News Column

Heartland Financial USA, Inc. Reports Fourth Quarter 2013 Results

January 27, 2014

Quarterly Highlights Net income available to common stockholders of $7.7 million or $0.42 per diluted common share Net interest margin of 3.82% Loan growth, exclusive of acquisitions, of $178.6 million or 6% since September 30, 2013 Demand deposit growth, exclusive of acquisitions, of $73.3 million or 7% since September 30, 2013 Purchase of Morrill Bancshares, Inc. completed on October 18, 2013 Acquisition of Freedom Bank completed on November 22, 2013 DUBUQUE, Iowa --(BUSINESS WIRE)-- Heartland Financial USA, Inc. (NASDAQ: HTLF): Quarter Ended Twelve Months Ended December 31 , December 31 , 2013 2012 2013 2012 Net income (in millions) $ 7.9 $ 9.5 $ 36.9 $ 49.9 Net income available to common stockholders (in millions) 7.7 9.0 35.7 46.4 Diluted earnings per common share 0.42 0.54 2.04 2.77 Return on average assets 0.55 % 0.76 % 0.70 % 1.04 % Return on average common equity 8.79 11.33 10.87 15.78 Net interest margin 3.82 3.81 3.78 3.98 “We are pleased to report that 2013 was Heartland’s second best in its 33-year history. Though the company fell short of matching the exceptional year experienced in 2012, Heartland’s net income of $35.7 million and return on average equity of 10.87% demonstrate the excellent potential in the company’s core operations.” Lynn B. Fuller , chairman, president and chief executive officer, Heartland Financial USA, Inc. Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income available to common stockholders of $7.7 million , or $0.42 per diluted common share, for the quarter ended December 31, 2013 , compared to $9.0 million , or $0.54 per diluted common share, for the fourth quarter of 2012. Return on average common equity was 8.79% and return on average assets was 0.55% for the fourth quarter of 2013, compared to 11.33% and 0.76%, respectively, for the same quarter in 2012. Net income for the fourth quarter of 2013 was $1.6 million lower than the fourth quarter of 2012, primarily as a result of an $11.1 million decrease in gains on sale of loans, offset by an $8.4 million increase in net interest income and a$1.3 million decrease in the provision for loan and lease losses. Loan growth, exclusive of acquisitions, was $178.6 million or 6% during the fourth quarter of 2013. Commenting on Heartland’s results for 2013, Lynn B. Fuller , Heartland’s chairman, president and chief executive officer said, “We are pleased to report that 2013 was Heartland’s second best in its 33-year history. Though the company fell short of matching the exceptional year experienced in 2012, Heartland’s net income of $35.7 million and return on average equity of 10.87% demonstrate the excellent potential in the company’s core operations.” Net income available to common stockholders was $35.7 million , or $2.04 per diluted common share, for the year ended December 31, 2013 , compared to $46.4 million , or $2.77 per diluted common share, earned during the prior year. Return on average common equity was 10.87% and return on average assets was 0.70% for 2013, compared to 15.78% and 1.04%, respectively, for 2012. Earnings for 2013, in comparison to 2012, were most positively affected by increases in net interest income, loan servicing income and service charges and fees, combined with decreases in net loss on repossessed assets and other noninterest expenses. In addition to a decline in gains on sale of loans during 2013, reduced securities gains and significant increases in salaries and employee benefits, occupancy and furniture and equipment expenses more than offset the improvements discussed above. On October 18, 2013 , Heartland completed a merger transaction with Morrill Bancshares, Inc. , the holding company for Morrill & Janes Bank and Trust Company , based in Merriam, Kansas . On the date of merger, Morrill & Janes Bank and Trust Company had total loans valued at $383.1 million and total deposits valued at $664.8 million . After the merger, Morrill & Janes Bank and Trust Company became Heartland's tenth independent, state-chartered, bank subsidiary and continues to operate under its current name and management team. The aggregate purchase price, which was based on the tangible book value of Morrill Bancshares, Inc. , was approximately $55.4 million , $16.6 million or 30% of which was paid in cash, and $38.8 million or 70% of which was paid by delivery of 1,402,431 shares of Heartland common stock. On November 22, 2013 , Heartland acquired Freedom Bank in Sterling, Illinois , from its parent company, River Valley Bancorp, Inc. , a Davenport, Iowa -based bank holding company. The acquisition of Freedom Bank was arranged through a negotiated transfer of ownership with Heartland’s flagship bank, Dubuque Bank and Trust Company . On the date of acquisition, Freedom Bank had total loans valued at $38.9 million and total deposits valued at $54.1 million . Freedom Bank will operate independently as a subsidiary of Dubuque Bank and Trust Company under its current name, staff and systems until at least the first quarter of 2014 when Heartland intends to consolidate Freedom with Riverside Community Bank , Heartland’s Rockford, Illinois -based bank. Net Interest Margin Percentage Remains Stable; Net Interest Income Increases Net interest margin, expressed as a percentage of average earning assets, was 3.82% during the fourth quarter of 2013 compared to 3.81% during the third quarter of 2013 and 3.81% for the fourth quarter of 2012. For the full year of 2013, net interest margin was 3.78% compared to 3.98% during 2012. Fuller said, “Compared to the previous quarter, we are pleased to see net interest margin increase slightly to 3.82% in the fourth quarter. Margin has been maintained through loan growth, a slowing in the decrease in asset yields and some improvement in our funding cost.” On a tax-equivalent basis, interest income was $58.0 million in the fourth quarter of 2013 compared to $49.5 million in the fourth quarter of 2012, an increase of $8.5 million or 17%. For the full year of 2013, interest income on a tax-equivalent basis was $209.0 million compared to $196.7 million during 2012, an increase of $12.3 million or 6%. Average earning assets increased $890.3 million or 21% during the fourth quarter of 2013 compared to the fourth quarter of 2012, with approximately $680.1 million of the growth attributable to the acquisitions completed during the fourth quarter of 2013. For the full year, average earning assets increased $620.0 million or 16% during 2013 compared to 2012, with approximately $171.4 million of the growth attributable to the acquisitions completed during the fourth quarter of 2013. The average interest rate earned on total average earning assets was 4.55% during the fourth quarter of 2013 compared to 4.72% during the fourth quarter of 2012. For the full year, the average interest rate earned on these assets was 4.56% during 2013 compared to 4.97% during 2012. Interest expense was $9.3 million for the fourth quarter of 2013, a decrease of $270,000 or 3% from $9.5 million in the fourth quarter of 2012. On an annual comparative basis, interest expense decreased $3.5 million or 9%. Even though average interest bearing liabilities increased $591.7 million or 18% for the quarter ended December 31, 2013 , as compared to the same quarter in 2012, and $348.5 million or 11% for the full year of 2013, as compared to the full year of 2012, the average interest rate paid on Heartland's deposits and borrowings declined 20 basis points during the comparable quarterly period and 22 basis points during the comparable yearly period. Contributing to this improvement in interest expense was a continued change in the mix of deposits. Average savings balances, the lowest cost interest bearing deposits, as a percentage of total average interest bearing deposits, were 74% during the fourth quarter of 2013 and 71% during the full year of 2013 compared to 69% for both the fourth quarter and full year of 2012. Additionally, the average interest rate paid on savings deposits was 0.33% during the fourth quarter of 2013 and 0.32% during the full year of 2013 compared to 0.35% during the fourth quarter of 2012 and 0.38% during the full year of 2012. Net interest income on a tax-equivalent basis totaled $48.8 million during the fourth quarter of 2013, an increase of $8.8 million or 22% from the $40.0 million recorded during the fourth quarter of 2012. For the full year of 2013, net interest income on a tax-equivalent basis was $173.3 million , an increase of $15.7 million or 10% from the $157.6 million recorded during the full year of 2012. Decrease in Noninterest Income; Decrease in Noninterest Expenses Over Fourth Quarter 2012 Noninterest income was $17.6 million during the fourth quarter of 2013 compared to $27.2 million during the fourth quarter of 2012, a decrease of $9.6 million or 35%. For the full year, noninterest income was $89.6 million in 2013 compared to $108.7 million in 2012, a decrease of $19.1 million or 18%. Although noninterest income was negatively affected by decreased gains on sale of loans in both the quarterly and yearly comparative periods, these decreases were partially offset by increases in other fee income categories. In particular, Heartland experienced solid growth in service charges and fees, which increased $883,000 or 22% for the quarter and $2.4 million or 16% for the full year; trust fees, which increased $406,000 or 16% for the quarter and $1.2 million or 12% for the full year; and brokerage and insurance commissions, which increased $301,000 or 32% for the quarter and $859,000 or 23% for the full year. Also negatively affecting noninterest income for the yearly comparative period were securities gains which totaled $7.1 million during 2013 compared to $14.0 million during 2012. The following table summarizes Heartland's residential mortgage loan activity during the most recent five quarters, in thousands: As Of and For the Quarter Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Mortgage Servicing Fees $ 1,951 $ 1,903 $ 1,613 $ 1,430 $ 1,304 Mortgage Servicing Rights Income 2,174 3,386 3,965 3,245 3,535 Mortgage Servicing Rights Amortization (1,766 ) (1,811 ) (1,976 ) (1,761 ) (1,871 ) Total Residential Mortgage Loan Servicing Income $ 2,359 $ 3,478 $ 3,602 $ 2,914 $ 2,968 Valuation Adjustment on Mortgage Servicing Rights $ — $ — $ — $ 496 $ 197 Gains On Sale of Residential Mortgage Loans $ 3,034 $ 5,279 $ 9,005 $ 9,641 $ 13,966 Total Residential Mortgage Loan Applications $ 293,115 $ 416,128 $ 653,461 $ 556,890 $ 645,603 Residential Mortgage Loans Originated $ 232,150 $ 349,012 $ 470,813 $ 432,974 $ 490,525 Residential Mortgage Loans Sold $ 214,334 $ 336,780 $ 445,452 $ 424,931 $ 478,280 Residential Mortgage Loan Servicing Portfolio $ 3,045,893 $ 2,887,667 $ 2,679,283 $ 2,428,067 $ 2,199,486 As reflected in the table above, on a sequential quarterly basis, residential mortgage loan originations and the gains on sale of residential mortgage loans and the mortgage servicing rights income they create, decreased during 2013. Gains on sale of loans totaled $3.2 million during the fourth quarter of 2013 compared to $14.3 million during the fourth quarter of 2012, a decrease of $11.1 million or 78%. During the full year of 2013, gains on sale of loans totaled $27.4 million compared to $49.2 million during the full year of 2012, a $21.8 million or 44% decrease. Gains on sale of loans result primarily from the gain or loss on sales of mortgage loans into the secondary market, related fees and fair value marks on the associated derivatives. The volume of residential mortgage loans sold totaled $214.3 million during the fourth quarter of 2013 compared to $478.3 million during the fourth quarter of 2012, and totaled $1.42 billion during the full year of 2013 compared to $1.53 billion during the full year of 2012. For the fourth quarter of 2013, refinancing activity represented 35% of total mortgage loan originations compared to 34% during the third quarter of 2013 and 71% during the fourth quarter of 2012. Loan servicing income decreased $516,000 or 15% for the fourth quarter of 2013 as compared to the fourth quarter of 2012. On an annual comparative basis, loan servicing income increased $3.1 million or 28% for 2013 as compared to 2012. Included in loan servicing income are the fees collected for the servicing of mortgage loans for others, which are dependent upon the aggregate outstanding balance of these loans, rather than quarterly production and sale of mortgage loans. Fees collected for the servicing of mortgage loans for others were $2.0 million during the fourth quarter of 2013 compared to $1.3 million during the fourth quarter of 2012, an increase of $647,000 or 50%. For the year, fees collected for the servicing of mortgage loans for others was $6.9 million for 2013 compared to $4.4 million during 2012, an increase of $2.5 million or 56%. The portfolio of mortgage loans serviced for others by Heartland totaled $3.05 billion at December 31, 2013 , compared to $2.20 billion at December 31, 2012 . Fuller commented, “The mortgage business changed considerably during 2013, creating challenges to our goals. Originations of $1.5 billion in 2013 came close to matching the previous year’s production of $1.6 billion . We remain committed to this business line and continue to look for opportunities to expand into markets with strong residential growth potential.” For the fourth quarter of 2013, noninterest expense totaled $53.9 million compared to $54.6 million during the fourth quarter of 2012, a decrease of $722,000 or 1%. For the full year, noninterest expense totaled $196.6 million in 2013 compared to $183.4 million in 2012, a $13.2 million or 7% increase. Included in other noninterest expenses during the fourth quarter of both years were writedowns on investments in commercial and residential real estate projects which qualified for historic rehabilitation tax credits. These writedowns were $596,000 in 2013 and $5.3 million in 2012. The largest component of noninterest expense, salaries and employee benefits, increased $838,000 or 3% during the fourth quarter of 2013 as compared to the same quarter in 2012, and $12.5 million or 12% for the full year of 2013 as compared to the full year of 2012. Full-time equivalent employees totaled 1,676 on December 31, 2013 , compared to 1,498 on December 31, 2012 . The acquisitions completed in the fourth quarter of 2013 added 133 full-time equivalent employees representing 75% of this increase. Heartland's effective tax rate was 21.90% for 2013 compared to 25.86% for 2012. Heartland's income taxes included federal historic rehabilitation tax credits totaling $914,000 for 2013 and $5.8 million in 2012. Federal low-income housing tax credits included in Heartland's income taxes totaled $798,000 during both 2013 and 2012. Heartland's effective tax rate is also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 37.26% during 2013 compared to 20.43% during 2012. The tax-equivalent adjustment for this tax-exempt interest income was $9.5 million during 2013 compared to $7.4 million during 2012. Solid Growth in Loans; Increase in Demand Deposits Total assets were $5.92 billion at December 31, 2013 , an increase of $927.5 million or 19% since December 31, 2012 . Total assets at acquisition date were $809.2 million for the Morrill & Janes merger and $67.1 million for the Freedom acquisition. Securities represented 32% of Heartland's total assets at December 31, 2013 , compared to 31% at year-end 2012. Total loans and leases held to maturity were $3.50 billion at December 31, 2013 , compared to $2.82 billion at year-end 2012, an increase of $675.4 million or 24%, with $595.2 million occurring during the fourth quarter. Included in the loan growth for the fourth quarter of 2013 were $377.4 million acquired in the Morrill & Janes merger and $39.3 million acquired in the Freedom acquisition. Excluding these acquisitions, loan growth totaled $178.9 million or 6% for the fourth quarter of 2013 and $258.7 million or 9% for the full year of 2013. Commercial and commercial real estate loans, which totaled $2.48 billion at December 31, 2013 , increased $478.6 million or 24% since year-end 2012, with $295.6 million attributable to the acquisitions. Residential mortgage loans, which totaled $349.3 million at December 31, 2013 , increased $99.7 million or 40% since year-end 2012, with $56.6 million attributable to the acquisitions. Agricultural and agricultural real estate loans, which totaled $376.7 million at December 31, 2013 , increased $48.4 million or 15% since year-end 2012, with $49.4 million attributable to the acquisitions. Consumer loans, which totaled $294.1 million at December 31, 2013 , increased $48.5 million or 20% since year-end 2012, with $15.0 million attributable to the acquisitions. “After a slow start in early 2013, Heartland experienced excellent loan growth in the second, third and fourth quarters of the year. Adjusting for acquisitions, total loans grew by 9%, balanced nicely among commercial and consumer business lines,” added Fuller. Total deposits were $4.67 billion at December 31, 2013 , compared to $3.85 billion at year-end 2012, an increase of $820.8 million or 21%, with $665.3 million attributable to the Morrill & Janes merger and $54.1 million attributable to the Freedom acquisition. Demand deposits totaled $1.24 billion at December 31, 2013 , an increase of $264.3 million or 27% since year-end 2012, with $91.6 million attributable to the acquisitions. Exclusive of $543.6 million acquired, savings deposits decreased $12.8 million or 1% since year-end 2012. Certificates of deposit decreased $58.5 million or 7% when excluding $84.2 million in acquired certificates of deposit. The composition of Heartland's deposits continued its positive trend as no-cost demand deposits as a percentage of total deposits were 27% at December 31, 2013 , compared to 25% at December 31, 2012 , while higher-cost certificates of deposit as a percentage of total deposits were 19% at December 31, 2013 , compared to 23% at December 31, 2012 . Fuller said, “Adjusting for acquisitions, deposits increased by 3% in 2013. We continue to experience a very favorable shift in deposit mix, with demand deposits growing at an 18% rate.” Common stockholders' equity was $357.8 million at December 31, 2013 , compared to $314.9 million at September 30, 2013 , and $320.1 million at year-end 2012. Book value per common share was $19.44 at December 31, 2013 , compared to $18.58 at September 30, 2013 , and $19.02 at year-end 2012. Changes in common stockholders' equity and book value per common share are the result of earnings, dividends paid, stock transactions and mark-to-market adjustment for unrealized gains and losses on securities available for sale. As a result of increases in market interest rates on many debt securities during the last three quarters of 2013, Heartland's unrealized gains and losses on securities available for sale, net of applicable taxes, were at an unrealized loss of $15.1 million at December 31, 2013 , and $11.2 million at September 30, 2013 , compared to an unrealized gain of $20.5 million at December 31, 2012 . Decrease in Provision for Loan Losses For the Year; Decrease in Nonperforming Loans During the Quarter The allowance for loan and lease losses at December 31, 2013 , was 1.19% of loans and leases and 98.27% of nonperforming loans compared to 1.37% of loans and leases and 89.71% of nonperforming loans at December 31, 2012 . The provision for loan losses was $2.0 million for the fourth quarter of 2013 compared to $3.4 million for the fourth quarter of 2012. For the full year of 2013, provision for loan losses was $9.7 million compared to $8.2 million for 2012. Nonperforming loans, exclusive of those covered under loss sharing agreements, were $42.4 million or 1.21% of total loans and leases at December 31, 2013 , compared to $47.1 million or 1.62% of total loans and leases at September 30, 2013 , and $43.2 million or 1.53% of total loans and leases at December 31, 2012 . Approximately 63%, or $27.3 million , of Heartland's nonperforming loans have individual loan balances exceeding $1.0 million , the largest of which is $6.8 million . These nonperforming loans, to an aggregate of 8 borrowers, are primarily located in the Midwestern states and are spread over 6 different industry classifications. Delinquencies in each of the loan portfolios continue to be well-managed. Loans delinquent 30 to 89 days as a percent of total loans were 0.29% at December 31, 2013 , compared to 0.67% at September 30, 2013 , and 0.32% at December 31, 2012 . The increase in delinquencies during the third quarter of 2013 was primarily associated with a single credit that was renewed after quarter end. Had this renewal occurred prior to quarter end, loans delinquent 30 to 89 days would have been at 0.37% at September 30, 2013 . Other real estate owned was $29.9 million at December 31, 2013 , compared to $33.0 million at September 30, 2013 , and $35.8 million at December 31, 2012 . Liquidation strategies have been identified for all the assets held in other real estate owned. Management continues to market these properties through an orderly liquidation process instead of a quick liquidation process in order to avoid discounts greater than the projected carrying costs. During 2013, $6.0 million of other real estate owned was sold during the fourth quarter, $2.7 million during the third quarter, $5.3 million during the second quarter and $3.3 million during the first quarter. The schedules below summarize the changes in Heartland's nonperforming assets, including those covered by loss share agreements, during the fourth quarter of 2013 and the year, in thousands: Other Other Total Nonperforming Real Estate Repossessed Nonperforming Loans Owned Assets Assets September 30, 2013 $ 47,893 $ 33,018 $ 473 $ 81,384 Loan foreclosures (5,047 ) 5,025 22 — Net loan charge offs (1,675 ) — — (1,675 ) New nonperforming loans 6,981 — — 6,981 Reduction of nonperforming loans (1) (4,951 ) — — (4,951 ) OREO/Repossessed assets sales proceeds — (6,842 ) (65 ) (6,907 ) OREO/Repossessed assets writedowns, net — (1,349 ) (38 ) (1,387 ) Net activity at Citizens Finance Co. — — 5 5 December 31, 2013 $ 43,201 $ 29,852 $ 397 $ 73,450 (1) Includes principal reductions and transfers to performing status. Other Other Total Nonperforming Real Estate Repossessed Nonperforming Loans Owned Assets Assets December 31, 2012 $ 44,415 $ 35,822 $ 542 $ 80,779 Loan foreclosures (18,956 ) 18,343 613 — Net loan charge offs (6,727 ) — — (6,727 ) New nonperforming loans 44,884 — — 44,884 Reduction of nonperforming loans (1) (20,415 ) — — (20,415 ) OREO/Repossessed assets sales proceeds — (19,081 ) (546 ) (19,627 ) OREO/Repossessed assets writedowns, net — (5,232 ) (179 ) (5,411 ) Net activity at Citizens Finance Co. — — (33 ) (33 ) December 31, 2013 $ 43,201 $ 29,852 $ 397 $ 73,450 (1) Includes principal reductions and transfers to performing status. Net charge-offs on loans during the fourth quarter of 2013 were $1.7 million compared to $5.0 during the fourth quarter of 2012. For the full year, net charge-offs were $6.7 million during 2013 compared to $6.3 million during 2012. “For both the fourth quarter and the year 2013, we made excellent progress in the reduction of nonperforming loans. Total nonperforming loans ended the quarter at 1.21% of total loans, a decrease from 1.62% for the third quarter of 2013 and from 1.53% at year-end 2012. Maintaining excellent quality in our loan portfolio will always be one of our highest priorities,” Fuller concluded. Conference Call Details Heartland will host a conference call for investors at 5:00 p.m. EDT today. To participate, dial 877-407-0781 at least five minutes before start time. To listen to the live webcast, log on to www.htlf.com at least 15 minutes before start time. If you are unable to participate on the call, a replay will be available until January 26, 2015 , by logging on to www.htlf.com . About Heartland Financial USA, Inc. Heartland Financial USA, Inc. is a $5.9 billion diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 80 banking locations in 60 communities in Iowa , Illinois , Wisconsin , New Mexico , Arizona , Montana , Colorado , Minnesota , Kansas and Missouri and loan production offices in California , Nevada , Wyoming , Idaho , North Dakota , Oregon , Washington and Nebraska . Additional information about Heartland Financial USA, Inc. is available at www.htlf.com . Safe Harbor Statement This release, and future oral and written statements of Heartland and its management, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Heartland's financial condition, results of operations, plans, objectives, future performance and business. Although these forward-looking statements are based upon the beliefs, expectations and assumptions of Heartland's management, there are a number of factors, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed in the risk factors included in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission , include, among others: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war, (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the potential impact of acquisitions, (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x) unexpected outcomes of existing or new litigation involving the Company; and (xii) changes in accounting policies and practices. All statements in this release, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events. HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended For the Year Ended December 31 , December 31 , 2013 2012 2013 2012 Interest Income Interest and fees on loans and leases $ 44,995 $ 39,510 $ 164,702 $ 156,499 Interest on securities: Taxable 7,327 5,079 21,501 22,129 Nontaxable 3,294 2,912 13,295 10,698 Interest on federal funds sold 1 3 1 4 Interest on deposits in other financial institutions 3 3 12 8 Total Interest Income 55,620 47,507 199,511 189,338 Interest Expense Interest on deposits 5,057 5,347 19,968 22,230 Interest on short-term borrowings 421 166 808 818 Interest on other borrowings 3,785 4,020 14,907 16,134 Total Interest Expense 9,263 9,533 35,683 39,182 Net Interest Income 46,357 37,974 163,828 150,156 Provision for loan and lease losses 2,049 3,350 9,697 8,202 Net Interest Income After Provision for Loan and Lease Losses 44,308 34,624 154,131 141,954 Noninterest Income Service charges and fees 4,885 4,002 17,660 15,242 Loan servicing income 2,952 3,468 14,413 11,300 Trust fees 2,944 2,538 11,708 10,478 Brokerage and insurance commissions 1,246 945 4,561 3,702 Securities gain (loss), net 509 (108 ) 7,121 13,998 Gain (loss) on trading account securities 582 164 1,421 47 Impairment loss on securities — — — (981 ) Gains on sale of loans 3,184 14,257 27,430 49,198 Valuation adjustment on mortgage servicing rights — 197 496 (477 ) Income on bank owned life insurance 426 311 1,555 1,442 Other noninterest income 846 1,456 3,253 4,713 Total Noninterest Income 17,574 27,230 89,618 108,662 Noninterest Expense Salaries and employee benefits 30,121 29,283 118,224 105,727 Occupancy 3,663 3,017 13,459 10,629 Furniture and equipment 2,007 1,822 8,040 6,326 Professional fees 5,270 4,400 17,532 15,338 FDIC insurance assessments 1,036 810 3,544 3,292 Advertising 1,458 1,736 5,294 5,294 Intangible assets amortization 469 163 1,063 562 Net loss on repossessed assets 2,358 1,983 7,244 9,969 Other noninterest expenses 7,519 11,409 22,161 26,244 Total Noninterest Expense 53,901 54,623 196,561 183,381 Income Before Income Taxes 7,981 7,231 47,188 67,235 Income taxes 46 (2,258 ) 10,335 17,384 Net Income 7,935 9,489 36,853 49,851 Net (income) loss attributable to noncontrolling interest, net of tax — (82 ) (64 ) (59 ) Net Income Attributable to Heartland 7,935 9,407 36,789 49,792 Preferred dividends and discount (204 ) (409 ) (1,093 ) (3,400 ) Net Income Available to Common Stockholders $ 7,731 $ 8,998 $ 35,696 $ 46,392 Earnings per common share-diluted $ 0.42 $ 0.54 $ 2.04 $ 2.77 Weighted average shares outstanding-diluted 18,360,470 16,812,947 17,460,066 16,768,602 HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Interest Income Interest and fees on loans and leases $ 44,995 $ 40,154 $ 39,726 $ 39,827 $ 39,510 Interest on securities: Taxable 7,327 4,803 4,712 4,659 5,079 Nontaxable 3,294 3,443 3,360 3,198 2,912 Interest on federal funds sold 1 — — — 3 Interest on deposits in other financial institutions 3 3 2 4 3 Total Interest Income 55,620 48,403 47,800 47,688 47,507 Interest Expense Interest on deposits 5,057 4,769 5,066 5,076 5,347 Interest on short-term borrowings 421 131 108 148 166 Interest on other borrowings 3,785 3,623 3,702 3,797 4,020 Total Interest Expense 9,263 8,523 8,876 9,021 9,533 Net Interest Income 46,357 39,880 38,924 38,667 37,974 Provision for loan and lease losses 2,049 5,149 1,862 637 3,350 Net Interest Income After Provision for Loan and Lease Losses 44,308 34,731 37,062 38,030 34,624 Noninterest Income Service charges and fees 4,885 4,487 4,280 4,008 4,002 Loan servicing income 2,952 3,984 4,106 3,371 3,468 Trust fees 2,944 2,918 2,942 2,904 2,538 Brokerage and insurance commissions 1,246 1,277 1,087 951 945 Securities gain (loss), net 509 1,118 2,067 3,427 (108 ) Gain (loss) on trading account securities 582 263 262 314 164 Impairment loss on securities — — — — — Gains on sale of loans 3,184 5,251 9,083 9,912 14,257 Valuation adjustment on mortgage servicing rights — — — 496 197 Income on bank owned life insurance 426 409 315 405 311 Other noninterest income 846 1,011 716 680 1,456 Total Noninterest Income 17,574 20,718 24,858 26,468 27,230 Noninterest Expense Salaries and employee benefits 30,121 28,847 29,516 29,740 29,283 Occupancy 3,663 3,387 3,224 3,185 3,017 Furniture and equipment 2,007 1,917 2,065 2,051 1,822 Professional fees 5,270 4,486 4,233 3,543 4,400 FDIC insurance assessments 1,036 745 861 902 810 Advertising 1,458 1,360 1,248 1,228 1,736 Intangible assets amortization 469 196 198 200 163 Net loss on repossessed assets 2,358 1,069 2,477 1,340 1,983 Other noninterest expenses 7,519 5,140 4,944 4,558 11,409 Total Noninterest Expense 53,901 47,147 48,766 46,747 54,623 Income Before Income Taxes 7,981 8,302 13,154 17,751 7,231 Income taxes 46 1,492 3,598 5,199 (2,258 ) Net Income 7,935 6,810 9,556 12,552 9,489 Net (income) loss attributable to noncontrolling interest, net of tax — — — (64 ) (82 ) Net Income Attributable to Heartland 7,935 6,810 9,556 12,488 9,407 Preferred dividends and discount (204 ) (276 ) (205 ) (408 ) (409 ) Net Income Available to Common Stockholders $ 7,731 $ 6,534 $ 9,351 $ 12,080 $ 8,998 Earnings per common share-diluted $ 0.42 $ 0.38 $ 0.54 $ 0.70 $ 0.54 Weighted average shares outstanding-diluted 18,360,470 17,221,154 17,203,924 17,187,180 16,812,947 HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA As Of 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Assets Cash and cash equivalents $ 125,270 $ 165,008 $ 112,097 $ 74,587 $ 168,054 Time deposits in other financial institutions 3,355 3,605 3,605 3,605 — Securities 1,895,044 1,446,670 1,578,573 1,580,719 1,561,957 Loans held for sale 46,665 61,326 88,541 91,708 96,165 Loans and leases: Held to maturity 3,496,952 2,901,706 2,832,377 2,789,893 2,821,549 Loans covered by loss share agreements 5,749 5,876 6,275 6,741 7,253 Allowance for loan and lease losses (41,685 ) (41,311 ) (37,623 ) (37,528 ) (38,715 ) Loans and leases, net 3,461,016 2,866,271 2,801,029 2,759,106 2,790,087 Premises, furniture and equipment, net 135,714 129,029 129,938 128,411 128,294 Goodwill 35,583 30,627 30,627 30,627 30,627 Other intangible assets, net 32,959 23,435 22,056 20,266 18,486 Cash surrender value on life insurance 81,110 79,238 75,992 75,907 75,480 Other real estate, net 29,852 33,018 34,763 36,704 35,822 FDIC indemnification asset 249 795 282 528 749 Other assets 76,899 73,708 82,253 98,390 84,832 Total Assets $ 5,923,716 $ 4,912,730 $ 4,959,756 $ 4,900,558 $ 4,990,553 Liabilities and Equity Liabilities Deposits: Demand $ 1,238,581 $ 1,073,688 $ 1,029,784 $ 971,142 $ 974,232 Savings 2,535,242 2,043,397 1,978,962 2,022,625 2,004,438 Time 892,676 807,913 832,388 848,689 866,990 Total deposits 4,666,499 3,924,998 3,841,134 3,842,456 3,845,660 Short-term borrowings 408,756 224,048 339,181 202,694 224,626 Other borrowings 350,109 322,538 336,332 336,577 389,025 Accrued expenses and other liabilities 58,892 44,543 47,974 104,857 126,703 Total Liabilities 5,484,256 4,516,127 4,564,621 4,486,584 4,586,014 Equity Preferred equity 81,698 81,698 81,698 81,698 81,698 Common equity 357,762 314,905 313,437 329,478 320,107 Total Heartland Stockholders' Equity 439,460 396,603 395,135 411,176 401,805 Noncontrolling interest — — — 2,798 2,734 Total Equity 439,460 396,603 395,135 413,974 404,539 Total Liabilities and Equity $ 5,923,716 $ 4,912,730 $ 4,959,756 $ 4,900,558 $ 4,990,553 Common Share Data Book value per common share $ 19.44 $ 18.58 $ 18.51 $ 19.54 $ 19.02 ASC 320 effect on book value per common share $ (0.82 ) $ (0.66 ) $ (0.44 ) $ 1.03 $ 1.21 Common shares outstanding, net of treasury stock 18,399,156 16,951,053 16,934,161 16,865,919 16,827,835 Tangible Capital Ratio (1) 5.29 % 5.78 % 5.69 % 6.09 % 5.78 % (1) Total common stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by total assets less intangible assets (excluding mortgage servicing rights). This is a non-GAAP financial measure but has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength. HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended For the Year Ended December 31 , December 31 , 2013 2012 2013 2012 Average Balances Assets $ 5,604,487 $ 4,739,887 $ 5,083,131 $ 4,463,665 Loans and leases, net of unearned 3,341,252 2,803,361 3,016,433 2,696,452 Deposits 4,512,170 3,674,507 4,013,252 3,396,488 Earning assets 5,061,822 4,171,475 4,582,296 3,962,268 Interest bearing liabilities 3,921,951 3,330,270 3,545,737 3,197,249 Common stockholders' equity 349,056 316,073 328,454 293,917 Total stockholders' equity 430,754 400,442 411,056 378,278 Tangible common stockholders' equity 308,802 288,359 293,505 266,423 Earnings Performance Ratios Annualized return on average assets 0.55 % 0.76 % 0.70 % 1.04 % Annualized return on average common equity 8.79 % 11.33 % 10.87 % 15.78 % Annualized return on average common tangible equity 9.93 % 12.41 % 12.16 % 17.41 % Annualized net interest margin (1) 3.82 % 3.81 % 3.78 % 3.98 % Efficiency ratio, fully taxable equivalent (2) 81.86 % 81.13 % 76.84 % 72.71 % HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Average Balances Assets $ 5,604,487 $ 4,901,972 $ 4,932,852 $ 4,890,023 $ 4,739,887 Loans and leases, net of unearned 3,341,252 2,937,508 2,905,778 2,876,960 2,803,361 Deposits 4,512,170 3,861,624 3,871,945 3,801,125 3,674,507 Earning assets 5,061,822 4,396,140 4,461,923 4,404,119 4,171,475 Interest bearing liabilities 3,921,951 3,413,205 3,433,686 3,412,641 3,330,270 Common stockholders' equity 349,056 309,472 332,386 322,820 316,073 Total stockholders' equity 430,754 391,170 414,976 407,282 400,442 Tangible common stockholders' equity 308,802 276,511 299,225 289,453 288,359 Earnings Performance Ratios Annualized return on average assets 0.55 % 0.53 % 0.76 % 1.00 % 0.76 % Annualized return on average common equity 8.79 % 8.38 % 11.28 % 15.18 % 11.33 % Annualized return on average common tangible equity 9.93 % 9.38 % 12.53 % 16.93 % 12.41 % Annualized net interest margin (1) 3.82 % 3.81 % 3.71 % 3.77 % 3.81 % Efficiency ratio, fully taxable equivalent (2) 81.86 % 76.21 % 76.08 % 73.06 % 81.13 % (1) Computed on a tax equivalent basis using an effective tax rate of 35% (2) Efficiency ratio, fully taxable equivalent, is noninterest expense, divided by the sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains (losses), net. This efficiency ratio is presented on a taxable equivalent basis, which adjusts net interest income for the tax-favored status of certain loans and investment securities. Management believes this measure to be the preferred industry measurement of net interest income as it enhances the comparability of net interest income arising from taxable and tax-exempt sources and it excludes certain specific revenue items (such as investment securities gains (losses), net). This is a non-GAAP measure. HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA As of and for the Quarter Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Loan and Lease Data Loans held to maturity: Commercial and commercial real estate $ 2,479,880 $ 2,042,995 $ 2,004,883 $ 1,990,818 $ 2,001,492 Residential mortgage 349,349 269,501 248,604 240,453 249,689 Agricultural and agricultural real estate 376,735 324,339 327,490 314,606 328,311 Consumer 294,145 268,112 254,825 246,996 245,678 Unearned discount and deferred loan fees (3,157 ) (3,241 ) (3,425 ) (2,980 ) (3,621 ) Total loans and leases held to maturity $ 3,496,952 $ 2,901,706 $ 2,832,377 $ 2,789,893 $ 2,821,549 Loans covered under loss share agreements: Commercial and commercial real estate $ 2,314 $ 2,402 $ 2,519 $ 2,738 $ 3,074 Residential mortgage 2,280 2,433 2,493 2,722 2,645 Agricultural and agricultural real estate 543 446 441 453 748 Consumer 612 595 822 828 786 Total loans and leases covered under loss share agreements $ 5,749 $ 5,876 $ 6,275 $ 6,741 $ 7,253 Asset Quality Not covered under loss share agreements: Nonaccrual loans $ 42,394 $ 47,088 $ 41,003 $ 32,356 $ 43,156 Loans and leases past due ninety days or more as to interest or principal payments 24 - 6 454 - Other real estate owned 29,794 32,753 33,709 35,697 35,470 Other repossessed assets 397 469 603 1,059 542 Total nonperforming assets not covered under loss share agreements $ 72,609 $ 80,310 $ 75,321 $ 69,566 $ 79,168 Performing troubled debt restructured loans $ 19,353 $ 19,371 $ 32,661 $ 24,473 $ 21,121 Covered under loss share agreements: Nonaccrual loans $ 783 $ 805 $ 571 $ 636 $ 1,259 Other real estate owned 58 265 1,054 1,007 352 Other repossessed assets - 4 - - - Total nonperforming assets covered under loss share agreements $ 841 $ 1,074 $ 1,625 $ 1,643 $ 1,611 Allowance for Loan and Lease Losses Balance, beginning of period $ 41,311 $ 37,623 $ 37,528 $ 38,715 $ 40,401 Provision for loan and lease losses 2,049 5,149 1,862 637 3,350 Charge-offs on loans not covered by loss share agreements (3,197 ) (2,454 ) (2,742 ) (3,041 ) (7,455 ) Charge-offs on loans covered by loss share agreements - (59 ) (31 ) (23 ) (137 ) Recoveries 1,522 1,052 1,006 1,240 2,556 Balance, end of period $ 41,685 $ 41,311 $ 37,623 $ 37,528 $ 38,715 Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements Ratio of nonperforming loans and leases to total loans and leases 1.21 % 1.62 % 1.45 % 1.18 % 1.53 % Ratio of nonperforming assets to total assets 1.23 % 1.63 % 1.52 % 1.42 % 1.59 % Annualized ratio of net loan charge-offs to average loans and leases 0.20 % 0.20 % 0.24 % 0.26 % 0.71 % Allowance for loan and lease losses as a percent of loans and leases 1.19 % 1.42 % 1.33 % 1.35 % 1.37 % Allowance for loan and lease losses as a percent of nonperforming loans and leases 98.27 % 87.73 % 91.74 % 114.38 % 89.71 % HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS For the Quarter Ended December 31, 2013 December 31, 2012 Average Average Balance Interest Rate Balance Interest Rate Earning Assets Securities: Taxable $ 1,354,055 $ 7,327 2.15 % $ 1,077,167 $ 5,079 1.88 % Nontaxable (1) 395,449 5,063 5.08 325,864 4,481 5.47 Total securities 1,749,504 12,390 2.81 1,403,031 9,560 2.71 Interest bearing deposits 9,320 3 0.13 5,580 3 0.21 Federal funds sold 3,629 1 0.11 428 3 2.79 Loans and leases: Commercial and commercial real estate (1) 2,310,060 28,951 4.97 1,941,806 25,236 5.17 Residential mortgage 382,446 4,177 4.33 318,583 3,380 4.22 Agricultural and agricultural real estate (1) 361,153 4,651 5.11 301,502 4,094 5.40 Consumer 287,593 6,316 8.71 241,470 5,906 9.73 Fees on loans — 1,547 — — 1,341 — Less: allowance for loan and lease losses (41,883 ) — — (40,925 ) — — Net loans and leases 3,299,369 45,642 5.49 2,762,436 39,957 5.75 Total earning assets 5,061,822 58,036 4.55 % 4,171,475 49,523 4.72 % Nonearning Assets 542,665 568,412 Total Assets $ 5,604,487 $ 4,739,887 Interest Bearing Liabilities Savings $ 2,443,175 $ 2,037 0.33 % $ 1,900,292 $ 1,672 0.35 % Time, $100,000 and over 331,321 1,008 1.21 295,566 1,174 1.58 Other time deposits 531,761 2,012 1.50 538,831 2,501 1.85 Short-term borrowings 276,785 421 0.60 214,592 166 0.31 Other borrowings 338,909 3,785 4.43 380,989 4,020 4.20 Total interest bearing liabilities 3,921,951 9,263 0.94 % 3,330,270 9,533 1.14 % Noninterest Bearing Liabilities Noninterest bearing deposits 1,205,913 939,818 Accrued interest and other liabilities 45,869 69,357 Total noninterest bearing liabilities 1,251,782 1,009,175 Stockholders' Equity 430,754 400,442 Total Liabilities and Stockholders' Equity $ 5,604,487 $ 4,739,887 Net interest income (1) $ 48,773 $ 39,990 Net interest spread (1) 3.61 % 3.58 % Net interest income to total earning assets (1) 3.82 % 3.81 % Interest bearing liabilities to earning assets 77.48 % 79.83 % (1) Computed on a tax equivalent basis using an effective tax rate of 35% HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS For the Year Ended December 31, 2013 December 31, 2012 Average Average Balance Interest Rate Balance Interest Rate Earning Assets Securities: Taxable $ 1,198,777 $ 21,501 1.79 % $ 1,015,624 $ 22,129 2.18 % Nontaxable (1) 395,578 20,452 5.17 283,735 16,459 5.80 Total securities 1,594,355 41,953 2.63 1,299,359 38,588 2.97 Interest bearing deposits 9,242 12 0.13 5,658 8 0.14 Federal funds sold 1,417 1 0.07 556 4 0.72 Loans and leases: Commercial and commercial real estate (1) 2,078,594 105,239 5.06 1,889,891 100,644 5.33 Residential mortgage 344,606 14,511 4.21 293,850 13,142 4.47 Agricultural and agricultural real estate (1) 331,622 17,494 5.28 282,519 15,896 5.63 Consumer 261,611 24,210 9.25 230,192 22,874 9.94 Fees on loans 5,556 — 5,580 — Less: allowance for loan and lease losses (39,151 ) — — (39,757 ) — — Net loans and leases 2,977,282 167,010 5.61 2,656,695 158,136 5.95 Total earning assets 4,582,296 208,976 4.56 % 3,962,268 196,736 4.97 % Nonearning Assets 500,835 501,397 Total Assets $ 5,083,131 $ 4,463,665 Interest Bearing Liabilities Savings $ 2,101,295 $ 6,674 0.32 % $ 1,763,233 $ 6,736 0.38 % Time, $100,000 and over 315,623 4,403 1.40 272,338 4,776 1.75 Other time deposits 532,157 8,891 1.67 531,351 10,718 2.02 Short-term borrowings 257,084 808 0.32 252,849 818 0.32 Other borrowings 339,578 14,907 4.39 377,478 16,134 4.27 Total interest bearing liabilities 3,545,737 35,683 1.01 % 3,197,249 39,182 1.23 % Noninterest Bearing Liabilities Noninterest bearing deposits 1,064,177 829,566 Accrued interest and other liabilities 62,161 58,572 Total noninterest bearing liabilities 1,126,338 888,138 Stockholders' Equity 411,056 378,278 Total Liabilities and Stockholders' Equity $ 5,083,131 $ 4,463,665 Net interest income (1) $ 173,293 $ 157,554 Net interest spread (1) 3.55 % 3.74 % Net interest income to total earning assets (1) 3.78 % 3.98 % Interest bearing liabilities to earning assets 77.38 % 80.69 % (1) Computed on a tax equivalent basis using an effective tax rate of 35% HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS As of and For the Quarter Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Total Assets Dubuque Bank and Trust Company $ 1,540,049 $ 1,438,041 $ 1,512,215 $ 1,436,744 $ 1,482,504 New Mexico Bank & Trust 1,032,441 999,555 1,029,360 1,010,607 1,026,952 Morrill & Janes Bank and Trust Company 890,984 - - - - Wisconsin Bank & Trust 643,430 635,606 643,727 651,277 691,715 Rocky Mountain Bank 467,443 464,221 448,855 457,389 465,614 Arizona Bank & Trust 450,320 415,174 393,829 404,518 307,871 Riverside Community Bank 443,114 460,224 450,915 422,352 450,863 Galena State Bank & Trust Co. 290,457 296,383 290,388 294,484 295,226 Minnesota Bank & Trust 170,517 166,324 164,714 127,044 126,421 Summit Bank & Trust 113,719 115,547 118,049 115,649 119,752 Total Deposits Dubuque Bank and Trust Company $ 1,116,154 $ 1,118,225 $ 1,122,506 $ 1,123,323 $ 1,150,141 New Mexico Bank & Trust 765,572 765,903 748,345 716,938 721,445 Morrill & Janes Bank and Trust Company 692,038 - - - - Wisconsin Bank & Trust 531,371 545,163 527,762 533,956 549,773 Rocky Mountain Bank 380,011 375,949 367,707 380,024 372,135 Arizona Bank & Trust 368,059 320,737 321,813 339,797 243,044 Riverside Community Bank 353,046 371,779 334,248 352,189 344,005 Galena State Bank & Trust Co. 244,505 252,691 245,324 235,000 245,554 Minnesota Bank & Trust 154,812 151,659 145,246 111,886 109,862 Summit Bank & Trust 101,447 102,855 102,891 100,617 93,318 Net Income (Loss) Dubuque Bank and Trust Company $ 5,009 $ 2,737 $ 3,694 $ 2,872 $ 5,581 New Mexico Bank & Trust 1,575 1,660 2,520 3,444 1,354 Morrill & Janes Bank and Trust Company 1,145 - - - - Wisconsin Bank & Trust 1,850 1,990 1,534 2,544 638 Rocky Mountain Bank 576 916 854 1,175 2,029 Arizona Bank & Trust 125 380 1,568 1,714 1,346 Riverside Community Bank 433 546 240 827 482 Galena State Bank & Trust Co. 403 324 981 1,270 929 Minnesota Bank & Trust (31 ) (124 ) 196 320 412 Summit Bank & Trust 44 (368 ) (242 ) (45 ) (69 ) Return on Average Assets Dubuque Bank and Trust Company 1.36 % 0.74 % 1.00 % 0.81 % 1.34 % New Mexico Bank & Trust 0.61 0.66 0.99 1.38 0.53 Morrill & Janes Bank and Trust Company 0.66 - - - - Wisconsin Bank & Trust 1.16 1.24 0.96 1.58 0.44 Rocky Mountain Bank 0.49 0.80 0.75 1.03 1.86 Arizona Bank & Trust 0.12 0.38 1.59 1.69 1.87 Riverside Community Bank 0.38 0.46 0.21 0.77 0.46 Galena State Bank & Trust Co. 0.54 0.43 1.35 1.82 1.25 Minnesota Bank & Trust (0.07 ) (0.32 ) 0.55 1.03 1.41 Summit Bank & Trust 0.15 (1.27 ) (0.85 ) (0.16 ) (0.25 ) Net Interest Margin as a Percentage of Average Earning Assets Dubuque Bank and Trust Company 3.59 % 3.30 % 3.23 % 3.37 % 3.57 % New Mexico Bank & Trust 3.63 3.58 3.53 3.56 3.51 Morrill & Janes Bank and Trust Company 2.97 - - - - Wisconsin Bank & Trust 4.39 4.43 4.25 4.34 4.16 Rocky Mountain Bank 4.22 4.15 3.96 3.82 4.26 Arizona Bank & Trust 4.35 4.57 4.29 4.25 3.89 Riverside Community Bank 3.17 2.82 2.89 2.80 3.02 Galena State Bank & Trust Co. 3.47 3.32 3.48 3.69 3.31 Minnesota Bank & Trust 3.64 3.50 3.30 3.68 4.04 Summit Bank & Trust 3.79 3.76 3.57 3.89 3.62 HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS As of 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Total Portfolio Loans and Leases Dubuque Bank and Trust Company $ 915,377 $ 828,502 $ 828,088 $ 803,084 $ 814,400 New Mexico Bank & Trust 529,808 508,452 501,373 490,691 497,837 Morrill & Janes Bank and Trust Company 384,685 - - - - Wisconsin Bank & Trust 459,594 444,174 442,184 445,869 446,214 Rocky Mountain Bank 316,702 301,224 285,900 272,385 278,252 Riverside Community Bank 186,739 181,024 174,498 167,776 166,852 Arizona Bank & Trust 329,211 278,616 251,416 249,642 189,314 Galena State Bank & Trust Co. 183,639 177,480 169,306 170,500 176,109 Minnesota Bank & Trust 101,491 94,182 89,121 89,876 90,729 Summit Bank & Trust 73,150 75,681 75,869 77,305 77,264 Allowance For Loan and Lease Losses Dubuque Bank and Trust Company $ 10,303 $ 11,040 $ 8,858 $ 8,758 $ 9,217 New Mexico Bank & Trust 7,202 7,007 6,619 6,381 6,837 Morrill & Janes Bank and Trust Company 406 - - - - Wisconsin Bank & Trust 4,850 4,554 4,420 4,248 4,164 Rocky Mountain Bank 4,148 4,451 4,404 4,009 4,072 Arizona Bank & Trust 4,133 3,841 3,573 4,065 4,444 Riverside Community Bank 3,121 3,012 2,924 3,174 3,240 Galena State Bank & Trust Co. 1,916 1,872 1,759 1,856 2,031 Minnesota Bank & Trust 1,091 1,068 944 920 961 Summit Bank & Trust 1,334 1,297 1,222 1,339 1,204 Nonperforming Loans and Leases Dubuque Bank and Trust Company $ 15,641 $ 19,803 $ 9,612 $ 2,234 $ 2,783 New Mexico Bank & Trust 6,880 7,406 8,606 8,228 10,711 Morrill & Janes Bank and Trust Company 160 - - - - Wisconsin Bank & Trust 6,165 6,825 7,921 3,875 5,433 Rocky Mountain Bank 3,326 4,076 5,997 6,130 8,174 Arizona Bank & Trust 4,413 1,862 2,240 3,378 3,549 Riverside Community Bank 3,325 4,120 2,769 3,118 3,473 Galena State Bank & Trust Co. 1,077 1,131 1,246 3,087 5,080 Minnesota Bank & Trust - - 3 4 5 Summit Bank & Trust 688 1,021 1,897 2,001 3,159 Allowance As a Percent of Total Loans and Leases Dubuque Bank and Trust Company 1.13 % 1.33 % 1.07 % 1.09 % 1.13 % New Mexico Bank & Trust 1.36 1.38 1.32 1.30 1.37 Morrill & Janes Bank and Trust Company 0.11 - - - - Wisconsin Bank & Trust 1.06 1.03 1.00 0.95 0.93 Rocky Mountain Bank 1.31 1.48 1.54 1.47 1.46 Arizona Bank & Trust 1.26 1.38 1.42 1.63 2.35 Riverside Community Bank 1.67 1.66 1.68 1.89 1.94 Galena State Bank & Trust Co. 1.04 1.05 1.04 1.09 1.15 Minnesota Bank & Trust 1.07 1.13 1.06 1.02 1.06 Summit Bank & Trust 1.82 1.71 1.61 1.73 1.56 Heartland Financial USA, Inc. Bryan R. McKeag , 563-589-1994 Executive Vice President Chief Financial Officer bmckeag@htlf.com Source: Heartland Financial USA, Inc.


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