CONTACT:
John K. Schmidt
Chief Operating Officer
Chief Financial Officer
(563) 589-1994
jschmidt@htlf.com
FOR IMMEDIATE RELEASE
MONDAY, OCTOBER 27, 2008
HEARTLAND FINANCIAL USA, INC. REPORTS EARNINGS OF $3.0 MILLION FOR THIRD QUARTER 2008
Highlights
| § | Net interest income increased $2.7 million or 10% over third quarter 2007 |
| § | Average earning assets increased $209.4 million or 7% over third quarter 2007 |
| § | Pre-tax gain on sale of merchant credit card processing of $5.2 million recorded |
| § | Provision for loan losses was $7.1 million compared to $575 thousand in third quarter 2007 |
| § | Pre-tax impairment loss on Fannie Mae preferred stock of $4.6 million recorded |
| | | | Quarters Ended September 30, | | | | Nine Months Ended September 30, | |
| | | | 2008 | | | | 2007 | | | | 2008 | | | | 2007 | |
| Net income (in millions) | | $ | 3.0 | | | $ | 6.9 | | | $ | 14.0 | | | $ | 18.9 | |
| Income from continuing operations (in millions) | | | 3.0 | | | | 6.9 | | | | 14.0 | | | | 17.2 | |
| Diluted earnings per share | | | 0.18 | | | | 0.42 | | | | 0.85 | | | | 1.14 | |
| Diluted earnings per share from continuing operations | | | 0.18 | | | | 0.42 | | | | 0.85 | | | | 1.04 | |
| | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.35 | % | | | 0.86 | % | | | 0.56 | % | | | 0.80 | % |
| Return on average equity | | | 5.26 | | | | 12.72 | | | | 8.04 | | | | 11.89 | |
| Net interest margin | | | 3.96 | | | | 3.87 | | | | 3.92 | | | | 3.98 | |
“We are operating in a truly unprecedented financial environment. Despite the impact of an increased loan loss provision and impairment loss on Fannie Mae preferred stock in the third quarter, Heartland continues to be profitable. To that point, our two largest banks are having their best years on record. Overall, the company is experiencing positive trends in net interest margin, deposit growth, capital and liquidity.”-- Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA, Inc.
Dubuque, Iowa, October 27, 2008—Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported earnings for the third quarter of 2008. Net income was $3.0 million, or $0.18 per diluted share, for the quarter ended September 30, 2008, compared to $6.9 million, or $0.42 per diluted share, earned during the third quarter of 2007. Return on average equity was 5.26 percent and return on average assets was 0.35 percent for the third quarter of 2008, compared to 12.72 percent and 0.86 percent, respectively, for the same quarter in 2007.
Lynn B. Fuller, Heartland’s chairman, president and chief executive officer said, “We are operating in a truly unprecedented financial environment. Despite the impact of an increased loan loss provision and impairment loss on Fannie Mae preferred stock in the third quarter, Heartland continues to be profitable. To that point, our two largest banks are having their best years on record. Overall, the company is experiencing positive trends in net interest margin, deposit growth, capital and liquidity.”
Earnings for the third quarter of 2008 were significantly impacted by the provision for loan losses, which was $7.1 million for the third quarter of 2008 compared to $575,000 for the third quarter of 2007. This increase in the loan loss provision was due, in large part, to the continued softening of the economy and reduced real estate values, particularly in the Phoenix market. Earnings in the third quarter of 2008 were also negatively impacted by a $4.6 million impairment loss on Fannie Mae preferred stock, which was offset by a $5.2 million gain on the sale of Heartland’s merchant bankcard processing services. Additionally, the quarterly performance during 2008 was positively affected by increased net interest income.
Net income recorded for the first nine months of 2008 was $14.0 million, or $0.85 per diluted share, compared to $18.9 million, or $1.14 per diluted share, recorded during the first nine months of 2007. Return on average equity was 8.04 percent and return on average assets was 0.56 percent for the first nine months of 2008, compared to 11.89 percent and 0.80 percent, respectively, for the same period in 2007.
The 2007 results were impacted by the sale of Rocky Mountain Bank’s branch banking office in Broadus, Montana, which was completed on June 22, 2007. The results of operations of the branch are reflected on the income statement as discontinued operations for the nine-month period ended on September 30, 2007, which included a $2.4 million pre-tax gain recorded as a result of the sale. Income from continuing operations during the first nine months of 2008 was $14.0 million, or $0.85 per diluted share, a decrease of $3.2 million or 19 percent over the $17.2 million, or $1.04 per diluted share, earned during the same period in 2007. The provision for loan losses for the nine-month comparative period was $14.2 million during 2008 compared to $6.8 million during 2007. In addition to significant charge-offs, the provision for loan losses increased as a result of loan growth, an increase in nonperforming loans and the impact historical losses has on the calculation of the adequacy of Heartland’s allowance for loan and lease losses. The nine-month performance during 2008 was positively affected by increased net interest income and growth in noninterest income.
Net Interest Margin Sustained; Net Interest Income Grows
Net interest margin, expressed as a percentage of average earning assets, was 3.96 percent during the third quarter of 2008 compared to 3.87 percent for the third quarter of 2007. For the nine-month periods ended on September 30, net interest margin, expressed as a percentage of average earning assets, was 3.92 percent during 2008 and 3.98 percent during 2007. Affecting the net interest margin throughout the second half of 2007 and first nine months of 2008 was the impact of foregone interest on Heartland’s nonperforming loans, which had balances of $43.9 million at September 30, 2008, compared to $31.8 million at year-end 2007 and $30.4 million at September 30, 2007. Additionally, early in the third quarter of 2007, a $20.5 million investment was made in bank owned life insurance upon which interest expense associated with the funding of this investment is reflected in net interest margin while the corresponding earnings on this investment are recorded as noninterest income.
Commenting on net interest margin, Fuller stated, “Our margin, now just below the four percent mark, has improved in each of the past four quarters. We are optimistic that a reduction in non-performing assets, along with strict pricing discipline, will have a further positive effect on margin in future periods.”
Net interest income on a tax-equivalent basis totaled $30.9 million during the third quarter of 2008, an increase of $2.7 million or 10 percent from the $28.2 million recorded during the third quarter of 2007. For the nine-month period during 2008, net interest income on a tax-equivalent basis was $89.3 million, an increase of $4.7 million or 6 percent from the $84.6 million recorded during the first nine months of 2007. These increases occurred as Heartland’s interest bearing liabilities repriced downward more quickly than its interest bearing assets. Also contributing to these increases was the $209.4 million or 7 percent growth in average earning assets during the third quarter of 2008 compared to the same quarter in 2007 and the $198.2 million or 7 percent growth in average earning assets during the first nine months of 2008 compared to the same nine months of 2007.
On a tax-equivalent basis, interest income in the third quarter of 2008 totaled $52.0 million compared to $55.6 million in the third quarter of 2007, a decrease of $3.6 million or 7 percent. For the first nine months of 2008, interest income on a tax-equivalent basis decreased $8.9 million or 5 percent over the same period in 2007. Nearly half of the loans in Heartland’s commercial and agricultural loan portfolios are floating rate loans that reprice immediately upon a change in the national prime interest rate, thus changes in the national prime rate impact interest income more quickly than if there were more fixed rate loans. The national prime interest rate was 8.25% for the first eight months of 2007. During the first nine months of 2008, the national prime interest rate decreased 225 basis points, ranging from 7.25% on January 1, 2008, to 5.00% on September 30, 2008. A large portion of Heartland’s floating rate loans that reprice immediately have a floor interest rate which they have now met. Additionally, Heartland has two $50.0 million derivative transactions on the loan portfolio that are at their floor interest rates. Accordingly, management believes the negative impact of further reductions in the national prime interest rate on Heartland’s interest income in future periods should be softened.
Interest expense for the third quarter of 2008 was $21.1 million compared to $27.4 million in the third quarter of 2007, a decrease of $6.3 million or 23 percent. On a nine-month comparative basis, interest expense decreased $13.6 million or 17 percent. Interest rates paid on Heartland’s deposits and borrowings were significantly lower during the first nine months of 2008 compared to the first nine months of 2007. Approximately 51 percent of Heartland’s certificate of deposit accounts will mature within the next six months at a weighted average rate of 3.39 percent.
Fuller added, “Through the third quarter, we experienced a reduction in funding costs as higher rate certificates of deposit rolled over at lower rates. We believe deposit costs are close to leveling off now, as competitor banks seeking to improve their liquidity positions will push rates upward. Additionally, we are anticipating higher costs resulting from increased FDIC premium assessments beginning in the fourth quarter of this year and ramping up next year.”
Noninterest Income Remains Consistent; Noninterest Expense Grows
Noninterest income remained at $7.9 million during both the third quarter of 2008 and 2007. Included in the third quarter 2008 noninterest income was a $5.2 million gain on the sale of Heartland’s merchant bankcard processing services to TransFirst LLC. Also included in third quarter 2008 noninterest income was a $4.6 million impairment loss recorded on Heartland’s investment in perpetual preferred securities issued by Fannie Mae. For the first nine months of 2008, noninterest income increased $1.1 million or 4 percent over the same period in 2007, primarily from increased service charges and fees, loan servicing income, brokerage and insurance commissions and securities gains. For both comparative periods, the improvements in the aforementioned categories were partially offset by increased losses on trading account securities, reduced gains on sale of loans and a reduction in the cash surrender value on bank owned life insurance. A large portion of Heartland’s bank owned life insurance is held in a separate account product that experienced significant market value declines during the third quarter of 2008.
“Noninterest income improved nicely during the first three quarters of 2008, thanks in part to excellent growth in transaction accounts that is driving a noticeable improvement in service charge income. Loan servicing income and revenue from our HTLF Investment Services unit are also contributing to noninterest income growth this year,” Fuller added.
For the third quarter of 2008, noninterest expense increased $1.9 million or 8 percent from the same period in 2007. The largest component of noninterest expense, salaries and employee benefits, increased $699,000 or 5 percent during the third quarter of 2008 compared to the third quarter of 2007. For the nine-month period ended September 30, 2008, noninterest expense increased $3.8 million or 5 percent when compared to the same nine-month period in 2007. Again, the largest component of noninterest expense, salaries and employee benefits, grew by $1.8 million or 4 percent during this nine-month comparative period. Total full-time equivalent employees were 1,011 at September 30, 2008, compared to 975 at September 30, 2007. Occupancy expense increased during the 2008 quarter and nine-month periods, primarily as a result of the opening of six new banking offices during 2007 and the 2008 opening of Heartland’s 10th bank subsidiary, Minnesota Bank & Trust. The other category of noninterest expense that increased significantly during the 2008 quarter and nine-month period was outside services, resulting primarily from additional legal fees related to collection efforts on nonperforming loans and additional FDIC assessments as a majority of the FDIC credits at Heartland’s bank subsidiaries were utilized during 2007.
Referring to Heartland’s expansion plans, Fuller said, “We have opened only two new banking offices in 2008 as part of our plan to slow branch expansion in favor of potential acquisition opportunities, which we believe may be offered at attractive prices. With a sizeable number of new offices opened in the past three years, our best opportunity for growth in earnings is to get each of these locations to a meaningful size as quickly as possible. Along with gains in market share, we would also enjoy better economies of scale.”
Heartland’s effective tax rate was 26.66 percent for the first nine months of 2008 compared to 31.01 percent for the first nine months of 2007. The decrease in Heartland’s effective tax rate during the first nine months of 2008 resulted primarily from $170,000 in federal rehabilitation tax credits associated with Dubuque Bank and Trust Company’s ownership interest in a limited liability company that owns a certified historic structure. Heartland’s effective tax rate is also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 28.12 percent during the first nine months of 2008 compared to 18.91 percent during the same nine months of 2007. The tax-equivalent adjustment for this tax-exempt interest income was $2.9 million during the first nine months of 2008 compared to $2.8 million during the same nine months in 2007.
Loan Growth Picks Up; Double Digit Growth in Deposits
At September 30, 2008, total assets had increased $181.9 million or 7 percent annualized since year-end 2007. Total loans and leases were $2.36 billion at September 30, 2008, compared to $2.28 billion at year-end 2007, an increase of $84.1 million or 5 percent annualized. This growth was primarily distributed among the commercial, agricultural and consumer loan categories at $39.8 million, $19.7 million and $25.0 million, respectively. Most of the loan growth in the commercial and commercial real estate category occurred at Dubuque Bank and Trust Company, Riverside Community Bank and Summit Bank & Trust. A majority of the increase in agricultural and agricultural real estate loans occurred at Dubuque Bank and Trust Company. Growth in the consumer portfolio occurred primarily at New Mexico Bank & Trust, Rocky Mountain Bank, Summit Bank & Trust and Citizens Finance Co.
Total deposits grew to $2.57 billion at September 30, 2008, an increase of $191.6 million or 11 percent annualized since year-end 2007. Growth in deposits was weighted more heavily in Heartland’s Western markets. Demand deposits experienced a decrease of $8.3 million or 3 percent annualized since year-end 2007. Savings deposit balances experienced an increase of $187.3 million or 29 percent annualized since year-end 2007. Time deposits, exclusive of brokered deposits, remained at $1.1 billion. At September 30, 2008, brokered time deposits totaled $81.9 million or 3 percent of total deposits compared to $69.0 million or 3 percent of total deposits at year-end 2007. A large portion of the growth in savings deposits is attributable to the January 2008 introduction of a new retail interest-bearing checking account product and the conversion of several retail repurchase agreement sweep accounts to a new money market sweep product initially rolled out to business depositors during the second quarter of 2008.
Increase in Nonperforming Loans and Net Charge-offs
The allowance for loan and lease losses at September 30, 2008, was 1.47 percent of loans and leases and 79.43 percent of nonperforming loans, compared to 1.45 percent of loans and leases and 103.66 percent of nonperforming loans at December 31, 2007. Additions to the allowance for loan and lease losses were primarily driven by the continued softening of the economy and reduced real estate values, particularly in the Phoenix market. Nonperforming loans were $43.9 million or 1.86 percent of total loans and leases at September 30, 2008, compared to $31.8 million or 1.40 percent of total loans and leases at December 31, 2007. The majority of the $12.1 million increase in nonperforming loans from December 31, 2007, resulted from two large credits originated by Arizona Bank & Trust and Rocky Mountain Bank. Approximately 64 percent, or $28.1 million, of Heartland’s nonperforming loans are to eight borrowers, with $12.5 million originated by Arizona Bank & Trust, $8.1 million originated by Wisconsin Community Bank, $4.8 million originated by Rocky Mountain Bank, $1.6 million originated by Summit Bank & Trust and $1.1 million originated by Dubuque Bank and Trust Company. The portion of Heartland’s nonperforming loans covered by government guarantees was $3.4 million at September 30, 2008. Management monitors the loan portfolio of each bank subsidiary and, at this point, believes that the increase in nonperforming loans is most likely a result of the continuing shift in the economy in some of Heartland’s markets.
Net charge-offs during the first nine months of 2008 were $12.4 million compared to $5.2 million during the first nine months of 2007. Net charge-offs at Arizona Bank & Trust comprised $6.4 million or 52 percent of the total net charge-offs for the first nine months of 2008. Due to the untimely death of the sole owner of a business in June of 2008 and the filing of Chapter 11 bankruptcy shortly thereafter by the business, the $2.0 million outstanding on a line of credit for working capital was charged-off. The remaining $4.4 million of net charge-offs at Arizona Bank & Trust was primarily related to commercial real estate development loans and residential lot loans. Heartland has generally recognized the charge-off on a loan when the loan was resolved, sold or transferred to other real estate owned. However, in the third quarter of 2008, Heartland recognized charge-offs on certain collateral dependent loans by writing down the loan balance to an estimated net realizable value based on the anticipated disposition value.
Fuller added, “Given the prospects of a long and slow recovery for the nation’s economy, we continue to view the task of managing nonperforming loans as our number one priority.
With respect to the U.S. Treasury’s “troubled asset relief program” (TARP), we are reviewing the benefits of accessing this low cost source of capital. Initially, it appears the plan represents an opportunity to access attractively priced tier one capital. This program would allow us to further stimulate our local economies through increased lending activities and could possibly be used by Heartland to fund acquisitions,” Fuller concluded.
Conference Call Details
Heartland will host a conference call for investors at 4:00 p.m. EDT today. To participate, dial 800-218-0204 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 November 3, 2008, by dialing 800-405-2236, passcode 11120596, or by logging onto www.htlf.com.
About Heartland Financial USA, Inc.:
Heartland Financial USA, Inc. is a $3.4 billion diversified financial services company providing banking, mortgage, wealth management, insurance and consumer finance services to individuals and businesses. Heartland currently has 61 banking locations in 41 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado and Minnesota. 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 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. 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.
-FINANCIAL TABLES FOLLOW-
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | For the Quarters Ended | | For the Nine Months Ended |
| | | | 9/30/2008 | | | | 9/30/2007 | | | | 9/30/2008 | | | | 9/30/2007 | |
| Interest Income | | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | $ | 40,990 | | | $ | 47,406 | | | $ | 124,444 | | | $ | 140,712 | |
| Interest on securities and other: | | | | | | | | | | | | | | | | |
Taxable | | | 8,228 | | | | 5,446 | | | | 22,728 | | | | 16,010 | |
Nontaxable | | | 1,670 | | | | 1,513 | | | | 4,996 | | | | 4,414 | |
| Interest on federal funds sold | | | 85 | | | | 310 | | | | 267 | | | | 310 | |
| Interest on deposits in other financial institutions | | | 3 | | | | 2 | | | | 10 | | | | 20 | |
Total Interest Income | | | 50,976 | | | | 54,677 | | | | 152,445 | | | | 161,466 | |
| Interest Expense | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 15,622 | | | | 20,477 | | | | 48,375 | | | | 58,325 | |
| Interest on short-term borrowings | | | 776 | | | | 2,764 | | | | 4,049 | | | | 10,545 | |
| Interest on other borrowings | | | 4,692 | | | | 4,199 | | | | 13,562 | | | | 10,762 | |
Total Interest Expense | | | 21,090 | | | | 27,440 | | | | 65,986 | | | | 79,632 | |
Net Interest Income | | | 29,886 | | | | 27,237 | | | | 86,459 | | | | 81,834 | |
| Provision for loan and lease losses | | | 7,083 | | | | 575 | | | | 14,213 | | | | 6,769 | |
Net Interest Income After Provision for Loan and Lease Losses | | | 22,803 | | | | 26,662 | | | | 72,246 | | | | 75,065 | |
| Noninterest Income | | | | | | | | | | | | | | | | |
| Service charges and fees | | | 3,125 | | | | 2,861 | | | | 8,620 | | | | 8,287 | |
| Loan servicing income | | | 1,094 | | | | 1,068 | | | | 3,585 | | | | 3,103 | |
| Trust fees | | | 2,070 | | | | 2,089 | | | | 6,159 | | | | 6,265 | |
| Brokerage and insurance commissions | | | 942 | | | | 820 | | | | 2,717 | | | | 2,158 | |
| Securities gains, net | | | 5 | | | | 31 | | | | 1,015 | | | | 303 | |
| Gain (loss) on trading account securities | | | (33 | ) | | | (7 | ) | | | (467 | ) | | | 80 | |
| Impairment loss on securities | | | (4,688 | ) | | | - | | | | (4,804 | ) | | | - | |
| Gains on sale of loans | | | 295 | | | | 604 | | | | 1,279 | | | | 2,051 | |
| Income (loss) on bank owned life insurance | | | (247 | ) | | | 595 | | | | 596 | | | | 1,212 | |
| Gain on sale of merchant credit card services | | | 5,200 | | | | - | | | | 5,200 | | | | - | |
| Other noninterest income | | | 117 | | | | (145 | ) | | | 772 | | | | 161 | |
Total Noninterest Income | | | 7,880 | | | | 7,916 | | | | 24,672 | | | | 23,620 | |
| Noninterest Expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,000 | | | | 14,301 | | | | 44,459 | | | | 42,680 | |
| Occupancy | | | 2,262 | | | | 2,004 | | | | 6,799 | | | | 5,941 | |
| Furniture and equipment | | | 1,662 | | | | 1,669 | | | | 5,201 | | | | 5,124 | |
| Outside services | | | 3,096 | | | | 2,374 | | | | 8,254 | | | | 7,011 | |
| Advertising | | | 1,012 | | | | 886 | | | | 2,853 | | | | 2,694 | |
| Other intangibles amortization | | | 236 | | | | 241 | | | | 708 | | | | 652 | |
| Other noninterest expenses | | | 3,392 | | | | 3,272 | | | | 9,588 | | | | 9,970 | |
Total Noninterest Expense | | | 26,660 | | | | 24,747 | | | | 77,862 | | | | 74,072 | |
Income Before Income Taxes | | | 4,023 | | | | 9,831 | | | | 19,056 | | | | 24,613 | |
| Income taxes | | | 1,018 | | | | 2,906 | | | | 5,081 | | | | 7,403 | |
Income From Continuing Operations | | | 3,005 | | | | 6,925 | | | | 13,975 | | | | 17,210 | |
| Discontinued Operations | | | | | | | | | | | | | | | | |
Income from operations of discontinued operations | | | - | | | | - | | | | - | | | | 2,756 | |
Income taxes | | | - | | | | - | | | | - | | | | 1,085 | |
Income From Discontinued Operations | | | - | | | | - | | | | - | | | | 1,671 | |
Net Income | | $ | 3,005 | | | $ | 6,925 | | | $ | 13,975 | | | $ | 18,881 | |
| Earnings per common share-basic | | $ | 0.18 | | | $ | 0.42 | | | $ | 0.86 | | | $ | 1.15 | |
| Earnings per common share-diluted | | $ | 0.18 | | | $ | 0.42 | | | $ | 0.85 | | | $ | 1.14 | |
Earnings per common share from continuing operations-basic | | $ | 0.18 | | | $ | 0.42 | | | $ | 0.86 | | | $ | 1.04 | |
Earnings per common share from continuing operations-diluted | | $ | 0.18 | | | $ | 0.42 | | | $ | 0.85 | | | $ | 1.04 | |
| Weighted average shares outstanding-basic | | | 16,264,032 | | | | 16,447,270 | | | | 16,314,906 | | | | 16,486,669 | |
| Weighted average shares outstanding-diluted | | | 16,355,393 | | | | 16,543,635 | | | | 16,392,321 | | | | 16,619,681 | |
| | | | | | | | | | | | | | | | | |
| |
| HEARTLAND FINANCIAL USA, INC. | |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |
| | | For the Quarters Ended | |
| | | 9/30/2008 | | | 6/30/2008 | | | 3/31/2008 | | | 12/31/2007 | | | 9/30/2007 | |
| Interest Income | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | $ | 40,990 | | | $ | 40,555 | | | $ | 42,899 | | | $ | 46,083 | | | $ | 47,406 | |
| Interest on securities and other: | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 8,228 | | | | 7,885 | | | | 6,615 | | | | 5,927 | | | | 5,446 | |
| Nontaxable | | | 1,670 | | | | 1,679 | | | | 1,647 | | | | 1,665 | | | | 1,513 | |
| Interest on federal funds sold | | | 85 | | | | 51 | | | | 131 | | | | 77 | | | | 310 | |
| Interest on deposits in other financial institutions | | | 3 | | | | 2 | | | | 5 | | | | 13 | | | | 2 | |
| Total Interest Income | | | 50,976 | | | | 50,172 | | | | 51,297 | | | | 53,765 | | | | 54,677 | |
| Interest Expense | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 15,622 | | | | 15,657 | | | | 17,096 | | | | 19,540 | | | | 20,477 | |
| Interest on short-term borrowings | | | 776 | | | | 1,087 | | | | 2,186 | | | | 2,748 | | | | 2,764 | |
| Interest on other borrowings | | | 4,692 | | | | 4,593 | | | | 4,277 | | | | 3,971 | | | | 4,199 | |
| Total Interest Expense | | | 21,090 | | | | 21,337 | | | | 23,559 | | | | 26,259 | | | | 27,440 | |
| Net Interest Income | | | 29,886 | | | | 28,835 | | | | 27,738 | | | | 27,506 | | | | 27,237 | |
| Provision for loan and lease losses | | | 7,083 | | | | 5,369 | | | | 1,761 | | | | 3,304 | | | | 575 | |
Net Interest Income After Provision for Loan and Lease Losses | | | 22,803 | | | | 23,466 | | | | 25,977 | | | | 24,202 | | | | 26,662 | |
| Noninterest Income | | | | | | | | | | | | | | | | | | | | |
| Service charges and fees | | | 3,125 | | | | 2,880 | | | | 2,615 | | | | 2,821 | | | | 2,861 | |
| Loan servicing income | | | 1,094 | | | | 1,195 | | | | 1,296 | | | | 1,273 | | | | 1,068 | |
| Trust fees | | | 2,070 | | | | 2,068 | | | | 2,021 | | | | 1,788 | | | | 2,089 | |
| Brokerage and insurance commissions | | | 942 | | | | 883 | | | | 892 | | | | 939 | | | | 820 | |
| Securities gains, net | | | 5 | | | | 648 | | | | 362 | | | | 38 | | | | 31 | |
| Gain (loss) on trading account securities | | | (33 | ) | | | (227 | ) | | | (207 | ) | | | (185 | ) | | | (7 | ) |
| Impairment loss on securities | | | (4,688 | ) | | | (30 | ) | | | (86 | ) | | | - | | | | - | |
| Gains on sale of loans | | | 295 | | | | 480 | | | | 504 | | | | 1,527 | | | | 604 | |
| Income (loss) on bank owned life insurance | | | (247 | ) | | | 380 | | | | 463 | | | | 565 | | | | 595 | |
| Gain on sale of merchant credit card services | | | 5,200 | | | | - | | | | - | | | | - | | | | - | |
| Other noninterest income | | | 117 | | | | 41 | | | | 614 | | | | (676 | ) | | | (145 | ) |
| Total Noninterest Income | | | 7,880 | | | | 8,318 | | | | 8,474 | | | | 8,090 | | | | 7,916 | |
| Noninterest Expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,000 | | | | 14,666 | | | | 14,793 | | | | 11,888 | | | | 14,301 | |
| Occupancy | | | 2,262 | | | | 2,193 | | | | 2,344 | | | | 1,961 | | | | 2,004 | |
| Furniture and equipment | | | 1,662 | | | | 1,771 | | | | 1,768 | | | | 1,848 | | | | 1,669 | |
| Outside services | | | 3,096 | | | | 2,648 | | | | 2,510 | | | | 2,544 | | | | 2,374 | |
| Advertising | | | 1,012 | | | | 1,046 | | | | 795 | | | | 948 | | | | 886 | |
| Other intangibles amortization | | | 236 | | | | 236 | | | | 236 | | | | 240 | | | | 241 | |
| Other noninterest expenses | | | 3,392 | | | | 2,878 | | | | 3,318 | | | | 4,105 | | | | 3,272 | |
| Total Noninterest Expense | | | 26,660 | | | | 25,438 | | | | 25,764 | | | | 23,534 | | | | 24,747 | |
| Income Before Income Taxes | | | 4,023 | | | | 6,346 | | | | 8,687 | | | | 8,758 | | | | 9,831 | |
| Income taxes | | | 1,018 | | | | 1,643 | | | | 2,420 | | | | 2,006 | | | | 2,906 | |
| Income From Continuing Operations | | | 3,005 | | | | 4,703 | | | | 6,267 | | | | 6,752 | | | | 6,925 | |
| Discontinued Operations | | | | | | | | | | | | | | | | | | | | |
| Income from operations of discontinued operations | | | - | | | | - | | | | - | | | | - | | | | - | |
| Income taxes | | | - | | | | - | | | | - | | | | - | | | | - | |
| Income From Discontinued Operations | | | - | | | | - | | | | - | | | | - | | | | - | |
| Net Income | | $ | 3,005 | | | $ | 4,703 | | | $ | 6,267 | | | $ | 6,752 | | | $ | 6,925 | |
| Earnings per common share-basic | | $ | 0.18 | | | $ | 0.29 | | | $ | 0.38 | | | $ | 0.41 | | | $ | 0.42 | |
| Earnings per common share-diluted | | $ | 0.18 | | | $ | 0.29 | | | $ | 0.38 | | | $ | 0.41 | | | $ | 0.42 | |
| Earnings per common share from continuingoperations-basic | | $ | 0.18 | | | $ | 0.29 | | | $ | 0.38 | | | $ | 0.41 | | | $ | 0.42 | |
| Earnings per common share from continuingoperations-diluted | | $ | 0.18 | | | $ | 0.29 | | | $ | 0.38 | | | $ | 0.41 | | | $ | 0.42 | |
| Weighted average shares outstanding-basic | | | 16,264,032 | | | | 16,316,529 | | | | 16,378,394 | | | | 16,481,854 | | | | 16,447,270 | |
| Weighted average shares outstanding-diluted | | | 16,355,393 | | | | 16,388,885 | | | | 16,465,985 | | | | 16,574,540 | | | | 16,543,635 | |
| | | | | | | | | | | | | | | | | | | | | |
| | |
| HEARTLAND FINANCIAL USA, INC. | |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |
| | | As Of | |
| | | 9/30/2008 | | | 6/30/2008 | | | 3/31/2008 | | | 12/31/2007 | | | 9/30/2007 | |
| Assets | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 67,074 | | | $ | 41,292 | | | $ | 50,141 | | | $ | 46,832 | | | $ | 31,591 | |
| Securities | | | 760,143 | | | | 795,624 | | | | 734,690 | | | | 689,949 | | | | 648,337 | |
| Loans held for sale | | | 9,812 | | | | 11,437 | | | | 11,222 | | | | 12,679 | | | | 16,267 | |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | |
| Held to maturity | | | 2,364,259 | | | | 2,295,406 | | | | 2,271,663 | | | | 2,280,167 | | | | 2,274,119 | |
| Allowance for loan and lease losses | | | (34,845 | ) | | | (34,931 | ) | | | (33,695 | ) | | | (32,993 | ) | | | (31,438 | ) |
| Loans and leases, net | | | 2,329,414 | | | | 2,260,475 | | | | 2,237,968 | | | | 2,247,174 | | | | 2,242,681 | |
| Premises, furniture and equipment, net | | | 120,225 | | | | 118,063 | | | | 119,542 | | | | 120,285 | | | | 119,461 | |
| Goodwill | | | 40,207 | | | | 40,207 | | | | 40,207 | | | | 40,207 | | | | 40,207 | |
| Other intangible assets, net | | | 8,332 | | | | 8,434 | | | | 8,416 | | | | 8,369 | | | | 8,378 | |
| Cash surrender value on life insurance | | | 55,684 | | | | 56,430 | | | | 56,018 | | | | 55,532 | | | | 54,936 | |
| Other assets | | | 55,091 | | | | 47,109 | | | | 42,276 | | | | 43,099 | | | | 40,597 | |
| Total Assets | | $ | 3,445,982 | | | $ | 3,379,071 | | | $ | 3,300,480 | | | $ | 3,264,126 | | | $ | 3,202,455 | |
| | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand | | $ | 373,193 | | | $ | 383,136 | | | $ | 377,709 | | | $ | 381,499 | | | $ | 367,617 | |
| Savings | | | 1,042,364 | | | | 894,074 | | | | 863,067 | | | | 855,036 | | | | 850,845 | |
| Brokered time deposits | | | 81,895 | | | | 79,515 | | | | 89,439 | | | | 68,984 | | | | 116,082 | |
| Other time deposits | | | 1,070,455 | | | | 1,052,160 | | | | 1,090,724 | | | | 1,070,780 | | | | 1,086,732 | |
| Total deposits | | | 2,567,907 | | | | 2,408,885 | | | | 2,420,939 | | | | 2,376,299 | | | | 2,421,276 | |
| Short-term borrowings | | | 176,543 | | | | 263,137 | | | | 226,106 | | | | 354,146 | | | | 256,822 | |
| Other borrowings | | | 440,146 | | | | 444,006 | | | | 380,479 | | | | 263,607 | | | | 268,716 | |
| Accrued expenses and other liabilities | | | 36,074 | | | | 35,345 | | | | 37,103 | | | | 39,474 | | | | 33,366 | |
| Total Liabilities | | | 3,220,670 | | | | 3,151,373 | | | | 3,064,627 | | | | 3,033,526 | | | | 2,980,180 | |
| Stockholders’ Equity | | | 225,312 | | | | 227,698 | | | | 235,853 | | | | 230,600 | | | | 222,275 | |
| Total Liabilities and Stockholders’ Equity | | $ | 3,445,982 | | | $ | 3,379,071 | | | $ | 3,300,480 | | | $ | 3,264,126 | | | $ | 3,202,455 | |
| | | | | | | | | | | | | | | | | | | | | |
| Common Share Data | | | | | | | | | | | | | | | | | | | | |
| Book value per common share | | $ | 13.86 | | | $ | 13.99 | | | $ | 14.46 | | | $ | 14.04 | | | $ | 13.48 | |
| FAS 115 effect on book value per common share | | $ | (0.28 | ) | | $ | (0.07 | ) | | $ | 0.52 | | | $ | 0.37 | | | $ | 0.13 | |
| Common shares outstanding, net of treasury stock | | | 16,252,891 | | | | 16,270,872 | | | | 16,312,384 | | | | 16,427,016 | | | | 16,492,245 | |
| | | | | | | | | | | | | | | | | | | | | |
Tangible Capital Ratio(1) | | | 5.33 | % | | | 5.50 | % | | | 5.88 | % | | | 5.78 | % | | | 5.62 | % |
(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 | For the Nine Months Ended |
| | | | 9/30/2008 | 9/30/2007 | 9/30/2008 | 9/30/2007 |
| | | | | | | |
| Average Balances | | | | | | |
| Assets | | | $ 3,399,199 | $ 3,176,715 | $ 3,341,205 | $ 3,136,034 |
| Loans and leases | | | 2,339,539 | 2,287,264 | 2,303,522 | 2,268,127 |
| Deposits | | | 2,499,988 | 2,415,158 | 2,411,862 | 2,344,847 |
| Earning assets | | | 3,100,208 | 2,890,761 | 3,043,976 | 2,845,735 |
| Interest bearing liabilities | | | 2,750,004 | 2,558,460 | 2,700,151 | 2,513,295 |
| Stockholders’ equity | | | 227,111 | 216,038 | 232,087 | 212,339 |
| Tangible stockholders’ equity | | | 187,509 | 174,637 | 192,021 | 170,607 |
| | | | | | | |
| Earnings Performance Ratios | | | | | | |
| Annualized return on average assets | | | 0.35% | 0.86% | 0.56% | 0.80% |
| Annualized return on average equity | | | 5.26 | 12.72 | 8.04 | 11.89 |
| Annualized return on average tangible equity | | | 6.38 | 15.91 | 9.72 | 14.80 |
Annualized net interest margin(1) | | | 3.96 | 3.87 | 3.92 | 3.98 |
Efficiency ratio(2) | | | 68.79 | 68.58 | 68.90 | 68.62 |
(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
| | | For the Quarters Ended | |
| | | 9/30/2008 | | | 6/30/2008 | | | 3/31/2008 | | | 12/31/2007 | | | 9/30/2007 | |
| | | | | | | | | | | | | | | | |
| Average Balances | | | | | | | | | | | | | | | |
| Assets | | $ | 3,399,199 | | | $ | 3,354,880 | | | $ | 3,269,534 | | | $ | 3,211,155 | | | $ | 3,176,715 | |
| Loans and leases, net of unearned | | | 2,339,539 | | | | 2,286,392 | | | | 2,284,634 | | | | 2,283,591 | | | | 2,287,264 | |
| Deposits | | | 2,499,988 | | | | 2,396,963 | | | | 2,338,634 | | | | 2,409,315 | | | | 2,415,158 | |
| Earning assets | | | 3,100,208 | | | | 3,057,505 | | | | 2,974,215 | | | | 2,910,942 | | | | 2,890,761 | |
| Interest bearing liabilities | | | 2,750,004 | | | | 2,712,487 | | | | 2,637,962 | | | | 2,571,327 | | | | 2,558,460 | |
| Stockholders’ equity | | | 227,111 | | | | 234,005 | | | | 235,144 | | | | 225,945 | | | | 216,038 | |
| Tangible stockholders’ equity | | | 187,509 | | | | 193,950 | | | | 194,600 | | | | 184,871 | | | | 174,637 | |
| | | | | | | | | | | | | | | | | | | | | |
| Earnings Performance Ratios | | | | | | | | | | | | | | | | | | | | |
| Annualized return on average assets | | | 0.35 | % | | | 0.56 | % | | | 0.77 | % | | | 0.83 | % | | | 0.86 | % |
| Annualized return on average equity | | | 5.26 | | | | 8.08 | | | | 10.72 | | | | 11.86 | | | | 12.72 | |
| Annualized return on average tangible equity | | | 6.38 | | | | 9.75 | | | | 12.95 | | | | 14.49 | | | | 15.91 | |
Annualized net interest margin(1) | | | 3.96 | | | | 3.92 | | | | 3.88 | | | | 3.87 | | | | 3.87 | |
Efficiency ratio(2) | | | 68.79 | | | | 67.92 | | | | 70.02 | | | | 64.54 | | | | 68.58 | |
(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 Nine Months | | | the Year | | | the Nine Months | | | the Year | |
| | | Ended | | | Ended | | | Ended | | | Ended | |
| | | 9/30/2008 | | | 12/31/2007 | | | 9/30/2007 | | | 12/31/2006 | |
| Loan and Lease Data | | | | | | | | | | | | |
| Commercial and commercial real estate | | $ | 1,672,372 | | | $ | 1,632,597 | | | $ | 1,611,226 | | | $ | 1,483,738 | |
| Residential mortgage | | | 219,662 | | | | 217,044 | | | | 224,732 | | | | 225,343 | |
| Agricultural and agricultural real estate | | | 245,355 | | | | 225,663 | | | | 226,550 | | | | 233,748 | |
| Consumer | | | 224,474 | | | | 199,518 | | | | 204,545 | | | | 194,652 | |
| Direct financing leases, net | | | 6,689 | | | | 9,158 | | | | 10,902 | | | | 14,359 | |
| Unearned discount and deferred loan fees | | | (4,293 | ) | | | (3,813 | ) | | | (3,836 | ) | | | (3,995 | ) |
| Total loans and leases | | $ | 2,364,259 | | | $ | 2,280,167 | | | $ | 2,274,119 | | | $ | 2,147,845 | |
| | | | | | | | | | | | | | | | | |
| Asset Quality | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 43,523 | | | $ | 30,694 | | | $ | 30,286 | | | $ | 8,104 | |
| Loans and leases past due ninety days or more as tointerest or principal payments | | | 347 | | | | 1,134 | | | | 69 | | | | 315 | |
| Other real estate owned | | | 9,387 | | | | 2,195 | | | | 2,129 | | | | 1,575 | |
| Other repossessed assets | | | 520 | | | | 438 | | | | 392 | | | | 349 | |
| Total nonperforming assets | | $ | 53,777 | | | $ | 34,461 | | | $ | 32,876 | | | $ | 10,343 | |
| | | | | | | | | | | | | | | | | |
| Allowance for Loan and Lease Losses | | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 32,993 | | | $ | 29,981 | | | $ | 29,981 | | | $ | 27,791 | |
| Provision for loan and lease losses from continuingoperations | | | 14,213 | | | | 10,073 | | | | 6,769 | | | | 3,883 | |
| Provision for loan and lease losses from discontinuedoperations | | | - | | | | - | | | | - | | | | (5 | ) |
| Loans charged off | | | (13,335 | ) | | | (8,564 | ) | | | (6,536 | ) | | | (3,989 | ) |
| Recoveries | | | 974 | | | | 1,641 | | | | 1,362 | | | | 1,733 | |
| Additions related to acquired bank | | | - | | | | - | | | | - | | | | 591 | |
| Reductions related to discontinued operations | | | - | | | | (138 | ) | | | (138 | ) | | | (23 | ) |
| Balance, end of period | | $ | 34,845 | | | $ | 32,993 | | | $ | 31,438 | | | $ | 29,981 | |
| | | | | | | | | | | | | | | | | |
| Asset Quality Ratios | | | | | | | | | | | | | | | | |
| Ratio of nonperforming loans and leases to total loans and leases | | | 1.86 | % | | | 1.40 | % | | | 1.33 | % | | | 0.39 | % |
| Ratio of nonperforming assets to total assets | | | 1.56 | | | | 1.06 | | | | 1.03 | | | | 0.34 | |
| Ratio of net loan chargeoffs to average loans and leases | | | 0.54 | | | | 0.30 | | | | 0.23 | | | | 0.11 | |
Allowance for loan and lease losses as a percent ofloans and leases | | | 1.47 | | | | 1.45 | | | | 1.38 | | | | 1.40 | |
Allowance for loan and lease losses as a percent ofnonperforming loans and leases loans and leases | | | 79.43 | | | | 103.66 | | | | 103.57 | | | | 356.11 | |
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS |
| | | | For the Quarters Ended | |
| | | | 9/30/2008 | | | | 9/30/2007 | |
| | | | Average | | | | | | | | | | | Average | | | | | | | | |
| | | | Balance | | | | Interest | | | Rate | | | | Balance | | | | Interest | | | Rate | |
| Earning Assets | | | | | | | | | | | | | | | | | | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | | | | |
Taxable | | $ | 622,376 | | | $ | 8,228 | | | 5.26 | % | | $ | 474,366 | | | $ | 5,446 | | | 4.55 | % |
Nontaxable(1) | | | 153,996 | | | | 2,441 | | | 6.31 | | | | 136,834 | | | | 2,271 | | | 6.58 | |
Total securities | | | 776,372 | | | | 10,669 | | | 5.47 | | | | 611,200 | | | | 7,717 | | | 5.01 | |
| Interest bearing deposits | | | 654 | | | | 3 | | | 1.82 | | | | 764 | | | | 2 | | | 1.04 | |
| Federal funds sold | | | 18,419 | | | | 85 | | | 1.84 | | | | 24,180 | | | | 310 | | | 5.09 | |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and commercial real estate(1) | | | 1,651,002 | | | | 26,910 | | | 6.48 | | | | 1,609,044 | | | | 31,757 | | | 7.83 | |
Residential mortgage | | | 223,267 | | | | 3,570 | | | 6.36 | | | | 239,447 | | | | 4,069 | | | 6.74 | |
Agricultural and agricultural real estate(1) | | | 241,541 | | | | 4,191 | | | 6.90 | | | | 227,630 | | | | 4,650 | | | 8.10 | |
Consumer | | | 216,651 | | | | 5,081 | | | 9.33 | | | | 199,823 | | | | 5,351 | | | 10.62 | |
Direct financing leases, net | | | 7,078 | | | | 105 | | | 5.90 | | | | 11,320 | | | | 171 | | | 5.99 | |
Fees on loans | | | - | | | | 1,356 | | | - | | | | - | | | | 1,589 | | | - | |
Less: allowance for loan and lease losses | | | (34,776 | ) | | | - | | | - | | | | (32,647 | ) | | | - | | | - | |
Net loans and leases | | | 2,304,763 | | | | 41,213 | | | 7.11 | | | | 2,254,617 | | | | 47,587 | | | 8.37 | |
Total earning assets | | | 3,100,208 | | | $ | 51,970 | | | 6.67 | % | | | 2,890,761 | | | $ | 55,616 | | | 7.63 | % |
| Nonearning Assets | | | 298,991 | | | | | | | | | | | 285,954 | | | | | | | | |
| Total Assets | | $ | 3,399,199 | | | | | | | | | | $ | 3,176,715 | | | | | | | | |
| Interest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | | | | | | | | | | | | | | | | | | | | | |
Savings | | $ | 981,108 | | | $ | 4,777 | | | 1.94 | % | | $ | 850,988 | | | $ | 6,021 | | | 2.81 | % |
Time, $100,000 and over | | | 374,170 | | | | 3,527 | | | 3.75 | | | | 305,748 | | | | 3,848 | | | 4.99 | |
Other time deposits | | | 759,999 | | | | 7,318 | | | 3.83 | | | | 888,706 | | | | 10,608 | | | 4.74 | |
| Short-term borrowings | | | 184,800 | | | | 776 | | | 1.67 | | | | 243,820 | | | | 2,764 | | | 4.50 | |
| Other borrowings | | | 449,927 | | | | 4,692 | | | 4.15 | | | | 269,198 | | | | 4,199 | | | 6.19 | |
Total interest bearing liabilities | | | 2,750,004 | | | | 21,090 | | | 3.05 | | | | 2,558,460 | | | | 27,440 | | | 4.26 | |
| Noninterest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest bearing deposits | | | 384,711 | | | | | | | | | | | 369,716 | | | | | | | | |
| Accrued interest and other liabilities | | | 37,373 | | | | | | | | | | | 32,501 | | | | | | | | |
Total noninterest bearing liabilities | | | 422,084 | | | | | | | | | | | 402,217 | | | | | | | | |
| Stockholders’ Equity | | | 227,111 | | | | | | | | | | | 216,038 | | | | | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 3,399,199 | | | | | | | | | | $ | 3,176,715 | | | | | | | | |
Net interest income(1) | | | | | | $ | 30,880 | | | | | | | | | | $ | 28,176 | | | | |
Net interest spread(1) | | | | | | | | | | 3.62 | % | | | | | | | | | | 3.38 | % |
Net interest income to total earning assets(1) | | | | | | | | | | 3.96 | % | | | | | | | | | | 3.87 | % |
| Interest bearing liabilities to earning assets | | | 88.70 | % | | | | | | | | | | 88.50 | % | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Tax equivalent basis is calculated using an effective tax rate of 35%. |
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS |
| | | | For the Nine Months Ended | |
| | | | 9/30/2008 | | | | 9/30/2007 | |
| | | | Average | | | | | | | | | | | Average | | | | | | | | |
| | | | Balance | | | | Interest | | | Rate | | | | Balance | | | | Interest | | | Rate | |
| Earning Assets | | | | | | | | | | | | | | | | | | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | | | | |
Taxable | | $ | 607,082 | | | $ | 22,728 | | | 5.00 | % | | $ | 468,616 | | | $ | 16,010 | | | 4.57 | % |
Nontaxable(1) | | | 150,803 | | | | 7,330 | | | 6.49 | | | | 132,831 | | | | 6,677 | | | 6.72 | |
Total securities | | | 757,885 | | | | 30,058 | | | 5.30 | | | | 601,447 | | | | 22,687 | | | 5.04 | |
| Interest bearing deposits | | | 494 | | | | 10 | | | 2.70 | | | | 683 | | | | 20 | | | 3.92 | |
| Federal funds sold | | | 15,579 | | | | 267 | | | 2.29 | | | | 7,490 | | | | 310 | | | 5.53 | |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and commercial real estate(1) | | | 1,629,584 | | | | 82,133 | | | 6.73 | | | | 1,590,559 | | | | 94,567 | | | 7.95 | |
Residential mortgage | | | 222,359 | | | | 10,779 | | | 6.48 | | | | 243,299 | | | | 12,399 | | | 6.81 | |
Agricultural and agricultural real estate(1) | | | 236,537 | | | | 12,855 | | | 7.26 | | | | 225,606 | | | | 13,728 | | | 8.14 | |
Consumer | | | 207,116 | | | | 14,909 | | | 9.62 | | | | 196,110 | | | | 15,482 | | | 10.55 | |
Direct financing leases, net | | | 7,926 | | | | 353 | | | 5.95 | | | | 12,553 | | | | 560 | | | 5.96 | |
Fees on loans | | | - | | | | 3,966 | | | - | | | | - | | | | 4,500 | | | - | |
Less: allowance for loan and lease losses | | | (33,504 | ) | | | - | | | - | | | | (32,012 | ) | | | - | | | - | |
Net loans and leases | | | 2,270,018 | | | | 124,995 | | | 7.36 | | | | 2,236,115 | | | | 141,236 | | | 8.44 | |
Total earning assets | | | 3,043,976 | | | $ | 155,330 | | | 6.82 | % | | | 2,845,735 | | | $ | 164,253 | | | 7.72 | % |
| Nonearning Assets | | | 297,229 | | | | | | | | | | | 290,299 | | | | | | | | |
| Total Assets | | $ | 3,341,205 | | | | | | | | | | $ | 3,136,034 | | | | | | | | |
| Interest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | | | | | | | | | | | | | | | | | | | | | |
Savings | | $ | 895,057 | | | $ | 12,575 | | | 1.88 | % | | $ | 825,967 | | | $ | 17,132 | | | 2.77 | % |
Time, $100,000 and over | | | 326,038 | | | | 10,091 | | | 4.13 | | | | 282,393 | | | | 10,394 | | | 4.92 | |
Other time deposits | | | 821,894 | | | | 25,709 | | | 4.18 | | | | 878,808 | | | | 30,799 | | | 4.69 | |
| Short-term borrowings | | | 246,735 | | | | 4,049 | | | 2.19 | | | | 291,941 | | | | 10,545 | | | 4.83 | |
| Other borrowings | | | 410,427 | | | | 13,562 | | | 4.41 | | | | 234,186 | | | | 10,762 | | | 6.14 | |
Total interest bearing liabilities | | | 2,700,151 | | | | 65,986 | | | 3.26 | | | | 2,513,295 | | | | 79,632 | | | 4.24 | |
| Noninterest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest bearing deposits | | | 368,873 | | | | | | | | | | | 357,679 | | | | | | | | |
| Accrued interest and other liabilities | | | 40,094 | | | | | | | | | | | 52,721 | | | | | | | | |
Total noninterest bearing liabilities | | | 408,967 | | | | | | | | | | | 410,400 | | | | | | | | |
| Stockholders’ Equity | | | 232,087 | | | | | | | | | | | 212,339 | | | | | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 3,341,205 | | | | | | | | | | $ | 3,136,034 | | | | | | | | |
Net interest income(1) | | | | | | $ | 89,344 | | | | | | | | | | $ | 84,621 | | | | |
Net interest spread(1) | | | | | | | | | | 3.55 | % | | | | | | | | | | 3.48 | % |
Net interest income to total earning assets(1) | | | | | | | | | | 3.92 | % | | | | | | | | | | 3.98 | % |
| Interest bearing liabilities to earning assets | | | 88.70 | % | | | | | | | | | | 88.32 | % | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(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 Nine Months Ended 9/30/2008 | | | As of and For the Year Ended 12/31/2007 | | | As of and For the Nine Months Ended 9/30/2007 | | | As of and For the Year Ended 12/31/2006 | |
| Total Assets | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 1,021,965 | | $ | 976,489 | | $ | 902,139 | | $ | 843,282 | |
| New Mexico Bank & Trust | | 741,438 | | | 672,863 | | | 660,490 | | | 638,712 | |
| Rocky Mountain Bank | | 461,356 | | | 427,437 | | | 431,850 | | | 438,972 | |
| Wisconsin Community Bank | | 403,252 | | | 399,532 | | | 420,803 | | | 413,108 | |
| Riverside Community Bank | | 244,500 | | | 225,206 | | | 217,232 | | | 199,483 | |
| Galena State Bank & Trust Co. | | 229,959 | | | 215,698 | | | 230,055 | | | 219,863 | |
| Arizona Bank & Trust | | 218,730 | | | 222,576 | | | 228,507 | | | 223,567 | |
| First Community Bank | | 120,606 | | | 127,305 | | | 122,157 | | | 118,010 | |
| Summit Bank & Trust | | 70,755 | | | 46,668 | | | 47,625 | | | 21,590 | |
| Minnesota Bank & Trust | | 19,430 | | | - | | | - | | | - | |
| Total Deposits | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 707,646 | | $ | 670,257 | | $ | 640,883 | | $ | 636,527 | |
| New Mexico Bank & Trust | | 538,453 | | | 459,530 | | | 464,948 | | | 437,708 | |
| Rocky Mountain Bank | | 344,104 | | | 305,933 | | | 323,306 | | | 335,053 | |
| Wisconsin Community Bank | | 317,244 | | | 321,647 | | | 343,827 | | | 336,015 | |
| Riverside Community Bank | | 188,280 | | | 187,052 | | | 180,561 | | | 162,319 | |
| Galena State Bank & Trust Co. | | 196,007 | | | 177,040 | | | 196,606 | | | 178,388 | |
| Arizona Bank & Trust | | 162,494 | | | 155,093 | | | 175,374 | | | 176,438 | |
| First Community Bank | | 100,019 | | | 103,602 | | | 100,512 | | | 95,287 | |
| Summit Bank & Trust | | 46,411 | | | 30,860 | | | 33,531 | | | 6,514 | |
| Minnesota Bank & Trust | | 3,898 | | | - | | | - | | | - | |
| Return on Average Assets | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | 1.59 | % | | 1.34 | % | | 1.28 | % | | 1.45 | % |
| New Mexico Bank & Trust | | 1.30 | | | 1.48 | | | 1.30 | | | 1.21 | |
| Rocky Mountain Bank | | 0.75 | | | 1.51 | | | 1.60 | | | 1.18 | |
| Wisconsin Community Bank | | 0.58 | | | 0.62 | | | 0.51 | | | 0.53 | |
| Riverside Community Bank | | 0.68 | | | 0.55 | | | 0.46 | | | 0.64 | |
| Galena State Bank & Trust Co. | | 1.33 | | | 0.92 | | | 0.61 | | | 1.35 | |
| Arizona Bank & Trust | | (1.84 | ) | | (0.08 | ) | | 0.13 | | | 0.47 | |
| First Community Bank | | 0.59 | | | 1.30 | | | 1.28 | | | 1.01 | |
| Summit Bank & Trust | | (5.23 | ) | | (2.43 | ) | | (2.85 | ) | | (6.31 | ) |
| Minnesota Bank & Trust | | (6.98 | ) | | - | | | - | | | - | |
| Net Interest Margin | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | 3.54 | % | | 3.40 | % | | 3.40 | % | | 3.61 | % |
| New Mexico Bank & Trust | | 4.61 | | | 4.80 | | | 4.77 | | | 5.05 | |
| Rocky Mountain Bank | | 4.38 | | | 4.76 | | | 4.80 | | | 5.16 | |
| Wisconsin Community Bank | | 3.68 | | | 3.45 | | | 3.48 | | | 3.83 | |
| Riverside Community Bank | | 3.26 | | | 3.39 | | | 3.48 | | | 3.71 | |
| Galena State Bank & Trust Co. | | 3.42 | | | 3.40 | | | 3.39 | | | 3.45 | |
| Arizona Bank & Trust | | 3.98 | | | 4.56 | | | 4.73 | | | 4.92 | |
| First Community Bank | | 3.48 | | | 3.80 | | | 3.84 | | | 3.95 | |
| Summit Bank & Trust | | 4.17 | | | 5.10 | | | 5.46 | | | 6.98 | |
| Minnesota Bank & Trust | | 2.20 | | | - | | | - | | | - | |
| Net Income (Loss) | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 11,884 | | $ | 11,907 | | $ | 8,421 | | $ | 11,990 | |
| New Mexico Bank & Trust | | 6.752 | | | 8,727 | | | 6,323 | | | 6,873 | |
| Rocky Mountain Bank | | 2,529 | | | 6,622 | | | 5,296 | | | 4,840 | |
| Wisconsin Community Bank | | 1,723 | | | 2,355 | | | 1,588 | | | 2,109 | |
| Riverside Community Bank | | 1,221 | | | 1,055 | | | 706 | | | 1,252 | |
| Galena State Bank & Trust Co. | | 2,194 | | | 1,895 | | | 992 | | | 3,167 | |
| Arizona Bank & Trust | | (3,065 | ) | | (154 | ) | | 226 | | | 902 | |
| First Community Bank | | 546 | | | 1,476 | | | 1,145 | | | 1,197 | |
| Summit Bank & Trust | | (2,175 | ) | | (965 | ) | | (778 | ) | | (1,220 | ) |
| Minnesota Bank & Trust | | (1,097 | ) | | - | | | - | | | - | |
HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA – SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS |
| | | As of 9/30/2008 | | | As of 12/31/2007 | | | As of 9/30/2007 | | | As of 12/31/2006 | |
| Total Portfolio Loans and Leases | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 666,613 | | $ | 637,782 | | $ | 630,104 | | $ | 581,166 | |
| New Mexico Bank & Trust | | 472,382 | | | 455,383 | | | 439,801 | | | 410,438 | |
| Rocky Mountain Bank | | 337,049 | | | 316,776 | | | 313,994 | | | 309,943 | |
| Wisconsin Community Bank | | 283,677 | | | 285,010 | | | 295,864 | | | 272,407 | |
| Riverside Community Bank | | 162,976 | | | 146,925 | | | 142,260 | | | 137,102 | |
| Galena State Bank & Trust Co. | | 142,776 | | | 144,152 | | | 149,612 | | | 158,222 | |
| Arizona Bank & Trust | | 134,838 | | | 160,309 | | | 163,295 | | | 160,614 | |
| First Community Bank | | 77,765 | | | 84,475 | | | 85,554 | | | 81,498 | |
| Summit Bank & Trust | | 55,125 | | | 27,493 | | | 31,611 | | | 14,953 | |
| Minnesota Bank & Trust | | 7,986 | | | - | | | - | | | - | |
| Allowance For Loan and Lease Losses | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 8,200 | | $ | 7,827 | | $ | 7,712 | | $ | 7,235 | |
| New Mexico Bank & Trust | | 6,748 | | | 6,079 | | | 5,837 | | | 5,352 | |
| Rocky Mountain Bank | | 4,983 | | | 4,061 | | | 4,041 | | | 4,044 | |
| Wisconsin Community Bank | | 4,448 | | | 4,520 | | | 4,494 | | | 4,570 | |
| Riverside Community Bank | | 2,154 | | | 1,885 | | | 1,815 | | | 1,747 | |
| Galena State Bank & Trust Co. | | 1,883 | | | 1,830 | | | 1,992 | | | 2,049 | |
| Arizona Bank & Trust | | 2,246 | | | 3,605 | | | 2,392 | | | 2,133 | |
| First Community Bank | | 1,404 | | | 1,179 | | | 1,103 | | | 1,182 | |
| Summit Bank & Trust | | 898 | | | 367 | | | 392 | | | 192 | |
| Minnesota Bank & Trust | | 100 | | | - | | | - | | | - | |
| Nonperforming Loans and Leases | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | $ | 4,840 | | $ | 3,344 | | $ | 4,338 | | $ | 1,216 | |
| New Mexico Bank & Trust | | 5,711 | | | 1,130 | | | 3,060 | | | 2,206 | |
| Rocky Mountain Bank | | 6,367 | | | 2,099 | | | 2,033 | | | 822 | |
| Wisconsin Community Bank | | 10,951 | | | 12,152 | | | 14,082 | | | 1,966 | |
| Riverside Community Bank | | 2,508 | | | 2,671 | | | 1,542 | | | 602 | |
| Galena State Bank & Trust Co. | | 3,006 | | | 1,707 | | | 1,587 | | | 370 | |
| Arizona Bank & Trust | | 4,972 | | | 5,541 | | | 2,137 | | | 254 | |
| First Community Bank | | 3,251 | | | 1,312 | | | 884 | | | 588 | |
| Summit Bank & Trust | | 1,533 | | | 1,376 | | | - | | | - | |
| Minnesota Bank & Trust | | - | | | - | | | - | | | - | |
| Allowance As a Percent of Total Loans and Leases | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | 1.23 | % | | 1.23 | % | | 1.22 | % | | 1.24 | % |
| New Mexico Bank & Trust | | 1.43 | | | 1.33 | | | 1.33 | | | 1.30 | |
| Rocky Mountain Bank | | 1.48 | | | 1.28 | | | 1.29 | | | 1.30 | |
| Wisconsin Community Bank | | 1.57 | | | 1.59 | | | 1.52 | | | 1.68 | |
| Riverside Community Bank | | 1.32 | | | 1.28 | | | 1.28 | | | 1.27 | |
| Galena State Bank & Trust Co. | | 1.32 | | | 1.27 | | | 1.33 | | | 1.30 | |
| Arizona Bank & Trust | | 1.67 | | | 2.25 | | | 1.46 | | | 1.33 | |
| First Community Bank | | 1.81 | | | 1.40 | | | 1.29 | | | 1.45 | |
| Summit Bank & Trust | | 1.63 | | | 1.33 | | | 1.24 | | | 1.28 | |
| Minnesota Bank & Trust | | 1.25 | | | - | | | - | | | - | |
