Heartland Financial USA, Inc. Reports Record Annual Earnings and Strong Fourth Quarter Results as of December 31, 2019

Highlights

• Record annual net income available to common stockholders of $149.1 million, an increase of $32.2 million or 28% from $117.0 million for 2018
  
• Quarterly net income available to common stockholders of $37.9 million or $1.03 per diluted common share in comparison with $32.1 million or $0.93 per diluted common share for the fourth quarter of the prior year
  
• Net interest margin of 3.86%, fully tax-equivalent (non-GAAP)(1) of 3.90% for the fourth quarter of 2019
  
• Return on average common equity of 9.56% and return on average tangible common equity (non-GAAP)(1) of 14.65% for the fourth quarter of 2019
  
• Efficiency ratio (non-GAAP)(1) for the fourth quarter of 2019 of 60.69%
  
• Tangible common equity ratio (non-GAAP)(1) of 8.52% at December 31, 2019
  
• Organic commercial and commercial real estate loan growth of $96.8 million and organic non-time deposit growth of $225.0 million for the fourth quarter of 2019
  
• Completed the acquisition of substantially all of the assets and deposits and certain other liabilities of Rockford Bank and Trust Company

		Quarter Ended December 31,								Year Ended December 31,
		2019				2018				2019				2018
Net income available to common stockholders (in millions)		$	37.9			$	32.1			$	149.1			$	117.0
Diluted earnings per common share		1.03				0.93				4.14				3.52
Return on average assets		1.17		%		1.12		%		1.24		%		1.09		%
Return on average common equity		9.56				9.88				10.12				9.93
Return on average tangible common equity (non-GAAP)(1)		14.65				15.96				15.73				15.72
Net interest margin		3.86				4.28				4.00				4.26
Net interest margin, fully tax-equivalent (non-GAAP)(1)		3.90				4.34				4.04				4.32
Efficiency ratio, fully-tax equivalent (non-GAAP)(1)		60.69				59.35				63.11				63.54

(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.

"Heartland completed a record year with net income available to common stockholders of $149.1 million, which was an increase of $32.2 million or 28 percent over the prior year. Diluted earnings per share for 2019 increased $0.62 or 18 percent to $4.14 from $3.52 for 2018."

Bruce K. Lee, president and chief executive officer, Heartland Financial USA, Inc.

DUBUQUE, Iowa, Jan. 27, 2020 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $37.9 million, or $1.03 per diluted common share, for the quarter ended December 31, 2019, compared to $32.1 million, or $0.93 per diluted common share, for the fourth quarter of 2018. Return on average common equity was 9.56% and return on average assets was 1.17% for the fourth quarter of 2019, compared to 9.88% and 1.12%, respectively, for the same quarter in 2018.

Net income available to common stockholders for the year ended December 31, 2019, was $149.1 million or $4.14 per diluted common share, compared to $117.0 million or $3.52 per diluted common share for the year ended December 31, 2018. Return on average common equity was 10.12% and return on average assets was 1.24% for the year 2019, compared to 9.93% and 1.09% for the same period in 2018.

Commenting on Heartland’s 2019 results, Bruce K. Lee, Heartland’s president and chief executive officer, said, "Heartland completed a record year with net income available to common stockholders of $149.1 million, which was an increase of $32.2 million or 28 percent over the prior year. Diluted earnings per share for 2019 increased $0.62 or 18 percent to $4.14 from $3.52 for 2018."

Strategic Developments in 2019

In keeping with its focus on core businesses and execution of strategic priorities, Heartland completed the following transactions:

• In the first quarter of 2019, two branch locations of Wisconsin Bank & Trust and the consumer finance loan portfolios totaling approximately $67 million of Citizens’ Finance Company were sold. During the second quarter of 2019, Heartland completed the sale of two branches of Dubuque Bank and Trust Company, two branches of Illinois Bank & Trust and one branch of Citywide Banks. On April 30, 2019, Dubuque Bank and Trust Company closed on the sale of substantially all its mortgage servicing rights to PNC Bank, N.A. Heartland is utilizing a portion of the net gains from these sales transactions, which totaled approximately $24.5 million, to invest in several new technology and process improvement projects. These projects include system upgrades, process automation, and expansion of online and mobile banking capabilities.
• On May 10, 2019, Heartland completed the acquisition of Blue Valley Ban Corp. ("BVBC") and its wholly-owned subsidiary, Bank of Blue Valley, headquartered in Overland Park, Kansas. Based on Heartland's closing common stock price of $44.78 per share on May 10, 2019, the aggregate consideration paid to BVBC common shareholders was $92.3 million, which was paid by delivery of Heartland common stock. Immediately following the closing of the transaction, Bank of Blue Valley was merged with and into Heartland's wholly-owned Kansas subsidiary, Morrill & Janes Bank and Trust Company, and the combined entity operates under the Bank of Blue Valley brand. As of the closing date, BVBC had, at fair value, total assets of $766.2 million, total loans held to maturity of $542.0 million, and total deposits of $617.1 million. Heartland also assumed, at fair value, $16.1 million of trust preferred debt. The systems conversion for this transaction was completed on August 23, 2019.
• On November 30, 2019, Heartland's Illinois Bank & Trust subsidiary completed its acquisition of substantially all of the assets and substantially all of the deposits and certain other liabilities of Rockford Bank and Trust Company ("RB&T"), headquartered in Rockford, Illinois. RB&T is a wholly-owned subsidiary of Moline, Illinois-based QCR Holdings, Inc. As of the closing date, RB&T had, at fair value, total assets of $495.7 million, which included $354.0 million of gross loans held to maturity, and $430.3 million of deposits. RB&T serves the Rockford market from two full-service banking locations. The systems conversion is expected to occur in the first quarter of 2020.

“We are pleased that we have advanced our goal to have two additional charters over $1 billion dollars in assets with the acquisitions in 2019 of Bank of Blue Valley and Rockford Bank & Trust," commented Lynn B. Fuller, Heartland's executive operating chairman.

Net Interest Income Increases, Net Interest Margin Decreases, from Fourth Quarter of 2018

Net interest margin, expressed as a percentage of average earning assets, was 3.86% (3.90% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2019, compared to 3.98% (4.02% on a fully tax-equivalent basis, non-GAAP) during the third quarter of 2019 and 4.28% (4.34% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2018.

Total interest income for the fourth quarter of 2019 was $133.2 million compared to $126.3 million recorded in the fourth quarter of 2018, an increase of $6.9 million or 5%. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.1 million for the fourth quarter of 2019 and $1.6 million for the fourth quarter of 2018. With these adjustments, total interest income on a tax-equivalent basis was $134.3 million for the fourth quarter of 2019, an increase of $6.4 million or 5%, compared to total interest income on a tax-equivalent basis of $127.9 million for the fourth quarter of 2018.

Average earning assets of $11.58 billion increased $1.35 billion or 13% from the fourth quarter of 2018, which was primarily attributable to recent acquisitions. The average rate on earning assets decreased 36 basis points to 4.60% for the fourth quarter of 2019 compared to 4.96% for the same quarter in 2018. In the first quarter of 2019, Heartland sold its higher yielding consumer loan portfolios, which accounted for 10 basis points of margin in the fourth quarter of 2018.

Total interest expense for the fourth quarter of 2019 was $20.5 million, an increase of $4.4 million or 28% from $16.0 million in the fourth quarter of 2018. The average interest rate paid on Heartland's interest bearing liabilities increased to 1.08% for the fourth quarter of 2019 compared to 0.97% for the fourth quarter of 2018.

Average interest bearing deposits increased $961.3 million or 16% to $7.12 billion for the quarter ended December 31, 2019, from $6.16 billion in the same quarter in 2018, which was primarily attributable to recent acquisitions. The average interest rate paid on Heartland's interest bearing deposits increased 15 basis points to 0.91% for the fourth quarter of 2019 compared to 0.76% for the same quarter in 2018.

Average borrowings decreased $4.8 million or 1% to $392.7 million during the fourth quarter of 2019 from $397.5 million during the same quarter in 2018. The average interest rate paid on Heartland's borrowings was 4.10% for the fourth quarter of 2019 compared to 4.19% in the fourth quarter of 2018.

Net interest income was $112.7 million during the fourth quarter of 2019 compared to $110.3 million during the fourth quarter of 2018, an increase of $2.5 million or 2%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $113.9 million during the fourth quarter of 2019 compared to net interest income on a tax-equivalent basis of $111.8 million during the fourth quarter of 2018, an increase of $2.0 million or 2%.

"While our net interest margin declined during the fourth quarter of 2019, we were able to lower our non-time deposit costs by 16 basis points. The current interest rate environment is very competitive, however, we are actively working to maintain our yield on loans while lowering our funding costs," Lee said.

Noninterest Income and Noninterest Expense Increase from Fourth Quarter of 2018

Total noninterest income was $28.0 million during the fourth quarter of 2019 compared to $27.0 million during the fourth quarter of 2018, an increase of $985,000 or 4%. Significant changes by noninterest income category were:

• Service charges and fees decreased $1.3 million or 9% to $12.4 million for the fourth quarter of 2019 compared to $13.7 million for the fourth quarter of 2018. Debit card income for the fourth quarter of 2019 totaled $1.6 million compared to $3.7 million for the same quarter in 2018, which was a decrease of $2.2 million or 58%, primarily due to the impact of the Durbin Amendment, which was effective for Heartland on July 1, 2019.
• Loan servicing income totaled $955,000 for the fourth quarter of 2019 compared to $2.1 million for the fourth quarter of 2018, which was a decrease of $1.1 million or 54%. The decrease was primarily due to the sale of the mortgage servicing rights of Dubuque Bank and Trust Company in the second quarter of 2019.
• Other noninterest income totaled $2.9 million for the fourth quarter of 2019 compared to $1.2 million for the fourth quarter of 2018, which was an increase of $1.6 million or 133%. Included in other noninterest income for the fourth quarter of 2019 was $891,000 related to proceeds on life insurance policies.

Total noninterest expense for the fourth quarter of 2019 was $92.9 million compared to $88.8 million for the same quarter of 2018, which was an increase of $4.0 million or 5%. Significant changes by noninterest expense category were:

• Salaries and employee benefits totaled $50.2 million for the fourth quarter of 2019 compared to $46.7 million for the same quarter of 2018, which is an increase of $3.5 million or 8%, which was primarily attributable to higher incentive compensation costs.
• Professional fees increased $914,000 or 9% to $11.5 million for the fourth quarter of 2019 compared to $10.6 million for the fourth quarter of 2018. This increase was primarily attributable to higher consulting fees related to process improvement and model validations. Consulting fees increased $759,000 or 150% to $1.3 million in the fourth quarter of 2019 from $507,000 in the same quarter of 2018.
• Net losses on assets totaled $1.5 million for the fourth quarter of 2019 compared to net gains of $35,000 for the fourth quarter of 2018, which was an increase of $1.5 million. Write-downs on fixed assets and buildings held for sale totaling $2.4 million were recorded in the fourth quarter of 2019. An additional gain of $1.2 million was recorded associated with the mortgage servicing rights sale due to the re-evaluation of any remaining contingencies. 

Heartland's effective tax rate was 11.99% for the fourth quarter of 2019 compared to 17.22% for the fourth quarter of 2018. The following items impacted Heartland's fourth quarter 2019 and 2018 tax calculations:

• Solar energy tax credits of $764,000 and $2.6 million for the fourth quarter of 2019 and 2018, respectively.
• Federal low-income housing tax credits of $281,000 and $307,000 for the fourth quarter of 2019 and 2018, respectively.
• Tax-exempt interest income as a percentage of pre-tax income declined to 9.79% during the fourth quarter of 2019 from 15.16% during the fourth quarter of 2018.
• Historic rehabilitation tax credits totaled $1.8 million for the fourth quarter of 2019 compared to $0 for the same quarter of 2018.
• Included in the fourth quarter 2019 tax calculation were $1.9 million of tax benefits related to the release of valuation allowances on deferred tax assets.

For the years ended December 31, 2019 and 2018, Heartland's effective tax rate was 19.00% and 19.43%, respectively.

Loans and Deposits Increase Since December 31, 2018

Total assets were $13.21 billion at December 31, 2019, an increase of $1.80 billion or 16% from $11.41 billion at year-end 2018. Excluding $766.2 million of assets acquired at fair value in the BVBC transaction and $495.7 million of assets acquired at fair value in the RB&T transaction, total assets increased $539.7 million or 5% since year-end 2018. Securities represented 26% and 24% of total assets at December 31, 2019, and December 31, 2018, respectively.

Total loans held to maturity were $8.37 billion at December 31, 2019, compared to $7.41 billion at year-end 2018, an increase of $960.2 million or 13%. This change includes $896.0 million of total loans held to maturity acquired at fair value in the BVBC and RB&T transactions. During the first quarter of 2019, Heartland classified $32.1 million of loans as held for sale in conjunction with the branch sales. Excluding the reclassification of loans to held for sale and the BVBC and RB&T transactions, total loans held to maturity organically grew $96.3 million or 1% since December 31, 2018. Loan changes by category were:

• Commercial and commercial real estate loans totaled $6.79 billion at December 31, 2019, compared to $5.73 billion at December 31, 2018, which was an increase of $1.06 billion or 18%. Excluding $14.9 million of commercial and commercial real estate loans classified as held for sale during the first quarter of 2019 and $780.3 million of loans acquired in the BVBC and RB&T transactions, commercial and commercial real estate loans organically grew $293.4 million or 5% December 31, 2018.
• Agricultural and agricultural real estate loans totaled $533.1 million at December 31, 2019, compared to $565.4 million at December 31, 2018, which was a decrease of $32.3 million or 6%. Excluding $6.6 million of agricultural and agricultural real estate loans classified as held for sale during the first quarter of 2019 and $1.8 million of loans acquired in the BVBC transaction, agricultural and agricultural real estate loans organically decreased $27.5 million or 5% since December 31, 2018.
• Residential mortgage loans decreased $75.9 million or 11% to $597.7 million at December 31, 2019, from $673.6 million at December 31, 2018. Excluding $2.0 million of residential mortgage loans classified as held for sale during the first quarter of 2019 and $59.3 million of loans acquired in the BVBC and RB&T transactions, residential mortgage loans organically decreased $133.2 million or 20% since December 31, 2018.
• Consumer loans increased $12.1 million or 3% to $452.2 million at December 31, 2019, compared to $440.2 million at December 31, 2018. Excluding $8.6 million of loans classified as held for sale during the first quarter of 2019 and $54.7 million of loans acquired in the BVBC and RB&T transactions, consumer loans organically decreased $33.9 million or 8% since December 31, 2018.

"We had outstanding organic commercial and commercial real estate loan growth in the fourth quarter of 2019 of $96.8 million and $293.4 million for the year, and we expect this growth to continue in 2020," said Lee. 

Total deposits were $11.04 billion as of December 31, 2019, compared to $9.40 billion at year-end, which was an increase of $1.65 billion or 18%. This increase includes $1.05 billion of deposits acquired at fair value in the BVBC and RB&T transactions. During the first quarter of 2019, Heartland classified $77.0 million of deposits as held for sale in conjunction with the branch sales. Exclusive of the reclassification of deposits to held for sale and the deposits acquired at fair value in the BVBC and RB&T transactions, total deposits organically increased $677.5 million or 7% since December 31, 2018. Deposit changes by category were:

• Demand deposits increased $279.1 million or 9% to $3.54 billion at December 31, 2019, compared to $3.26 billion at December 31, 2018. Excluding $235.5 million of demand deposits acquired in the BVBC and RB&T transactions and $17.3 million of demand deposits classified as held for sale in the first quarter of 2019, demand deposits organically increased $60.9 million or 2% since year-end 2018.
• Savings deposits increased $1.20 billion or 23% to $6.31 billion at December 31, 2019, from $5.11 billion at December 31, 2018. Excluding savings deposits of $550.0 million acquired in the BVBC and RB&T transactions and $47.8 million of savings deposits classified as held for sale in the first quarter of 2019, savings deposits organically increased $697.3 million or 14% since year-end 2018.
• Time deposits increased $169.3 million or 17% to $1.19 billion at December 31, 2019 from $1.02 billion at December 31, 2018. Excluding time deposits of $261.9 million acquired in the BVBC and RB&T transactions and $11.9 million of time deposits classified as held for sale in the first quarter of 2019, time deposits organically decreased $80.8 million or 8% since year-end 2018.

"We had impressive organic non-time deposit growth of $225.0 million for the fourth quarter of 2019 and $758.2 million for the year. Non-time deposits represented 89 percent of total deposits at December 31, 2019," Lee stated.

Nonperforming Assets Increase Since December 31, 2018

Nonperforming assets increased $8.3 million or 10% to $87.6 million or 0.66% of total assets at December 31, 2019, compared to $79.3 million or 0.69% of total assets at December 31, 2018. Excluding $3.5 million of nonperforming assets acquired in the BVBC and RB&T transactions, nonperforming assets increased $4.8 million or 6%. Nonperforming loans were $80.7 million or 0.96% of total loans at December 31, 2019, compared to $72.7 million or 0.98% of total loans at December 31, 2018. Nonperforming loans past due 90 days or more increased $3.4 million to $4.1 million at December 31, 2019 compared to $726,000 at December 31, 2018, which was primarily attributable to one $2.7 million commercial relationship that has been paid off since December 31, 2019. At December 31, 2019, loans delinquent 30-89 days were 0.33% of total loans compared to 0.21% of total loans at December 31, 2018.

The allowance for loan losses at December 31, 2019, was 0.84% of loans at December 31, 2019, and December 31, 2018. The allowance for loan losses as a percentage of nonperforming loans was 87.28% and 85.27% at December 31, 2019 and December 31, 2018, respectively. Provision expense for the fourth quarter of 2019 was $4.9 million compared to $9.7 million for the fourth quarter of 2018, which was a decrease of $4.8 million or 49%. Provision expense in the fourth quarter of 2018 included $4.0 million of provision expense due to two impaired commercial loans from acquired portfolios.

Non-GAAP Financial Measures

This press 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 Heartland'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 press 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 press release, except that organic loan and deposit growth are reconciled to total loan and deposit growth in the preceding narrative discussion.

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

• Annualized return on average tangible common equity is net income available to common stockholders plus core deposit and customer relationship intangibles amortization, net of tax, divided by average common stockholders' 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 financial condition and capital strength.
• 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 press release.
• Organic deposit growth is exclusive of deposits obtained through acquisitions and the reclassification of deposits that are held for sale. Management believes that this measure provides a more complete understanding of underlying trends in deposit growth notwithstanding dispositions and acquisitions.
• Organic loan growth is exclusive of loans obtained through acquisitions and the reclassification of loans that are held for sale. Management believes that this measure provides a more complete understanding of underlying trends in loan growth notwithstanding dispositions and acquisitions.
• Tangible book value per common share is total common stockholders' 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 stockholders' 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 use of equity, financial condition and capital strength.

Conference Call Details
Heartland 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 start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. A replay will be available until January 26, 2021, by logging on to www.htlf.com.

About Heartland Financial USA, Inc.
Heartland Financial USA, Inc. is a diversified financial services company with assets of $13.21 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 115 banking locations serving 83 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

Safe Harbor Statement
This release, and future oral and written statements of Heartland and its management, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Heartland's financial condition, results of operations, plans, objectives, future performance and business. Although these forward-looking statements are based upon the beliefs, expectations and assumptions of Heartland's management, there are a number of factors, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed in the risk factors in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, contained, among others: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war; (iii) changes in state and federal laws, regulations and governmental policies as they impact the company's general business; (iv) changes in interest rates and prepayment rates of the company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the potential impact of acquisitions and Heartland's ability to successfully integrate acquired banks; (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x) unexpected outcomes of existing or new litigation involving the company; and (xi) changes in accounting policies and practices. All statements in this release, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended December 31,								For the Year Ended December 31,
	2019				2018				2019				2018
Interest Income
Interest and fees on loans	$	107,566			$	105,700			$	424,615			$	393,871
Interest on securities:
Taxable	22,581				15,851				73,147				54,131
Nontaxable	2,102				3,467				9,868				14,120
Interest on federal funds sold	—				—				4				—
Interest on deposits with other banks and other short-term investments	953				1,285				6,695				3,698
Total Interest Income	133,202				126,303				514,329				465,820
Interest Expense
Interest on deposits	16,401				11,826				63,734				35,667
Interest on short-term borrowings	271				417				1,748				1,696
Interest on other borrowings	3,785				3,777				15,118				14,503
Total Interest Expense	20,457				16,020				80,600				51,866
Net Interest Income	112,745				110,283				433,729				413,954
Provision for loan losses	4,903				9,681				16,657				24,013
Net Interest Income After Provision for Loan Losses	107,842				100,602				417,072				389,941
Noninterest Income
Service charges and fees	12,368				13,660				52,157				48,706
Loan servicing income	955				2,061				4,843				7,292
Trust fees	5,141				4,599				19,399				18,393
Brokerage and insurance commissions	1,062				1,618				3,786				4,513
Securities gains, net	491				48				7,659				1,085
Unrealized gain on equity securities, net	11				115				525				212
Net gains on sale of loans held for sale	3,363				3,189				15,555				21,450
Valuation adjustment on servicing rights	668				(58		)		(911		)		(46		)
Income on bank owned life insurance	1,117				587				3,785				2,793
Other noninterest income	2,854				1,226				9,410				4,762
Total Noninterest Income	28,030				27,045				116,208				109,160
Noninterest Expense
Salaries and employee benefits	50,234				46,729				200,541				196,118
Occupancy	5,813				6,622				25,450				25,328
Furniture and equipment	3,330				3,126				12,100				12,529
Professional fees	11,544				10,630				50,022				43,510
Advertising	2,305				2,726				10,028				9,565
Core deposit and customer relationship intangibles amortization	2,918				2,592				11,972				9,355
Other real estate and loan collection expenses, net	261				574				1,035				3,038
(Gain)/loss on sales/valuations of assets, net	1,512				(35		)		(19,422		)		2,208
Restructuring expenses	—				—				3,227				2,564
Other noninterest expenses	14,949				15,857				54,208				49,673
Total Noninterest Expense	92,866				88,821				349,161				353,888
Income Before Income Taxes	43,006				38,826				184,119				145,213
Income taxes	5,155				6,685				34,990				28,215
Net Income	37,851				32,141				149,129				116,998
Preferred dividends	—				—				—				(39		)
Net Income Available to Common Stockholders	$	37,851			$	32,141			$	149,129			$	116,959
Earnings per common share-diluted	$	1.03			$	0.93			$	4.14			$	3.52
Weighted average shares outstanding-diluted	36,840,519				34,670,180				36,061,908				33,213,148

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended
	12/31/2019				9/30/2019				6/30/2019				3/31/2019					12/31/2018
Interest Income
Interest and fees on loans	$	107,566			$	110,566			$	106,027			$	100,456				$	105,700
Interest on securities:
Taxable	22,581				18,567				16,123				15,876					15,851
Nontaxable	2,102				2,119				2,554				3,093					3,467
Interest on federal funds sold	—				—				—				4					—
Interest on deposits with other banks and other short-term investments	953				2,151				2,299				1,292					1,285
Total Interest Income	133,202				133,403				127,003				120,721					126,303
Interest Expense
Interest on deposits	16,401				17,982				16,138				13,213					11,826
Interest on short-term borrowings	271				250				338				889					417
Interest on other borrowings	3,785				3,850				3,819				3,664					3,777
Total Interest Expense	20,457				22,082				20,295				17,766					16,020
Net Interest Income	112,745				111,321				106,708				102,955					110,283
Provision for loan losses	4,903				5,201				4,918				1,635					9,681
Net Interest Income After Provision for Loan Losses	107,842				106,120				101,790				101,320					100,602
Noninterest Income
Service charges and fees	12,368				12,366				14,629				12,794					13,660
Loan servicing income	955				821				1,338				1,729					2,061
Trust fees	5,141				4,959				4,825				4,474					4,599
Brokerage and insurance commissions	1,062				962				1,028				734					1,618
Securities gains, net	491				2,013				3,580				1,575					48
Unrealized gain on equity securities, net	11				144				112				258					115
Net gains on sale of loans held for sale	3,363				4,673				4,343				3,176					3,189
Valuation adjustment on servicing rights	668				(626		)		(364		)		(589		)			(58		)
Income on bank owned life insurance	1,117				881				888				899					587
Other noninterest income	2,854				3,207				1,682				1,667					1,226
Total Noninterest Income	28,030				29,400				32,061				26,717					27,045
Noninterest Expense
Salaries and employee benefits	50,234				50,027				49,995				50,285					46,729
Occupancy	5,813				6,594				6,436				6,607					6,622
Furniture and equipment	3,330				2,858				3,220				2,692					3,126
Professional fees	11,544				12,131				14,968				11,379					10,630
Advertising	2,305				2,737				2,661				2,325					2,726
Core deposit and customer relationship intangibles amortization	2,918				2,899				3,313				2,842					2,592
Other real estate and loan collection expenses, net	261				(89		)		162				701					574
(Gain)/loss on sales/valuations of assets, net	1,512				356				(18,286		)		(3,004		)			(35		)
Restructuring expenses	—				—				—				3,227					—
Other noninterest expenses	14,949				15,454				12,629				11,176					15,857
Total Noninterest Expense	92,866				92,967				75,098				88,230					88,821
Income Before Income Taxes	43,006				42,553				58,753				39,807					38,826
Income taxes	5,155				7,941				13,584				8,310					6,685
Net Income	37,851				34,612				45,169				31,497					32,141
Preferred dividends	—				—				—				—					—
Net Income Available to Common Stockholders	$	37,851			$	34,612			$	45,169			$	31,497				$	32,141
Earnings per common share-diluted	$	1.03			$	0.94			$	1.26			$	0.91				$	0.93
Weighted average shares outstanding-diluted	36,840,519				36,835,191				35,879,259				34,699,839					34,670,180

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of
	12/31/2019				9/30/2019				6/30/2019				3/31/2019				12/31/2018
Assets
Cash and due from banks	$	206,607			$	243,395			$	198,664			$	174,198			$	223,135
Interest bearing deposits with other banks and other short-term investments	172,127				204,372				443,475				318,303				50,495
Cash and cash equivalents	378,734				447,767				642,139				492,501				273,630
Time deposits in other financial institutions	3,564				3,711				4,430				4,675				4,672
Securities:
Carried at fair value	3,312,796				3,020,568				2,561,887				2,400,460				2,450,709
Held to maturity, at cost	91,324				87,965				88,166				88,089				236,283
Other investments, at cost	31,321				29,042				31,366				27,506				28,396
Loans held for sale	26,748				35,427				34,575				69,716				119,801
Loans:
Held to maturity	8,367,917				7,971,608				7,853,051				7,331,544				7,407,697
Allowance for loan losses	(70,395		)		(66,222		)		(63,850		)		(62,639		)		(61,963		)
Loans, net	8,297,522				7,905,386				7,789,201				7,268,905				7,345,734
Premises, furniture and equipment, net	200,525				199,235				198,329				190,215				194,676
Goodwill	446,345				427,097				427,097				391,668				391,668
Core deposit and customer relationship intangibles, net	48,688				49,819				52,718				44,637				47,479
Servicing rights, net	6,736				6,271				7,180				28,968				31,072
Cash surrender value on life insurance	171,625				171,471				170,421				163,764				162,892
Other real estate, net	6,914				6,425				6,646				5,391				6,153
Other assets	186,755				179,078				146,135				136,000				114,841
Total Assets	$	13,209,597			$	12,569,262			$	12,160,290			$	11,312,495			$	11,408,006
Liabilities and Equity
Liabilities
Deposits:
Demand	$	3,543,863			$	3,581,127			$	3,426,758			$	3,118,909			$	3,264,737
Savings	6,307,425				5,770,754				5,533,503				5,145,929				5,107,962
Time	1,193,043				1,117,975				1,148,296				1,088,104				1,023,730
Total deposits	11,044,331				10,469,856				10,108,557				9,352,942				9,396,429
Deposits held for sale	—				—				—				118,564				106,409
Short-term borrowings	182,626				107,853				107,260				104,314				227,010
Other borrowings	275,773				278,417				282,863				268,312				274,905
Accrued expenses and other liabilities	128,730				149,293				139,823				96,261				78,078
Total Liabilities	11,631,460				11,005,419				10,638,503				9,940,393				10,082,831
Stockholders' Equity
Common stock	36,704				36,696				36,690				34,604				34,477
Capital surplus	839,857				838,543				837,150				745,596				743,095
Retained earnings	702,502				670,816				642,808				603,506				579,252
Accumulated other comprehensive income/(loss)	(926		)		17,788				5,139				(11,604		)		(31,649		)
Total Equity	1,578,137				1,563,843				1,521,787				1,372,102				1,325,175
Total Liabilities and Equity	$	13,209,597			$	12,569,262			$	12,160,290			$	11,312,495			$	11,408,006

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended December 31,								For the Year Ended December 31,
	2019				2018				2019				2018
Average Balances
Assets	$	12,798,770			$	11,371,247			$	12,021,917			$	10,772,297
Loans, net of unearned	8,090,476				7,436,497				7,761,091				7,140,239
Deposits	10,704,643				9,596,807				10,030,629				9,104,278
Earning assets	11,580,295				10,225,409				10,845,940				9,718,106
Interest bearing liabilities	7,513,701				6,557,185				7,048,607				6,253,586
Common stockholders' equity	1,570,258				1,290,691				1,473,396				1,177,346
Total stockholders' equity	1,570,258				1,290,691				1,473,396				1,177,955
Tangible common stockholders' equity (non-GAAP)	1,087,495				849,851				1,008,178				790,788
Key Performance Ratios
Annualized return on average assets	1.17		%		1.12		%		1.24		%		1.09		%
Annualized return on average common equity (GAAP)	9.56		%		9.88		%		10.12		%		9.93		%
Annualized return on average tangible common equity (non-GAAP)(1)	14.65		%		15.96		%		15.73		%		15.72		%
Annualized ratio of net charge-offs to average loans	0.04		%		0.48		%		0.11		%		0.25		%
Annualized net interest margin (GAAP)	3.86		%		4.28		%		4.00		%		4.26		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.90		%		4.34		%		4.04		%		4.32		%
Efficiency ratio, fully tax-equivalent(1)	60.69		%		59.35		%		63.11		%		63.54		%
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
Net income available to common stockholders (GAAP)	$	37,851			$	32,141			$	149,129			$	116,959
Plus core deposit and customer relationship intangibles amortization, net of tax(2)	2,305				2,048				9,458				7,391
Adjusted net income available to common stockholders (non-GAAP)	$	40,156			$	34,189			$	158,587			$	124,350
Average common stockholders' equity (GAAP)	$	1,570,258			$	1,290,691			$	1,473,396			$	1,177,346
Less average goodwill	433,374				391,668				415,841				340,352
Less average core deposit and customer relationship intangibles, net	49,389				49,172				49,377				46,206
Average tangible common equity (non-GAAP)	$	1,087,495			$	849,851			$	1,008,178			$	790,788
Annualized return on average common equity (GAAP)	9.56		%		9.88		%		10.12		%		9.93		%
Annualized return on average tangible common equity (non-GAAP)	14.65		%		15.96		%		15.73		%		15.72		%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
Net Interest Income (GAAP)	$	112,745			$	110,283			$	433,729			$	413,954
Plus tax-equivalent adjustment(2)	1,109				1,565				4,929				6,228
Net interest income, tax-equivalent (non-GAAP)	$	113,854			$	111,848			$	438,658			$	420,182
Average earning assets	$	11,580,295			$	10,225,409			$	10,845,940			$	9,718,106
Annualized net interest margin (GAAP)	3.86		%		4.28		%		4.00		%		4.26		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)	3.90		%		4.34		%		4.04		%		4.32		%
(1) Refer to the "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.
(2) 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
	12/31/2019				9/30/2019				6/30/2019				3/31/2019				12/31/2018
Average Balances
Assets	$	12,798,770			$	12,293,332			$	11,708,538			$	11,267,214			$	11,371,247
Loans, net of unearned	8,090,476				7,883,678				7,648,562				7,412,855				7,436,497
Deposits	10,704,643				10,253,643				9,790,756				9,356,204				9,596,807
Earning assets	11,580,295				11,102,581				10,552,166				10,129,957				10,225,409
Interest bearing liabilities	7,513,701				7,174,944				6,872,449				6,622,149				6,557,185
Common stockholders' equity	1,570,258				1,541,369				1,442,388				1,336,250				1,290,691
Total stockholders' equity	1,570,258				1,541,369				1,442,388				1,336,250				1,290,691
Tangible common stockholders' equity (non-GAAP)	1,087,495				1,062,568				981,878				898,092				849,851
Key Performance Ratios
Annualized return on average assets	1.17		%		1.12		%		1.55		%		1.13		%		1.12		%
Annualized return on average common equity (GAAP)	9.56		%		8.91		%		12.56		%		9.56		%		9.88		%
Annualized return on average tangible common equity (non-GAAP)(1)	14.65		%		13.78		%		19.52		%		15.24		%		15.96		%
Annualized ratio of net charge-offs to average loans	0.04		%		0.14		%		0.19		%		0.05		%		0.48		%
Annualized net interest margin (GAAP)	3.86		%		3.98		%		4.06		%		4.12		%		4.28		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.90		%		4.02		%		4.10		%		4.18		%		4.34		%
Efficiency ratio, fully tax-equivalent (non-GAAP)(1)	60.69		%		61.92		%		64.81		%		65.23		%		59.35		%
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
Net income available to common stockholders (GAAP)	$	37,851			$	34,612			$	45,169			$	31,497			$	32,141
Plus core deposit and customer relationship intangibles amortization, net of tax(2)	2,305				2,291				2,617				2,245				2,048
Adjusted net income available to common stockholders (non-GAAP)	$	40,156			$	36,903			$	47,786			$	33,742			$	34,189
Average common stockholders' equity (GAAP)	$	1,570,258			$	1,541,369			$	1,442,388			$	1,336,250			$	1,290,691
Less average goodwill	433,374				427,097				410,642				391,668				391,668
Less average core deposit and customer relationship intangibles, net	49,389				51,704				49,868				46,490				49,172
Average tangible common stockholders' equity (non-GAAP)	$	1,087,495			$	1,062,568			$	981,878			$	898,092			$	849,851
Annualized return on average common equity (GAAP)	9.56		%		8.91		%		12.56		%		9.56		%		9.88		%
Annualized return on average tangible common equity (non-GAAP)	14.65		%		13.78		%		19.52		%		15.24		%		15.96		%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
Net Interest Income (GAAP)	$	112,745			$	111,321			$	106,708			$	102,955			$	110,283
Plus tax-equivalent adjustment(2)	1,109				1,140				1,268				1,412				1,565
Net interest income, fully tax-equivalent (non-GAAP)	$	113,854			$	112,461			$	107,976			$	104,367			$	111,848
Average earning assets	$	11,580,295			$	11,102,581			$	10,552,166			$	10,129,957			$	10,225,409
Annualized net interest margin (GAAP)	3.86		%		3.98		%		4.06		%		4.12		%		4.28		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)	3.90		%		4.02		%		4.10		%		4.18		%		4.34		%
(1) Refer to the "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.
(2) 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 December 31,								For the Year Ended December 31,
Reconciliation of Efficiency Ratio (non-GAAP)	2019				2018				2019				2018
Net interest income (GAAP)	$	112,745			$	110,283			$	433,729			$	413,954
Tax-equivalent adjustment(1)	1,109				1,565				4,929				6,228
Fully tax-equivalent net interest income	113,854				111,848				438,658				420,182
Noninterest income	28,030				27,045				116,208				109,160
Securities gains, net	(491		)		(48		)		(7,659		)		(1,085		)
Unrealized gain on equity securities, net	(11		)		(115		)		(525		)		(212		)
Gain on extinguishment of debt	—				—				(375		)		—
Valuation adjustment on servicing rights	(668		)		58				911				46
Adjusted income (non-GAAP)	$	140,714			$	138,788			$	547,218			$	528,091
Total noninterest expenses (GAAP)	$	92,866			$	88,821			$	349,161			$	353,888
Less:
Core deposit and customer relationship intangibles amortization	2,918				2,592				11,972				9,355
Partnership investment in tax credit projects	3,038				3,895				8,030				4,233
(Gain)/loss on sales/valuations of assets, net	1,512				(35		)		(19,422		)		2,208
Restructuring expenses	—				—				3,227				2,564
Adjusted noninterest expenses (non-GAAP)	$	85,398			$	82,369			$	345,354			$	335,528
Efficiency ratio, fully tax-equivalent (non-GAAP)	60.69		%		59.35		%		63.11		%		63.54		%

Reconciliation of Efficiency Ratio (non-GAAP)	For the Quarter Ended
	12/31/2019				9/30/2019				6/30/2019				3/31/2019				12/31/2018
Net interest income (GAAP)	$	112,745			$	111,321			$	106,708			$	102,955			$	110,283
Tax-equivalent adjustment(1)	1,109				1,140				1,268				1,412				1,565
Fully tax-equivalent net interest income	113,854				112,461				107,976				104,367				111,848
Noninterest income	28,030				29,400				32,061				26,717				27,045
Securities gains, net	(491		)		(2,013		)		(3,580		)		(1,575		)		(48		)
Unrealized gain on equity securities, net	(11		)		(144		)		(112		)		(258		)		(115		)
Gain on extinguishment of debt	—				(375		)		—				—				—
Valuation adjustment on servicing rights	(668		)		626				364				589				58
Adjusted income (non-GAAP)	$	140,714			$	139,955			$	136,709			$	129,840			$	138,788
Total noninterest expenses (GAAP)	$	92,866			$	92,967			$	75,098			$	88,230			$	88,821
Less:
Core deposit and customer relationship intangibles amortization	2,918				2,899				3,313				2,842				2,592
Partnership investment in tax credit projects	3,038				3,052				1,465				475				3,895
(Gain)/loss on sales/valuation of assets, net	1,512				356				(18,286		)		(3,004		)		(35		)
Restructuring expenses	—				—				—				3,227				—
Adjusted noninterest expenses (non-GAAP)	$	85,398			$	86,660			$	88,606			$	84,690			$	82,369
Efficiency ratio, fully tax-equivalent (non-GAAP)	60.69		%		61.92		%		64.81		%		65.23		%		59.35		%
(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 AND FULL TIME EQUIVALENT EMPLOYEE DATA
	As of and for the Quarter Ended
	12/31/2019				9/30/2019				6/30/2019				3/31/2019				12/31/2018
Common Share Data
Book value per common share	$	43.00			$	42.62			$	41.48			$	39.65			$	38.44
Tangible book value per common share (non-GAAP)(1)	$	29.51			$	29.62			$	28.40			$	27.04			$	25.70
Common shares outstanding, net of treasury stock	36,704,278				36,696,190				36,690,061				34,603,611				34,477,499
Tangible common equity ratio (non-GAAP)(1)	8.52		%		8.99		%		8.92		%		8.60		%		8.08		%
Reconciliation of Tangible Book Value Per Common Share (non-GAAP)
Common stockholders' equity (GAAP)	$	1,578,137			$	1,563,843			$	1,521,787			$	1,372,102			$	1,325,175
Less goodwill	446,345				427,097				427,097				391,668				391,668
Less core deposit and customer relationship intangibles, net	48,688				49,819				52,718				44,637				47,479
Tangible common stockholders' equity (non-GAAP)	$	1,083,104			$	1,086,927			$	1,041,972			$	935,797			$	886,028
Common shares outstanding, net of treasury stock	36,704,278				36,696,190				36,690,061				34,603,611				34,477,499
Common stockholders' equity (book value) per share (GAAP)	$	43.00			$	42.62			$	41.48			$	39.65			$	38.44
Tangible book value per common share (non-GAAP)	$	29.51			$	29.62			$	28.40			$	27.04			$	25.70
Reconciliation of Tangible Common Equity Ratio (non-GAAP)
Tangible common stockholders' equity (non-GAAP)	$	1,083,104			$	1,086,927			$	1,041,972			$	935,797			$	886,028
Total assets (GAAP)	$	13,209,597			$	12,569,262			$	12,160,290			$	11,312,495			$	11,408,006
Less goodwill	446,345				427,097				427,097				391,668				391,668
Less core deposit and customer relationship intangibles, net	48,688				49,819				52,718				44,637				47,479
Total tangible assets (non-GAAP)	$	12,714,564			$	12,092,346			$	11,680,475			$	10,876,190			$	10,968,859
Tangible common equity ratio (non-GAAP)	8.52		%		8.99		%		8.92		%		8.60		%		8.08		%
Loan Data
Loans held to maturity:
Commercial and commercial real estate	$	6,790,458			$	6,393,596			$	6,230,372			$	5,745,051			$	5,731,712
Residential mortgage	597,742				589,793				613,707				630,433				673,603
Agricultural and agricultural real estate	533,064				545,006				549,404				544,805				565,408
Consumer	452,233				447,718				461,802				412,573				440,158
Unearned discount and deferred loan fees	(5,580		)		(4,505		)		(2,234		)		(1,318		)		(3,184		)
Total loans held to maturity	$	8,367,917			$	7,971,608			$	7,853,051			$	7,331,544			$	7,407,697
Other Selected Trend Information
Effective tax rate	11.99		%		18.66		%		23.12		%		20.88		%		17.22		%
Full time equivalent employees	1,908				1,962				2,040				1,976				2,045
(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
	12/31/2019				9/30/2019				6/30/2019				3/31/2019				12/31/2018
Allowance for Loan Losses
Balance, beginning of period	$	66,222			$	63,850			$	62,639			$	61,963			$	61,221
Provision for loan losses	4,903				5,201				4,918				1,635				9,681
Charge-offs	(2,018		)		(4,842		)		(4,780		)		(1,950		)		(9,777		)
Recoveries	1,288				2,013				1,073				991				838
Balance, end of period	$	70,395			$	66,222			$	63,850			$	62,639			$	61,963
Asset Quality
Nonaccrual loans	$	76,548			$	72,208			$	79,619			$	77,294			$	71,943
Loans past due ninety days or more	4,105				40				285				1,706				726
Other real estate owned	6,914				6,425				6,646				5,391				6,153
Other repossessed assets	11				13				39				8				459
Total nonperforming assets	$	87,578			$	78,686			$	86,589			$	84,399			$	79,281
Performing troubled debt restructured loans	$	3,794			$	3,199			$	3,539			$	3,460			$	4,026
Nonperforming Assets Activity
Balance, beginning of period	$	78,686			$	86,589			$	84,399			$	79,281			$	85,617
Net loan charge offs	(730		)		(2,829		)		(3,707		)		(959		)		(8,939		)
New nonperforming loans	13,751				6,818				13,688				15,314				17,332
Acquired nonperforming assets	3,262				—				230				—				—
Reduction of nonperforming loans(1)	(5,859		)		(8,861		)		(6,246		)		(6,238		)		(6,065		)
OREO/Repossessed assets sales proceeds	(1,399		)		(3,067		)		(1,288		)		(2,092		)		(8,390		)
OREO/Repossessed assets gain/(loss and writedowns), net	(133		)		36				(487		)		(462		)		(230		)
Net activity at Citizens Finance Co.	—				—				—				(445		)		(44		)
Balance, end of period	$	87,578			$	78,686			$	86,589			$	84,399			$	79,281
Asset Quality Ratios
Ratio of nonperforming loans to total loans	0.96		%		0.91		%		1.02		%		1.08		%		0.98		%
Ratio of nonperforming loans and performing trouble debt restructured loans to total loans	1.01		%		0.95		%		1.06		%		1.12		%		1.04		%
Ratio of nonperforming assets to total assets	0.66		%		0.63		%		0.71		%		0.75		%		0.69		%
Annualized ratio of net loan charge-offs to average loans	0.04		%		0.14		%		0.19		%		0.05		%		0.48		%
Allowance for loan losses as a percent of loans	0.84		%		0.83		%		0.81		%		0.85		%		0.84		%
Allowance for loan losses as a percent of nonperforming loans	87.28		%		91.66		%		79.91		%		79.29		%		85.27		%
Loans delinquent 30-89 days as a percent of total loans	0.33		%		0.28		%		0.31		%		0.47		%		0.21		%
(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
	December 31, 2019											September 30, 2019										December 31, 2018
	Average Balance				Interest				Rate			Average Balance				Interest			Rate			Average Balance				Interest			Rate
Earning Assets
Securities:
Taxable	$	3,033,480			$	22,581			2.95	%		$	2,658,107			$	18,567		2.77	%		$	2,184,096			$	15,851		2.88	%
Nontaxable(1)	271,792				2,661				3.88			266,933				2,682			3.99			427,332				4,388			4.07
Total securities	3,305,272				25,242				3.03			2,925,040				21,249			2.88			2,611,428				20,239			3.07
Interest on deposits with other banks and other short-term investments	251,599				953				1.50			358,327				2,151			2.38			238,087				1,285			2.14
Federal funds sold	—				—				—			—				—			—			309				—			—
Loans:(2)
Commercial and commercial real estate(1)	6,484,485				85,591				5.24			6,216,133				86,864			5.54			5,644,475				77,822			5.47
Residential mortgage	614,735				7,156				4.62			662,663				7,979			4.78			704,012				8,682			4.89
Agricultural and agricultural real estate(1)	538,029				7,005				5.17			550,441				7,551			5.44			568,904				7,752			5.41
Consumer	453,227				6,109				5.35			454,441				6,697			5.85			519,106				9,355			7.15
Fees on loans					2,255				—							2,052			—			—				2,733			—
Less: allowance for loan losses	(67,052		)		—				—			(64,464		)		—			—			(60,912		)		—			—
Net loans	8,023,424				108,116				5.35			7,819,214				111,143			5.64			7,375,585				106,344			5.72
Total earning assets	11,580,295				134,311				4.60	%		11,102,581				134,543			4.81	%		10,225,409				127,868			4.96	%
Nonearning Assets	1,218,475											1,190,751										1,145,838
Total Assets	$	12,798,770										$	12,293,332									$	11,371,247
Interest Bearing Liabilities(3)
Savings	$	5,986,007			$	11,790			0.78	%		$	5,643,722			$	13,301		0.94	%		$	5,071,573			$	8,817		0.69	%
Time deposits	1,135,025				4,611				1.61			1,149,064				4,681			1.62			1,088,122				3,009			1.10
Short-term borrowings	115,680				271				0.93			102,440				250			0.97			121,053				417			1.37
Other borrowings	276,989				3,785				5.42			279,718				3,850			5.46			276,437				3,777			5.42
Total interest bearing liabilities	7,513,701				20,457				1.08	%		7,174,944				22,082			1.22	%		6,557,185				16,020			0.97	%
Noninterest Bearing Liabilities(3)
Noninterest bearing deposits	3,583,611											3,460,857										3,437,112
Accrued interest and other liabilities	131,200											116,162										86,259
Total noninterest bearing liabilities	3,714,811											3,577,019										3,523,371
Stockholders' Equity	1,570,258											1,541,369										1,290,691
Total Liabilities and Stockholders' Equity	$	12,798,770										$	12,293,332									$	11,371,247
Net interest income, fully tax-equivalent (non-GAAP)(1)					$	113,854										$	112,461									$	111,848
Net interest spread(1)									3.52	%									3.59	%									3.99	%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets									3.90	%									4.02	%									4.34	%
(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) Includes deposits held for sale.

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
	For the Year Ended
	December 31, 2019										December 31, 2018
	Average Balance				Interest			Rate			Average Balance				Interest			Rate
Earning Assets
Securities:
Taxable	$	2,522,365			$	73,147		2.90	%		$	1,999,321			$	54,131		2.71	%
Nontaxable(1)	313,197				12,491			3.99			439,894				17,873			4.06
Total securities	2,835,562				85,638			3.02			2,439,215				72,004			2.95
Interest bearing deposits with other banks and other short-term investments	313,373				6,695			2.14			197,562				3,698			1.87
Federal funds sold	138				4			2.90			430				—			—
Loans:(2)
Commercial and commercial real estate(1)	6,105,889				332,866			5.45			5,401,683				289,379			5.36
Residential mortgage	656,741				30,552			4.65			692,310				32,047			4.63
Agricultural and agricultural real estate(1)	550,231				29,438			5.35			549,346				28,331			5.16
Consumer	448,230				25,802			5.76			496,900				37,250			7.50
Fees on loans					8,263			—							9,339			—
Less: allowance for loan losses	(64,224		)		—			—			(59,340		)		—			—
Net loans	7,696,867				426,921			5.55			7,080,899				396,346			5.60
Total earning assets	10,845,940				519,258			4.79	%		9,718,106				472,048			4.86	%
Nonearning Assets	1,175,977										1,054,191
Total Assets	$	12,021,917									$	10,772,297
Interest Bearing Liabilities(3)
Savings	$	5,530,503			$	47,069		0.85	%		$	4,779,977			$	25,123		0.53	%
Time deposits	1,115,785				16,665			1.49			1,058,769				10,544			1.00
Short-term borrowings	126,337				1,748			1.38			142,295				1,696			1.19
Other borrowings	275,982				15,118			5.48			272,545				14,503			5.32
Total interest bearing liabilities	7,048,607				80,600			1.14	%		6,253,586				51,866			0.83	%
Noninterest Bearing Liabilities(3)
Noninterest bearing deposits	3,384,341										3,265,532
Accrued interest and other liabilities	115,573										75,224
Total noninterest bearing liabilities	3,499,914										3,340,756
Stockholders' Equity	1,473,396										1,177,955
Total Liabilities and Stockholders' Equity	$	12,021,917									$	10,772,297
Net interest income, fully tax-equivalent (non-GAAP)(1)					$	438,658									$	420,182
Net interest spread(1)								3.65	%									4.03	%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets								4.04	%									4.32	%
(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) Includes deposits held for sale.

HEARTLAND FINANCIAL USA, INC.
SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited)
DOLLARS IN THOUSANDS
	As of and For the Quarter Ended
	12/31/2019			9/30/2019			6/30/2019			3/31/2019			12/31/2018
Total Assets
Citywide Banks	$	2,294,512		$	2,335,811		$	2,261,591		$	2,214,105		$	2,307,284
New Mexico Bank & Trust	1,763,037			1,607,498			1,534,236			1,500,024			1,492,555
Dubuque Bank and Trust Company	1,646,105			1,547,014			1,680,539			1,550,487			1,480,914
Bank of Blue Valley(1)	1,307,688			1,346,342			1,319,226			564,833			571,012
Illinois Bank & Trust	1,301,172			839,721			852,830			810,357			804,907
First Bank & Trust	1,137,714			1,158,320			1,088,796			1,099,759			1,109,929
Wisconsin Bank & Trust	1,090,412			1,032,016			1,042,463			1,031,305			1,114,352
Premier Valley Bank	903,220			888,401			847,076			855,473			849,696
Arizona Bank & Trust	784,240			695,236			732,783			669,806			658,714
Minnesota Bank & Trust	718,724			718,035			631,339			657,187			666,564
Rocky Mountain Bank	532,191			528,094			503,126			489,135			490,453
Total Deposits(2)
Citywide Banks	$	1,829,217		$	1,895,894		$	1,833,259		$	1,802,701		$	1,848,373
New Mexico Bank & Trust	1,565,070			1,413,170			1,346,304			1,313,708			1,307,464
Dubuque Bank and Trust Company	1,290,756			1,275,131			1,157,881			1,245,553			1,214,541
Bank of Blue Valley(1)	1,016,743			1,091,243			1,077,183			473,712			489,471
Illinois Bank & Trust	1,167,905			768,267			769,577			735,101			715,482
First Bank & Trust	893,419			903,410			844,793			857,313			861,629
Wisconsin Bank & Trust	941,109			880,217			892,020			872,090			927,821
Premier Valley Bank	707,814			719,141			689,384			676,849			639,194
Arizona Bank & Trust	693,975			578,694			646,728			593,089			574,762
Minnesota Bank & Trust	574,369			600,175			515,310			546,706			560,399
Rocky Mountain Bank	468,314			462,825			438,349			426,503			424,700
Net Income
Citywide Banks	$	6,963		$	6,030		$	8,120		$	7,283		$	7,005
New Mexico Bank & Trust	6,288			6,404			7,634			7,847			6,007
Dubuque Bank and Trust Company	8,357			5,445			17,353			5,011			6,002
Bank of Blue Valley(1)	3,556			3,550			3,505			1,172			324
Illinois Bank & Trust	1,741			2,223			1,751			2,632			2,180
First Bank & Trust	4,366			2,927			3,099			2,792			3,334
Wisconsin Bank & Trust	3,103			3,195			2,516			4,707			3,229
Premier Valley Bank	3,299			3,301			2,763			2,411			2,930
Arizona Bank & Trust	993			3,222			3,110			2,780			1,951
Minnesota Bank & Trust	2,094			3,250			1,980			1,454			1,038
Rocky Mountain Bank	952			720			779			1,358			1,230
(1) Formerly known as Morrill & Janes Bank and Trust Company.
(2) Includes deposits held for sale.

CONTACT:
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
[phone]
[e-mail]