Heartland Financial USA, Inc. ("HTLF") Reports Quarterly and Year to Date Results as of September 30, 2022
10/31/2022 - 04:01 PM
Highlights and Developments • Quarterly loan growth of $254.8 million or 2% , exclusive of Paycheck Protection Program ("PPP") loans • Total revenue growth of $8.1 million or 5% during the quarter to $185.1 million • Quarterly net income available to common stockholders of $54.6 million • Efficiency ratio of 55.26% • Diluted earnings per common share of $1.28 • Quarterly net charge-offs of $26,000 and 30-89 day loan delinquencies were 0.10% of total loans • Completed the consolidation of two bank charters during the quarter, and one charter consolidation completed subsequent to the end of the quarter
Quarter Ended September 30, Nine Months Ended 2022 2021 2022 2021 Net income available to common stockholders (in millions) $ 54.6 $ 53.9 $ 145.5 $ 164.3 Diluted earnings per common share 1.28 1.27 3.42 3.88 Return on average assets 1.13 % 1.19 % 1.04 % 1.25 % Return on average common equity 12.93 10.32 10.80 10.95 Return on average tangible common equity (non-GAAP)(1) 20.76 15.14 16.79 16.34 Net interest margin 3.41 3.30 3.22 3.37 Net interest margin, fully tax-equivalent (non-GAAP)(1) 3.45 3.34 3.27 3.41 Efficiency ratio, fully-tax equivalent (non-GAAP)(1) 55.26 60.38 58.99 58.05 (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 completed another successful quarter as we continue to execute on our growth and efficiency strategies. Our third quarter results were highlighted by an improved efficiency ratio, solid loan growth and clean credit metrics." Bruce K. Lee, president and chief executive officer, HTLF
DUBUQUE, Iowa, Oct. 31, 2022 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021:
Net income available to common stockholders of $54.6 million compared to $53.9 million , an increase of $640,000 or 1% . Earnings per diluted common share of $1.28 compared to $1.27 , an increase of $0.01 or 1% . Net interest income of $155.9 million compared to $142.6 million , an increase of $13.3 million or 9% . Return on average assets was 1.13% compared to 1.19% . Return on average common equity was 12.93% compared to 10.32% . Return on average tangible common equity (non-GAAP) was 20.76% compared to 15.14% . "HTLF completed another successful quarter as we continue to execute on our growth and efficiency strategies. Our third quarter results were highlighted by an improved efficiency ratio, solid loan growth and clean credit metrics," said Bruce K. Lee, president and chief executive officer of HTLF.
HTLF reported the following results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:
Net income available to common stockholders of $145.5 million compared to $164.3 million , a decrease of $18.8 million or 11% . Earnings per diluted common share of $3.42 compared to $3.88 , a decrease of $0.46 or 12% . Net interest income of $433.0 million compared to $423.4 million , an increase of $9.7 million or 2% . Return on average assets was 1.04% compared to 1.25% . Return on average common equity was 10.80% compared to 10.95% . Return on average tangible common equity (non-GAAP) was 16.79% compared to 16.34% . Charter Consolidation Update
During the third quarter of 2022, the charters of Premier Valley Bank and Minnesota Bank & Trust were consolidated into HTLF Bank. Subsequent to September 30, 2022, the Arizona Bank & Trust charter was consolidated into HTLF Bank. Citywide Banks, Premier Valley Bank, Minnesota Bank & Trust and Arizona Bank & Trust are now operating as divisions of HTLF Bank. During the fourth quarter of 2022, one additional charter consolidation is expected to be completed, and the remaining six charters are expected to be consolidated by the end of 2023. Charter consolidation follows a template that retains the current brands, local leadership and local decision making.
Consolidation restructuring costs are projected to be $19 -$20 million with approximately $12 -$13 million of expenses remaining to be incurred through 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 third quarter of 2022 with the completion of two charter consolidations, and total benefits are estimated to be approximately $20.0 million annually after the project is completed.
Net Interest Income and Net Interest Margin
Net interest margin, expressed as a percentage of average earning assets, was 3.41% (3.45% on a fully tax-equivalent basis, non-GAAP) for the third quarter of 2022 compared to 3.30% (3.34% on a fully tax-equivalent basis, non-GAAP) for the third quarter of 2021.
Total interest income and average earning asset changes for the third quarter of 2022 compared to the third quarter of 2021 were:
Total interest income was $175.8 million compared to $149.2 million , which was an increase of $26.6 million or 18% and primarily attributable to an increase in average earning assets and higher yields partially offset by a reduction of PPP loan interest income. PPP loan interest income totaled $363,000 compared to $11.2 million , which was a decrease of $10.8 million or 97% . Total interest income on a tax-equivalent basis (non-GAAP) was $178.0 million , which was an increase of $27.1 million or 18% from $150.9 million . Average earning assets increased $1.03 billion or 6% to $18.16 billion compared to $17.12 billion . The average rate on earning assets increased 39 basis points to 3.89% compared to 3.50% , which was primarily due to recent interest rate increases. Total interest expense and average interest bearing liability changes for the third quarter of 2022 compared to the third quarter of 2021 were:
Total interest expense was $19.9 million , an increase of $13.3 million from $6.6 million , based on an increase in the average interest rate paid and an increase in average interest bearing liabilities. The average interest rate paid on interest bearing liabilities increased to 0.67% compared to 0.27% . Average interest bearing deposits increased $1.76 billion or 19% to $11.22 billion from $9.46 billion . The average interest rate paid on interest bearing deposits increased 40 basis points to 0.54% compared to 0.14% . Average borrowings increased $86.6 million or 21% to $506.5 million from $419.9 million , and the average interest rate paid on borrowings was 3.74% compared to 3.02% . Net interest income changes for the third quarter of 2022 compared to the third quarter of 2021 were:
Net interest income totaled $155.9 million compared to $142.5 million , which was an increase of $13.3 million or 9% . Net interest income on a tax-equivalent basis (non-GAAP) totaled $158.0 million compared to $144.3 million , which was an increase of $13.8 million or 10% . Noninterest Income and Noninterest Expense
Total noninterest income was $29.2 million during the third quarter of 2022 compared to $32.7 million during the third quarter of 2021, a decrease of $3.5 million or 11% . Significant changes within the noninterest income category for the third quarter of 2022 compared to the third quarter of 2021 were:
Service charges and fees increased $1.7 million or 11% to $17.3 million from $15.1 million , which was primarily attributable to an increase of $1.2 million or 25% in credit card revenue to $6.2 million compared to $5.0 million . Net security losses totaled $1.1 million compared to net gains of $1.5 million . Net gains on sales of loans held for sale totaled $1.8 million compared to $5.3 million , which was a decrease of $3.4 million or 65% and was primarily attributable to a decrease of loans sold to the secondary market. Other noninterest income totaled $3.8 million compared to $1.2 million , which was an increase of $2.5 million and was primarily attributable to an increase in commercial swap fees and syndication income to $1.8 million from $131,000. Total noninterest expense was $108.9 million during the third quarter of 2022 compared to $110.6 million during the third quarter of 2021, which was a decrease of $1.7 million or 2% . Significant changes within the noninterest expense category for the third quarter of 2022 compared to the third quarter of 2021 were:
Salaries and employee benefits totaled $62.7 million compared to $60.7 million , which was an increase of $2.0 million or 3% . The increase was primarily attributable to higher incentive compensation expenses. Acquisition, integration and restructuring costs totaled $2.2 million compared to $204,000 , an increase of $2.0 million due to the progression of the charter consolidation project. Partnership investment in tax credit projects decreased $1.4 million or 59% to $979,000 from $2.4 million . Occupancy expense decreased $572,000 or 8% to $6.8 million from $7.4 million , and furniture and equipment expense decreased $437,000 or 13% to $2.9 million from $3.4 million . These decreases are primarily attributable to the reduction in branch locations. Branch locations totaled 121 at September 30, 2022, compared to 131 at September 30, 2021. The effective tax rate was 19.97% for the third quarter of 2022 compared to 19.15% for the third quarter of 2021. The following items impacted the third quarter 2022 and 2021 tax calculations:
Solar energy tax credits of $1.1 million compared to $2.1 million . Federal low-income housing tax credits of $519,000 compared to $135,000. New markets tax credits of $75,000 in each quarterly calculation. Historic rehabilitation tax credits of $63,000 compared to $327,000. Tax-exempt interest income as a percentage of pre-tax income of 11.45% compared to 9.32% . Total Assets, Total Loans and Total Deposits
Total assets were $19.68 billion at September 30, 2022, an increase of $408.4 million or 2% from $19.27 billion at year-end 2021. Securities represented 35% and 40% of total assets at September 30, 2022, and December 31, 2021, respectively.
During the third quarter of 2022, HTLF transferred taxable municipal bonds with a book value of $934.5 million and a fair value of $748.3 million from the available for sale portfolio to the held to maturity portfolio.
Total loans held to maturity were $10.92 billion at September 30, 2022, compared to $9.95 billion at December 31, 2021, which was an increase of $969.0 million or 10% . Excluding total PPP loans, loans increased $254.8 million or 2% since June 30, 2022 and $1.16 billion or 12% since December 31, 2021.
Significant changes by loan category at September 30, 2022 compared to June 30, 2022 included:
Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $212.8 million or 4% to $5.58 billion compared to $5.37 billion . PPP loans originated in 2020 ("PPP I") decreased $883,000 or 32% . PPP loans originated in 2021 ("PPP II") decreased $8.6 million or 43% . Excluding total PPP loans, commercial and business lending increased $222.3 million or 4% to $5.56 billion from $5.34 billion . Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $48.8 million or 2% to $3.22 billion compared to $3.17 billion . Agricultural and agricultural real estate loans decreased $55.3 million or 7% to $781.4 million compared to $836.7 million . Consumer loans increased $31.4 million or 7% to $495.5 million from $464.1 million . Significant changes by loan category at September 30, 2022 compared to December 31, 2021 included:
Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $492.9 million or 10% to $5.58 billion compared to $5.09 billion . PPP I loans decreased $25.2 million or 93% . PPP II loans decreased $161.1 million or 93% . Excluding total PPP loans, commercial and business lending increased $679.3 million or 14% to $5.56 billion from $4.89 billion . Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $348.8 million or 12% to $3.22 billion compared to $2.87 billion . Agricultural and agricultural real estate loans increased $27.6 million or 4% to $781.4 million compared to $753.8 million . Consumer loans increased $76.0 million or 18% to $495.5 million from $419.5 million . Total deposits were $17.27 billion as of September 30, 2022, compared to $16.42 billion at December 31, 2021. Significant deposit changes by category at September 30, 2022 compared to December 31, 2021 included:
Demand deposits decreased $411.8 million or 6% to $6.08 billion compared to $6.50 billion . Savings deposits increased $1.16 billion or 13% to $10.06 billion from $8.90 billion . Provision and Allowance
Provision and Allowance for Credit Losses for Loans $4.4 million , which was an increase of $8.8 million from a provision benefit of $4.4 million recorded in the third quarter of 2021. The provision expense for the third quarter of 2022 reflects a stable credit environment with a deteriorating economic outlook due to the long-term impact of rising interest rates and record high inflation. The provision benefit recorded in the third quarter of 2021 reflected an improving credit environment coming off elevated COVID reserving levels with an improving economic outlook due to waning COVID concerns.
The allowance for credit losses for loans totaled $105.7 million and $110.1 million at September 30, 2022, and December 31, 2021, respectively. The following items impacted the allowance for credit losses for loans at September 30, 2022:
Provision expense for the nine months ended September 30, 2022, totaled $8.6 million . Net charge offs of $12.9 million were recorded for the first nine months of 2022. Nonpass loans declined to 5.3% of total loans compared to 7.4% of total loans at December 31, 2021. Provision and Allowance for Credit Losses for Unfunded Commitments $18.9 million at September 30, 2022, which was an increase of $3.4 million from $15.5 million at December 31, 2021. Unfunded commitments increased $834.2 million to $4.66 billion at September 30, 2022 compared to $3.83 billion at December 31, 2021.
Total Provision and Allowance for Lending Related Credit Losses $5.5 million for the third quarter of 2022 compared to provision benefit of $4.5 million for the third quarter of 2021. The total allowance for lending related credit losses was $124.6 million or 1.14% of total loans at September 30, 2022, compared to $125.6 million or 1.26% of total loans as of December 31, 2021.
Nonperforming Assets
Nonperforming assets increased $1.4 million or 2% to $73.3 million or 0.37% of total assets at September 30, 2022, compared to $71.9 million or 0.37% of total assets at December 31, 2021. Nonperforming loans were $65.2 million or 0.60% of total loans at September 30, 2022, compared to $69.9 million or 0.70% of total loans at December 31, 2021. At September 30, 2022, loans delinquent 30-89 days were 0.10% of total loans compared to 0.07% of total loans at December 31, 2021.
Non-GAAP Financial Measures
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. 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 www.htlf.com
About HTLF $19.68 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 treasury management, wealth management, investments and residential mortgage. Additional information is available at www.htlf.com
Safe Harbor Statement
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", "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 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, 2021, include, among others:
Coronavirus Disease 2019 ("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 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. 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 HTLF’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. 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 SEC.
-FINANCIAL TABLES FOLLOW-
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Interest Income Interest and fees on loans $ 122,913 $ 112,062 $ 334,000 $ 336,416 Interest on securities: Taxable 45,648 32,384 116,366 94,373 Nontaxable 6,164 4,609 17,874 13,673 Interest on federal funds sold — — — 1 Interest on deposits with other banks and short-term investments 1,081 132 1,715 258 Total Interest Income 175,806 149,187 469,955 444,721 Interest Expense Interest on deposits 15,158 3,444 24,665 11,629 Interest on short-term borrowings 360 98 494 348 Interest on other borrowings 4,412 3,102 11,780 9,378 Total Interest Expense 19,930 6,644 36,939 21,355 Net Interest Income 155,876 142,543 433,016 423,366 Provision (benefit) for credit losses 5,492 (4,534 ) 11,983 (12,262 ) Net Interest Income After Provision (Benefit) for Credit Losses 150,384 147,077 421,033 435,628 Noninterest Income Service charges and fees 17,282 15,551 50,599 44,354 Loan servicing income 831 784 1,951 2,495 Trust fees 5,372 6,221 17,130 18,037 Brokerage and insurance commissions 649 866 2,357 2,584 Securities gains/(losses), net (1,055 ) 1,535 (272 ) 4,347 Unrealized gain/ (loss) on equity securities, net (211 ) 112 (615 ) 85 Net gains on sale of loans held for sale 1,832 5,281 8,144 16,454 Valuation adjustment on servicing rights — 195 1,658 586 Income on bank owned life insurance 694 940 1,741 2,706 Other noninterest income 3,787 1,239 15,596 4,557 Total Noninterest Income 29,181 32,724 98,289 96,205 Noninterest Expense Salaries and employee benefits 62,661 60,689 192,867 177,083 Occupancy 6,794 7,366 21,250 22,683 Furniture and equipment 2,928 3,365 9,480 9,959 Professional fees 16,277 17,242 47,420 46,969 Advertising 1,554 1,921 4,392 5,039 Core deposit and customer relationship intangibles amortization 1,856 2,295 5,993 7,226 Other real estate and loan collection expenses, net 304 78 577 627 (Gain)/loss on sales/valuations of assets, net (251 ) (3 ) (3,435 ) 374 Acquisition, integration and restructuring costs 2,156 204 5,144 3,342 Partnership investment in tax credit projects 979 2,374 1,793 3,754 Other noninterest expenses 13,625 15,096 40,678 39,370 Total Noninterest Expense 108,883 110,627 326,159 316,426 Income Before Income Taxes 70,682 69,174 193,163 215,407 Income taxes 14,118 13,250 41,637 45,064 Net Income 56,564 55,924 151,526 170,343 Preferred dividends (2,013 ) (2,013 ) (6,038 ) (6,038 ) Net Income Available to Common Stockholders $ 54,551 $ 53,911 $ 145,488 $ 164,305 Earnings per common share-diluted $ 1.28 $ 1.27 $ 3.42 $ 3.88 Weighted average shares outstanding-diluted 42,643,940 42,415,993 42,596,301 42,381,313
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Interest Income Interest and fees on loans $ 122,913 $ 108,718 $ 102,369 $ 107,721 $ 112,062 Interest on securities: Taxable 45,648 38,098 32,620 30,637 32,384 Nontaxable 6,164 5,508 6,202 5,595 4,609 Interest on federal funds sold — — — — — Interest on deposits with other banks and short-term investments 1,081 563 71 86 132 Total Interest Income 175,806 152,887 141,262 144,039 149,187 Interest Expense Interest on deposits 15,158 6,530 2,977 3,168 3,444 Interest on short-term borrowings 360 88 46 123 98 Interest on other borrowings 4,412 3,808 3,560 3,554 3,102 Total Interest Expense 19,930 10,426 6,583 6,845 6,644 Net Interest Income 155,876 142,461 134,679 137,194 142,543 Provision (benefit) for credit losses 5,492 3,246 3,245 (5,313 ) (4,534 ) Net Interest Income After Provision (Benefit) for Credit Losses 150,384 139,215 131,434 142,507 147,077 Noninterest Income Service charges and fees 17,282 18,066 15,251 15,349 15,551 Loan servicing income 831 834 286 781 784 Trust fees 5,372 5,679 6,079 6,380 6,221 Brokerage and insurance commissions 649 839 869 962 866 Securities gains/(losses), net (1,055 ) (2,089 ) 2,872 1,563 1,535 Unrealized gain/ (loss) on equity securities, net (211 ) (121 ) (283 ) (27 ) 112 Net gains on sale of loans held for sale 1,832 2,901 3,411 4,151 5,281 Valuation adjustment on servicing rights — — 1,658 502 195 Income on bank owned life insurance 694 523 524 1,056 940 Other noninterest income 3,787 7,907 3,902 2,013 1,239 Total Noninterest Income 29,181 34,539 34,569 32,730 32,724 Noninterest Expense Salaries and employee benefits 62,661 64,032 66,174 63,031 60,689 Occupancy 6,794 7,094 7,362 7,282 7,366 Furniture and equipment 2,928 3,033 3,519 3,364 3,365 Professional fees 16,277 15,987 15,156 17,631 17,242 Advertising 1,554 1,283 1,555 2,218 1,921 Core deposit and customer relationship intangibles amortization 1,856 2,083 2,054 2,169 2,295 Other real estate and loan collection expenses, net 304 78 195 363 78 (Gain)/loss on sales/valuations of assets, net (251 ) (3,230 ) 46 214 (3 ) Acquisition, integration and restructuring costs 2,156 2,412 576 1,989 204 Partnership investment in tax credit projects 979 737 77 2,549 2,374 Other noninterest expenses 13,625 12,970 14,083 14,576 15,096 Total Noninterest Expense 108,883 106,479 110,797 115,386 110,627 Income Before Income Taxes 70,682 67,275 55,206 59,851 69,174 Income taxes 14,118 15,402 12,117 10,271 13,250 Net Income 56,564 51,873 43,089 49,580 55,924 Preferred dividends (2,013 ) (2,012 ) (2,013 ) (2,012 ) (2,013 ) Net Income Available to Common Stockholders $ 54,551 $ 49,861 $ 41,076 $ 47,568 $ 53,911 Earnings per common share-diluted $ 1.28 $ 1.17 $ 0.97 $ 1.12 $ 1.27 Weighted average shares outstanding-diluted 42,643,940 42,565,391 42,540,953 42,479,442 42,415,993
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA As of 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Assets Cash and due from banks $ 250,394 $ 221,077 $ 198,559 $ 163,895 $ 192,247 Interest bearing deposits with other banks and short-term investments 149,466 163,717 406,343 271,704 135,158 Cash and cash equivalents 399,860 384,794 604,902 435,599 327,405 Time deposits in other financial institutions 1,740 1,855 2,894 2,894 3,138 Securities: Carried at fair value 6,060,331 7,106,218 7,025,243 7,530,374 7,449,936 Held to maturity, at cost, less allowance for credit losses 830,247 81,939 81,785 84,709 85,354 Other investments, at cost 80,286 85,899 82,751 82,567 83,332 Loans held for sale 9,570 18,803 22,685 21,640 37,078 Loans: Held to maturity 10,923,532 10,678,218 10,177,385 9,954,572 9,854,907 Allowance for credit losses (105,715 ) (101,353 ) (100,522 ) (110,088 ) (117,533 ) Loans, net 10,817,817 10,576,865 10,076,863 9,844,484 9,737,374 Premises, furniture and equipment, net 203,585 206,818 213,752 215,827 221,996 Goodwill 576,005 576,005 576,005 576,005 576,005 Core deposit and customer relationship intangibles, net 26,995 28,851 30,934 32,988 35,157 Servicing rights, net 8,379 8,288 8,102 6,890 6,351 Cash surrender value on life insurance 193,184 192,474 192,267 191,722 190,576 Other real estate, net 8,030 4,528 1,422 1,927 4,744 Other assets 466,921 385,062 311,274 246,923 237,779 Total Assets $ 19,682,950 $ 19,658,399 $ 19,230,879 $ 19,274,549 $ 18,996,225 Liabilities and Equity Liabilities Deposits: Demand $ 6,083,563 $ 6,087,304 $ 6,376,249 $ 6,495,326 $ 6,537,722 Savings 10,060,523 10,059,678 9,236,427 8,897,909 8,416,204 Time 1,123,035 1,078,568 1,054,008 1,024,020 1,068,317 Total deposits 17,267,121 17,225,550 16,666,684 16,417,255 16,022,243 Short-term borrowings 147,000 97,749 107,372 131,597 265,620 Other borrowings 371,446 372,538 372,290 372,072 371,765 Accrued expenses and other liabilities 241,425 188,494 152,676 171,447 164,345 Total Liabilities 18,026,992 17,884,331 17,299,022 17,092,371 16,823,973 Stockholders' Equity Preferred equity 110,705 110,705 110,705 110,705 110,705 Common stock 42,444 42,439 42,370 42,275 42,250 Capital surplus 1,079,277 1,076,766 1,073,048 1,071,956 1,068,913 Retained earnings 1,074,168 1,031,076 992,655 962,994 926,834 Accumulated other comprehensive income (loss) (650,636 ) (486,918 ) (286,921 ) (5,752 ) 23,550 Total Equity 1,655,958 1,774,068 1,931,857 2,182,178 2,172,252 Total Liabilities and Equity $ 19,682,950 $ 19,658,399 $ 19,230,879 $ 19,274,549 $ 18,996,225
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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Average Balances Assets $ 19,775,341 $ 19,559,091 $ 19,229,872 $ 19,151,691 $ 18,608,775 Loans, net of unearned 10,783,135 10,477,368 10,043,594 9,886,027 9,920,047 Deposits 17,282,289 17,044,479 16,459,378 16,265,476 15,817,778 Earning assets 18,157,795 17,987,734 17,757,067 17,681,917 17,123,824 Interest bearing liabilities 11,723,026 11,575,319 10,453,400 10,207,255 9,881,350 Common equity 1,674,306 1,731,393 2,003,424 2,061,973 2,072,593 Total stockholders' equity 1,785,011 1,842,098 2,114,129 2,172,678 2,183,298 Tangible common equity (non-GAAP)(1) 1,070,399 1,125,543 1,395,488 1,451,950 1,460,309 Key Performance Ratios Annualized return on average assets 1.13 % 1.06 % 0.91 % 1.03 % 1.19 % Annualized return on average common equity (GAAP) 12.93 11.55 8.32 9.15 10.32 Annualized return on average tangible common equity (non-GAAP)(1) 20.76 18.35 12.41 13.47 15.14 Annualized ratio of net charge-offs/(recoveries) to average loans 0.00 0.03 0.49 0.03 (0.05 ) Annualized net interest margin (GAAP) 3.41 3.18 3.08 3.08 3.30 Annualized net interest margin, fully tax-equivalent (non-GAAP)(1) 3.45 3.22 3.12 3.12 3.34 Efficiency ratio, fully tax-equivalent (non-GAAP)(1) 55.26 57.66 64.65 63.86 60.38 Annualized ratio of total noninterest expenses to average assets (GAAP) 2.18 2.18 2.34 2.39 2.36 Annualized ratio of core expenses to average assets (non-GAAP)(1) 2.09 2.14 2.28 2.25 2.25
For the Quarter Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Average Balances Assets $ 19,775,341 $ 18,608,775 $ 19,523,433 $ 18,291,444 Loans, net of unearned 10,783,135 9,920,047 10,437,409 9,981,306 Deposits 17,282,289 15,817,778 16,931,730 15,482,394 Earning assets 18,157,795 17,123,824 17,969,001 16,803,740 Interest bearing liabilities 11,723,026 9,881,350 11,255,232 9,889,806 Common equity 1,674,306 2,072,593 1,801,835 2,006,123 Total stockholders' equity 1,785,011 2,183,298 1,912,540 2,116,828 Tangible common stockholders' equity 1,070,399 1,460,309 1,195,952 1,391,373 Key Performance Ratios Annualized return on average assets 1.13 % 1.19 % 1.04 % 1.25 % Annualized return on average common equity (GAAP) 12.93 10.32 10.80 10.95 Annualized return on average tangible common equity (non-GAAP)(1) 20.76 15.14 16.79 16.34 Annualized ratio of net charge-offs/(recoveries) to average loans 0.00 (0.05 ) 0.17 0.04 Annualized net interest margin (GAAP) 3.41 3.30 3.22 3.37 Annualized net interest margin, fully tax-equivalent (non-GAAP)(1) 3.45 3.34 3.27 3.41 Efficiency ratio, fully tax-equivalent (non-GAAP)(1) 55.26 60.38 58.99 58.05 Total noninterest expenses to average assets (GAAP) 2.18 2.36 2.23 2.31 Core expenses to average assets (non-GAAP)(1) 2.09 2.25 2.17 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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Common Share Data Book value per common share $ 36.41 $ 39.19 $ 42.98 $ 49.00 $ 48.79 Tangible book value per common share (non-GAAP)(1) $ 22.20 $ 24.94 $ 28.66 $ 34.59 $ 34.33 Common shares outstanding, net of treasury stock 42,444,106 42,439,439 42,369,908 42,275,264 42,250,092 Tangible common equity ratio (non-GAAP)(1) 4.94 % 5.56 % 6.52 % 7.84 % 7.89 % Other Selected Trend Information Effective tax rate 19.97 % 22.89 % 21.95 % 17.16 % 19.15 % Full time equivalent employees 2,020 2,087 2,208 2,249 2,163 Loans Held to Maturity Commercial and industrial $ 3,278,703 $ 3,059,519 $ 2,814,513 $ 2,645,085 $ 2,538,369 Paycheck Protection Program ("PPP") 13,506 23,031 74,065 199,883 409,247 Owner occupied commercial real estate 2,285,973 2,282,833 2,266,076 2,240,334 2,135,227 Commercial and business lending 5,578,182 5,365,383 5,154,654 5,085,302 5,082,843 Non-owner occupied commercial real estate 2,219,542 2,321,718 2,161,761 2,010,591 2,020,487 Real estate construction 996,017 845,045 842,483 856,119 814,001 Commercial real estate lending 3,215,559 3,166,763 3,004,244 2,866,710 2,834,488 Total commercial lending 8,793,741 8,532,146 8,158,898 7,952,012 7,917,331 Agricultural and agricultural real estate 781,354 836,703 766,443 753,753 684,670 Residential mortgage 852,928 845,270 825,242 829,283 840,356 Consumer 495,509 464,099 426,802 419,524 412,550 Total loans held to maturity $ 10,923,532 $ 10,678,218 $ 10,177,385 $ 9,954,572 $ 9,854,907 Total unfunded loan commitments $ 4,664,379 $ 4,458,874 $ 4,130,316 $ 3,830,219 $ 3,583,417 (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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Allowance for Credit Losses-Loans Balance, beginning of period $ 101,353 $ 100,522 $ 110,088 $ 117,533 $ 120,726 Provision (benefit) for credit losses 4,388 1,545 2,628 (6,808 ) (4,448 ) Charge-offs (938 ) (1,473 ) (13,217 ) (1,953 ) (1,167 ) Recoveries 912 759 1,023 1,316 2,422 Balance, end of period $ 105,715 $ 101,353 $ 100,522 $ 110,088 $ 117,533 Allowance for Unfunded Commitments Balance, beginning of period $ 17,780 $ 16,079 $ 15,462 $ 13,967 $ 14,002 Provision (benefit) for credit losses 1,104 1,701 617 1,495 (35 ) Balance, end of period $ 18,884 $ 17,780 $ 16,079 $ 15,462 $ 13,967 Allowance for lending related credit losses $ 124,599 $ 119,133 $ 116,601 $ 125,550 $ 131,500 Provision for Credit Losses Provision (benefit) for credit losses-loans $ 4,388 $ 1,545 $ 2,628 $ (6,808 ) $ (4,448 ) Provision (benefit) for credit losses-unfunded commitments 1,104 1,701 617 1,495 (35 ) Provision (benefit) for credit losses-held to maturity securities — — — — (51 ) Total provision (benefit) for credit losses $ 5,492 $ 3,246 $ 3,245 $ (5,313 ) $ (4,534 ) Asset Quality Nonaccrual loans $ 64,560 $ 62,909 $ 64,174 $ 69,369 $ 82,375 Loans past due ninety days or more 678 95 246 550 861 Other real estate owned 8,030 4,528 1,422 1,927 4,744 Other repossessed assets — — 34 43 166 Total nonperforming assets $ 73,268 $ 67,532 $ 65,876 $ 71,889 $ 88,146 Performing troubled debt restructured loans $ 8,047 $ 1,350 $ 882 $ 817 $ 1,817 Nonperforming Assets Activity Balance, beginning of period $ 67,532 $ 65,876 $ 71,889 $ 88,146 $ 91,729 Net loan (charge offs)/recoveries (26 ) (714 ) (12,194 ) (637 ) 1,255 New nonperforming loans 8,388 8,590 15,832 5,886 6,908 Reduction of nonperforming loans(1) (2,015 ) (5,244 ) (8,448 ) (18,429 ) (8,581 ) Net OREO/repossessed assets sales proceeds and losses (611 ) (976 ) (1,203 ) (3,077 ) (3,165 ) Balance, end of period $ 73,268 $ 67,532 $ 65,876 $ 71,889 $ 88,146 Asset Quality Ratios Ratio of nonperforming loans to total loans 0.60 % 0.59 % 0.63 % 0.70 % 0.84 % Ratio of nonperforming loans and performing trouble debt restructured loans to total loans 0.67 0.60 0.64 0.71 0.86 Ratio of nonperforming assets to total assets 0.37 0.34 0.34 0.37 0.46 Annualized ratio of net loan charge-offs/(recoveries) to average loans — 0.03 0.49 0.03 (0.05 ) Allowance for loan credit losses as a percent of loans 0.97 0.95 0.99 1.11 1.19 Allowance for lending related credit losses as a percent of loans 1.14 1.12 1.15 1.26 1.33 Allowance for loan credit losses as a percent of nonperforming loans 162.05 160.87 156.04 157.45 141.20 Loans delinquent 30-89 days as a percent of total loans 0.10 0.06 0.10 0.07 0.12 (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 September 30, 2022 June 30, 2022 September 30, 2021 Average Balance Interest Rate Average Balance Interest Rate Average Balance Interest Rate Earning Assets Securities: Taxable $ 6,303,278 $ 45,648 2.87 % $ 6,419,615 $ 38,098 2.38 % $ 6,244,097 $ 32,384 2.06 % Nontaxable(1) 951,232 7,802 3.25 915,880 6,972 3.05 759,073 5,835 3.05 Total securities 7,254,510 53,450 2.92 7,335,495 45,070 2.46 7,003,170 38,219 2.17 Interest on deposits with other banks and short-term investments 222,170 1,081 1.93 277,773 563 0.81 322,430 132 0.16 Federal funds sold 11 — — — — — — — — Loans:(2) Commercial and industrial(1) 3,182,134 37,526 4.68 3,002,822 30,441 4.07 2,588,270 28,224 4.33 PPP loans 17,859 363 8.06 41,370 1,801 17.46 602,675 11,186 7.36 Owner occupied commercial real estate 2,272,666 23,601 4.12 2,294,524 22,863 4.00 1,990,538 20,048 4.00 Non-owner occupied commercial real estate 2,258,424 25,895 4.55 2,179,048 22,871 4.21 1,964,609 22,129 4.47 Real estate construction 914,520 12,382 5.37 878,555 10,015 4.57 835,976 9,591 4.55 Agricultural and agricultural real estate 799,823 8,966 4.45 782,610 7,933 4.07 674,510 7,415 4.36 Residential mortgage 858,119 8,665 4.01 849,174 8,358 3.95 855,734 9,068 4.20 Consumer 479,590 6,028 4.99 449,265 4,949 4.42 407,735 4,889 4.76 Less: allowance for credit losses-loans (102,031 ) — — (102,902 ) — — (121,823 ) — — Net loans 10,681,104 123,426 4.58 10,374,466 109,231 4.22 9,798,224 112,550 4.56 Total earning assets 18,157,795 177,957 3.89 % 17,987,734 154,864 3.45 % 17,123,824 150,901 3.50 % Nonearning Assets 1,617,546 1,571,357 1,484,951 Total Assets $ 19,775,341 $ 19,559,091 $ 18,608,775 Interest Bearing Liabilities Savings $ 10,059,652 $ 12,907 0.51 % $ 9,995,497 $ 5,372 0.22 % $ 8,364,326 $ 2,240 0.11 % Time deposits 1,156,908 2,251 0.77 1,088,765 1,158 0.43 1,097,126 1,204 0.44 Short-term borrowings 134,974 360 1.06 118,646 88 0.30 139,001 98 0.28 Other borrowings 371,492 4,412 4.71 372,411 3,808 4.10 280,897 3,102 4.38 Total interest bearing liabilities 11,723,026 19,930 0.67 % 11,575,319 10,426 0.36 % 9,881,350 6,644 0.27 % Noninterest Bearing Liabilities Noninterest bearing deposits 6,065,729 5,960,217 6,356,326 Accrued interest and other liabilities 201,575 181,457 187,801 Total noninterest bearing liabilities 6,267,304 6,141,674 6,544,127 Equity 1,785,011 1,842,098 2,183,298 Total Liabilities and Equity $ 19,775,341 $ 19,559,091 $ 18,608,775 Net interest income, fully tax-equivalent (non-GAAP) (1)(3) $ 158,027 $ 144,438 $ 144,257 Net interest spread (1) 3.22 % 3.09 % 3.23 % Net interest income, fully tax-equivalent (non-GAAP )(1)(3) to total earning assets 3.45 % 3.22 % 3.34 % Interest bearing liabilities to earning assets 64.56 % 64.35 % 57.71 % (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 Nine Months Ended September 30, 2022 September 30, 2021 Average Balance Interest Rate Average Balance Interest Rate Earning Assets Securities: Taxable $ 6,407,459 $ 116,366 2.43 % $ 5,935,295 $ 94,373 2.13 % Nontaxable(1) 990,784 22,625 3.05 743,534 17,308 3.11 Total securities 7,398,243 138,991 2.51 6,678,829 111,681 2.24 % Interest bearing deposits with other banks and other short-term investments 238,819 1,715 0.96 266,701 258 0.13 Federal funds sold 7 — — 4,622 1 0.03 Loans:(2) Commercial and industrial(1) 2,977,751 95,020 4.27 2,519,608 85,008 4.51 PPP loans 63,342 6,487 13.69 879,489 32,521 4.94 Owner occupied commercial real estate 2,270,486 67,742 3.99 1,876,929 59,710 4.25 Non-owner occupied commercial real estate 2,166,873 69,929 4.31 1,961,016 65,984 4.50 Real estate construction 880,354 31,673 4.81 819,452 28,501 4.65 Agricultural and agricultural real estate 776,127 23,905 4.12 676,091 22,733 4.50 Residential mortgage 850,444 25,108 3.95 844,337 28,153 4.46 Consumer 452,032 15,632 4.62 404,384 15,408 5.09 Less: allowance for credit losses-loans (105,477 ) — — (127,718 ) — — Net loans 10,331,932 335,496 4.34 9,853,588 338,018 4.59 Total earning assets 17,969,001 476,202 3.54 % 16,803,740 449,958 3.58 % Nonearning Assets 1,554,432 1,487,704 Total Assets $ 19,523,433 $ 18,291,444 Interest Bearing Liabilities Savings $ 9,652,651 $ 20,673 0.29 % $ 8,211,478 $ 6,903 0.11 % Time deposits 1,106,095 3,992 0.48 1,166,858 4,726 0.54 Short-term borrowings 124,459 494 0.53 182,583 348 0.25 Other borrowings 372,027 11,780 4.23 328,887 9,378 3.81 Total interest bearing liabilities 11,255,232 36,939 0.44 % 9,889,806 21,355 0.29 % Noninterest Bearing Liabilities Noninterest bearing deposits 6,172,984 6,104,058 Accrued interest and other liabilities 182,677 180,752 Total noninterest bearing liabilities 6,355,661 6,284,810 Stockholders' Equity 1,912,540 2,116,828 Total Liabilities and Stockholders' Equity $ 19,523,433 $ 18,291,444 Net interest income, fully tax-equivalent (non-GAAP) (1)(3) $ 439,263 $ 428,603 Net interest spread (1) 3.10 % 3.29 % Net interest income, fully tax-equivalent (non-GAAP) (1)(3) to total earning assets 3.27 % 3.41 % Interest bearing liabilities to earning assets 62.64 % 58.85 % (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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP) Net income available to common stockholders (GAAP) $ 54,551 $ 49,861 $ 41,076 $ 47,568 $ 53,911 Plus core deposit and customer relationship intangibles amortization, net of tax(1) 1,466 1,645 1,623 1,713 1,814 Net income available to common stockholders excluding intangible amortization (non-GAAP) $ 56,017 $ 51,506 $ 42,699 $ 49,281 $ 55,725 Average common equity (GAAP) $ 1,674,306 $ 1,731,393 $ 2,003,424 $ 2,061,973 $ 2,072,593 Less average goodwill 576,005 576,005 576,005 576,005 576,005 Less average core deposit and customer relationship intangibles, net 27,902 29,845 31,931 34,018 36,279 Average tangible common equity (non-GAAP) $ 1,070,399 $ 1,125,543 $ 1,395,488 $ 1,451,950 $ 1,460,309 Annualized return on average common equity (GAAP) 12.93 % 11.55 % 8.32 % 9.15 % 10.32 % Annualized return on average tangible common equity (non-GAAP) 20.76 % 18.35 % 12.41 % 13.47 % 15.14 % Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP) Net Interest Income (GAAP) $ 155,876 $ 142,461 $ 134,679 $ 137,194 $ 142,543 Plus tax-equivalent adjustment(1) 2,151 1,977 2,119 1,975 1,714 Net interest income, fully tax-equivalent (non-GAAP) $ 158,027 $ 144,438 $ 136,798 $ 139,169 $ 144,257 Average earning assets $ 18,157,795 $ 17,987,734 $ 17,757,067 $ 17,681,917 $ 17,123,824 Annualized net interest margin (GAAP) 3.41 % 3.18 % 3.08 % 3.08 % 3.30 % Annualized net interest margin, fully tax-equivalent (non-GAAP) 3.45 3.22 3.12 3.12 3.34 Net purchase accounting discount amortization on loans included in annualized net interest margin 0.03 0.07 0.05 0.05 0.08
Reconciliation of Tangible Book Value Per Common Share (non-GAAP) Common equity (GAAP) $ 1,545,253 $ 1,663,363 $ 1,821,152 $ 2,071,473 $ 2,061,547 Less goodwill 576,005 576,005 576,005 576,005 576,005 Less core deposit and customer relationship intangibles, net 26,995 28,851 30,934 32,988 35,157 Tangible common equity (non-GAAP) $ 942,253 $ 1,058,507 $ 1,214,213 $ 1,462,480 $ 1,450,385 Common shares outstanding, net of treasury stock 42,444,106 42,439,439 42,369,908 42,275,264 42,250,092 Common equity (book value) per share (GAAP) $ 36.41 $ 39.19 $ 42.98 $ 49.00 $ 48.79 Tangible book value per common share (non-GAAP) $ 22.20 $ 24.94 $ 28.66 $ 34.59 $ 34.33 Reconciliation of Tangible Common Equity Ratio (non-GAAP) Tangible common equity (non-GAAP) $ 942,253 $ 1,058,507 $ 1,214,213 $ 1,462,480 $ 1,450,385 Total assets (GAAP) $ 19,682,950 $ 19,658,399 $ 19,230,879 $ 19,274,549 $ 18,996,225 Less goodwill 576,005 576,005 576,005 576,005 576,005 Less core deposit and customer relationship intangibles, net 26,995 28,851 30,934 32,988 35,157 Total tangible assets (non-GAAP) $ 19,079,950 $ 19,053,543 $ 18,623,940 $ 18,665,556 $ 18,385,063 Tangible common equity ratio (non-GAAP) 4.94 % 5.56 % 6.52 % 7.84 % 7.89 % (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 Efficiency Ratio (non-GAAP) For the Quarter Ended 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Net interest income (GAAP) $ 155,876 $ 142,461 $ 134,679 $ 137,194 $ 142,543 Tax-equivalent adjustment(1) 2,151 1,977 2,119 1,975 1,714 Fully tax-equivalent net interest income 158,027 144,438 136,798 139,169 144,257 Noninterest income 29,181 34,539 34,569 32,730 32,724 Securities (gains)/losses, net 1,055 2,089 (2,872 ) (1,563 ) (1,535 ) Unrealized (gain)/loss on equity securities, net 211 121 283 27 (112 ) Valuation adjustment on servicing rights — — (1,658 ) (502 ) (195 ) Adjusted revenue (non-GAAP) $ 188,474 $ 181,187 $ 167,120 $ 169,861 $ 175,139 Total noninterest expenses (GAAP) $ 108,883 $ 106,479 $ 110,797 $ 115,386 $ 110,627 Less: Core deposit and customer relationship intangibles amortization 1,856 2,083 2,054 2,169 2,295 Partnership investment in tax credit projects 979 737 77 2,549 2,374 (Gain)/loss on sales/valuation of assets, net (251 ) (3,230 ) 46 214 (3 ) Acquisition, integration and restructuring costs 2,156 2,412 576 1,989 204 Core expenses (non-GAAP) $ 104,143 $ 104,477 $ 108,044 $ 108,465 $ 105,757 Efficiency ratio, fully tax-equivalent (non-GAAP) 55.26 % 57.66 % 64.65 % 63.86 % 60.38 % Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP) Total noninterest expenses (GAAP) $ 108,883 $ 106,479 $ 110,797 $ 115,386 $ 110,627 Core expenses (non-GAAP) 104,143 104,477 108,044 108,465 105,757 Average assets $ 19,775,341 $ 19,559,091 $ 19,229,872 $ 19,151,691 $ 18,608,775 Total noninterest expenses to average assets (GAAP) 2.18 % 2.18 % 2.34 % 2.39 % 2.36 % Core expenses to average assets (non-GAAP) 2.09 % 2.14 % 2.28 % 2.25 % 2.25 % Acquisition, integration and restructuring costs Salaries and employee benefits $ 365 $ 275 $ 340 $ — $ — Occupancy — — — — — Furniture and equipment — — — — 7 Professional fees 1,480 1,779 236 1,989 145 Advertising 131 156 — — 11 (Gain)/loss on sales/valuations of assets, net — — — — 39 Other noninterest expenses 180 202 — — 2 Total acquisition, integration and restructuring costs $ 2,156 $ 2,412 $ 576 $ 1,989 $ 204 After tax impact on diluted earnings per common share(1) $ 0.04 $ 0.04 $ 0.01 $ 0.05 $ — (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 September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP) Net income available to common stockholders (GAAP) $ 54,551 $ 53,911 $ 145,488 $ 164,305 Plus core deposit and customer relationship intangibles amortization, net of tax(1) 1,466 1,814 4,734 5,709 Net income available to common stockholders excluding intangible amortization (non-GAAP) $ 56,017 $ 55,725 $ 150,222 $ 170,014 Average common equity (GAAP) $ 1,674,306 $ 2,072,593 $ 1,801,835 $ 2,006,123 Less average goodwill 576,005 576,005 576,005 576,005 Less average core deposit and customer relationship intangibles, net 27,902 36,279 29,878 38,745 Average tangible common equity (non-GAAP) $ 1,070,399 $ 1,460,309 $ 1,195,952 $ 1,391,373 Annualized return on average common equity (GAAP) 12.93 % 10.32 % 10.80 % 10.95 % Annualized return on average tangible common equity (non-GAAP) 20.76 % 15.14 % 16.79 % 16.34 % Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP) Net Interest Income (GAAP) $ 155,876 $ 142,543 $ 433,016 $ 423,366 Plus tax-equivalent adjustment(1) 2,151 1,714 6,247 5,237 Net interest income, fully tax-equivalent (non-GAAP) $ 158,027 $ 144,257 $ 439,263 $ 428,603 Average earning assets $ 18,157,795 $ 17,123,824 $ 17,969,001 $ 16,803,740 Annualized net interest margin (GAAP) 3.41 % 3.30 % 3.22 % 3.37 % Annualized net interest margin, fully tax-equivalent (non-GAAP) 3.45 3.34 3.27 3.41 Purchase accounting discount amortization on loans included in annualized net interest margin 0.03 0.08 0.05 0.10 (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 Efficiency Ratio (non-GAAP) For the Quarter Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Net interest income (GAAP) $ 155,876 $ 142,543 $ 433,016 $ 423,366 Tax-equivalent adjustment(1) 2,151 1,714 6,247 5,237 Fully tax-equivalent net interest income 158,027 144,257 439,263 428,603 Noninterest income 29,181 32,724 98,289 96,205 Securities (gains)/losses, net 1,055 (1,535 ) 272 (4,347 ) Unrealized (gain)/loss on equity securities, net 211 (112 ) 615 (85 ) Valuation adjustment on servicing rights — (195 ) (1,658 ) (586 ) Adjusted revenue (non-GAAP) $ 188,474 $ 175,139 $ 536,781 $ 519,790 Total noninterest expenses (GAAP) $ 108,883 $ 110,627 $ 326,159 $ 316,426 Less: Core deposit and customer relationship intangibles amortization 1,856 2,295 5,993 7,226 Partnership investment in tax credit projects 979 2,374 1,793 3,754 (Gain)/loss on sales/valuation of assets, net (251 ) (3 ) (3,435 ) 374 Acquisition, integration and restructuring costs 2,156 204 5,144 3,342 Core expenses (non-GAAP) $ 104,143 $ 105,757 $ 316,664 $ 301,730 Efficiency ratio, fully tax-equivalent (non-GAAP) 55.26 % 60.38 % 58.99 % 58.05 % Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP) Total noninterest expenses (GAAP) $ 108,883 $ 110,627 $ 326,159 $ 316,426 Core expenses (non-GAAP) 104,143 105,757 316,664 301,730 Average assets $ 19,775,341 $ 18,608,775 $ 19,523,433 $ 18,291,444 Total noninterest expenses to average assets (GAAP) 2.18 % 2.36 % 2.23 % 2.31 % Core expenses to average assets (non-GAAP) 2.09 % 2.25 % 2.17 % 2.21 % Acquisition, integration and restructuring costs Salaries and employee benefits $ 365 $ — $ 980 $ 578 Occupancy — — — 10 Furniture and equipment — 7 — 655 Professional fees 1,480 145 3,495 878 Advertising 131 11 287 173 (Gain)/loss on sales/valuations of assets, net — 39 — 39 Other noninterest expenses 180 2 382 1,009 Total acquisition, integration and restructuring costs $ 2,156 $ 204 $ 5,144 $ 3,342 After tax impact on diluted earnings per common share(1) $ 0.04 $ — $ 0.10 $ 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
