| AT THE COMPANY: | AT FINANCIAL RELATIONS BOARD: |
| John K. Schmidt | Leslie Loyet |
| Chief Operating Officer | General Inquiries |
| Chief Financial Officer | (312) 640-6672 |
| (563) 589-1994 | lloyet@frbir.com |
| jschmidt@htlf.com | |
FOR IMMEDIATE RELEASE
MONDAY, APRIL 30, 2007
HEARTLAND FINANCIAL USA, INC. REPORTS FIRST QUARTER 2007 EARNINGS
Highlights
| § | Net interest margin exceeded 4% |
| § | Average earning assets increased 13% over first quarter 2006 |
| § | Total loans increased $253.3 million or 13% when compared to one year ago |
| § | Total deposits increased $248.2 million or 12% when compared to one year ago |
| § | Announced the pending sale of Rocky Mountain Bank’s Broadus branch |
| § | Opened Wisconsin Community Bank’s Madison office |
| | | | | | | | Quarters Ended March 31, | |
| | | | | | | | | | | | 2007 | | | | 2006 | |
| Net income (in millions) | | | | | | | | | | $ | 5.8 | | | $ | 4.5 | |
| Diluted earnings per share | | | | | | | | | | | .34 | | | | .27 | |
| | | | | | | | | | | | | | | | | |
| Return on average assets | | | | | | | | | | | 0.76 | % | | | 0.65 | % |
| Return on average equity | | | | | | | | | | | 11.18 | | | | 9.56 | |
| Net interest margin | | | | | | | | | | | 4.04 | | | | 4.22 | |
“Heartland began 2007 with exceptional growth in loans, steady growth in deposits and maintenance of net interest margin above the 4.00% level.”-- Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA, Inc.
Dubuque, Iowa, April 30, 2007—Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported increased earnings for the first quarter of 2007. Net income for the quarter ended March 31, 2007, was $5.8 million, or $0.34 per diluted share, compared to net income of $4.5 million, or $0.27 per diluted share, for the first quarter of 2006, an increase of $1.3 million or 29 percent. Return on average equity was 11.18 percent and return on average assets was 0.76 percent for the first quarter of 2007, compared to 9.56 percent and 0.65 percent, respectively, for the same quarter in 2006.
Lynn B. Fuller, Heartland’s chairman, president and chief executive officer stated, “Heartland began 2007 with exceptional growth in loans, steady growth in deposits and maintenance of net interest margin above the 4.00% level.”
During the first quarter of 2006, a pre-tax judgment of $2.4 million against Heartland and Wisconsin Community Bank was recorded as noninterest expense, while a $286,000 award under a counterclaim was recorded as a loan loss recovery. The net after-tax effect to net income for this one-time event was $1.3 million. Exclusive of this expense, Heartland’s net income for the first quarter of 2006 was $5.7 million, or $.35 per diluted share. Because of the non-recurring nature of this expense, Heartland believes this pro-forma presentation is more representative of Heartland’s true financial performance for the first quarter of 2006.
On March 23, 2007, Rocky Mountain Bank, our Montana subsidiary, announced that an agreement had been signed for the sale of its branch banking office in Broadus, Montana. The sale is scheduled for completion near the end of the second quarter of 2007. Since consummation of the sale is highly probable, the attached financial statements reflect the pending sale. The assets and liabilities of the Broadus branch have been classified as assets and liabilities of discontinued operations held for sale on the balance sheet for the current period and the results of operations of the branch have been reflected on the income statement as discontinued operations for both the current and prior periods reported. Also included with the results of operations of the Broadus branch on the income statement as discontinued operations for the prior periods are the results of operations and the gain resulting from the sale of ULTEA, Inc., Heartland’s fleet leasing subsidiary, which was sold to ALD Automotive on December 22, 2006. Since negotiations were underway and the sale of ULTEA was highly probable at the end of the third quarter of 2006, the assets and liabilities of ULTEA were classified as assets and liabilities of discontinued operations held for sale on the balance sheet at September 30, 2006.
Net interest margin, expressed as a percentage of average earning assets, was 4.04 percent during the first quarter of 2007 compared to 4.22 percent for the first quarter of 2006 and 4.04 percent for the fourth quarter of 2006. Heartland’s continued expansion into the Western states of New Mexico, Montana, Arizona and Colorado, where net interest margins tend to be higher than those earned in the Midwestern states, has been a contributing factor to the maintenance of the net interest margin above 4.00 percent. Net interest income on a tax-equivalent basis totaled $27.8 million during the first quarter of 2007, an increase of $2.0 million or 8 percent from the $25.8 million recorded during the first quarter of 2006. Contributing to this increase was a $313.9 million or 13 percent growth in average earning assets when comparing the first quarter of 2007 to the same quarter in 2006.
Fuller added, “We were pleased that our net interest margin remained above 4.00 percent during the first quarter of the year. Like most other banks, however, Heartland is facing pressure on both sides of the balance sheet. A continued inverted yield curve will make it a challenge to maintain our margin at the 4.00 percent level and we would not be surprised to see it dip below this level over the next few quarters. The key to maintenance of our margin above this threshold will be continued loan and demand deposit growth.”
On a tax-equivalent basis, interest income in the first quarter of 2007 totaled $53.3 million compared to $43.6 million in the first quarter of 2006, an increase of $9.7 million or 22 percent. More than half of the loans in Heartland’s commercial and agricultural loan portfolios are floating rate loans, thus changes in the national prime rate impact interest income more quickly than if there were more fixed rate loans. Interest expense for the first quarter of 2007 was $25.4 million compared to $17.8 million in the first quarter of 2006, an increase of $7.6 million or 43 percent. Approximately 72 percent of Heartland’s certificate of deposit accounts will mature within the next twelve months at a weighted average rate of 4.83 percent.
Noninterest income increased by $728,000 or 11 percent during the first quarter of 2007 compared to the same quarter in 2006. The categories experiencing the largest increases were trust fees, brokerage and insurance commissions and other noninterest income. Recorded in other noninterest income during the first quarter of 2007 was a $250,000 settlement of a dispute with two former employees at one of our bank subsidiaries. Exclusive of this one-time income item, noninterest income increased $478,000 or 7 percent during the quarters under comparison.
Fuller commented, “Our arrival into the Denver market presented us with an opportunity that we hope will further enhance our noninterest income. Summit Bank & Trust recently completed the acquisition of a book of business from Independent Financial, a subsidiary of Sun Life. The experienced brokers and support staff are now serving their 8,800 investment clients from Summit’s Broomfield office. This arrangement provides Summit an opportunity to introduce a complete menu of financial products and services to these new customers.”
For the first quarter of 2007, noninterest expense decreased $359,000 or 1 percent in comparison with the same period in 2006. The $2.4 million judgment against Heartland and a bank subsidiary recorded during the first quarter of 2006 was a major factor in the decrease in noninterest expense for the first-quarter comparative period. Exclusive of the judgment, noninterest expense increased $2.0 million or 9 percent during the first quarter of 2007 compared to the first quarter of 2006. The largest component of noninterest expense, salaries and employee benefits, increased $1.4 million or 11 percent during the first quarter of 2007 in comparison to the first quarter of 2006. In addition to the merit increases for all salaried employees that are made on January 1 of each year, the growth in salaries and employee benefits expense was primarily the result of additional staffing at Heartland’s operations center to provide support services to the growing number of bank subsidiaries, the addition of offices at New Mexico Bank & Trust, Arizona Bank & Trust and Citizens Finance Co. and the formation of Summit Bank & Trust. Total full-time equivalent employees increased to 982 at March 31, 2007, from 938 at March 31, 2006. Also included in salaries and employee benefits are the expenses recorded as a result of stock options granted, which are usually granted during the first quarter of each year. These expenses are recorded throughout the vesting period of the grants with a larger portion of the expense being recorded during the first quarter of the year due to early retirement provisions within the option agreements. Costs associated with the expansion efforts have also contributed to increases in occupancy and outside services expense during the first-quarter comparative periods. During the first quarter of both years, other noninterest expenses included a non-recurring expense. Remaining unamortized issuance costs totaling $202,000 were expensed during the first quarter of 2007 due to the redemption of $8.0 million floating rate trust preferred securities. During the first quarter of 2006, the $2.4 million judgment referred to previously was recorded as other noninterest expenses.
Fuller commented, “Heartland continues to focus on growth opportunities. Wisconsin Community Bank celebrated the opening of its Madison, Wisconsin, office this March and New Mexico Bank & Trust opened its third branch office in Santa Fe last week. Presently, we have three new branch office locations under development or construction in Thornton, Colorado; Gilbert, Arizona and Billings, Montana. Our expansion efforts do adversely affect our short-term profitability. Yet, we feel these investments offer great potential for Heartland’s future profitability. Of Heartland’s 56 banking offices, four have been open for less than one year, an additional five have been open for less than two years and two more have been open for less than three years. We believe it generally takes approximately three years for new branch offices to become profitable. With the additional three offices under construction, we have roughly 25 percent of our distribution network yet to make a meaningful contribution to earnings.”
Heartland’s effective tax rate was 30.95 percent for the first quarter of 2007 compared to 28.25 percent during the first quarter of 2006. Tax-exempt interest income as a percentage of pre-tax income was 21.09 percent during the first quarter of 2007 compared to 27.50 percent during the same quarter of 2006. The tax-equivalent adjustment for this tax-exempt interest income was $929,000 during the first quarter of 2007 compared to $868,000 during the same quarter in 2006. During the first quarters of both years, low-income housing tax credits were projected to total $225,000 for the year.
At March 31, 2007, total assets had increased $78.1 million or 10 percent annualized since year-end 2006, primarily as a result of strong loan growth. Total loans and leases were $2.2 billion at March 31, 2007, an increase of $96.3 million or 18 percent annualized since year-end 2006. Included in the calculation of this growth was the $20.1 million in loans at the Broadus branch of Rocky Mountain Bank included on the balance sheet in assets of discontinued operations held for sale. This growth, balanced between our Midwest and Western markets, was a significant improvement over the $37.8 million or 8 percent annualized increase in loans experienced during the first quarter of 2006. The Heartland subsidiary banks experiencing notable loan growth since year-end 2006 were Dubuque Bank and Trust Company, Wisconsin Community Bank, New Mexico Bank & Trust, Rocky Mountain Bank, Arizona Bank & Trust and Summit Bank & Trust. The commercial and commercial real estate loan category grew by $84.2 million or 23 percent annualized. Included in this calculation was the $3.2 million in commercial and commercial real estate loans at the Broadus branch classified as held for sale.
Total deposits at March 31, 2007, were $2.4 billion, an increase of $68.4 million or 12 percent annualized since year-end 2006. Included in the calculation of this growth was the $30.3 million in deposits at the Broadus branch of Rocky Mountain Bank included on the balance sheet in liabilities of discontinued operations held for sale. Excluding brokered deposits, all of Heartland’s subsidiary banks, except for Wisconsin Community Bank, experienced growth in deposits since year-end 2006 with 84 percent of the growth occurring in our banks located in our Western markets. Demand deposits experienced a $7.0 million or 8 percent annualized decline, in large part, due to normal seasonal fluctuations that many banks experience during the first quarter of the year. Included in this calculation were $3.7 million in demand deposits at the Broadus branch held for sale. Savings deposit balances, including $10.3 million at the Broadus branch, increased by $13.0 million or 6 percent annualized. Time deposits, excluding brokered time deposits, increased $44.9 million or 18 percent annualized. Included in this calculation were the $16.3 million time deposits at the Broadus branch. As deposit growth lagged loan growth during the first quarter of 2007, brokered time deposit balances were increased. At March 31, 2007, brokered time deposits totaled $118.2 million or 5 percent of total deposits compared to $100.6 million or 4 percent of total deposits at year-end 2006.
The allowance for loan and lease losses at March 31, 2007, was 1.42 percent of loans and 318 percent of nonperforming loans, compared to 1.40 percent of loans and 356 percent of nonperforming loans at December 31, 2006. The provision for loan losses increased $751,000 or 64 percent during the first quarter of 2007 compared to the same quarter of 2006, primarily as a result of the loan growth. Nonperforming loans were $9.9 million or 0.45 percent of total loans and leases at March 31, 2007, compared to $8.4 million or 0.39 percent of total loans and leases at December 31, 2006. The increase in nonperforming loans during the first quarter of 2007 was primarily the result of one large nonperforming loan at Galena State Bank and Trust Company.
Added Fuller, “Credit quality continues to be an outstanding strength for Heartland. Although we may encounter blips on individual credits from time-to-time, the credit culture at Heartland and its subsidiary banks stands out as one of our core competencies.”
Conference Call Details
Heartland will host a conference call for investors at 3:00 p.m. CDT today. To participate, dial 800-218-8862 at least five minutes before start time or log onto www.htlf.com. If you are unable to participate on the call, a replay will be available through May 7, 2007, by dialing 800-405-2236, code 11088228, or by logging onto www.htlf.com.
About Heartland Financial USA:
Heartland Financial USA, Inc. is a $3.1 billion diversified financial services company providing banking, mortgage, wealth management, insurance and consumer finance services to individuals and businesses. The Company currently has 56 banking locations in 38 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana and Colorado.
Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.
Safe Harbor Statement
This release may contain, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as believe, expect, anticipate, plan, intend, estimate, may, will, would, could, should or similar expressions. Additionally, all statements in this release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.
A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (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 or threats thereof, (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 loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of acquisitions; (x) unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.
-FINANCIAL TABLES FOLLOW-
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | | | For the Quarters Ended |
| | | | | | | | | | | | 3/31/2007 | | | | 3/31/2006 | |
Interest Income | | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | | | | | | | | | $ | 45,558 | | | $ | 37,362 | |
| Interest on securities and other: | | | | | | | | | | | | | | | | |
Taxable | | | | | | | | | | | 5,297 | | | | 3,883 | |
Nontaxable | | | | | | | | | | | 1,458 | | | | 1,428 | |
| Interest on federal funds sold | | | | | | | | | | | - | | | | 59 | |
| Interest on deposits in other financial institutions | | | | | | | | | | | 10 | | | | 5 | |
Total Interest Income | | | | | | | | | | | 52,323 | | | | 42,737 | |
Interest Expense | | | | | | | | | | | | | | | | |
| Interest on deposits | | | | | | | | | | | 18,298 | | | | 12,927 | |
| Interest on short-term borrowings | | | | | | | | | | | 3,811 | | | | 1,858 | |
| Interest on other borrowings | | | | | | | | | | | 3,323 | | | | 3,044 | |
Total Interest Expense | | | | | | | | | | | 25,432 | | | | 17,829 | |
Net Interest Income | | | | | | | | | | | 26,891 | | | | 24,908 | |
| Provision for loan and lease losses | | | | | | | | | | | 1,926 | | | | 1,175 | |
Net Interest Income After Provision for Loan and Lease Losses | | | | | | | | | | | 24,965 | | | | 23,733 | |
Noninterest Income | | | | | | | | | | | | | | | | |
| Service charges and fees | | | | | | | | | | | 2,571 | | | | 2,569 | |
| Loan servicing income | | | | | | | | | | | 995 | | | | 980 | |
| Trust fees | | | | | | | | | | | 2,121 | | | | 1,817 | |
| Brokerage and insurance commissions | | | | | | | | | | | 493 | | | | 379 | |
| Securities gains, net | | | | | | | | | | | 125 | | | | 132 | |
| Gain on trading account securities | | | | | | | | | | | 41 | | | | 33 | |
| Gains on sale of loans | | | | | | | | | | | 591 | | | | 550 | |
| Income on bank owned life insurance | | | | | | | | | | | 300 | | | | 289 | |
| Other noninterest income | | | | | | | | | | | 374 | | | | 134 | |
Total Noninterest Income | | | | | | | | | | | 7,611 | | | | 6,883 | |
Noninterest Expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | | | | | | | | | 14,169 | | | | 12,722 | |
| Occupancy | | | | | | | | | | | 1,927 | | | | 1,758 | |
| Furniture and equipment | | | | | | | | | | | 1,676 | | | | 1,677 | |
| Outside services | | | | | | | | | | | 2,269 | | | | 2,124 | |
| Advertising | | | | | | | | | | | 769 | | | | 951 | |
| Other intangibles amortization | | | | | | | | | | | 219 | | | | 217 | |
| Other noninterest expenses | | | | | | | | | | | 3,367 | | | | 5,306 | |
Total Noninterest Expense | | | | | | | | | | | 24,396 | | | | 24,755 | |
Income Before Income Taxes | | | | | | | | | | | 8,180 | | | | 5,861 | |
| Income taxes | | | | | | | | | | | 2,532 | | | | 1,656 | |
Income From Continuing Operations | | | | | | | | | | | 5,648 | | | | 4,205 | |
Discontinued Operations | | | | | | | | | | | | | | | | |
Income from operations of discontinued operations | | | | | | | | | | | 191 | | | | 422 | |
Income taxes | | | | | | | | | | | 68 | | | | 154 | |
Income From Discontinued Operations | | | | | | | | | | | 123 | | | | 268 | |
Net Income | | | | | | | | | | $ | 5,771 | | | $ | 4,473 | |
Earnings per common share-basic | | | | | | | | | | $ | 0.35 | | | $ | 0.27 | |
Earnings per common share-diluted | | | | | | | | | | $ | 0.34 | | | $ | 0.27 | |
Earnings per common share from continuing operations- basic | | | | | | | | | | $ | 0.34 | | | $ | 0.26 | |
Earnings per common share from continuing operations- diluted | | | | | | | | | | $ | 0.34 | | | $ | 0.25 | |
Weighted average shares outstanding-basic | | | | | | | | | | | 16,542,876 | | | | 16,430,504 | |
Weighted average shares outstanding-diluted | | | | | | | | | | | 16,760,688 | | | | 16,638,458 | |
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | For the Quarters Ended |
| | | 3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | 3/31/2006 |
Interest Income | | | | | | |
| Interest and fees on loans and leases | | $45,558 | $44,738 | $43,664 | $40,824 | $37,362 |
| Interest on securities and other: | | | | | | |
| Taxable | | 5,297 | 5,128 | 4,591 | 3,991 | 3,883 |
| Nontaxable | | 1,458 | 1,445 | 1,441 | 1,469 | 1,428 |
| Interest on federal funds sold | | - | - | 64 | 41 | 59 |
| Interest on deposits in other financial institutions | | 10 | 6 | 4 | 7 | 5 |
Total Interest Income | | 52,323 | 51,317 | 49,764 | 46,332 | 42,737 |
Interest Expense | | | | | | |
| Interest on deposits | | 18,298 | 18,073 | 16,862 | 14,668 | 12,927 |
| Interest on short-term borrowings | | 3,811 | 2,952 | 2,702 | 2,316 | 1,858 |
| Interest on other borrowings | | 3,323 | 3,508 | 3,348 | 3,151 | 3,044 |
Total Interest Expense | | 25,432 | 24,533 | 22,912 | 20,135 | 17,829 |
Net Interest Income | | 26,891 | 26,784 | 26,852 | 26,197 | 24,908 |
| Provision for loan and lease losses | | 1,926 | (157) | 1,381 | 1,484 | 1,175 |
Net Interest Income After Provision for Loan and Lease Losses | | 24,965 | 26,941 | 25,471 | 24,713 | 23,733 |
Noninterest Income | | | | | | |
| Service charges and fees | | 2,571 | 2,704 | 3,085 | 2,700 | 2,569 |
| Loan servicing income | | 995 | 1,091 | 1,150 | 1,058 | 980 |
| Trust fees | | 2,121 | 1,926 | 1,774 | 1,741 | 1,817 |
| Brokerage and insurance commissions | | 493 | 532 | 450 | 510 | 379 |
| Securities gains, net | | 125 | 125 | 67 | 229 | 132 |
| Gain (loss) on trading account securities | | 41 | 80 | 53 | (25) | 33 |
| Impairment loss on equity securities | | - | - | (76) | - | - |
| Gains on sale of loans | | 591 | 611 | 551 | 577 | 550 |
| Income on bank owned life insurance | | 300 | 382 | 250 | 230 | 289 |
| Other noninterest income | | 374 | 8 | 197 | 87 | 134 |
Total Noninterest Income | | 7,611 | 7,459 | 7,501 | 7,107 | 6,883 |
Noninterest Expense | | | | | | |
| Salaries and employee benefits | | 14,169 | 12,518 | 13,039 | 12,696 | 12,722 |
| Occupancy | | 1,927 | 1,918 | 1,828 | 1,787 | 1,758 |
| Furniture and equipment | | 1,676 | 1,737 | 1,593 | 1,717 | 1,677 |
| Outside services | | 2,269 | 2,450 | 2,273 | 2,557 | 2,124 |
| Advertising | | 769 | 1,030 | 998 | 914 | 951 |
| Other intangibles amortization | | 219 | 249 | 249 | 227 | 217 |
| Other noninterest expenses | | 3,367 | 3,122 | 3,180 | 3,118 | 5,306 |
Total Noninterest Expense | | 24,396 | 23,024 | 23,160 | 23,016 | 24,755 |
Income Before Income Taxes | | 8,180 | 11,376 | 9,812 | 8,804 | 5,861 |
| Income taxes | | 2,532 | 3,913 | 3,207 | 2,802 | 1,656 |
Income From Continuing Operations | | 5,648 | 7,463 | 6,605 | 6,002 | 4,205 |
Discontinued Operations | | | | | | |
| Income from operations of discontinued operations | | 191 | 567 | 423 | 346 | 422 |
| Income taxes | | 68 | 497 | 154 | 126 | 154 |
Income From Discontinued Operations | | 123 | 70 | 269 | 220 | 268 |
Net Income | | $5,771 | $7,533 | $6,874 | $6,222 | $4,473 |
Earnings per common share-basic | | $.35 | $.46 | $.42 | $.38 | $.27 |
Earnings per common share-diluted | | $.34 | $.45 | $.41 | $.37 | $.27 |
Earnings per common share from continuing operations-basic | | $.34 | $.45 | $.40 | $.36 | $.26 |
Earnings per common share from continuing operations-diluted | | $.34 | $.44 | $.39 | $.36 | $.25 |
Weighted average shares outstanding-basic | | 16,542,876 | 16,531,998 | 16,521,527 | 16,540,587 | 16,430,504 |
Weighted average shares outstanding-diluted | | 16,760,688 | 16,784,656 | 16,775,749 | 16,798,654 | 16,638,458 |
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | As Of |
| | | 3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | 3/31/2006 |
Assets | | | | | | |
| Cash and cash equivalents | | $62,232 | $49,143 | $45,483 | $47,385 | $48,355 |
| Securities | | 587,803 | 617,040 | 593,103 | 526,784 | 520,062 |
| Loans held for sale | | 42,644 | 50,381 | 42,561 | 44,686 | 38,885 |
| Loans and leases: | | | | | | |
Held to maturity | | 2,224,097 | 2,147,845 | 2,122,156 | 2,077,393 | 1,990,852 |
| Allowance for loan and lease losses | | (31,545) | (29,981) | (30,684) | (29,941) | (28,674) |
| Loans and leases, net | | 2,192,552 | 2,117,864 | 2,091,472 | 2,047,452 | 1,962,178 |
| Assets under operating lease | | - | - | - | 39,852 | 39,634 |
| Premises, furniture and equipment, net | | 112,951 | 108,567 | 106,937 | 105,146 | 102,462 |
| Goodwill | | 40,207 | 39,817 | 39,817 | 40,531 | 35,398 |
| Other intangible assets, net | | 8,997 | 9,010 | 9,198 | 9,327 | 8,958 |
| Cash surrender value on life insurance | | 33,698 | 33,371 | 32,962 | 33,386 | 33,124 |
| Assets of discontinued operations held for sale | | 20,947 | - | 51,122 | - | - |
| Other assets | | 34,329 | 33,049 | 40,934 | 40,762 | 33,705 |
Total Assets | | $3,136,360 | $3,058,242 | $3,053,589 | $2,935,311 | $2,822,761 |
| | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | |
| Liabilities | | | | | | |
| Deposits: | | | | | | |
| Demand | | $360,744 | $371,465 | $367,133 | $378,211 | $334,940 |
| Savings | | 825,600 | 822,915 | 813,573 | 799,884 | 778,960 |
| Brokered time deposits | | 118,151 | 100,572 | 147,669 | 155,079 | 115,416 |
| Other time deposits | | 1,045,330 | 1,016,705 | 962,809 | 920,055 | 902,539 |
| Total deposits | | 2,349,825 | 2,311,657 | 2,291,184 | 2,253,229 | 2,131,855 |
| Short-term borrowings | | 304,342 | 275,694 | 239,531 | 229,723 | 232,506 |
| Other borrowings | | 210,804 | 224,523 | 243,987 | 225,650 | 232,025 |
| Liabilities of discontinued operations held for sale | | 32,086 | - | 47,424 | - | - |
| Accrued expenses and other liabilities | | 27,453 | 36,657 | 29,480 | 35,251 | 36,243 |
Total Liabilities | | 2,924,510 | 2,848,531 | 2,851,606 | 2,743,853 | 2,632,629 |
Stockholders’ Equity | | 211,850 | 209,711 | 201,983 | 191,458 | 190,132 |
Total Liabilities and Stockholders’ Equity | | $3,136,360 | $3,058,242 | $3,053,589 | $2,935,311 | $2,822,761 |
| | | | | | | |
Common Share Data | | | | | | |
| Book value per common share | | $12.85 | $12.65 | $12.22 | $11.59 | $11.49 |
| FAS 115 effect on book value per common share | | $0.10 | $0.05 | $0.01 | $(0.30) | $(0.13) |
| Common shares outstanding, net of treasury stock | | 16,484,541 | 16,572,080 | 16,530,266 | 16,520,820 | 16,547,079 |
| | | | | | | |
Tangible Capital Ratio(1) | | 5.38% | 5.46% | 5.18% | 5.02% | 5.36% |
(1) Total stockholders’ equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by total assets less intangible assets (excluding mortgage servicing rights).
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | |
| | | For the Quarters Ended |
| | | 3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | 3/31/2006 |
Average Balances | | | | | | |
| Assets | | $3,073,337 | $3,051,995 | $2,985,231 | $2,883,367 | $2,798,216 |
| Loans and leases, net of unearned | | 2,214,852 | 2,151,870 | 2,112,091 | 2,049,261 | 1,973,427 |
| Deposits | | 2,270,678 | 2,263,567 | 2,229,536 | 2,137,116 | 2,073,874 |
| Earning assets | | 2,790,087 | 2,716,768 | 2,644,161 | 2,548,918 | 2,476,223 |
| Interest bearing liabilities | | 2,457,797 | 2,391,269 | 2,327,554 | 2,242,116 | 2,176,290 |
| Stockholders’ equity | | 209,338 | 204,438 | 195,737 | 190,519 | 189,803 |
| Tangible stockholders’ equity | | 167,566 | 162,053 | 152,755 | 150,842 | 151,871 |
| | | | | | |
Earnings Performance Ratios | | | | | | |
| Annualized return on average assets | | 0.76% | 0.98% | 0.91% | 0.87% | 0.65% |
| Annualized return on average equity | | 11.18 | 14.62 | 13.93 | 13.10 | 9.56 |
| Annualized return on average tangible equity | | 13.97 | 18.44 | 17.85 | 16.54 | 11.94 |
Annualized net interest margin(1) | | 4.04 | 4.04 | 4.16 | 4.27 | 4.22 |
Efficiency ratio(2) | | 69.10 | 65.74 | 65.82 | 67.72 | 76.11 |
(1) Tax equivalent basis is calculated using an effective tax rate of 35%
(2) Noninterest expense divided by the sum of net interest income and noninterest income less net security gains
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | As of and For | As of and For | As of and For | As of and For |
| | the Quarter | the Year | the Quarter | The Year |
| | Ended | Ended | Ended | Ended |
| | 3/31/2007 | 12/31/2006 | 3/31/2006 | 12/31/2005 |
Loan and Lease Data | | | | |
| Commercial and commercial real estate | $1,564,676 | $1,483,738 | $1,363,204 | $1,304,080 |
| Residential mortgage | 230,128 | 225,343 | 211,349 | 219,671 |
| Agricultural and agricultural real estate | 225,353 | 233,748 | 217,701 | 230,357 |
| Consumer | 194,538 | 194,652 | 180,929 | 181,019 |
| Direct financing leases, net | 13,273 | 14,359 | 21,170 | 21,586 |
| Unearned discount and deferred loan fees | (3,871) | (3,995) | (3,501) | (3,647) |
Total loans and leases | $2,224,097 | $2,147,845 | $1,990,852 | $1,953,066 |
| | | | | |
Asset Quality | | | | |
| Nonaccrual loans | $9,436 | $8,104 | $16,115 | $14,877 |
Loans past due ninety days or more as to interest or principal payments | 494 | 315 | 599 | 115 |
| Other real estate owned | 1,689 | 1,575 | 2,612 | 1,586 |
| Other repossessed assets | 359 | 349 | 387 | 471 |
Total nonperforming assets | $11,978 | $10,343 | $19,713 | $17,049 |
| | | | | |
Allowance for Loan and Lease Losses | | | | |
| Balance, beginning of period | $29,981 | $27,791 | $27,791 | $24,973 |
Provision for loan and lease losses from continuing operations | 1,926 | 3,883 | 1,175 | 6,533 |
Provision for loan and lease losses from discontinued operations | - | (5) | (3) | 31 |
| Loans charged off | (726) | (3,989) | (778) | (4,579) |
| Recoveries | 364 | 1,733 | 489 | 1,152 |
| Reclass for unfunded commitments to other liabilities | - | - | - | (319) |
| Additions related to acquired bank | - | 591 | - | - |
| Reductions related to discontinued operations | - | (23) | - | - |
Balance, end of period | $31,545 | $29,981 | $28,674 | $27,791 |
| | | | | |
Asset Quality Ratios | | | | |
| Ratio of nonperforming loans to total loans and leases | 0.45% | 0.39% | 0.84% | 0.77% |
| Ratio of nonperforming assets to total assets | 0.38 | 0.34 | 0.70 | 0.60 |
| Ratio of net loan chargeoffs to average loans and leases | 0.02 | 0.11 | 0.01 | 0.18 |
Allowance for loan losses as a percent of loans and leases | 1.42 | 1.40 | 1.44 | 1.42 |
Allowance for loan losses as a percent of nonperforming loans and leases loans and leases loans and leases | 317.67 | 356.11 | 171.56 | 185.37 |
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS |
| | | For the Quarters Ended |
| | | 3/31/2007 | | 3/31/2006 |
| | | | Average Balance | | | | Interest | | | Rate | | | | Average Balance | | | | Interest | | | Rate | |
| | | | | | | | | | | | | | | | |
Earning Assets | | | | | | | | | | | | | | | | | | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | | | | |
Taxable | | $ | 474,390 | | | $ | 5,297 | | | 4.53 | % | | $ | 395,503 | | | $ | 3,883 | | | 3.98 | % |
Nontaxable(1) | | | 131,068 | | | | 2,215 | | | 6.85 | | | | 129,570 | | | | 2,197 | | | 6.88 | |
Total securities | | | 605,458 | | | | 7,512 | | | 5.03 | | | | 525,073 | | | | 6,080 | | | 4.70 | |
| Interest bearing deposits | | | 481 | | | | 10 | | | 8.43 | | | | 426 | | | | 5 | | | 4.76 | |
| Federal funds sold | | | - | | | | - | | | - | | | | 5,416 | | | | 59 | | | 4.42 | |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and commercial real estate(1) | | 1,543,366 | | | | 30,566 | | | 8.03 | | | | 1,353,619 | | | | 24,258 | | | 7.27 | |
Residential mortgage | | | 242,946 | | | | 4,122 | | | 6.88 | | | | 222,161 | | | | 3,460 | | | 6.32 | |
Agricultural and agricultural real estate(1) | | 221,634 | | | | 4,430 | | | 8.11 | | | | 203,913 | | | | 3,945 | | | 7.85 | |
Consumer | | | 193,179 | | | | 4,985 | | | 10.47 | | | | 180,110 | | | | 4,251 | | | 9.57 | |
Direct financing leases, net | | | 13,727 | | | | 200 | | | 5.91 | | | | 13,624 | | | | 201 | | | 5.98 | |
Fees on loans | | | - | | | | 1,427 | | | - | | | | - | | | | 1,346 | �� | | - | |
| Less: allowance for loan and lease losses | | (30,704 | ) | | | - | | | 0.00 | | | | (28,119 | ) | | | - | | | - | |
Net loans and leases | | | 2,184,148 | | | | 45,730 | | | 8.49 | | | | 1,945,308 | | | | 37,461 | | | 7.81 | |
Total earning assets | | | 2,790,087 | | | | 53,252 | | | 7.74 | | | | 2,476,223 | | | | 43,605 | | | 7.14 | |
Nonearning Assets | | | 283,250 | | | | - | | | - | | | | 321,993 | | | | - | | | - | |
Total Assets | | $ | 3,073,337 | | | $ | 53,252 | | | 7.03 | % | | $ | 2,798,216 | | | $ | 43,605 | | | 6.32 | % |
Interest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | | | | | | | | | | | | | | | | | | | | | |
Savings | | $ | 803,973 | | | $ | 5,433 | | | 2.74 | % | | $ | 752,136 | | | $ | 3,808 | | | 2.05 | % |
Time, $100,000 and over | | | 251,360 | | | | 2,990 | | | 4.82 | | | | 216,495 | | | | 2,013 | | | 3.77 | |
Other time deposits | | | 868,229 | | | | 9,875 | | | 4.61 | | | | 776,072 | | | | 7,106 | | | 3.71 | |
| Short-term borrowings | | | 314,026 | | | | 3,811 | | | 4.92 | | | | 202,506 | | | | 1,858 | | | 3.72 | |
| Other borrowings | | | 220,209 | | | | 3,323 | | | 6.12 | | | | 229,081 | | | | 3,044 | | | 5.39 | |
Total interest bearing liabilities | | | 2,457,797 | | | | 25,432 | | | 4.20 | | | | 2,176,290 | | | | 17,829 | | | 3.32 | |
Noninterest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest bearing deposits | | | 347,116 | | | | - | | | - | | | | 329,171 | | | | - | | | - | |
| Accrued interest and other liabilities | | | 59,086 | | | | - | | | - | | | | 102,952 | | | | - | | | - | |
Total noninterest bearing liabilities | | | 406,202 | | | | - | | | - | | | | 432,123 | | | | - | | | - | |
Stockholders’ Equity | | | 209,338 | | | | - | | | - | | | | 189,803 | | | | - | | | - | |
Total Liabilities and Stockholders’ Equity | $ | 3,073,337 | | | $ | 25,432 | | | 3.36 | % | | $ | 2,798,216 | | | $ | 17,829 | | | 2.58 | % |
Net interest income(1) | | | | | | $ | 27,820 | | | | | | | | | | $ | 25,776 | | | | |
Net interest income to total earning assets(1) | | | | | | | | | 4.04 | % | | | | | | | | | | 4.22 | % |
| Interest bearing liabilities to earning assets | | 88.09 | % | | | | | | | | | | 87.89 | % | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Tax equivalent basis is calculated 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 3/31/2007 | | | As of and For the Year Ended 12/31/2006 | | | As of and For the Quarter Ended 3/31/2006 | | | As of and For the Year Ended 12/31/2005 | |
Total Assets | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 876,288 | | $ | 843,282 | | $ | 816,469 | | $ | 833,885 | |
| New Mexico Bank & Trust | | 649,075 | | | 638,712 | | | 531,240 | | | 557,062 | |
| Wisconsin Community Bank | | 415,873 | | | 413,108 | | | 386,836 | | | 390,842 | |
| Rocky Mountain Bank | | 447,067 | | | 438,972 | | | 387,890 | | | 388,149 | |
| Galena State Bank and Trust Company | | 214,605 | | | 219,863 | | | 242,884 | | | 241,719 | |
| Riverside Community Bank | | 199,584 | | | 199,483 | | | 193,453 | | | 195,099 | |
| Arizona Bank & Trust | | 234,715 | | | 223,567 | | | 138,060 | | | 136,832 | |
| First Community Bank | | 120,513 | | | 118,010 | | | 119,891 | | | 121,337 | |
| Summit Bank & Trust | | 35,465 | | | 21,590 | | | - | | | - | |
Total Deposits | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 636,027 | | $ | 636,527 | | $ | 612,723 | | $ | 608,687 | |
| New Mexico Bank & Trust | | 461,641 | | | 437,708 | | | 387,243 | | | 388,935 | |
| Wisconsin Community Bank | | 339,508 | | | 336,015 | | | 318,274 | | | 311,436 | |
| Rocky Mountain Bank | | 345,618 | | | 335,053 | | | 305,266 | | | 306,967 | |
| Galena State Bank and Trust Company | | 178,912 | | | 178,388 | | | 180,988 | | | 179,437 | |
| Riverside Community Bank | | 164,137 | | | 162,319 | | | 156,452 | | | 153,791 | |
| Arizona Bank & Trust | | 179,941 | | | 176,438 | | | 120,533 | | | 118,959 | |
| First Community Bank | | 98,454 | | | 95,287 | | | 92,562 | | | 95,506 | |
| Summit Bank & Trust | | 16,395 | | | 6,514 | | | - | | | - | |
Return on Average Assets | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | 1.31 | % | | 1.45 | % | | 1.37 | % | | 1.28 | % |
| New Mexico Bank & Trust | | 1.26 | | | 1.21 | | | 1.05 | | | 1.10 | |
| Wisconsin Community Bank | | 0.67 | | | 0.53 | | | (0.57 | ) | | 0.63 | |
| Rocky Mountain Bank | | 0.88 | | | 1.18 | | | 0.88 | | | 0.72 | |
| Galena State Bank and Trust Company | | 1.23 | | | 1.35 | | | 1.23 | | | 1.22 | |
| Riverside Community Bank | | 0.50 | | | 0.64 | | | 0.42 | | | 0.83 | |
| Arizona Bank & Trust | | 0.43 | | | 0.47 | | | 0.21 | | | 0.19 | |
| First Community Bank | | 1.39 | | | 1.01 | | | 1.03 | | | 1.00 | |
| Summit Bank & Trust | | (4.24 | ) | | (6.31 | ) | | - | | | - | |
Net Interest Margin | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | 3.42 | % | | 3.61 | % | | 3.57 | % | | 3.48 | % |
| New Mexico Bank & Trust | | 4.80 | | | 5.05 | | | 5.09 | | | 4.75 | |
| Wisconsin Community Bank | | 3.78 | | | 3.83 | | | 3.98 | | | 3.75 | |
| Rocky Mountain Bank | | 4.70 | | | 5.16 | | | 5.37 | | | 4.93 | |
| Galena State Bank and Trust Company | | 3.55 | | | 3.45 | | | 3.35 | | | 3.43 | |
| Riverside Community Bank | | 3.74 | | | 3.71 | | | 3.78 | | | 3.76 | |
| Arizona Bank & Trust | | 4.91 | | | 4.92 | | | 4.79 | | | 5.03 | |
| First Community Bank | | 3.99 | | | 3.95 | | | 3.91 | | | 3.80 | |
| Summit Bank & Trust | | 7.20 | | | 6.98 | | | - | | | - | |
Net Income | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 2,785 | | $ | 11,990 | | $ | 2,734 | | $ | 10,156 | |
| New Mexico Bank & Trust | | 1,959 | | | 6,873 | | | 1,385 | | | 5,565 | |
| Wisconsin Community Bank | | 682 | | | 2,109 | | | (538 | ) | | 2,444 | |
| Rocky Mountain Bank | | 954 | | | 4,840 | | | 829 | | | 2,757 | |
| Galena State Bank and Trust Company | | 654 | | | 3,167 | | | 724 | | | 2,808 | |
| Riverside Community Bank | | 247 | | | 1,252 | | | 199 | | | 1,608 | |
| Arizona Bank & Trust | | 242 | | | 902 | | | 71 | | | 199 | |
| First Community Bank | | 404 | | | 1,197 | | | 303 | | | 1,198 | |
| Summit Bank & Trust | | (275 | ) | | (1,220 | ) | | - | | | - | |
HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS |
| | | As of 3/31/2007 | | | As of 12/31/2006 | | | As of 3/31/2006 | | | As of 12/31/2005 | |
Total Portfolio Loans | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 621,691 | | $ | 581,166 | | $ | 594,028 | | $ | 575,293 | |
| New Mexico Bank & Trust | | 420,915 | | | 410,438 | | | 338,486 | | | 330,609 | |
| Wisconsin Community Bank | | 282,334 | | | 272,407 | | | 263,261 | | | 270,837 | |
| Rocky Mountain Bank | | 325,698 | | | 309,943 | | | 286,347 | | | 279,230 | |
| Galena State Bank and Trust Company | | 155,024 | | | 158,222 | | | 180,246 | | | 176,813 | |
| Riverside Community Bank | | 139,236 | | | 137,102 | | | 131,571 | | | 132,781 | |
| Arizona Bank & Trust | | 171,087 | | | 160,614 | | | 98,321 | | | 94,285 | |
| First Community Bank | | 79,304 | | | 81,498 | | | 83,006 | | | 83,506 | |
| Summit Bank & Trust | | 26,755 | | | 14,953 | | | - | | | - | |
Allowance For Loan and Lease Losses | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 7,507 | | $ | 7,235 | | $ | 7,366 | | $ | 7,376 | |
| New Mexico Bank & Trust | | 5,452 | | | 5,352 | | | 4,761 | | | 4,497 | |
| Wisconsin Community Bank | | 4,782 | | | 4,570 | | | 4,233 | | | 4,285 | |
| Rocky Mountain Bank | | 4,263 | | | 4,044 | | | 4,246 | | | 4,048 | |
| Galena State Bank and Trust Company | | 2,031 | | | 2,049 | | | 2,205 | | | 2,181 | |
| Riverside Community Bank | | 1,854 | | | 1,747 | | | 1,740 | | | 1,674 | |
| Arizona Bank & Trust | | 2,456 | | | 2,133 | | | 1,345 | | | 1,181 | |
| First Community Bank | | 1,093 | | | 1,182 | | | 1,247 | | | 1,191 | |
| Summit Bank & Trust | | 334 | | | 192 | | | - | | | - | |
Nonperforming Loans | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 1,210 | | $ | 1,216 | | $ | 997 | | $ | 2,745 | |
| New Mexico Bank & Trust | | 1,246 | | | 2,206 | | | 2,145 | | | 2,359 | |
| Wisconsin Community Bank | | 2,450 | | | 1,966 | | | 1,334 | | | 1,321 | |
| Rocky Mountain Bank | | 762 | | | 822 | | | 9,295 | | | 5,634 | |
| Galena State Bank and Trust Company | | 2,171 | | | 370 | | | 1,185 | | | 965 | |
| Riverside Community Bank | | 969 | | | 602 | | | 421 | | | 462 | |
| Arizona Bank & Trust | | 207 | | | 254 | | | - | | | 7 | |
| First Community Bank | | 452 | | | 588 | | | 893 | | | 992 | |
| Summit Bank & Trust | | - | | | - | | | - | | | - | |
Allowance As a Percent of Total Loans | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | 1.21 | % | | 1.24 | % | | 1.24 | % | | 1.28 | % |
| New Mexico Bank & Trust | | 1.30 | | | 1.30 | | | 1.41 | | | 1.36 | |
| Wisconsin Community Bank | | 1.69 | | | 1.68 | | | 1.61 | | | 1.58 | |
| Rocky Mountain Bank | | 1.31 | | | 1.30 | | | 1.48 | | | 1.45 | |
| Galena State Bank and Trust Company | | 1.31 | | | 1.30 | | | 1.22 | | | 1.23 | |
| Riverside Community Bank | | 1.33 | | | 1.27 | | | 1.32 | | | 1.26 | |
| Arizona Bank & Trust | | 1.44 | | | 1.33 | | | 1.37 | | | 1.25 | |
| First Community Bank | | 1.38 | | | 1.45 | | | 1.50 | | | 1.43 | |
| Summit Bank & Trust | | 1.25 | | | 1.28 | | | - | | | - | |
| | | | | | | | | | | | | |
