| CONTACT: | FOR IMMEDIATE RELEASE |
| John K. Schmidt | July 26, 2010 |
| Chief Operating Officer | |
| Chief Financial Officer | |
| (563) 589-1994 | |
| jschmidt@htlf.com | |
HEARTLAND FINANCIAL USA, INC. REPORTS SECOND QUARTER 2010 RESULTS
Second Quarter 2010 Highlights
| § | Net income of $5.1 million for the quarter |
| § | Net interest margin of 4.09% for the quarter |
| § | Net interest income increased $3.4 million or 11% over the second quarter of 2009 |
| § | Nonperforming assets not covered by loss share agreements increased $10.9 million during the quarter to $118.0 million |
| § | Allowance for loan and lease losses increased during the quarter from 1.96% to 2.03% of total loans and leases |
| | | | Quarter Ended June 30, | | | | Six Months Ended June 30, | |
| | | | 2010 | | | | 2009 | | | | 2010 | | | | 2009 | |
| Net income (in millions) | | $ | 5.1 | | | $ | 4.7 | | | $ | 10.4 | | | $ | 10.8 | |
| Net income available to common stockholders (in millions) | | | 3.8 | | | | 3.4 | | | | 7.8 | | | | 8.2 | |
| Diluted earnings per common share | | | 0.23 | | | | 0.21 | | | | 0.47 | | | | 0.50 | |
| | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.37 | % | | | 0.36 | % | | | 0.39 | % | | | 0.45 | % |
| Return on average common equity | | | 6.25 | | | | 5.74 | | | | 6.54 | | | | 6.99 | |
| Net interest margin | | | 4.09 | | | | 3.92 | | | | 4.12 | | | | 3.93 | |
“Heartland’s second quarter earnings were an improvement over a year ago, but were tempered by an increase in nonperforming assets. While our strong net interest margin is a key driver of our core earnings potential, we are focused on reducing these problem credits. This will only enhance our ability to grow profitably in an economic recovery.”
Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA, Inc.
Dubuque, Iowa, Monday, July 26, 2010—Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income of $5.1 million for the quarter ended June 30, 2010, compared to net income of $4.7 million for the second quarter of 2009. Net income available to common stockholders was $3.8 million, or $0.23 per diluted common share, for the quarter ended June 30, 2010, compared to $3.4 million, or $0.21 per diluted common share, for the second quarter of 2009. Return on average common equity was 6.25 percent and return on average assets was 0.37 percent for the second quarter of 2010, compared to 5.74 percent and 0.36 percent, respectively, for the same quarter in 2009.
Net income recorded for the first six months of 2010 was $10.4 million, compared to $10.8 million recorded during the first six months of 2009. Net income available to common stockholders was $7.8 million, or $0.47 per diluted common share, for the six months ended June 30, 2010, compared to $8.2 million, or $0.50 per diluted common share, earned during the first six months of 2009. Return on average common equity was 6.54 percent and return on average assets was 0.39 percent for the first six months of 2010, compared to 6.99 percent and 0.45 percent, respectively, for the same period in 2009.
Earnings for the quarter and six months ended June 30, 2010, continued to be negatively affected by significant loan loss provisions. Growth in net interest income during the first half of 2010 compared to the first half of 2009 helped to offset decreases in the income associated with residential mortgage loan activity and gains on the sales of securities.
Lynn B. Fuller, Heartland’s chairman, president and chief executive officer said, “Heartland’s second quarter earnings were an improvement over a year ago, but were tempered by an increase in nonperforming assets. While our strong net interest margin is a key driver of our core earnings potential, we are focused on reducing these problem credits. This will only enhance our ability to grow profitably in an economic recovery.”
Net Interest Margin Remains Above 4.00%; Net Interest Income Grows
Net interest margin, expressed as a percentage of average earning assets, was 4.09 percent during the second quarter of 2010 compared to 3.92 percent for the second quarter of 2009. For the six-month periods ended June 30, net interest margin was 4.12 percent during 2010 and 3.93 percent during 2009.
Fuller said, “We are extremely pleased with our ability to maintain a net interest margin above the 4.00 percent level now for four consecutive quarters. Our net interest margin of 4.09 percent for the second quarter was an improvement of 17 basis points over one year ago.”
Net interest income on a tax-equivalent basis totaled $37.0 million during the second quarter of 2010, an increase of $3.6 million or 11 percent from the $33.4 million recorded during the second quarter of 2009. For the first six months of 2010, net interest income on a tax-equivalent basis was $72.9 million, an increase of $7.3 million or 11 percent from the $65.6 million recorded during the first six months of 2009. These increases reflect our success in focusing during the past six months on optimizing the composition of our interest bearing liabilities by de-emphasizing more expensive time deposits, which decreased from 50 percent of total average interest bearing deposits during the first half of 2009 to 39 percent during the first half of 2010.
On a tax-equivalent basis, interest income in the second quarter of 2010 was consistent with the interest income earned in the second quarter of 2009 at $51.5 million. For the first six months of 2010, interest income on a tax-equivalent basis was $102.3 million compared to $102.4 million during the same period in 2009. The $211.8 million or 6 percent growth in average earning assets during the second quarter of 2010 and the $206.1 million or 6 percent growth in average earning assets during the first six months of 2010 compared to the same periods in 2009 was offset by the impact of a decrease in the average interest rate earned on these assets. The composition of average earning assets continued to change as the percentage of loans, which are typically the highest yielding asset, to total average earning assets was 66 percent during the first half of 2010 compared to 70 percent during the first half of 2009.
Interest expense for the second quarter of 2010 was $14.4 million, a decrease of $3.7 million or 20 percent from $18.1 million in the second quarter of 2009. On a six-month comparative basis, interest expense decreased $7.4 million or 20 percent. Despite an increase in average interest bearing liabilities of $181.0 million or 6 percent for the quarter ended June 30, 2010, as compared to the same quarter in 2009, the average interest rates paid on Heartland’s deposits and borrowings declined 60 basis points from 2.43 percent in 2009 to 1.83 percent in 2010, in large part because of our de-emphasis in time deposits. For the six-month comparative period, average interest bearing liabilities increased $212.7 million or 7 percent while the average interest rate paid on these liabilities was 2.52 percent in 2009 compared to 1.87 percent i n 2010, a 65 basis point decrease.
Noninterest Income Decreases; Noninterest Expense Decreases
Noninterest income was $10.8 million during the second quarter of 2010 compared to $14.6 million during the second quarter of 2009, a decrease of $3.8 million or 26 percent. For the first six months of 2010, noninterest income was $21.4 million compared to $27.4 million during the first six months of 2009, a decrease of $6.0 million or 22 percent. These decreases were primarily due to reductions in loan servicing income, securities gains and gains on sale of loans. A portion of the decreases in these noninterest income categories was offset by increases in service charges and fees, which grew by $385,000 or 12 percent during the quarter and $702,000 or 12 percent during the first half of the year, and trust fees, which grew by $359,000 or 18 percent during the quarter and $843,000 or 23 percent during the first half of the year.
Loan servicing income decreased $1.7 million or 51 percent for the quarter and $3.1 million or 50 percent for the six-month periods under comparison. Included in loan servicing income is mortgage servicing rights income, which was $957,000 during the second quarter of 2010 compared to $3.2 million during the second quarter of 2009, and amortization of mortgage servicing rights, which was $707,000 during the second quarter of 2010 compared to $1.0 million during the second quarter of 2009. For the first six months of 2010, mortgage servicing rights income was $1.7 million and the amortization of mortgage servicing rights was $1.3 million compared to $6.4 million and $2.4 million, respectively, during the first six months of 2009. These components of loan servicing income decreased during the first half of 2010 as the volume of mortgage loa ns originated and sold into the secondary market returned to more normal levels from the abnormally high levels created by a low interest rate environment in the first half of 2009. Also included in loan servicing income are the fees collected for the servicing of mortgage loans for others, which was $743,000 during the second quarter of 2010 compared to $553,000 during the second quarter of 2009. For the first six months of 2010, the fees collected for the servicing of mortgage loans for others was $1.5 million compared to $1.0 million during the same period in 2009. The portfolio of mortgage loans serviced for others by Heartland totaled $1.22 billion at June 30, 2010, compared to $1.02 billion at June 30, 2009. Securities gains totaled $1.1 million during the second quarter of 2010 compared to $2.2 million during the second quarter of 2009. For the six-month comparative period, securities gains totaled $2.5 million during 2010 compared to $5.2 million during 2009. There was a higher volume of securities s ales during the first half of 2009 as securities designed to outperform in a declining rate environment were sold and replaced with securities that are expected to outperform as rates rise. Gains on sale of loans totaled $1.1 million during the second quarter of 2010 compared to $2.2 million during the second quarter of 2009. For the first six months of 2010, gains on sale of loans totaled $1.9 million compared to $4.0 million for the first six months of 2009. As long-term mortgage loan rates fell below 5.00 percent during the first half of 2009, refinancing activity significantly increased on 15- and 30-year, fixed-rate mortgage loans which Heartland normally elects to sell into the secondary market and retain the servicing.
Fuller stated, “Consistent with our industry, noninterest income decreased from last year’s quarter due to lower mortgage banking revenue and reduced securities gains. However, we believe that residential mortgage lending will recover with the economy and are channeling resources to build this line of business at all of our banks.”
For the second quarter of 2010, noninterest expense totaled $29.6 million, a decrease of $902,000 or 3 percent from the same period in 2009. This decrease was primarily attributable to lower FDIC assessments, which totaled $1.4 million during the second quarter of 2010 compared to $2.8 million during the second quarter of 2009, and net losses on repossessed assets, which totaled $1.6 million during the second quarter of 2010 compared to $2.5 million during the second quarter of 2009. Included in the FDIC insurance assessments recorded during the second quarter of 2009 was $1.7 million for an emergency special assessment. For the six-month period ended June 30, 2010, noninterest expense was $58.5 million compared to $58.8 million during the same six-month period in 2009. The largest component of noninterest expense, salaries and employee b enefits, increased $622,000 or 4 percent during the second quarter of 2010 compared to the second quarter of 2009 as we marginally increased compensation to many of our employees after freezing their salaries during the previous year. For the six-month comparative period, salaries and employee benefits decreased $388,000 or 1 percent. Total full-time equivalent employees remained consistent at 1,020 on both June 30, 2010 and 2009.
Heartland’s effective tax rate was 28.74 percent for the first half of 2010 compared to 30.05 percent for the first half of 2009. Heartland’s effective tax rate is affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 30.37 percent during the first half of 2010 compared to 25.21 percent during the first half of 2009. The tax-equivalent adjustment for this tax-exempt interest income was $2.4 million during the first six months of 2010 compared to $2.1 million during the same six months in 2009.
Loan Demand Remains Soft; Growth in Demand Deposits
At June 30, 2010, total assets had experienced a slight increase of $4.6 million or less than 1 percent annualized since year-end 2009. Securities represented 30 percent of total assets at June 30, 2010, compared to 29 percent of total assets at December 31, 2009.
Total loans and leases, exclusive of those covered by the FDIC loss share agreements, were $2.39 billion at June 30, 2010, compared to $2.33 billion at year-end 2009, an increase of $54.6 million or 5 percent annualized. Growth in total loans and leases was $16.5 million during the second quarter of 2010 and $38.1 million during the first quarter of 2010. The loan category experiencing the majority of this growth was commercial and commercial real estate loans, which totaled $1.74 billion at June 30, 2010, an increase of $70.7 million or 8 percent annualized since year-end 2009. This growth occurred at Dubuque Bank and Trust Company and Wisconsin Community Bank.
Total deposits were $3.02 billion at June 30, 2010, compared to $3.05 billion at year-end 2009, a decrease of $34.2 million or 2 percent annualized. The decrease in total deposits was distributed between the first two quarters of 2010 at $21.2 million during the second quarter and $13.0 million during the first quarter. The composition of our deposits continued to improve during the first half of 2010, as demand deposits increased $47.7 million during the second quarter and $29.2 million during the first quarter. Conversely, time deposits, exclusive of brokered deposits, experienced a decrease of $49.6 million during the second quarter and $55.2 million during the first quarter. At June 30, 2010, brokered time deposits totaled $37.3 million or 1 percent of total deposits compared to $41.8 million or 1 percent of total deposits at year-end 2009.
“Deposit growth in our targeted non-time categories remains strong,” Fuller noted. “Remarkably, nearly seventy percent of total deposits are comprised of demand and savings. Overall, deposits grew by 7 percent over last year, somewhat slower than recent quarters and a reflection of our strategy to slow the inflow and change to a more profitable mix.”
Nonperforming Assets Increase; Allowance for Loan Losses Increase
The allowance for loan and lease losses at June 30, 2010, was 2.03 percent of loans and leases and 56.89 percent of nonperforming loans compared to 1.80 percent of loans and leases and 53.56 percent of nonperforming loans at December 31, 2009, and 1.57 percent of loans and leases and 52.32 percent of nonperforming loans at June 30, 2009. The provision for loan losses was $10.0 million for the second quarter of both 2010 and 2009. The first six months of 2010 provision for loan losses was $18.8 million compared to $16.7 million for the first six months of 2009. Additions to the allowance for loan and lease losses during the first half of 2010 were driven by a variety of factors including the continuation of depressed economic conditions, primarily in Heartland’s Western markets of Arizona and Montana, that have resulted in increased delinquencies, reductions in the appraised values of collateral and downgrades in internal risk ratings of loans, including particularly the loans in those geographies.
Nonperforming loans, exclusive of those covered under the loss sharing agreements, were $84.9 million or 3.56 percent of total loans and leases at June 30, 2010, compared to $78.1 million or 3.35 percent of total loans and leases at December 31, 2009, and $71.2 million or 3.00 percent of total loans and leases at June 30, 2009. Approximately 65 percent, or $55.5 million, of Heartland’s nonperforming loans are to 22 borrowers, with $29.2 million originated by Rocky Mountain Bank, $10.5 million originated by Summit Bank & Trust, $5.7 million originated by Wisconsin Community Bank, $5.5 million originated by New Mexico Bank & Trust, $3.1 million originated by Arizona Bank & Trust and $1.5 million originated by Riverside Community Bank. The portion of Heartland’s nonperforming loans covered by government guarantees was $3.7 million at June 30, 2010.
Other real estate owned, exclusive of assets covered under the loss sharing agreements, was $32.6 million at June 30, 2010, compared to $30.2 million at December 31, 2009, and $29.3 million at June 30, 2009. Liquidation strategies have been identified for all the assets held in other real estate owned. Management plans to market these properties through an orderly liquidation process instead of a quick liquidation process that would likely result in discounts greater than the projected carrying costs.
Net charge-offs on loans not covered by loss share agreements during the second quarter of 2010 were $7.9 million compared to $10.1 million during the second quarter of 2009. For the six-month period ended on June 30, net charge-offs not covered by loss share agreements were $12.1 million in 2010 and $15.1 million in 2009. A large portion of the net charge-offs in both years was related to commercial real estate development loans and residential lot loans.
“We are obviously dissatisfied with the increase in nonperforming assets to $118 million. The reduction of nonperforming assets clearly continues as our number one priority. To that end, we strengthened our commitment in this regard earlier in the year by staffing up the special assets team in our Western markets. Overall, we believe we are in a stable-to-improving credit environment in which some fluctuations may occur,” Fuller said.
Conference Call Details
Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-941-8610 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 until July 25, 2011, by dialing 800-406-7325, pass code 4329088, or by logging onto www.htlf.com.
About Heartland Financial USA, Inc.
Heartland Financial USA, Inc. is a $4.0 billion diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 61 banking locations in 42 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 s trength 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 ligh t 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 Quarter Ended | | For the Six Months Ended | |
| | | June 30, | | June 30, | |
| | | | 2010 | | | | 2009 | | | | 2010 | | | | 2009 | |
| Interest Income | | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | $ | 38,270 | | | $ | 38,423 | | | $ | 75,598 | | | $ | 77,906 | |
| Interest on securities and other: | | | | | | | | | | | | | | | | |
Taxable | | | 8,938 | | | | 10,039 | | | | 18,393 | | | | 18,460 | |
Nontaxable | | | 3,047 | | | | 2,025 | | | | 5,896 | | | | 3,908 | |
| Interest on federal funds sold | | | 1 | | | | - | | | | 1 | | | | 1 | |
| Interest on deposits in other financial institutions | | | 7 | | | | - | | | | 12 | | | | 1 | |
Total Interest Income | | | 50,263 | | | | 50,487 | | | | 99,900 | | | | 100,276 | |
| Interest Expense | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 9,955 | | | | 13,576 | | | | 20,715 | | | | 27,698 | |
| Interest on short-term borrowings | | | 291 | | | | 173 | | | | 525 | | | | 385 | |
| Interest on other borrowings | | | 4,208 | | | | 4,360 | | | | 8,167 | | | | 8,738 | |
Total Interest Expense | | | 14,454 | | | | 18,109 | | | | 29,407 | | | | 36,821 | |
Net Interest Income | | | 35,809 | | | | 32,378 | | | | 70,493 | | | | 63,455 | |
| Provision for loan and lease losses | | | 9,955 | | | | 10,041 | | | | 18,849 | | | | 16,706 | |
Net Interest Income After Provision for Loan and Lease Losses | | | 25,854 | | | | 22,337 | | | | 51,644 | | | | 46,749 | |
| Noninterest Income | | | | | | | | | | | | | | | | |
| Service charges and fees | | | 3,494 | | | | 3,109 | | | | 6,698 | | | | 5,996 | |
| Loan servicing income | | | 1,620 | | | | 3,311 | | | | 3,047 | | | | 6,097 | |
| Trust fees | | | 2,330 | | | | 1,971 | | | | 4,511 | | | | 3,668 | |
| Brokerage and insurance commissions | | | 785 | | | | 715 | | | | 1,497 | | | | 1,596 | |
| Securities gains, net | | | 1,050 | | | | 2,206 | | | | 2,506 | | | | 5,171 | |
| Gain (loss) on trading account securities | | | (264 | ) | | | 348 | | | | (216 | ) | | | 62 | |
| Gains on sale of loans | | | 1,083 | | | | 2,231 | | | | 1,881 | | | | 4,039 | |
| Income on bank owned life insurance | | | 293 | | | | 213 | | | | 607 | | | | 343 | |
| Other noninterest income | | | 443 | | | | 560 | | | | 896 | | | | 454 | |
Total Noninterest Income | | | 10,834 | | | | 14,664 | | | | 21,427 | | | | 27,426 | |
| Noninterest Expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,574 | | | | 14,952 | | | | 30,997 | | | | 31,385 | |
| Occupancy | | | 2,201 | | | | 2,176 | | | | 4,495 | | | | 4,551 | |
| Furniture and equipment | | | 1,599 | | | | 1,695 | | | | 3,046 | | | | 3,342 | |
| Professional fees | | | 2,549 | | | | 2,151 | | | | 4,760 | | | | 4,321 | |
| FDIC insurance assessments | | | 1,384 | | | | 2,818 | | | | 2,804 | | | | 3,865 | |
| Advertising | | | 1,052 | | | | 949 | | | | 1,866 | | | | 1,532 | |
| Intangible assets amortization | | | 145 | | | | 234 | | | | 296 | | | | 469 | |
| Net loss on repossessed assets | | | 1,636 | | | | 2,532 | | | | 3,700 | | | | 3,152 | |
| Other noninterest expenses | | | 3,435 | | | | 2,970 | | | | 6,512 | | | | 6,146 | |
Total Noninterest Expense | | | 29,575 | | | | 30,477 | | | | 58,476 | | | | 58,763 | |
Income Before Income Taxes | | | 7,113 | | | | 6,524 | | | | 14,595 | | | | 15,412 | |
| Income taxes | | | 2,035 | | | | 1,812 | | | | 4,195 | | | | 4,631 | |
| Net Income | | | 5,078 | | | | 4,712 | | | | 10,400 | | | | 10,781 | |
| Net income attributable to noncontrolling interest, net of tax | | | 25 | | | | 44 | | | | 50 | | | | 103 | |
Net Income Attributable to Heartland | | | 5,103 | | | | 4,756 | | | | 10,450 | | | | 10,884 | |
Preferred dividends and discount | | | (1,336 | ) | | | (1,336 | ) | | | (2,672 | ) | | | (2,672 | ) |
Net Income Available to Common Stockholders | | $ | 3,767 | | | $ | 3,420 | | | $ | 7,778 | | | $ | 8,212 | |
| | | | | | | | | | | | | | | | | |
| Earnings per common share-diluted | | $ | 0.23 | | | $ | 0.21 | | | $ | 0.47 | | | $ | 0.50 | |
| Weighted average shares outstanding-diluted | | | 16,459,978 | | | | 16,323,724 | | | | 16,448,002 | | | | 16,310,384 | |
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | For the Quarter Ended |
| | | | 6/30/2010 | | | | 3/31/2010 | | | | 12/31/2009 | | | | 9/30/2009 | | | | 6/30/2009 | |
| Interest Income | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | $ | 38,270 | | | $ | 37,328 | | | $ | 38,191 | | | $ | 38,790 | | | $ | 38,423 | |
| Interest on securities and other: | | | | | | | | | | | | | | | | | | | | |
Taxable | | | 8,938 | | | | 9,455 | | | | 10,513 | | | | 10,809 | | | | 10,039 | |
Nontaxable | | | 3,047 | | | | 2,849 | | | | 2,456 | | | | 2,231 | | | | 2,025 | |
| Interest on federal funds sold | | | 1 | | | | - | | | | 1 | | | | - | | | | - | |
| Interest on deposits in other financial institutions | | | 7 | | | | 5 | | | | 9 | | | | 17 | | | | - | |
Total Interest Income | | | 50,263 | | | | 49,637 | | | | 51,170 | | | | 51,847 | | | | 50,487 | |
| Interest Expense | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 9,955 | | | | 10,760 | | | | 12,000 | | | | 13,046 | | | | 13,576 | |
| Interest on short-term borrowings | | | 291 | | | | 234 | | | | 194 | | | | 154 | | | | 173 | |
| Interest on other borrowings | | | 4,208 | | | | 3,959 | | | | 4,250 | | | | 4,065 | | | | 4,360 | |
Total Interest Expense | | | 14,454 | | | | 14,953 | | | | 16,444 | | | | 17,265 | | | | 18,109 | |
Net Interest Income | | | 35,809 | | | | 34,684 | | | | 34,726 | | | | 34,582 | | | | 32,378 | |
| Provision for loan and lease losses | | | 9,955 | | | | 8,894 | | | | 10,775 | | | | 11,896 | | | | 10,041 | |
| Net Interest Income After Provision for Loan and Lease Losses | | | 25,854 | | | | 25,790 | | | | 23,951 | | | | 22,686 | | | | 22,337 | |
| Noninterest Income | | | | | | | | | | | | | | | | | | | | |
| Service charges and fees | | | 3,494 | | | | 3,204 | | | | 3,257 | | | | 3,288 | | | | 3,109 | |
| Loan servicing income | | | 1,620 | | | | 1,427 | | | | 1,813 | | | | 1,756 | | | | 3,311 | |
| Trust fees | | | 2,330 | | | | 2,181 | | | | 2,156 | | | | 1,949 | | | | 1,971 | |
| Brokerage and insurance commissions | | | 785 | | | | 712 | | | | 697 | | | | 824 | | | | 715 | |
| Securities gains, net | | | 1,050 | | | | 1,456 | | | | 2,186 | | | | 1,291 | | | | 2,206 | |
| Gain (loss) on trading account securities | | | (264 | ) | | | 48 | | | | (61 | ) | | | 210 | | | | 348 | |
| Impairment loss on securities | | | - | | | | - | | | | (40 | ) | | | - | | | | - | |
| Gains on sale of loans | | | 1,083 | | | | 798 | | | | 1,168 | | | | 877 | | | | 2,231 | |
| Income on bank owned life insurance | | | 293 | | | | 314 | | | | 362 | | | | 297 | | | | 213 | |
| Gain on acquisition | | | - | | | | - | | | | 298 | | | | 998 | | | | - | |
| Other noninterest income | | | 443 | | | | 453 | | | | 1,534 | | | | 418 | | | | 560 | |
Total Noninterest Income | | | 10,834 | | | | 10,593 | | | | 13,370 | | | | 11,908 | | | | 14,664 | |
| Noninterest Expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,574 | | | | 15,423 | | | | 14,419 | | | | 14,661 | | | | 14,952 | |
| Occupancy | | | 2,201 | | | | 2,294 | | | | 2,220 | | | | 2,221 | | | | 2,176 | |
| Furniture and equipment | | | 1,599 | | | | 1,447 | | | | 1,638 | | | | 1,594 | | | | 1,695 | |
| Professional fees | | | 2,549 | | | | 2,211 | | | | 2,100 | | | | 2,706 | | | | 2,151 | |
| FDIC insurance assessments | | | 1,384 | | | | 1,420 | | | | 1,320 | | | | 1,393 | | | | 2,818 | |
| Advertising | | | 1,052 | | | | 814 | | | | 1,065 | | | | 740 | | | | 949 | |
| Goodwill impairment charge | | | - | | | | - | | | | 12,659 | | | | - | | | | - | |
| Intangible assets amortization | | | 145 | | | | 151 | | | | 198 | | | | 199 | | | | 234 | |
| Net loss on repossessed assets | | | 1,636 | | | | 2,064 | | | | 4,015 | | | | 3,680 | | | | 2,532 | |
| Other noninterest expenses | | | 3,435 | | | | 3,077 | | | | 3,800 | | | | 3,129 | | | | 2,970 | |
Total Noninterest Expense | | | 29,575 | | | | 28,901 | | | | 43,434 | | | | 30,323 | | | | 30,477 | |
Income (Loss) Before Income Taxes | | | 7,113 | | | | 7,482 | | | | (6,113 | ) | | | 4,271 | | | | 6,524 | |
| Income taxes | | | 2,035 | | | | 2,160 | | | | 1,762 | | | | 803 | | | | 1,812 | |
Net Income (Loss) | | | 5,078 | | | | 5,322 | | | | (7,875 | ) | | | 3,468 | | | | 4,712 | |
Net income available to noncontrolling interest, net of tax | | | 25 | | | | 25 | | | | 41 | | | | 44 | | | | 44 | |
Net Income (Loss) Attributable to Heartland | | | 5,103 | | | | 5,347 | | | | (7,834 | ) | | | 3,512 | | | | 4,756 | |
Preferred dividends and discount | | | (1,336 | ) | | | (1,336 | ) | | | (1,336 | ) | | | (1,336 | ) | | | (1,336 | ) |
Net Income (Loss) Available to Common Stockholders | | $ | 3,767 | | | $ | 4,011 | | | $ | (9,170 | ) | | $ | 2,176 | | | $ | 3,420 | |
| | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) per common share-diluted | | $ | 0.23 | | | $ | 0.24 | | | $ | (0.56 | ) | | $ | 0.13 | | | $ | 0.21 | |
| Weighted average shares outstanding-diluted | | | 16,459,978 | | | | 16,435,844 | | | | 16,345,095 | | | | 16,340,092 | | | | 16,323,724 | |
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | As Of |
| | | | 6/30/2010 | | | | 3/31/2010 | | | | 12/31/2009 | | | | 9/30/2009 | | | | 6/30/2009 | |
| Assets | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 75,771 | | | $ | 78,010 | | | $ | 182,410 | | | $ | 82,508 | | | $ | 39,961 | |
| Securities | | | 1,213,875 | | | | 1,234,339 | | | | 1,175,217 | | | | 1,105,744 | | | | 1,061,211 | |
| Loans held for sale | | | 25,750 | | | | 16,002 | | | | 17,310 | | | | 19,923 | | | | 24,339 | |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | |
| Held to maturity | | | 2,385,772 | | | | 2,369,233 | | | | 2,331,142 | | | | 2,367,871 | | | | 2,375,027 | |
| Loans covered by loss share agreements | | | 25,420 | | | | 27,968 | | | | 31,860 | | | | 36,175 | | | | - | |
| Allowance for loan and lease losses | | | (48,314 | ) | | | (46,350 | ) | | | (41,848 | ) | | | (42,260 | ) | | | (37,234 | ) |
| Loans and leases, net | | | 2,362,878 | | | | 2,350,851 | | | | 2,321,154 | | | | 2,361,786 | | | | 2,337,793 | |
| Premises, furniture and equipment, net | | | 122,066 | | | | 121,033 | | | | 118,835 | | | | 117,140 | | | | 117,914 | |
| Goodwill | | | 27,548 | | | | 27,548 | | | | 27,548 | | | | 40,207 | | | | 40,207 | |
| Other intangible assets, net | | | 12,426 | | | | 12,320 | | | | 12,380 | | | | 12,101 | | | | 11,591 | |
| Cash surrender value on life insurance | | | 62,113 | | | | 61,525 | | | | 55,516 | | | | 55,141 | | | | 54,817 | |
| Other real estate, net | | | 32,882 | | | | 28,652 | | | | 30,568 | | | | 33,342 | | | | 29,311 | |
| FDIC indemnification asset | | | 1,952 | | | | 2,357 | | | | 5,532 | | | | 4,393 | | | | - | |
| Other assets | | | 71,168 | | | | 65,604 | | | | 66,521 | | | | 47,328 | | | | 49,587 | |
| Total Assets | | $ | 4,008,429 | | | $ | 3,998,241 | | | $ | 4,012,991 | | | $ | 3,879,613 | | | $ | 3,766,731 | |
| | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Equity | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand | | $ | 537,468 | | | $ | 489,807 | | | $ | 460,645 | | | $ | 451,645 | | | $ | 436,985 | |
| Savings | | | 1,552,546 | | | | 1,571,881 | | | | 1,554,358 | | | | 1,386,059 | | | | 1,259,861 | |
| Brokered time deposits | | | 37,285 | | | | 37,285 | | | | 41,791 | | | | 43,473 | | | | 45,322 | |
| Other time deposits | | | 888,847 | | | | 938,438 | | | | 993,595 | | | | 1,063,237 | | | | 1,085,335 | |
| Total deposits | | | 3,016,146 | | | | 3,037,411 | | | | 3,050,389 | | | | 2,944,414 | | | | 2,827,503 | |
| Short-term borrowings | | | 200,515 | | | | 190,732 | | | | 162,349 | | | | 111,346 | | | | 132,301 | |
| Other borrowings | | | 425,994 | | | | 426,039 | | | | 451,429 | | | | 457,444 | | | | 457,508 | |
| Accrued expenses and other liabilities | | | 38,273 | | | | 28,226 | | | | 33,767 | | | | 38,044 | | | | 31,459 | |
| Total Liabilities | | | 3,680,928 | | | | 3,682,408 | | | | 3,697,934 | | | | 3,551,248 | | | | 3,448,771 | |
| | | | | | | | | | | | | | | | | | | | | |
| Equity | | | | | | | | | | | | | | | | | | | | |
| Preferred equity | | | 77,853 | | | | 77,539 | | | | 77,224 | | | | 76,909 | | | | 76,594 | |
| Common equity | | | 246,922 | | | | 235,543 | | | | 235,057 | | | | 248,583 | | | | 238,449 | |
| Total Heartland Stockholders’ Equity | | | 324,775 | | | | 313,082 | | | | 312,281 | | | | 325,492 | | | | 315,043 | |
| Noncontrolling interest | | | 2,726 | | | | 2,751 | | | | 2,776 | | | | 2,873 | | | | 2,917 | |
| Total Equity | | | 327,501 | | | | 315,833 | | | | 315,057 | | | | 328,365 | | | | 317,960 | |
| Total Liabilities and Equity | | $ | 4,008,429 | | | $ | 3,998,241 | | | $ | 4,012,991 | | | $ | 3,879,613 | | | $ | 3,766,731 | |
| | | | | | | | | | | | | | | | | | | | | |
| Common Share Data | | | | | | | | | | | | | | | | | | | | |
| Book value per common share | | $ | 15.08 | | | $ | 14.40 | | | $ | 14.38 | | | $ | 15.23 | | | $ | 14.62 | |
| FAS 115 effect on book value per common share | | $ | 0.93 | | | $ | 0.28 | | | $ | 0.38 | | | $ | 0.62 | | | $ | (0.02 | ) |
| Common shares outstanding, net of treasury stock | | | 16,375,460 | | | | 16,357,874 | | | | 16,346,362 | | | | 16,321,953 | | | | 16,310,825 | |
| | | | | | | | | | | | | | | | | | | | | |
Tangible Capital Ratio(1) | | | 5.45 | % | | | 5.17 | % | | | 5.14 | % | | | 5.35 | % | | | 5.24 | % |
| (1) | Total common 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 Quarter Ended | For the Six Months Ended |
| | | | 6/30/2010 | | | | 6/30/2009 | | | 6/30/2010 | | | | 6/30/2009 | |
| Average Balances | | | | | | | | | | | | | | | |
| Assets | | $ | 4,033,350 | | | $ | 3,763,003 | | $ | 4,009,072 | | | $ | 3,711,104 | |
| Loans and leases, net of unearned | | | 2,437,357 | | | | 2,384,568 | | | 2,410,923 | | | | 2,404,087 | |
| Deposits | | | 3,040,763 | | | | 2,790,322 | | | 3,032,795 | | | | 2,732,321 | |
| Earning assets | | | 3,632,056 | | | | 3,420,233 | | | 3,571,035 | | | | 3,364,894 | |
| Interest bearing liabilities | | | 3,165,862 | | | | 2,984,903 | | | 3,164,512 | | | | 2,951,833 | |
| Common stockholders’ equity | | | 241,816 | | | | 238,878 | | | 239,921 | | | | 237,038 | |
| Total stockholders’ equity | | | 322,110 | | | | 318,077 | | | 320,068 | | | | 316,022 | |
| Tangible common stockholders’ equity | | | 211,640 | | | | 195,483 | | | 209,666 | | | | 193,524 | |
| | | | | | | | | | | | | | | | |
| Earnings Performance Ratios | | | | | | | | | | | | | | | |
| Annualized return on average assets | | | 0.37 | % | | | 0.36 | % | | 0.39 | % | | | 0.45 | % |
| Annualized return on average common equity | | | 6.25 | | | | 5.74 | | | 6.54 | | | | 6.99 | |
| Annualized return on average common tangible equity | | | 7.14 | | | | 7.02 | | | 7.48 | | | | 8.56 | |
Annualized net interest margin(1) | | | 4.09 | | | | 3.92 | | | 4.12 | | | | 3.93 | |
Efficiency ratio(2) | | | 63.14 | | | | 66.40 | | | 63.69 | | | | 66.92 | |
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
| | | | For the Quarter Ended |
| | | | 6/30/2010 | | | | 3/31/2010 | | | | 12/31/2009 | | | | 9/30/2009 | | | | 6/30/2009 | |
| Average Balances | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 4,033,350 | | | $ | 3,984,794 | | | $ | 3,975,107 | | | $ | 3,853,658 | | | $ | 3,763,003 | |
| Loans and leases, net of unearned | | | 2,437,357 | | | | 2,384,490 | | | | 2,410,459 | | | | 2,430,161 | | | | 2,384,568 | |
| Deposits | | | 3,040,763 | | | | 3,024,827 | | | | 3,013,644 | | | | 2,912,325 | | | | 2,790,322 | |
| Earning assets | | | 3,632,056 | | | | 3,510,015 | | | | 3,525,624 | | | | 3,496,607 | | | | 3,420,233 | |
| Interest bearing liabilities | | | 3,165,862 | | | | 3,163,161 | | | | 3,127,792 | | | | 3,041,502 | | | | 2,984,903 | |
| Common stockholders’ equity | | | 241,816 | | | | 238,028 | | | | 246,505 | | | | 243,542 | | | | 238,878 | |
| Total stockholders’ equity | | | 322,110 | | | | 318,027 | | | | 326,254 | | | | 323,040 | | | | 318,077 | |
| Tangible common stockholders’ equity | | | 211,640 | | | | 207,695 | | | | 203,573 | | | | 200,370 | | | | 195,483 | |
| | | | | | | | | | | | | | | | | | | | | |
| Earnings Performance Ratios | | | | | | | | | | | | | | | | | | | | |
| Annualized return on average assets | | | 0.37 | % | | | 0.41 | % | | | (0.92 | ) | % | | 0.22 | % | | | 0.36 | % |
| Annualized return on average common equity | | | 6.25 | | | | 6.83 | | | | (14.76 | ) | | | 3.54 | | | | 5.74 | |
| Annualized return on average common tangible equity | | | 7.14 | | | | 7.83 | | | | (17.87 | ) | | | 4.31 | | | | 7.02 | |
Annualized net interest margin(1) | | | 4.09 | | | | 4.14 | | | | 4.04 | | | | 4.06 | | | | 3.92 | |
Efficiency ratio(2) | | | 63.14 | | | | 64.27 | | | | 92.19 | | | | 65.55 | | | | 66.40 | |
(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 | As of and For |
| | the Qtr. Ended | the Qtr. Ended | the Qtr. Ended | the Qtr. Ended | the Qtr. Ended |
| | 6/30/2010 | 3/31/2010 | 12/31/2009 | 9/30/2009 | 6/30/2009 |
| Loan and Lease Data | | | | | | | | | | | | | | | | | | | | |
| Loans held to maturity: | | | | | | | | | | | | | | | | | | | | |
| Commercial and commercial real estate | | $ | 1,740,856 | | | $ | 1,710,669 | | | $ | 1,670,108 | | | $ | 1,694,589 | | | $ | 1,701,933 | |
| Residential mortgage | | | 169,105 | | | | 175,065 | | | | 175,059 | | | | 184,292 | | | | 187,016 | |
| Agricultural and agricultural real estate | | | 255,576 | | | | 258,239 | | | | 256,780 | | | | 257,738 | | | | 255,340 | |
| Consumer | | | 223,800 | | | | 228,311 | | | | 231,709 | | | | 233,259 | | | | 231,986 | |
| Direct financing leases, net | | | 1,420 | | | | 1,951 | | | | 2,326 | | | | 2,882 | | | | 3,615 | |
| Unearned discount and deferred loan fees | | | (4,985 | ) | | | (5,002 | ) | | | (4,840 | ) | | | (4,889 | ) | | | (4,863 | ) |
| Total loans and leases held to maturity | | $ | 2,385,772 | | | $ | 2,369,233 | | | $ | 2,331,142 | | | $ | 2,367,871 | | | $ | 2,375,027 | |
| Loans covered under loss share agreements: | | | | | | | | | | | | | | | | | | | | |
| Commercial and commercial real estate | | $ | 12,266 | | | $ | 13,241 | | | $ | 15,068 | | | $ | 17,109 | | | $ | - | |
| Residential mortgage | | | 7,148 | | | | 8,064 | | | | 8,984 | | | | 10,201 | | | | - | |
| Agricultural and agricultural real estate | | | 3,346 | | | | 2,806 | | | | 3,626 | | | | 4,117 | | | | - | |
| Consumer | | | 2,660 | | | | 3,857 | | | | 4,182 | | | | 4,748 | | | | - | |
| Total loans and leases covered underloss share agreements | | $ | 25,420 | | | $ | 27,968 | | | $ | 31,860 | | | $ | 36,175 | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Asset Quality | | | | | | | | | | | | | | | | | | | | |
| Not covered under loss share agreements: | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 84,925 | | | $ | 78,239 | | | $ | 78,118 | | | $ | 78,940 | | | $ | 71,116 | |
| Loans and leases past due ninety days or more as to interest or principal payments | | | - | | | | 47 | | | | 17 | | | | 5,063 | | | | 54 | |
| Other real estate owned | | | 32,554 | | | | 28,290 | | | | 30,205 | | | | 32,643 | | | | 29,311 | |
| Other repossessed assets | | | 486 | | | | 528 | | | | 501 | | | | 565 | | | | 1,477 | |
| Total nonperforming assets not covered under loss share agreements | | $ | 117,965 | | | $ | 107,104 | | | $ | 108,841 | | | $ | 117,211 | | | $ | 101,958 | |
| | | | | | | | | | | | | | | | | | | | | |
| Covered under loss share agreements: | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 4,949 | | | $ | 4,621 | | | $ | 4,170 | | | $ | 4,102 | | | $ | - | |
| Loans and leases past due ninety days or more as to interest or principal payments | | | - | | | | - | | | | - | | | | - | | | | - | |
| Other real estate owned | | | 328 | | | | 362 | | | | 363 | | | | 599 | | | | - | |
| Other repossessed assets | | | - | | | | - | | | | - | | | | - | | | | - | |
| Total nonperforming assets covered under loss share agreements | | $ | 5,277 | | | $ | 4,983 | | | $ | 4,533 | | | $ | 4,701 | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for Loan and Lease Losses | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | | $ | 46,350 | | | $ | 41,848 | | | $ | 42,260 | | | $ | 37,234 | | | $ | 37,277 | |
| Provision for loan and lease losses | | | 9,955 | | | | 8,894 | | | | 10,775 | | | | 11,896 | | | | 10,041 | |
| Charge offs on loans not covered by loss share agreements | | | (8,879 | ) | | | (4,505 | ) | | | (10,115 | ) | | | (7,465 | ) | | | (10,406 | ) |
| Charge offs on loans covered by loss share agreements | | | (46 | ) | | | (264 | ) | | | (1,344 | ) | | | - | | | | - | |
| Recoveries | | | 934 | | | | 377 | | | | 272 | | | | 595 | | | | 322 | |
| Balance, end of period | | $ | 48,314 | | | $ | 46,350 | | | $ | 41,848 | | | $ | 42,260 | | | $ | 37,234 | |
| | | | | | | | | | | | | | | | | | | | | |
| Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements | | | | | | | | | | | | | | | | | | | | |
| Ratio of nonperforming loans and leases to total loans and leases | | | 3.56 | % | | | 3.30 | % | | | 3.35 | % | | | 3.55 | % | | | 3.00 | % |
| Ratio of nonperforming assets to total assets | | | 2.94 | % | | | 2.68 | % | | | 2.71 | % | | | 3.02 | % | | | 2.71 | % |
| Annualized ratio of net loan charge-offs to average loans and leases | | | 1.32 | % | | | 0.75 | % | | | 1.84 | % | | | 1.12 | % | | | 1.70 | % |
| Allowance for loan and lease losses as a percent of loans and leases | | | 2.03 | % | | | 1.96 | % | | | 1.80 | % | | | 1.78 | % | | | 1.57 | % |
| Allowance for loan and lease losses as a percent of nonperforming loans and leases | | | 56.89 | % | | | 59.21 | % | | | 53.56 | % | | | 50.31 | % | | | 52.32 | % |
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS |
| | | | For the Quarter Ended | |
| | | | June 30, 2010 | | | | June 30, 2009 | |
| | | | Average | | | | | | | | | | | Average | | | | | | | | |
| | | | Balance | | | | Interest | | | Rate | | | | Balance | | | | Interest | | | Rate | |
| Earning Assets | | | | | | | | | | | | | | | | | | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | | | | |
Taxable | | $ | 980,894 | | | $ | 8,914 | | | 3.65 | % | | $ | 891,873 | | | $ | 10,038 | | | 4.51 | % |
Nontaxable(1) | | | 255,226 | | | | 4,022 | | | 6.32 | % | | | 178,433 | | | | 2,879 | | | 6.47 | % |
Total securities | | | 1,236,120 | | | | 12,936 | | | 4.20 | % | | | 1,070,306 | | | | 12,917 | | | 4.84 | % |
| Interest bearing deposits | | | 4,555 | | | | 7 | | | 0.62 | % | | | 1,727 | | | | 2 | | | 0.46 | % |
| Federal funds sold | | | 349 | | | | 1 | | | 1.15 | % | | | 139 | | | | - | | | 0.00 | % |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and commercial real estate(1) | | | 1,750,917 | | | | 25,837 | | | 5.92 | % | | | 1,676,614 | | | | 25,092 | | | 6.00 | % |
Residential mortgage | | | 198,059 | | | | 2,497 | | | 5.06 | % | | | 217,054 | | | | 3,225 | | | 5.96 | % |
Agricultural and agricultural real estate(1) | | | 260,301 | | | | 4,098 | | | 6.31 | % | | | 257,283 | | | | 4,224 | | | 6.59 | % |
Consumer | | | 226,344 | | | | 5,029 | | | 8.91 | % | | | 229,298 | | | | 5,038 | | | 8.81 | % |
Direct financing leases, net | | | 1,736 | | | | 25 | | | 5.78 | % | | | 4,319 | | | | 60 | | | 5.57 | % |
Fees on loans | | | - | | | | 1,082 | | | - | | | | - | | | | 991 | | | - | |
Less: allowance for loan and lease losses | | | (46,325 | ) | | | - | | | - | | | | (36,507 | ) | | | - | | | - | |
Net loans and leases | | | 2,391,032 | | | | 38,568 | | | 6.47 | % | | | 2,348,061 | | | | 38,630 | | | 6.60 | % |
Total earning assets | | | 3,632,056 | | | | 51,512 | | | 5.69 | % | | | 3,420,233 | | | | 51,549 | | | 6.05 | % |
| Nonearning Assets | | | 401,294 | | | | | | | | | | | 342,770 | | | | | | | | |
| Total Assets | | $ | 4,033,350 | | | $ | 51,512 | | | | | | $ | 3,763,003 | | | $ | 51,549 | | | | |
| Interest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | | | | | | | | | | | | | | | | | | | | | |
Savings | | $ | 1,576,820 | | | $ | 3,753 | | | 0.95 | % | | $ | 1,213,206 | | | $ | 4,568 | | | 1.51 | % |
Time, $100,000 and over | | | 300,454 | | | | 1,912 | | | 2.55 | % | | | 389,827 | | | | 2,965 | | | 3.05 | % |
Other time deposits | | | 649,680 | | | | 4,290 | | | 2.65 | % | | | 763,416 | | | | 6,043 | | | 3.17 | % |
| Short-term borrowings | | | 212,539 | | | | 291 | | | 0.55 | % | | | 142,600 | | | | 173 | | | 0.49 | % |
| Other borrowings | | | 426,369 | | | | 4,208 | | | 3.96 | % | | | 475,854 | | | | 4,360 | | | 3.68 | % |
Total interest bearing liabilities | | | 3,165,862 | | | | 14,454 | | | 1.83 | % | | | 2,984,903 | | | | 18,109 | | | 2.43 | % |
| Noninterest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest bearing deposits | | | 513,809 | | | | | | | | | | | 423,873 | | | | | | | | |
| Accrued interest and other liabilities | | | 31,569 | | | | | | | | | | | 36,510 | | | | | | | | |
Total noninterest bearing liabilities | | | 545,378 | | | | | | | | | | | 460,023 | | | | | | | | |
| Stockholders’ Equity | | | 322,110 | | | | | | | | | | | 318,077 | | | | | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 4,033,350 | | | | | | | | | | $ | 3,763,003 | | | | | | | | |
Net interest income(1) | | | | | | $ | 37,058 | | | | | | | | | | $ | 33,440 | | | | |
Net interest spread(1) | | | | | | | | | | 3.86 | % | | | | | | | | | | 3.61 | % |
Net interest income to total earning assets(1) | | | | | | | | | | 4.09 | % | | | | | | | | | | 3.92 | % |
| Interest bearing liabilities to earning assets | | | 87.16 | % | | | | | | | | | | 87.27 | % | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(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 Six Months Ended | |
| | | | June 30, 2010 | | | | June 30, 2009 | |
| | | | Average | | | | | | | | | | | Average | | | | | | | | |
| | | | Balance | | | | Interest | | | Rate | | | | Balance | | | | Interest | | | Rate | |
| Earning Assets | | | | | | | | | | | | | | | | | | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | | | | |
Taxable | | $ | 953,528 | | | $ | 18,369 | | | 3.88 | % | | $ | 825,928 | | | $ | 18,459 | | | 4.51 | % |
Nontaxable(1) | | | 247,406 | | | | 7,829 | | | 6.38 | % | | | 169,290 | | | | 5,599 | | | 6.67 | % |
Total securities | | | 1,200,934 | | | | 26,198 | | | 4.40 | % | | | 995,218 | | | | 24,058 | | | 4.87 | % |
| Interest bearing deposits | | | 3,701 | | | | 12 | | | 0.65 | % | | | 1,181 | | | | 3 | | | 0.51 | % |
| Federal funds sold | | | 483 | | | | 1 | | | 0.42 | % | | | 462 | | | | 1 | | | 0.44 | % |
| Loans and leases: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and commercial real estate(1) | | | 1,723,039 | | | | 50,658 | | | 5.93 | % | | | 1,685,205 | | | | 51,234 | | | 6.13 | % |
Residential mortgage | | | 197,415 | | | | 5,217 | | | 5.33 | % | | | 226,966 | | | | 6,674 | | | 5.93 | % |
Agricultural and agricultural real estate(1) | | | 259,535 | | | | 8,082 | | | 6.28 | % | | | 256,671 | | | | 8,316 | | | 6.53 | % |
Consumer | | | 229,002 | | | | 10,003 | | | 8.81 | % | | | 230,313 | | | | 10,011 | | | 8.77 | % |
Direct financing leases, net | | | 1,932 | | | | 57 | | | 5.95 | % | | | 4,932 | | | | 128 | | | 5.23 | % |
Fees on loans | | | - | | | | 2,068 | | | - | | | | - | | | | 1,957 | | | - | |
Less: allowance for loan and lease losses | | | (45,006 | ) | | | - | | | - | | | | (36,054 | ) | | | - | | | - | |
Net loans and leases | | | 2,365,917 | | | | 76,085 | | | 6.49 | % | | | 2,368,033 | | | | 78,320 | | | 6.67 | % |
Total earning assets | | | 3,571,035 | | | | 102,296 | | | 5.78 | % | | | 3,364,894 | | | | 102,382 | | | 6.14 | % |
| Nonearning Assets | | | 438,037 | | | | | | | | | | | 346,210 | | | | | | | | |
| Total Assets | | $ | 4,009,072 | | | $ | 102,296 | | | | | | $ | 3,711,104 | | | $ | 102,382 | | | | |
| Interest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | | | | | | | | | | | | | | | | | | | | | |
Savings | | $ | 1,562,980 | | | $ | 7,889 | | | 1.02 | % | | $ | 1,164,760 | | | $ | 9,092 | | | 1.57 | % |
Time, $100,000 and over | | | 312,671 | | | | 3,982 | | | 2.57 | % | | | 392,387 | | | | 6,203 | | | 3.19 | % |
Other time deposits | | | 666,770 | | | | 8,844 | | | 2.67 | % | | | 766,430 | | | | 12,403 | | | 3.26 | % |
| Short-term borrowings | | | 190,888 | | | | 525 | | | 0.55 | % | | | 156,713 | | | | 385 | | | 0.50 | % |
| Other borrowings | | | 431,203 | | | | 8,167 | | | 3.82 | % | | | 471,543 | | | | 8,738 | | | 3.74 | % |
Total interest bearing liabilities | | | 3,164,512 | | | | 29,407 | | | 1.87 | % | | | 2,951,833 | | | | 36,821 | | | 2.52 | % |
| Noninterest Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest bearing deposits | | | 490,374 | | | | | | | | | | | 408,744 | | | | | | | | |
| Accrued interest and other liabilities | | | 34,118 | | | | | | | | | | | 34,505 | | | | | | | | |
Total noninterest bearing liabilities | | | 524,492 | | | | | | | | | | | 443,249 | | | | | | | | |
| Stockholders’ Equity | | | 320,068 | | | | | | | | | | | 316,022 | | | | | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 4,009,072 | | | | | | | | | | $ | 3,711,104 | | | | | | | | |
Net interest income(1) | | | | | | $ | 72,889 | | | | | | | | | | $ | 65,561 | | | | |
Net interest spread(1) | | | | | | | | | | 3.90 | % | | | | | | | | | | 3.62 | % |
Net interest income to total earning assets(1) | | | | | | | | | | 4.12 | % | | | | | | | | | | 3.93 | % |
| Interest bearing liabilities to earning assets | | | 88.62 | % | | | | | | | | | | 87.72 | % | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA – SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS |
| | | | As of and | | | As of and | | | As of and | | | As of and | | | As of and | |
| | | | For the | | | For the | | | For the | | | For the | | | For the | |
| | | | Qtr. Ended | | | Qtr. Ended | | | Qtr. Ended | | | Qtr. Ended | | | Qtr. Ended | |
| | | | 6/30/2010 | | | 3/31/2010 | | | 12/31/2009 | | | 9/30/2009 | | | 6/30/2009 | |
| Total Assets | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | $ | 1,128,580 | | $ | 1,160,474 | | $ | 1,249,124 | | $ | 1,104,217 | | $ | 1,097,161 | |
| New Mexico Bank & Trust | | | 878,518 | | | 849,428 | | | 868,295 | | | 785,146 | | | 791,019 | |
| Wisconsin Community Bank | | | 458,468 | | | 456,510 | | | 448,106 | | | 433,900 | | | 434,362 | |
| Rocky Mountain Bank | | | 439,241 | | | 454,558 | | | 469,723 | | | 468,695 | | | 470,220 | |
| Galena State Bank & Trust Co. | | | 283,038 | | | 287,495 | | | 291,412 | | | 288,501 | | | 231,655 | |
| Riverside Community Bank | | | 295,671 | | | 283,195 | | | 283,258 | | | 277,639 | | | 270,354 | |
| Arizona Bank & Trust | | | 267,959 | | | 267,453 | | | 258,280 | | | 268,600 | | | 251,562 | |
| First Community Bank | | | 118,887 | | | 119,962 | | | 121,492 | | | 121,938 | | | 125,069 | |
| Summit Bank & Trust | | | 97,332 | | | 95,442 | | | 97,025 | | | 99,724 | | | 91,211 | |
| Minnesota Bank & Trust | | | 55,722 | | | 54,318 | | | 49,330 | | | 39,283 | | | 34,547 | |
| Total Deposits | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | $ | 784,955 | | $ | 806,574 | | $ | 864,133 | | $ | 815,553 | | $ | 798,927 | |
| New Mexico Bank & Trust | | | 624,454 | | | 608,030 | | | 589,468 | | | 563,414 | | | 552,650 | |
| Wisconsin Community Bank | | | 358,034 | | | 355,880 | | | 358,994 | | | 338,328 | | | 330,327 | |
| Rocky Mountain Bank | | | 350,636 | | | 363,842 | | | 376,487 | | | 364,570 | | | 364,159 | |
| Galena State Bank & Trust Co. | | | 243,964 | | | 250,621 | | | 253,073 | | | 244,389 | | | 196,035 | |
| Riverside Community Bank | | | 242,964 | | | 233,440 | | | 232,459 | | | 226,791 | | | 220,097 | |
| Arizona Bank & Trust | | | 229,885 | | | 230,699 | | | 202,730 | | | 215,092 | | | 198,310 | |
| First Community Bank | | | 97,057 | | | 98,691 | | | 100,328 | | | 99,351 | | | 99,772 | |
| Summit Bank & Trust | | | 82,445 | | | 81,414 | | | 85,131 | | | 89,130 | | | 79,991 | |
| Minnesota Bank & Trust | | | 41,234 | | | 39,912 | | | 34,616 | | | 24,364 | | | 18,477 | |
| Net Income (Loss) | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | $ | 3,304 | | $ | 4,921 | | $ | 3,751 | | $ | 3,863 | | $ | 4,144 | |
| New Mexico Bank & Trust | | | 1,828 | | | 2,341 | | | 1,640 | | | 1,955 | | | 1,434 | |
| Wisconsin Community Bank | | | 2,271 | | | 1,367 | | | 770 | | | 1,198 | | | 1,464 | |
| Rocky Mountain Bank | | | 1,204 | | | (596 | ) | | (6,399 | ) | | (463 | ) | | 204 | |
| Galena State Bank & Trust Co. | | | 967 | | | 1,046 | | | 663 | | | 962 | | | 513 | |
| Riverside Community Bank | | | 290 | | | 640 | | | (55 | ) | | 283 | | | (326 | ) |
| Arizona Bank & Trust | | | (2,004 | ) | | (2,900 | ) | | (5,117 | ) | | (1,227 | ) | | (1,151 | ) |
| First Community Bank | | | 19 | | | 399 | | | (225 | ) | | 101 | | | (209 | ) |
| Summit Bank & Trust | | | 399 | | | (118 | ) | | (490 | ) | | (1,366 | ) | | (1,169 | ) |
| Minnesota Bank & Trust | | | (134 | ) | | (123 | ) | | (203 | ) | | (221 | ) | | (225 | ) |
| Return on Average Assets | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | | 1.13 | % | | 1.66 | % | | 1.25 | % | | 1.40 | % | | 1.50 | % |
| New Mexico Bank & Trust | | | 0.83 | | | 1.12 | | | 0.79 | | | 0.99 | | | 0.73 | |
| Wisconsin Community Bank | | | 1.98 | | | 1.23 | | | 0.69 | | | 1.09 | | | 1.35 | |
| Rocky Mountain Bank | | | 1.08 | | | (0.53 | ) | | (5.30 | ) | | (0.39 | ) | | 0.17 | |
| Galena State Bank & Trust Co. | | | 1.35 | | | 1.46 | | | 0.90 | | | 1.34 | �� | | 0.90 | |
| Riverside Community Bank | | | 0.40 | | | 0.93 | | | (0.08 | ) | | 0.41 | | | (0.50 | ) |
| Arizona Bank & Trust | | | (2.95 | ) | | (4.62 | ) | | (7.60 | ) | | (1.86 | ) | | (1.88 | ) |
| First Community Bank | | | 0.06 | | | 1.35 | | | (0.72 | ) | | 0.32 | | | (0.67 | ) |
| Summit Bank & Trust | | | 1.65 | | | (0.50 | ) | | (1.94 | ) | | (5.62 | ) | | (5.59 | ) |
| Minnesota Bank & Trust | | | (1.00 | ) | | (0.95 | ) | | (1.95 | ) | | (2.42 | ) | | (2.77 | ) |
| Net Interest Margin as a Percentage of Average Earning Assets | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | | 4.04 | % | | 4.05 | % | | 3.98 | % | | 3.98 | % | | 3.72 | % |
| New Mexico Bank & Trust | | | 3.94 | | | 4.18 | | | 4.23 | | | 4.67 | | | 4.38 | |
| Wisconsin Community Bank | | | 4.35 | | | 3.80 | | | 3.91 | | | 3.76 | | | 4.12 | |
| Rocky Mountain Bank | | | 3.79 | | | 3.90 | | | 3.68 | | | 3.80 | | | 3.82 | |
| Galena State Bank & Trust Co. | | | 3.56 | | | 3.48 | | | 3.46 | | | 3.47 | | | 3.59 | |
| Riverside Community Bank | | | 3.84 | | | 3.95 | | | 4.14 | | | 3.86 | | | 3.38 | |
| Arizona Bank & Trust | | | 3.46 | | | 3.64 | | | 3.58 | | | 3.33 | | | 3.20 | |
| First Community Bank | | | 3.58 | | | 3.79 | | | 4.24 | | | 4.31 | | | 3.60 | |
| Summit Bank & Trust | | | 3.98 | | | 3.29 | | | 3.00 | | | 2.47 | | | 3.17 | |
| Minnesota Bank & Trust | | | 3.24 | | | 3.24 | | | 4.16 | | | 3.86 | | | 3.94 | |
HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA – SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS |
| | | | As of | | | As of | | | As of | | | As of | | | As of | |
| | | | 6/30/2010 | | | 3/31/2010 | | | 12/31/2009 | | | 9/30/2009 | | | 6/30/2009 | |
| Total Portfolio Loans and Leases | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | $ | 698,562 | | $ | 681,668 | | $ | 658,274 | | $ | 653,579 | | $ | 669,925 | |
| New Mexico Bank & Trust | | | 513,257 | | | 509,696 | | | 502,497 | | | 513,560 | | | 499,597 | |
| Wisconsin Community Bank | | | 323,024 | | | 314,102 | | | 274,487 | | | 289,558 | | | 298,817 | |
| Rocky Mountain Bank | | | 272,035 | | | 281,079 | | | 292,914 | | | 302,494 | | | 314,523 | |
| Galena State Bank & Trust Co. | | | 133,666 | | | 131,539 | | | 134,104 | | | 136,700 | | | 130,011 | |
| Riverside Community Bank | | | 159,137 | | | 157,511 | | | 161,280 | | | 161,025 | | | 159,977 | |
| Arizona Bank & Trust | | | 129,445 | | | 131,115 | | | 138,604 | | | 142,387 | | | 135,198 | |
| First Community Bank | | | 64,666 | | | 66,560 | | | 72,113 | | | 73,722 | | | 72,676 | |
| Summit Bank & Trust | | | 53,543 | | | 58,272 | | | 58,108 | | | 58,410 | | | 60,948 | |
| Minnesota Bank & Trust | | | 25,058 | | | 24,997 | | | 24,472 | | | 22,118 | | | 19,977 | |
| Allowance For Loan and Lease Losses | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | $ | 12,343 | | $ | 10,395 | | $ | 10,486 | | $ | 10,318 | | $ | 9,478 | |
| New Mexico Bank & Trust | | | 8,388 | | | 7,999 | | | 7,578 | | | 7,641 | | | 7,080 | |
| Wisconsin Community Bank | | | 4,306 | | | 5,328 | | | 5,390 | | | 5,133 | | | 4,386 | |
| Rocky Mountain Bank | | | 6,465 | | | 7,434 | | | 5,897 | | | 6,152 | | | 5,743 | |
| Galena State Bank & Trust Co. | | | 1,543 | | | 1,466 | | | 1,989 | | | 1,897 | | | 1,711 | |
| Riverside Community Bank | | | 2,751 | | | 2,425 | | | 2,395 | | | 2,475 | | | 2,270 | |
| Arizona Bank & Trust | | | 7,912 | | | 7,056 | | | 3,825 | | | 4,380 | | | 2,520 | |
| First Community Bank | | | 1,262 | | | 993 | | | 1,072 | | | 1,122 | | | 989 | |
| Summit Bank & Trust | | | 913 | | | 994 | | | 926 | | | 930 | | | 922 | |
| Minnesota Bank & Trust | | | 242 | | | 240 | | | 295 | | | 276 | | | 234 | |
| Nonperforming Loans and Leases | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | $ | 5,754 | | $ | 6,408 | | $ | 6,102 | | $ | 7,365 | | $ | 6,474 | |
| New Mexico Bank & Trust | | | 15,901 | | | 13,998 | | | 14,069 | | | 18,693 | | | 10,283 | |
| Wisconsin Community Bank | | | 10,159 | | | 15,773 | | | 14,396 | | | 13,276 | | | 12,173 | |
| Rocky Mountain Bank | | | 31,981 | | | 21,558 | | | 18,443 | | | 17,286 | | | 18,570 | |
| Galena State Bank & Trust Co. | | | 2,605 | | | 1,372 | | | 1,545 | | | 2,045 | | | 2,425 | |
| Riverside Community Bank | | | 7,722 | | | 5,543 | | | 8,104 | | | 9,493 | | | 8,457 | |
| Arizona Bank & Trust | | | 5,165 | | | 4,922 | | | 5,158 | | | 5,689 | | | 5,806 | |
| First Community Bank | | | 2,338 | | | 2,512 | | | 2,736 | | | 3,866 | | | 2,893 | |
| Summit Bank & Trust | | | 2,691 | | | 5,513 | | | 6,719 | | | 5,528 | | | 3,305 | |
| Minnesota Bank & Trust | | | - | | | - | | | 19 | | | - | | | - | |
| Allowance As a Percent of Total Loans and Leases | | | | | | | | | | | | | | | | |
| Dubuque Bank and Trust Company | | | 1.77 | % | | 1.52 | % | | 1.59 | % | | 1.58 | % | | 1.41 | % |
| New Mexico Bank & Trust | | | 1.63 | | | 1.57 | | | 1.51 | | | 1.49 | | | 1.42 | |
| Wisconsin Community Bank | | | 1.33 | | | 1.70 | | | 1.96 | | | 1.77 | | | 1.47 | |
| Rocky Mountain Bank | | | 2.38 | | | 2.64 | | | 2.01 | | | 2.03 | | | 1.83 | |
| Galena State Bank & Trust Co. | | | 1.15 | | | 1.11 | | | 1.48 | | | 1.39 | | | 1.32 | |
| Riverside Community Bank | | | 1.73 | | | 1.54 | | | 1.48 | | | 1.54 | | | 1.42 | |
| Arizona Bank & Trust | | | 6.11 | | | 5.38 | | | 2.76 | | | 3.08 | | | 1.86 | |
| First Community Bank | | | 1.95 | | | 1.49 | | | 1.49 | | | 1.52 | | | 1.36 | |
| Summit Bank & Trust | | | 1.71 | | | 1.71 | | | 1.59 | | | 1.59 | | | 1.51 | |
| Minnesota Bank & Trust | | | 0.97 | | | 0.96 | | | 1.21 | | | 1.25 | | | 1.17 | |
