At Heartland Financial USA, Inc., 2017 was a year of “Reaching New Heights.” 
 
It was an outstanding year in terms of our accomplishments and in the many ways we have positioned our company for future success. We Reached New Heights in the Mile-High City, with the acquisition of Citywide Banks in Denver, Colorado, now our largest bank at $2.3 billion in assets as of December 31, 2017. We also Reached New Heights along California’s Central Coast, with the acquisition of Founders Community Bank in San Luis Obispo. 
 
I am extremely proud to report that in 2017, we Reached New Heights in value by delivering exceptional financial performance. 
 
  • Total Assets – Doubled over the past four years
  • Annual Earnings – Doubled over the past four years
  • Market Cap – More than doubled over the past two years
  • Earnings per Share – Doubled over the past six years
  • Stock Price – Doubled over the past three years, with a $53.65 closing price at December 31, 2017
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    In December, the board approved a seven cents per share special dividend, taking our dividend to 51 cents for 2017, and voted to increase our 2018 quarterly dividend to 13 cents per share or 52 cents annually.This continues our 37-year trend of increased or level dividends. 
     
    Our net interest margin rose to 4.22%¹, up from 4.13%¹ in 2016. That’s an enviable achievement, which is considerably better than many of our high-performance peers. Our efficiency ratio, which measures the amount of money we spend to generate one dollar of income, has significantly improved and finished 2017 at 65.4%¹. We are confident that our continued investment in technology and the cost take-outs associated with acquisitions will drive our efficiency ratio toward our long-term goal of 65 percent or less over the years ahead. 
     
    Total assets ended the year at $9.8 billion with a net income of $85.7 million² before the impact of the Tax Cuts and Jobs Act. We recorded a $10.4 million onetime non-cash charge to income tax expense to adjust the value of our deferred tax assets and liabilities, which reduced net income to $75.3 million³. We expect to earn back this amount in 2018, given the substantial reduction in our federal income tax expense. 
     
    The combination of our Texas and Minnesota acquisitions announced in late 2017, plus budgeted organic loan growth, should drive Heartland’s assets to nearly $12 billion by the end of 2018. Crossing this threshold is an important milestone, as it helps grow market share and increase our earnings base. From your perspective as a shareholder, this growth translates into increased earnings per share, increased share price and increased dividends. 
     
    Forbes recognized Heartland as one of the Best Banks in America in 2013, 2017 and 2018. Based on 10 financial metrics related to growth, profitability, capital adequacy and asset quality, Heartland ranked number 60 on the Forbes list of the 100 largest U.S. banks in 2018.  
     
    Our winning master strategy since Heartland’s inception has been to balance profit and growth. We’ve continued to do that and more in 2017, generating considerable momentum as we forge ahead. Thanks to our customers, dedicated professional staff and loyal shareholders, we are confident in our future. Our vision is clear, our course is set and, with wind in our sails, we are excited to continue our journey as we head for a tremendous 2018 and beyond. Always upward, “Reaching New Heights.” 
     
    Sincerely, 
     
    Lynn. B. Fuller 
    Chairman and CEO 
    Heartland Financial USA, Inc. 
     
     
     
    ¹This is calculated on a fully tax-equivalent basis. Refer to page 38 of our Annual Report on Form 10-K for a reconciliation of this non-GAAP measure. 
     
    ²In response to the passage of the Tax Cuts and Jobs Act, Heartland recorded a reduction in the value of our deferred tax assets and liabilities, resulting in a one-time non-cash charge to income of $10.4 million, or $.35 per diluted common share, in 2017. This is a non-GAAP financial measure that has been included as it provides consistent comparability with prior years’ financial results. 
     
    ³As reported. 


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