Heartland Financial USA, Inc. (NASDAQ:HTLF):
   
Quarter Ended
March 31,
2015     2014
Net income (in millions) $ 15.7 $ 6.9
Net income available to common stockholders (in millions) 15.5 6.7
Diluted earnings per common share 0.76 0.36
 
Return on average assets 0.97 % 0.47 %
Return on average common equity 13.58 7.41
Return on average tangible common equity 15.67 8.50
Net interest margin 3.90 3.92
 
 
"Heartland's first quarter earnings of $0.76 per diluted common share clearly surpassed expectations. Quarterly net income available to common stockholders of $15.5 million was more than double our net income of $6.7 million in the first quarter last year."

 

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

Heartland Financial USA, Inc. (NASDAQ:HTLF) today reported net income available to common stockholders of $15.5 million, or $0.76 per diluted common share, for the quarter ended March 31, 2015, compared to $6.7 million, or $0.36 per diluted common share, for the first quarter of 2014. Return on average common equity was 13.58% and return on average assets was 0.97% for the first quarter of 2015, compared to 7.41% and 0.47%, respectively, for the same quarter in 2014.

Positively affecting net income for the quarter were increases in net interest income, securities gains and gains on sale of loans held for sale and a reduction in provision for loan and lease losses. These improvements were partially offset by increases in the noninterest expense categories of salaries and employee benefits, professional fees and other noninterest expenses.

Commenting on Heartland's first quarter 2015 results, Lynn B. Fuller, Heartland's chairman and chief executive officer said, "Heartland's first quarter earnings of $0.76 per diluted common share clearly surpassed expectations. Quarterly net income available to common stockholders of $15.5 million was more than double our net income of $6.7 million in the first quarter last year."

On January 16, 2015, Heartland completed the acquisition of Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin, in an all stock transaction. Simultaneous with the closing, Community Bank & Trust was merged into Heartland's Wisconsin Bank & Trust subsidiary. As of the close date, the transaction included, at fair value, total assets of $525.3 million, total loans of $395.0 million and total deposits of $434.0 million.

Subsequent to the quarter-end, Heartland announced it had entered into a definitive merger agreement with Community Bancorporation of New Mexico, Inc., parent company of Community Bank in Santa Fe, New Mexico. Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Heartland will acquire Community Bancorporation of New Mexico, Inc. in an all cash transaction valued at approximately $11.3 million. Simultaneous with closing of the transaction, Community Bank will be merged into Heartland's New Mexico Bank & Trust subsidiary. The transaction is subject to approvals by Community Bancorporation of New Mexico, Inc. shareholders and bank regulatory authorities, and is expected to close during the third quarter of 2015.

Fuller commented, "Expansion of our banking franchise through M&A remains a high priority for Heartland. In the first quarter, we completed the acquisition of Community Banc-Corp of Sheboygan, Inc., a $525 million commercial banking company in Sheboygan, Wisconsin. And on April 16, we announced the proposed acquisition of Community Bancorporation of Santa Fe, Inc., a New Mexico - based holding company with assets of approximately $181 million."

Net Interest Margin Increases in Dollars; Net Interest Margin as a Percentage of Average Earning Assets Remains Steady

Net interest margin, expressed as a percentage of average earning assets, was 3.90% during the first quarter of 2015 compared to 3.94% during the fourth quarter of 2014 and 3.92% during the first quarter of 2014.

Fuller said, "We continue to enjoy a strong net interest margin, which held up nicely at 3.90%. Our success in maintaining net interest margin above many of our peers is the result of continuous price discipline on both sides of the balance sheet. Net interest income in dollars has also increased steadily for each of the last six quarters."

Interest income increased $5.8 million or 10% to $63.1 million in the first quarter of 2015 from the $57.3 million recorded in the first quarter of 2014. After adjustment to add $2.4 million for both the first quarter of 2015 and the first quarter of 2014 for income taxes saved on the interest earned on nontaxable securities and loans, on a tax-equivalent basis, interest income in the first quarter of 2015 was $65.5 million compared to $59.6 million in the first quarter of 2014. The increase in interest income in the first quarter of 2015, as compared to the first quarter of 2014, was primarily due to an increase in average earning assets, which increased $578.9 million or 11% during the first quarter of 2015 compared to the first quarter of 2014, with approximately $375.0 million attributable to the acquisition completed during the first quarter of 2015 and the remainder attributable primarily to loan growth experienced during the last three quarters of 2014. Also contributing to the increase in interest income during the first quarter of 2015 compared to the first quarter of 2014 was a change in the composition of average earning assets from lower-yielding investments to higher-yielding loans. The percentage of average net loans and leases to total earning assets was 72% during the first quarter of 2015 compared to 67% during the first quarter of 2014.

Interest expense for the first quarter of 2015 was $9.2 million, an increase of $510,000 or 6% from $8.7 million in the first quarter of 2014. Average interest bearing liabilities increased $308.5 million or 8% for the quarter ended March 31, 2015, as compared to the same quarter in 2014, while the average interest rate paid on Heartland's interest bearing deposits and borrowings declined 1 basis point from 0.86% in the first quarter of 2014 to 0.85% in the first quarter of 2015. The average interest rate paid on savings deposits was 0.26% during the first quarter of 2015 compared to 0.33% during the first quarter of 2014 and the average interest rate paid on time deposits was 1.09% during the first quarter of 2015 compared to 1.21% during the first quarter of 2014.

Net interest income increased $5.3 million or 11% to $53.9 million in the first quarter of 2015 from the $48.6 million recorded in the first quarter of 2014. Net interest income on a tax-equivalent basis totaled $56.3 million during the first quarter of 2015, an increase of $5.3 million or 10% from the $51.0 million recorded during the first quarter of 2014.

Noninterest Income Increases; Noninterest Expense Increases

Noninterest income totaled $30.7 million during the first quarter of 2015 compared to $18.9 million during the first quarter of 2014, an increase of $11.8 million or 63%. Net securities gains totaled $4.4 million during the first quarter of 2015 compared to $781,000 during the first quarter of 2014, an increase of $3.6 million or 457%. Gains on sale of loans held for sale totaled $13.7 million during the first quarter of 2015 compared to $6.4 million during the first quarter of 2014, an increase of $7.3 million or 115%. The Community Bank & Trust acquisition completed during the first quarter of 2015 contributed approximately $1.5 million to noninterest income.

Fuller commented, "A renewed wave of residential refinancing activity in the first quarter resulted in a significant increase in gains on sale of loans compared to the prior year's quarter. Our Heartland Mortgage unit remains a key area of emphasis for Heartland; we are making diligent efforts to increase loan production while seeking efficiencies in the back office."

For the first quarter of 2015, noninterest expenses totaled $59.6 million compared to $52.5 million during the first quarter of 2014, an increase of $7.1 million or 13%, with approximately $4.4 million attributable to the Community Bank & Trust acquisition. The largest contributor to this increase was salaries and employee benefits, which increased $4.3 million or 13%, with $2.2 million attributable to the acquisition. Salaries and employee benefits was also affected by increases in incentive plan accruals and higher compensation in the mortgage segment during the first quarter of 2015. The other noninterest expense categories with significant increases during the first quarter of 2015 in comparison with the first quarter of 2014 were professional fees, which increased $1.5 million or 34%, and other noninterest expenses, which increased $1.2 million or 21%. The acquisition was responsible for $1.0 million of the increase in professional fees and $312,000 of the increase in other noninterest expenses.

Heartland's effective tax rate was 32.60% for the first quarter of 2015 compared to 19.82% for the first quarter of 2014. Federal low-income housing tax credits included in Heartland's income taxes totaled $145,000 during the first quarter of 2015 compared to $200,000 during the first quarter of 2014. Heartland's effective tax rate was also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 19.07% during the first quarter of 2015 compared to 51.28% during the first quarter of 2014. The tax-equivalent adjustment for this tax-exempt interest income was $2.4 million during both the first quarter of 2015 and the first quarter of 2014.

Exclusive of Acquisition, Loans Decline Slightly and Deposits Increase

Total assets were $6.51 billion at March 31, 2015, an increase of $454.5 million or 7% since year-end 2014. Total assets of Community Banc-Corp of Sheboygan, Inc. at acquisition date were $525.3 million. Securities represented 25% of total assets at March 31, 2015, compared to 28% at year-end 2014.

Total loans and leases held to maturity were $4.24 billion at March 31, 2015, compared to $3.88 billion at year-end 2014, an increase of $366.9 million or 9%. Included in the loan growth for the first quarter of 2015 were $395.0 million acquired in the Community Bank & Trust merger. Exclusive of this acquisition, total loans and leases held to maturity decreased $28.1 million or 1%.

Total deposits were $5.27 billion as of March 31, 2015, compared to $4.77 billion at year-end 2014, an increase of $498.4 million or 10%, with $434.0 million attributable to the Community Bank & Trust acquisition. Demand deposits totaled $1.52 billion at March 31, 2015, an increase of $219.8 million or 17% since year-end 2014, with $117.1 million attributable to the acquisition. Exclusive of $127.9 million acquired, certificates of deposits decreased $25.6 million or 3%.

Fuller said, "We continue to experience a favorable change in our deposit mix, with sustained growth in no-cost demand deposits, which now represent 29 percent of total deposits. Non-time categories now account for 83 percent of total deposits."

Increase in Nonperforming Assets; Decrease in Provision for Loan Losses

Nonperforming loans, excluding those covered under loss sharing agreements, were $27.0 million or 0.64% of total loans and leases at March 31, 2015, compared to $25.1 million or 0.63% of total loans and leases at December 31, 2014. Exclusive of $6.1 million of nonperforming assets acquired in the acquisition of Community Bank & Trust, nonperforming assets decreased $4.4 million or 9.8% since year-end 2014.

The allowance for loan and lease losses at March 31, 2015, was 0.99% of loans and leases and 154.83% of nonperforming loans compared to 1.07% of loans and leases and 168.58% of nonperforming loans at December 31, 2014. The provision for loan losses was $1.7 million for the first quarter of 2015 compared to $6.3 million for the first quarter of 2014, which 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 2015 were $1.3 million compared to $9.4 million during the first quarter of 2014. The higher amount during the first quarter of 2014 was primarily due to a $6.8 million credit which was fully charged off.

"With nonperforming loans currently at 0.64 percent of total loans, Heartland's credit quality can be described as exceptional. Looking back several years, we are proud to see this ratio approaching pre-recession levels," Fuller concluded.

Conference Call Details

Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0782 at least five minutes before start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. A replay will be available until April 26, 2016, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.

Heartland Financial USA, Inc. is a diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 86 banking locations in 63 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 (xi) changes in accounting policies and practices. All statements in this release, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
March 31,
      2015     2014
Interest Income    
Interest and fees on loans and leases $ 53,049 $ 46,384
Interest on securities:
Taxable 7,132 7,761
Nontaxable 2,916 3,122
Interest on federal funds sold 1
Interest on deposits in other financial institutions   4     7  
Total Interest Income   63,102     57,274  
Interest Expense
Interest on deposits 4,172 4,778
Interest on short-term borrowings 198 226
Interest on other borrowings   4,802     3,658  
Total Interest Expense   9,172     8,662  
Net Interest Income 53,930 48,612
Provision for loan and lease losses   1,671     6,331  
Net Interest Income After Provision for Loan and Lease Losses   52,259     42,281  
Noninterest Income
Service charges and fees 5,404 4,896
Loan servicing income 1,041 1,511
Trust fees 3,631 3,210
Brokerage and insurance commissions 1,087 1,123
Securities gains, net 4,353 781
Loss on trading account securities (38 )
Gains on sale of loans held for sale 13,742 6,379
Income on bank owned life insurance 524 363
Other noninterest income   881     625  
Total Noninterest Income   30,663     18,850  
Noninterest Expense
Salaries and employee benefits 36,638 32,319
Occupancy 4,259 4,050
Furniture and equipment 2,106 1,890
Professional fees 6,044 4,526
FDIC insurance assessments 956 980
Advertising 1,181 1,188
Intangible assets amortization 631 624
Other real estate and loan collection expenses 465 1,052
Loss on sales/valuations of assets, net 353 163
Other noninterest expenses   6,981     5,746  
Total Noninterest Expense   59,614     52,538  
Income Before Income Taxes 23,308 8,593
Income taxes   7,599     1,703  
Net Income 15,709 6,890
Preferred dividends and discount   (204 )   (204 )
Net Income Available to Common Stockholders $ 15,505   $ 6,686  
Earnings per common share-diluted $ 0.76 $ 0.36
Weighted average shares outstanding-diluted 20,493,266 18,724,936
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Interest Income                
Interest and fees on loans and leases $ 53,049 $ 50,226 $ 49,311 $ 48,101 $ 46,384
Interest on securities:
Taxable 7,132 6,972 7,547 7,447 7,761
Nontaxable 2,916 3,190 3,249 3,708 3,122
Interest on federal funds sold 1 1
Interest on deposits in other financial institutions   4     3     6     7     7  
Total Interest Income   63,102     60,391     60,114     59,263     57,274  
Interest Expense
Interest on deposits 4,172 4,144 4,655 4,577 4,778
Interest on short-term borrowings 198 222 227 202 226
Interest on other borrowings   4,802     3,854     3,741     3,685     3,658  
Total Interest Expense   9,172     8,220     8,623     8,464     8,662  
Net Interest Income 53,930 52,171 51,491 50,799 48,612
Provision for loan and lease losses   1,671     2,866     2,553     2,751     6,331  
Net Interest Income After Provision for Loan and Lease Losses   52,259     49,305     48,938     48,048     42,281  
Noninterest Income
Service charges and fees 5,404 5,078 4,857 5,254 4,896
Loan servicing income 1,041 1,360 1,319 1,393 1,511
Trust fees 3,631 3,350 3,194 3,343 3,210
Brokerage and insurance commissions 1,087 1,115 1,044 1,158 1,123
Securities gains, net 4,353 1,208 825 854 781
Loss on trading account securities (38 )
Gains on sale of loans held for sale 13,742 7,778 8,384 8,796 6,379
Income on bank owned life insurance 524 399 371 339 363
Other noninterest income   881     945     612     398     625  
Total Noninterest Income   30,663     21,233     20,606     21,535     18,850  
Noninterest Expense
Salaries and employee benefits 36,638 31,415 33,546 32,563 32,319
Occupancy 4,259 3,905 3,807 3,984 4,050
Furniture and equipment 2,106 2,097 2,033 2,085 1,890
Professional fees 6,044 5,072 4,429 4,214 4,526
FDIC insurance assessments 956 960 888 980 980
Advertising 1,181 1,442 1,383 1,511 1,188
Intangible assets amortization 631 487 521 591 624
Other real estate and loan collection expenses 465 524 215 518 1,052
Loss on sales/valuations of assets, net 353 116 447 1,379 163
Other noninterest expenses   6,981     7,930     7,386     6,834     5,746  
Total Noninterest Expense   59,614     53,948     54,655     54,659     52,538  
Income Before Income Taxes 23,308 16,590 14,889 14,924 8,593
Income taxes   7,599     4,327     2,916     4,150     1,703  
Net Income 15,709 12,263 11,973 10,774 6,890
Preferred dividends and discount   (204 )   (204 )   (205 )   (204 )   (204 )
Net Income Available to Common Stockholders $ 15,505   $ 12,059   $ 11,768   $ 10,570   $ 6,686  
Earnings per common share-diluted $ 0.76 $ 0.64 $ 0.63 $ 0.56 $ 0.36
Weighted average shares outstanding-diluted 20,493,266 18,762,272 18,752,748 18,746,735 18,724,936
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    As Of
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Assets                
Cash and due from banks $ 104,475 $ 64,150 $ 63,400 $ 98,613 $ 84,744
Federal funds sold and other short-term investments   7,257     9,721     4,436     4,047     3,884  
Cash and cash equivalents 111,732 73,871 67,836 102,660 88,628
Time deposits in other financial institutions 2,605 2,605 2,605 3,105 3,355
Securities:
Available for sale, at fair value 1,353,537 1,401,868 1,369,703 1,412,809 1,400,756
Held to maturity, at cost 284,030 284,587 255,312 257,217 257,927
Other investments, at cost 18,297 20,498 20,514 20,932 18,755
Loans held for sale 105,670 70,514 93,054 87,173 54,862
Loans and leases:
Held to maturity 4,243,689 3,876,745 3,798,305 3,694,734 3,577,776
Loans covered by loss share agreements 1,258 3,850 4,379 5,466
Allowance for loan and lease losses   (41,854 )   (41,449 )   (41,698 )   (40,892 )   (38,573 )
Loans and leases, net 4,201,835 3,836,554 3,760,457 3,658,221 3,544,669
Premises, furniture and equipment, net 145,132 130,713 132,240 133,127 135,054
Other real estate, net 19,097 19,016 20,475 24,395 28,083
Goodwill 51,073 35,583 35,583 35,583 35,583
Other intangible assets, net 44,024 33,932 33,399 32,732 32,690
Cash surrender value on life insurance 95,118 82,638 82,224 81,840 81,486
FDIC indemnification asset 83 124 190
Other assets   74,126     59,433     61,122     63,792     64,854  
Total Assets $ 6,506,276   $ 6,051,812   $ 5,934,607   $ 5,913,710   $ 5,746,892  
Liabilities and Equity
Liabilities
Deposits:
Demand $ 1,515,004 $ 1,295,193 $ 1,274,439 $ 1,221,703 $ 1,195,457
Savings 2,863,744 2,687,493 2,599,850 2,556,784 2,582,166
Time   887,650     785,336     852,430     862,995     885,741  
Total deposits 5,266,398 4,768,022 4,726,719 4,641,482 4,663,364
Short-term borrowings 259,335 330,264 348,305 420,494 256,250
Other borrowings 361,300 395,705 334,311 329,507 334,706
Accrued expenses and other liabilities   51,896     61,504     41,873     49,806     35,237  
Total Liabilities 5,938,929 5,555,495 5,451,208 5,441,289 5,289,557
Stockholders' Equity
Preferred equity 81,698 81,698 81,698 81,698 81,698
Common stock 20,586 18,511 18,477 18,468 18,455
Capital surplus 147,642 95,816 94,393 93,334 92,199
Retained earnings 312,212 298,764 288,555 278,632 269,908
Accumulated other comprehensive income (loss) 5,255 1,528 276 289 (4,903 )
Treasury stock at cost   (46 )               (22 )
Total Equity   567,347     496,317     483,399     472,421     457,335  
Total Liabilities and Equity $ 6,506,276   $ 6,051,812   $ 5,934,607   $ 5,913,710   $ 5,746,892  
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
    For the Quarter Ended
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Average Balances                
Assets $ 6,454,271 $ 5,974,188 $ 5,882,792 $ 5,800,104 $ 5,770,350
Loans and leases, net of unearned 4,267,593 3,899,465 3,812,218 3,692,159 3,571,127
Deposits 5,161,782 4,784,592 4,710,177 4,665,993 4,633,192
Earning assets 5,857,204 5,508,287 5,426,336 5,321,149 5,278,331
Interest bearing liabilities 4,398,184 4,123,478 4,099,526 4,091,233 4,089,691
Common stockholders' equity 463,048 406,664 393,740 380,561 365,889
Total stockholders' equity 544,746 488,362 475,438 462,259 447,587
Tangible common stockholders' equity 401,294 361,916 348,423 334,747 318,898
 
Key Performance Ratios
Annualized return on average assets 0.97 % 0.80 % 0.79 % 0.73 % 0.47 %
Annualized return on average common equity 13.58 % 11.77 % 11.86 % 11.14 % 7.41 %
Annualized return on average common tangible equity 15.67 % 13.22 % 13.40 % 12.66 % 8.50 %
Annualized ratio of net charge-offs to average loans and leases 0.12 % 0.32 % 0.18 % 0.05 % 1.07 %
Annualized net interest margin(1) 3.90 % 3.94 % 3.96 % 4.04 % 3.92 %
Efficiency ratio, fully taxable equivalent(2) 70.95 % 69.99 % 70.76 % 70.97 % 74.94 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%.
(2) Refer to the "Non-GAAP Reconciliation-Efficiency Ratio" table that follows for details of this non-GAAP measure.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
     

For the Quarter Ended
    3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Reconciliation of Non-GAAP Measure-Efficiency Ratio                
Net interest income $ 53,930 $ 52,171 $ 51,491 $ 50,799 $ 48,612
Taxable equivalent adjustment(1)   2,393     2,550     2,613     2,762     2,372  
Fully taxable equivalent net interest income 56,323 54,721 54,104 53,561 50,984
Noninterest income 30,663 21,233 20,606 21,535 18,850
Securities gains, net   (4,353 )   (1,208 )   (825 )   (854 )   (781 )
Adjusted income $ 82,633   $ 74,746   $ 73,885   $ 74,242   $ 69,053  
 
Total noninterest expenses $ 59,614 $ 53,948 $ 54,655 $ 54,659 $ 52,538
Less:
Intangible assets amortization 631 487 521 591 624
Partnership investment in historic rehabilitation tax credits 1,028 1,408
Loss on sales/valuation of assets, net   353     116     447     1,379     163  
Adjusted noninterest expenses $ 58,630   $ 52,317   $ 52,279   $ 52,689   $ 51,751  
 
Efficiency ratio, fully taxable equivalent(2) 70.95 % 69.99 % 70.76 % 70.97 % 74.94 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%.
(2) Efficiency ratio, fully taxable equivalent, expresses noninterest expenses as a percentage of fully taxable equivalent net interest income and noninterest income. Noninterest income and noninterest expenses exclude items that management believes are not comparable among the periods presented. This measure should not be considered a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the non-GAAP measure provides supplemental useful information for proper understanding of the financial results.
 
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
    As of and for the Quarter Ended
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Common Share Data                
Book value per common share $ 23.59 $ 22.40 $ 21.74 $ 21.16 $ 20.36
Tangible book value per common share(1) $ 20.41 $ 19.99 $ 19.30 $ 18.69 $ 17.86
ASC 320 effect on book value per common share $ 0.38 $ 0.19 $ 0.10 $ 0.13 $ (0.16 )
Common shares outstanding, net of treasury stock 20,585,072 18,511,125 18,477,463 18,467,646 18,454,048
Tangible capital ratio(2) 6.52 % 6.16 % 6.06 % 5.88 % 5.78 %
 
Loan and Lease Data
Loans held to maturity:
Commercial and commercial real estate $ 3,067,315 $ 2,743,140 $ 2,709,544 $ 2,650,517 $ 2,547,625
Residential mortgage 413,938 380,341 360,309 341,697 365,162
Agricultural and agricultural real estate 411,732 423,827 404,423 389,918 370,348
Consumer 351,981 330,555 326,148 315,234 297,978
Unearned discount and deferred loan fees   (1,277 )   (1,118 )   (2,119 )   (2,632 )   (3,337 )
Total loans and leases held to maturity $ 4,243,689   $ 3,876,745   $ 3,798,305   $ 3,694,734   $ 3,577,776  
 
Loans covered under loss share agreements:
Commercial and commercial real estate $ $ 54 $ 1,188 $ 1,208 $ 2,292
Residential mortgage 1,204 1,762 1,995 2,062
Agricultural and agricultural real estate 573 567 502
Consumer           327     609     610  
Total loans and leases covered under loss share agreements $   $ 1,258   $ 3,850   $ 4,379   $ 5,466  
 
Other Selected Trend Information
Effective tax rate 32.60 % 26.08 % 19.59 % 27.81 % 19.82 %
Full time equivalent employees 1,776 1,631 1,646 1,658 1,668
Trust assets under management $ 2,064,044 $ 1,860,546 $ 1,820,612 $ 1,859,643 $ 1,736,308
Total Residential Mortgage Loan Applications $ 647,487 $ 383,845 $ 445,039 $ 460,533 $ 316,829
Residential Mortgage Loans Originated $ 319,581 $ 293,268 $ 312,428 $ 277,895 $ 175,249
Residential Mortgage Loans Sold $ 268,786 $ 281,250 $ 283,677 $ 208,429 $ 149,993
Residential Mortgage Loan Servicing Portfolio $ 3,578,409 $ 3,498,724 $ 3,362,717 $ 3,198,510 $ 3,107,589
 
(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
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Allowance for Loan and Lease Losses                
Balance, beginning of period $ 41,449 $ 41,698 $ 40,892 $ 38,573 $ 41,685
Provision for loan and lease losses 1,671 2,866 2,553 2,751 6,331
Charge-offs on loans not covered by loss share agreements (2,004 ) (4,020 ) (2,649 ) (1,392 ) (10,617 )
Charge-offs on loans covered by loss share agreements (8 ) (41 )
Recoveries 738 905 894 913 1,215
Recoveries on loans covered by loss share agreements           8     55      
Balance, end of period $ 41,854   $ 41,449   $ 41,698   $ 40,892   $ 38,573  
 
Asset Quality
Not covered under loss share agreements:
Nonaccrual loans $ 27,023 $ 25,070 $ 30,130 $ 29,076 $ 31,928
Loans and leases past due ninety days or more as to interest or principal payments 9
Other real estate owned 19,097 19,016 19,873 23,761 28,033
Other repossessed assets   404     445     506     414     397  
Total nonperforming assets not covered under loss share agreements $ 46,533   $ 44,531   $ 50,509   $ 53,251   $ 60,358  
 
Covered under loss share agreements:
Nonaccrual loans $ $ 278 $ 297 $ 297 $ 820
Other real estate owned           602     634     50  
Total nonperforming assets covered under loss share agreements $   $ 278   $ 899   $ 931   $ 870  
 
Performing troubled debt restructured loans $ 10,904 $ 12,133 $ 11,994 $ 12,076 $ 12,548
 
Nonperforming Assets Activity
Balance, beginning of period $ 44,809 $ 51,408 $ 54,182 $ 61,228 $ 73,450
Net loan charge offs (1,266 ) (3,115 ) (1,747 ) (432 ) (9,443 )
New nonperforming loans 4,059 5,226 5,911 4,264 5,328
Acquired nonperforming assets 6,101
Reduction of nonperforming loans(1) (4,493 ) (6,446 ) (2,679 ) (4,145 ) (3,303 )
OREO/Repossessed assets sales proceeds (2,312 ) (1,252 ) (4,313 ) (5,878 ) (4,731 )
OREO/Repossessed assets writedowns, net (319 ) (918 ) (38 ) (902 ) (80 )
Net activity at Citizens Finance Co.   (46 )   (94 )   92     47     7  
Balance, end of period $ 46,533   $ 44,809   $ 51,408   $ 54,182   $ 61,228  
 
Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements
Ratio of nonperforming loans and leases to total loans and leases 0.64 % 0.63 % 0.79 % 0.79 % 0.89 %
Ratio of nonperforming assets to total assets 0.72 % 0.73 % 0.85 % 0.90 % 1.06 %
Annualized ratio of net loan charge-offs to average loans and leases 0.12 % 0.32 % 0.18 % 0.05 % 1.07 %
Allowance for loan and lease losses as a percent of loans and leases 0.99 % 1.07 % 1.10 % 1.11 % 1.08 %
Allowance for loan and lease losses as a percent of nonperforming loans and leases 154.83 % 168.58 % 138.40 % 140.64 % 120.81 %
Loans delinquent 30-89 days as a percent of total loans 0.42 % 0.21 % 0.32 % 0.25 % 0.31 %
 
(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, 2015     March 31, 2014
Average         Average        
      Balance    

 Interest 
   

  Rate  
    Balance    

 Interest 
   

  Rate  
Earning Assets
Securities:
Taxable $ 1,283,509 $ 7,132 2.25 % $ 1,298,930 $ 7,761 2.42 %
Nontaxable(1)   331,339     4,486 5.49     443,120     4,803 4.40  
Total securities   1,614,848     11,618 2.92     1,742,050     12,564 2.92  
Interest bearing deposits 9,194 4 0.18 6,417 7 0.44
Federal funds sold   7,617     1 0.05     809      
Loans and leases:(2)
Commercial and commercial real estate(1) 3,023,204 35,875 4.81 2,500,341 30,311 4.92
Residential mortgage 478,948 4,883 4.13 400,194 4,352 4.41
Agricultural and agricultural real estate(1) 418,251 5,030 4.88 374,188 4,738 5.14
Consumer 347,190 6,888 8.05 296,404 6,186 8.46
Fees on loans 1,196 1,489
Less: allowance for loan and lease losses   (42,048 )       (42,072 )    
Net loans and leases   4,225,545     53,872 5.17     3,529,055     47,076 5.41  
Total earning assets   5,857,204     65,495 4.53 %   5,278,331     59,647 4.58 %
Nonearning Assets   597,067     492,019  
Total Assets $ 6,454,271   $ 5,770,350  
Interest Bearing Liabilities
Savings $ 2,830,961 $ 1,795 0.26 % $ 2,538,418 $ 2,062 0.33 %
Time, $100,000 and over 344,360 838 0.99 340,344 875 1.04
Other time deposits 536,170 1,539 1.16 566,998 1,841 1.32
Short-term borrowings 294,756 198 0.27 306,070 226 0.30
Other borrowings   391,937     4,802 4.97     337,861     3,658 4.39  
Total interest bearing liabilities   4,398,184     9,172 0.85 %   4,089,691     8,662 0.86 %
Noninterest Bearing Liabilities
Noninterest bearing deposits 1,450,291 1,187,432
Accrued interest and other liabilities   61,050     45,640  
Total noninterest bearing liabilities   1,511,341     1,233,072  
Stockholders' Equity   544,746     447,587  
Total Liabilities and Stockholders' Equity $ 6,454,271   $ 5,770,350  
Net interest income(1) $ 56,323 $ 50,985
Net interest spread(1) 3.68 % 3.72 %
Net interest income to total earning assets(1) 3.90 % 3.92 %
Interest bearing liabilities to earning assets 75.09 % 77.48 %
 
(1) Computed on a tax equivalent basis using an effective tax rate of 35%
(2) Nonaccrual loans are included in average loans outstanding.
 
 
HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
    As of and For the Quarter Ended
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Total Assets                
Dubuque Bank and Trust Company $ 1,413,772 $ 1,508,573 $ 1,389,241 $ 1,393,391 $ 1,346,025
Wisconsin Bank & Trust 1,128,104 650,658 664,630 658,773 631,501
New Mexico Bank & Trust 1,113,031 1,142,580 1,069,722 1,050,117 1,020,381
Morrill & Janes Bank and Trust Company 888,321 898,161 867,346 837,148 859,998
Illinois Bank & Trust(1) 748,937 778,542 798,934 803,448 772,128
Arizona Bank & Trust 487,059 470,997 471,661 467,966 472,141
Rocky Mountain Bank 477,799 468,671 480,345 472,079 456,201
Minnesota Bank & Trust 169,254 167,808 165,580 165,250 157,965
Summit Bank & Trust       140,868         134,145         137,774         135,721         116,154  
Total Deposits
Dubuque Bank and Trust Company $ 1,166,070 $ 1,211,896 $ 1,055,036 $ 1,001,798 $ 1,066,711
Wisconsin Bank & Trust 939,157 554,722 564,674 558,654 544,323
New Mexico Bank & Trust 880,422 860,465 828,637 814,523 790,172
Morrill & Janes Bank and Trust Company 696,606 703,016 686,833 680,176 673,325
Illinois Bank & Trust(1) 625,885 600,357 654,592 649,082 648,325
Arizona Bank & Trust 378,422 351,635 390,167 382,011 381,121
Rocky Mountain Bank 407,958 395,609 395,728 384,856 379,017
Minnesota Bank & Trust 148,773 150,146 148,453 148,260 142,750
Summit Bank & Trust       124,113         111,859         118,896         118,275         104,598  
Net Income (Loss)
Dubuque Bank and Trust Company $ 6,016 $ 5,184 $ 4,480 $ 4,135 $ 2,381
Wisconsin Bank & Trust 2,181 1,737 1,077 1,299 1,068
New Mexico Bank & Trust 4,164 2,015 3,201 2,855 2,199
Morrill & Janes Bank and Trust Company 1,656 2,157 1,626 1,711 1,301
Illinois Bank & Trust(1) 2,482 1,721 1,538 1,465 1,329
Arizona Bank & Trust 677 1,159 551 1,243 837
Rocky Mountain Bank 1,156 1,684 1,448 388 1,049
Minnesota Bank & Trust 162 395 106 59 122
Summit Bank & Trust       305         (491 )       (65 )       (82 )       (434 )
Return on Average Assets
Dubuque Bank and Trust Company 1.66 % 1.43 % 1.27 % 1.20 % 0.67 %
Wisconsin Bank & Trust 0.83 1.05 0.65 0.82 0.69
New Mexico Bank & Trust 1.52 0.72 1.20 1.10 0.88
Morrill & Janes Bank and Trust Company 0.77 0.99 0.76 0.81 0.62
Illinois Bank & Trust(1) 1.35 0.87 0.73 0.73 0.75
Arizona Bank & Trust 0.58 0.97 0.47 1.05 0.74
Rocky Mountain Bank 0.99 1.42 1.22 0.34 0.92
Minnesota Bank & Trust 0.40 0.98 0.26 0.15 0.32
Summit Bank & Trust       0.92         (1.46 )       (0.19 )       (0.26 )       (1.57 )
Net Interest Margin as a Percentage of Average Earning Assets
Dubuque Bank and Trust Company 3.55 % 3.69 % 3.63 % 3.67 % 3.72 %
Wisconsin Bank & Trust 4.44 4.09 4.24 4.27 4.41
New Mexico Bank & Trust 3.88 3.73 3.85 3.96 3.80
Morrill & Janes Bank and Trust Company 3.35 3.35 3.51 3.50 3.17
Illinois Bank & Trust(1) 3.69 3.61 3.43 3.65 3.56
Arizona Bank & Trust 4.17 4.28 4.23 4.47 4.37
Rocky Mountain Bank 4.31 4.74 4.44 4.36 4.21
Minnesota Bank & Trust 3.95 4.02 3.84 3.88 3.79
Summit Bank & Trust       4.16         3.74         3.81         3.98         4.03  
 
(1) Includes Galena State Bank & Trust Co. for the quarters ended March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014.
 
 
HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
    As of
      3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014
Total Portfolio Loans and Leases                
Dubuque Bank and Trust Company $ 907,956 $ 952,114 $ 917,092 $ 908,729 $ 897,860
Wisconsin Bank & Trust 865,323 502,310 509,364 496,486 465,969
New Mexico Bank & Trust 635,843 635,402 609,170 575,685 556,928
Morrill & Janes Bank and Trust Company 475,295 440,899 445,100 429,326 400,243
Illinois Bank & Trust(1) 439,757 429,772 419,202 414,803 410,932
Arizona Bank & Trust 355,986 342,731 335,648 328,438 343,298
Rocky Mountain Bank 343,008 354,455 356,049 339,479 317,513
Minnesota Bank & Trust 114,477 110,920 104,061 105,142 98,818
Summit Bank & Trust       87,913         90,515         88,199         84,040         72,898  
Allowance For Loan and Lease Losses
Dubuque Bank and Trust Company $ 9,376 $ 9,403 $ 9,143 $ 9,441 $ 8,839
Wisconsin Bank & Trust 5,148 5,216 5,327 4,564 4,281
New Mexico Bank & Trust 6,670 6,863 6,688 6,628 6,388
Morrill & Janes Bank and Trust Company 3,200 2,305 2,077 1,741 1,137
Illinois Bank & Trust(1) 5,056 4,734 5,343 4,888 4,551
Arizona Bank & Trust 3,566 3,258 3,432 3,754 3,913
Rocky Mountain Bank 3,155 3,450 4,048 4,179 3,965
Minnesota Bank & Trust 1,170 1,116 1,052 1,071 1,021
Summit Bank & Trust       850         1,554         996         1,099         1,054  
Nonperforming Loans and Leases
Dubuque Bank and Trust Company $ 4,056 $ 3,067 $ 6,151 $ 5,718 $ 7,729
Wisconsin Bank & Trust 8,857 2,967 3,335 3,617 4,904
New Mexico Bank & Trust 4,386 6,416 5,550 4,781 5,195
Morrill & Janes Bank and Trust Company 406 380 519 368 129
Illinois Bank & Trust(1) 5,499 5,939 7,611 7,039 6,152
Arizona Bank & Trust 1,009 2,156 2,732 2,946 3,200
Rocky Mountain Bank 2,111 1,954 3,008 3,471 3,271
Minnesota Bank & Trust
Summit Bank & Trust       40         1,076         583         567         584  
Allowance As a Percent of Total Loans and Leases
Dubuque Bank and Trust Company 1.03 % 0.99 % 1.00 % 1.04 % 0.98 %
Wisconsin Bank & Trust 0.59 1.04 1.05 0.92 0.92
New Mexico Bank & Trust 1.05 1.08 1.10 1.15 1.15
Morrill & Janes Bank and Trust Company 0.67 0.52 0.47 0.41 0.28
Illinois Bank & Trust(1) 1.15 1.10 1.27 1.18 1.11
Arizona Bank & Trust 1.00 0.95 1.02 1.14 1.14
Rocky Mountain Bank 0.92 0.97 1.14 1.23 1.25
Minnesota Bank & Trust 1.02 1.01 1.01 1.02 1.03
Summit Bank & Trust       0.97         1.72         1.13         1.31         1.45  
 
(1) Includes Galena State Bank & Trust Co. for the quarters ended March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014.
 

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