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Heartland Financial USA, Inc. (“HTLF”) Reports Quarterly and Year to Date Results as of June 30, 2023

Highlights and Developments

  • Quarterly net income available to common stockholders of $47.4 million
  • Quarterly diluted earnings per common share of $1.11
  • Total revenue growth of $2.6 million or 1% from the second quarter of 2022, and $15.6 million or 5% from the first six months of 2022
  • Quarterly loan growth of $222.6 million or 2%
  • Nearly 1,300 net new commercial deposit accounts and over 1,400 net new consumer deposit accounts opened in the quarter
  • Completed the consolidation of two bank charters during the quarter, and one charter consolidation completed subsequent to the end of the quarter
  Quarter Ended
June 30,
 Six Months Ended
June 30,
   2023   2022   2023   2022 
Net income available to common stockholders (in millions) $47.4  $49.9  $98.2  $90.9 
Diluted earnings per common share  1.11   1.17   2.30   2.14 
         
Return on average assets  0.98%  1.06%  1.02%  0.99%
Return on average common equity  11.01   11.55   11.70   9.82 
Return on average tangible common equity (non-GAAP)(1)  17.33   18.35   18.63   15.08 
Net interest margin  3.19   3.18   3.27   3.13 
Net interest margin, fully tax-equivalent (non-GAAP)(1)  3.24   3.22   3.32   3.17 
Efficiency ratio  60.93   60.16   60.94   62.75 
Adjusted efficiency ratio, fully-tax equivalent (non-GAAP)(1)  59.82   57.66   58.48   61.02 

(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to the financial tables for reconciliations to the most directly comparable GAAP measures.

"HTLF's strength and diverse geography enabled us to continue executing on our strategic priorities despite recent industry challenges. We were pleased with our strong loan growth and new customer relationships. Our stable deposit base and growth strategies give us momentum heading into the second half of the year. "
Bruce K. Lee, President and Chief Executive Officer, HTLF


DENVER, July 31, 2023 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022:

  • Net income available to common stockholders of $47.4 million compared to $49.9 million, a decrease of $2.5 million or 5%.
  • Earnings per diluted common share of $1.11 compared to $1.17, a decrease of $0.06 or 5%.
  • Net interest income of $147.1 million compared to $142.5 million, an increase of $4.7 million or 3%.
  • Total revenue growth of $2.6 million or 1% to $179.6 million compared to $177.0 million.
  • Return on average assets was 0.98% compared to 1.06%.
  • Return on average common equity was 11.01% compared to 11.55%.
  • Return on average tangible common equity (non-GAAP) was 17.33% compared to 18.35%.

"HTLF's strength and diverse geography enabled us to continue executing on our strategic priorities despite recent industry challenges. We were pleased with our strong loan growth and new customer relationships. Our stable deposit base and growth strategies give us momentum heading into the second half of the year," said Bruce K. Lee, president and chief executive officer of HTLF.

HTLF report the following results for the six months ended June 30, 2023, compared to the six months ended June 30, 2022:

  • Net income available to common stockholders of $98.2 million compared to $90.9 million, an increase of $7.2 million or 8%.
  • Earnings per diluted common share of $2.30 compared to $2.14, an increase of $0.16 or 7%.
  • Net interest income of $299.3 million compared to $277.1 million, an increase of $22.2 million or 8%.
  • Total revenue of $361.8 million compared to $346.2 million, an increase of $15.6 million or 5%.
  • Return on average assets was 1.02% compared to 0.99%.
  • Return on average common equity was 11.70% compared to 9.82%.
  • Return on average tangible common equity (non-GAAP) was 18.63% compared to 15.08%.

Charter Consolidation Update

During the second quarter of 2023, Bank of Blue Valley and First Bank & Trust were consolidated into HTLF Bank. Subsequent to June 30, 2023, Rocky Mountain Bank was consolidated into HTLF Bank. Citywide Banks, Premier Valley Bank, Minnesota Bank & Trust, Arizona Bank & Trust, Illinois Bank & Trust, Wisconsin Bank & Trust, Bank of Blue Valley, First Bank & Trust and Rocky Mountain Bank are now operating as divisions of HTLF Bank. The two remaining charters are expected to be consolidated by the end of October 2023. Charter consolidation follows a template that retains the current brands, local leadership and local decision making.

Total consolidation restructuring costs are projected to be $19-$20 million with approximately $6-$7 million of expenses remaining to be incurred in 2023. Charter consolidation is designed to eliminate redundancies and improve HTLF’s operating efficiency and capacity to support ongoing product and service enhancements, as well as current and future growth. HTLF realized some operating efficiency and financial benefits in the second half of 2022 and first half of 2023 with the completion of nine charter consolidations, and total benefits are estimated to be approximately $20 million annually after the project is completed.

Recent Developments

As of March 29, 2023, HTLF's subsidiary, Dubuque Bank & Trust, entered into an agreement to sell and transfer the recordkeeping and administration services component of HTLF’s Retirement Plan Services business to July Business Services ("July"). Through the new partnership with July, HTLF will augment the comprehensive retirement plan solutions offered to clients with enhanced technology and an expanded suite of product offerings that clients expect from a top retirement services provider. The transaction was completed and recordkeeping and administration services were transferred in the second quarter of 2023. The transaction resulted in a gain of $4.3 million.

On March 31, 2023, HTLF's division, First Bank & Trust, closed on the sale of its mortgage servicing rights portfolio, which consisted of approximately 4,500 loans serviced for others with an unpaid principal balance of approximately $700 million. In the agreement, which includes customary terms and conditions, First Bank & Trust provided interim servicing of the loans until the transfer date in May 2023.

Net Interest Income and Net Interest Margin

Net interest margin, expressed as a percentage of average earning assets, was 3.19% (3.24% on a fully tax-equivalent basis, non-GAAP) for the second quarter of 2023 compared to 3.36% (3.40% on a fully tax-equivalent basis, non-GAAP) for the first quarter of 2023, and 3.18% (3.22% on a fully tax-equivalent basis, non-GAAP) for the second quarter of 2022.

Total interest income and average earning asset changes for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Total interest income was $235.5 million compared to $152.9 million, an increase of $82.6 million or 54% primarily attributable to an increase in average earning assets and higher yields.
  • Total interest income on a tax-equivalent basis (non-GAAP) was $237.8 million, an increase of $83.0 million or 54% from $154.9 million.
  • Average earning assets increased $535.8 million or 3% to $18.52 billion compared to $17.99 billion.
  • The average rate on earning assets increased 170 basis points to 5.15% from 3.45%, primarily due to recent interest rate increases.

Total interest expense and average interest bearing liability changes for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Total interest expense was $88.4 million, an increase of $77.9 million from $10.4 million, due to increases in the average interest rate paid and average interest bearing liabilities.
  • The average interest rate paid on interest bearing liabilities increased 232 basis points to 2.68% compared to 0.36%.
  • Average interest bearing deposits increased $1.66 billion or 15% to $12.75 billion from $11.08 billion, primarily due to an increase of $1.94 billion in wholesale deposits.
  • The average interest rate paid on interest bearing deposits increased 234 basis points to 2.58% compared to 0.24%.
  • Average borrowings decreased $29.4 million or 6% to $461.7 million from $491.1 million, and the average interest rate paid on borrowings was 5.55% compared to 3.18%.

Net interest income changes for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Net interest income totaled $147.1 million compared to $142.5 million, an increase of $4.7 million or 3%.
  • Net interest income on a tax-equivalent basis (non-GAAP) totaled $149.4 million compared to $144.4 million, an increase of $5.0 million or 3%.

Noninterest Income and Noninterest Expense

Total noninterest income was $32.5 million during the second quarter of 2023 compared to $34.5 million during the second quarter of 2022, a decrease of $2.0 million or 6%. Significant changes within the noninterest income category for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Service charges and fees increased $1.6 million or 9% to $19.6 million from $18.1 million.
  • Net security losses totaled $314,000 compared to net losses of $2.1 million.
  • Net gains on sales of loans held for sale decreased $1.9 million or 64% to $1.1 million from $2.9 million, primarily attributable to a decrease in loans sold to the secondary market.
  • Other noninterest income decreased $2.6 million or 87% to $407,000 compared to $3.0 million. Included in other noninterest income for the second quarter of 2022 was a gain of $1.9 million on the sale of VISA Class B shares.

Total noninterest expense was $109.4 million during the second quarter of 2023 compared to $106.5 million during the second quarter of 2022, which was an increase of $3.0 million or 3%. Significant changes within the noninterest expense category for the second quarter of 2023 compared to the second quarter of 2022 were:

  • Salaries and employee benefits totaled $62.1 million compared to $64.0 million, a decrease of $1.9 million or 3%. The decrease was primarily due to a reduction of full-time equivalent employees and lower incentive compensation expense. Full-time equivalent employees totaled 1,966 compared to 2,087, a decrease of 121 or 6%.
  • Other noninterest expenses totaled $15.6 million compared to $13.0 million, an increase of $2.6 million or 20%. Credit card expenses increased $909,000 or 27% to $4.3 million from $3.4 million. Fraud losses increased $739,000 to $948,000 from $209,000.
  • FDIC insurance assessments totaled $3.0 million compared to $1.5 million, an increase of $1.5 million due to assessment rate changes that were effective with the first quarter 2023 assessment.
  • Acquisition, integration and restructuring costs totaled $1.9 million compared to $2.4 million, a decrease of $520,000 primarily due to reduced charter consolidation expenses.

The effective tax rate was 23.74% for the second quarter of 2023 compared to 22.89% for the second quarter of 2022. The following items impacted the second quarter 2023 and 2022 tax calculations:

  • Various tax credits of $568,000 compared to $975,000.
  • Tax expense of $1,086,000 compared to $109,000 resulting from the disallowed interest expense related to tax-exempt loans and securities, aligning with increases in total interest expense.
  • Tax-exempt interest income as a percentage of pre-tax income of 12.40% compared to 11.05%.

Total Assets, Total Loans and Total Deposits

Total assets were $20.22 billion at June 30, 2023, a decrease of $19.5 million or less than 1% from $20.24 billion at year-end 2022. Securities represented 33% and 35% of total assets at June 30, 2023, and December 31, 2022, respectively.

Total loans held to maturity were $11.72 billion at June 30, 2023, compared to $11.50 billion at March 31, 2023, and $11.43 billion at December 31, 2022, representing increases of $222.6 million or 2%, and $289.6 million or 3%, respectively.

Significant changes by loan category at June 30, 2023 compared to March 31, 2023 included:

  • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $174.4 million or 3% to $5.99 billion compared to $5.82 billion.
  • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $20.3 million or 1% to $3.54 billion compared to $3.52 billion.
  • Agricultural and agricultural real estate loans increased $29.6 million or 4% to $839.8 million from $810.2 million.

Significant changes by loan category at June 30, 2023 compared to December 31, 2022 included:

  • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $252.8 million or 4% to $5.99 billion compared to $5.74 billion.
  • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $136.8 million or 4% to $3.54 billion compared to $3.41 billion.
  • Agricultural and agricultural real estate loans decreased $80.7 million or 9% to $839.8 million compared to $920.5 million.
  • Residential real estate loans decreased $24.9 million or 3% to $828.4 million compared to $853.4 million.

Total deposits were $17.66 billion as of June 30, 2023, compared to $17.68 billion at March 31, 2023, which was a decrease of $17.8 million or less than 1%. Total deposits were $17.66 billion as of June 30, 2023, compared to $17.51 billion at December 31, 2022, an increase of $150.5 million or 1%.

Total customer deposits were $14.65 billion as of June 30, 2023 compared to $14.69 billion at March 31, 2023, which was a decrease of $47.1 million or less than 1%. During the second quarter of 2023, nearly 1,300 net new commercial deposit accounts and over 1,400 net new consumer deposit accounts were opened. Significant deposit changes by category at June 30, 2023, compared to March 31, 2023, included:

  • Customer demand deposits decreased $221.7 million or 4% to $4.90 billion compared to $5.12 billion.
  • Customer savings deposits decreased $351.7 million or 4% to $8.15 billion compared to $8.50 billion.
  • Customer time deposits increased $526.4 million or 49% to $1.60 billion compared to $1.07 billion.

Total customer deposits were $14.65 billion at June 30, 2023 compared to $15.22 billion at December 31, 2022, which was a decrease of $578.5 million or 4%. Significant deposit changes by category at June 30, 2023 compared to December 31, 2022, included:

  • Customer demand deposits decreased $803.5 million or 14% to $4.90 billion compared to $5.70 billion.
  • Customer savings deposits decreased $521.3 million or 6% to $8.15 billion compared to $8.67 billion.
  • Customer time deposits increased $746.3 million or 88% to $1.60 billion compared to $851.5 million.

Total wholesale and institutional deposits were $3.02 billion as of June 30, 2023, which was an increase of $29.3 million or 1% from $2.99 billion at March 31, 2023. Significant deposit changes by category at June 30, 2023, compared to March 31, 2023, included:

  • Wholesale and institutional savings deposits decreased $132.3 million or 18% to $623.0 million compared to $755.3 million.
  • Wholesale time deposits increased $161.5 million or 7% to $2.40 billion compared to $2.23 billion.

Total wholesale deposits were $3.02 billion as of June 30, 2023, which was an increase of $729.0 million or 32% from $2.29 billion at December 31, 2022. Significant deposit changes by category at June 30, 2023 compared to December 31, 2022 included:

  • Wholesale and institutional savings deposits decreased $700.5 million or 53% to $623.0 million compared to $1.32 billion.
  • Wholesale time deposits increased $1.43 billion to $2.40 billion compared to $965.7 million.

Provision and Allowance

Provision and Allowance for Credit Losses for Loans
Provision for credit losses for loans for the second quarter of 2023 was $7.8 million, which was an increase of $6.3 million from $1.5 million recorded in the second quarter of 2022. The provision expense for the second quarter of 2023 was impacted by a $5.3 million charge-off related to an overdraft, the result of a fraud incident impacting the account of a single long-term customer.

The allowance for credit losses for loans totaled $111.2 million and $109.5 million at June 30, 2023, and December 31, 2022, respectively. Management continued to utilize a macroeconomic outlook which anticipated a moderate recession developing within the next twelve months. The following items impacted the allowance for credit losses for loans at June 30, 2023:

  • Provision expense for the six months ended June 30, 2023, totaled $10.0 million.
  • Net charge-offs of $8.3 million were recorded for the first six months of 2023.

Provision and Allowance for Credit Losses for Unfunded Commitments
The allowance for unfunded commitments decreased $1.6 million or 8% to $18.6 million at June 30, 2023, from $20.2 million at December 31, 2022, primarily due to a reduction of $164.2 million in unfunded commitments for construction loans, which carry the highest loss rate. Total unfunded commitments increased $175.5 million or 4% to $4.91 billion at June 30, 2023 compared to $4.73 billion at December 31, 2022.

Total Provision and Allowance for Lending Related Credit Losses
The total provision expense for lending related credit losses was $5.4 million for the second quarter of 2023 compared to $3.2 million for the second quarter of 2022. The total allowance for lending related credit losses was $129.8 million or 1.11% of total loans at June 30, 2023, compared to $129.7 million or 1.13% of total loans as of December 31, 2022.

Nonperforming Assets

Nonperforming assets decreased $834,000 or 1% to $66.1 million or 0.33% of total assets at June 30, 2023, compared to $66.9 million or 0.33% of total assets at December 31, 2022. Nonperforming loans were $63.4 million or 0.54% of total loans at June 30, 2023, compared to $58.5 million or 0.51% of total loans at December 31, 2022. At June 30, 2023, loans delinquent 30-89 days were 0.12% of total loans compared to 0.04% of total loans at December 31, 2022.

Non-GAAP Financial Measures
This earnings release contains references to financial measures which are not defined by generally accepted accounting principles ("GAAP"). Management believes the non-GAAP measures are helpful for investors to analyze and evaluate the company's financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this earnings release with other companies' non-GAAP measures. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure may be found in the financial tables in this earnings release.

Below are the non-GAAP measures included in this earnings release, management's reason for including each measure and the method of calculating each measure:

  • Annualized net interest margin, fully tax-equivalent, adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
  • Adjusted efficiency ratio, fully tax equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities, and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items as noted in reconciliation contained in this earnings release.
  • Net interest income, fully tax equivalent, is net income adjusted for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
  • Tangible book value per common share is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
  • Tangible common equity ratio is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
  • Adjusted tangible common equity ratio is total common equity less goodwill, core deposit and customer relationship intangibles, net, and accumulated other comprehensive loss divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength excluding the variability of accumulated other comprehensive income (loss).
  • Annualized return on average tangible common equity is net income excluding intangible amortization calculated as (1) net income excluding tax-effected core deposit and customer relationship intangibles amortization, divided by (2) average common equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
  • Annualized ratio of core expenses to average assets adjusts noninterest expenses to exclude specific items noted in the reconciliation. Management includes this measure as it is considered to be a critical metric to analyze and evaluate controllable expenses related to primary business operations.

Conference Call Details
HTLF will host a conference call for shareholders, analysts and other interested parties at 5:00 p.m. EDT today. To join via webcast, please visit https://ir.htlf.com/news-and-events/event-calendar/default.aspx 10 minutes prior to the call. A replay will be available until July 30, 2024, by logging on to www.htlf.com.

About HTLF
Heartland Financial USA, Inc., is a Denver, Colorado-based bank holding company operating under the brand name HTLF, with assets of $20.22 billion as of June 30, 2023. HTLF's banks serves communities in Arizona, California, Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, New Mexico, Texas and Wisconsin. HTLF is committed to its core commercial business, supported by a strong retail operation, and provides a diversified line of financial services including treasury management, wealth management, investments and residential mortgage. Additional information is available at www.htlf.com.

Safe Harbor Statement
This release (including any information incorporated herein by reference) and future oral and written statements of HTLF and its management, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, financial condition, results of operations, plans, objectives and future performance of HTLF.

Any statements about HTLF's expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Forward-looking statements may include information about possible or assumed future results of HTLF's operations or performance, and may be based upon beliefs, expectations and assumptions of HTLF's management. These forward-looking statements are generally identified by the use of the words such as "believe", "expect", "anticipate", "plan", "intend", "estimate", "project", "may", "will", "would", "could", "should", "view", "opportunity", "potential", or similar or negative expressions of these words or phrases that are used in this release, and future oral and written statements of HTLF and its management. Although HTLF may make these statements based on management’s experience, beliefs, expectations, assumptions and best estimate of future events, the ability of HTLF to predict results or the actual effect or outcomes of plans or strategies is inherently uncertain, and there may be events or factors that management has not anticipated. Therefore, the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, 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 HTLF currently believes could have a material effect on its operations and future prospects, are detailed below and in the risk factors in HTLF's reports filed with the Securities and Exchange Commission ("SEC"), including the "Risk Factors" section under Item 1A of Part I of HTLF’s Annual Report on Form 10-K for the year ended December 31, 2022, include, among others:

  • Economic and Market Conditions Risks, including risks related to the deterioration of the U.S. economy in general and in the local economies in which HTLF conducts its operations and future civil unrest, natural disasters, pandemics, such as the COVID-19 pandemic or future pandemics and governmental measures addressing them, climate change and climate-related regulations, persistent inflation, higher interest rates, recession, supply chain issues, labor shortages, terrorist threats or acts of war;
  • Credit Risks, including risks of increasing credit losses due to deterioration in the financial condition of HTLF's borrowers, changes in asset and collateral values and climate and other borrower industry risks which may impact the provision for credit losses and net charge-offs;
  • Liquidity and Interest Rate Risks, including the impact of capital market conditions, rising interest rates and changes in monetary policy on our borrowings and net interest income;
  • Operational Risks, including processing, information systems, cybersecurity, vendor, business interruption, and fraud risks;
  • Strategic and External Risks, including economic, political and competitive forces impacting our business;
  • Legal, Compliance and Reputational Risks, including regulatory and litigation risks; and
  • Risks of Owning Stock in HTLF, including stock price volatility and dilution as a result of future equity offerings and acquisitions.

There can be no assurance that other factors not currently anticipated by HTLF will not materially and adversely affect HTLF's business, financial condition and results of operations. Additionally, all statements in this release, including forward-looking statements speak only as of the date they are made. HTLF does not undertake and specifically disclaims any obligation to publicly release the results of any revisions which may be made to any forward-looking statement to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events or to otherwise update any statement in light of new information or future events. Further information concerning HTLF and its business, including additional factors that could materially affect HTLF’s financial results, is included in HTLF's filings with the Securities and Exchange Commission (the "SEC").

-FINANCIAL TABLES FOLLOW-

 
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
June 30,
 For the Six Months Ended
June 30,
   2023   2022   2023   2022 
Interest Income        
Interest and fees on loans $168,899  $108,718  $322,742  $211,087 
Interest on securities:        
Taxable  58,172   38,098   114,148   70,718 
Nontaxable  6,378   5,508   12,406   11,710 
Interest on federal funds sold            
Interest on deposits with other banks and short-term investments  2,051   563   3,182   634 
Total Interest Income  235,500   152,887   452,478   294,149 
Interest Expense        
Interest on deposits  81,975   6,530   138,873   9,507 
Interest on short-term borrowings  848   88   3,270   134 
Interest on other borrowings  5,545   3,808   10,991   7,368 
Total Interest Expense  88,368   10,426   153,134   17,009 
Net Interest Income  147,132   142,461   299,344   277,140 
Provision for credit losses  5,379   3,246   8,453   6,491 
Net Interest Income After Provision for Credit Losses  141,753   139,215   290,891   270,649 
Noninterest Income        
Service charges and fees  19,627   18,066   36,763   33,317 
Loan servicing income  411   834   1,125   1,120 
Trust fees  5,419   5,679   11,076   11,758 
Brokerage and insurance commissions  677   839   1,373   1,708 
Capital markets fees  4,037   4,871   6,486   7,910 
Securities gains/(losses), net  (314)  (2,089)  (1,418)  783 
Unrealized gain/(loss) on equity securities, net  (41)  (121)  152   (404)
Net gains on sale of loans held for sale  1,050   2,901   2,881   6,312 
Valuation adjustment on servicing rights           1,658 
Income on bank owned life insurance  1,220   523   2,184   1,047 
Other noninterest income  407   3,036   1,870   3,899 
Total Noninterest Income  32,493   34,539   62,492   69,108 
Noninterest Expense        
Salaries and employee benefits  62,099   64,032   124,248   130,206 
Occupancy  6,691   7,094   13,900   14,456 
Furniture and equipment  3,063   3,033   5,978   6,552 
Professional fees  15,194   14,457   27,991   27,997 
FDIC insurance assessments  3,035   1,530   6,314   3,146 
Advertising  3,052   1,283   5,037   2,838 
Core deposit and customer relationship intangibles amortization  1,715   2,083   3,503   4,137 
Other real estate and loan collection expenses, net  348   78   503   273 
(Gain)/loss on sales/valuations of assets, net  (3,372)  (3,230)  (2,257)  (3,184)
Acquisition, integration and restructuring costs  1,892   2,412   3,565   2,988 
Partnership investment in tax credit projects  154   737   692   814 
Other noninterest expenses  15,575   12,970   31,015   27,053 
Total Noninterest Expense  109,446   106,479   220,489   217,276 
Income Before Income Taxes  64,800   67,275   132,894   122,481 
Income taxes  15,384   15,402   30,702   27,519 
Net Income  49,416   51,873   102,192   94,962 
Preferred dividends  (2,012)  (2,012)  (4,025)  (4,025)
Net Income Available to Common Stockholders $47,404  $49,861  $98,167  $90,937 
Earnings per common share-diluted $1.11  $1.17  $2.30  $2.14 
Weighted average shares outstanding-diluted  42,757,603   42,565,391   42,753,197   42,562,639 


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
  6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Interest Income          
Interest and fees on loans $168,899  $153,843  $143,970  $122,913  $108,718 
Interest on securities:          
Taxable  58,172   55,976   53,178   45,648   38,098 
Nontaxable  6,378   6,028   6,132   6,164   5,508 
Interest on federal funds sold        11       
Interest on deposits with other banks and short-term investments  2,051   1,131   1,410   1,081   563 
Total Interest Income  235,500   216,978   204,701   175,806   152,887 
Interest Expense          
Interest on deposits  81,975   56,898   32,215   15,158   6,530 
Interest on short-term borrowings  848   2,422   2,223   360   88 
Interest on other borrowings  5,545   5,446   5,043   4,412   3,808 
Total Interest Expense  88,368   64,766   39,481   19,930   10,426 
Net Interest Income  147,132   152,212   165,220   155,876   142,461 
Provision for credit losses  5,379   3,074   3,387   5,492   3,246 
Net Interest Income After Provision for Credit Losses  141,753   149,138   161,833   150,384   139,215 
Noninterest Income          
Service charges and fees  19,627   17,136   17,432   17,282   18,066 
Loan servicing income  411   714   790   831   834 
Trust fees  5,419   5,657   5,440   5,372   5,679 
Brokerage and insurance commissions  677   696   629   649   839 
Capital markets fees  4,037   2,449   1,824   1,809   4,871 
Securities gains/(losses), net  (314)  (1,104)  (153)  (1,055)  (2,089)
Unrealized gain/(loss) on equity securities, net  (41)  193   (7)  (211)  (121)
Net gains on sale of loans held for sale  1,050   1,831   888   1,832   2,901 
Valuation adjustment on servicing rights               
Income on bank owned life insurance  1,220   964   600   694   523 
Other noninterest income  407   1,463   2,532   1,978   3,036 
Total Noninterest Income  32,493   29,999   29,975   29,181   34,539 
Noninterest Expense          
Salaries and employee benefits  62,099   62,149   61,611   62,661   64,032 
Occupancy  6,691   7,209   6,905   6,794   7,094 
Furniture and equipment  3,063   2,915   3,019   2,928   3,033 
Professional fees  15,194   12,797   16,320   14,289   14,457 
FDIC insurance assessments  3,035   3,279   1,866   1,988   1,530 
Advertising  3,052   1,985   1,829   1,554   1,283 
Core deposit and customer relationship intangibles amortization  1,715   1,788   1,841   1,856   2,083 
Other real estate and loan collection expenses, net  348   155   373   304   78 
(Gain)/loss on sales/valuations of assets, net  (3,372)  1,115   2,388   (251)  (3,230)
Acquisition, integration and restructuring costs  1,892   1,673   2,442   2,156   2,412 
Partnership investment in tax credit projects  154   538   3,247   979   737 
Other noninterest expenses  15,575   15,440   15,377   13,625   12,970 
Total Noninterest Expense  109,446   111,043   117,218   108,883   106,479 
Income Before Income Taxes  64,800   68,094   74,590   70,682   67,275 
Income taxes  15,384   15,318   13,936   14,118   15,402 
Net Income  49,416   52,776   60,654   56,564   51,873 
Preferred dividends  (2,012)  (2,013)  (2,012)  (2,013)  (2,012)
Net Income Available to Common Stockholders $47,404  $50,763  $58,642  $54,551  $49,861 
Earnings per common share-diluted $1.11  $1.19  $1.37  $1.28  $1.17 
Weighted average shares outstanding-diluted  42,757,603   42,742,878   42,699,752   42,643,940   42,565,391 


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As of
  6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Assets          
Cash and due from banks $317,303  $274,354  $309,045  $250,394  $221,077 
Interest bearing deposits with other banks and short-term investments  82,884   87,757   54,042   149,466   163,717 
Cash and cash equivalents  400,187   362,111   363,087   399,860   384,794 
Time deposits in other financial institutions  1,490   1,740   1,740   1,740   1,855 
Securities:          
Carried at fair value  5,798,041   6,096,657   6,147,144   6,060,331   7,106,218 
Held to maturity, at cost, less allowance for credit losses  834,673   832,098   829,403   830,247   81,939 
Other investments, at cost  72,291   72,364   74,567   80,286   85,899 
Loans held for sale  14,353   10,425   5,277   9,570   18,803 
Loans:          
Held to maturity  11,717,974   11,495,353   11,428,352   10,923,532   10,678,218 
Allowance for credit losses  (111,198)  (112,707)  (109,483)  (105,715)  (101,353)
Loans, net  11,606,776   11,382,646   11,318,869   10,817,817   10,576,865 
Premises, furniture and equipment, net  190,420   191,267   197,330   203,585   206,818 
Goodwill  576,005   576,005   576,005   576,005   576,005 
Core deposit and customer relationship intangibles, net  21,651   23,366   25,154   26,995   28,851 
Servicing rights, net        7,840   8,379   8,288 
Cash surrender value on life insurance  195,793   194,419   193,403   193,184   192,474 
Other real estate, net  2,677   7,438   8,401   8,030   4,528 
Other assets  510,359   432,008   496,008   466,921   385,062 
Total Assets $20,224,716  $20,182,544  $20,244,228  $19,682,950  $19,658,399 
Liabilities and Equity          
Liabilities          
Deposits:          
Demand $4,897,858  $5,119,554  $5,701,340  $6,083,563  $6,087,304 
Savings  8,772,596   9,256,609   9,994,391   10,060,523   10,059,678 
Time  3,993,089   3,305,183   1,817,278   1,123,035   1,078,568 
Total deposits  17,663,543   17,681,346   17,513,009   17,267,121   17,225,550 
Short-term borrowings  44,364   92,337   376,117   147,000   97,749 
Other borrowings  372,403   372,097   371,753   371,446   372,538 
Accrued expenses and other liabilities  285,416   207,359   248,294   241,425   188,494 
Total Liabilities  18,365,726   18,353,139   18,509,173   18,026,992   17,884,331 
Stockholders' Equity          
Preferred equity  110,705   110,705   110,705   110,705   110,705 
Common stock  42,645   42,559   42,467   42,444   42,439 
Capital surplus  1,087,358   1,084,112   1,080,964   1,079,277   1,076,766 
Retained earnings  1,193,522   1,158,948   1,120,925   1,074,168   1,031,076 
Accumulated other comprehensive loss  (575,240)  (566,919)  (620,006)  (650,636)  (486,918)
Total Equity  1,858,990   1,829,405   1,735,055   1,655,958   1,774,068 
Total Liabilities and Equity $20,224,716  $20,182,544  $20,244,228  $19,682,950  $19,658,399 


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
  For the Quarter Ended
  6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Average Balances          
Assets $20,221,511  $20,118,005  $19,913,849  $19,775,341  $19,559,091 
Loans, net of unearned  11,625,442   11,378,078   11,117,513   10,783,135   10,477,368 
Deposits  17,689,138   17,505,867   17,319,218   17,282,289   17,044,479 
Earning assets  18,523,552   18,392,649   18,175,838   18,157,795   17,987,734 
Interest bearing liabilities  13,209,794   12,582,234   11,980,032   11,723,026   11,575,319 
Common equity  1,727,013   1,655,860   1,548,739   1,674,306   1,731,393 
Total stockholders' equity  1,837,718   1,766,565   1,659,444   1,785,011   1,842,098 
Tangible common equity (non-GAAP)(1)  1,128,527   1,055,617   946,688   1,070,399   1,125,543 
           
Key Performance Ratios          
Annualized return on average assets  0.98%  1.06%  1.21%  1.13%  1.06%
Annualized return on average common equity (GAAP)  11.01   12.43   15.02   12.93   11.55 
Annualized return on average tangible common equity (non-GAAP)(1)  17.33   20.05   25.19   20.76   18.35 
Annualized ratio of net charge-offs/(recoveries) to average loans  0.32   (0.04)  (0.06)  0.00   0.03 
Annualized net interest margin (GAAP)  3.19   3.36   3.61   3.41   3.18 
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)  3.24   3.40   3.65   3.45   3.22 
Efficiency ratio (GAAP)  60.93   60.94   60.05   58.84   60.16 
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)(1)  59.82   57.16   54.33   55.26   57.66 
Annualized ratio of total noninterest expenses to average assets (GAAP)  2.17   2.24   2.34   2.18   2.18 
Annualized ratio of core expenses to average assets (non-GAAP)(1)  2.16   2.14   2.14   2.09   2.14 
           
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


  For the Quarter Ended
June 30,
 For the Six Months Ended
June 30,
   2023   2022   2023   2022 
Average Balances        
Assets $20,221,511  $19,559,091  $20,170,044  $19,395,391 
Loans, net of unearned  11,625,442   10,477,368   11,502,443   10,261,679 
Deposits  17,689,138   17,044,479   17,598,009   16,753,544 
Earning assets  18,523,552   17,987,734   18,458,462   17,873,037 
Interest bearing liabilities  13,209,794   11,575,319   12,897,747   11,017,459 
Common equity  1,727,013   1,731,393   1,691,633   1,866,657 
Total stockholders' equity  1,837,718   1,842,098   1,802,338   1,977,362 
Tangible common stockholders' equity  1,128,527   1,125,543   1,092,273   1,259,769 
         
Key Performance Ratios        
Annualized return on average assets  0.98%  1.06%  1.02%  0.99%
Annualized return on average common equity (GAAP)  11.01   11.55   11.70   9.82 
Annualized return on average tangible common equity (non-GAAP)(1)  17.33   18.35   18.63   15.08 
Annualized ratio of net charge-offs/(recoveries) to average loans  0.32   0.03   0.15   0.25 
Annualized net interest margin (GAAP)  3.19   3.18   3.27   3.13 
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)  3.24   3.22   3.32   3.17 
Efficiency ratio (GAAP)  60.93   60.16   60.94   62.75 
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)(1)  59.82   57.66   58.48   61.02 
Total noninterest expenses to average assets (GAAP)  2.17   2.18   2.20   2.26 
Core expenses to average assets (non-GAAP)(1)  2.16   2.14   2.15   2.21 
         
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
  As of and for the Quarter Ended
  6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Common Share Data          
Book value per common share $41.00  $40.38  $38.25  $36.41  $39.19 
Tangible book value per common share (non-GAAP)(1) $26.98  $26.30  $24.09  $22.20  $24.94 
ASC 320 effect on book value per common share $(14.04) $(13.35) $(14.58) $(15.31) $(11.43)
Common shares outstanding, net of treasury stock  42,644,544   42,558,726   42,467,394   42,444,106   42,439,439 
Tangible common equity ratio (non-GAAP)(1)  5.86%  5.72%  5.21%  4.94%  5.56%
Adjusted tangible common equity ratio (non-GAAP)(1)  8.79%  8.61%  8.37%  8.35%  8.11%
           
Other Selected Trend Information          
Effective tax rate  23.74%  22.50%  18.68%  19.97%  22.89%
Full time equivalent employees  1,966   1,991   2,002   2,020   2,087 
           
Loans Held to Maturity          
Commercial and industrial $3,590,680  $3,498,345  $3,464,414  $3,278,703  $3,059,519 
Paycheck Protection Program ("PPP")  4,139   8,258   11,025   13,506   23,031 
Owner occupied commercial real estate  2,398,698   2,312,538   2,265,307   2,285,973   2,282,833 
Commercial and business lending  5,993,517   5,819,141   5,740,746   5,578,182   5,365,383 
Non-owner occupied commercial real estate  2,530,736   2,421,341   2,330,940   2,219,542   2,321,718 
Real estate construction  1,013,134   1,102,186   1,076,082   996,017   845,045 
Commercial real estate lending  3,543,870   3,523,527   3,407,022   3,215,559   3,166,763 
Total commercial lending  9,537,387   9,342,668   9,147,768   8,793,741   8,532,146 
Agricultural and agricultural real estate  839,817   810,183   920,510   781,354   836,703 
Residential mortgage  828,437   841,084   853,361   852,928   845,270 
Consumer  512,333   501,418   506,713   495,509   464,099 
Total loans held to maturity $11,717,974  $11,495,353  $11,428,352  $10,923,532  $10,678,218 
           
Total unfunded loan commitments $4,905,147  $4,867,925  $4,729,677  $4,664,379  $4,458,874 
           
Deposits          
Demand-customer $4,897,858  $5,119,554  $5,701,340  $6,083,563  $6,087,304 
Savings-customer  8,149,596   8,501,337   8,670,898   8,691,545   8,852,602 
Savings-wholesale and institutional  623,000   755,272   1,323,493   1,368,978   1,207,076 
Total savings  8,772,596   9,256,609   9,994,391   10,060,523   10,059,678 
Time-customer  1,597,849   1,071,476   851,539   973,035   1,003,568 
Time-wholesale  2,395,240   2,233,707   965,739   150,000   75,000 
Total time  3,993,089   3,305,183   1,817,278   1,123,035   1,078,568 
Total deposits $17,663,543  $17,681,346  $17,513,009  $17,267,121  $17,225,550 
           
Total customer deposits $14,645,303  $14,692,367  $15,223,777  $15,748,143  $15,943,474 
Total wholesale and institutional deposits  3,018,240   2,988,979   2,289,232   1,518,978   1,282,076 
Total deposits $17,663,543  $17,681,346  $17,513,009  $17,267,121  $17,225,550 
           
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  As of and for the Quarter Ended
  6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Allowance for Credit Losses-Loans          
Balance, beginning of period $112,707  $109,483  $105,715  $101,353  $100,522 
Provision for credit losses  7,829   2,184   2,075   4,388   1,545 
Charge-offs  (9,613)  (2,151)  (2,668)  (938)  (1,473)
Recoveries  275   3,191   4,361   912   759 
Balance, end of period $111,198  $112,707  $109,483  $105,715  $101,353 
           
Allowance for Unfunded Commitments          
Balance, beginning of period $21,086  $20,196  $18,884  $17,780  $16,079 
Provision for credit losses  (2,450)  890   1,312   1,104   1,701 
Balance, end of period $18,636  $21,086  $20,196  $18,884  $17,780 
           
Allowance for lending related credit losses $129,834  $133,793  $129,679  $124,599  $119,133 
           
Provision for Credit Losses          
Provision for credit losses-loans $7,829  $2,184  $2,075  $4,388  $1,545 
Provision (benefit) for credit losses-unfunded commitments  (2,450)  890   1,312   1,104   1,701 
Total provision for credit losses $5,379  $3,074  $3,387  $5,492  $3,246 
           
Asset Quality          
Nonaccrual loans $61,956  $58,066  $58,231  $64,560  $62,909 
Loans past due ninety days or more  1,459   174   273   678   95 
Other real estate owned  2,677   7,438   8,401   8,030   4,528 
Other repossessed assets  5   24   26       
Total nonperforming assets $66,097  $65,702  $66,931  $73,268  $67,532 
           
Nonperforming Assets Activity          
Balance, beginning of period $65,702  $66,931  $73,268  $67,532  $65,876 
Net loan (charge-offs)/recoveries  (9,338)  1,040   1,693   (26)  (714)
New nonperforming loans  19,805   4,626   1,439   8,388   8,590 
Reduction of nonperforming loans(1)  (5,253)  (5,711)  (8,875)  (2,015)  (5,244)
Net OREO/repossessed assets sales proceeds and losses  (4,819)  (1,184)  (594)  (611)  (976)
Balance, end of period $66,097  $65,702  $66,931  $73,268  $67,532 
           
Asset Quality Ratios          
Ratio of nonperforming loans to total loans  0.54%  0.51%  0.51%  0.60%  0.59%
Ratio of nonperforming assets to total assets  0.33   0.33   0.33   0.37   0.34 
Annualized ratio of net loan charge-offs/(recoveries) to average loans  0.32   (0.04)  (0.06)  0.00   0.03 
Allowance for loan credit losses as a percent of loans  0.95   0.98   0.96   0.97   0.95 
Allowance for lending related credit losses as a percent of loans  1.11   1.16   1.13   1.14   1.12 
Allowance for loan credit losses as a percent of nonperforming loans  175.35   193.52   187.14   162.05   160.87 
Loans delinquent 30-89 days as a percent of total loans  0.12   0.10   0.04   0.10   0.06 
           
(1) Includes principal reductions, transfers to performing status and transfers to OREO.


HEARTLAND FINANCIAL USA, INC.  
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Quarter Ended
  June 30, 2023 March 31, 2023 June 30, 2022
  Average
Balance
 Interest Rate Average
Balance
 Interest Rate Average
Balance
 Interest Rate
Earning Assets                  
Securities:                  
Taxable $5,962,207  $58,172 3.91% $6,096,888  $55,976 3.72% $6,419,615  $38,098 2.38%
Nontaxable(1)  895,458   8,074 3.62   922,676   7,630 3.35   915,880   6,972 3.05 
Total securities  6,857,665   66,246 3.87   7,019,564   63,606 3.67   7,335,495   45,070 2.46 
Interest on deposits with other banks and short-term investments  153,622   2,051 5.41   105,400   1,131 4.35   277,773   563 0.81 
Federal funds sold                     
Loans:(2)                  
Commercial and industrial(1)  3,565,449   56,644 6.37   3,459,317   49,907 5.85   3,002,822   30,441 4.07 
PPP loans  6,302   24 1.53   9,970   26 1.06   41,370   1,801 17.46 
Owner occupied commercial real estate  2,366,107   28,031 4.75   2,289,002   26,769 4.74   2,294,524   22,863 4.00 
Non-owner occupied commercial real estate  2,462,098   35,583 5.80   2,331,318   30,749 5.35   2,179,048   22,871 4.21 
Real estate construction  1,028,109   18,528 7.23   1,099,026   18,131 6.69   878,555   10,015 4.57 
Agricultural and agricultural real estate  848,554   12,256 5.79   835,648   11,353 5.51   782,610   7,933 4.07 
Residential mortgage  840,741   9,383 4.48   852,561   9,273 4.41   849,174   8,358 3.95 
Consumer  508,082   9,068 7.16   501,236   8,242 6.67   449,265   4,949 4.42 
Less: allowance for credit losses-loans  (113,177)      (110,393)      (102,902)    
Net loans  11,512,265   169,517 5.91   11,267,685   154,450 5.56   10,374,466   109,231 4.22 
Total earning assets  18,523,552   237,814 5.15%  18,392,649   219,187 4.83%  17,987,734   154,864 3.45%
Nonearning Assets  1,697,959       1,725,356       1,571,357     
Total Assets $20,221,511      $20,118,005      $19,559,091     
Interest Bearing Liabilities                  
Savings $8,935,775  $41,284 1.85% $9,730,494  $37,893 1.58% $9,995,497  $5,372 0.22%
Time deposits  3,812,330   40,691 4.28   2,257,047   19,005 3.41   1,088,765   1,158 0.43 
Short-term borrowings  89,441   848 3.80   222,772   2,422 4.41   118,646   88 0.30 
Other borrowings  372,248   5,545 5.97   371,921   5,446 5.94   372,411   3,808 4.10 
Total interest bearing liabilities  13,209,794   88,368 2.68%  12,582,234   64,766 2.09%  11,575,319   10,426 0.36%
Noninterest Bearing Liabilities                  
Noninterest bearing deposits  4,941,033       5,518,326       5,960,217     
Accrued interest and other liabilities  232,966       250,880       181,457     
Total noninterest bearing liabilities  5,173,999       5,769,206       6,141,674     
Equity  1,837,718       1,766,565       1,842,098     
Total Liabilities and Equity $20,221,511      $20,118,005      $19,559,091     
Net interest income, fully tax-equivalent (non-GAAP)(1)(3)   $149,446     $154,421     $144,438  
Net interest spread(1)     2.47%     2.74%     3.09%
Net interest income, fully tax-equivalent (non-GAAP)(1)(3)to total earning assets     3.24%     3.40%     3.22%
Interest bearing liabilities to earning assets  71.31%      68.41%      64.35%    
                   
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
  For the Six Months Ended
  June 30, 2023 June 30, 2022
  Average
Balance
 Interest Rate Average
Balance
 Interest Rate
Earning Assets            
Securities:            
Taxable $6,029,175  $114,148  3.82% $6,460,412  $70,718  2.21%
Nontaxable(1)  908,992   15,704  3.48   1,010,888   14,823  2.96 
Total securities  6,938,167   129,852  3.77   7,471,300   85,541  2.31%
Interest bearing deposits with other banks and other short-term investments  129,645   3,182  4.95   247,281   634  0.52 
Federal funds sold          6      
Loans:(2)            
Commercial and industrial(1)  3,512,807   106,551  6.12%  2,874,694   57,494  4.03 
PPP loans  8,126   50  1.24   86,460   6,124  14.28 
Owner occupied commercial real estate  2,327,702   54,800  4.75   2,268,963   44,141  3.92 
Non-owner occupied commercial real estate  2,397,004   66,332  5.58   2,119,925   44,034  4.19 
Real estate construction  1,063,372   36,659  6.95   862,989   19,291  4.51 
Agricultural and agricultural real estate  842,136   23,609  5.65   764,082   14,939  3.94 
Residential mortgage  846,618   18,656  4.44   846,542   16,443  3.92 
Consumer  504,678   17,310  6.92   438,024   9,604  4.42 
Less: allowance for credit losses-loans  (111,793)       (107,229)     
Net loans  11,390,650   323,967  5.74   10,154,450   212,070  4.21 
Total earning assets  18,458,462   457,001  4.99%  17,873,037   298,245  3.37%
Nonearning Assets  1,711,582       1,522,354     
Total Assets $20,170,044      $19,395,391     
Interest Bearing Liabilities            
Savings $9,330,939  $79,177  1.71% $9,445,778  $7,766  0.17%
Time deposits  3,038,985   59,696  3.96   1,080,267   1,741  0.32 
Short-term borrowings  155,738   3,270  4.23   119,115   134  0.23 
Other borrowings  372,085   10,991  5.96   372,299   7,368  3.99 
Total interest bearing liabilities  12,897,747   153,134  2.39%  11,017,459   17,009  0.31%
Noninterest Bearing Liabilities            
Noninterest bearing deposits  5,228,085       6,227,499     
Accrued interest and other liabilities  241,874       173,071     
Total noninterest bearing liabilities  5,469,959       6,400,570     
Stockholders' Equity  1,802,338       1,977,362     
Total Liabilities and Stockholders' Equity $20,170,044      $19,395,391     
Net interest income, fully tax-equivalent (non-GAAP)(1)(3)   $303,867      $281,236   
Net interest spread(1)     2.60%     3.06%
Net interest income, fully tax-equivalent (non-GAAP)(1)(3)to total earning assets     3.32%     3.17%
Interest bearing liabilities to earning assets  69.87%      61.64%    
             
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.  
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
  For the Quarter Ended
  6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)          
Net income available to common stockholders (GAAP) $47,404  $50,763  $58,642  $54,551  $49,861 
Plus core deposit and customer relationship intangibles amortization, net of tax(1)  1,354   1,413   1,455   1,466   1,645 
Net income available to common stockholders excluding intangible amortization (non-GAAP) $48,758  $52,176  $60,097  $56,017  $51,506 
           
Average common equity (GAAP) $1,727,013  $1,655,860  $1,548,739  $1,674,306  $1,731,393 
Less average goodwill  576,005   576,005   576,005   576,005   576,005 
Less average core deposit and customer relationship intangibles, net  22,481   24,238   26,046   27,902   29,845 
Average tangible common equity (non-GAAP) $1,128,527  $1,055,617  $946,688  $1,070,399  $1,125,543 
Annualized return on average common equity (GAAP)  11.01%  12.43%  15.02%  12.93%  11.55%
Annualized return on average tangible common equity (non-GAAP)  17.33%  20.05%  25.19%  20.76%  18.35%
           
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)          
Net Interest Income (GAAP) $147,132  $152,212  $165,220  $155,876  $142,461 
Plus tax-equivalent adjustment(1)  2,314   2,209   2,152   2,151   1,977 
Net interest income, fully tax-equivalent (non-GAAP) $149,446  $154,421  $167,372  $158,027  $144,438 
Average earning assets $18,523,552  $18,392,649  $18,175,838  $18,157,795  $17,987,734 
           
Annualized net interest margin (GAAP)  3.19%  3.36%  3.61%  3.41%  3.18%
Annualized net interest margin, fully tax-equivalent (non-GAAP)  3.24   3.40   3.65   3.45   3.22 
Net purchase accounting discount amortization on loans included in annualized net interest margin  0.03   0.02   0.03   0.03   0.07 


Reconciliation of Tangible Book Value Per Common Share (non-GAAP)          
Common equity (GAAP) $1,748,285  $1,718,700  $1,624,350  $1,545,253  $1,663,363 
Less goodwill  576,005   576,005   576,005   576,005   576,005 
Less core deposit and customer relationship intangibles, net  21,651   23,366   25,154   26,995   28,851 
Tangible common equity (non-GAAP) $1,150,629  $1,119,329  $1,023,191  $942,253  $1,058,507 
           
Common shares outstanding, net of treasury stock  42,644,544   42,558,726   42,467,394   42,444,106   42,439,439 
Common equity (book value) per share (GAAP) $41.00  $40.38  $38.25  $36.41  $39.19 
Tangible book value per common share (non-GAAP) $26.98  $26.30  $24.09  $22.20  $24.94 
           
Reconciliation of Tangible Common Equity Ratio (non-GAAP)          
Tangible common equity (non-GAAP) $1,150,629  $1,119,329  $1,023,191  $942,253  $1,058,507 
           
Total assets (GAAP) $20,224,716  $20,182,544  $20,244,228  $19,682,950  $19,658,399 
Less goodwill  576,005   576,005   576,005   576,005   576,005 
Less core deposit and customer relationship intangibles, net  21,651   23,366   25,154   26,995   28,851 
Total tangible assets (non-GAAP) $19,627,060  $19,583,173  $19,643,069  $19,079,950  $19,053,543 
Tangible common equity ratio (non-GAAP)  5.86%  5.72%  5.21%  4.94%  5.56%
           
Reconciliation of Adjusted Tangible Common Equity Ratio (non-GAAP)          
Tangible common equity (non-GAAP) $1,150,629  $1,119,329  $1,023,191  $942,253  $1,058,507 
Accumulated other comprehensive loss  575,240   566,919   620,006   650,636   486,918 
Adjusted tangible common equity (non-GAAP) $1,725,869  $1,686,248  $1,643,197  $1,592,889  $1,545,425 
Total tangible assets (non-GAAP) $19,627,060  $19,583,173  $19,643,069  $19,079,950  $19,053,543 
Adjusted tangible common equity ratio (non-GAAP)  8.79%  8.61%  8.37%  8.35%  8.11%
           
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
Reconciliation of Adjusted Efficiency Ratio, fully tax-equivalent (non-GAAP)
 For the Quarter Ended
 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Net interest income (GAAP) $147,132  $152,212  $165,220  $155,876  $142,461 
Tax-equivalent adjustment(1)  2,314   2,209   2,152   2,151   1,977 
Fully tax-equivalent net interest income  149,446   154,421   167,372   158,027   144,438 
Noninterest income (GAAP)  32,493   29,999   29,975   29,181   34,539 
Securities (gains)/losses, net  314   1,104   153   1,055   2,089 
Unrealized (gain)/loss on equity securities, net  41   (193)  7   211   121 
Valuation adjustment on servicing rights               
Adjusted revenue (non-GAAP) $182,294  $185,331  $197,507  $188,474  $181,187 
           
Total noninterest expenses (GAAP) $109,446  $111,043  $117,218  $108,883  $106,479 
Less:          
Core deposit and customer relationship intangibles amortization  1,715   1,788   1,841   1,856   2,083 
Partnership investment in tax credit projects  154   538   3,247   979   737 
(Gain)/loss on sales/valuation of assets, net  (3,372)  1,115   2,388   (251)  (3,230)
Acquisition, integration and restructuring costs  1,892   1,673   2,442   2,156   2,412 
Core expenses (non-GAAP) $109,057  $105,929  $107,300  $104,143  $104,477 
           
Efficiency ratio (GAAP)  60.93%  60.94%  60.05%  58.84%  60.16%
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)  59.82%  57.16%  54.33%  55.26%  57.66%
           
Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP)          
Total noninterest expenses (GAAP) $109,446  $111,043  $117,218  $108,883  $106,479 
Core expenses (non-GAAP)  109,057   105,929   107,300   104,143   104,477 
           
Average assets $20,221,511  $20,118,005  $19,913,849  $19,775,341  $19,559,091 
Total noninterest expenses to average assets (GAAP)  2.17%  2.24%  2.34%  2.18%  2.18%
Core expenses to average assets (non-GAAP)  2.16%  2.14%  2.14%  2.09%  2.14%
           
Acquisition, integration and restructuring costs          
Salaries and employee benefits $93  $74  $424  $365  $275 
Professional fees  1,068   934   1,587   1,480   1,779 
Advertising  222   122   95   131   156 
Other noninterest expenses  509   543   336   180   202 
Total acquisition, integration and restructuring costs $1,892  $1,673  $2,442  $2,156  $2,412 
After tax impact on diluted earnings per common share(1) $0.03  $0.03  $0.05  $0.04  $0.04 
           
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
  For the Quarter Ended
June 30,
 For the Six Months Ended
June 30,
   2023   2022   2023   2022 
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)        
Net income available to common stockholders (GAAP) $47,404  $49,861  $98,167  $90,937 
Plus core deposit and customer relationship intangibles amortization, net of tax(1)  1,354   1,645   2,767   3,268 
Net income available to common stockholders excluding intangible amortization (non-GAAP) $48,758  $51,506  $100,934  $94,205 
         
Average common equity (GAAP) $1,727,013  $1,731,393  $1,691,633  $1,866,657 
Less average goodwill  576,005   576,005   576,005   576,005 
Less average core deposit and customer relationship intangibles, net  22,481   29,845   23,355   30,883 
Average tangible common equity (non-GAAP) $1,128,527  $1,125,543  $1,092,273  $1,259,769 
Annualized return on average common equity (GAAP)  11.01%  11.55%  11.70%  9.82%
Annualized return on average tangible common equity (non-GAAP)  17.33%  18.35%  18.63%  15.08%
         
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)        
Net Interest Income (GAAP) $147,132  $142,461  $299,344  $277,140 
Plus tax-equivalent adjustment(1)  2,314   1,977   4,523   4,096 
Net interest income, fully tax-equivalent (non-GAAP) $149,446  $144,438  $303,867  $281,236 
         
Average earning assets $18,523,552  $17,987,734  $18,458,462  $17,873,037 
         
Annualized net interest margin (GAAP)  3.19%  3.18%  3.27%  3.13%
Annualized net interest margin, fully tax-equivalent (non-GAAP)  3.24   3.22   3.32   3.17 
Purchase accounting discount amortization on loans included in annualized net interest margin  0.03   0.07   0.02   0.06 
         
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
Reconciliation of Adjusted Efficiency Ratio, fully tax-equivalent (non-GAAP)
 For the Quarter Ended
June 30,
 For the Six Months Ended
June 30,
  2023   2022   2023   2022 
Net interest income (GAAP) $147,132  $142,461  $299,344  $277,140 
Tax-equivalent adjustment(1)  2,314   1,977   4,523   4,096 
Fully tax-equivalent net interest income  149,446   144,438   303,867   281,236 
Noninterest income (GAAP)  32,493   34,539   62,492   69,108 
Securities (gains)/losses, net  314   2,089   1,418   (783)
Unrealized (gain)/loss on equity securities, net  41   121   (152)  404 
Valuation adjustment on servicing rights           (1,658)
Adjusted revenue (non-GAAP) $182,294  $181,187  $367,625  $348,307 
         
Total noninterest expenses (GAAP) $109,446  $106,479  $220,489  $217,276 
Less:        
Core deposit and customer relationship intangibles amortization  1,715   2,083   3,503   4,137 
Partnership investment in tax credit projects  154   737   692   814 
(Gain)/loss on sales/valuation of assets, net  (3,372)  (3,230)  (2,257)  (3,184)
Acquisition, integration and restructuring costs  1,892   2,412   3,565   2,988 
Core expenses (non-GAAP) $109,057  $104,477  $214,986  $212,521 
Efficiency ratio (GAAP)  60.93%  60.16%  60.94%  62.75%
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)  59.82%  57.66%  58.48%  61.02%
         
Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP)        
Total noninterest expenses (GAAP) $109,446  $106,479  $220,489  $217,276 
Core expenses (non-GAAP)  109,057   104,477   214,986   212,521 
         
Average assets $20,221,511  $19,559,091  $20,170,044  $19,395,391 
Total noninterest expenses to average assets (GAAP)  2.17%  2.18%  2.20%  2.26%
Core expenses to average assets (non-GAAP)  2.16%  2.14%  2.15%  2.21%
         
Acquisition, integration and restructuring costs        
Salaries and employee benefits $93  $275  $167  $615 
Professional fees  1,068   1,779   2,002   2,015 
Advertising  222   156   344   156 
Other noninterest expenses  509   202   1,052   202 
Total acquisition, integration and restructuring costs $1,892  $2,412  $3,565  $2,988 
After tax impact on diluted earnings per common share(1) $0.03  $0.04  $0.07  $0.06 
 
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.


CONTACT:
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
(563) 589-1994
BMcKeag@htlf.com

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