Heartland Financial USA, Inc. Reports First Quarter 2014 Results

Heartland Financial USA, Inc. (NASDAQ:HTLF):
   
Quarter Ended
March 31,

  2014  
   

  2013  
Net income (in millions) $ 6.9 $ 12.6
Net income available to common stockholders (in millions) 6.7 12.1
Diluted earnings per common share 0.36 0.70
 
Return on average assets 0.47 % 1.00 %
Return on average common equity 7.41 15.18
Net interest margin 3.92 3.77
 
 

“Excellent core earnings, led by strong loan growth in the first quarter, were partially offset by the charge-off of a single large credit. Unfortunately, the bottom line doesn’t reflect the many positive aspects of Heartland’s performance this quarter.”

 

Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA, Inc.
 

Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $6.7 million, or $0.36 per diluted common share, for the quarter ended March 31, 2014, compared to $12.1 million, or $0.70 per diluted common share, for the first quarter of 2013. Return on average common equity was 7.41% and return on average assets was 0.47% for the first quarter of 2014, compared to 15.18% and 1.00%, respectively, for the same quarter in 2013.

Net income for the first quarter of 2014 was $5.7 million lower than the first quarter of 2013, primarily as a result of a $5.7 million increase in provision for loan and lease losses. This increase was primarily the result of a charge-off on one significant credit during the first quarter of 2014. Positively affecting net income for the quarter was a $9.9 million increase in net interest income, largely due to strong loan growth, the acquisition of Morrill & Janes Bank and Trust Company completed during the last quarter of 2013 and a lower cost of funds. This improvement was offset by a $6.8 million decrease in gains on sale of loans held for sale, resulting from weaker mortgage loan volumes, and a $6.2 million increase in noninterest expenses, primarily due to the added expenses of Morrill & Janes Bank and Trust Company.

Commenting on Heartland's first quarter results, Lynn B. Fuller, Heartland's chairman, president and chief executive officer said, “Excellent core earnings, led by strong loan growth in the first quarter, were partially offset by the charge-off of a single large credit. Unfortunately, the bottom line doesn’t reflect the many positive aspects of Heartland’s performance this quarter.”

Net Interest Margin Increases in Both Percentage and Dollars

Net interest margin, expressed as a percentage of average earning assets, was 3.92% during the first quarter of 2014 compared to 3.82% during the fourth quarter of 2013 and 3.77% during the first quarter of 2013.

Fuller said, “We are pleased to see net interest margin increase to 3.92 percent in the first quarter from 3.82 percent in the previous quarter. This is the best we’ve seen in the last five quarters. Margin benefited from loan growth, better asset mix, improved yield on securities and a continued decrease in deposit costs.”

On a tax-equivalent basis, interest income in the first quarter of 2014 was $59.6 million compared to $50.0 million in the first quarter of 2013. The increase in interest income in the first quarter of 2014, as compared to the first quarter of 2013, was due to an increase in average earning assets, as the interest rate earned on those assets remained relatively consistent. The average interest rate earned on total earning assets was 4.58% during the first quarter of 2014 compared to 4.60% during the first quarter of 2013. Average earning assets increased $874.2 million or 20% during the first quarter of 2014 compared to the first quarter of 2013, with approximately $840.0 million attributable to the two acquisitions completed during the fourth quarter of 2013.

Interest expense for the first quarter of 2014 was $8.7 million, a decrease of $359,000 or 4% from $9.0 million in the first quarter of 2013. Even though average interest bearing liabilities increased $677.1 million or 20% for the quarter ended March 31, 2014, as compared to the same quarter in 2013, the average interest rate paid on Heartland's interest bearing deposits and borrowings declined 21 basis points decreasing from 1.07% in the first quarter of 2013 to 0.86% in the first quarter of 2014. Contributing to this improvement in interest expense was a continued favorable change in the mix of deposits. Average savings balances, the lowest cost interest-bearing deposits, as a percentage of total average interest bearing deposits was 74% during the first quarter of 2014, compared to 69% for the first quarter of 2013. Additionally, the average interest rate paid on savings deposits was 0.33% during the first quarter of 2014 compared to 0.34% during the first quarter of 2013 and the average interest rate paid on time deposits was 1.21% during the first quarter of 2014 compared to 1.61% during the first quarter of 2013.

Net interest income on a tax-equivalent basis totaled $51.0 million during the first quarter of 2014, an increase of $10.1 million or 25% from the $40.9 million recorded during the first quarter of 2013.

Decrease in Noninterest Income; Increase in Noninterest Expenses

Noninterest income was $18.7 million during the first quarter of 2014 compared to $26.0 million during the first quarter of 2013, a decrease of $7.3 million or 28%, primarily due to a $6.8 million decrease in gains on sale of loans held for sale and a $3.0 million decrease in securities and trading account securities gains. These decreases are related to the flat or moderately increasing interest rate environment in the first quarter of 2014, as opposed to an extremely low interest rate environment in the first quarter of 2013 that encouraged mortgage loan refinancings and rebalancing of the securities portfolio. The volume of mortgage loans sold totaled $150.0 million during the first quarter of 2014, a 65% decrease from the $424.9 million sold during the first quarter of 2013. The negative impact of these decreases was partially offset by higher service charges and fees, loan servicing income, trust fees and brokerage and insurance commissions.

Fuller commented, “In the first quarter, we saw signs of improvement in mortgage loan application volumes, though not at levels experienced early last year. We are expecting newly opened loan origination offices in the Pacific Northwest, Kansas City and Omaha to make a meaningful contribution to overall production volumes in the very near future.”

For the first quarter of 2014, noninterest expense totaled $52.4 million, an increase of $6.2 million or 13% from the same quarter of 2013, largely due to $4.7 million of expenses related to the two acquisitions completed during the last quarter of 2013. Excluding the effect of the acquisitions, noninterest expense increased $1.5 million or 3% during the first quarter of 2014 in comparison to the first quarter of 2013.

Heartland's effective tax rate was 19.82% for the first quarter of 2014 compared to 29.39% for the first quarter of 2013. Federal low-income housing tax credits included in Heartland's effective tax rate totaled $200,000 during both the first quarter of 2014 and 2013. Heartland's effective tax rate is also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 51.28% during the first quarter of 2014 compared to 23.81% during the first quarter of 2013. The tax-equivalent adjustment for this tax-exempt interest income was $2.4 million during the first quarter of 2014 compared to $2.3 million during the first quarter of 2013.

Increase in Loans; Slight Decrease in Deposits

Total assets were $5.75 billion at March 31, 2014, a decrease of $176.6 million since December 31, 2013. Securities represented 29% of total assets at March 31, 2014, compared to 32% at year-end 2013.

Total loans and leases held to maturity were $3.58 billion at March 31, 2014, compared to $3.50 billion at year-end 2013, an increase of $80.8 million or 9% annualized. Commercial and commercial real estate loans, which totaled $2.55 billion at March 31, 2014, increased $67.7 million or 11% annualized since year-end 2013. Residential mortgage loans, which totaled $365.2 million at March 31, 2014, increased $15.8 million or 18% annualized since year-end 2013. Agricultural and agricultural real estate loans, which totaled $370.3 million at March 31, 2014, decreased $6.4 million or 7% annualized since year-end 2013. Consumer loans, which totaled $298.0 million at March 31, 2014, increased $3.8 million or 5% annualized since year-end 2013.

“Heartland experienced solid broad-based loan growth of $81 million during the quarter, growing at an annualized rate of 9 percent. All of the loan growth was organic, with commercial representing the largest portion,” added Fuller.

Total deposits remained relatively flat at $4.66 billion as of March 31, 2014, compared to $4.67 billion at year-end 2013. Demand deposits totaled $1.20 billion at March 31, 2014, a decrease of $43.1 million or 14% annualized since year-end 2013. Also experiencing a decrease during the quarter, certificates of deposit totaled $885.7 million at March 31, 2014, a decrease of $6.9 million or 3% annualized. Savings deposits experienced an increase during the quarter, growing to $2.58 billion at March 31, 2014, an increase of $46.9 million or 7% annualized. The composition of Heartland's deposits continued its positive trend as no-cost demand deposits as a percentage of total deposits was 26% at March 31, 2014, while higher-cost certificates of deposit as a percentage of total deposits was 19% at March 31, 2014.

Fuller said, “Deposit growth slowed, dropping slightly from the previous quarter. We see that primarily as a seasonal effect, which has been experienced in previous years.”

Increase in Provision for Loan Losses; Decrease in Nonperforming Loans

The allowance for loan and lease losses at March 31, 2014, was 1.08% of loans and leases and 120.81% of nonperforming loans compared to 1.19% of loans and leases and 98.27% of nonperforming loans at December 31, 2013. The provision for loan losses was $6.3 million for the first quarter of 2014 compared to $637,000 for the first quarter of 2013. The first quarter 2014 provision included approximately $4.5 million to compensate for a charge off on a single large credit.

Net charge-offs on loans during the first quarter of 2014 were $9.4 million, up $7.7 million as compared to the prior quarter and up $7.6 million as compared to the first quarter of 2013. The increase was primarily due to a $6.8 million credit which was fully charged off during the first quarter of 2014.

Nonperforming loans, exclusive of those covered under the loss sharing agreements, were $31.9 million or 0.89% of total loans and leases at March 31, 2014, compared to $42.4 million or 1.21% of total loans and leases at December 31, 2013. Approximately 54%, or $17.3 million, of Heartland's nonperforming loans have individual loan balances exceeding $1.0 million, the largest of which is $4.5 million. These nonperforming loans, to an aggregate of 6 borrowers, were evenly distributed between Heartland's Western and Midwestern markets and are spread over five different industry classifications.

Other real estate owned was $28.1 million at March 31, 2014, compared to $29.9 million at December 31, 2013. Liquidation strategies have been identified for all the assets held in other real estate owned. Management continues to market these properties through an orderly liquidation process instead of a quick liquidation process in order to avoid discounts greater than the projected carrying costs.

“We are encouraged by the steady improvement in our level of nonperforming assets. For the first quarter of 2014, we experienced a steep decline in nonperforming assets of over $12 million, falling below 1 percent of total loans to the lowest level we’ve seen in nearly seven years,” Fuller concluded.

Conference Call Details

Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0781 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. If you are unable to participate on the call, a replay will be available until April 27, 2015, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.

Heartland Financial USA, Inc. is a $5.7 billion diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 78 banking locations in 58 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas and Missouri and loan production offices in California, Nevada, Wyoming, Idaho, North Dakota, Oregon, Washington and Nebraska. 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 included in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, include, among others: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war, (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the potential impact of acquisitions, (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 (xii) 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.
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
March 31,
      2014     2013
Interest Income    
Interest and fees on loans and leases $ 46,384 $ 39,827
Interest on securities:
Taxable 7,761 4,659
Nontaxable 3,122 3,198
Interest on federal funds sold
Interest on deposits in other financial institutions   7     4  
Total Interest Income   57,274     47,688  
Interest Expense
Interest on deposits 4,778 5,076
Interest on short-term borrowings 226 148
Interest on other borrowings   3,658     3,797  
Total Interest Expense   8,662     9,021  
Net Interest Income 48,612 38,667
Provision for loan and lease losses   6,331     637  
Net Interest Income After Provision for Loan and Lease Losses   42,281     38,030  
Noninterest Income
Service charges and fees 4,896 4,008
Loan servicing income 1,511 126
Trust fees 3,210 2,904
Brokerage and insurance commissions 1,123 951
Securities gains, net 781 3,427
Gain (loss) on trading account securities (38 ) 314
Gains on sale of loans held for sale 6,379 13,157
Loss on sales/valuations of repossessed assets, net (123 ) (502 )
Valuation adjustment on mortgage servicing rights 496
Income on bank owned life insurance 363 405
Other noninterest income   625     680  
Total Noninterest Income   18,727     25,966  
Noninterest Expense
Salaries and employee benefits 32,319 29,740
Occupancy 4,050 3,185
Furniture and equipment 1,890 2,051
Professional fees 4,526 3,543
FDIC insurance assessments 980 902
Advertising 1,188 1,228
Intangible assets amortization 624 200
Other real estate and loan collection expenses 1,052 838
Other noninterest expenses   5,786     4,558  
Total Noninterest Expense   52,415     46,245  
Income Before Income Taxes 8,593 17,751
Income taxes   1,703     5,199  
Net Income 6,890 12,552
Net income attributable to noncontrolling interest, net of tax       (64 )
Net Income Attributable to Heartland 6,890 12,488
Preferred dividends and discount   (204 )   (408 )
Net Income Available to Common Stockholders $ 6,686   $ 12,080  
Earnings per common share-diluted $ 0.36 $ 0.70
Weighted average shares outstanding-diluted 18,724,936 17,187,180
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Interest Income                
Interest and fees on loans and leases $ 46,384 $ 44,995 $ 40,154 $ 39,726 $ 39,827
Interest on securities:
Taxable 7,761 7,327 4,803 4,712 4,659
Nontaxable 3,122 3,294 3,443 3,360 3,198
Interest on federal funds sold 1
Interest on deposits in other financial institutions   7     3     3     2     4  
Total Interest Income   57,274     55,620     48,403     47,800     47,688  
Interest Expense
Interest on deposits 4,778 5,057 4,769 5,066 5,076
Interest on short-term borrowings 226 421 131 108 148
Interest on other borrowings   3,658     3,785     3,623     3,702     3,797  
Total Interest Expense   8,662     9,263     8,523     8,876     9,021  
Net Interest Income 48,612 46,357 39,880 38,924 38,667
Provision for loan and lease losses   6,331     2,049     5,149     1,862     637  
Net Interest Income After Provision for Loan and Lease Losses   42,281     44,308     34,731     37,062     38,030  
Noninterest Income
Service charges and fees 4,896 4,885 4,487 4,280 4,008
Loan servicing income 1,511 783 598 141 126
Trust fees 3,210 2,944 2,918 2,942 2,904
Brokerage and insurance commissions 1,123 1,246 1,277 1,087 951
Securities gains, net 781 509 1,118 2,067 3,427
Gain (loss) on trading account securities (38 ) 582 263 262 314
Gains on sale of loans held for sale 6,379 5,353 8,637 13,048 13,157
Loss on sales/valuations of repossessed assets, net (123 ) (359 ) (339 ) (1,599 ) (502 )
Valuation adjustment on mortgage servicing rights 496
Income on bank owned life insurance 363 426 409 315 405
Other noninterest income   625     846     1,011     716     680  
Total Noninterest Income   18,727     17,215     20,379     23,259     25,966  
Noninterest Expense
Salaries and employee benefits 32,319 30,121 28,847 29,516 29,740
Occupancy 4,050 3,663 3,387 3,224 3,185
Furniture and equipment 1,890 2,007 1,917 2,065 2,051
Professional fees 4,526 5,270 4,486 4,233 3,543
FDIC insurance assessments 980 1,036 745 861 902
Advertising 1,188 1,458 1,360 1,248 1,228
Intangible assets amortization 624 469 196 198 200
Other real estate and loan collection expenses 1,052 1,999 730 878 838
Other noninterest expenses   5,786     7,519     5,140     4,944     4,558  
Total Noninterest Expense   52,415     53,542     46,808     47,167     46,245  
Income Before Income Taxes 8,593 7,981 8,302 13,154 17,751
Income taxes   1,703     46     1,492     3,598     5,199  
Net Income 6,890 7,935 6,810 9,556 12,552
Net income attributable to noncontrolling interest, net of tax                   (64 )
Net Income Attributable to Heartland 6,890 7,935 6,810 9,556 12,488
Preferred dividends and discount   (204 )   (204 )   (276 )   (205 )   (408 )
Net Income Available to Common Stockholders $ 6,686   $ 7,731   $ 6,534   $ 9,351   $ 12,080  
Earnings per common share-diluted $ 0.36 $ 0.42 $ 0.38 $ 0.54 $ 0.70
Weighted average shares outstanding-diluted 18,724,936 18,360,470 17,221,154 17,203,924 17,187,180
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As Of
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Assets                
Cash and due from banks $ 84,744 $ 118,441 $ 160,225 $ 105,127 $ 68,450
Federal funds sold and other short-term investments   3,884     6,829     4,783     6,970     6,137  
Cash and cash equivalents 88,628 125,270 165,008 112,097 74,587
Time deposits in other financial institutions 3,355 3,355 3,605 3,605 3,605
Securities:
Trading, at fair value 1,801 1,219 956 694
Available for sale, at fair value 1,400,756 1,633,902 1,374,180 1,507,026 1,509,779
Held to maturity, at cost 257,927 237,498 53,841 55,199 55,456
Other investments, at cost 18,755 21,843 17,430 15,392 14,790
Loans held for sale 54,862 46,665 61,326 88,541 91,708
Loans and leases:
Held to maturity 3,577,776 3,496,952 2,901,706 2,832,377 2,789,893
Loans covered by loss share agreements 5,466 5,749 5,876 6,275 6,741
Allowance for loan and lease losses   (38,573 )   (41,685 )   (41,311 )   (37,623 )   (37,528 )
Loans and leases, net 3,544,669 3,461,016 2,866,271 2,801,029 2,759,106
Premises, furniture and equipment, net 135,054 135,714 129,029 129,938 128,411
Other real estate, net 28,083 29,852 33,018 34,763 36,704
Goodwill 35,583 35,583 30,627 30,627 30,627
Other intangible assets, net 32,690 32,959 23,435 22,056 20,266
Cash surrender value on life insurance 81,486 81,110 79,238 75,992 75,907
FDIC indemnification asset 190 249 795 282 528
Other assets   65,064     76,899     73,708     82,253     98,390  
Total Assets $ 5,747,102   $ 5,923,716   $ 4,912,730   $ 4,959,756   $ 4,900,558  
Liabilities and Equity
Liabilities
Deposits:
Demand $ 1,195,457 $ 1,238,581 $ 1,073,688 $ 1,029,784 $ 971,142
Savings 2,582,166 2,535,242 2,043,397 1,978,962 2,022,625
Time   885,741     892,676     807,913     832,388     848,689  
Total deposits 4,663,364 4,666,499 3,924,998 3,841,134 3,842,456
Short-term borrowings 256,250 408,756 224,048 339,181 202,694
Other borrowings 334,916 350,109 322,538 336,332 336,577
Accrued expenses and other liabilities   35,237     58,892     44,543     47,974     104,857  
Total Liabilities 5,289,767 5,484,256 4,516,127 4,564,621 4,486,584
Stockholders' Equity
Preferred equity 81,698 81,698 81,698 81,698 81,698
Common stock 18,455 18,399 16,953 16,947 16,867
Capital surplus 92,199 91,632 52,641 52,710 52,131
Retained earnings 269,908 265,067 259,172 254,332 246,675
Accumulated other comprehensive income (loss) (4,903 ) (17,336 ) (13,819 ) (10,200 ) 13,831
Treasury stock at cost   (22 )       (42 )   (352 )   (26 )
Total Heartland Stockholders' Equity 457,335 439,460 396,603 395,135 411,176
Noncontrolling interest                   2,798  
Total Equity   457,335     439,460     396,603     395,135     413,974  
Total Liabilities and Equity $ 5,747,102   $ 5,923,716   $ 4,912,730   $ 4,959,756   $ 4,900,558  
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Average Balances                
Assets $ 5,770,350 $ 5,604,487 $ 4,901,972 $ 4,932,852 $ 4,890,023
Loans and leases, net of unearned 3,571,127 3,341,252 2,937,508 2,905,778 2,876,960
Deposits 4,633,192 4,512,170 3,861,624 3,871,945 3,801,125
Earning assets 5,278,331 5,061,822 4,396,140 4,461,923 4,404,119
Interest bearing liabilities 4,089,691 3,921,951 3,413,205 3,433,686 3,412,641
Common stockholders' equity 365,889 349,056 309,472 332,386 322,820
Total stockholders' equity 447,587 430,754 391,170 414,976 407,282
Tangible common stockholders' equity 318,898 308,802 276,511 299,225 289,453
 
Earnings Performance Ratios
Annualized return on average assets 0.47 % 0.55 % 0.53 % 0.76 % 1.00 %
Annualized return on average common equity 7.41 % 8.79 % 8.38 % 11.28 % 15.18 %
Annualized return on average common tangible equity 8.50 % 9.93 % 9.38 % 12.53 % 16.93 %
Annualized net interest margin (1) 3.92 % 3.82 % 3.81 % 3.71 % 3.77 %
Efficiency ratio, fully taxable equivalent (2) 76.04 % 81.32 % 76.08 % 75.46 % 72.85 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%
(2) Efficiency ratio, fully taxable equivalent, is noninterest expense, divided by the sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains (losses) and loss on sales/valuations of repossessed assets, net. This efficiency ratio is presented on a taxable equivalent basis, which adjusts net interest income for the tax-favored status of certain loans and investment securities. Management believes this measure to be the preferred industry measurement of net interest income as it enhances the comparability of net interest income arising from taxable and tax-exempt sources, and it excludes certain specific revenue items (such as investment securities gains (losses), net, and loss on sales/valuations of repossessed assets, net). This is a non-GAAP measure.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As of and for the Quarter Ended
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Common Share Data                
Book value per common share $ 20.36 $ 19.44 $ 18.58 $ 18.51 $ 19.54
Tangible book value per common share (1) $ 17.86 $ 16.90 $ 16.64 $ 16.56 $ 17.56
ASC 320 effect on book value per common share $ (0.16 ) $ (0.82 ) $ (0.66 ) $ (0.44 ) $ 1.03
Common shares outstanding, net of treasury stock 18,454,048 18,399,156 16,951,053 16,934,161 16,865,919
Tangible capital ratio (2) 5.78 % 5.29 % 5.78 % 5.69 % 6.09 %
 
Loan and Lease Data
Loans held to maturity:
Commercial and commercial real estate $ 2,547,625 $ 2,479,880 $ 2,042,995 $ 2,004,883 $ 1,990,818
Residential mortgage 365,162 349,349 269,501 248,604 240,453
Agricultural and agricultural real estate 370,348 376,735 324,339 327,490 314,606
Consumer 297,978 294,145 268,112 254,825 246,996
Unearned discount and deferred loan fees   (3,337 )   (3,157 )   (3,241 )   (3,425 )   (2,980 )
Total loans and leases held to maturity $ 3,577,776   $ 3,496,952   $ 2,901,706   $ 2,832,377   $ 2,789,893  
 
Loans covered under loss share agreements:
Commercial and commercial real estate $ 2,292 $ 2,314 $ 2,402 $ 2,519 $ 2,738
Residential mortgage 2,062 2,280 2,433 2,493 2,722
Agricultural and agricultural real estate 502 543 446 441 453
Consumer   610     612     595     822     828  
Total loans and leases covered under loss share agreements $ 5,466   $ 5,749   $ 5,876   $ 6,275   $ 6,741  
 
Other Selected Trend Information
Effective tax rate 19.82 % 0.57 % 17.98 % 27.35 % 29.39 %
Average full time equivalent employees 1,678 1,662 1,616 1,542 1,522
Trust assets under management $ 1,736,308 $ 1,621,970 $ 1,535,092 $ 1,577,903 $ 1,462,815
Total Residential Mortgage Loan Applications $ 316,829 $ 293,115 $ 416,128 $ 653,461 $ 556,890
Residential Mortgage Loans Originated $ 175,249 $ 232,150 $ 349,012 $ 470,813 $ 432,974
Residential Mortgage Loans Sold $ 149,993 $ 214,334 $ 336,780 $ 445,452 $ 424,931
Residential Mortgage Loan Servicing Portfolio $ 3,107,589 $ 3,045,893 $ 2,887,667 $ 2,679,283 $ 2,428,067
 
(1) Total common stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) 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.
(2) Total common stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by total assets less intangible assets (excluding mortgage servicing rights). 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.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As of and for the Quarter Ended
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Allowance for Loan and Lease Losses                
Balance, beginning of period $ 41,685 $ 41,311 $ 37,623 $ 37,528 $ 38,715
Provision for loan and lease losses 6,331 2,049 5,149 1,862 637
Charge-offs on loans not covered by loss share agreements (10,617 ) (3,197 ) (2,454 ) (2,742 ) (3,041 )
Charge-offs on loans covered by loss share agreements (41 ) (59 ) (31 ) (23 )
Recoveries   1,215     1,522     1,052     1,006     1,240  
Balance, end of period $ 38,573   $ 41,685   $ 41,311   $ 37,623   $ 37,528  
 
Asset Quality
Not covered under loss share agreements:
Nonaccrual loans $ 31,928 $ 42,394 $ 47,088 $ 41,003 $ 32,356
Loans and leases past due ninety days or more as to interest or principal payments 24 6 454
Other real estate owned 28,033 29,794 32,753 33,709 35,697
Other repossessed assets   397     397     469     603     1,059  
Total nonperforming assets not covered under loss share agreements $ 60,358   $ 72,609   $ 80,310   $ 75,321   $ 69,566  
 
Covered under loss share agreements:
Nonaccrual loans $ 820 $ 783 $ 805 $ 571 $ 636
Other real estate owned 50 58 265 1,054 1,007
Other repossessed assets           4          
Total nonperforming assets covered under loss share agreements $ 870   $ 841   $ 1,074   $ 1,625   $ 1,643  
 
Performing troubled debt restructured loans $ 12,548 $ 19,353 $ 19,371 $ 32,661 $ 24,473
 
Nonperforming Assets Activity
Balance, beginning of period $ 73,450 $ 81,384 $ 76,946 $ 71,209 $ 80,779
Net loan charge offs (9,443 ) (1,675 ) (1,461 ) (1,767 ) (1,824 )
New nonperforming loans 5,328 6,981 16,070 18,471 3,362
Reduction of nonperforming loans (1) (3,303 ) (4,951 ) (5,653 ) (2,634 ) (7,177 )
OREO/Repossessed assets sales proceeds (4,731 ) (6,907 ) (3,444 ) (5,953 ) (3,323 )
OREO/Repossessed assets writedowns, net (80 ) (1,387 ) (1,048 ) (2,284 ) (692 )
Net activity at Citizens Finance Co.   7     5     (26 )   (96 )   84  
Balance, end of period $ 61,228   $ 73,450   $ 81,384   $ 76,946   $ 71,209  
 
Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements
Ratio of nonperforming loans and leases to total loans and leases 0.89 % 1.21 % 1.62 % 1.45 % 1.18 %
Ratio of nonperforming assets to total assets 1.06 % 1.23 % 1.63 % 1.52 % 1.42 %
Annualized ratio of net loan charge-offs to average loans and leases 1.07 % 0.20 % 0.20 % 0.24 % 0.26 %
Allowance for loan and lease losses as a percent of loans and leases 1.08 % 1.19 % 1.42 % 1.33 % 1.35 %
Allowance for loan and lease losses as a percent of nonperforming loans and leases 120.81 % 98.27 % 87.73 % 91.74 % 114.38 %
Loans delinquent 30-89 days as a percent of total loans 0.31 % 0.32 % 0.53 % 0.46 % 0.55 %
 
(1) Includes principal reductions and transfers to performing status
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
    For the Quarter Ended
March 31, 2014     March 31, 2013
Average         Average        
      Balance     Interest    

  Rate  
    Balance     Interest    

  Rate  
Earning Assets
Securities:
Taxable $ 1,298,930 $ 7,761 2.42 % $ 1,184,567 $ 4,659 1.60 %
Nontaxable(1)   443,120     4,803 4.40     370,872     4,920 5.38  
Total securities   1,742,050     12,564 2.92     1,555,439     9,579 2.50  
Interest bearing deposits 6,417 7 0.44 8,985 4 0.18
Federal funds sold   809         1,634      
Loans and leases:
Commercial and commercial real estate(1) 2,500,341 30,311 4.92 1,982,456 25,560 5.23
Residential mortgage 400,194 4,352 4.41 333,742 3,439 4.18
Agricultural and agricultural real estate(1) 374,188 4,738 5.14 315,176 4,364 5.62
Consumer 296,404 6,186 8.46 245,586 5,824 9.62
Fees on loans 1,489 1,194
Less: allowance for loan and lease losses   (42,072 )       (38,899 )    
Net loans and leases   3,529,055     47,076 5.41     2,838,061     40,381 5.77  
Total earning assets   5,278,331     59,647 4.58 %   4,404,119     49,964 4.60 %
Nonearning Assets   492,019     485,904  
Total Assets $ 5,770,350   $ 4,890,023  
Interest Bearing Liabilities
Savings $ 2,538,418 $ 2,062 0.33 % $ 1,961,438 $ 1,633 0.34 %
Time, $100,000 and over 340,344 875 1.04 315,761 1,170 1.50
Other time deposits 566,998 1,841 1.32 550,633 2,273 1.67
Short-term borrowings 306,070 226 0.30 229,752 148 0.26
Other borrowings   337,861     3,658 4.39     355,057     3,797 4.34  
Total interest bearing liabilities   4,089,691     8,662 0.86 %   3,412,641     9,021 1.07 %
Noninterest Bearing Liabilities
Noninterest bearing deposits 1,187,432 973,293
Accrued interest and other liabilities   45,640     96,807  
Total noninterest bearing liabilities   1,233,072     1,070,100  
Stockholders' Equity   447,587     407,282  
Total Liabilities and Stockholders' Equity $ 5,770,350   $ 4,890,023  
Net interest income(1) $ 50,985 $ 40,943
Net interest spread(1) 3.72 % 3.53 %
Net interest income to total earning assets(1) 3.92 % 3.77 %
Interest bearing liabilities to earning assets 77.48 % 77.49 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%
 
 
HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
    As of and For the Quarter Ended
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Total Assets                
Dubuque Bank and Trust Company $ 1,346,025 $ 1,540,049 $ 1,438,041 $ 1,512,215 $ 1,436,744
New Mexico Bank & Trust 1,020,381 1,032,441 999,555 1,029,360 1,010,607
Morrill & Janes Bank and Trust Company 859,998 890,984
Wisconsin Bank & Trust 631,501 643,430 635,606 643,727 651,277
Riverside Community Bank 490,147 443,114 460,224 450,915 422,352
Arizona Bank & Trust 472,141 450,320 415,174 393,829 404,518
Rocky Mountain Bank 456,201 467,443 464,221 448,855 457,389
Galena State Bank & Trust Co. 281,981 290,457 296,383 290,388 294,484
Minnesota Bank & Trust 157,965 170,517 166,324 164,714 127,044
Summit Bank & Trust       116,154         113,719         115,547         118,049         115,649  
Total Deposits
Dubuque Bank and Trust Company $ 1,066,711 $ 1,116,154 $ 1,118,225 $ 1,122,506 $ 1,123,323
New Mexico Bank & Trust 790,172 765,572 765,903 748,345 716,938
Morrill & Janes Bank and Trust Company 673,325 692,038
Wisconsin Bank & Trust 544,323 531,371 545,163 527,762 533,956
Riverside Community Bank 403,643 353,046 371,779 334,248 352,189
Arizona Bank & Trust 381,121 368,059 320,737 321,813 339,797
Rocky Mountain Bank 379,017 380,011 375,949 367,707 380,024
Galena State Bank & Trust Co. 244,682 244,505 252,691 245,324 235,000
Minnesota Bank & Trust 142,750 154,812 151,659 145,246 111,886
Summit Bank & Trust       104,598         101,447         102,855         102,891         100,617  
Net Income (Loss)
Dubuque Bank and Trust Company $ 2,381 $ 5,009 $ 2,737 $ 3,694 $ 2,872
New Mexico Bank & Trust 2,199 1,575 1,660 2,520 3,444
Morrill & Janes Bank and Trust Company 1,301 1,145
Wisconsin Bank & Trust 1,068 1,850 1,990 1,534 2,544
Riverside Community Bank 527 433 546 240 827
Arizona Bank & Trust 837 125 380 1,568 1,714
Rocky Mountain Bank 1,049 576 916 854 1,175
Galena State Bank & Trust Co. 802 403 324 981 1,270
Minnesota Bank & Trust 122 (31 ) (124 ) 196 320
Summit Bank & Trust       (434 )       44         (368 )       (242 )       (45 )
Return on Average Assets
Dubuque Bank and Trust Company 0.67 % 1.36 % 0.74 % 1.00 % 0.81 %
New Mexico Bank & Trust 0.88 0.61 0.66 0.99 1.38
Morrill & Janes Bank and Trust Company 0.62 0.66
Wisconsin Bank & Trust 0.69 1.16 1.24 0.96 1.58
Riverside Community Bank 0.49 0.38 0.46 0.21 0.77
Arizona Bank & Trust 0.74 0.12 0.38 1.59 1.69
Rocky Mountain Bank 0.92 0.49 0.80 0.75 1.03
Galena State Bank & Trust Co. 1.15 0.54 0.43 1.35 1.82
Minnesota Bank & Trust 0.32 (0.07 ) (0.32 ) 0.55 1.03
Summit Bank & Trust       (1.57 )       0.15         (1.27 )       (0.85 )       (0.16 )
Net Interest Margin as a Percentage of Average Earning Assets
Dubuque Bank and Trust Company 3.72 % 3.59 % 3.30 % 3.23 % 3.37 %
New Mexico Bank & Trust 3.80 3.63 3.58 3.53 3.56
Morrill & Janes Bank and Trust Company 3.17 2.97
Wisconsin Bank & Trust 4.41 4.39 4.43 4.25 4.34
Riverside Community Bank 3.45 3.17 2.82 2.89 2.80
Arizona Bank & Trust 4.37 4.35 4.57 4.29 4.25
Rocky Mountain Bank 4.21 4.22 4.15 3.96 3.82
Galena State Bank & Trust Co. 3.74 3.47 3.32 3.48 3.69
Minnesota Bank & Trust 3.79 3.64 3.50 3.30 3.68
Summit Bank & Trust       4.03         3.79         3.76         3.57         3.89  
 
 
HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
    As of
      3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013
Total Portfolio Loans and Leases                
Dubuque Bank and Trust Company $ 897,860 $ 915,377 $ 828,502 $ 828,088 $ 803,084
New Mexico Bank & Trust 556,928 529,808 508,452 501,373 490,691
Morrill & Janes Bank and Trust Company 400,243 384,685
Wisconsin Bank & Trust 465,969 459,594 444,174 442,184 445,869
Riverside Community Bank 227,920 186,739 181,024 174,498 167,776
Arizona Bank & Trust 343,298 329,211 278,616 251,416 249,642
Rocky Mountain Bank 317,513 316,702 301,224 285,900 272,385
Galena State Bank & Trust Co. 183,012 183,639 177,480 169,306 170,500
Minnesota Bank & Trust 98,818 101,491 94,182 89,121 89,876
Summit Bank & Trust       72,898         73,150         75,681         75,869         77,305  
Allowance For Loan and Lease Losses
Dubuque Bank and Trust Company $ 8,839 $ 10,303 $ 11,040 $ 8,858 $ 8,758
New Mexico Bank & Trust 6,388 7,202 7,007 6,619 6,381
Morrill & Janes Bank and Trust Company 1,137 406
Wisconsin Bank & Trust 4,281 4,850 4,554 4,420 4,248
Riverside Community Bank 2,835 3,121 3,012 2,924 3,174
Arizona Bank & Trust 3,913 4,133 3,841 3,573 4,065
Rocky Mountain Bank 3,965 4,148 4,451 4,404 4,009
Galena State Bank & Trust Co. 1,716 1,916 1,872 1,759 1,856
Minnesota Bank & Trust 1,021 1,091 1,068 944 920
Summit Bank & Trust       1,054         1,334         1,297         1,222         1,339  
Nonperforming Loans and Leases
Dubuque Bank and Trust Company $ 7,729 $ 15,641 $ 19,803 $ 9,612 $ 2,234
New Mexico Bank & Trust 5,195 6,880 7,406 8,606 8,228
Morrill & Janes Bank and Trust Company 129 160
Wisconsin Bank & Trust 4,904 6,165 6,825 7,921 3,875
Riverside Community Bank 5,213 3,325 4,120 2,769 3,118
Arizona Bank & Trust 3,200 4,413 1,862 2,240 3,378
Rocky Mountain Bank 3,271 3,326 4,076 5,997 6,130
Galena State Bank & Trust Co. 939 1,077 1,131 1,246 3,087
Minnesota Bank & Trust 3 4
Summit Bank & Trust       584         688         1,021         1,897         2,001  
Allowance As a Percent of Total Loans and Leases
Dubuque Bank and Trust Company 0.98 % 1.13 % 1.33 % 1.07 % 1.09 %
New Mexico Bank & Trust 1.15 1.36 1.38 1.32 1.30
Morrill & Janes Bank and Trust Company 0.28 0.11
Wisconsin Bank & Trust 0.92 1.06 1.03 1.00 0.95
Riverside Community Bank 1.24 1.67 1.66 1.68 1.89
Arizona Bank & Trust 1.14 1.26 1.38 1.42 1.63
Rocky Mountain Bank 1.25 1.31 1.48 1.54 1.47
Galena State Bank & Trust Co. 0.94 1.04 1.05 1.04 1.09
Minnesota Bank & Trust 1.03 1.07 1.13 1.06 1.02
Summit Bank & Trust       1.45         1.82         1.71         1.61         1.73  
 

Copyright Business Wire 2010

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