Heartland Financial USA, Inc. (NASDAQ: HTLF):

Highlights
  • Record annual net income of $60.0 million, a 43% increase from the prior year
  • Diluted earnings per common share of $0.67 for the quarter and $2.83 for the year
  • Return on average tangible common equity of 12.78% for the quarter and 13.90% for the year
  • Net interest margin of 3.99% for the quarter and 3.97% for the year
  • Deposits, exclusive of acquisitions, increased $367.8 million or 8% for the year
  • Loans held to maturity, exclusive of acquisitions, increased $185.7 million or 5% for the year
  • Completed acquisition of Premier Valley Bank in Fresno, California during the quarter
  • Completed systems conversion of Community Bank in Santa Fe, New Mexico during the quarter
  Quarter Ended   Year Ended
December 31, December 31,
2015   2014 2015   2014
Net income (in millions) $ 14.6 $ 12.3 $ 60.0 $ 41.9
Net income available to common stockholders (in millions) 14.4 12.1 59.2 41.1
Diluted earnings per common share 0.67 0.64 2.83 2.19
 
Return on average assets 0.79 % 0.80 % 0.88 % 0.70 %
Return on average common equity 10.69 11.77 11.92 10.62
Return on average tangible common equity 12.78 13.22 13.90 12.04
Net interest margin 3.99 3.94 3.97 3.96
 
 

"The year 2015 was Heartland's best year on record with net income of $60 million. Net income increased by 43 percent over 2014, with earnings per share growing by 29 percent."
 

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 $14.4 million, or $0.67 per diluted common share, for the quarter ended December 31, 2015, compared to $12.1 million, or $0.64 per diluted common share, for the fourth quarter of 2014. Return on average common equity was 10.69% and return on average assets was 0.79% for the fourth quarter of 2015, compared to 11.77% and 0.80%, respectively, for the same quarter in 2014.

Commenting on Heartland's results for 2015, Lynn B. Fuller, Heartland's chairman and chief executive officer said, "The year 2015 was Heartland's best year on record with net income of $60 million. Net income increased by 43 percent over 2014, with earnings per share growing by 29 percent."

Net income available to common stockholders for the year 2015 was $59.2 million, or $2.83 per diluted common share, compared to $41.1 million, or $2.19 per diluted common share, recorded during the year 2014. Return on average common equity was 11.92% and return on average assets was 0.88% for the year 2015, compared to 10.62% and 0.70%, respectively, for the same period in 2014.

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 valued at approximately $53.1 million. 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. The systems conversion for this transaction was completed on May 15, 2015.

On August 21, 2015, Heartland completed the acquisition of Community Bancorporation of New Mexico, Inc., parent company of Community Bank in Santa Fe, New Mexico, in an all cash transaction valued at approximately $11.1 million. Simultaneous with closing of the transaction, Community Bank merged into Heartland's New Mexico Bank & Trust subsidiary. As of the close date, the transaction included, at fair value, total assets of $166.5 million, total loans of $99.5 million and total deposits of $147.4 million. The systems conversion for this transaction was completed on November 6, 2015.

On September 11, 2015, Heartland completed the acquisition of First Scottsdale Bank, N.A. in Scottsdale, Arizona, in an all cash transaction valued at approximately $17.7 million. Simultaneous with the close, First Scottsdale Bank was merged into Heartland's Arizona Bank & Trust subsidiary. As of the close date, the transaction included, at fair value, total assets of $83.7 million, total loans of $54.7 million and total deposits of $65.9 million. The systems conversion for this transaction was completed simultaneous with the closing.

On November 30, 2015, Heartland completed the acquisition of Premier Valley Bank, a community bank based in Fresno, California. Simultaneous with the close, Premier Valley became a wholly-owned subsidiary of Heartland. Premier Valley shareholders received $95.0 million or $7.73 per share of Premier Valley common stock in the merger, and elected to receive this payment in shares of Heartland common stock or in cash, subject to proration so that 70% of the total payment was in Heartland common stock and 30% in cash. As of the close date, the transaction included, at fair value, total assets of $733.7 million, total loans of $389.8 million and total deposits of $622.7 million. The systems conversion for this transaction is expected to occur during the first quarter of 2016.

On October 22, 2015, Heartland entered into a merger agreement with CIC Bancshares, Inc., parent company of Centennial Bank, headquartered in Denver, Colorado. Under the agreement, Heartland will acquire CIC Bancshares, Inc. in a transaction valued at approximately $83.5 million, of which approximately 20 percent would be payable in cash and approximately 80 percent would be payable by issuance of Heartland common stock. Simultaneous with closing of the transaction, Centennial Bank will be merged into Heartland's Summit Bank & Trust subsidiary, with the resulting institution operating under the name, Centennial Bank and Trust. Centennial Bank had total assets of approximately $730.0 million as of September 30, 2015. The transaction has received regulatory approval, but is subject to approval by shareholders of CIC Bancshares, Inc., and is expected to close during the first quarter of 2016.

Net Interest Margin As a Percentage of Average Earning Assets and In Dollars Increases

Net interest margin, expressed as a percentage of average earning assets, was 3.99% during the fourth quarter of 2015, compared to 4.01% during the third quarter of 2015 and 3.94% during the fourth quarter of 2014.

Fuller said, "Throughout the year, we were pleased to see net interest margin hold steady in the 4 percent range. Despite continued pressure from a very low interest rate environment, we continue to find opportunities to maintain asset yields while managing down our funding costs."

Interest income for the fourth quarter of 2015 was $70.2 million, an increase of $9.8 million or 16%, compared to the $60.4 million recorded in the fourth quarter of 2014. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $2.8 million for the fourth quarter of 2015 and $2.6 million for the fourth quarter of 2014. With these adjustments, interest income on a tax-equivalent basis was $73.0 million for the fourth quarter of 2015, an increase of $10.1 million or 16%, compared to $62.9 million for the fourth quarter of 2014. The increase in interest income in the fourth quarter of 2015, as compared to the fourth quarter of 2014, was primarily due to an increase in average earning assets, which increased $1.00 billion or 18% during the fourth quarter of 2015 compared to the fourth quarter of 2014, with approximately $626.3 million attributable to the acquisitions completed during 2015 and the remainder attributable primarily to loan growth experienced during the last half of 2014 and first half of 2015. Also contributing to the increase in interest income during the fourth quarter of 2015 compared to the fourth 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 73% during the fourth quarter of 2015 compared to 70% during the fourth quarter of 2014.

Interest expense for the fourth quarter of 2015 was $7.5 million, a decrease of $763,000 or 9% from $8.2 million in the fourth quarter of 2014. Average interest bearing liabilities increased $658.3 million or 16% for the quarter ended December 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 17 basis points from 0.79% in the fourth quarter of 2014 to 0.62% in the fourth quarter of 2015. The average interest rate paid on savings deposits was 0.20% during the fourth quarter of 2015 compared to 0.28% during the fourth quarter of 2014 and the average interest rate paid on time deposits was 0.82% during the fourth quarter of 2015 compared to 1.09% during the fourth quarter of 2014.

Net interest income increased $10.5 million or 20% to $62.7 million in the fourth quarter of 2015 from the $52.2 million recorded in the fourth quarter of 2014. Net interest income on a tax-equivalent basis totaled $65.5 million during the fourth quarter of 2015, an increase of $10.8 million or 20% from the $54.7 million recorded during the fourth quarter of 2014.

Noninterest Income and Noninterest Expenses Increase

Noninterest income totaled $24.4 million during the fourth quarter of 2015 compared to $21.2 million during the fourth quarter of 2014, an increase of $3.1 million or 15%. Service charges and fees totaled $6.7 million during the fourth quarter of 2015 compared to $5.1 million during the fourth quarter of 2014, an increase of $1.6 million or 31%. This increase was primarily attributable to a larger demand deposit customer base, a portion of which is attributable to the acquisitions. Net securities gains totaled $3.9 million during the fourth quarter of 2015 compared to $1.2 million during the fourth quarter of 2014, an increase of $2.7 million or 224%.

For the fourth quarter of 2015, noninterest expenses totaled $66.0 million compared to $53.9 million during the fourth quarter of 2014, an increase of $12.0 million or 22%. Salaries and employee benefits increased $2.2 million or 7%, primarily attributable to acquisitions. Losses on sales/valuations of assets, net, totaled $4.2 million during the fourth quarter of 2015 compared to $116,000 during the fourth quarter of 2014, an increase of $4.1 million, primarily attributable to the writedown on one property. Other noninterest expenses increased $2.9 million or 36%, primarily as a result of one-time costs associated with the acquisitions and additional investments in technology.

Heartland's effective tax rate was 23.03% for the fourth quarter of 2015 compared to 26.08% for the fourth quarter of 2014. Included in the determination of Heartland's income taxes for the fourth quarters of both 2015 and 2014 were federal historic rehabilitation tax credits associated with Heartland's ownership interest in qualifying real estate projects totaling $1.4 million in 2015 and $1.3 million in 2014. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $145,000 during the fourth quarter of 2015 compared to $189,000 during the fourth 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 27.70% during the fourth quarter of 2015 compared to 28.54% during the fourth quarter of 2014.

Loans and Deposits Increase

Total assets were $7.70 billion at December 31, 2015, an increase of $1.65 billion or 27% since year-end 2014. Total assets of the entities acquired during 2015 were $1.51 billion at acquisition date. Securities represented 24% of total assets at December 31, 2015, compared to 28% at year-end 2014.

Total loans and leases held to maturity were $5.00 billion at December 31, 2015, compared to $3.88 billion at year-end 2014, an increase of $1.12 billion or 29%. This increase includes $939.0 million of total loans and leases held to maturity acquired in the 2015 acquisitions. Exclusive of these acquisitions, total loans and leases held to maturity increased $185.7 million or 5% since year-end 2014.

"After a very strong second quarter, loan demand moderated during the second half of the year. That said, organic loan growth of $186 million represents an increase of 5 percent which is respectable. And for 2016, we remain cautiously optimistic as quality loan growth is our second highest priority," added Fuller.

Total deposits were $6.41 billion as of December 31, 2015, compared to $4.77 billion at year-end 2014, an increase of $1.64 billion or 34%. Of this increase, $1.27 billion was attributable to the acquisitions completed during 2015. Exclusive of these acquisitions, total deposits increased $367.8 million or 8% since year-end 2014. Demand deposits totaled $1.91 billion at December 31, 2015, an increase of $618.9 million or 48% since year-end 2014, with $414.5 million of the increase attributable to the acquisitions. Included in the deposit growth during 2015 was a $89.3 million increase in brokered time deposits, the majority of which were issued to replace higher cost long-term FHLB advances and wholesale repurchase agreements that matured during the year.

Fuller said, "We were very pleased to see excellent deposit growth in 2015, especially in the fourth quarter. Excluding acquisitions, deposits increased by $368 million, or 8 percent over year-end 2014. We have experienced a very favorable shift in our deposit mix through the growth of demand deposits, which now represent 30 percent of total deposits."

Nonperforming Assets Increase; Provision for Loan Losses Decrease

Nonperforming assets were $51.7 million or 0.67% of total assets at December 31, 2015, compared to $44.5 million or 0.73% of total assets at December 31, 2014. Exclusive of $16.4 million of nonperforming assets acquired in the acquisitions, nonperforming assets decreased $9.5 million or 21% since year-end 2014. Nonperforming loans, excluding those covered under loss sharing agreements, were $39.7 million or 0.79% of total loans and leases at December 31, 2015, compared to $25.1 million or 0.63% of total loans and leases at December 31, 2014.

The allowance for loan and lease losses at December 31, 2015, was 0.97% of loans and leases and 122.77% of nonperforming loans compared to 1.07% of loans and leases and 165.33% of nonperforming loans at December 31, 2014. The provision for loan losses was $2.2 million for the fourth quarter of 2015 compared to $2.9 million for the fourth quarter of 2014.

Conference Call DetailsHeartland will host a conference call for investors at 5:00 p.m. EST 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 January 24, 2017, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.Heartland Financial USA, Inc. is a $7.7 billion diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 94 banking locations serving 71 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California, with mortgage loan production offices in California, Nevada and Idaho. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

Safe Harbor StatementThis 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   For the Year Ended
December 31, December 31,
    2015   2014   2015   2014
Interest Income    
Interest and fees on loans and leases $ 59,905 $ 50,226 $ 227,106 $ 194,022
Interest on securities:
Taxable 6,917 6,972 26,646 29,727
Nontaxable 3,311 3,190 12,178 13,269
Interest on federal funds sold 21 24 1
Interest on deposits in other financial institutions   3     3     14     23  
Total Interest Income   70,157     60,391     265,968     237,042  
Interest Expense
Interest on deposits 3,772 4,144 15,530 18,154
Interest on short-term borrowings 200 222 838 877
Interest on other borrowings   3,485     3,854     15,602     14,938  
Total Interest Expense   7,457     8,220     31,970     33,969  
Net Interest Income 62,700 52,171 233,998 203,073
Provision for loan and lease losses   2,171     2,866     12,697     14,501  
Net Interest Income After Provision for Loan and Lease Losses   60,529     49,305     221,301     188,572  
Noninterest Income
Service charges and fees 6,654 5,078 24,308 20,085
Loan servicing income 1,704 1,360 5,276 5,583
Trust fees 3,230 3,350 14,281 13,097
Brokerage and insurance commissions 917 1,115 3,789 4,440
Securities gains, net 3,913 1,208 13,143 3,668
Loss on trading account securities (38 )
Impairment loss on securities (769 ) (769 )
Gains on sale of loans held for sale 7,085 7,778 45,249 31,337
Income on bank owned life insurance 644 399 1,999 1,472
Other noninterest income   1,003     945     3,409     2,580  
Total Noninterest Income   24,381     21,233     110,685     82,224  
Noninterest Expense
Salaries and employee benefits 33,583 31,415 144,105 129,843
Occupancy 4,334 3,905 16,928 15,746
Furniture and equipment 2,344 2,097 8,747 8,105
Professional fees 6,503 5,072 23,047 18,241
FDIC insurance assessments 886 960 3,759 3,808
Advertising 1,624 1,442 5,465 5,524
Intangible assets amortization 898 487 2,978 2,223
Other real estate and loan collection expenses 723 524 2,437 2,309
Loss on sales/valuations of assets, net 4,238 116 6,821 2,105
Other noninterest expenses   10,821     7,930     36,759     27,896  
Total Noninterest Expense   65,954     53,948     251,046     215,800  
Income Before Income Taxes 18,956 16,590 80,940 54,996
Income taxes   4,365     4,327     20,898     13,096  
Net Income 14,591 12,263 60,042 41,900
Preferred dividends and discount   (204 )   (204 )   (817 )   (817 )
Net Income Available to Common Stockholders $ 14,387   $ 12,059   $ 59,225   $ 41,083  
Earnings per common share-diluted $ 0.67 $ 0.64 $ 2.83 $ 2.19
Weighted average shares outstanding-diluted 21,491,699 18,762,272 20,929,385 18,741,921
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
    12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Interest Income        
Interest and fees on loans and leases $ 59,905 $ 58,328 $ 55,824 $ 53,049 $ 50,226
Interest on securities:
Taxable 6,917 5,858 6,739 7,132 6,972
Nontaxable 3,311 3,077 2,874 2,916 3,190
Interest on federal funds sold 21 1 1 1
Interest on deposits in other financial institutions   3     4     3     4     3  
Total Interest Income   70,157     67,268     65,441     63,102     60,391  
Interest Expense
Interest on deposits 3,772 3,767 3,819 4,172 4,144
Interest on short-term borrowings 200 228 212 198 222
Interest on other borrowings   3,485     3,549     3,766     4,802     3,854  
Total Interest Expense   7,457     7,544     7,797     9,172     8,220  
Net Interest Income 62,700 59,724 57,644 53,930 52,171
Provision for loan and lease losses   2,171     3,181     5,674     1,671     2,866  
Net Interest Income After Provision for Loan and Lease Losses   60,529     56,543     51,970     52,259     49,305  
Noninterest Income
Service charges and fees 6,654 6,350 5,900 5,404 5,078
Loan servicing income 1,704 1,368 1,163 1,041 1,360
Trust fees 3,230 3,507 3,913 3,631 3,350
Brokerage and insurance commissions 917 869 916 1,087 1,115
Securities gains, net 3,913 1,767 3,110 4,353 1,208
Loss on trading account securities
Impairment loss on securities (769 )
Gains on sale of loans held for sale 7,085 9,823 14,599 13,742 7,778
Income on bank owned life insurance 644 372 459 524 399
Other noninterest income   1,003     924     601     881     945  
Total Noninterest Income   24,381     24,980     30,661     30,663     21,233  
Noninterest Expense
Salaries and employee benefits 33,583 37,033 36,851 36,638 31,415
Occupancy 4,334 4,307 4,028 4,259 3,905
Furniture and equipment 2,344 2,121 2,176 2,106 2,097
Professional fees 6,503 5,251 5,249 6,044 5,072
FDIC insurance assessments 886 1,018 899 956 960
Advertising 1,624 1,327 1,333 1,181 1,442
Intangible assets amortization 898 734 715 631 487
Other real estate and loan collection expenses 723 496 753 465 524
Loss on sales/valuations of assets, net 4,238 721 1,509 353 116
Other noninterest expenses   10,821     8,988     9,969     6,981     7,930  
Total Noninterest Expense   65,954     61,996     63,482     59,614     53,948  
Income Before Income Taxes 18,956 19,527 19,149 23,308 16,590
Income taxes   4,365     4,945     3,989     7,599     4,327  
Net Income 14,591 14,582 15,160 15,709 12,263
Preferred dividends and discount   (204 )   (205 )   (204 )   (204 )   (204 )
Net Income Available to Common Stockholders $ 14,387   $ 14,377   $ 14,956   $ 15,505   $ 12,059  
Earnings per common share-diluted $ 0.67 $ 0.69 $ 0.72 $ 0.76 $ 0.64
Weighted average shares outstanding-diluted 21,419,699 20,893,312 20,877,236 20,493,266 18,762,272
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As Of
    12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Assets        
Cash and due from banks $ 237,841 $ 76,954 $ 111,909 $ 104,475 $ 64,150
Federal funds sold and other short-term investments   20,958     14,151     7,813     7,257     9,721  
Cash and cash equivalents 258,799 91,105 119,722 111,732 73,871
Time deposits in other financial institutions 2,355 2,355 2,355 2,605 2,605
Securities:
Available for sale, at fair value 1,578,434 1,261,687 1,315,699 1,353,537 1,401,868
Held to maturity, at cost 279,117 282,200 283,258 284,030 284,587
Other investments, at cost 21,443 19,292 20,455 18,297 20,498
Loans held for sale 74,783 102,569 105,898 105,670 70,514
Loans and leases:
Held to maturity 5,001,486 4,642,523 4,449,823 4,243,689 3,876,745
Loans covered by loss share agreements 1,258
Allowance for loan and lease losses   (48,685 )   (47,105 )   (45,614 )   (41,854 )   (41,449 )
Loans and leases, net 4,952,801 4,595,418 4,404,209 4,201,835 3,836,554
Premises, furniture and equipment, net 150,678 147,486 143,423 145,132 130,713
Other real estate, net 11,524 17,041 16,983 19,097 19,016
Goodwill 97,277 56,828 54,162 51,073 35,583
Other intangible assets, net 56,945 48,695 45,226 44,024 33,932
Cash surrender value on life insurance 110,297 99,564 96,693 95,118 82,638
Other assets   100,301     81,644     108,924     74,126     59,433  
Total Assets $ 7,694,754   $ 6,805,884   $ 6,717,007   $ 6,506,276   $ 6,051,812  
Liabilities and Equity
Liabilities
Deposits:
Demand $ 1,914,141 $ 1,632,005 $ 1,536,355 $ 1,515,004 $ 1,295,193
Savings 3,367,479 2,936,611 2,816,666 2,863,744 2,687,493
Time   1,124,203     938,621     964,248     887,650     785,336  
Total deposits 6,405,823 5,507,237 5,317,269 5,266,398 4,768,022
Short-term borrowings 293,898 335,845 477,918 259,335 330,264
Other borrowings 263,214 302,086 296,594 361,300 395,705
Accrued expenses and other liabilities   68,646     69,707     46,020     51,896     61,504  
Total Liabilities 7,031,581 6,214,875 6,137,801 5,938,929 5,555,495
Stockholders' Equity
Preferred equity 81,698 81,698 81,698 81,698 81,698
Common stock 22,436 20,640 20,616 20,586 18,511
Capital surplus 216,436 149,613 148,789 147,642 95,816
Retained earnings 348,630 337,421 325,106 312,212 298,764
Accumulated other comprehensive income (loss) (6,027 ) 1,731 3,059 5,255 1,528
Treasury stock at cost       (94 )   (62 )   (46 )    
Total Equity   663,173     591,009     579,206     567,347     496,317  
Total Liabilities and Equity $ 7,694,754   $ 6,805,884   $ 6,717,007   $ 6,506,276   $ 6,051,812  
 
HEARTLAND FINANCIAL USA, INC
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended   For the Year Ended
December 31, December 31,
    2015   2014   2015   2014
Average Balances    
Assets $ 7,241,104 $ 5,974,188 $ 6,763,901 $ 5,857,488
Loans and leases, net of unearned 4,827,844 3,899,465 4,551,008 3,744,830
Deposits 5,938,905 4,784,592 5,458,623 4,698,936
Earning assets 6,512,565 5,508,287 6,152,090 5,384,275
Interest bearing liabilities 4,781,797 4,123,478 4,531,510 4,101,071
Common stockholders' equity 533,845 406,664 496,877 386,844
Total stockholders' equity 615,543 488,362 578,575 468,542
Tangible common stockholders' equity 446,564 361,916

425,992
341,134
 
Key Performance Ratios
Annualized return on average assets 0.79 % 0.80 % 0.88 % 0.70 %
Annualized return on average common equity 10.69 % 11.77 % 11.92 % 10.62 %
Annualized return on average common tangible equity 12.78 % 13.22 % 13.90 % 12.04 %
Annualized ratio of net charge-offs to average loans and leases 0.05 % 0.32 % 0.12 % 0.39 %
Annualized net interest margin (1) 3.99 % 3.94 % 3.97 % 3.96 %
Efficiency ratio, fully taxable equivalent (2) 68.53 % 69.99 % 69.16 % 71.61 %
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA    
  For the Quarter Ended
    12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Average Balances
Assets $ 7,241,104 $ 6,726,196 $ 6,625,797 $ 6,454,271 $ 5,974,188
Loans and leases, net of unearned 4,827,844 4,654,179 4,447,124 4,267,593 3,899,465
Deposits 5,938,905 5,423,418 5,302,235 5,161,782 4,784,592
Earning assets 6,512,565 6,161,495 6,069,844 5,857,204 5,508,287
Interest bearing liabilities 4,781,797 4,491,089 4,451,200 4,398,184 4,123,478
Common stockholders' equity 533,845 500,399 489,394 463,048 406,664
Total stockholders' equity 615,543 582,097 571,092 544,746 488,362
Tangible common stockholders' equity 446,564 431,304 424,245 401,294 361,916
 
Key Performance Ratios
Annualized return on average assets 0.79 % 0.85 % 0.91 % 0.97 % 0.80 %
Annualized return on average common equity 10.69 % 11.40 % 12.26 % 13.58 % 11.77 %
Annualized return on average common tangible equity 12.78 % 13.22 % 14.14 % 15.67 % 13.22 %
Annualized ratio of net charge-offs to average loans and leases 0.05 % 0.14 % 0.17 % 0.12 % 0.32 %
Annualized net interest margin (1) 3.99 % 4.01 % 3.97 % 3.90 % 3.94 %
Efficiency ratio, fully taxable equivalent (2) 68.53 % 69.85 % 67.43 % 70.95 % 69.99 %
 
(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   For the Year Ended
December 31, December 31,
Reconciliation of Non-GAAP Measure-Efficiency Ratio   2015   2014   2015   2014
Net interest income $ 62,700   $ 52,171 $ 233,998   $ 203,073
Taxable equivalent adjustment (1) 2,827   2,550   10,216   10,298  
Fully taxable equivalent net interest income 65,527 54,721 244,214 213,371
Noninterest income 24,381 21,233 110,685 82,224
Securities gains, net (3,913 ) (1,208 ) (13,143 ) (3,668 )
Impairment loss on securities 769     769    
Adjusted income $ 86,764   $ 74,746   $ 342,525   $ 291,927  
 
Total noninterest expenses $ 65,954 $ 53,948 $ 251,046 $ 215,800
Less:
Intangible assets amortization 898 487 2,978 2,223
Partnership investment in historic rehabilitation tax credits 1,362 1,028 4,357 2,436
Loss on sales/valuations of assets, net 4,238   116   6,821   2,105  
Adjusted noninterest expenses $ 59,456   $ 52,317   $ 236,890   $ 209,036  
 
Efficiency ratio, fully taxable equivalent (2) 68.53 % 69.99 % 69.16 % 71.61 %
 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Reconciliation of Non-GAAP Measure-Efficiency Ratio
Net interest income $ 62,700 $ 59,724 $ 57,644 $ 53,930 $ 52,171
Taxable equivalent adjustment (1) 2,827   2,588   2,408   2,393   2,550  
Fully taxable equivalent net interest income 65,527 62,312 60,052 56,323 54,721
Noninterest income 24,381 24,980 30,661 30,663 21,233
Securities gains, net (3,913 ) (1,767 ) (3,110 ) (4,353 ) (1,208 )
Impairment loss on securities 769          
Adjusted income $ 86,764   $ 85,525   $ 87,603   $ 82,633   $ 74,746  
 
Total noninterest expenses $ 65,954 $ 61,996 $ 63,482 $ 59,614 $ 53,948
Less:
Intangible assets amortization 898 734 715 631 487
Partnership investment in historic rehabilitation tax credits 1,362 805 2,190 1,028
Loss on sales/valuation of assets, net 4,238   721   1,509   353   116  
Adjusted noninterest expenses $ 59,456   $ 59,736   $ 59,068   $ 58,630   $ 52,317  
 
Efficiency ratio, fully taxable equivalent (2) 68.53 % 69.85 % 67.43 % 70.95 % 69.99 %
 

(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. 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 historic rehabilitation tax credits. 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, such as securities gains, net and losses on sales/valuations of assets, net. This measure should not be considered a substitute for operating results determined in accordance with GAAP.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
  As of and for the Quarter Ended
    12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Common Share Data        
Book value per common share $ 25.92 $ 24.68 $ 24.13 $ 23.59 $ 22.40
Tangible book value per common share (1) $ 20.60 $ 21.20 $ 20.84 $ 20.41 $ 19.99
ASC 320 effect on book value per common share $ (0.18 ) $ 0.22 $ 0.21 $ 0.38 $ 0.19
Common shares outstanding, net of treasury stock 22,435,693 20,637,321 20,614,325 20,585,072 18,511,125
Tangible capital ratio (2) 6.10 % 6.50 % 6.46 % 6.52 % 6.16 %
 
Loan and Lease Data
Loans held to maturity:
Commercial and commercial real estate $ 3,605,574 $ 3,303,098 $ 3,199,717 $ 3,067,315 $ 2,743,140
Residential mortgage 539,555 491,667 443,026 413,938 380,341
Agricultural and agricultural real estate 471,870 469,381 444,110 411,732 423,827
Consumer 386,867 379,903 364,441 351,981 330,555
Unearned discount and deferred loan fees   (2,380 )   (1,526 )   (1,471 )   (1,277 )   (1,118 )
Total loans and leases held to maturity $ 5,001,486   $ 4,642,523   $ 4,449,823   $ 4,243,689   $ 3,876,745  
 
Loans covered under loss share agreements:
Commercial and commercial real estate $ $ $ $ $ 54
Residential mortgage 1,204
Agricultural and agricultural real estate
Consumer                    
Total loans and leases covered under loss share agreements $   $   $   $   $ 1,258  
 
Other Selected Trend Information
Effective tax rate 23.03 % 25.32 % 20.83 % 32.60 % 26.08 %
Full time equivalent employees 1,799 1,736 1,788 1,776 1,631
Total Residential Mortgage Loan Applications $ 307,163 $ 443,294 $ 615,463 $ 647,487 $ 383,845
Residential Mortgage Loans Originated $ 258,939 $ 370,956 $ 421,798 $ 319,581 $ 293,268
Residential Mortgage Loans Sold $ 260,189 $ 360,172 $ 402,151 $ 268,786 $ 281,250
Residential Mortgage Loan Servicing Portfolio $ 4,057,861 $ 3,963,677 $ 3,785,794 $ 3,578,409 $ 3,498,724
 

(1) Total common stockholders' equity less goodwill and intangible assets (excluding 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 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
    12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Allowance for Loan and Lease Losses        
Balance, beginning of period $ 47,105 $ 45,614 $ 41,854 $ 41,449 $ 41,698
Provision for loan and lease losses 2,171 3,181 5,674 1,671 2,866
Charge-offs on loans not covered by loss share agreements (1,837 ) (2,439 ) (2,734 ) (2,004 ) (4,020 )
Charge-offs on loans covered by loss share agreements
Recoveries 1,246 749 820 738 905
Recoveries on loans covered by loss share agreements          
Balance, end of period $ 48,685   $ 47,105   $ 45,614   $ 41,854   $ 41,449  
 
Asset Quality
Not covered under loss share agreements:
Nonaccrual loans $ 39,655 $ 32,577 $ 26,710 $ 27,023 $ 25,070
Loans and leases past due ninety days or more as to interest or principal payments 1,181 9
Other real estate owned 11,524 17,041 16,983 19,097 19,016
Other repossessed assets 485   626   544   404   445  
Total nonperforming assets not covered under loss share agreements $ 51,664   $ 51,425   $ 44,237   $ 46,533   $ 44,531  
 
Covered under loss share agreements:
Nonaccrual loans $ $ $ $ $ 278
Other real estate owned          
Total nonperforming assets covered under loss share agreements $   $   $   $   $ 278  
 
Performing troubled debt restructured loans $ 10,968 $ 10,154 $ 10,903 $ 10,904 $ 12,133
 
Nonperforming Assets Activity
Balance, beginning of period $ 51,425 $ 44,237 $ 46,533 $ 44,809 $ 51,408
Net loan charge offs (591 ) (1,690 ) (1,914 ) (1,266 ) (3,115 )
New nonperforming loans 9,686 7,996 4,676 4,059 5,226
Acquired nonperforming assets 4,956 5,328 6,101
Reduction of nonperforming loans (1) (6,768 ) (2,758 ) (1,409 ) (4,493 ) (6,446 )
OREO/Repossessed assets sales proceeds (2,980 ) (1,074 ) (3,202 ) (2,312 ) (1,252 )
OREO/Repossessed assets writedowns, net (3,909 ) (756 ) (565 ) (319 ) (918 )
Net activity at Citizens Finance Co. (155 ) 142   118   (46 ) (94 )
Balance, end of period $ 51,664   $ 51,425   $ 44,237   $ 46,533   $ 44,809  
 
Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements
Ratio of nonperforming loans and leases to total loans and leases 0.79 % 0.73 % 0.60 % 0.64 % 0.63 %
Ratio of nonperforming assets to total assets 0.67 % 0.76 % 0.66 % 0.72 % 0.73 %
Annualized ratio of net loan charge-offs to average loans and leases 0.05 % 0.14 % 0.17 % 0.12 % 0.32 %
Allowance for loan and lease losses as a percent of loans and leases 0.97 % 1.01 % 1.03 % 0.99 % 1.07 %
Allowance for loan and lease losses as a percent of nonperforming loans and leases

122.77
% 139.54 % 170.78 % 154.83 % 165.33 %
Loans delinquent 30-89 days as a percent of total loans 0.31 % 0.40 % 0.31 % 0.42 % 0.21 %
 

(1) Includes principal reductions and transfers to performing status
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Quarter Ended
December 31, 2015   December 31, 2014
Average     Average    
    Balance   Interest   Rate   Balance   Interest   Rate
Earning Assets
Securities:
Taxable $ 1,290,462 $ 6,917 2.13 % $ 1,278,709 $ 6,972 2.16 %
Nontaxable (1) 387,015   5,094   5.22   362,832   4,908   5.37  
Total securities 1,677,477   12,011   2.84   1,641,541   11,880   2.87  
Interest bearing deposits 12,350 3 0.10 8,928 3 0.13
Federal funds sold 42,614   21   0.20   683      
Loans and leases: (2)
Commercial and commercial real estate (1) 3,395,242 40,588 4.74 2,701,006 32,613 4.79
Residential mortgage 580,797 5,836 3.99 458,781 4,803 4.15
Agricultural and agricultural real estate (1) 470,797 5,663 4.77 411,431 5,050 4.87
Consumer 381,008 7,460 7.77 328,247 6,664 8.05
Fees on loans 1,402 1,928
Less: allowance for loan and lease losses (47,720 )     (42,330 )    
Net loans and leases 4,780,124   60,949   5.06   3,857,135   51,058   5.25  
Total earning assets 6,512,565   72,984   4.45 % 5,508,287   62,941   4.53 %
Nonearning Assets 728,539   465,901  
Total Assets $ 7,241,104   $ 5,974,188  
Interest Bearing Liabilities
Savings $ 3,118,115 $ 1,611 0.20 % $ 2,640,560 $ 1,858 0.28 %
Time, $100,000 and over 334,254 779 0.92 331,770 833 1.00
Other time deposits 711,622 1,382 0.77 497,832 1,453 1.16
Short-term borrowings 325,613 200 0.24 311,738 222 0.28
Other borrowings 292,193   3,485   4.73   341,578   3,854   4.48  
Total interest bearing liabilities 4,781,797   7,457   0.62 % 4,123,478   8,220   0.79 %
Noninterest Bearing Liabilities
Noninterest bearing deposits 1,774,914 1,314,430
Accrued interest and other liabilities 68,850   47,918  
Total noninterest bearing liabilities 1,843,764   1,362,348  
Stockholders' Equity 615,543   488,362  
Total Liabilities and Stockholders' Equity $ 7,241,104   $ 5,974,188  
Net interest income (1) $ 65,527   $ 54,721  
Net interest spread (1) 3.83 % 3.74 %
Net interest income to total earning assets (1) 3.99 % 3.94 %
Interest bearing liabilities to earning assets 73.42 % 74.86 %
 

(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.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Year Ended
December 31, 2015   December 31, 2014
Average     Average    
Balance Interest Rate Balance Interest Rate
Earning Assets
Securities:
Taxable $ 1,272,573 $ 26,646 2.09 % $ 1,296,991 $ 29,727 2.29 %
Nontaxable (1) 348,189   18,735   5.38   375,788   20,414   5.43  
Total securities 1,620,762   45,381   2.80   1,672,779   50,141   3.00  
Interest bearing deposits 10,997 14 0.13 7,678 23 0.30
Federal funds sold 14,153   24   0.17   509   1   0.20  
Loans and leases: (2)
Commercial and commercial real estate (1) 3,199,493 152,931 4.78 2,611,150 126,592 4.85
Residential mortgage 542,364 21,982 4.05 430,950 18,359 4.26
Agricultural and agricultural real estate (1) 444,808 21,498 4.83 388,974 19,558 5.03
Consumer 364,343 28,936 7.94 313,756 26,034 8.30
Fees on loans 5,418 6,632
Less: allowance for loan and lease losses (44,830 )     (41,521 )    
Net loans and leases 4,506,178   230,765   5.12   3,703,309   197,175   5.32  
Total earning assets 6,152,090   276,184   4.49 % 5,384,275   247,340   4.59 %
Nonearning Assets 611,811   473,213  
Total Assets $ 6,763,901   $ 5,857,488  
Interest Bearing Liabilities
Savings $ 2,918,706 $ 6,613 0.23 % $ 2,589,649 $ 8,042 0.31 %
Time, $100,000 and over 341,071 3,152 0.92 330,428 3,474 1.05
Other time deposits 606,030 5,765 0.95 535,483 6,638 1.24
Short-term borrowings 339,019 838 0.25 308,942 877 0.28
Other borrowings 326,684   15,602   4.78   336,569   14,938   4.44  
Total interest bearing liabilities 4,531,510   31,970   0.71 % 4,101,071   33,969   0.83 %
Noninterest Bearing Liabilities
Noninterest bearing deposits 1,592,816 1,243,376
Accrued interest and other liabilities 61,000   44,499  
Total noninterest bearing liabilities 1,653,816   1,287,875  
Stockholders' Equity 578,575   468,542  
Total Liabilities and Stockholders' Equity $ 6,763,901   $ 5,857,488  
Net interest income (1) $ 244,214   $ 213,371  
Net interest spread (1) 3.78 % 3.76 %
Net interest income to total earning assets (1) 3.97 % 3.96 %
Interest bearing liabilities to earning assets 73.66 % 76.17 %

 

(1) Computed on a tax equivalent basis using an effective tax rate of 35%(2) Nonaccrual loans are included in the average loans outstanding.
HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
  As of and For the Quarter Ended
    12/31/2015   9/30/2015   6/30/2015   3/31/2015   12/31/2014
Total Assets    
Dubuque Bank and Trust Company $ 1,617,322 $ 1,431,767 $ 1,541,610 $ 1,413,772 $ 1,508,573
New Mexico Bank & Trust 1,336,004 1,282,784 1,141,575 1,113,031 1,142,580
Wisconsin Bank & Trust 1,139,337 1,098,405 1,150,867 1,128,104 650,658
Morrill & Janes Bank and Trust Company 902,918 845,067 860,781 888,321 898,161
Premier Valley Bank 765,451
Illinois Bank & Trust (1) 757,478 769,170 784,162 748,937 778,542
Arizona Bank & Trust 591,066 599,119 510,838 487,059 470,997
Rocky Mountain Bank 491,522 501,093 508,262 477,799 468,671
Minnesota Bank & Trust 214,303 188,633 195,201 169,254 167,808
Summit Bank & Trust   161,806   155,114   152,672   140,868   134,145  
Total Portfolio Loans
Dubuque Bank and Trust Company $ 956,517 $ 953,273 $ 945,574 $ 907,956 $ 952,114
New Mexico Bank & Trust 794,744 777,433 658,543 635,843 635,402
Wisconsin Bank & Trust 793,508 844,557 876,321 865,323 502,310
Morrill & Janes Bank and Trust Company 539,198 527,217 520,978 475,295 440,899
Premier Valley Bank 383,929
Illinois Bank & Trust (1) 465,937 473,859 455,247 439,757 429,772
Arizona Bank & Trust 444,501 444,916 383,588 355,986 342,731
Rocky Mountain Bank 370,440 380,304 375,860 343,008 254,455
Minnesota Bank & Trust 134,137 128,700 127,172 114,477 110,920
Summit Bank & Trust   101,449   94,127   95,275   87,913   90,515  
Total Deposits
Dubuque Bank and Trust Company $ 1,209,074 $ 1,120,999 $ 1,144,932 $ 1,166,070 $ 1,211,896
New Mexico Bank & Trust 1,085,052 1,047,358 891,003 880,422 860,465
Wisconsin Bank & Trust 974,001 904,803 985,804 939,157 554,722
Morrill & Janes Bank and Trust Company 713,589 650,123 662,524 696,606 703,016
Premier Valley Bank 647,022
Illinois Bank & Trust (1) 631,010 641,024 645,354 625,885 600,357
Arizona Bank & Trust 500,490 491,254 405,680 378,422 351,635
Rocky Mountain Bank 417,426 428,234 417,647 407,958 395,609
Minnesota Bank & Trust 194,373 163,291 172,547 148,773 150,146
Summit Bank & Trust   128,759   139,826   122,928   124,113   111,859  
Net Income (Loss)
Dubuque Bank and Trust Company $ 3,587 $ 4,477 $ 7,416 $ 6,016 $ 5,184
New Mexico Bank & Trust 2,576 3,220 3,658 4,164 2,015
Wisconsin Bank & Trust 2,443 3,886 2,950 2,181 1,737
Morrill & Janes Bank and Trust Company 1,096 2,024 1,566 1,656 2,157
Premier Valley Bank 1,008
Illinois Bank & Trust (1) 574 1,877 1,309 2,482 1,721
Arizona Bank & Trust 968 1,254 998 677 1,159
Rocky Mountain Bank 1,506 1,471 1,196 1,156 1,684
Minnesota Bank & Trust 166 411 223 162 395
Summit Bank & Trust   62   (6 ) (81 ) 305   (491 )

 

(1) Includes Galena State Bank & Trust Co. for the quarter ended December 31, 2014.

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