HTLF Reports Record Quarterly Results as of March 31, 2021

Monday, April 26, 2021

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Highlights and Developments

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Record net income available to common stockholders of $50.8 million compared to $20.0 million for the first quarter of 2020, an increase of $30.8 million or 153%

§

Diluted earnings per common share of $1.20 compared to $0.54 for the first quarter of the prior year, an increase of $0.66 or 122%

§

Annualized net charge off ratio of 0.06%, nonperforming assets to total assets of 0.54%, and 30-89 day loan delinquencies of 0.16%

§

Net interest income of $139.6 million compared to $112.5 million for the first quarter of 2020, an increase of $27.1 million or 24%

§

Efficiency ratio (non-GAAP)1 of 56.61% compared to 61.82% for the first quarter of 2020

§

Completed the AimBank systems conversion on February 19, 2021

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Announced a branding change on April 14, 2021 from Heartland Financial to HTLF

Three Months Ended March 31,

2021

2020

Net income available to common stockholders (in millions)

$

50.8

$

20.0

Diluted earnings per common share

1.20

0.54

Return on average assets

1.19

%

0.61

%

Return on average common equity

10.49

4.98

Return on average tangible common equity (non-GAAP)(1)

15.90

8.00

Net interest margin

3.44

3.81

Net interest margin, fully tax-equivalent (non-GAAP)(1)

3.48

3.84

Efficiency ratio, fully-tax equivalent (non-GAAP)(1)

56.61

61.82

(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 is off to an excellent start in 2021 with record quarterly net income available to common stockholders of $50.8 million. The strong quarterly results were driven by increased net interest income, reduced provision for credit losses and an improved efficiency ratio."

Bruce K. Lee, president and chief executive officer, HTLF

Dubuque, Iowa, Monday, April 26, 2021-Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020:

  • Net income available to common stockholders of $50.8 million compared to $20.0 million, an increase of $30.8 million or 153%.
  • Earnings per diluted common share of $1.20 compared to $0.54, an increase of $0.66 or 122%.
  • Net interest income of $139.6 million compared to $112.5 million, an increase of $27.1 million or 24%.
  • Return on average common equity was 10.49% and return on average assets was 1.19% compared to 4.98% and 0.61%.
  • Return on average tangible common equity (non-GAAP) was 15.90% compared to 8.00%.

"HTLF is off to an excellent start in 2021 with record quarterly net income available to common stockholders of $50.8 million. The strong quarterly results were driven by increased net interest income, reduced provision for credit losses and an improved efficiency ratio," said Bruce K. Lee, president and chief executive officer of HTLF.

In April 2021, the company announced a branding change from Heartland Financial to HTLF. Lee said, "We refreshed our branding to better reflect who we are today. HTLF is our company’s stock ticker symbol. Now, those same four letters are our brand name, reflecting the strength of our diverse footprint and continued growth."

Net Interest Income and Net Interest Margin

Net interest margin, expressed as a percentage of average earning assets, was 3.44% (3.48% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2021, compared to 3.51% (3.55% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2020 and 3.81% (3.84% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2020.

Total interest income and average earning asset changes for the first quarter of 2021 compared to the first quarter of 2020 were:

  • Total interest income was $147.5 million, which was an increase of $16.4 million or 13% from $131.0 million and primarily attributable to an increase in average earning assets partially offset by lower yields.
  • Total interest income on a tax-equivalent basis was $149.2 million, which was an increase of $17.0 million or 13% from $132.2 million. 
  • Average earning assets increased $4.57 billion or 38% to $16.46 billion compared to $11.89 billion, which was primarily attributable to recent acquisitions and loan growth, including Paycheck Protection Program ("PPP") loans.
  • The average rate on earning assets decreased 79 basis points to 3.68% compared to 4.47%, which was primarily due to recent decreases in market interest rates and a shift in earning asset mix. Total average securities were 39% of total earning average assets compared to 29%.

Total interest expense and average interest bearing liability changes for the first quarter of 2021 compared to the first quarter of 2020 were:

  • Total interest expense was $7.8 million, a decrease of $10.7 million or 58% from $18.5 million, based on a decrease in the average interest rate paid, which was partially offset by an increase in average interest bearing liabilities.
  • The average interest rate paid on interest bearing liabilities decreased to 0.32% compared to 0.95%, which was primarily due to recent decreases in market interest rates.
  • Average interest bearing deposits increased $1.84 billion or 25% to $9.27 billion from $7.42 billion which was primarily attributable to recent acquisitions and deposit growth, including deposits from government stimulus payments and other COVID-19 relief programs. 
  • The average interest rate paid on interest bearing deposits decreased 60 basis points to 0.19% compared to 0.79%.
  • Average borrowings increased $233.4 million or 56% to $651.2 million from $417.8 million, which primarily attributable to outstanding advances from the PPP lending fund used to fund PPP loans to borrowers. The average interest rate paid on borrowings was 2.15% compared to 3.81%.

Net interest income increased for the first quarter of 2021 compared to the first quarter of 2020:

  • Net interest income totaled $139.6 million compared to $112.5 million, which was an increase of $27.1 million or 24%.
  • Net interest income on a tax-equivalent basis (non-GAAP) totaled $141.4 million compared to $113.6 million, which was an increase of $27.7 million or 24%. 

Noninterest Income and Noninterest Expense

Total noninterest income was $30.3 million during the first quarter of 2021 compared to $25.8 million during the first quarter of 2020, an increase of $4.5 million or 17%. Significant changes by noninterest income category for the first quarter of 2021 compared to the first quarter of 2020 were:

  • Service charges and fees increased $1.7 million or 14% to $13.7 million from $12.0 million. The increase was primarily attributable to the larger customer base due to recent acquisitions.
  • Net gains on sales of loans held for sale totaled $6.4 million compared to $4.7 million, which was an increase of $1.8 million or 38% and was primarily attributable to an increase of loans sold to the secondary market.
  • Valuation adjustment on servicing rights reflects an increase to income of $2.5 million due to a recovery of $917,000 compared to an impairment of $1.6 million, primarily due to recent increases in long-term interest rates.

Total noninterest expense was $102.4 million during the first quarter of 2021 compared to $90.9 million during the first quarter of 2020, which was an increase of $11.6 million or 13%. Significant changes within the noninterest expense category for the first quarter of 2021 compared to the first quarter of 2020 were:

  • Salaries and employee benefits totaled $59.1 million compared to $50.0 million, which was an increase of $9.1 million or 18%. Full-time equivalent employees increased 314 to 2,131 compared to 1,817 which was primarily attributable to the acquisitions completed in the fourth quarter of 2020.
  • Acquisitions, integration and restructuring costs increased $1.6 million or 113% to $2.9 million compared to $1.4 million, which was primarily attributable to the AimBank conversion.

The effective tax rate was 22.51% for the first quarter of 2021 compared to 22.77% for the first quarter of 2020. The following items impacted the first quarter 2021 and 2020 tax calculations:

  • Solar energy tax credits of $97,000 compared to $76,000.
  • Federal low-income housing tax credits of $135,000 compared to $195,000.
  • New markets tax credits of $75,000 in each quarterly calculation.
  • Tax-exempt interest income as a percentage of pre-tax income of 9.72% compared to 16.40%.
  • Tax benefit of $153,000 compared to tax expense of $25,000 resulting from the vesting of restricted stock unit awards.

Total Assets, Total Loans and Total Deposits

Total assets were $18.24 billion at March 31, 2021, an increase of $336.1 million or 2% from $17.91 billion at year-end 2020. Securities represented 36% and 35% of total assets at March 31, 2021, and December 31, 2020, respectively.

Total loans held to maturity were $10.05 billion at March 31, 2021, and $10.02 billion at December 31, 2020, which was an increase of $27.4 million or less than 1%. Loan changes by category were:

  • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $145.2 million or 3% to $5.41 billion at March 31, 2021, compared to $5.27 billion at December 31, 2020.
  • PPP loans originated in 2020 ("PPP I") decreased $218.2 million from year-end 2020. PPP loans originated in 2021 ("PPP II") totaled $415.8 million.
  • Excluding total PPP loans, commercial and business lending decreased $52.4 million or 1% since year-end 2020. 
  • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, decreased $21.5 million or 1% to $2.76 billion at March 31, 2021, from $2.78 billion at year-end 2020. 
  • Agricultural and agricultural real estate loans totaled $684.0 million at March 31, 2021, compared to $714.5 million at December 31, 2020, which was a decrease of $30.6 million or 4%.
  • Residential mortgage loans decreased $53.4 million or 6% to $787.0 million at March 31, 2021, from $840.4 million at December 31, 2020.
  • Consumer loans decreased $12.3 million or 3% to $402.1 million at March 31, 2021, compared to $414.4 million at December 31, 2020.

Total deposits were $15.56 billion as of March 31, 2021, compared to $14.98 billion at year-end 2020, an increase of $579.1 million or 4%. Deposit changes by category were:

  • Demand deposits increased $487.1 million or 9% to $6.18 billion at March 31, 2021, compared to $5.69 billion at December 31, 2020.
  • Savings deposits increased $159.5 million or 2% to $8.18 billion at March 31, 2021, from $8.02 billion at December 31, 2020. 
  • Time deposits decreased $67.5 million or 5% to $1.20 billion at March 31, 2021 from $1.27 billion at December 31, 2020. 

Growth in non-time deposits was positively impacted by federal government stimulus payments and other COVID-19 relief programs.

Provision and Allowance

Provision and Allowance for Credit Losses for Loans

Provision expense for credit losses for loans for the first quarter of 2021 was $16,000, which was a decrease of $19.8 million from $19.9 million recorded in the first quarter of 2020. The provision expense for the first quarter of 2021 was impacted by several factors, including:

  • decreases in balances of loans held to maturity excluding total PPP loans of $170.1 million from year-end 2020;
  • modest changes in credit quality marked by delinquencies of 0.16% of total loans and nonpass loans of 11.5% of total loans for the first quarter compared to delinquencies of 0.23% of total loans and nonpass loans of 10.8% of total loans for the fourth quarter of 2020, and
  • consistent macroeconomic factors compared to previous quarters.

The allowance for credit losses for loans totaled $130.2 million and $131.6 million at March 31, 2021, and December 31, 2020, respectively. The following items have impacted the allowance for credit losses for loans for the three months ended March 31, 2021:

  • Provision expense for the three months ended March 31, 2021, totaled $16,000.
  • Net charge offs of $1.5 million were recorded for the first three months of 2021.

Provision and Allowance for Credit Losses for Unfunded Commitments

The allowance for unfunded commitments totaled $14.6 million at March 31, 2021, which was a decrease of $661,000 from $15.3 million at December 31, 2020. Unfunded commitments increased $59.1 million to $3.31 billion at March 31, 2021 compared to $3.25 billion at December 31, 2020. Included in the increase of unfunded commitments was $33.0 million of commitments related to 100% government guaranteed lending, for which no provision expense was required.

Total Provision and Allowance for Lending Related Credit Losses

The total provision benefit for lending related credit losses was $645,000 for the first quarter of 2021 compared to provision expense of $21.5 million for the first quarter of 2020. The total allowance for lending related credit losses was $144.8 million at March 31, 2021, which was 1.44% of total loans as of March 31, 2021 compared to $146.9 million or 1.47% of total loans as of December 31, 2020. Excluding PPP loans, the allowance for lending related credit losses as a percentage of total loans was 1.63% and 1.62% as March 31, 2021, and December 31, 2020, respectively.

 Nonperforming Assets

Nonperforming assets increased $3.4 million or 4% to $98.4 million or 0.54% of total assets at March 31, 2021, compared to $95.0 million or 0.53% of total assets at December 31, 2020. Nonperforming loans were $91.9 million or 0.91% of total loans at March 31, 2021, compared to $88.1 million or 0.88% of total loans at December 31, 2020. At March 31, 2021, loans delinquent 30-89 days were 0.16% of total loans compared to 0.23% of total loans at December 31, 2020.

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. Additionally, 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.
  • 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.
  • 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.

 

Conference Call Details

HTLF will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 866-928-9948 at least five minutes before the start time. A replay will be available until April 25, 2022, by logging on to www.htlf.com.

About HTLF

Heartland Financial USA, Inc., operating under the brand name HTLF, is a financial services company with assets of $18.24 billion. HTLF has banks serving 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 residential mortgage, wealth management, investment and insurance. 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 the company 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 the company'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 the company's operations or performance. These forward-looking statements are generally identified by the use of the words such as "believe", "expect", "intent", "anticipate", "plan", "intend", "estimate", "project", "may", "will", "would", "could", "should", "may", "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 the company and its management. Although the company may make these statements based on management’s experience, beliefs, expectations, assumptions and best estimate of future events, the ability of the company 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 the company 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 the company’s Annual Report on Form 10-K for the year ended December 31, 2020, include, among others:

  • COVID-19 Pandemic Risks, including risks related to the ongoing COVID-19 pandemic and measures enacted by the U.S. federal and state governments and adopted by private businesses in response to the COVID-19 pandemic;
  • Economic and Market Conditions Risks, including risks related to changes in the U.S. economy in general and in the local economies in which HTLF conducts its operations and future civil unrest, natural disasters, 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 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 competitive forces impacting our business and strategic acquisition risks;
  • 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 the company’s business, financial condition and results of operations. In addition, many of these risks and uncertainties are currently amplified by and may continue to be amplified by the COVID-19 pandemic and the impact of varying governmental responses that affect the company’s customers and the economies where they operate. Additionally, all statements in this release, including forward-looking statements speak only as of the date they are made. The company does not undertake and specifically disclaims any obligation to publicly release the results of any revisions which may be made to or correct or update 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 the company’s financial results, is included in the company’s filings with the SEC.

-FINANCIAL TABLES FOLLOW-

###

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Three Months Ended

March 31,

2021

2020

Interest Income

Interest and fees on loans

$

112,439

$

106,414

Interest on securities:

Taxable

30,443

21,731

Nontaxable

4,503

2,183

Interest on federal funds sold

1

Interest on deposits with other banks and short-term investments

66

721

Total Interest Income

147,452

131,049

Interest Expense

Interest on deposits

4,395

14,582

Interest on short-term borrowings

152

296

Interest on other borrowings

3,300

3,660

Total Interest Expense

7,847

18,538

Net Interest Income

139,605

112,511

Provision (benefit) for credit losses

(648)

21,520

Net Interest Income After Provision for Credit Losses

140,253

90,991

Noninterest Income

Service charges and fees

13,671

12,021

Loan servicing income

838

963

Trust fees

5,777

5,022

Brokerage and insurance commissions

853

733

Securities gains/(losses), net

(30)

1,658

Unrealized gain/ (loss) on equity securities, net

(110)

(231)

Net gains on sale of loans held for sale

6,420

4,660

Valuation adjustment on servicing rights

917

(1,565)

Income on bank owned life insurance

829

498

Other noninterest income

1,152

2,058

Total Noninterest Income

30,317

25,817

Noninterest Expense

Salaries and employee benefits

59,062

49,957

Occupancy

7,918

6,471

Furniture and equipment

3,093

3,108

Professional fees

13,490

12,473

Advertising

1,469

2,205

Core deposit and customer relationship intangibles amortization

2,516

2,981

Other real estate and loan collection expenses, net

135

334

Loss on sales/valuations of assets, net

194

16

Acquisition, integration and restructuring costs

2,928

1,376

Partnership investment in tax credit projects

35

184

Other noninterest expenses

11,583

11,754

Total Noninterest Expense

102,423

90,859

Income Before Income Taxes

68,147

25,949

Income taxes

15,333

5,909

Net Income

52,814

20,040

Preferred dividends

(2,013)

Net Income Available to Common Stockholders

$

50,801

$

20,040

Earnings per common share-diluted

$

1.20

$

0.54

Weighted average shares outstanding-diluted

42,335,747

36,895,591

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

For the Quarter Ended

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Interest Income

Interest and fees on loans

$

112,439

$

108,865

$

102,657

$

107,005

$

106,414

Interest on securities:

Taxable

30,443

28,154

25,016

23,362

21,731

Nontaxable

4,503

3,735

3,222

3,344

2,183

Interest on federal funds sold

1

Interest on deposits with other banks and short-term investments

66

77

72

54

721

Total Interest Income

147,452

140,831

130,967

133,765

131,049

Interest Expense

Interest on deposits

4,395

4,609

4,962

6,134

14,582

Interest on short-term borrowings

152

175

78

61

296

Interest on other borrowings

3,300

3,472

3,430

3,424

3,660

Total Interest Expense

7,847

8,256

8,470

9,619

18,538

Net Interest Income

139,605

132,575

122,497

124,146

112,511

Provision (benefit) for credit losses

(648)

17,072

1,678

26,796

21,520

Net Interest Income After Provision for Credit Losses

140,253

115,503

120,819

97,350

90,991

Noninterest Income

Service charges and fees

13,671

12,725

11,749

10,972

12,021

Loan servicing income

838

997

638

379

963

Trust fees

5,777

5,506

5,357

4,977

5,022

Brokerage and insurance commissions

853

779

649

595

733

Securities gains/(losses), net

(30)

2,829

1,300

2,006

1,658

Unrealized gain/ (loss) on equity securities, net

(110)

36

155

680

(231)

Net gains on sale of loans held for sale

6,420

7,104

8,894

7,857

4,660

Valuation adjustment on servicing rights

917

(102)

(120)

9

(1,565)

Income on bank owned life insurance

829

1,021

868

1,167

498

Other noninterest income

1,152

1,726

1,726

1,995

2,058

Total Noninterest Income

30,317

32,621

31,216

30,637

25,817

Noninterest Expense

Salaries and employee benefits

59,062

51,615

50,978

50,118

49,957

Occupancy

7,918

6,849

6,732

6,502

6,471

Furniture and equipment

3,093

3,913

2,500

2,993

3,108

Professional fees

13,490

15,117

12,802

13,676

12,473

Advertising

1,469

1,107

928

995

2,205

Core deposit and customer relationship intangibles amortization

2,516

2,501

2,492

2,696

2,981

Other real estate and loan collection expenses, net

135

468

335

203

334

Loss on sales/valuations of assets, net

194

2,621

1,763

701

16

Acquisition, integration and restructuring costs

2,928

2,186

1,146

673

1,376

Partnership investment in tax credit projects

35

1,899

927

791

184

Other noninterest expenses

11,583

10,993

9,793

11,091

11,754

Total Noninterest Expense

102,423

99,269

90,396

90,439

90,859

Income Before Income Taxes

68,147

48,855

61,639

37,548

25,949

Income taxes

15,333

9,046

13,681

7,417

5,909

Net Income

52,814

39,809

47,958

30,131

20,040

Preferred dividends

(2,013)

(2,014)

(2,437)

Net Income Available to Common Stockholders

$

50,801

$

37,795

$

45,521

$

30,131

$

20,040

Earnings per common share-diluted

$

1.20

$

0.98

$

1.23

$

0.82

$

0.54

Weighted average shares outstanding-diluted

42,335,747

38,534,082

36,995,572

36,915,630

36,895,591

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

As of

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Assets

Cash and due from banks

$

198,177

$

219,243

$

175,284

$

211,429

$

175,587

Interest bearing deposits with other banks and short-term investments

269,685

118,660

156,371

242,149

64,156

Cash and cash equivalents

467,862

337,903

331,655

453,578

239,743

Time deposits in other financial institutions

3,138

3,129

3,129

3,128

3,568

Securities:

Carried at fair value

6,370,495

6,127,975

4,950,698

4,126,351

3,488,621

Held to maturity, at cost, less allowance for credit losses

85,293

88,839

88,700

90,579

91,875

Other investments, at cost

74,935

75,253

35,940

35,902

35,370

Loans held for sale

43,037

57,949

65,969

54,382

22,957

Loans:

Held to maturity

10,050,456

10,023,051

9,099,646

9,246,830

8,374,236

 Allowance for credit losses

(130,172)

(131,606)

(103,377)

(119,937)

(97,350)

Loans, net

9,920,284

9,891,445

8,996,269

9,126,893

8,276,886

Premises, furniture and equipment, net

225,047

226,094

200,028

198,481

200,960

Goodwill

576,005

576,005

446,345

446,345

446,345

Core deposit and customer relationship intangibles, net

39,867

42,383

40,520

43,011

45,707

Servicing rights, net

6,953

6,052

5,752

5,469

5,220

Cash surrender value on life insurance

188,521

187,664

173,111

172,813

172,140

Other real estate, net

6,236

6,624

5,050

5,539

6,074

Other assets

236,754

281,024

269,498

263,682

259,043

Total Assets

$

18,244,427

$

17,908,339

$

15,612,664

$

15,026,153

$

13,294,509

Liabilities and Equity

Liabilities

Deposits:

 Demand

$

6,175,946

$

5,688,810

$

5,022,567

$

4,831,151

$

3,696,974

 Savings

8,179,251

8,019,704

6,742,151

6,810,296

6,366,610

 Time

1,203,854

1,271,391

1,002,392

1,067,252

1,110,441

Total deposits

15,559,051

14,979,905

12,767,110

12,708,699

11,174,025

Short-term borrowings

140,597

167,872

306,706

88,631

121,442

Other borrowings

349,514

457,042

524,045

306,459

276,150

Accrued expenses and other liabilities

139,058

224,289

203,199

174,987

169,178

Total Liabilities

16,188,220

15,829,108

13,801,060

13,278,776

11,740,795

Stockholders' Equity

Preferred equity

110,705

110,705

110,705

110,705

Common stock

42,174

42,094

36,885

36,845

36,807

Capital surplus

1,063,497

1,062,083

847,377

844,202

842,780

Retained earnings

833,171

791,630

761,211

723,067

700,298

Accumulated other comprehensive income/(loss)

6,660

72,719

55,426

32,558

(26,171)

Total Equity

2,056,207

2,079,231

1,811,604

1,747,377

1,553,714

Total Liabilities and Equity

$

18,244,427

$

17,908,339

$

15,612,664

$

15,026,153

$

13,294,509

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

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Average Balances

Assets

$

17,964,723

$

16,401,152

$

15,167,225

$

14,391,856

$

13,148,173

Loans, net of unearned

9,952,152

9,366,430

9,220,666

9,186,913

8,364,220

Deposits

15,044,561

13,518,020

12,650,822

12,288,378

10,971,193

Earning assets

16,460,124

15,042,079

13,868,360

13,103,159

11,891,455

Interest bearing liabilities

9,917,159

9,053,855

8,320,123

8,155,753

7,841,941

Common equity

1,963,674

1,769,575

1,661,381

1,574,902

1,619,682

Total stockholders' equity

2,074,379

1,880,280

1,772,086

1,580,997

1,619,682

Tangible common equity (non-GAAP)(1)

1,346,270

1,238,691

1,172,891

1,083,834

1,125,705

Key Performance Ratios

Annualized return on average assets

1.19

%

0.97

%

1.26

%

0.84

%

0.61

%

Annualized return on average common equity (GAAP)

10.49

8.50

10.90

7.69

4.98

Annualized return on average tangible common equity (non-GAAP)(1)

15.90

12.77

16.11

11.97

8.00

Annualized ratio of net charge-offs to average loans

0.06

0.01

0.92

0.11

0.24

Annualized net interest margin (GAAP)

3.44

3.51

3.51

3.81

3.81

Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)

3.48

3.55

3.55

3.85

3.84

Efficiency ratio, fully tax-equivalent (non-GAAP)(1)

56.61

54.93

54.67

55.75

61.82

(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

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Common Share Data

Book value per common share

$

46.13

$

46.77

$

46.11

$

44.42

$

42.21

Tangible book value per common share (non-GAAP)(1)

$

31.53

$

32.07

$

32.91

$

31.14

$

28.84

Common shares outstanding, net of treasury stock

42,173,675

42,093,862

36,885,390

36,844,744

36,807,217

Tangible common equity ratio (non-GAAP)(1)

7.54

%

7.81

%

8.03

%

7.89

%

8.29

%

Other Selected Trend Information

Effective tax rate

22.51

%

18.52

%

22.20

%

19.75

%

22.77

%

Full time equivalent employees

2,131

2,013

1,827

1,821

1,817

Loans Held to Maturity

Commercial and industrial

$

2,421,260

$

2,534,799

$

2,303,646

$

2,364,400

$

2,550,490

Paycheck Protection Program ("PPP")

1,155,328

957,785

1,128,035

1,124,430

Owner occupied commercial real estate

1,837,559

1,776,406

1,494,902

1,433,271

1,431,038

Commercial and business lending

5,414,147

5,268,990

4,926,583

4,922,101

3,981,528

Non-owner occupied commercial real estate

1,967,183

1,921,481

1,659,683

1,543,623

1,551,787

Real estate construction

796,027

863,220

917,765

1,115,843

1,069,700

Commercial real estate lending

2,763,210

2,784,701

2,577,448

2,659,466

2,621,487

Total commercial lending

8,177,357

8,053,691

7,504,031

7,581,567

6,603,015

Agricultural and agricultural real estate

683,969

714,526

508,058

520,773

550,107

Residential mortgage

786,994

840,442

701,899

735,762

792,540

Consumer

402,136

414,392

385,658

408,728

428,574

Total loans held to maturity

$

10,050,456

$

10,023,051

$

9,099,646

$

9,246,830

$

8,374,236

Total unfunded loan commitments

$

3,306,042

$

3,246,953

$

2,980,484

$

3,065,283

$

2,782,679

(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.

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

As of and for the Quarter Ended

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Allowance for Credit Losses-Loans

Balance, beginning of period

$

131,606

$

103,377

$

119,937

$

97,350

$

70,395

Impact of ASU 2016-13 adoption

12,071

Allowance for acquired purchased credit deteriorated loans

12,313

Provision for credit losses

16

16,132

4,741

25,007

19,865

Charge-offs

(2,126)

(1,104)

(21,753)

(3,564)

(6,301)

Recoveries

676

888

452

1,144

1,320

Balance, end of period

$

130,172

$

131,606

$

103,377

$

119,937

$

97,350

Allowance for Unfunded Commitments

Balance, beginning of period

$

15,280

$

14,330

$

17,392

$

15,468

$

248

Impact of ASU 2016-13 adoption

13,604

Provision (benefit) for credit losses

(661)

950

(3,062)

1,924

1,616

Balance, end of period

$

14,619

$

15,280

$

14,330

$

17,392

$

15,468

Allowance for lending related credit losses

$

144,791

$

146,886

$

117,707

$

137,329

$

112,818

Provision for Credit Losses

Provision for credit losses-loans

$

16

$

6,572

$

4,741

$

25,007

$

19,865

Provision for credit losses-acquired loans

9,560

Provision (benefit) for credit losses-unfunded commitments

(661)

(1,372)

(3,062)

1,924

1,616

Provision for credit losses-acquired unfunded commitments

2,322

Provision (benefit) for credit losses-held to maturity securities

(3)

(10)

(1)

(135)

39

Total provision for credit losses

$

(648)

$

17,072

$

1,678

$

26,796

$

21,520

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

As of and for the Quarter Ended

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Asset Quality

Nonaccrual loans

$

91,718

$

87,386

$

79,040

$

91,609

$

79,280

Loans past due ninety days or more

171

720

1,681

1,360

Other real estate owned

6,236

6,624

5,050

5,539

6,074

Other repossessed assets

239

240

130

29

17

Total nonperforming assets