Heartland Financial USA, Inc. Reports Quarterly Results as of March 31, 2020

Highlights and Developments

• Quarterly net income of $20.0 million or $0.54 per diluted common share in comparison with $31.5 million or $0.91 per diluted common share for the first quarter of the prior year
• Net interest margin of 3.81%, fully tax-equivalent net interest margin (non-GAAP)⁽¹⁾ of 3.84%
• Return on average common equity of 4.98% and return on average tangible common equity (non-GAAP)⁽¹⁾ of 8.00%
• Efficiency ratio (non-GAAP)⁽¹⁾ for the first quarter of 2020 of 61.82% compared to 64.93% for the first quarter of 2019
• Tangible common equity ratio (non-GAAP)⁽¹⁾ of 8.29% compared to 8.60% at March 31, 2019
• Total commercial loan growth of $76.5 million and non-time deposit growth of $212.3 million for the first quarter of 2020
• Entered into a definitive merger agreement with AIM Bancshares, Inc. 
• Adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)"

		Three Months Ended March 31,
		2020				2019
Net income available to common stockholders (in millions)		$	20.0			$	31.5
Diluted earnings per common share		0.54				0.91
Return on average assets		0.61		%		1.13		%
Return on average common equity		4.98				9.56
Return on average tangible common equity (non-GAAP)(1)		8.00				15.24
Net interest margin		3.81				4.12
Net interest margin, fully tax-equivalent (non-GAAP)(1)		3.84				4.18
Efficiency ratio, fully-tax equivalent (non-GAAP)(1)		61.82				64.93

(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 had a solid first quarter, which included $76.5 million of commercial loan growth, non-time deposit growth of $212.3 million, strong net interest margin, and a significantly improved efficiency ratio compared to the same quarter last year."

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

DUBUQUE, Iowa, April 27, 2020 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results:

• net income available to common stockholders of $20.0 million, or $0.54 per diluted common share, for the quarter ended March 31, 2020, compared to $31.5 million, or $0.91 per diluted common share, for the first quarter of 2019.
• excluding provision for credit losses and acquisition, integration and restructuring costs (tax-effected), adjusted net income available to common stockholders (non-GAAP) was $38.1 million, or $1.03 of adjusted earnings per diluted common share (non-GAAP) for the first quarter of 2020, compared to $35.6 million (non-GAAP), or $1.03 per adjusted earnings per diluted common share (non-GAAP), for the first quarter of 2019.
• return on average common equity was 4.98% and return on average assets was 0.61% for the first quarter of 2020, compared to 9.56% and 1.13%, respectively, for the same quarter in 2019.
• return on average tangible common equity (non-GAAP) of 8.00% and adjusted return on average tangible common equity (non-GAAP) of 14.46% for the first quarter of 2020 compared to 15.24% and 17.11%, respectively, for the first quarter of 2019.

Responses to COVID-19 

Heartland has implemented its pandemic management plan to protect employees and enable business continuity while providing relief and support to customers and communities facing challenges from the impacts of COVID-19, which included the following:

• enabled approximately 2/3rds of employees to work from home and canceled all in-person events and meetings;
• expanded time off program and enhanced health care coverage for COVID-19 related testing and treatments;
• implemented a 20% wage premium for customer-facing and call center employees;
• closed most bank lobbies and implemented drive-through only for in-person transactions;
• announced a series of relief programs for consumers and small business customers, which include waiving account maintenance fees, ATM fees and early redemption penalties on CDs, and deferrals on loan payments;
• provided direct loans to customers via participation in the Small Business Administration's Paycheck Protection Program ("PPP"), and
• contributed $1.2 million to support non-profit organizations in communities served by Heartland and its subsidiary banks.

"The health and safety of our employees is our top priority. Our customers and communities are relying on us now more than ever, and we are there for them with our full line of products and services to help navigate these unprecedented economic times," Lee said.

The economic disruption resulting from the COVID-19 pandemic will make it difficult for some customers to repay the principal and interest on their loans, and Heartland's subsidiary banks have started working with customers to modify the terms of certain existing loans.

The following table shows the total exposure, which includes loans outstanding and unfunded loan commitments as of March 31, 2020, to customer segment profiles that Heartland believes will be more heavily impacted by COVID-19, dollars in thousands:

Industry		Total Exposure(1)				% of Gross Exposure(1)
Lodging		$	498,596			4.47	%
Multi-family properties		436,931				3.92
Retail real estate		408,506				3.66
Retail trade		367,764				3.30
Restaurants and bars		247,239				2.22
Nursing homes/assisted living		126,267				1.13
Oil and gas		56,302				0.50
Childcare facilities		48,455				0.43
Gaming		34,790				0.31
(1) Total loans outstanding and unfunded commitments

As of April 23, 2020, loan modifications have been made on approximately $556.2 million of loans in Heartland's portfolio. Approximately 69% of these modifications are interest only for 90 days, and the remainder are primarily principal and interest deferments for 90 days. Heartland expects modifications to increase in the near term.

Through April 23, 2020, Heartland's subsidiary banks have processed approximately 3,000 PPP applications and disbursed $1.02 billion of PPP loans. Heartland expects to process approximately $300-$500 million of additional loans due to the announced expansion of the PPP on April 24, 2020.

The ultimate impact of the COVID-19 pandemic on Heartland's financial condition and results of operations will depend on risks and uncertainties, such as the severity and duration of the pandemic, related restrictions on business and consumer activity, and the availability of government programs to alleviate the economic stress of the pandemic. See Heartland's "Safe Harbor Statement" below.

Recent Developments

Adoption of ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)"
On January 1, 2020, Heartland adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)," commonly referred to as "CECL." The impact of Heartland's adoption of CECL ("Day 1") resulted in the following:

• an increase of $12.1 million to the allowance for credit losses related to loans, which included a reclassification of $6.0 million of purchased credit impaired loan discount on previously acquired loans, and a cumulative-effect adjustment to retained earnings totaling $4.6 million, net of taxes of $1.5 million;
• an increase of $13.6 million to the allowance for unfunded commitments and a cumulative-effect adjustment to retained earnings totaling $10.2 million, net of taxes of $3.4 million, and
• established an allowance for credit losses for Heartland's held to maturity debt securities of $158,000 and a cumulative-effect adjustment to retained earnings totaling $118,000, net of taxes of $40,000.

The allowance calculation under CECL is an expected loss model, which encompasses expected losses over the life of the portfolio, including expected losses due to changes in economic conditions and forecasts, such as those caused by the COVID-19 pandemic. Heartland recorded $21.5 million of provision for credit losses in the first quarter of 2020, primarily due to a deteriorating economic outlook resulting in an increase in expected credit losses.

Entered into a Definitive Merger Agreement with AIM Bancshares, Inc.
On February 11, 2020, Heartland entered into a definitive merger agreement to acquire AIM Bancshares, Inc. and its wholly-owned subsidiary, AimBank, headquartered in Levelland, Texas. In the transaction, all issued and outstanding shares of AIM Bancshares stock will be exchanged for shares of Heartland common stock and cash. Shareholders of AIM Bancshares will receive 207.0 shares of Heartland common stock and $685.00 of cash for each share of AIM Bancshares. The transaction value will change due to fluctuations in the price of Heartland common stock and is subject to certain potential adjustments as set forth in the merger agreement. Simultaneous with the closing of the transaction, AimBank will merge with and into Heartland's Lubbock, Texas-based subsidiary, First Bank and Trust. The transaction is expected to close in the third quarter of 2020 with a systems conversion planned for the fourth quarter of 2020. As of March 31, 2020, AimBank had total assets of approximately $1.82 billion, which included $1.16 billion of gross loans outstanding, and approximately $1.58 billion of deposits.

"We continue to move forward with our acquisition of AIM Bancshares, Inc., and we are excited to welcome them to the Heartland family in the third quarter," commented Lynn B. Fuller, Heartland's executive operating chairman.

Net Interest Income Increases and Net Interest Margin Decreases from First Quarter of 2019

Net interest margin, expressed as a percentage of average earning assets, was 3.81% (3.84% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2020, compared to 3.86% (3.90% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2019 and 4.12% (4.18% on a fully tax-equivalent basis, non-GAAP) during the first quarter of 2019.

Total interest income for the first quarter of 2020 was $131.0 million compared to $120.7 million recorded in the first quarter of 2019, an increase of $10.3 million or 9%. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $1.1 million for the first quarter of 2020 and $1.4 million for the first quarter of 2019. With these adjustments, total interest income on a tax-equivalent basis was $132.2 million for the first quarter of 2020, an increase of $10.0 million or 8%, compared to total interest income on a tax-equivalent basis of $122.1 million for the first quarter of 2019.

Average earning assets of $11.89 billion increased $1.76 billion or 17% from the first quarter of 2019, which was primarily attributable to recent acquisitions. The average rate on earning assets decreased 42 basis points to 4.47% for the first quarter of 2020 compared to 4.89% for the same quarter in 2019, which was primarily due to recent decreases in market interest rates.

Total interest expense for the first quarter of 2020 was $18.5 million, an increase of $772,000 or 4% from $17.8 million in the first quarter of 2019, which was the result of the increase in average interest bearing liabilities. The average interest rate paid on Heartland's interest bearing liabilities decreased to 0.95% for the first quarter of 2020 compared to 1.09% for the first quarter of 2019, which was primarily due to recent decreases in market interest rates.

Average interest bearing deposits increased $1.27 billion or 21% to $7.42 billion for the quarter ended March 31, 2020, from $6.16 billion in the same quarter in 2019, which was primarily attributable to recent acquisitions. The average interest rate paid on Heartland's interest bearing deposits decreased 8 basis points to 0.79% for the first quarter of 2020 compared to 0.87% for the same quarter in 2019.

Average borrowings decreased $48.4 million or 10% to $417.8 million during the first quarter of 2020 from $466.2 million during the same quarter in 2019. The average interest rate paid on Heartland's borrowings was 3.81% for the first quarter of 2020 compared to 3.96% in the first quarter of 2019.

Net interest income was $112.5 million during the first quarter of 2020 compared to $103.0 million during the first quarter of 2019, an increase of $9.6 million or 9%. After the tax-equivalent adjustment discussed above, net interest income on a tax-equivalent basis totaled $113.6 million during the first quarter of 2020 compared to net interest income on a tax-equivalent basis of $104.4 million during the first quarter of 2019, an increase of $9.3 million or 9%.

Noninterest Income Decreases and Noninterest Expense Increases from First Quarter of 2019

Total noninterest income was $25.8 million during the first quarter of 2020 compared to $26.7 million during the first quarter of 2019, a decrease of $900,000 or 3%. Significant changes by noninterest income category were:

• Loan servicing income totaled $963,000 for the first quarter of 2020 compared to $1.7 million for the first quarter of 2019, which was a decrease of $766,000 or 44%. The decrease was attributable to the sale of the mortgage servicing rights of Dubuque Bank and Trust Company in the second quarter of 2019.
• Net gains on sale of loans held for sale totaled $4.7 million during the first quarter of 2020 compared to $3.2 million during the same quarter in 2019, which was an increase of $1.5 million or 47%, primarily due to an increase in residential mortgage loan refinancing activity in response to the recent declines in mortgage interest rates.
• The valuation adjustment on servicing rights increased $976,000 to $1.6 million in the first quarter of 2020 from $589,000 in the first quarter of 2019, primarily due to recent declines in mortgage interest rates.

For the first quarter of 2020, total noninterest expense was $90.9 million compared to $88.2 million during the first quarter of 2019, an increase of $2.6 million or 3%. Significant changes by noninterest expense category were:

• Professional fees totaled $12.5 million for the first quarter of 2020 compared to $11.0 million for the same quarter of 2019, which was an increase of $1.5 million or 13%, which was primarily due to recent technology upgrades.
• Net loss on sales/valuations of assets increased $3.0 million as losses totaled $16,000 in the first quarter of 2020 compared to gains of $3.0 million in the first quarter of 2019. The gains recorded in 2019 were primarily attributable to the branch sales at Wisconsin Bank & Trust.
• Other noninterest expenses totaled $11.8 million for the first quarter of 2020 compared to $10.7 million for the first quarter of 2019, which was an increase of $1.1 million or 10%, which was primarily attributable to recent acquisitions.

Heartland's effective tax rate was 22.77% for the first quarter of 2020 compared to 20.88% for the first quarter of 2019. The following items impacted Heartland's first quarter 2020 and 2019 tax calculations:

• Solar energy tax credits of $76,000 and $314,000 for the first quarter of 2020 and 2019, respectively.
• Federal low-income housing tax credits of $195,000 and $281,000 for the first quarter of 2020 and 2019, respectively.
• New markets tax credits of $75,000 during the first quarter of 2020 compared to $0 in the first quarter of 2019.
• Tax-exempt interest income as a percentage of pre-tax income increased to 16.40% during the first quarter of 2020 compared to 13.35% for the first quarter of 2019. 
• Tax expense of $25,000 in the first quarter of 2020 compared to a tax benefit of $336,000 in the first quarter of 2019 resulting from the vesting of restricted stock unit awards.

Total Assets Increase, Total Loans Remain Flat and Deposits Increase Since December 31, 2019

Total assets were $13.29 billion at March 31, 2020, an increase of $84.9 million or 1% from $13.21 billion at year-end 2019. Securities represented 27% and 26% of total assets at March 31, 2020, and December 31, 2019, respectively.

Total loans held to maturity were $8.37 billion at both March 31, 2020, and December 31, 2019. Loan changes by category were:

• Commercial and business lending, which includes commercial and industrial and owner occupied commercial real estate loans, decreased $22.0 million or 1% to $3.98 billion at March 31, 2020, compared to $4.00 billion at December 31, 2019.
• Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $98.5 million or 4% to $2.62 billion at March 31, 2020 from $2.52 billion at year-end 2019. 
• Agricultural and agricultural real estate loans totaled $550.1 million at March 31, 2020, compared to $565.8 million at December 31, 2019, which was a decrease of $15.7 million or 3%.
• Residential mortgage loans decreased $39.7 million or 5% to $792.5 million at March 31, 2020, from $832.3 million at December 31, 2019.
• Consumer loans decreased $14.8 million or 3% to $428.6 million at March 31, 2020, compared to $443.3 million at December 31, 2019.

Total deposits were $11.17 billion as of March 31, 2020, compared to $11.04 billion at year-end 2019, an increase of $129.7 million or 1%. Deposit changes by category were:

• Demand deposits increased $153.1 million or 4% to $3.70 billion at March 31, 2020, compared to $3.54 billion at December 31, 2019.
• Savings deposits increased $59.2 million or 1% to $6.37 billion at March 31, 2020, from $6.31 billion at December 31, 2019. 
• Time deposits decreased $82.6 million or 7% to $1.11 billion at March 31, 2020 from $1.19 billion at December 31, 2019. 

Provision and Allowance for Credit Losses for Loans Increase Since December 31, 2019

Heartland's allowance for credit losses for loans totaled $82.5 million after adoption of CECL on January 1, 2020, which was an increase of $12.1 million since year-end 2019. Heartland recorded provision for credit losses for loans of $19.9 million in the first quarter of 2020 compared to $1.6 million in the first quarter of 2019.  The allowance for credit losses for loans totaled $97.4 million and $70.4 million at March 31, 2020, and December 31, 2019, respectively.

The allowance for credit losses for loans at March 31, 2020, was 1.16% of loans compared to 0.84% of loans at December 31, 2019. Net charge offs for the first quarter of 2020 totaled $5.0 million compared to $959,000 for the first quarter of 2019, which was a $4.0 million increase. The increase was primarily attributable to a $3.2 million charge off on a commercial and industrial loan for which a full reserve had been previously established.

Heartland's allowance for unfunded commitments totaled $13.9 million after the adoption of CECL on January 1, 2020. Prior to January 1, 2020, the allowance for unfunded commitments was immaterial. Heartland recorded $1.6 million of provision for credit losses related to unfunded loan commitments in the first quarter of 2020. At March 31, 2020, the allowance for unfunded commitments was $15.5 million. At March 31, 2020, Heartland had $2.78 billion of unfunded loan commitments.

The total allowance for credit related lending losses was $112.8 million at March 31, 2020, which was 1.35% of loans as of March 31, 2020.

Nonperforming Assets Decrease Since December 31, 2019

Nonperforming assets decreased $2.2 million or 3% to $85.4 million or 0.64% of total assets at March 31, 2020, compared to $87.6 million or 0.66% of total assets at December 31, 2019. Nonperforming loans were $79.3 million or 0.95% of total loans at March 31, 2020, compared to $80.7 million or 0.96% of total loans at December 31, 2019. At March 31, 2020, loans delinquent 30-89 days were 0.38% of total loans compared to 0.33% of total loans at December 31, 2019. Heartland expects that nonperforming assets and delinquent loans will increase through 2020 as customers’ ability to repay loans is adversely impacted by economic disruptions caused by the COVID-19 pandemic.

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.

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 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 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.
• Tangible book value per common share is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
• Tangible common equity ratio is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
• Adjusted net income and adjusted diluted earnings per share exclude tax-effected provision for credit losses and acquisition, integration and restructuring costs. Management believes the presentation of these non-GAAP measures are useful to compare net income and earnings per share results excluding the variability of credit loss provisions and acquisition, integration and restructuring costs. 
• Annualized adjusted return on average tangible common equity is adjusted net income excluding intangible amortization calculated as (1) net income excluding (A) tax-effected provision for credit losses, (B) tax-effected acquisition, integration and restructuring costs and (C) tax-effected core deposit and customer relationship intangibles amortization, divided by (2) average common equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.

Conference Call Details
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 the 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 April 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 $13.29 billion. The company provides banking, mortgage, private client, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 114 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 below and 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, including to the extent that they are affected by the COVID-19 pandemic and related restrictions on business and consumer activities; (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, including government programs offering relief from the COVID-19 pandemic; (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, including changes resulting from the COVID-19 pandemic; (x) unexpected outcomes of existing or new litigation involving the company, including claims resulting from our participation in and execution of government programs related to the COVID-19 pandemic; and (xi) changes in accounting policies and practices.

The COVID-19 pandemic is adversely affecting Heartland and its customers, counterparties, employees and third-party service providers. The pandemic’s severity, its duration and the extent of its impact on Heartland’s business, financial condition, results of operations, liquidity and prospects remain uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect Heartland’s net income and the value of its assets and liabilities, reduce the availability of funding to Heartland, lead to a tightening of credit and increase stock price volatility. Some economists and investment banks also predict that a recession or depression may result from the continued spread of COVID-19 and the economic consequences.

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.

-FINANCIAL TABLES FOLLOW- 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Three Months Ended March 31,
	2020				2019
Interest Income
Interest and fees on loans	$	106,414			$	100,456
Interest on securities:
Taxable	21,731				15,876
Nontaxable	2,183				3,093
Interest on federal funds sold	—				4
Interest on deposits with other banks and short-term investments	721				1,292
Total Interest Income	131,049				120,721
Interest Expense
Interest on deposits	14,582				13,213
Interest on short-term borrowings	296				889
Interest on other borrowings	3,660				3,664
Total Interest Expense	18,538				17,766
Net Interest Income	112,511				102,955
Provision for credit losses	21,520				1,635
Net Interest Income After Provision for Credit Losses	90,991				101,320
Noninterest Income
Service charges and fees	12,021				12,794
Loan servicing income	963				1,729
Trust fees	5,022				4,474
Brokerage and insurance commissions	733				734
Securities gains, net	1,658				1,575
Unrealized gain/ (loss) on equity securities, net	(231		)		258
Net gains on sale of loans held for sale	4,660				3,176
Valuation adjustment on servicing rights	(1,565		)		(589		)
Income on bank owned life insurance	498				899
Other noninterest income	2,058				1,667
Total Noninterest Income	25,817				26,717
Noninterest Expense
Salaries and employee benefits	49,957				50,285
Occupancy	6,471				6,607
Furniture and equipment	3,108				2,692
Professional fees	12,473				10,995
Advertising	2,205				2,320
Core deposit and customer relationship intangibles amortization	2,981				2,869
Other real estate and loan collection expenses, net	334				701
(Gain)/loss on sales/valuations of assets, net	16				(3,004		)
Acquisition, integration and restructuring costs	1,376				3,614
Partnership investment in tax credit projects	184				475
Other noninterest expenses	11,754				10,676
Total Noninterest Expense	90,859				88,230
Income Before Income Taxes	25,949				39,807
Income taxes	5,909				8,310
Net Income	$	20,040			$	31,497
Earnings per common share-diluted	$	0.54			$	0.91
Weighted average shares outstanding-diluted	36,895,591				34,699,839

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended
	3/31/2020				12/31/2019			9/30/2019				6/30/2019				3/31/2019
Interest Income
Interest and fees on loans	$	106,414			$	107,566		$	110,566			$	106,027			$	100,456
Interest on securities:
Taxable	21,731				22,581			18,567				16,123				15,876
Nontaxable	2,183				2,102			2,119				2,554				3,093
Interest on federal funds sold	—				—			—				—				4
Interest on deposits with other banks and short-term investments	721				953			2,151				2,299				1,292
Total Interest Income	131,049				133,202			133,403				127,003				120,721
Interest Expense
Interest on deposits	14,582				16,401			17,982				16,138				13,213
Interest on short-term borrowings	296				271			250				338				889
Interest on other borrowings	3,660				3,785			3,850				3,819				3,664
Total Interest Expense	18,538				20,457			22,082				20,295				17,766
Net Interest Income	112,511				112,745			111,321				106,708				102,955
Provision for credit losses	21,520				4,903			5,201				4,918				1,635
Net Interest Income After Provision for Credit Losses	90,991				107,842			106,120				101,790				101,320
Noninterest Income
Service charges and fees	12,021				12,368			12,366				14,629				12,794
Loan servicing income	963				955			821				1,338				1,729
Trust fees	5,022				5,141			4,959				4,825				4,474
Brokerage and insurance commissions	733				1,062			962				1,028				734
Securities gains, net	1,658				491			2,013				3,580				1,575
Unrealized gain/ (loss) on equity securities, net	(231		)		11			144				112				258
Net gains on sale of loans held for sale	4,660				3,363			4,673				4,343				3,176
Valuation adjustment on servicing rights	(1,565		)		668			(626		)		(364		)		(589		)
Income on bank owned life insurance	498				1,117			881				888				899
Other noninterest income	2,058				2,854			3,207				1,682				1,667
Total Noninterest Income	25,817				28,030			29,400				32,061				26,717
Noninterest Expense
Salaries and employee benefits	49,957				50,234			49,927				49,895				50,285
Occupancy	6,471				5,802			6,594				6,426				6,607
Furniture and equipment	3,108				3,323			2,862				3,136				2,692
Professional fees	12,473				11,082			11,276				14,344				10,995
Advertising	2,205				2,274			2,622				2,609				2,320
Core deposit and customer relationship intangibles amortization	2,981				2,918			2,899				3,313				2,869
Other real estate and loan collection expenses, net	334				261			(89		)		162				701
(Gain)/loss on sales/valuations of assets, net	16				1,512			356				(18,286		)		(3,004		)
Acquisition, integration and restructuring costs	1,376				537			1,500				929				3,614
Partnership investment in tax credit projects	184				3,038			3,052				1,465				475
Other noninterest expenses	11,754				11,885			11,968				11,105				10,676
Total Noninterest Expense	90,859				92,866			92,967				75,098				88,230
Income Before Income Taxes	25,949				43,006			42,553				58,753				39,807
Income taxes	5,909				5,155			7,941				13,584				8,310
Net Income	$	20,040			$	37,851		$	34,612			$	45,169			$	31,497
Earnings per common share-diluted	$	0.54			$	1.03		$	0.94			$	1.26			$	0.91
Weighted average shares outstanding-diluted	36,895,591				36,840,519			36,835,191				35,879,259				34,699,839

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Assets
Cash and due from banks	$	175,587			$	206,607			$	243,395			$	198,664			$	174,198
Interest bearing deposits with other banks and short-term investments	64,156				172,127				204,372				443,475				318,303
Cash and cash equivalents	239,743				378,734				447,767				642,139				492,501
Time deposits in other financial institutions	3,568				3,564				3,711				4,430				4,675
Securities:
Carried at fair value	3,488,621				3,312,796				3,020,568				2,561,887				2,400,460
Held to maturity, at cost, less allowance for credit losses	91,875				91,324				87,965				88,166				88,089
Other investments, at cost	35,370				31,321				29,042				31,366				27,506
Loans held for sale	22,957				26,748				35,427				34,575				69,716
Loans:
Held to maturity	8,374,236				8,367,917				7,971,608				7,853,051				7,331,544
Allowance for credit losses	(97,350		)		(70,395		)		(66,222		)		(63,850		)		(62,639		)
Loans, net	8,276,886				8,297,522				7,905,386				7,789,201				7,268,905
Premises, furniture and equipment, net	200,960				200,525				199,235				198,329				190,215
Goodwill	446,345				446,345				427,097				427,097				391,668
Core deposit and customer relationship intangibles, net	45,707				48,688				49,819				52,718				44,637
Servicing rights, net	5,220				6,736				6,271				7,180				28,968
Cash surrender value on life insurance	172,140				171,625				171,471				170,421				163,764
Other real estate, net	6,074				6,914				6,425				6,646				5,391
Other assets	259,043				186,755				179,078				146,135				136,000
Total Assets	$	13,294,509			$	13,209,597			$	12,569,262			$	12,160,290			$	11,312,495
Liabilities and Equity
Liabilities
Deposits:
Demand	$	3,696,974			$	3,543,863			$	3,581,127			$	3,426,758			$	3,118,909
Savings	6,366,610				6,307,425				5,770,754				5,533,503				5,145,929
Time	1,110,441				1,193,043				1,117,975				1,148,296				1,088,104
Total deposits	11,174,025				11,044,331				10,469,856				10,108,557				9,352,942
Deposits held for sale	—				—				—				—				118,564
Short-term borrowings	121,442				182,626				107,853				107,260				104,314
Other borrowings	276,150				275,773				278,417				282,863				268,312
Accrued expenses and other liabilities	169,178				128,730				149,293				139,823				96,261
Total Liabilities	11,740,795				11,631,460				11,005,419				10,638,503				9,940,393
Stockholders' Equity
Common stock	36,807				36,704				36,696				36,690				34,604
Capital surplus	842,780				839,857				838,543				837,150				745,596
Retained earnings	700,298				702,502				670,816				642,808				603,506
Accumulated other comprehensive income/(loss)	(26,171		)		(926		)		17,788				5,139				(11,604		)
Total Equity	1,553,714				1,578,137				1,563,843				1,521,787				1,372,102
Total Liabilities and Equity	$	13,294,509			$	13,209,597			$	12,569,262			$	12,160,290			$	11,312,495

 

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
	For the Quarter Ended
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Average Balances
Assets	$	13,148,173			$	12,798,770			$	12,293,332			$	11,708,538			$	11,267,214
Loans, net of unearned	8,364,220				8,090,476				7,883,678				7,648,562				7,412,855
Deposits	10,971,193				10,704,643				10,253,643				9,790,756				9,356,204
Earning assets	11,891,455				11,580,295				11,102,581				10,552,166				10,129,957
Interest bearing liabilities	7,841,941				7,513,701				7,174,944				6,872,449				6,622,149
Common equity	1,619,682				1,570,258				1,541,369				1,442,388				1,336,250
Tangible common equity (non-GAAP)	1,125,705				1,087,495				1,062,568				981,878				898,092
Key Performance Ratios
Annualized return on average assets	0.61		%		1.17		%		1.12		%		1.55		%		1.13		%
Annualized return on average common equity (GAAP)	4.98				9.56				8.91				12.56				9.56
Annualized return on average tangible common equity (non-GAAP)(1)	8.00				14.65				13.78				19.52				15.24
Annualized adjusted return on average tangible common equity (non-GAAP)	14.46		%		16.22		%		15.76		%		21.41		%		17.11		%
Annualized ratio of net charge-offs to average loans	0.24				0.04				0.14				0.19				0.05
Annualized net interest margin (GAAP)	3.81				3.86				3.98				4.06				4.12
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1)	3.84				3.90				4.02				4.10				4.18
Efficiency ratio, fully tax-equivalent (non-GAAP)(1)	61.82				60.31				60.85				64.13				64.93

	As of and for the Quarter Ended
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Common Share Data
Book value per common share	$	42.21			$	43.00			$	42.62			$	41.48			$	39.65
Tangible book value per common share (non-GAAP)(1)	$	28.84			$	29.51			$	29.62			$	28.40			$	27.04
Common shares outstanding, net of treasury stock	36,807,217				36,704,278				36,696,190				36,690,061				34,603,611
Tangible common equity ratio (non-GAAP)(1)	8.29		%		8.52		%		8.99		%		8.92		%		8.60		%
Other Selected Trend Information
Effective tax rate	22.77		%		11.99		%		18.66		%		23.12		%		20.88		%
Full time equivalent employees	1,817				1,908				1,962				2,040				1,976
Loans Held to Maturity(2)
Commercial and industrial	$	2,550,490			$	2,530,809			$	2,388,861			$	2,325,025			$	2,158,085
Owner occupied commercial real estate	1,431,038				1,472,704				1,392,415				1,354,996				1,278,181
Commercial and business lending	3,981,528				4,003,513				3,781,276				3,680,021				3,436,266
Non-owner occupied commercial real estate	1,551,787				1,495,877				1,378,020				1,372,343				1,233,525
Real estate construction	1,069,700				1,027,081				980,298				943,109				850,844
Commercial real estate lending	2,621,487				2,522,958				2,358,318				2,315,452				2,084,369
Total commercial lending	6,603,015				6,526,471				6,139,594				5,995,473				5,520,635
Agricultural and agricultural real estate	550,107				565,837				571,596				559,054				558,090
Residential mortgage	792,540				832,277				823,056				849,576				850,845
Consumer	428,574				443,332				437,362				448,948				401,974
Total loans held to maturity	$	8,374,236			$	8,367,917			$	7,971,608			$	7,853,051			$	7,331,544
Total unfunded loan commitments	$	2,782,679			$	2,973,732			$	2,659,729			$	2,530,946			$	2,332,174
(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.
(2) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted.

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of and for the Quarter Ended
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Allowance for Credit Losses-Loans
Balance, beginning of period	$	70,395			$	66,222			$	63,850			$	62,639			$	61,963
Impact of ASU 2016-13 adoption	12,071				—				—				—				—
Provision for credit losses	19,865				4,903				5,201				4,918				1,635
Charge-offs	(6,301		)		(2,018		)		(4,842		)		(4,780		)		(1,950		)
Recoveries	1,320				1,288				2,013				1,073				991
Balance, end of period	$	97,350			$	70,395			$	66,222			$	63,850			$	62,639
Allowance for Unfunded Commitments(1)
Balance, beginning of period	$	248			$	—			$	—			$	—			$	—
Impact of ASU 2016-13 adoption	13,604				—				—				—				—
Provision for credit losses	1,616				—				—				—				—
Balance, end of period	$	15,468			$	—			$	—			$	—			$	—
Allowance for lending related credit losses	$	112,818			$	70,395			$	66,222			$	63,850			$	62,639
Provision for Credit Losses
Provision for credit losses-loans	$	19,865			$	4,903			$	5,201			$	4,918			$	1,635
Provision for credit losses-unfunded commitments	1,616				—				—				—				—
Provision for credit losses-held to maturity securities(2)	39				—				—				—				—
Total provision for credit losses	$	21,520			$	4,903			$	5,201			$	4,918			$	1,635
(1) Prior to the adoption of ASU 2016-13, the allowance for unfunded commitments was immaterial and therefore prior periods have not been shown in this table.
(2) Prior to ASU 2016-13, there was no requirement to record provision for credit losses for held to maturity securities.

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of and for the Quarter Ended
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Asset Quality
Nonaccrual loans	$	79,280			$	76,548			$	72,208			$	79,619			$	77,294
Loans past due ninety days or more	—				4,105				40				285				1,706
Other real estate owned	6,074				6,914				6,425				6,646				5,391
Other repossessed assets	17				11				13				39				8
Total nonperforming assets	$	85,371			$	87,578			$	78,686			$	86,589			$	84,399
Performing troubled debt restructured loans	$	2,858			$	3,794			$	3,199			$	3,539			$	3,460
Nonperforming Assets Activity
Balance, beginning of period	$	87,578			$	78,686			$	86,589			$	84,399			$	79,281
Net loan charge offs	(4,981		)		(730		)		(2,829		)		(3,707		)		(959		)
New nonperforming loans	15,796				13,751				6,818				13,688				15,314
Acquired nonperforming assets	—				3,262				—				230				—
Reduction of nonperforming loans(1)	(11,937		)		(5,859		)		(8,861		)		(6,246		)		(6,238		)
Net OREO/repossessed assets sales proceeds and losses	(1,085		)		(1,532		)		(3,031		)		(1,775		)		(2,999		)
Balance, end of period	$	85,371			$	87,578			$	78,686			$	86,589			$	84,399
Asset Quality Ratios
Ratio of nonperforming loans to total loans	0.95				0.96				0.91				1.02				1.08
Ratio of nonperforming loans and performing trouble debt restructured loans to total loans	0.98				1.01				0.95				1.06				1.12
Ratio of nonperforming assets to total assets	0.64				0.66				0.63				0.71				0.75
Annualized ratio of net loan charge-offs to average loans	0.24				0.04				0.14				0.19				0.05
Allowance for loan credit losses as a percent of loans	1.16				0.84				0.83				0.81				0.85
Allowance for lending related credit losses as a percent of loans(2)	1.35				0.84				0.83				0.81				0.85
Allowance for loan credit losses as a percent of nonperforming loans	122.79				87.28				91.66				79.91				79.29
Loans delinquent 30-89 days as a percent of total loans	0.38				0.33				0.28				0.31				0.47
(1) Includes principal reductions, transfers to performing status and transfers to OREO.
(2) Prior to the adoption of ASU 2016-13, the reserve for unfunded commitments was immaterial.

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS
	For the Quarter Ended
	March 31, 2020											December 31, 2019											March 31, 2019
	Average Balance				Interest				Rate			Average Balance				Interest				Rate			Average Balance				Interest				Rate
Earning Assets
Securities:
Taxable	$	3,132,103			$	21,731			2.79	%		$	3,033,480			$	22,581			2.95	%		$	2,169,016			$	15,876			2.97	%
Nontaxable(1)	288,535				2,763				3.85			271,792				2,661				3.88			391,724				3,915				4.05
Total securities	3,420,638				24,494				2.88			3,305,272				25,242				3.03			2,560,740				19,791				3.13
Interest on deposits with other banks and short-term investments	181,320				721				1.60			251,599				953				1.50			218,445				1,292				2.40
Federal funds sold	—				—				—			—				—				—			560				4				2.90
Loans:(2)(3)
Commercial and industrial(1)	2,607,513				32,454				5.01			2,444,961				32,006				5.19			2,137,168				30,389				5.77
Owner occupied commercial real estate	1,433,160				18,581				5.21			1,416,338				19,241				5.39			1,262,567				17,531				5.63
Non-owner occupied commercial real estate	1,472,268				19,530				5.34			1,388,677				18,952				5.41			1,326,014				17,423				5.33
Real estate construction	1,045,836				12,845				4.94			1,003,797				13,645				5.39			825,634				11,871				5.83
Agricultural and agricultural real estate	552,968				7,039				5.12			566,419				7,314				5.12			566,878				7,203				5.15
Residential mortgage	819,730				10,421				5.11			830,277				10,454				5.00			880,825				10,286				4.74
Consumer	432,745				6,095				5.66			440,007				6,504				5.86			413,769				6,343				6.22
Less: allowance for loan losses	(74,723		)		—				—			(67,052		)		—				—			(62,643		)		—				—
Net loans	8,289,497				106,965				5.19			8,023,424				108,116				5.35			7,350,212				101,046				5.58
Total earning assets	11,891,455				132,180				4.47	%		11,580,295				134,311				4.60	%		10,129,957				122,133				4.89	%
Nonearning Assets	1,256,718											1,218,475											1,137,257
Total Assets	$	13,148,173										$	12,798,770										$	11,267,214
Interest Bearing Liabilities(4)
Savings	$	6,277,528			$	10,082			0.65	%		$	5,986,007			$	11,790			0.78	%		$	5,121,179			$	10,083			0.80	%
Time deposits	1,146,619				4,500				1.58			1,135,025				4,611				1.61			1,034,744				3,130				1.23
Short-term borrowings	141,807				296				0.84			115,680				271				0.93			195,390				889				1.85
Other borrowings	275,987				3,660				5.33			276,989				3,785				5.42			270,836				3,664				5.49
Total interest bearing liabilities	7,841,941				18,538				0.95	%		7,513,701				20,457				1.08	%		6,622,149				17,766				1.09
Noninterest Bearing Liabilities(3)
Noninterest bearing deposits	3,547,046											3,583,611											3,200,281
Accrued interest and other liabilities	139,504											131,200											108,534
Total noninterest bearing liabilities	3,686,550											3,714,811											3,308,815
Common Equity	1,619,682											1,570,258											1,336,250
Total Liabilities and Common Equity	$	13,148,173										$	12,798,770										$	11,267,214
Net interest income, fully tax-equivalent (non-GAAP)(1)					$	113,642										$	113,854										$	104,367
Net interest spread(1)									3.52	%										3.52	%										3.80	%
Net interest income, fully tax-equivalent (non-GAAP) to total earning assets									3.84	%										3.90	%										4.18	%
Interest bearing liabilities to earning assets	65.95											64.88											65.37
(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) In conjunction with the adoption of ASU 2016-13, Heartland reclassified loan balances to more closely align with FDIC codes. All prior period balances have been adjusted.
(4) 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
	3/31/2020			12/31/2019			9/30/2019			6/30/2019			3/31/2019
Total Assets
Citywide Banks	$	2,271,889		$	2,294,512		$	2,335,811		$	2,261,591		$	2,214,105
New Mexico Bank & Trust	1,670,097			1,763,037			1,607,498			1,534,236			1,500,024
Dubuque Bank and Trust Company	1,591,312			1,646,105			1,547,014			1,680,539			1,550,487
Illinois Bank & Trust	1,295,984			1,301,172			839,721			852,830			810,357
Bank of Blue Valley(1)	1,222,358			1,307,688			1,346,342			1,319,226			564,833
First Bank & Trust	1,163,181			1,137,714			1,158,320			1,088,796			1,099,759
Wisconsin Bank & Trust	1,079,582			1,090,412			1,032,016			1,042,463			1,031,305
Premier Valley Bank	889,280			903,220			888,401			847,076			855,473
Arizona Bank & Trust	866,107			784,240			695,236			732,783			669,806
Minnesota Bank & Trust	778,724			718,724			718,035			631,339			657,187
Rocky Mountain Bank	576,245			532,191			528,094			503,126			489,135
Total Deposits(2)
Citywide Banks	$	1,868,404		$	1,829,217		$	1,895,894		$	1,833,259		$	1,802,701
New Mexico Bank & Trust	1,451,041			1,565,070			1,413,170			1,346,304			1,313,708
Dubuque Bank and Trust Company	1,363,164			1,290,756			1,275,131			1,157,881			1,245,553
Illinois Bank & Trust	1,139,945			1,167,905			768,267			769,577			735,101
Bank of Blue Valley(1)	1,008,362			1,016,743			1,091,243			1,077,183			473,712
First Bank & Trust	900,399			893,419			903,410			844,793			857,313
Wisconsin Bank & Trust	920,168			941,109			880,217			892,020			872,090
Premier Valley Bank	706,479			707,814			719,141			689,384			676,849
Arizona Bank & Trust	754,464			693,975			578,694			646,728			593,089
Minnesota Bank & Trust	648,560			574,369			600,175			515,310			546,706
Rocky Mountain Bank	496,465			468,314			462,825			438,349			426,503
(1) Formerly known as Morrill & Janes Bank and Trust Company.
(2) Includes deposits held for sale.

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
	For the Quarter Ended
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)
Net income (GAAP)	$	20,040			$	37,851			$	34,612			$	45,169			$	31,497
Plus core deposit and customer relationship intangibles amortization, net of tax(1)	2,355				2,305				2,291				2,617				2,245
Net income excluding intangible amortization (non-GAAP)	$	22,395			$	40,156			$	36,903			$	47,786			$	33,742
Average common equity (GAAP)	$	1,619,682			$	1,570,258			$	1,541,369			$	1,442,388			$	1,336,250
Less average goodwill	446,345				433,374				427,097				410,642				391,668
Less average core deposit and customer relationship intangibles, net	47,632				49,389				51,704				49,868				46,490
Average tangible common equity (non-GAAP)	$	1,125,705			$	1,087,495			$	1,062,568			$	981,878			$	898,092
Annualized return on average common equity (GAAP)	4.98		%		9.56		%		8.91		%		12.56		%		9.56		%
Annualized return on average tangible common equity (non-GAAP)	8.00		%		14.65		%		13.78		%		19.52		%		15.24		%
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)
Net Interest Income (GAAP)	$	112,511			$	112,745			$	111,321			$	106,708			$	102,955
Plus tax-equivalent adjustment(1)	1,131				1,109				1,140				1,268				1,412
Net interest income, fully tax-equivalent (non-GAAP)	$	113,642			$	113,854			$	112,461			$	107,976			$	104,367
Average earning assets	$	11,891,455			$	11,580,295			$	11,102,581			$	10,552,166			$	10,129,957
Annualized net interest margin (GAAP)	3.81		%		3.86		%		3.98		%		4.06		%		4.12		%
Annualized net interest margin, fully tax-equivalent (non-GAAP)	3.84		%		3.90		%		4.02		%		4.10		%		4.18		%
Purchase accounting discount amortization on loans included in annualized net interest margin	0.09		%		0.17		%		0.23		%		0.18		%		0.16		%

Reconciliation of Tangible Book Value Per Common Share (non-GAAP)
Common equity (GAAP)	$	1,553,714			$	1,578,137			$	1,563,843			$	1,521,787			$	1,372,102
Less goodwill	446,345				446,345				427,097				427,097				391,668
Less core deposit and customer relationship intangibles, net	45,707				48,688				49,819				52,718				44,637
Tangible common equity (non-GAAP)	$	1,061,662			$	1,083,104			$	1,086,927			$	1,041,972			$	935,797
Common shares outstanding, net of treasury stock	36,807,217				36,704,278				36,696,190				36,690,061				34,603,611
Common equity (book value) per share (GAAP)	$	42.21			$	43.00			$	42.62			$	41.48			$	39.65
Tangible book value per common share (non-GAAP)	$	28.84			$	29.51			$	29.62			$	28.40			$	27.04
Reconciliation of Tangible Common Equity Ratio (non-GAAP)
Tangible common equity (non-GAAP)	$	1,061,662			$	1,083,104			$	1,086,927			$	1,041,972			$	935,797
Total assets (GAAP)	$	13,294,509			$	13,209,597			$	12,569,262			$	12,160,290			$	11,312,495
Less goodwill	446,345				446,345				427,097				427,097				391,668
Less core deposit and customer relationship intangibles, net	45,707				48,688				49,819				52,718				44,637
Total tangible assets (non-GAAP)	$	12,802,457			$	12,714,564			$	12,092,346			$	11,680,475			$	10,876,190
Tangible common equity ratio (non-GAAP)	8.29		%		8.52		%		8.99		%		8.92		%		8.60		%
(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
	3/31/2020				12/31/2019				9/30/2019				6/30/2019				3/31/2019
Net interest income (GAAP)	$	112,511			$	112,745			$	111,321			$	106,708			$	102,955
Tax-equivalent adjustment(1)	1,131				1,109				1,140				1,268				1,412
Fully tax-equivalent net interest income	113,642				113,854				112,461				107,976				104,367
Noninterest income	25,817				28,030				29,400				32,061				26,717
Securities gains, net	(1,658		)		(491		)		(2,013		)		(3,580		)		(1,575		)
Unrealized (gain)/loss on equity securities, net	231				(11		)		(144		)		(112		)		(258		)
Gain on extinguishment of debt	—				—				(375		)		—				—
Valuation adjustment on servicing rights	1,565				(668		)		626				364				589
Adjusted revenue (non-GAAP)	$	139,597			$	140,714			$	139,955			$	136,709			$	129,840
Total noninterest expenses (GAAP)	$	90,859			$	92,866			$	92,967			$	75,098			$	88,230
Less:
Core deposit and customer relationship intangibles amortization	2,981				2,918				2,899				3,313				2,842
Partnership investment in tax credit projects	184				3,038				3,052				1,465				475
(Gain)/loss on sales/valuation of assets, net	16				1,512				356				(18,286		)		(3,004		)
Acquisition, integration and restructuring costs	1,376				537				1,500				929				3,614
Adjusted noninterest expenses (non-GAAP)	$	86,302			$	84,861			$	85,160			$	87,677			$	84,303
Efficiency ratio, fully tax-equivalent (non-GAAP)	61.82		%		60.31		%		60.85		%		64.13		%		64.93		%
Acquisition, integration and restructuring costs
Salaries and employee benefits	$	44			$	—			$	100			$	100			$	616
Occupancy	—				11				—				10				1,194
Furniture and equipment	24				7				(4		)		84				—
Professional fees	996				462				855				624				424
Advertising	89				31				115				52				5
(Gain)/loss on sales/valuations of assets, net	—				—				—				—				1,003
Other noninterest expenses	223				26				434				59				372
Total acquisition, integration and restructuring costs	$	1,376			$	537			$	1,500			$	929			$	3,614
After tax impact on diluted earnings per share(1)	$	0.03			$	0.01			$	0.03			$	0.02			$	0.08
Reconciliation of Adjusted Net Income and Adjusted Diluted EPS (non-GAAP)
Net income (GAAP)	$	20,040			$	37,851			$	34,612			$	45,169			$	31,497
Provision for credit losses(1)	17,001				3,873				4,109				3,885				1,292
Acquisition, integration and restructuring costs(1)	1,087				424				1,185				734				2,855
Adjusted net income (non-GAAP)	$	38,128			$	42,148			$	39,906			$	49,788			$	35,644
Diluted earnings per share (GAAP)	$	0.54			$	1.03			$	0.94			$	1.26			$	0.91
Adjusted diluted earnings per share (non-GAAP)	$	1.03			$	1.14			$	1.08			$	1.39			$	1.03
Reconciliation of Annualized Adjusted Return on Average Tangible Common Equity (non-GAAP)
Adjusted net income (non-GAAP)	$	38,128			$	42,148			$	39,906			$	49,788			$	35,644
Plus core deposit and customer relationship intangibles amortization, net of tax(1)	2,355				2,305				2,291				2,617				2,245
Adjusted net income excluding intangible amortization (non-GAAP)	$	40,483			$	44,453			$	42,197			$	52,405			$	37,889
Average tangible common equity (non-GAAP)	$	1,125,705			$	1,087,495			$	1,062,568			$	981,878			$	898,092
Annualized adjusted return on average tangible common equity (non-GAAP)	14.46		%		16.22		%		15.76		%		21.41		%		17.11		%
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

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