 |  | |
| CONTACT: | FOR IMMEDIATE RELEASE |
| Bryan R. McKeag | October 28, 2013 |
| Executive Vice President | |
| Chief Financial Officer | |
| (563) 589-1994 | |
| bmckeag@htlf.com | |
HEARTLAND FINANCIAL USA, INC. REPORTS THIRD QUARTER 2013 RESULTS
Quarterly Highlights
| § | Net income available to common stockholders of $6.5 million or $0.38 per diluted common share |
| § | Return on average common equity of 8.38% |
| § | Net interest margin of 3.81% |
| § | Loan growth of $69.3 million or 10% annualized since June 30, 2013 |
| § | Deposit growth of $83.9 million or 9% annualized since June 30, 2013 |
| § | Purchase of Morrill Bancshares, Inc. completed on October 18, 2013 |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Net income (in millions) | $ | 6.8 | $ | 13.6 | $ | 28.9 | $ | 40.4 | |||||||
| Net income available to common stockholders (in millions) | 6.5 | 12.6 | 28.0 | 37.4 | |||||||||||
| Diluted earnings per common share | 0.38 | 0.75 | 1.63 | 2.24 | |||||||||||
| Return on average assets | 0.53 | % | 1.11 | % | 0.76 | % | 1.14 | % | |||||||
| Return on average common equity | 8.38 | 16.79 | 11.63 | 17.44 | |||||||||||
| Net interest margin | 3.81 | 3.84 | 3.77 | 4.03 | |||||||||||
“Though Heartland’s third quarter earnings fell short of our expectations, we were pleased to see many positive results for the period. Notable highlights include improved loan growth, solid pre-tax, pre-provision earnings, an increase in net interest margin to 3.81% and year-to-date return on equity of 11.63%.” Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA, Inc. | ||||
Dubuque, Iowa, Monday, October 28, 2013-Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders was $6.5 million, or $0.38 per diluted common share, for the quarter ended September 30, 2013, compared to $12.6 million, or $0.75 per diluted common share, for the third quarter of 2012. Return on average common equity was 8.38% and return on average assets was 0.53% for the third quarter of 2013, compared to 16.79% and 1.11%, respectively, for the same quarter in 2012.
Earnings for the third quarter of 2013 were below earnings for the third quarter of 2012, primarily as a result of an $8.5 million decrease in gains on sale of loans and a $4.1 million decrease in securities gains, coupled with a $5.6 million increase in provision for loan and lease losses. Positively affecting earnings for the third quarter of 2013, in comparison to the third quarter of 2012, were an increase in net interest income and a decrease in net loss on repossessed assets. Loan growth was strong during the third quarter of 2013.
Commenting on Heartland's third quarter results, Lynn B. Fuller, Heartland's chairman, president and chief executive officer said, “Though Heartland’s third quarter earnings fell short of our expectations, we were pleased to see many positive results for the period. Notable highlights include improved loan growth, solid pre-tax, pre-provision earnings, an increase in net interest margin to 3.81% and year-to-date return on equity of 11.63%."
Net income available to common stockholders was $28.0 million, or $1.63 per diluted common share, for the nine months ended September 30, 2013, compared to $37.4 million, or $2.24 per diluted common share, earned during the first nine months of 2012. Return on average common equity was 11.63% and return on average assets was 0.76% for the first nine months of 2013, compared to 17.44% and 1.14%, respectively, for the same period in 2012.
Earnings for the first nine months of 2013, in comparison to the first nine months of 2012, were most positively affected by increases in net interest income, loan servicing income and service charges and fees, combined with a decrease in net loss on repossessed assets. In addition to a decline in gains on sale of loans during the first nine months of 2013, reduced securities gains and significant increases in salaries and employee benefits, occupancy and furniture and equipment expenses more than offset the improvements discussed above. The earnings for the first nine months of 2012 included the two best quarterly earnings in Heartland's history.
Net Interest Margin Percentage Remains Stable; Increases in Dollars
Net interest margin, expressed as a percentage of average earning assets, was 3.81% during the third quarter of 2013 compared to 3.71% during the second quarter of 2013, 3.77% during the first quarter of 2013 and 3.84% for the third quarter of 2012. For the nine-month periods ended September 30, net interest margin was 3.77% during 2013 and 4.03% during 2012.
Fuller said, “Our net interest margin increased to 3.81% during the third quarter from 3.71% for the previous quarter. Margin improvement was the result of a combination of loan growth, improved yields on securities and some improvement in funding costs.”
On a tax-equivalent basis, interest income in the third quarter of 2013 was $50.8 million compared to $48.5 million in the third quarter of 2012, an increase of $2.3 million or 5%. For the first nine months of 2013, interest income on a tax-equivalent basis was $150.9 million compared to $147.2 million during the same period in 2012, an increase of $3.7 million or 3%. Average earning assets increased $376.5 million or 9% during the third quarter of 2013 compared to the third quarter of 2012 and $528.7 million or 14% during the first nine months of 2013 compared to the same period in 2012, with approximately $225.0 million of the growth in both periods attributable to the three acquisitions completed during the second half of 2012. The average interest rate earned on total average earning assets was 4.58% during the third quarter of 2013 compared to 4.80% during the third quarter of 2012. For the first nine months of the year, the average interest rate earned on these assets was 4.56% during 2013 compared to 5.05% during 2012.
Interest expense for the third quarter of 2013 was $8.5 million, a decrease of $1.2 million or 12% from $9.7 million in the third quarter of 2012. On a nine-month comparative basis, interest expense decreased $3.2 million or 11%. Even though average interest bearing liabilities increased $177.8 million or 5% for the quarter ended September 30, 2013, as compared to the same quarter in 2012, and $266.4 million or 8% for the nine-month period ended on September 30, 2013, as compared to the same nine-month period in 2012, the average interest rate paid on Heartland's deposits and borrowings declined 21 basis points during the quarterly period under comparison and 23 basis points during the nine-month period under comparison. Contributing to this improvement in interest expense was a continued change in the mix of deposits. Average savings balances, the lowest cost interest bearing
deposits, as a percentage of total average interest bearing deposits, were 71% during the third quarter of 2013 and 70% during the first nine-month period of 2013 compared to 68% for both the third quarter and first nine months of 2012. Additionally, the average interest rate paid on savings deposits was 0.30% during the third quarter and 0.31% during the first nine months of 2013 compared to 0.38% during the third quarter and 0.39% during the first nine months of 2012.
Net interest income on a tax-equivalent basis totaled $42.3 million during the third quarter of 2013, an increase of $3.5 million or 9% from the $38.8 million recorded during the third quarter of 2012. For the first nine months of 2013, net interest income on a tax-equivalent basis was $124.5 million, an increase of $6.9 million or 6% from the $117.6 million recorded during the first nine months of 2012.
Decrease in Noninterest Income; Increase in Noninterest Expenses
Noninterest income was $20.7 million during the third quarter of 2013 compared to $29.8 million during the third quarter of 2012, a decrease of $9.1 million or 31%. For the nine-month period ended September 30, noninterest income was $72.0 million in 2013 compared to $81.4 million in 2012, a decrease of $9.4 million or 12%. Although noninterest income was negatively affected by decreased gains on sale of loans and securities gains in both the quarterly and nine-month comparative periods, these decreases were partially offset by increases in loan servicing income and other fee income categories. Gains on sale of loans totaled $5.3 million during the third quarter of 2013 compared to $13.8 million during the third quarter of 2012, a decrease of $8.5 million or 62%. During the first nine months of 2013, gains on sale of loans totaled $24.2 million compared to $34.9 million during the first nine months of 2012, a $10.7 million or 31% decrease. Gains on sale of loans result primarily from the gain or loss on sales of mortgage loans into the secondary market, related fees and fair value marks on the associated derivatives. The volume of residential mortgage loans sold totaled $336.8 million during the third quarter of 2013 compared to $448.7 million during the third quarter of 2012, and totaled $1.21 billion during the first nine months of 2013 compared to $1.05 billion during the first nine months of 2012. Securities gains totaled $1.1 million during the third quarter of 2013 compared to $5.2 million during the third quarter of 2012, and totaled $6.6 million during the first nine months of 2013 compared to $14.1 million during the first nine months of 2012.
Loan servicing income increased $968,000 or 32% for the third quarter of 2013 as compared to the third quarter of 2012 and $3.6 million or 46% for the nine-month period ended September 30, 2013, as compared to the same period in 2012. Included in loan servicing income are the fees collected for the servicing of mortgage loans for others, which are dependent upon the aggregate outstanding balance of these loans, rather than quarterly production and sale of mortgage loans. Fees collected for the servicing of mortgage loans for others were $1.9 million during the third quarter of 2013 compared to $1.1 million during the third quarter of 2012, an increase of $780,000 or 69%. For the first nine months of 2013, fees collected for the servicing of mortgage loans for others was $4.9 million compared to $3.1 million during the first nine months of 2012, an increase of $1.8 million or 58%. The portfolio of mortgage loans serviced for others by Heartland totaled $2.89 billion at September 30, 2013, compared to $1.96 billion at September 30, 2012.
As reflected in the table below, on a sequential quarterly basis, residential mortgage loan originations and the gains on sale of residential mortgage loans and the mortgage servicing rights income they create, decreased in the first three quarters of 2013 as compared to the last two quarters of 2012. These decreases resulted primarily from the seasonality typically experienced in mortgage loan activity during the first quarter of the year, coupled with an increase in residential mortgage loan interest rates and corresponding decrease in refinancing activity. Heartland is committed to achieving long term success in the mortgage banking business which depends on its ability to shift toward the origination of loans for the purchase of new homes versus the refinance of mortgages on existing homes. For the third quarter of 2013, refinancing activity represented 34% of total mortgage loan originations compared to 50% of total mortgage loan originations during the second quarter of 2013, 70% during the first quarter of 2013, 71% during the fourth quarter of 2012 and 64% during the third quarter of 2012.
The following table summarizes Heartland's residential mortgage loan activity during the most recent five quarters, in thousands:
| As Of and For the Quarter Ended | |||||||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||||||
| Mortgage Servicing Fees | $ | 1,903 | $ | 1,613 | $ | 1,430 | $ | 1,304 | $ | 1,123 | |||||||||
| Mortgage Servicing Rights Income | 3,386 | 3,965 | 3,245 | 3,535 | 3,316 | ||||||||||||||
| Mortgage Servicing Rights Amortization | (1,811 | ) | (1,976 | ) | (1,761 | ) | (1,871 | ) | (1,896 | ) | |||||||||
| Total Residential Mortgage Loan Servicing Income | $ | 3,478 | $ | 3,602 | $ | 2,914 | $ | 2,968 | $ | 2,543 | |||||||||
| Valuation Adjustment on Mortgage Servicing Rights | $ | — | $ | — | $ | 496 | $ | 197 | $ | (493 | ) | ||||||||
| Gains On Sale of Residential Mortgage Loans | $ | 5,279 | $ | 9,005 | $ | 9,641 | $ | 13,966 | $ | 13,750 | |||||||||
| Total Residential Mortgage Loan Applications | $ | 416,128 | $ | 653,461 | $ | 556,890 | $ | 645,603 | $ | 672,382 | |||||||||
| Residential Mortgage Loans Originated | $ | 349,012 | $ | 470,813 | $ | 432,974 | $ | 490,525 | $ | 488,658 | |||||||||
| Residential Mortgage Loans Sold | $ | 336,780 | $ | 445,452 | $ | 424,931 | $ | 478,280 | $ | 448,704 | |||||||||
| Residential Mortgage Loan Servicing Portfolio | $ | 2,887,667 | $ | 2,679,283 | $ | 2,428,067 | $ | 2,199,486 | $ | 1,963,567 | |||||||||
For both the third quarter of 2013 and the third quarter of 2012, noninterest expense totaled $47.1 million. For the nine-month period ended September 30, noninterest expense totaled $142.7 million in 2013 compared to $128.8 million in 2012, a $13.9 million or 11% increase. The largest component of noninterest expense, salaries and employee benefits, increased $1.8 million or 7% during the third quarter of 2013 as compared to the same quarter in 2012 and $11.7 million or 15% for the nine-month period ended September 30, 2013, as compared to the same nine months in 2012. A large portion of these increases resulted from the expansion of Heartland's residential loan origination operations, with a smaller portion attributable to the additional employees joining Heartland through the acquisitions completed during the last two quarters of 2012. Full-time equivalent employees totaled 1,655 on September 30, 2013, compared to 1,391 on September 30, 2012. The impact of increases in occupancy, furniture and equipment and professional fees was mitigated by a reduction in net losses in repossessed assets of $2.7 million or 72% for the third quarter of 2013 compared to the third quarter of 2012 and $3.1 million or 39% for the nine-month period ended September 30, 2013, compared to the same period in 2012.
Fuller commented, “Like most banks providing mortgage loan services, we are experiencing a slowdown in loan originations. Despite the trend, we are fully committed to the ongoing opportunity in mortgage lending as a supplement to our community banking model. As we shift gears from refinancing to purchase originations, we are focusing on expansion into new markets. These include the Pacific Northwest, Kansas City and Milwaukee.”
Heartland's effective tax rate was 26.24% for the first nine months of 2013 compared to 32.73% for the first nine months of 2012. Federal low-income housing tax credits included in Heartland's effective tax rate totaled $599,000 during the first nine months of both 2013 and 2012. 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 33.37% during the first nine months of 2013 compared to 16.65% during the first nine months of 2012. The tax-equivalent adjustment for this tax-exempt interest income was $7.0 million during the first nine months of 2013 compared to $5.4 million during the first nine months of 2012.
Solid Growth in Loans; Increase in Deposits, With Improved Mix
Total assets were $4.91 billion at September 30, 2013, a decrease of $77.8 million or 2% annualized since December 31, 2012. Securities represented 29% of total assets at September 30, 2013, compared to 31% at year-end 2012 as a portion of the proceeds from maturities, paydowns and sales were used to fund loan growth.
Total loans and leases held to maturity were $2.90 billion at September 30, 2013, compared to $2.82 billion at year-end 2012, an increase of $80.2 million or 4% annualized. Loan demand continued to pick up during the third quarter of 2013, resulting in growth of $69.3 million or 10% annualized. During the second quarter of 2013, loan growth was $42.5 million or 6% annualized. Commercial and commercial real estate loans, which totaled $2.04 billion at September 30, 2013, increased $41.5 million or 3% annualized since year-end 2012, with $38.1 million occurring during the third quarter and $14.1 million occurring during the second quarter. Residential mortgage loans, which totaled $269.5 million at September 30, 2013, increased $19.8 million or 11% annualized since year-end 2012, with growth of $20.9 million occurring during the third quarter and $8.2 million occurring during the second quarter.
Agricultural and agricultural real estate loans, which totaled $324.3 million at September 30, 2013, decreased $4.0 million or 2% annualized since year-end 2012, with a decrease of $3.2 million occurring during the third quarter and growth of $12.9 million occurring during the second quarter. Consumer loans, which totaled $268.1 million at September 30, 2013, increased $22.4 million or 12% annualized since year-end 2012, with $13.3 million occurring during the third quarter and $7.8 million during the second quarter.
“We were pleased to see loan growth of $70 million during the quarter as well as improvement in the loan pipeline. Growth in quality loans remains a high priority. We continue to emphasize new business development and are devoting significant resources to support our calling officers,” added Fuller.
Fuller also noted, “Relative to the Small Business Lending Fund, we are pleased to note that the Heartland banks have reached, and exceeded, our goal for small business loan growth. As a result, we have locked in a one percent dividend rate through the first quarter of 2016. We continue to focus attention on the small business market as a key segment and one we are well-suited to serve.”
Total deposits were $3.92 billion at September 30, 2013, compared to $3.85 billion at year-end 2012, an increase of $79.3 million or 3% annualized. Demand deposits totaled $1.07 billion at September 30, 2013, an increase of $99.5 million or 14% annualized since year-end 2012. Savings deposits increased $39.0 million or 3% annualized since year-end 2012 and certificates of deposit decreased $59.1 million or 9% annualized. The composition of Heartland's deposits continued its positive trend as no-cost demand deposits as a percentage of total deposits were 27% at both September 30, 2013, and June 30, 2013, compared to 25% at both March 31, 2013, and December 31, 2012, while higher-cost certificates of deposit as a percentage of total deposits were 21% at September 30, 2013, compared to 22% at both June 30, 2013, and March 31, 2013, and 23% at December 31, 2012.
Fuller said, “Deposits are up year-over-year, primarily as a result of our acquisitions. We continue to realize the benefit of a shift in deposit mix, with growth in the key low-cost categories of demand, savings and money market accounts. Demand deposit balances continue to grow and currently represent 27 percent of total deposits.”
Common stockholders' equity was $314.9 million at September 30, 2013, compared to $313.4 million at June 30, 2013, and $320.1 million at year-end 2012. Book value per common share was $18.58 at September 30, 2013, compared to $18.51 at June 30, 2013, and $19.02 at year-end 2012. Changes in common stockholders' equity and book value per common share are the result of earnings, dividends paid, stock transactions and mark-to-market adjustment for unrealized gains and losses on securities available for sale. As a result of increases in market interest rates on many debt securities during the second and third quarters of 2013, Heartland's unrealized gains and losses on securities available for sale, net of applicable taxes, were at an unrealized loss of $17.5 million at September 30, 2013, and $7.5 million at June 30, 2013, compared to an unrealized gain of $17.4 million at March 31, 2013, and $20.5 million at December 31, 2012.
Increase in Provision for Loan Losses; Increase in Nonperforming Loans During the Quarter
The allowance for loan and lease losses at September 30, 2013, was 1.42% of loans and leases and 87.73% of nonperforming loans compared to 1.37% of loans and leases and 89.71% of nonperforming loans at December 31, 2012, and 1.53% of loans and leases and 99.16% of nonperforming loans at September 30, 2012. The provision for loan losses was $5.1 million for the third quarter of 2013 compared to a negative $502,000 for the third quarter of 2012. For the first nine months of 2013, provision for loan losses was $7.6 million compared to $4.8 million for the first nine months of 2012, a $2.8 million or 58% increase. During the third quarter of 2013, a $2.2 million impairment reserve was recorded on a $13.0 million secured loan to a bank holding company. Although not delinquent, this loan was moved to non-accrual status as of September 30, 2013, based upon management's assessment. The increased provision for loan and lease losses during 2013 was also attributable to the loan growth experienced, particularly during the second and third quarters.
Nonperforming loans, exclusive of those covered under loss sharing agreements, were $47.1 million or 1.62% of total loans and leases at September 30, 2013, compared to $41.0 million or 1.45% of total loans and leases at June 30, 2013, $32.8 million or 1.18% of total loans and leases at March 31, 2013, $43.2 million or 1.53% of total loans and leases at December 31, 2012, and $40.7 million or 1.54% of total loans and leases at September 30, 2012. Without the $13.0 million bank holding company loan previously discussed, nonperforming loans experienced a $6.9 million or 17% decrease during the quarter. Approximately 69%, or $32.3 million, of Heartland's nonperforming loans have individual loan balances exceeding $1.0 million. These nonperforming loans, to an aggregate of 6 borrowers, were primarily located in the Midwestern states, with $17.7 million originated by Dubuque Bank and
Trust Company, $6.0 million originated by Wisconsin Bank & Trust, $4.4 million originated by New Mexico Bank & Trust, $2.4 million originated by Rocky Mountain Bank and $1.8 million originated by Summit Bank & Trust. The portion of Heartland's nonperforming loans covered by government guarantees was $352,000 at September 30, 2013. The industry breakdown for nonperforming loans with individual balances exceeding $1.0 million, as identified using the North American Industry Classification System (NAICS), was $13.0 million for bank holding company, $6.8 million for lot and land development, $6.0 million for grain/cattle operation, $4.7 million for gas rig and $1.8 million for commercial real estate investment.
Delinquencies in each of the loan portfolios continue to be well-managed. Loans delinquent 30 to 89 days as a percent of total loans were 0.67% at September 30, 2013, compared to 0.29% at June 30, 2013, 0.48% at March 31, 2013, 0.32% at December 31, 2012, and 0.53% at September 30, 2012. The increase in delinquencies during the third quarter of 2013 was primarily associated with a single credit that was renewed after quarter end. Had this renewal occurred prior to quarter end, loans delinquent 30 to 89 days would have been at 0.37%.
Other real estate owned was $33.0 million at September 30, 2013, compared to $34.8 million at June 30, 2013, $36.7 million at March 31, 2013, and $35.8 million at December 31, 2012. Liquidation strategies have been identified for all the assets held in other real estate owned. Management continues to market these properties through an orderly liquidation process instead of a quick liquidation process in order to avoid discounts greater than the projected carrying costs. During 2013, $2.7 million of other real estate owned was sold during the third quarter and $11.3 million during the first nine months.
The schedules below summarize the changes in Heartland's nonperforming assets, including those covered by loss share agreements, during the third quarter of 2013 and the first nine months of 2013, in thousands:
Nonperforming Loans | Other Real Estate Owned | Other Repossessed Assets | Total Nonperforming Assets | ||||||||||||
| June 30, 2013 | $ | 41,580 | $ | 34,763 | $ | 603 | $ | 76,946 | |||||||
| Loan foreclosures | (2,643 | ) | 2,608 | 35 | — | ||||||||||
| Net loan charge offs | (1,461 | ) | — | — | (1,461 | ) | |||||||||
| New nonperforming loans | 16,070 | — | — | 16,070 | |||||||||||
Reduction of nonperforming loans(1) | (5,653 | ) | — | — | (5,653 | ) | |||||||||
| OREO/Repossessed assets sales proceeds | — | (3,401 | ) | (43 | ) | (3,444 | ) | ||||||||
| OREO/Repossessed assets writedowns, net | — | (952 | ) | (96 | ) | (1,048 | ) | ||||||||
| Net activity at Citizens Finance Co. | — | — | (26 | ) | (26 | ) | |||||||||
| September 30, 2013 | $ | 47,893 | $ | 33,018 | $ | 473 | $ | 81,384 | |||||||
| (1) Includes principal reductions and transfers to performing status. | |||||||||||||||
Nonperforming Loans | Other Real Estate Owned | Other Repossessed Assets | Total Nonperforming Assets | ||||||||||||
| December 31, 2012 | $ | 44,415 | $ | 35,822 | $ | 542 | $ | 80,779 | |||||||
| Loan foreclosures | (13,909 | ) | 13,318 | 591 | — | ||||||||||
| Net loan charge offs | (5,052 | ) | — | — | (5,052 | ) | |||||||||
| New nonperforming loans | 37,903 | — | — | 37,903 | |||||||||||
Reduction of nonperforming loans(1) | (15,464 | ) | — | — | (15,464 | ) | |||||||||
| OREO/Repossessed assets sales proceeds | — | (12,239 | ) | (481 | ) | (12,720 | ) | ||||||||
| OREO/Repossessed assets writedowns, net | — | (3,883 | ) | (141 | ) | (4,024 | ) | ||||||||
| Net activity at Citizens Finance Co. | — | — | (38 | ) | (38 | ) | |||||||||
| September 30, 2013 | $ | 47,893 | $ | 33,018 | $ | 473 | $ | 81,384 | |||||||
| (1) Includes principal reductions and transfers to performing status. | |||||||||||||||
Net charge-offs on loans during the third quarter of 2013 were $1.5 million compared to $536,000 during the third quarter of 2012.
“The increase in nonperforming assets during the third quarter was disappointing; however, it was primarily due to a single large credit. Excluding this one credit, we continue to see an improving trend for this measure. Credit quality remains one of our highest priorities,” Fuller concluded.
Conference Call Details
Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0782 at least five minutes before start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. If you are unable to participate on the call, a replay will be available until October 27, 2014, by logging on to www.htlf.com.
About Heartland Financial USA, Inc.
Heartland Financial USA, Inc., one of Forbes 2013 "Best Banks in America," is a $5.7 billion diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 78 banking locations in 56 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas and Missouri and loan production offices in California, Nevada, Wyoming, Idaho and North Dakota. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.
Safe Harbor Statement
This release, and future oral and written statements of Heartland and its management, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Heartland's financial condition, results of operations, plans, objectives, future performance and business. Although these forward-looking statements are based upon the beliefs, expectations and assumptions of Heartland's management, there are a number of factors, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed in the risk factors included in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, include, among others: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war, (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the potential impact of acquisitions, (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x) unexpected outcomes of existing or new litigation involving the Company; and (xii) 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 Quarter Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Interest Income | |||||||||||||||
| Interest and fees on loans and leases | $ | 40,154 | $ | 39,208 | $ | 119,707 | $ | 116,989 | |||||||
| Interest on securities: | |||||||||||||||
| Taxable | 4,803 | 4,452 | 14,174 | 17,050 | |||||||||||
| Nontaxable | 3,443 | 2,896 | 10,001 | 7,786 | |||||||||||
| Interest on federal funds sold | — | — | — | 1 | |||||||||||
| Interest on deposits in other financial institutions | 3 | 3 | 9 | 5 | |||||||||||
| Total Interest Income | 48,403 | 46,559 | 143,891 | 141,831 | |||||||||||
| Interest Expense | |||||||||||||||
| Interest on deposits | 4,769 | 5,504 | 14,911 | 16,883 | |||||||||||
| Interest on short-term borrowings | 131 | 215 | 387 | 652 | |||||||||||
| Interest on other borrowings | 3,623 | 4,028 | 11,122 | 12,114 | |||||||||||
| Total Interest Expense | 8,523 | 9,747 | 26,420 | 29,649 | |||||||||||
| Net Interest Income | 39,880 | 36,812 | 117,471 | 112,182 | |||||||||||
| Provision for loan and lease losses | 5,149 | (502 | ) | 7,648 | 4,852 | ||||||||||
| Net Interest Income After Provision for Loan and Lease Losses | 34,731 | 37,314 | 109,823 | 107,330 | |||||||||||
| Noninterest Income | |||||||||||||||
| Service charges and fees | 4,487 | 3,944 | 12,775 | 11,240 | |||||||||||
| Loan servicing income | 3,984 | 3,016 | 11,461 | 7,832 | |||||||||||
| Trust fees | 2,918 | 2,667 | 8,764 | 7,940 | |||||||||||
| Brokerage and insurance commissions | 1,277 | 908 | 3,315 | 2,757 | |||||||||||
| Securities gain (loss), net | 1,118 | 5,212 | 6,612 | 14,106 | |||||||||||
| Gain (loss) on trading account securities | 263 | (163 | ) | 839 | (117 | ) | |||||||||
| Impairment loss on securities | — | — | — | (981 | ) | ||||||||||
| Gains on sale of loans | 5,251 | 13,750 | 24,246 | 34,941 | |||||||||||
| Valuation adjustment on mortgage servicing rights | — | (493 | ) | 496 | (674 | ) | |||||||||
| Income on bank owned life insurance | 409 | 382 | 1,129 | 1,131 | |||||||||||
| Other noninterest income | 1,011 | 543 | 2,407 | 3,257 | |||||||||||
| Total Noninterest Income | 20,718 | 29,766 | 72,044 | 81,432 | |||||||||||
| Noninterest Expense | |||||||||||||||
| Salaries and employee benefits | 28,847 | 27,064 | 88,103 | 76,444 | |||||||||||
| Occupancy | 3,387 | 2,596 | 9,796 | 7,612 | |||||||||||
| Furniture and equipment | 1,917 | 1,541 | 6,033 | 4,504 | |||||||||||
| Professional fees | 4,486 | 4,217 | 12,262 | 10,938 | |||||||||||
| FDIC insurance assessments | 745 | 811 | 2,508 | 2,482 | |||||||||||
| Advertising | 1,360 | 1,183 | 3,836 | 3,558 | |||||||||||
| Intangible assets amortization | 196 | 146 | 594 | 399 | |||||||||||
| Net loss on repossessed assets | 1,069 | 3,775 | 4,886 | 7,986 | |||||||||||
| Other noninterest expenses | 5,140 | 5,826 | 14,642 | 14,835 | |||||||||||
| Total Noninterest Expense | 47,147 | 47,159 | 142,660 | 128,758 | |||||||||||
| Income Before Income Taxes | 8,302 | 19,921 | 39,207 | 60,004 | |||||||||||
| Income taxes | 1,492 | 6,338 | 10,289 | 19,642 | |||||||||||
| Net Income | 6,810 | 13,583 | 28,918 | 40,362 | |||||||||||
| Net (income) loss attributable to noncontrolling interest, net of tax | — | 4 | (64 | ) | 23 | ||||||||||
| Net Income Attributable to Heartland | 6,810 | 13,587 | 28,854 | 40,385 | |||||||||||
| Preferred dividends and discount | (276 | ) | (949 | ) | (889 | ) | (2,991 | ) | |||||||
| Net Income Available to Common Stockholders | $ | 6,534 | $ | 12,638 | $ | 27,965 | $ | 37,394 | |||||||
| Earnings per common share-diluted | $ | 0.38 | $ | 0.75 | $ | 1.63 | $ | 2.24 | |||||||
| Weighted average shares outstanding-diluted | 17,221,154 | 16,745,968 | 17,183,219 | 16,729,637 | |||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||||||
| Interest Income | |||||||||||||||||||
| Interest and fees on loans and leases | $ | 40,154 | $ | 39,726 | $ | 39,827 | $ | 39,510 | $ | 39,208 | |||||||||
| Interest on securities: | |||||||||||||||||||
| Taxable | 4,803 | 4,712 | 4,659 | 5,079 | 4,452 | ||||||||||||||
| Nontaxable | 3,443 | 3,360 | 3,198 | 2,912 | 2,896 | ||||||||||||||
| Interest on federal funds sold | — | — | — | 3 | — | ||||||||||||||
| Interest on deposits in other financial institutions | 3 | 2 | 4 | 3 | 3 | ||||||||||||||
| Total Interest Income | 48,403 | 47,800 | 47,688 | 47,507 | 46,559 | ||||||||||||||
| Interest Expense | |||||||||||||||||||
| Interest on deposits | 4,769 | 5,066 | 5,076 | 5,347 | 5,504 | ||||||||||||||
| Interest on short-term borrowings | 131 | 108 | 148 | 166 | 215 | ||||||||||||||
| Interest on other borrowings | 3,623 | 3,702 | 3,797 | 4,020 | 4,028 | ||||||||||||||
| Total Interest Expense | 8,523 | 8,876 | 9,021 | 9,533 | 9,747 | ||||||||||||||
| Net Interest Income | 39,880 | 38,924 | 38,667 | 37,974 | 36,812 | ||||||||||||||
| Provision for loan and lease losses | 5,149 | 1,862 | 637 | 3,350 | (502 | ) | |||||||||||||
| Net Interest Income After Provision for Loan and Lease Losses | 34,731 | 37,062 | 38,030 | 34,624 | 37,314 | ||||||||||||||
| Noninterest Income | |||||||||||||||||||
| Service charges and fees | 4,487 | 4,280 | 4,008 | 4,002 | 3,944 | ||||||||||||||
| Loan servicing income | 3,984 | 4,106 | 3,371 | 3,468 | 3,016 | ||||||||||||||
| Trust fees | 2,918 | 2,942 | 2,904 | 2,538 | 2,667 | ||||||||||||||
| Brokerage and insurance commissions | 1,277 | 1,087 | 951 | 945 | 908 | ||||||||||||||
| Securities gain (loss), net | 1,118 | 2,067 | 3,427 | (108 | ) | 5,212 | |||||||||||||
| Gain (loss) on trading account securities | 263 | 262 | 314 | 164 | (163 | ) | |||||||||||||
| Impairment loss on securities | — | — | — | — | — | ||||||||||||||
| Gains on sale of loans | 5,251 | 9,083 | 9,912 | 14,257 | 13,750 | ||||||||||||||
| Valuation adjustment on mortgage servicing rights | — | — | 496 | 197 | (493 | ) | |||||||||||||
| Income on bank owned life insurance | 409 | 315 | 405 | 311 | 382 | ||||||||||||||
| Other noninterest income | 1,011 | 716 | 680 | 1,456 | 543 | ||||||||||||||
| Total Noninterest Income | 20,718 | 24,858 | 26,468 | 27,230 | 29,766 | ||||||||||||||
| Noninterest Expense | |||||||||||||||||||
| Salaries and employee benefits | 28,847 | 29,516 | 29,740 | 29,283 | 27,064 | ||||||||||||||
| Occupancy | 3,387 | 3,224 | 3,185 | 3,017 | 2,596 | ||||||||||||||
| Furniture and equipment | 1,917 | 2,065 | 2,051 | 1,822 | 1,541 | ||||||||||||||
| Professional fees | 4,486 | 4,233 | 3,543 | 4,400 | 4,217 | ||||||||||||||
| FDIC insurance assessments | 745 | 861 | 902 | 810 | 811 | ||||||||||||||
| Advertising | 1,360 | 1,248 | 1,228 | 1,736 | 1,183 | ||||||||||||||
| Intangible assets amortization | 196 | 198 | 200 | 163 | 146 | ||||||||||||||
| Net loss on repossessed assets | 1,069 | 2,477 | 1,340 | 1,983 | 3,775 | ||||||||||||||
| Other noninterest expenses | 5,140 | 4,944 | 4,558 | 11,409 | 5,826 | ||||||||||||||
| Total Noninterest Expense | 47,147 | 48,766 | 46,747 | 54,623 | 47,159 | ||||||||||||||
| Income Before Income Taxes | 8,302 | 13,154 | 17,751 | 7,231 | 19,921 | ||||||||||||||
| Income taxes | 1,492 | 3,598 | 5,199 | (2,258 | ) | 6,338 | |||||||||||||
| Net Income | 6,810 | 9,556 | 12,552 | 9,489 | 13,583 | ||||||||||||||
| Net (income) loss attributable to noncontrolling interest, net of tax | — | — | (64 | ) | (82 | ) | 4 | ||||||||||||
| Net Income Attributable to Heartland | 6,810 | 9,556 | 12,488 | 9,407 | 13,587 | ||||||||||||||
| Preferred dividends and discount | (276 | ) | (205 | ) | (408 | ) | (409 | ) | (949 | ) | |||||||||
| Net Income Available to Common Stockholders | $ | 6,534 | $ | 9,351 | $ | 12,080 | $ | 8,998 | $ | 12,638 | |||||||||
| Earnings per common share-diluted | $ | 0.38 | $ | 0.54 | $ | 0.70 | $ | 0.54 | $ | 0.75 | |||||||||
| Weighted average shares outstanding-diluted | 17,221,154 | 17,203,924 | 17,187,180 | 16,812,947 | 16,745,968 | ||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| As Of | |||||||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||||||
| Assets | |||||||||||||||||||
| Cash and cash equivalents | $ | 165,008 | $ | 112,097 | $ | 74,587 | $ | 168,054 | $ | 191,126 | |||||||||
| Time deposits in other financial institutions | 3,605 | 3,605 | 3,605 | — | — | ||||||||||||||
| Securities | 1,446,670 | 1,578,573 | 1,580,719 | 1,561,957 | 1,332,082 | ||||||||||||||
| Loans held for sale | 61,326 | 88,541 | 91,708 | 96,165 | 99,429 | ||||||||||||||
| Loans and leases: | |||||||||||||||||||
| Held to maturity | 2,901,706 | 2,832,377 | 2,789,893 | 2,821,549 | 2,647,959 | ||||||||||||||
| Loans covered by loss share agreements | 5,876 | 6,275 | 6,741 | 7,253 | 8,511 | ||||||||||||||
| Allowance for loan and lease losses | (41,311 | ) | (37,623 | ) | (37,528 | ) | (38,715 | ) | (40,401 | ) | |||||||||
| Loans and leases, net | 2,866,271 | 2,801,029 | 2,759,106 | 2,790,087 | 2,616,069 | ||||||||||||||
| Premises, furniture and equipment, net | 129,029 | 129,938 | 128,411 | 128,294 | 120,334 | ||||||||||||||
| Goodwill | 30,627 | 30,627 | 30,627 | 30,627 | 26,590 | ||||||||||||||
| Other intangible assets, net | 23,435 | 22,056 | 20,266 | 18,486 | 15,612 | ||||||||||||||
| Cash surrender value on life insurance | 79,238 | 75,992 | 75,907 | 75,480 | 72,853 | ||||||||||||||
| Other real estate, net | 33,018 | 34,763 | 36,704 | 35,822 | 36,139 | ||||||||||||||
| FDIC indemnification asset | 795 | 282 | 528 | 749 | 1,238 | ||||||||||||||
| Other assets | 73,708 | 82,253 | 98,390 | 84,832 | 81,725 | ||||||||||||||
| Total Assets | $ | 4,912,730 | $ | 4,959,756 | $ | 4,900,558 | $ | 4,990,553 | $ | 4,593,197 | |||||||||
| Liabilities and Equity | |||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Demand | $ | 1,073,688 | $ | 1,029,784 | $ | 971,142 | $ | 974,232 | $ | 877,790 | |||||||||
| Savings | 2,043,397 | 1,978,962 | 2,022,625 | 2,004,438 | 1,809,776 | ||||||||||||||
| Time | 807,913 | 832,388 | 848,689 | 866,990 | 815,470 | ||||||||||||||
| Total deposits | 3,924,998 | 3,841,134 | 3,842,456 | 3,845,660 | 3,503,036 | ||||||||||||||
| Short-term borrowings | 224,048 | 339,181 | 202,694 | 224,626 | 245,308 | ||||||||||||||
| Other borrowings | 322,538 | 336,332 | 336,577 | 389,025 | 377,536 | ||||||||||||||
| Accrued expenses and other liabilities | 44,543 | 47,974 | 104,857 | 126,703 | 72,571 | ||||||||||||||
| Total Liabilities | 4,516,127 | 4,564,621 | 4,486,584 | 4,586,014 | 4,198,451 | ||||||||||||||
| Equity | |||||||||||||||||||
| Preferred equity | 81,698 | 81,698 | 81,698 | 81,698 | 81,698 | ||||||||||||||
| Common equity | 314,905 | 313,437 | 329,478 | 320,107 | 310,396 | ||||||||||||||
| Total Heartland Stockholders' Equity | 396,603 | 395,135 | 411,176 | 401,805 | 392,094 | ||||||||||||||
| Noncontrolling interest | — | — | 2,798 | 2,734 | 2,652 | ||||||||||||||
| Total Equity | 396,603 | 395,135 | 413,974 | 404,539 | 394,746 | ||||||||||||||
| Total Liabilities and Equity | $ | 4,912,730 | $ | 4,959,756 | $ | 4,900,558 | $ | 4,990,553 | $ | 4,593,197 | |||||||||
| Common Share Data | |||||||||||||||||||
| Book value per common share | $ | 18.58 | $ | 18.51 | $ | 19.54 | $ | 19.02 | $ | 18.81 | |||||||||
| ASC 320 effect on book value per common share | $ | (0.66 | ) | $ | (0.44 | ) | $ | 1.03 | $ | 1.21 | $ | 1.46 | |||||||
| Common shares outstanding, net of treasury stock | 16,951,053 | 16,934,161 | 16,865,919 | 16,827,835 | 16,505,241 | ||||||||||||||
Tangible Capital Ratio(1) | 5.78 | % | 5.69 | % | 6.09 | % | 5.78 | % | 6.18 | % | |||||||||
| (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). This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. | |||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||
| For the Quarter Ended | For the Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Average Balances | |||||||||||||||
| Assets | $ | 4,901,972 | $ | 4,532,302 | $ | 4,907,436 | $ | 4,370,919 | |||||||
| Loans and leases, net of unearned | 2,937,508 | 2,727,806 | 2,906,970 | 2,660,556 | |||||||||||
| Deposits | 3,861,624 | 3,415,810 | 3,845,120 | 3,303,138 | |||||||||||
| Earning assets | 4,396,140 | 4,019,601 | 4,420,699 | 3,892,024 | |||||||||||
| Interest bearing liabilities | 3,413,205 | 3,235,440 | 3,418,956 | 3,152,584 | |||||||||||
| Common stockholders' equity | 309,472 | 299,408 | 321,511 | 286,479 | |||||||||||
| Total stockholders' equity | 391,170 | 383,763 | 404,417 | 370,837 | |||||||||||
| Tangible common stockholders' equity | 276,511 | 272,078 | 288,349 | 259,060 | |||||||||||
| Earnings Performance Ratios | |||||||||||||||
| Annualized return on average assets | 0.53 | % | 1.11 | % | 0.76 | % | 1.14 | % | |||||||
| Annualized return on average common equity | 8.38 | % | 16.79 | % | 11.63 | % | 17.44 | % | |||||||
| Annualized return on average common tangible equity | 9.38 | % | 18.48 | % | 12.97 | % | 19.28 | % | |||||||
Annualized net interest margin (1) | 3.81 | % | 3.84 | % | 3.77 | % | 4.03 | % | |||||||
Efficiency ratio, fully taxable equivalent (2) | 76.21 | % | 74.47 | % | 75.10 | % | 69.64 | % | |||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||||||
| Average Balances | |||||||||||||||||||
| Assets | $ | 4,901,972 | $ | 4,932,852 | $ | 4,890,023 | $ | 4,739,887 | $ | 4,532,302 | |||||||||
| Loans and leases, net of unearned | 2,937,508 | 2,905,778 | 2,876,960 | 2,803,361 | 2,727,806 | ||||||||||||||
| Deposits | 3,861,624 | 3,871,945 | 3,801,125 | 3,674,507 | 3,415,810 | ||||||||||||||
| Earning assets | 4,396,140 | 4,461,923 | 4,404,119 | 4,171,475 | 4,019,601 | ||||||||||||||
| Interest bearing liabilities | 3,413,205 | 3,433,686 | 3,412,641 | 3,330,270 | 3,235,440 | ||||||||||||||
| Common stockholders' equity | 309,472 | 332,386 | 322,820 | 316,073 | 299,408 | ||||||||||||||
| Total stockholders' equity | 391,170 | 414,976 | 407,282 | 400,442 | 383,763 | ||||||||||||||
| Tangible common stockholders' equity | 276,511 | 299,225 | 289,453 | 288,359 | 272,078 | ||||||||||||||
| Earnings Performance Ratios | |||||||||||||||||||
| Annualized return on average assets | 0.53 | % | 0.76 | % | 1.00 | % | 0.76 | % | 1.11 | % | |||||||||
| Annualized return on average common equity | 8.38 | % | 11.28 | % | 15.18 | % | 11.33 | % | 16.79 | % | |||||||||
| Annualized return on average common tangible equity | 9.38 | % | 12.53 | % | 16.93 | % | 12.41 | % | 18.48 | % | |||||||||
Annualized net interest margin (1) | 3.81 | % | 3.71 | % | 3.77 | % | 3.81 | % | 3.84 | % | |||||||||
Efficiency ratio, fully taxable equivalent (2) | 76.21 | % | 76.08 | % | 73.06 | % | 81.13 | % | 74.47 | % | |||||||||
| (1) Computed on a tax equivalent basis using an effective tax rate of 35% | |||||||||||||||||||
| (2) Efficiency ratio, fully taxable equivalent, is noninterest expense, divided by the sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains (losses), net. This efficiency ratio is presented on a taxable equivalent basis, which adjusts net interest income for the tax-favored status of certain loans and investment securities. Management believes this measure to be the preferred industry measurement of net interest income as it enhances the comparability of net interest income arising from taxable and tax-exempt sources and it excludes certain specific revenue items (such as investment securities gains (losses), net). This is a non-GAAP measure. | |||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||||||
| Loan and Lease Data | |||||||||||||||||||
| Loans held to maturity: | |||||||||||||||||||
| Commercial and commercial real estate | $ | 2,042,995 | $ | 2,004,883 | $ | 1,990,818 | $ | 2,001,492 | $ | 1,902,588 | |||||||||
| Residential mortgage | 269,501 | 248,604 | 240,453 | 249,689 | 228,972 | ||||||||||||||
| Agricultural and agricultural real estate | 324,339 | 327,490 | 314,606 | 328,311 | 283,697 | ||||||||||||||
| Consumer | 268,112 | 254,825 | 246,996 | 245,678 | 236,619 | ||||||||||||||
| Unearned discount and deferred loan fees | (3,241 | ) | (3,425 | ) | (2,980 | ) | (3,621 | ) | (3,917 | ) | |||||||||
| Total loans and leases held to maturity | $ | 2,901,706 | $ | 2,832,377 | $ | 2,789,893 | $ | 2,821,549 | $ | 2,647,959 | |||||||||
| Loans covered under loss share agreements: | |||||||||||||||||||
| Commercial and commercial real estate | $ | 2,402 | $ | 2,519 | $ | 2,738 | $ | 3,074 | 3,772 | ||||||||||
| Residential mortgage | 2,433 | 2,493 | 2,722 | 2,645 | 3,099 | ||||||||||||||
| Agricultural and agricultural real estate | 446 | 441 | 453 | 748 | 863 | ||||||||||||||
| Consumer | 595 | 822 | 828 | 786 | 777 | ||||||||||||||
| Total loans and leases covered under loss share agreements | $ | 5,876 | $ | 6,275 | $ | 6,741 | $ | 7,253 | $ | 8,511 | |||||||||
| Asset Quality | |||||||||||||||||||
| Not covered under loss share agreements: | |||||||||||||||||||
| Nonaccrual loans | $ | 47,088 | $ | 41,003 | $ | 32,356 | $ | 43,156 | $ | 40,743 | |||||||||
| Loans and leases past due ninety days or more as to interest or principal payments | — | 6 | 454 | — | — | ||||||||||||||
| Other real estate owned | 32,753 | 33,709 | 35,697 | 35,470 | 35,994 | ||||||||||||||
| Other repossessed assets | 469 | 603 | 1,059 | 542 | 496 | ||||||||||||||
| Total nonperforming assets not covered under loss share agreements | $ | 80,310 | $ | 75,321 | $ | 69,566 | $ | 79,168 | $ | 77,233 | |||||||||
| Performing troubled debt restructured loans | $ | 19,371 | $ | 32,661 | $ | 24,473 | $ | 21,121 | $ | 22,385 | |||||||||
| Covered under loss share agreements: | |||||||||||||||||||
| Nonaccrual loans | $ | 805 | 571 | 636 | 1,259 | 2,236 | |||||||||||||
| Other real estate owned | 265 | 1,054 | 1,007 | 352 | 145 | ||||||||||||||
| Other repossessed assets | 4 | — | — | — | — | ||||||||||||||
| Total nonperforming assets covered under loss share agreements | $ | 1,074 | $ | 1,625 | $ | 1,643 | $ | 1,611 | $ | 2,381 | |||||||||
| Allowance for Loan and Lease Losses | |||||||||||||||||||
| Balance, beginning of period | $ | 37,623 | 37,528 | 38,715 | 40,401 | 41,439 | |||||||||||||
| Provision for loan and lease losses | 5,149 | 1,862 | 637 | 3,350 | (502 | ) | |||||||||||||
| Charge-offs on loans not covered by loss share agreements | (2,454 | ) | (2,742 | ) | (3,041 | ) | (7,455 | ) | (2,785 | ) | |||||||||
| Charge-offs on loans covered by loss share agreements | (59 | ) | (31 | ) | (23 | ) | (137 | ) | (265 | ) | |||||||||
| Recoveries | 1,052 | $ | 1,006 | $ | 1,240 | $ | 2,556 | $ | 2,514 | ||||||||||
| Balance, end of period | $ | 41,311 | $ | 37,623 | $ | 37,528 | $ | 38,715 | $ | 40,401 | |||||||||
| Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements | |||||||||||||||||||
| Ratio of nonperforming loans and leases to total loans and leases | 1.62 | % | 1.45 | % | 1.18 | % | 1.53 | % | 1.54 | % | |||||||||
| Ratio of nonperforming assets to total assets | 1.62 | % | 1.52 | % | 1.42 | % | 1.59 | % | 1.68 | % | |||||||||
| Annualized ratio of net loan charge-offs to average loans and leases | 0.20 | % | 0.24 | % | 0.26 | % | 0.71 | % | 0.08 | % | |||||||||
| Allowance for loan and lease losses as a percent of loans and leases | 1.42 | % | 1.33 | % | 1.35 | % | 1.37 | % | 1.53 | % | |||||||||
| Allowance for loan and lease losses as a percent of nonperforming loans and leases | 87.73 | % | 91.74 | % | 114.38 | % | 89.71 | % | 99.16 | % | |||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||||
| DOLLARS IN THOUSANDS | |||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||
| September 30, 2013 | September 30, 2012 | ||||||||||||||||||||
| Average | Average | ||||||||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||
| Earning Assets | |||||||||||||||||||||
| Securities: | |||||||||||||||||||||
| Taxable | $ | 1,086,302 | $ | 4,803 | 1.75 | % | $ | 1,008,820 | $ | 4,452 | 1.76 | % | |||||||||
Nontaxable(1) | 401,083 | 5,297 | 5.24 | 316,409 | 4,455 | 5.60 | |||||||||||||||
| Total securities | 1,487,385 | 10,100 | 2.69 | 1,325,229 | 8,907 | 2.67 | |||||||||||||||
| Interest bearing deposits | 9,054 | 3 | 0.13 | 6,631 | 3 | 0.18 | |||||||||||||||
| Federal funds sold | 237 | — | — | 220 | — | — | |||||||||||||||
| Loans and leases: | |||||||||||||||||||||
Commercial and commercial real estate(1) | 2,020,895 | 25,461 | 5.00 | 1,907,128 | 25,210 | 5.26 | |||||||||||||||
| Residential mortgage | 327,185 | 3,423 | 4.15 | 301,166 | 3,324 | 4.39 | |||||||||||||||
Agricultural and agricultural real estate(1) | 327,266 | 4,274 | 5.18 | 285,018 | 3,940 | 5.50 | |||||||||||||||
| Consumer | 262,162 | 6,144 | 9.30 | 234,494 | 5,798 | 9.84 | |||||||||||||||
| Fees on loans | 1,377 | — | — | 1,334 | — | ||||||||||||||||
| Less: allowance for loan and lease losses | (38,044 | ) | — | — | (40,285 | ) | — | — | |||||||||||||
| Net loans and leases | 2,899,464 | 40,679 | 5.57 | 2,687,521 | 39,606 | 5.86 | |||||||||||||||
| Total earning assets | 4,396,140 | 50,782 | 4.58 | % | 4,019,601 | 48,516 | 4.80 | % | |||||||||||||
| Nonearning Assets | 505,832 | 512,701 | |||||||||||||||||||
| Total Assets | $ | 4,901,972 | $ | 50,782 | $ | 4,532,302 | $ | 48,516 | |||||||||||||
| Interest Bearing Liabilities | |||||||||||||||||||||
| Savings | $ | 1,985,496 | $ | 1,495 | 0.30 | % | $ | 1,745,324 | $ | 1,683 | 0.38 | % | |||||||||
| Time, $100,000 and over | 301,633 | 1,056 | 1.39 | 290,236 | 1,179 | 1.62 | |||||||||||||||
| Other time deposits | 517,826 | 2,218 | 1.70 | 533,177 | 2,642 | 1.97 | |||||||||||||||
| Short-term borrowings | 277,041 | 131 | 0.19 | 289,213 | 215 | 0.30 | |||||||||||||||
| Other borrowings | 331,209 | 3,623 | 4.34 | 377,490 | 4,028 | 4.24 | |||||||||||||||
| Total interest bearing liabilities | 3,413,205 | 8,523 | 0.99 | % | 3,235,440 | 9,747 | 1.20 | % | |||||||||||||
| Noninterest Bearing Liabilities | |||||||||||||||||||||
| Noninterest bearing deposits | 1,056,669 | 847,073 | |||||||||||||||||||
| Accrued interest and other liabilities | 40,928 | 66,026 | |||||||||||||||||||
| Total noninterest bearing liabilities | 1,097,597 | 913,099 | |||||||||||||||||||
| Stockholders' Equity | 391,170 | 383,763 | |||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 4,901,972 | $ | 4,532,302 | |||||||||||||||||
Net interest income(1) | $ | 42,259 | $ | 38,769 | |||||||||||||||||
Net interest spread(1) | 3.59 | % | 3.60 | % | |||||||||||||||||
Net interest income to total earning assets(1) | 3.81 | % | 3.84 | % | |||||||||||||||||
| Interest bearing liabilities to earning assets | 77.64 | % | 80.49 | % | |||||||||||||||||
| (1) Computed on a tax equivalent basis using an effective tax rate of 35% | |||||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) | |||||||||||||||||||||
| DOLLARS IN THOUSANDS | |||||||||||||||||||||
| For the Nine Months Ended | |||||||||||||||||||||
| September 30, 2013 | September 30, 2012 | ||||||||||||||||||||
| Average | Average | ||||||||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||
| Earning Assets | |||||||||||||||||||||
| Securities: | |||||||||||||||||||||
| Taxable | $ | 1,153,876 | $ | 14,174 | 1.64 | % | $ | 994,961 | $ | 17,050 | 2.29 | % | |||||||||
Nontaxable(1) | 388,195 | 15,386 | 5.30 | 269,589 | 11,978 | 5.93 | |||||||||||||||
| Total securities | 1,542,071 | 29,560 | 2.56 | 1,264,550 | 29,028 | 3.07 | |||||||||||||||
| Interest bearing deposits | 9,216 | 9 | 0.13 | 5,684 | 5 | 0.12 | |||||||||||||||
| Federal funds sold | 672 | — | — | 599 | 1 | 0.22 | |||||||||||||||
| Loans and leases: | |||||||||||||||||||||
Commercial and commercial real estate(1) | 2,000,590 | 76,288 | 5.10 | 1,872,461 | 75,408 | 5.38 | |||||||||||||||
| Residential mortgage | 331,854 | 10,334 | 4.16 | 285,545 | 9,762 | 4.57 | |||||||||||||||
Agricultural and agricultural real estate(1) | 321,671 | 12,843 | 5.34 | 276,145 | 11,802 | 5.71 | |||||||||||||||
| Consumer | 252,855 | 17,894 | 9.46 | 226,405 | 16,968 | 10.01 | |||||||||||||||
| Fees on loans | 4,009 | — | 4,239 | — | |||||||||||||||||
| Less: allowance for loan and lease losses | (38,230 | ) | — | — | (39,365 | ) | — | — | |||||||||||||
| Net loans and leases | 2,868,740 | 121,368 | 5.66 | 2,621,191 | 118,179 | 6.02 | |||||||||||||||
| Total earning assets | 4,420,699 | 150,937 | 4.56 | % | 3,892,024 | 147,213 | 5.05 | % | |||||||||||||
| Nonearning Assets | 486,737 | 478,895 | |||||||||||||||||||
| Total Assets | $ | 4,907,436 | $ | 150,937 | $ | 4,370,919 | $ | 147,213 | |||||||||||||
| Interest Bearing Liabilities | |||||||||||||||||||||
| Savings | $ | 1,986,083 | $ | 4,637 | 0.31 | % | $ | 1,717,213 | $ | 5,064 | 0.39 | % | |||||||||
| Time, $100,000 and over | 310,333 | 3,395 | 1.46 | 264,539 | 3,602 | 1.82 | |||||||||||||||
| Other time deposits | 532,291 | 6,879 | 1.73 | 528,839 | 8,217 | 2.08 | |||||||||||||||
| Short-term borrowings | 250,326 | 387 | 0.21 | 265,695 | 652 | 0.33 | |||||||||||||||
| Other borrowings | 339,923 | 11,122 | 4.37 | 376,298 | 12,114 | 4.30 | |||||||||||||||
| Total interest bearing liabilities | 3,418,956 | 26,420 | 1.03 | % | 3,152,584 | 29,649 | 1.26 | % | |||||||||||||
| Noninterest Bearing Liabilities | |||||||||||||||||||||
| Noninterest bearing deposits | 1,016,413 | 792,547 | |||||||||||||||||||
| Accrued interest and other liabilities | 67,650 | 54,951 | |||||||||||||||||||
| Total noninterest bearing liabilities | 1,084,063 | 847,498 | |||||||||||||||||||
| Stockholders' Equity | 404,417 | 370,837 | |||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 4,907,436 | $ | 4,370,919 | |||||||||||||||||
Net interest income(1) | $ | 124,517 | $ | 117,564 | |||||||||||||||||
Net interest spread(1) | 3.53 | % | 3.79 | % | |||||||||||||||||
Net interest income to total earning assets(1) | 3.77 | % | 4.03 | % | |||||||||||||||||
| Interest bearing liabilities to earning assets | 77.34 | % | 81.00 | % | |||||||||||||||||
| (1) Computed on a tax equivalent basis using an effective tax rate of 35% | |||||||||||||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||
| SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) | |||||||||||||||
| DOLLARS IN THOUSANDS | |||||||||||||||
| As of and For the Quarter Ended | |||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||
| Total Assets | |||||||||||||||
| Dubuque Bank and Trust Company | $ | 1,438,041 | $ | 1,512,215 | $ | 1,436,744 | $ | 1,482,504 | $ | 1,478,943 | |||||
| New Mexico Bank & Trust | 999,555 | 1,029,360 | 1,010,607 | 1,026,952 | 973,177 | ||||||||||
| Wisconsin Bank & Trust | 635,606 | 643,727 | 651,277 | 691,715 | 511,580 | ||||||||||
| Rocky Mountain Bank | 464,221 | 448,855 | 457,389 | 465,614 | 435,283 | ||||||||||
| Riverside Community Bank | 460,224 | 450,915 | 422,352 | 450,863 | 424,044 | ||||||||||
| Arizona Bank & Trust | 415,174 | 393,829 | 404,518 | 307,871 | 275,053 | ||||||||||
| Galena State Bank & Trust Co. | 296,383 | 290,388 | 294,484 | 295,226 | 295,222 | ||||||||||
| Minnesota Bank & Trust | 166,324 | 164,714 | 127,044 | 126,421 | 109,586 | ||||||||||
| Summit Bank & Trust | 115,547 | 118,049 | 115,649 | 119,752 | 104,066 | ||||||||||
| Total Deposits | |||||||||||||||
| Dubuque Bank and Trust Company | $ | 1,118,225 | $ | 1,122,506 | $ | 1,123,323 | $ | 1,150,141 | $ | 1,089,125 | |||||
| New Mexico Bank & Trust | 765,903 | 748,345 | 716,938 | 721,445 | 720,520 | ||||||||||
| Wisconsin Bank & Trust | 545,163 | 527,762 | 533,956 | 549,773 | 424,146 | ||||||||||
| Rocky Mountain Bank | 375,949 | 367,707 | 380,024 | 372,135 | 354,396 | ||||||||||
| Riverside Community Bank | 371,779 | 334,248 | 352,189 | 344,005 | 335,899 | ||||||||||
| Arizona Bank & Trust | 320,737 | 321,813 | 339,797 | 243,044 | 216,851 | ||||||||||
| Galena State Bank & Trust Co. | 252,691 | 245,324 | 235,000 | 245,554 | 247,334 | ||||||||||
| Minnesota Bank & Trust | 151,659 | 145,246 | 111,886 | 109,862 | 91,179 | ||||||||||
| Summit Bank & Trust | 102,855 | 102,891 | 100,617 | 93,318 | 88,540 | ||||||||||
| Net Income (Loss) | |||||||||||||||
| Dubuque Bank and Trust Company | $ | 2,737 | $ | 3,694 | $ | 2,872 | $ | 5,581 | $ | 5,485 | |||||
| New Mexico Bank & Trust | 1,660 | 2,520 | 3,444 | 1,354 | 4,395 | ||||||||||
| Wisconsin Bank & Trust | 1,990 | 1,534 | 2,544 | 638 | 1,943 | ||||||||||
| Rocky Mountain Bank | 916 | 854 | 1,175 | 2,029 | 1,315 | ||||||||||
| Riverside Community Bank | 546 | 240 | 827 | 482 | 607 | ||||||||||
| Arizona Bank & Trust | 380 | 1,568 | 1,714 | 1,346 | 1,534 | ||||||||||
| Galena State Bank & Trust Co. | 324 | 981 | 1,270 | 929 | 938 | ||||||||||
| Minnesota Bank & Trust | (124 | ) | 196 | 320 | 412 | (15 | ) | ||||||||
| Summit Bank & Trust | (368 | ) | (242 | ) | (45 | ) | (69 | ) | (1 | ) | |||||
| Return on Average Assets | |||||||||||||||
| Dubuque Bank and Trust Company | 0.74 | % | 1.00 | % | 0.81 | % | 1.34 | % | 1.50 | % | |||||
| New Mexico Bank & Trust | 0.66 | 0.99 | 1.38 | 0.53 | 1.78 | ||||||||||
| Wisconsin Bank & Trust | 1.24 | 0.96 | 1.58 | 0.44 | 1.53 | ||||||||||
| Rocky Mountain Bank | 0.80 | 0.75 | 1.03 | 1.86 | 1.21 | ||||||||||
| Riverside Community Bank | 0.46 | 0.21 | 0.77 | 0.46 | 0.57 | ||||||||||
| Arizona Bank & Trust | 0.38 | 1.59 | 1.69 | 1.87 | 2.22 | ||||||||||
| Galena State Bank & Trust Co. | 0.43 | 1.35 | 1.82 | 1.25 | 1.24 | ||||||||||
| Minnesota Bank & Trust | (0.32 | ) | 0.55 | 1.03 | 1.41 | (0.06 | ) | ||||||||
| Summit Bank & Trust | (1.27 | ) | (0.85 | ) | (0.16 | ) | (0.25 | ) | — | ||||||
| Net Interest Margin as a Percentage of Average Earning Assets | |||||||||||||||
| Dubuque Bank and Trust Company | 3.30 | % | 3.23 | % | 3.37 | % | 3.57 | % | 3.61 | % | |||||
| New Mexico Bank & Trust | 3.58 | 3.53 | 3.56 | 3.51 | 3.50 | ||||||||||
| Wisconsin Bank & Trust | 4.43 | 4.25 | 4.34 | 4.16 | 4.04 | ||||||||||
| Rocky Mountain Bank | 4.15 | 3.96 | 3.82 | 4.26 | 4.35 | ||||||||||
| Riverside Community Bank | 2.82 | 2.89 | 2.80 | 3.02 | 2.44 | ||||||||||
| Arizona Bank & Trust | 4.57 | 4.29 | 4.25 | 3.89 | 3.76 | ||||||||||
| Galena State Bank & Trust Co. | 3.32 | 3.48 | 3.69 | 3.31 | 3.50 | ||||||||||
| Minnesota Bank & Trust | 3.50 | 3.30 | 3.68 | 4.04 | 4.47 | ||||||||||
| Summit Bank & Trust | 3.76 | 3.57 | 3.89 | 3.62 | 3.75 | ||||||||||
| HEARTLAND FINANCIAL USA, INC. | |||||||||||||||||||
| SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) | |||||||||||||||||||
| DOLLARS IN THOUSANDS | |||||||||||||||||||
| As of | |||||||||||||||||||
| 9/30/2013 | 6/30/2013 | 3/31/2013 | 12/31/2012 | 9/30/2012 | |||||||||||||||
| Total Portfolio Loans and Leases | |||||||||||||||||||
| Dubuque Bank and Trust Company | $ | 828,502 | $ | 828,088 | $ | 803,084 | $ | 814,400 | $ | 827,065 | |||||||||
| New Mexico Bank & Trust | 508,452 | 501,373 | 490,691 | 497,837 | 490,102 | ||||||||||||||
| Wisconsin Bank & Trust | 444,174 | 442,184 | 445,869 | 446,214 | 355,670 | ||||||||||||||
| Rocky Mountain Bank | 301,224 | 285,900 | 272,385 | 278,252 | 286,138 | ||||||||||||||
| Riverside Community Bank | 181,024 | 174,498 | 167,776 | 166,852 | 155,191 | ||||||||||||||
| Arizona Bank & Trust | 278,616 | 251,416 | 249,642 | 189,314 | 185,186 | ||||||||||||||
| Galena State Bank & Trust Co. | 177,480 | 169,306 | 170,500 | 176,109 | 172,530 | ||||||||||||||
| Minnesota Bank & Trust | 94,182 | 89,121 | 89,876 | 90,729 | 85,860 | ||||||||||||||
| Summit Bank & Trust | 75,681 | 75,869 | 77,305 | 77,264 | 67,909 | ||||||||||||||
| Allowance For Loan and Lease Losses | |||||||||||||||||||
| Dubuque Bank and Trust Company | $ | 11,040 | $ | 8,858 | $ | 8,758 | $ | 9,217 | $ | 9,760 | |||||||||
| New Mexico Bank & Trust | 7,007 | 6,619 | 6,381 | 6,837 | 7,834 | ||||||||||||||
| Wisconsin Bank & Trust | 4,554 | 4,420 | 4,248 | 4,164 | 3,719 | ||||||||||||||
| Rocky Mountain Bank | 4,451 | 4,404 | 4,009 | 4,072 | 4,135 | ||||||||||||||
| Riverside Community Bank | 3,012 | 2,924 | 3,174 | 3,240 | 3,122 | ||||||||||||||
| Arizona Bank & Trust | 3,841 | 3,573 | 4,065 | 4,444 | 4,723 | ||||||||||||||
| Galena State Bank & Trust Co. | 1,872 | 1,759 | 1,856 | 2,031 | 1,932 | ||||||||||||||
| Minnesota Bank & Trust | 1,068 | 944 | 920 | 961 | 915 | ||||||||||||||
| Summit Bank & Trust | 1,297 | 1,222 | 1,339 | 1,204 | 1,478 | ||||||||||||||
| Nonperforming Loans and Leases | |||||||||||||||||||
| Dubuque Bank and Trust Company | $ | 19,803 | $ | 9,612 | $ | 2,234 | $ | 2,783 | $ | 2,378 | |||||||||
| New Mexico Bank & Trust | 7,406 | 8,606 | 8,228 | 10,711 | 8,455 | ||||||||||||||
| Wisconsin Bank & Trust | 6,825 | 7,921 | 3,875 | 5,433 | 6,673 | ||||||||||||||
| Rocky Mountain Bank | 4,076 | 5,997 | 6,130 | 8,174 | 6,167 | ||||||||||||||
| Riverside Community Bank | 4,120 | 2,769 | 3,118 | 3,473 | 4,685 | ||||||||||||||
| Arizona Bank & Trust | 1,862 | 2,240 | 3,378 | 3,549 | 5,409 | ||||||||||||||
| Galena State Bank & Trust Co. | 1,131 | 1,246 | 3,087 | 5,080 | 3,242 | ||||||||||||||
| Minnesota Bank & Trust | — | 3 | 4 | 5 | 5 | ||||||||||||||
| Summit Bank & Trust | 1,021 | 1,897 | 2,001 | 3,159 | 2,913 | ||||||||||||||
| Allowance As a Percent of Total Loans and Leases | |||||||||||||||||||
| Dubuque Bank and Trust Company | 1.33 | % | 1.07 | % | 1.09 | % | 1.13 | % | 1.18 | % | |||||||||
| New Mexico Bank & Trust | 1.38 | 1.32 | 1.30 | 1.37 | 1.60 | ||||||||||||||
| Wisconsin Bank & Trust | 1.03 | 1.00 | 0.95 | 0.93 | 1.05 | ||||||||||||||
| Rocky Mountain Bank | 1.48 | 1.54 | 1.47 | 1.46 | 1.45 | ||||||||||||||
| Riverside Community Bank | 1.66 | 1.68 | 1.89 | 1.94 | 2.01 | ||||||||||||||
| Arizona Bank & Trust | 1.38 | 1.42 | 1.63 | 2.35 | 2.55 | ||||||||||||||
| Galena State Bank & Trust Co. | 1.05 | 1.04 | 1.09 | 1.15 | 1.12 | ||||||||||||||
| Minnesota Bank & Trust | 1.13 | 1.06 | 1.02 | 1.06 | 1.07 | ||||||||||||||
| Summit Bank & Trust | 1.71 | 1.61 | 1.73 | 1.56 | 2.18 | ||||||||||||||