 8.29% 8.52% 8.99% 8.92% Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP) Net Interest Income (GAAP) $ 124,146 $ 112,511 $ 112,745 $ 111,321 $ 106,708 Plus tax-equivalent adjustment(1) 1,416 1,131 1,109 1,140 1,268 Net interest income, fully tax-equivalent (non-GAAP) $ 125,562 $ 113,642 $ 113,854 $ 112,461 $ 107,976 Average earning assets $ 13,103,159 $ 11,891,455 $ 11,580,295 $ 11,102,581 $ 10,552,166 Annualized net interest margin (GAAP) 3.81% 3.81% 3.86% 3.98% 4.06% Annualized net interest margin, fully tax-equivalent (non-GAAP) 3.85% 3.84% 3.90% 4.02% 4.10% Purchase accounting discount amortization on loans included in annualized net interest margin 0.16% 0.09% 0.17% 0.23% 0.18% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods. 53


 
Non-GAAP Reconciliations (cont.) 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 Reconciliation of Efficiency Ratio (non-GAAP) Net Interest Income (GAAP) $ 124,146 $ 112,511 $ 112,745 $ 111,321 $ 106,708 Plus tax-equivalent adjustment(1) 1,416 1,131 1,109 1,140 1,268 Net interest income, fully tax-equivalent (non-GAAP) 125,562 113,642 113,854 112,461 107,976 Noninterest income 30,637 25,817 28,030 29,400 32,061 Securities gains, net (2,006) (1,658) (491) (2,013) (3,580) Unrealized (gain)/loss on equity securities, net (680) 231 (11) (144) (112) Gain on extinguishment of debt - - - (375) - Valuation adjustment on servicing rights (9) 1,565 (668) 626 364 Adjusted revenue (non-GAAP) $ 153,504 $ 139,597 $ 140,714 $ 139,955 $ 136,709 Total noninterest expenses (GAAP) $ 90,439 $ 90,859 $ 92,866 $ 92,967 $ 75,098 Less: Core deposit and customer relationship intangibles amortization 2,696 2,981 2,918 2,899 3,313 Partnership investment in tax credit projects 791 184 3,038 3,052 1,465 (Gain)/loss on sales/valuation of assets, net 701 16 1,512 356 (18,286) Acquisition, integration and restructuring costs 673 1,376 537 1,500 929 Adjusted noninterest expenses (non-GAAP) $ 85,578 $ 86,302 $ 84,861 $ 85,160 $ 87,677 Efficiency ratio, fully tax-equivalent (non-GAAP) 55.75% 61.82% 60.31% 60.85% 64.13% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods. 54


 
Non-GAAP Reconciliations (cont.) 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 Reconciliation of Return on Average Tangible Common Equity (non-GAAP) Net income (GAAP) $ 30,131 $ 20,040 $ 37,851 $ 34,612 $ 45,169 Plus core deposit and customer relationship intangibles amortization, net of tax (1) 2,130 2,355 2,305 2,291 2,617 Net income excluding intangible amortization (non-GAAP) $ 32,261 $ 22,395 $ 40,156 $ 36,903 $ 47,786 Average common equity (GAAP) $ 1,574,902 $ 1,619,682 $ 1,570,258 $ 1,541,369 $ 1,442,388 Less average goodwill 446,345 446,345 433,374 427,097 410,642 Less average core deposit and customer relationship intangibles, net 44,723 47,632 49,389 51,704 49,868 Average tangible common equity (non-GAAP) $ 1,083,834 $ 1,125,705 $ 1,087,495 $ 1,062,568 $ 981,878 Annualized return on average common equity (GAAP) 7.69% 4.98% 9.56% 8.91% 12.56% Annualized return on average tangible common equity (non-GAAP) 11.97% 8.00% 14.65% 13.78% 19.52% Reconciliation of Adjusted Return on Average Assets (non-GAAP) Net income (GAAP) $ 30,131 $ 20,040 $ 37,851 $ 34,612 $ 45,169 Provision for credit losses(1) 21,169 17,001 3,873 4,109 3,885 Acquisition, integration and restructuring costs(1) 532 1,087 424 1,185 734 Adjusted net income (non-GAAP) $ 51,832 $ 38,128 $ 42,148 $ 39,906 $ 49,788 Average assets (GAAP) $ 14,391,856 $ 13,148,173 $ 12,798,770 $ 12,293,332 $ 11,708,538 Adjusted return on average assets (non-GAAP) 1.45% 1.17% 1.31% 1.29% 1.71% Reconciliation of Adjusted Return on Average Tangible Common Equity (non- GAAP) Adjusted net income (non-GAAP) $ 51,832 $ 38,128 $ 42,148 $ 39,906 $ 49,788 Plus core deposit and customer relationship intangibles amortization, net of tax (1) 2,130 2,355 2,305 2,291 2,617 Adjusted net income excluding intangible amortization (non-GAAP) $ 53,962 $ 40,483 $ 44,453 $ 42,197 $ 52,405 Average tangible common equity (non-GAAP) $ 1,083,834 $ 1,125,705 $ 1,087,495 $ 1,062,568 $ 981,878 Annualized adjusted return on average tangible common equity (non-GAAP) 20.02% 14.46% 16.22% 15.76% 21.41% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% beginning January 1, 2018, and 35% for all prior periods. 55


 
Non-GAAP Reconciliations (cont.) For the Six Months Ended June 30, 2020 2019 Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP) Net Interest Income (GAAP) $ 236,657 $ 209,663 Plus tax-equivalent adjustment(1) 2,547 2,680 Net interest income, fully tax-equivalent (non-GAAP) $ 239,204 $ 212,343 Average earning assets $ 12,497,307 $ 10,342,229 Annualized net interest margin (GAAP) 3.81% 4.09% Annualized net interest margin, fully tax-equivalent (non-GAAP) 3.85% 4.14% Purchase accounting discount amortization on loans included in annualized net interest margin 0.10% 0.17% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% 56


 
Non-GAAP Reconciliations (cont.) For the Six Months Ended June 30, 2020 2019 Reconciliation of Efficiency Ratio (non-GAAP) Net Interest Income (GAAP) $ 236,657 $ 209,663 Plus tax-equivalent adjustment(1) 2,547 2,680 Net interest income, fully tax-equivalent (non-GAAP) 239,204 212,343 Noninterest income 56,454 58,778 Securities gains, net (3,664) (5,155) Unrealized (gain)/loss on equity securities, net (449) (370) Gain on extinguishment of debt - - Valuation adjustment on servicing rights 1,556 953 Adjusted revenue (non-GAAP) $ 293,101 $ 266,549 Total noninterest expenses (GAAP) $ 181,298 $ 163,328 Less: Core deposit and customer relationship intangibles amortization 5,677 6,155 Partnership investment in tax credit projects 975 1,940 (Gain)/loss on sales/valuation of assets, net 717 (21,290) Acquisition, integration and restructuring costs 2,049 4,543 Adjusted noninterest expenses (non-GAAP) $ 171,880 $ 171,980 Efficiency ratio, fully tax-equivalent (non-GAAP) 58.64% 64.52% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% 57


 
Non-GAAP Reconciliations (cont.) For the Six Months Ended June 30, 2020 2019 Reconciliation of Return on Average Tangible Common Equity (non-GAAP) Net income (GAAP) $ 50,171 $ 76,666 Plus core deposit and customer relationship intangibles amortization, net of tax (1) 4,485 4,862 Net income excluding intangible amortization (non-GAAP) $ 54,656 $ 81,528 Average common equity (GAAP) $ 1,597,292 $ 1,389,612 Less average goodwill 446,345 401,207 Less average core deposit and customer relationship intangibles, net 46,177 48,188 Average tangible common equity (non-GAAP) $ 1,104,770 $ 940,217 Annualized return on average common equity (GAAP) 6.32% 11.13% Annualized return on average tangible common equity (non-GAAP) 9.95% 17.49% Reconciliation of Adjusted Return on Average Assets (non-GAAP) Net income (GAAP) $ 50,171 $ 76,666 Provision for credit losses(1) 38,170 5,177 Acquisition, integration and restructuring costs(1) 1,619 3,589 Adjusted net income (non-GAAP) $ 89,960 $ 85,432 Average assets (GAAP) $ 13,770,015 $ 11,489,095 Adjusted return on average assets (non-GAAP) 1.31% 1.50% Reconciliation of Adjusted Return on Average Tangible Common Equity (non- GAAP) Adjusted net income (non-GAAP) $ 89,960 $ 85,432 Plus core deposit and customer relationship intangibles amortization, net of tax (1) 4,485 4,862 Adjusted net income excluding intangible amortization (non-GAAP) $ 94,445 $ 90,294 Average tangible common equity (non-GAAP) $ 1,104,770 $ 940,217 Annualized adjusted return on average tangible common equity (non-GAAP) 17.19% 19.37% (1) Computed on a tax-equivalent basis using an effective tax rate of 21% 58


 
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