Heartland Financial USA, Inc. ("HTLF") Reports Quarterly Results as of March 31, 2023


Highlights and Developments

  • Quarterly net income available to common stockholders of $50.8 million
  • Diluted earnings per common share of $1.19
  • Efficiency ratio, fully tax-equivalent (non-GAAP)(1) of 57.16%
  • Quarterly net recoveries of $1.0 million and 30-89 day loan delinquencies were 0.10% of total loans
  • Total deposits increased $168.3 million or 1%
  • Total customer deposits decreased $618.2 million or 4%
  • Uninsured deposits, excluding collateralized public deposits, were 35% of total deposits as of March 31, 2023
  • Increased borrowing capacity by $1.7 billion during the quarter to $2.8 billion
  • Common equity tier 1 ratio to risk-weighted assets of 11.28%, which is substantially above the well-capitalized regulatory requirement of 6.50%
  • Completed the consolidation of one bank charter during the quarter, and one charter consolidation completed subsequent to the end of the quarter
 Three Months Ended
March 31,
 2023 2022
Net income available to common stockholders (in millions)$50.8  $41.1 
Diluted earnings per common share 1.19   0.97 
    
Return on average assets 1.06%  0.91%
Return on average common equity 12.43   8.32 
Return on average tangible common equity (non-GAAP)(1) 20.05   12.41 
Net interest margin 3.36   3.08 
Net interest margin, fully tax-equivalent (non-GAAP)(1) 3.40   3.12 
Efficiency ratio 60.94   65.46 
Efficiency ratio, fully-tax equivalent (non-GAAP)(1) 57.16   64.65 

(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to the financial tables for reconciliations to the most directly comparable GAAP measures.

"HTLF's strength and stability helped us navigate the first quarter of 2023. Despite some challenging headwinds, we maintained solid regulatory capital ratios, enhanced our strong liquidity position and delivered excellent credit metrics while continuing to execute our growth strategies. "
Bruce K. Lee, President and Chief Executive Officer, HTLF

DENVER, April 24, 2023 (GLOBE NEWSWIRE) -- Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported the following results for the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022:

  • Net income available to common stockholders of $50.8 million compared to $41.1 million, an increase of $9.7 million or 24%.
  • Earnings per diluted common share of $1.19 compared to $0.97, an increase of $0.22 or 23%.
  • Net interest income of $152.2 million compared to $134.7 million, an increase of $17.5 million or 13%.
  • Return on average assets was 1.06% compared to 0.91%.
  • Return on average common equity was 12.43% compared to 8.32%.
  • Return on average tangible common equity (non-GAAP) was 20.05% compared to 12.41%.

"HTLF's strength and stability helped us navigate the first quarter of 2023. Despite some challenging headwinds, we maintained solid regulatory capital ratios, enhanced our strong liquidity position and delivered excellent credit metrics while continuing to execute our growth strategies," said Bruce K. Lee, president and chief executive officer of HTLF.

Strengthening HTLF in Response to Recent Banking Industry Disruptions

In the first quarter of 2023, HTLF took the following actions, primarily in response to the disruption in the banking industry in March 2023:

  • Proactively reached out to over 1,000 large depositors and helped facilitate additional FDIC insurance through Insured Cash Sweep ("ICS") products and Certificate of Deposit Registry Service ("CDARS") products,
  • Increased deposit pricing to address highly competitive deposit environment,
  • Increased access and availability to sources of liquidity by $1.7 billion,
  • Total borrowing capacity through various programs, including the Bank Term Funding Program, was $2.8 billion as of March 31, 2023, of which no balance was drawn, and
  • Retail deposit campaign resulted in over 8,000 new accounts opened.

Mr. Lee commented, "Conservative liquidity and capital management are fundamental to our strength and stability. During the quarter, we enhanced our liquidity and built our regulatory capital ratios which substantially exceed the well-capitalized thresholds. We believe our regulatory capital ratio buffers would withstand any changes in regulatory rules that require the inclusion of unrealized losses in our total investment portfolio and remain well capitalized."

Charter Consolidation Update

During the first quarter of 2023, Wisconsin Bank & Trust was consolidated into HTLF Bank. Subsequent to March 31, 2023, Bank of Blue Valley was consolidated into HTLF Bank. Citywide Banks, Premier Valley Bank, Minnesota Bank & Trust, Arizona Bank & Trust, Illinois Bank & Trust, Wisconsin Bank & Trust and Bank of Blue Valley are now operating as divisions of HTLF Bank. The remaining four charters are expected to be consolidated by the end of 2023. Charter consolidation follows a template that retains the current brands, local leadership and local decision making.

Total consolidation restructuring costs are projected to be $19-$20 million with approximately $8-$9 million of expenses remaining to be incurred in 2023. Charter consolidation is designed to eliminate redundancies and improve HTLF’s operating efficiency and capacity to support ongoing product and service enhancements, as well as current and future growth. HTLF realized some operating efficiency and financial benefits in the second half of 2022 and first quarter of 2023 with the completion of six charter consolidations, and total benefits are estimated to be approximately $20 million annually after the project is completed.

Recent Developments

As of March 29, 2023, HTLF's subsidiary, Dubuque Bank & Trust, entered into an agreement to sell and transfer the recordkeeping and administration services component of HTLF’s Retirement Plan Services business to July Business Services ("July"). Through the new partnership with July, HTLF will augment the comprehensive retirement plan solutions offered to clients with enhanced technology and an expanded suite of product offerings that clients expect from a top retirement services provider. The transaction is expected to be completed and recordkeeping and administration services transferred in the second quarter of 2023.

On March 31, 2023, HTLF's subsidiary, First Bank & Trust, closed on the sale of its mortgage servicing rights portfolio, which consisted of approximately 4,500 loans serviced for others with an unpaid principal balance of approximately $700 million. In the agreement, which includes customary terms and conditions, First Bank & Trust is providing interim servicing of the loans until the expected transfer date in May 2023.

Net Interest Income and Net Interest Margin

Net interest margin, expressed as a percentage of average earning assets, was 3.36% (3.40% on a fully tax-equivalent basis, non-GAAP) for the first quarter of 2023 compared to 3.61% (3.65% on a fully tax-equivalent basis, non-GAAP) for the fourth quarter of 2022, and 3.08% (3.12% on a fully tax-equivalent basis, non-GAAP) for the first quarter of 2022.

Total interest income and average earning asset changes for the first quarter of 2023 compared to the first quarter of 2022 were:

  • Total interest income was $217.0 million compared to $141.3 million, which was an increase of $75.7 million or 54% and primarily attributable to an increase in average earning assets and higher yields.
  • Total interest income on a tax-equivalent basis (non-GAAP) was $219.2 million, which was an increase of $75.8 million or 53% from $143.4 million.
  • Average earning assets increased $635.6 million or 4% to $18.39 billion compared to $17.76 billion.
  • The average rate on earning assets increased 156 basis points to 4.83% compared to 3.27%, which was primarily due to recent interest rate increases.

Total interest expense and average interest bearing liability changes for the first quarter of 2023 compared to the first quarter of 2022 were:

  • Total interest expense was $64.8 million, an increase of $58.2 million from $6.6 million, which was attributable to an increase in the average interest rate paid and an increase in average interest bearing liabilities.
  • The average interest rate paid on interest bearing liabilities increased 183 basis points to 2.09% compared to 0.26%.
  • Average interest bearing deposits increased $2.03 billion or 20% to $11.99 billion from $9.96 billion, primarily attributable to an increase of $1.04 billion in wholesale deposits.
  • The average interest rate paid on interest bearing deposits increased 180 basis points to 1.92% compared to 0.12%.
  • Average borrowings increased $102.9 million or 21% to $594.7 million from $491.8 million, and the average interest rate paid on borrowings was 5.37% compared to 2.97%.

Net interest income changes for the first quarter of 2023 compared to the first quarter of 2022 were:

  • Net interest income totaled $152.2 million compared to $134.7 million, which was an increase of $17.5 million or 13%.
  • Net interest income on a tax-equivalent basis (non-GAAP) totaled $154.4 million compared to $136.8 million, which was an increase of $17.6 million or 13%.

Noninterest Income and Noninterest Expense

Total noninterest income was $30.0 million during the first quarter of 2023 compared to $34.6 million during the first quarter of 2022, a decrease of $4.6 million or 13%. Significant changes within the noninterest income category for the first quarter of 2023 compared to the first quarter of 2022 were:

  • Service charges and fees increased $1.9 million or 12% to $17.1 million from $15.3 million, which was primarily attributable to an increase of $1.3 million or 26% in credit card revenue to $6.3 million compared to $5.0 million.
  • Net security losses totaled $1.1 million compared to net gains of $2.9 million.
  • Net gains on sales of loans held for sale totaled $1.8 million compared to $3.4 million, which was a decrease of $1.6 million or 46% and was primarily attributable to a decrease of loans sold to the secondary market.
  • Valuation adjustment benefit on servicing rights was $0 compared to $1.7 million.

Total noninterest expense was $111.0 million during the first quarter of 2023 compared to $110.8 million during the first quarter of 2022, which was an increase of $246,000 or less than 1%. Significant changes within the noninterest expense category for the first quarter of 2023 compared to the first quarter of 2022 were:

  • Salaries and employee benefits totaled $62.1 million compared to $66.2 million, which was a decrease of $4.0 million or 6%. The decrease was primarily attributable to a reduction of full-time equivalent employees and lower incentive compensation expense. Full-time equivalent employees totaled 1,991 compared to 2,208, which was a decrease of 217 or 10%.
  • Acquisition, integration and restructuring costs totaled $1.7 million compared to $576,000, an increase of $1.1 million due to the progression of the charter consolidation project.
  • Professional fees totaled $16.1 million compared to $15.2 million, which was an increase of $920,000 or 6%. FDIC insurance assessments totaled $3.3 million compared to $1.6 million, an increase of $1.7 million due to assessment rate changes that were effective with the first quarter 2023 assessment.
  • Loss on sales/valuations of assets, net totaled $1.1 million compared to $46,000, which was an increase of $1.1 million. HTLF recorded $813,000 of losses on fixed assets associated with branch optimization activities and a loss of $193,000 associated with the sale of the mortgage servicing rights portfolio.

The effective tax rate was 22.50% for the first quarter of 2023 compared to 21.95% for the first quarter of 2022. The following items impacted the first quarter 2023 and 2022 tax calculations:

  • Various tax credits of $969,000 compared to $273,000.
  • Tax expense of $929,000 compared to $58,000 resulting from the disallowed interest expense related to tax-exempt loans and securities, aligning with increases in total interest expense.
  • Tax-exempt interest income as a percentage of pre-tax income of 12.20% compared to 14.44%.

Total Assets, Total Loans and Total Deposits

Total assets were $20.18 billion at March 31, 2023, a decrease of $61.7 million or less than 1% from $20.24 billion at year-end 2022. Securities represented 35% of total assets at both March 31, 2023 and December 31, 2022.

Total loans held to maturity were $11.50 billion at March 31, 2023, compared to $11.43 billion at December 31, 2022, which was an increase of $67.0 million or 1%.

Significant changes by loan category at March 31, 2023 compared to December 31, 2022 included:

  • Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $78.4 million or 1% to $5.82 billion compared to $5.74 billion.
  • Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $116.5 million or 3% to $3.52 billion compared to $3.41 billion.
  • Agricultural and agricultural real estate loans decreased $110.3 million or 12% to $810.2 million compared to $920.5 million.

Total deposits were $17.68 billion as of March 31, 2023, compared to $17.51 billion at December 31, 2022, which was an increase of $168.3 million or 1%. Total customer deposits were $14.84 billion as of March 31, 2023 compared to $15.46 billion at December 31, 2022, which was a decrease of $618.2 million or 4%. Total wholesale deposits were $2.84 billion, which was an increase of $786.5 million or 38% from $2.06 billion at December 31, 2022.

Significant deposit changes by category at March 31, 2023 compared to December 31, 2022 included:

  • Customer demand deposits decreased $581.8 million or 10% to $5.12 billion compared to $5.70 billion.
  • Total savings deposits decreased $737.8 million or 7% to $9.26 billion from $9.99 billion. Total customer savings deposits decreased $256.4 million or 3% to $8.64 billion from $8.90 billion. Wholesale savings deposits decreased $481.4 million or 44% to $609.2 million from $1.09 billion.
  • Total time deposits increased $1.49 billion or 82% to $3.31 billion from $1.82 billion. Customer time deposits increased $219.9 million or 26% to $1.07 billion from $851.5 million. Wholesale time deposits increased $1.27 billion to $2.23 billion from $965.7 million.

Provision and Allowance

Provision and Allowance for Credit Losses for Loans
Provision for credit losses for loans for the first quarter of 2023 was $2.2 million, which was a decrease of $444,000 or 17% from $2.6 million recorded in the first quarter of 2022. The provision expense for the first quarter of 2023 reflects net recoveries of $1.0 million and healthy current credit metrics. Management continued to utilize a macroeconomic outlook which anticipated a moderate recession developing within the next twelve months.

The allowance for credit losses for loans totaled $112.7 million and $109.5 million at March 31, 2023, and December 31, 2022, respectively. The following items impacted the allowance for credit losses for loans at March 31, 2023:

  • Provision expense for the three months ended March 31, 2023, totaled $2.2 million.
  • Net recoveries of $1.0 million were recorded for the first three months of 2023.

Provision and Allowance for Credit Losses for Unfunded Commitments
The allowance for unfunded commitments totaled $21.1 million at March 31, 2023, which was an increase of $890,000 from $20.2 million at December 31, 2022. Unfunded commitments increased $138.2 million to $4.87 billion at March 31, 2023 compared to $4.73 billion at December 31, 2022.

Total Provision and Allowance for Lending Related Credit Losses
The total provision expense for lending related credit losses was $3.1 million for the first quarter of 2023 compared to $3.2 million for the first quarter of 2022. The total allowance for lending related credit losses was $133.8 million or 1.16% of total loans at March 31, 2023, compared to $129.7 million or 1.13% of total loans as of December 31, 2022.

Nonperforming Assets

Nonperforming assets decreased $1.2 million or 2% to $65.7 million or 0.33% of total assets at March 31, 2023, compared to $66.9 million or 0.33% of total assets at December 31, 2022. Nonperforming loans were $58.2 million or 0.51% of total loans at March 31, 2023, compared to $58.5 million or 0.51% of total loans at December 31, 2022. At March 31, 2023, loans delinquent 30-89 days were 0.10% of total loans compared to 0.04% of total loans at December 31, 2022.

Non-GAAP Financial Measures
This earnings release contains references to financial measures which are not defined by generally accepted accounting principles ("GAAP"). Management believes the non-GAAP measures are helpful for investors to analyze and evaluate the company's financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this earnings release with other companies' non-GAAP measures. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure may be found in the financial tables in this earnings release.

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

  • Annualized net interest margin, fully tax-equivalent, adjusts net interest income for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
  • Efficiency ratio, fully tax equivalent, expresses noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities, and tax credit projects. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items as noted in reconciliation contained in this earnings release.
  • Net interest income, fully tax equivalent, is net income adjusted for the tax-favored status of certain loans and securities. Management believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources.
  • Tangible book value per common share is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by common shares outstanding, net of treasury. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
  • Tangible common equity ratio is total common equity less goodwill and core deposit and customer relationship intangibles, net, divided by total assets less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength.
  • Adjusted tangible common equity ratio is total common equity less goodwill, core deposit and customer relationship intangibles, net, and accumulated other comprehensive loss 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 excluding the variability of accumulated other comprehensive income (loss).
  • Annualized return on average tangible common equity is net income excluding intangible amortization calculated as (1) net income excluding tax-effected core deposit and customer relationship intangibles amortization, divided by (2) average common equity less goodwill and core deposit and customer relationship intangibles, net. This measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength.
  • Annualized ratio of core expenses to average assets adjusts noninterest expenses to exclude specific items noted in the reconciliation. Management includes this measure as it is considered to be a critical metric to analyze and evaluate controllable expenses related to primary business operations.

Conference Call Details
HTLF will host a conference call for shareholders, analysts and other interested parties at 5:00 p.m. EDT today. To join via webcast, please visit https://ir.htlf.com/news-and-events/event-calendar/default.aspx 10 minutes prior to the call. A replay will be available until April 23, 2024, by logging on to www.htlf.com.

About HTLF
Heartland Financial USA, Inc., is a Denver, Colorado-based bank holding company operating under the brand name HTLF, with assets of $20.18 billion as of March 31, 2023. HTLF's banks serves communities in Arizona, California, Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, New Mexico, Texas and Wisconsin. HTLF is committed to its core commercial business, supported by a strong retail operation, and provides a diversified line of financial services including treasury management, wealth management, investments and residential mortgage. Additional information is available at www.htlf.com.

Safe Harbor Statement
This release (including any information incorporated herein by reference) and future oral and written statements of HTLF and its management, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, financial condition, results of operations, plans, objectives and future performance of HTLF.

Any statements about HTLF's expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Forward-looking statements may include information about possible or assumed future results of HTLF's operations or performance, and may be based upon beliefs, expectations and assumptions of HTLF's management. These forward-looking statements are generally identified by the use of the words such as "believe", "expect", "anticipate", "plan", "intend", "estimate", "project", "may", "will", "would", "could", "should", "may", "view", "opportunity", "potential", or similar or negative expressions of these words or phrases that are used in this release, and future oral and written statements of HTLF and its management. Although HTLF may make these statements based on management’s experience, beliefs, expectations, assumptions and best estimate of future events, the ability of HTLF to predict results or the actual effect or outcomes of plans or strategies is inherently uncertain, and there may be events or factors that management has not anticipated. Therefore, the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which HTLF currently believes could have a material effect on its operations and future prospects, are detailed below and in the risk factors in HTLF's reports filed with the Securities and Exchange Commission ("SEC"), including the "Risk Factors" section under Item 1A of Part I of HTLF’s Annual Report on Form 10-K for the year ended December 31, 2022, include, among others:

  • Economic and Market Conditions Risks, including risks related to the deterioration of the U.S. economy in general and in the local economies in which HTLF conducts its operations and future civil unrest, natural disasters, pandemics, such as the COVID-19 pandemic or future pandemics and governmental measures addressing them, climate change and climate-related regulations, persistent inflation, higher interest rates, recession, supply chain issues, labor shortages, terrorist threats or acts of war;
  • Credit Risks, including risks of increasing credit losses due to deterioration in the financial condition of HTLF's borrowers, changes in asset and collateral values and climate and other borrower industry risks which may impact the provision for credit losses and net charge-offs;
  • Liquidity and Interest Rate Risks, including the impact of capital market conditions, rising interest rates and changes in monetary policy on our borrowings and net interest income;
  • Operational Risks, including processing, information systems, cybersecurity, vendor, business interruption, and fraud risks;
  • Strategic and External Risks, including economic, political and competitive forces impacting our business;
  • Legal, Compliance and Reputational Risks, including regulatory and litigation risks; and
  • Risks of Owning Stock in HTLF, including stock price volatility and dilution as a result of future equity offerings and acquisitions.

There can be no assurance that other factors not currently anticipated by HTLF will not materially and adversely affect HTLF's business, financial condition and results of operations. Additionally, all statements in this release, including forward-looking statements speak only as of the date they are made. HTLF does not undertake and specifically disclaims any obligation to publicly release the results of any revisions which may be made to any forward-looking statement to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events or to otherwise update any statement in light of new information or future events. Further information concerning HTLF and its business, including additional factors that could materially affect HTLF’s financial results, is included in HTLF's filings with the Securities and Exchange Commission (the "SEC").

-FINANCIAL TABLES FOLLOW-

HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Three Months Ended 
March 31,
 2023
 2022
Interest Income   
Interest and fees on loans$153,843  $102,369 
Interest on securities:   
Taxable 55,976   32,620 
Nontaxable 6,028   6,202 
Interest on federal funds sold     
Interest on deposits with other banks and short-term investments 1,131   71 
Total Interest Income 216,978   141,262 
Interest Expense   
Interest on deposits 56,898   2,977 
Interest on short-term borrowings 2,422   46 
Interest on other borrowings 5,446   3,560 
Total Interest Expense 64,766   6,583 
Net Interest Income 152,212   134,679 
Provision for credit losses 3,074   3,245 
Net Interest Income After Provision for Credit Losses 149,138   131,434 
Noninterest Income   
Service charges and fees 17,136   15,251 
Loan servicing income 714   286 
Trust fees 5,657   6,079 
Brokerage and insurance commissions 696   869 
Capital markets fees 2,449   3,039 
Securities gains/(losses), net (1,104)  2,872 
Unrealized gain/(loss) on equity securities, net 193   (283)
Net gains on sale of loans held for sale 1,831   3,411 
Valuation adjustment on servicing rights    1,658 
Income on bank owned life insurance 964   524 
Other noninterest income 1,463   863 
Total Noninterest Income 29,999   34,569 
Noninterest Expense   
Salaries and employee benefits 62,149   66,174 
Occupancy 7,209   7,362 
Furniture and equipment 2,915   3,519 
Professional fees 16,076   15,156 
Advertising 1,985   1,555 
Core deposit and customer relationship intangibles amortization 1,788   2,054 
Other real estate and loan collection expenses, net 155   195 
(Gain)/loss on sales/valuations of assets, net 1,115   46 
Acquisition, integration and restructuring costs 1,673   576 
Partnership investment in tax credit projects 538   77 
Other noninterest expenses 15,440   14,083 
Total Noninterest Expense 111,043   110,797 
Income Before Income Taxes 68,094   55,206 
Income taxes 15,318   12,117 
Net Income 52,776   43,089 
Preferred dividends (2,013)  (2,013)
Net Income Available to Common Stockholders$50,763  $41,076 
Earnings per common share-diluted$1.19  $0.97 
Weighted average shares outstanding-diluted 42,742,878   42,540,953 


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 For the Quarter Ended
 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Interest Income         
Interest and fees on loans$153,843  $143,970  $122,913  $108,718  $102,369 
Interest on securities:         
Taxable 55,976   53,178   45,648   38,098   32,620 
Nontaxable 6,028   6,132   6,164   5,508   6,202 
Interest on federal funds sold    11          
Interest on deposits with other banks and short-term investments 1,131   1,410   1,081   563   71 
Total Interest Income 216,978   204,701   175,806   152,887   141,262 
Interest Expense         
Interest on deposits 56,898   32,215   15,158   6,530   2,977 
Interest on short-term borrowings 2,422   2,223   360   88   46 
Interest on other borrowings 5,446   5,043   4,412   3,808   3,560 
Total Interest Expense 64,766   39,481   19,930   10,426   6,583 
Net Interest Income 152,212   165,220   155,876   142,461   134,679 
Provision for credit losses 3,074   3,387   5,492   3,246   3,245 
Net Interest Income After Provision for Credit Losses 149,138   161,833   150,384   139,215   131,434 
Noninterest Income         
Service charges and fees 17,136   17,432   17,282   18,066   15,251 
Loan servicing income 714   790   831   834   286 
Trust fees 5,657   5,440   5,372   5,679   6,079 
Brokerage and insurance commissions 696   629   649   839   869 
Capital markets fees 2,449   1,824   1,809   4,871   3,039 
Securities gains/(losses), net (1,104)  (153)  (1,055)  (2,089)  2,872 
Unrealized gain/(loss) on equity securities, net 193   (7)  (211)  (121)  (283)
Net gains on sale of loans held for sale 1,831   888   1,832   2,901   3,411 
Valuation adjustment on servicing rights             1,658 
Income on bank owned life insurance 964   600   694   523   524 
Other noninterest income 1,463   2,532   1,978   3,036   863 
Total Noninterest Income 29,999   29,975   29,181   34,539   34,569 
Noninterest Expense         
Salaries and employee benefits 62,149   61,611   62,661   64,032   66,174 
Occupancy 7,209   6,905   6,794   7,094   7,362 
Furniture and equipment 2,915   3,019   2,928   3,033   3,519 
Professional fees 16,076   18,186   16,277   15,987   15,156 
Advertising 1,985   1,829   1,554   1,283   1,555 
Core deposit and customer relationship intangibles amortization 1,788   1,841   1,856   2,083   2,054 
Other real estate and loan collection expenses, net 155   373   304   78   195 
(Gain)/loss on sales/valuations of assets, net 1,115   2,388   (251)  (3,230)  46 
Acquisition, integration and restructuring costs 1,673   2,442   2,156   2,412   576 
Partnership investment in tax credit projects 538   3,247   979   737   77 
Other noninterest expenses 15,440   15,377   13,625   12,970   14,083 
Total Noninterest Expense 111,043   117,218   108,883   106,479   110,797 
Income Before Income Taxes 68,094   74,590   70,682   67,275   55,206 
Income taxes 15,318   13,936   14,118   15,402   12,117 
Net Income 52,776   60,654   56,564   51,873   43,089 
Preferred dividends (2,013)  (2,012)  (2,013)  (2,012)  (2,013)
Net Income Available to Common Stockholders$50,763  $58,642  $54,551  $49,861  $41,076 
Earnings per common share-diluted$1.19  $1.37  $1.28  $1.17  $0.97 
Weighted average shares outstanding-diluted 42,742,878   42,699,752   42,643,940   42,565,391   42,540,953 


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
 As of
 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Assets         
Cash and due from banks$274,354  $309,045  $250,394  $221,077  $198,559 
Interest bearing deposits with other banks and short-term investments 87,757   54,042   149,466   163,717   406,343 
Cash and cash equivalents 362,111   363,087   399,860   384,794   604,902 
Time deposits in other financial institutions 1,740   1,740   1,740   1,855   2,894 
Securities:         
Carried at fair value 6,096,657   6,147,144   6,060,331   7,106,218   7,025,243 
Held to maturity, at cost, less allowance for credit losses 832,098   829,403   830,247   81,939   81,785 
Other investments, at cost 72,364   74,567   80,286   85,899   82,751 
Loans held for sale 10,425   5,277   9,570   18,803   22,685 
Loans:         
Held to maturity 11,495,353   11,428,352   10,923,532   10,678,218   10,177,385 
Allowance for credit losses (112,707)  (109,483)  (105,715)  (101,353)  (100,522)
Loans, net 11,382,646   11,318,869   10,817,817   10,576,865   10,076,863 
Premises, furniture and equipment, net 191,267   197,330   203,585   206,818   213,752 
Goodwill 576,005   576,005   576,005   576,005   576,005 
Core deposit and customer relationship intangibles, net 23,366   25,154   26,995   28,851   30,934 
Servicing rights, net    7,840   8,379   8,288   8,102 
Cash surrender value on life insurance 194,419   193,403   193,184   192,474   192,267 
Other real estate, net 7,438   8,401   8,030   4,528   1,422 
Other assets 432,008   496,008   466,921   385,062   311,274 
Total Assets$20,182,544  $20,244,228  $19,682,950  $19,658,399  $19,230,879 
Liabilities and Equity         
Liabilities         
Deposits:         
Demand$5,119,554  $5,701,340  $6,083,563  $6,087,304  $6,376,249 
Savings 9,256,609   9,994,391   10,060,523   10,059,678   9,236,427 
Time 3,305,183   1,817,278   1,123,035   1,078,568   1,054,008 
Total deposits 17,681,346   17,513,009   17,267,121   17,225,550   16,666,684 
Short-term borrowings 92,337   376,117   147,000   97,749   107,372 
Other borrowings 372,097   371,753   371,446   372,538   372,290 
Accrued expenses and other liabilities 207,359   248,294   241,425   188,494   152,676 
Total Liabilities 18,353,139   18,509,173   18,026,992   17,884,331   17,299,022 
Stockholders' Equity         
Preferred equity 110,705   110,705   110,705   110,705   110,705 
Common stock 42,559   42,467   42,444   42,439   42,370 
Capital surplus 1,084,112   1,080,964   1,079,277   1,076,766   1,073,048 
Retained earnings 1,158,948   1,120,925   1,074,168   1,031,076   992,655 
Accumulated other comprehensive loss (566,919)  (620,006)  (650,636)  (486,918)  (286,921)
Total Equity 1,829,405   1,735,055   1,655,958   1,774,068   1,931,857 
Total Liabilities and Equity$20,182,544  $20,244,228  $19,682,950  $19,658,399  $19,230,879 


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
 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Average Balances         
Assets$20,118,005  $19,913,849  $19,775,341  $19,559,091  $19,229,872 
Loans, net of unearned 11,378,078   11,117,513   10,783,135   10,477,368   10,043,594 
Deposits 17,505,867   17,319,218   17,282,289   17,044,479   16,459,378 
Earning assets 18,392,649   18,175,838   18,157,795   17,987,734   17,757,067 
Interest bearing liabilities 12,582,234   11,980,032   11,723,026   11,575,319   10,453,400 
Common equity 1,655,860   1,548,739   1,674,306   1,731,393   2,003,424 
Total stockholders' equity 1,766,565   1,659,444   1,785,011   1,842,098   2,114,129 
Tangible common equity (non-GAAP)(1) 1,055,617   946,688   1,070,399   1,125,543   1,395,488 
          
Key Performance Ratios         
Annualized return on average assets 1.06%  1.21%  1.13%  1.06%  0.91%
Annualized return on average common equity (GAAP) 12.43   15.02   12.93   11.55   8.32 
Annualized return on average tangible common equity (non-GAAP)(1) 20.05   25.19   20.76   18.35   12.41 
Annualized ratio of net charge-offs/(recoveries) to average loans (0.04)  (0.06)  0.00   0.03   0.49 
Annualized net interest margin (GAAP) 3.36   3.61   3.41   3.18   3.08 
Annualized net interest margin, fully tax-equivalent (non-GAAP)(1) 3.40   3.65   3.45   3.22   3.12 
Efficiency ratio (GAAP) 60.94   60.05   58.84   60.16   65.46 
Efficiency ratio, fully tax-equivalent (non-GAAP)(1) 57.16   54.33   55.26   57.66   64.65 
Annualized ratio of total noninterest expenses to average assets (GAAP) 2.24   2.34   2.18   2.18   2.34 
Annualized ratio of core expenses to average assets (non-GAAP)(1) 2.14   2.14   2.09   2.14   2.28 
          
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA
 As of and for the Quarter Ended
 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Common Share Data         
Book value per common share$40.38  $38.25  $36.41  $39.19  $42.98 
Tangible book value per common share (non-GAAP)(1)$26.30  $24.09  $22.20  $24.94  $28.66 
ASC 320 effect on book value per common share$(13.35) $(14.58) $(15.31) $(11.43) $(6.74)
Common shares outstanding, net of treasury stock 42,558,726   42,467,394   42,444,106   42,439,439   42,369,908 
Tangible common equity ratio (non-GAAP)(1) 5.72%  5.21%  4.94%  5.56%  6.52%
Adjusted tangible common equity ratio (non-GAAP)(1) 8.61%  8.37%  8.35%  8.11%  8.06%
          
Other Selected Trend Information         
Effective tax rate 22.50%  18.68%  19.97%  22.89%  21.95%
Full time equivalent employees 1,991   2,002   2,020   2,087   2,208 
          
Loans Held to Maturity         
Commercial and industrial$3,498,345  $3,464,414  $3,278,703  $3,059,519  $2,814,513 
Paycheck Protection Program ("PPP") 8,258   11,025   13,506   23,031   74,065 
Owner occupied commercial real estate 2,312,538   2,265,307   2,285,973   2,282,833   2,266,076 
Commercial and business lending 5,819,141   5,740,746   5,578,182   5,365,383   5,154,654 
Non-owner occupied commercial real estate 2,421,341   2,330,940   2,219,542   2,321,718   2,161,761 
Real estate construction 1,102,186   1,076,082   996,017   845,045   842,483 
Commercial real estate lending 3,523,527   3,407,022   3,215,559   3,166,763   3,004,244 
Total commercial lending 9,342,668   9,147,768   8,793,741   8,532,146   8,158,898 
Agricultural and agricultural real estate 810,183   920,510   781,354   836,703   766,443 
Residential mortgage 841,084   853,361   852,928   845,270   825,242 
Consumer 501,418   506,713   495,509   464,099   426,802 
Total loans held to maturity$11,495,353  $11,428,352  $10,923,532  $10,678,218  $10,177,385 
          
Total unfunded loan commitments$4,867,925  $4,729,677  $4,664,379  $4,458,874  $4,130,316 
          
Deposits         
Demand-customer$5,119,554  $5,701,340  $6,083,563  $6,087,304  $6,376,249 
Savings-customer 8,647,396   8,903,747   8,927,535   9,050,011   8,661,306 
Savings-wholesale 609,213   1,090,644   1,132,988   1,009,667   575,121 
Total savings 9,256,609   9,994,391   10,060,523   10,059,678   9,236,427 
Time-customer 1,071,476   851,539   973,035   1,003,568   979,008 
Time-wholesale 2,233,707   965,739   150,000   75,000   75,000 
Total time 3,305,183   1,817,278   1,123,035   1,078,568   1,054,008 
Total deposits$17,681,346  $17,513,009  $17,267,121  $17,225,550  $16,666,684 
          
Total customer deposits$14,838,426  $15,456,626  $15,984,133  $16,140,883  $16,016,563 
Total wholesale deposits 2,842,920   2,056,383   1,282,988   1,084,667   650,121 
 $17,681,346  $17,513,009  $17,267,121  $17,225,550  $16,666,684 
          
(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
 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Allowance for Credit Losses-Loans         
Balance, beginning of period$109,483  $105,715  $101,353  $100,522  $110,088 
Provision for credit losses 2,184   2,075   4,388   1,545   2,628 
Charge-offs (2,151)  (2,668)  (938)  (1,473)  (13,217)
Recoveries 3,191   4,361   912   759   1,023 
Balance, end of period$112,707  $109,483  $105,715  $101,353  $100,522 
          
Allowance for Unfunded Commitments         
Balance, beginning of period$20,196  $18,884  $17,780  $16,079  $15,462 
Provision for credit losses 890   1,312   1,104   1,701   617 
Balance, end of period$21,086  $20,196  $18,884  $17,780  $16,079 
          
Allowance for lending related credit losses$133,793  $129,679  $124,599  $119,133  $116,601 
          
Provision for Credit Losses         
Provision for credit losses-loans$2,184  $2,075  $4,388  $1,545  $2,628 
Provision for credit losses-unfunded commitments 890   1,312   1,104   1,701   617 
Total provision for credit losses$3,074  $3,387  $5,492  $3,246  $3,245 
          
Asset Quality         
Nonaccrual loans$58,066  $58,231  $64,560  $62,909  $64,174 
Loans past due ninety days or more 174   273   678   95   246 
Other real estate owned 7,438   8,401   8,030   4,528   1,422 
Other repossessed assets 24   26         34 
Total nonperforming assets$65,702  $66,931  $73,268  $67,532  $65,876 
          
Nonperforming Assets Activity         
Balance, beginning of period$66,931  $73,268  $67,532  $65,876  $71,889 
Net loan (charge-offs)/recoveries 1,040   1,693   (26)  (714)  (12,194)
New nonperforming loans 4,626   1,439   8,388   8,590   15,832 
Reduction of nonperforming loans(1) (5,711)  (8,875)  (2,015)  (5,244)  (8,448)
Net OREO/repossessed assets sales proceeds and losses (1,184)  (594)  (611)  (976)  (1,203)
Balance, end of period$65,702  $66,931  $73,268  $67,532  $65,876 
          
Asset Quality Ratios         
Ratio of nonperforming loans to total loans 0.51%  0.51%  0.60%  0.59%  0.63%
Ratio of nonperforming assets to total assets 0.33   0.33   0.37   0.34   0.34 
Annualized ratio of net loan charge-offs/(recoveries) to average loans (0.04)  (0.06)  0.00   0.03   0.49 
Allowance for loan credit losses as a percent of loans 0.98   0.96   0.97   0.95   0.99 
Allowance for lending related credit losses as a percent of loans 1.16   1.13   1.14   1.12   1.15 
Allowance for loan credit losses as a percent of nonperforming loans 193.52   187.14   162.05   160.87   156.04 
Loans delinquent 30-89 days as a percent of total loans 0.10   0.04   0.10   0.06   0.10 
          
(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
 March 31, 2023 December 31, 2022 March 31, 2022
 Average 
Balance
 Interest Rate Average 
Balance
 Interest Rate Average 
Balance
 Interest Rate
Earning Assets                 
Securities:                 
Taxable$6,096,888  $55,976 3.72% $6,122,313  $53,178 3.45% $6,501,664  $32,620 2.03%
Nontaxable(1) 922,676   7,630 3.35   890,368   7,762 3.46   1,106,951   7,851 2.88 
Total securities 7,019,564   63,606 3.67   7,012,681   60,940 3.45   7,608,615   40,471 2.16 
Interest on deposits with other banks and short-term investments 105,400   1,131 4.35   151,405   1,410 3.69   216,451   71 0.13 
Federal funds sold        739   11 5.91   11     
Loans:(2)                 
Commercial and industrial(1) 3,459,317   49,907 5.85   3,346,843   45,290 5.37   2,744,336   27,053 4.00 
PPP loans 9,970   26 1.06   12,252   397 12.86   132,050   4,323 13.28 
Owner occupied commercial real estate 2,289,002   26,769 4.74   2,277,055   26,194 4.56   2,243,522   21,278 3.85 
Non-owner occupied commercial real estate 2,331,318   30,749 5.35   2,286,298   29,273 5.08   2,060,548   21,163 4.17 
Real estate construction 1,099,026   18,131 6.69   1,050,802   16,585 6.26   847,250   9,276 4.44 
Agricultural and agricultural real estate 835,648   11,353 5.51   785,647   10,159 5.13   745,348   7,006 3.81 
Residential mortgage 852,561   9,273 4.41   858,767   9,168 4.24   843,881   8,085 3.89 
Consumer 501,236   8,242 6.67   499,849   7,426 5.89   426,659   4,655 4.42 
Less: allowance for credit losses-loans (110,393)      (106,500)      (111,604)    
Net loans 11,267,685   154,450 5.56   11,011,013   144,492 5.21   9,931,990   102,839 4.20 
Total earning assets 18,392,649   219,187 4.83%  18,175,838   206,853 4.52%  17,757,067   143,381 3.27%
Nonearning Assets 1,725,356       1,738,011       1,472,805     
Total Assets$20,118,005      $19,913,849      $19,229,872     
Interest Bearing Liabilities                 
Savings$9,730,494  $37,893 1.58% $9,987,692  $25,950 1.03% $8,889,950  $2,394 0.11%
Time deposits 2,257,047   19,005 3.41   1,322,094   6,265 1.88   1,071,675   583 0.22 
Short-term borrowings 222,772   2,422 4.41   298,804   2,223 2.95   119,588   46 0.16 
Other borrowings 371,921   5,446 5.94   371,442   5,043 5.39   372,187   3,560 3.88 
Total interest bearing liabilities 12,582,234   64,766 2.09%  11,980,032   39,481 1.31%  10,453,400   6,583 0.26%
Noninterest Bearing Liabilities                 
Noninterest bearing deposits 5,518,326       6,009,432       6,497,753     
Accrued interest and other liabilities 250,880       264,941       164,590     
Total noninterest bearing liabilities 5,769,206       6,274,373       6,662,343     
Equity 1,766,565       1,659,444       2,114,129     
Total Liabilities and Equity$20,118,005      $19,913,849      $19,229,872     
Net interest income, fully tax-equivalent (non-GAAP)(1)(3)  $154,421     $167,372     $136,798  
Net interest spread(1)    2.74%     3.21%     3.01%
Net interest income, fully tax-equivalent (non-GAAP)(1)(3) to total earning assets    3.40%     3.65%     3.12%
Interest bearing liabilities to earning assets 68.41%      65.91%      58.87%    
                  
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.  
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.


HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA
 For the Quarter Ended
 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Reconciliation of Annualized Return on Average Tangible Common Equity (non-GAAP)         
Net income available to common stockholders (GAAP)$50,763  $58,642  $54,551  $49,861  $41,076 
Plus core deposit and customer relationship intangibles amortization, net of tax(1) 1,413   1,455   1,466   1,645   1,623 
Net income available to common stockholders excluding intangible amortization (non-GAAP)$52,176  $60,097  $56,017  $51,506  $42,699 
          
Average common equity (GAAP)$1,655,860  $1,548,739  $1,674,306  $1,731,393  $2,003,424 
Less average goodwill 576,005   576,005   576,005   576,005   576,005 
Less average core deposit and customer relationship intangibles, net 24,238   26,046   27,902   29,845   31,931 
Average tangible common equity (non-GAAP)$1,055,617  $946,688  $1,070,399  $1,125,543  $1,395,488 
Annualized return on average common equity (GAAP) 12.43%  15.02%  12.93%  11.55%  8.32%
Annualized return on average tangible common equity (non-GAAP) 20.05%  25.19%  20.76%  18.35%  12.41%
          
Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)         
Net Interest Income (GAAP)$152,212  $165,220  $155,876  $142,461  $134,679 
Plus tax-equivalent adjustment(1) 2,209   2,152   2,151   1,977   2,119 
Net interest income, fully tax-equivalent (non-GAAP)$154,421  $167,372  $158,027  $144,438  $136,798 
Average earning assets$18,392,649  $18,175,838  $18,157,795  $17,987,734  $17,757,067 
          
Annualized net interest margin (GAAP) 3.36%  3.61%  3.41%  3.18%  3.08%
Annualized net interest margin, fully tax-equivalent (non-GAAP) 3.40   3.65   3.45   3.22   3.12 
Net purchase accounting discount amortization on loans included in annualized net interest margin 0.02   0.03   0.03   0.07   0.05 


Reconciliation of Tangible Book Value Per Common Share (non-GAAP)         
Common equity (GAAP)$1,718,700  $1,624,350  $1,545,253  $1,663,363  $1,821,152 
Less goodwill 576,005   576,005   576,005   576,005   576,005 
Less core deposit and customer relationship intangibles, net 23,366   25,154   26,995   28,851   30,934 
Tangible common equity (non-GAAP)$1,119,329  $1,023,191  $942,253  $1,058,507  $1,214,213 
          
Common shares outstanding, net of treasury stock 42,558,726   42,467,394   42,444,106   42,439,439   42,369,908 
Common equity (book value) per share (GAAP)$40.38  $38.25  $36.41  $39.19  $42.98 
Tangible book value per common share (non-GAAP)$26.30  $24.09  $22.20  $24.94  $28.66 
          
Reconciliation of Tangible Common Equity Ratio (non-GAAP)         
Tangible common equity (non-GAAP)$1,119,329  $1,023,191  $942,253  $1,058,507  $1,214,213 
          
Total assets (GAAP)$20,182,544  $20,244,228  $19,682,950  $19,658,399  $19,230,879 
Less goodwill 576,005   576,005   576,005   576,005   576,005 
Less core deposit and customer relationship intangibles, net 23,366   25,154   26,995   28,851   30,934 
Total tangible assets (non-GAAP)$19,583,173  $19,643,069  $19,079,950  $19,053,543  $18,623,940 
Tangible common equity ratio (non-GAAP) 5.72%  5.21%  4.94%  5.56%  6.52%
          
Reconciliation of Adjusted Tangible Common Equity Ratio (non-GAAP)         
Tangible common equity (non-GAAP)$1,119,329  $1,023,191  $942,253  $1,058,507  $1,214,213 
Accumulated other comprehensive loss 566,919   620,006   650,636   486,918   286,921 
Adjusted tangible common equity (non-GAAP)$1,686,248  $1,643,197  $1,592,889  $1,545,425  $1,501,134 
Total tangible assets (non-GAAP)$19,583,173  $19,643,069  $19,079,950  $19,053,543  $18,623,940 
Adjusted tangible common equity ratio (non-GAAP) 8.61%  8.37%  8.35%  8.11%  8.06%
          
(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
3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Net interest income (GAAP)$152,212  $165,220  $155,876  $142,461  $134,679 
Tax-equivalent adjustment(1) 2,209   2,152   2,151   1,977   2,119 
Fully tax-equivalent net interest income 154,421   167,372   158,027   144,438   136,798 
Noninterest income (GAAP) 29,999   29,975   29,181   34,539   34,569 
Securities (gains)/losses, net 1,104   153   1,055   2,089   (2,872)
Unrealized (gain)/loss on equity securities, net (193)  7   211   121   283 
Valuation adjustment on servicing rights             (1,658)
Adjusted revenue (non-GAAP)$185,331  $197,507  $188,474  $181,187  $167,120 
          
Total noninterest expenses (GAAP)$111,043  $117,218  $108,883  $106,479  $110,797 
Less:         
Core deposit and customer relationship intangibles amortization 1,788   1,841   1,856   2,083   2,054 
Partnership investment in tax credit projects 538   3,247   979   737   77 
(Gain)/loss on sales/valuation of assets, net 1,115   2,388   (251)  (3,230)  46 
Acquisition, integration and restructuring costs 1,673   2,442   2,156   2,412   576 
Core expenses (non-GAAP)$105,929  $107,300  $104,143  $104,477  $108,044 
          
Efficiency ratio (GAAP) 60.94%  60.05%  58.84%  60.16%  65.46%
Efficiency ratio, fully tax-equivalent (non-GAAP) 57.16%  54.33%  55.26%  57.66%  64.65%
          
Reconciliation of Annualized Ratio of Core Expenses to Average Assets (non-GAAP)         
Total noninterest expenses (GAAP)$111,043  $117,218  $108,883  $106,479  $110,797 
Core expenses (non-GAAP) 105,929   107,300   104,143   104,477   108,044 
          
Average assets$20,118,005  $19,913,849  $19,775,341  $19,559,091  $19,229,872 
Total noninterest expenses to average assets (GAAP) 2.24%  2.34%  2.18%  2.18%  2.34%
Core expenses to average assets (non-GAAP) 2.14%  2.14%  2.09%  2.14%  2.28%
          
Acquisition, integration and restructuring costs         
Salaries and employee benefits$74  $424  $365  $275  $340 
Professional fees 934   1,587   1,480   1,779   236 
Advertising 122   95   131   156    
Other noninterest expenses 543   336   180   202    
Total acquisition, integration and restructuring costs$1,673  $2,442  $2,156  $2,412  $576 
After tax impact on diluted earnings per common share(1)$0.03  $0.05  $0.04  $0.04  $0.01 
          
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.


CONTACT:
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
(563) 589-1994
BMcKeag@htlf.com