Heartland Financial USA, Inc. ("HTLF") Reports Quarterly and Year to Date Results as of September 30, 2023
*Highlights and Developments*· Quarterly net income available to common stockholders of $46.1 million
· Quarterly diluted earnings per common share of $1.08, which includes $.04 of acquisition, integration and restructuring costs
· Quarterly loan growth of $154.5 million or 1%
· Total customer deposit growth during the quarter of $152.3 million or 1%
· Nonperforming assets to total assets and 30-89 day loan delinquencies remained unchanged at 0.33% and 0.12%, respectively
· Nonperforming loans to total loans decreased to 0.44% from 0.54% at June 30, 2023 and 0.60% at September 30, 2022
· Completed the consolidation of two bank charters during the quarter, and the final charter was consolidated following the end of the quarter
*Quarter Ended*
*September 30,* *Nine Months Ended September 30,* *2023* *2022* *2023* *2022*
Net income available to common stockholders (in millions) $ 46.1 $ 54.6 $ 144.2 $ 145.5
Diluted earnings per common share 1.08 1.28 3.37 3.42
Return on average assets 0.94 % 1.13 % 1.00 % 1.04 %
Return on average common equity 10.47 12.93 11.28 10.80
Return on average tangible common equity (non-GAAP)^(1) 16.34 20.76 17.83 16.79
Net interest margin 3.14 3.41 3.23 3.22
Net interest margin, fully tax-equivalent (non-GAAP)^(1) 3.18 3.45 3.27 3.27
Efficiency ratio 63.77 58.84 61.86 61.39
Adjusted efficiency ratio, fully-tax equivalent (non-GAAP)^(1) 59.95 55.26 58.98 58.99
(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 delivered another solid quarter highlighted by loan and customer deposit growth, reduced wholesale deposits and continued stable credit quality while effectively managing core expenses. We are also pleased that we successfully completed the final charter consolidation and look forward to 2024 with this significant project behind us."
*Bruce K. Lee, President and Chief Executive Officer, HTLF*
DENVER, Oct. 30, 2023 (GLOBE NEWSWIRE) -- *Heartland Financial USA, Inc. (NASDAQ: HTLF) *today reported the following results for the quarter ended September 30, 2023, compared to the quarter ended September 30, 2022:· Net income available to common stockholders of $46.1 million compared to $54.6 million, a decrease of $8.5 million or 16%.
· Earnings per diluted common share of $1.08 compared to $1.28, a decrease of $0.20 or 16%.
· Earnings per diluted common share included $0.04 of acquisition, integration and restructuring costs in both quarters.
· Net interest income of $145.8 million compared to $155.9 million, a decrease of $10.1 million or 6%.
· Return on average assets was 0.94% compared to 1.13%.
· Return on average common equity was 10.47% compared to 12.93%.
· Return on average tangible common equity (non-GAAP) was 16.34% compared to 20.76%."HTLF delivered another solid quarter highlighted by loan and customer deposit growth, reduced wholesale deposits and continued stable credit quality while effectively managing core expenses. We are also pleased that we successfully completed the final charter consolidation and look forward to 2024 with this significant project behind us," said Bruce K. Lee, president and chief executive officer of HTLF.
HTLF reported the following results for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022:
· Net income available to common stockholders of $144.2 million compared to $145.5 million, a decrease of $1.2 million or 1%.
· Earnings per diluted common share of $3.37 compared to $3.42, a decrease of $0.05 or 1%.
· Earnings per diluted common share included $0.11 of acquisition, integration and restructuring costs compared to $0.10.
· Net interest income of $445.1 million compared to $433.0 million, an increase of $12.1 million or 3%.
· Return on average assets was 1.00% compared to 1.04%.
· Return on average common equity was 11.28% compared to 10.80%.
· Return on average tangible common equity (non-GAAP) was 17.83% compared to 16.79%.*Charter Consolidation Update*
During the third quarter of 2023, Rocky Mountain Bank and New Mexico Bank & Trust were consolidated into HTLF Bank. Subsequent to September 30, 2023, Dubuque Bank and Trust Company was consolidated into HTLF Bank, which marked the completion of charter consolidation. Total consolidation restructuring costs are projected to be $18-$19 million with approximately $2-$3 million of expenses remaining to be incurred in 2023.
*Net Interest Income and Net Interest Margin *
Net interest margin, expressed as a percentage of average earning assets, was 3.14% (3.18% on a fully tax-equivalent basis, non-GAAP) for the third quarter of 2023 compared to 3.19% (3.23% on a fully tax-equivalent basis, non-GAAP) for the second quarter of 2023, and 3.41% (3.45% on a fully tax-equivalent basis, non-GAAP) for the third quarter of 2022.
Total interest income and average earning asset changes for the third quarter of 2023 compared to the third quarter of 2022 were:
· Total interest income was $245.4 million compared to $175.8 million, an increase of $69.6 million or 40%, primarily attributable to an increase in average earning assets and higher yields.
· Total interest income on a tax-equivalent basis (non-GAAP) was $247.6 million, an increase of $69.6 million or 39% from $178.0 million.
· Average earning assets increased $281.2 million or 2% to $18.44 billion compared to $18.16 billion.
· The average rate on earning assets increased 144 basis points to 5.33% from 3.89%, primarily due to recent interest rate increases.
Total interest expense and average interest bearing liability changes for the third quarter of 2023 compared to the third quarter of 2022 were:
· Total interest expense was $99.7 million, an increase of $79.7 million from $19.9 million, due to increases in the average interest rate paid and the average balance of interest bearing liabilities.
· The average interest rate paid on interest bearing liabilities increased 234 basis points to 3.01% from 0.67%.
· Average interest bearing deposits increased $1.47 billion or 13% to $12.68 billion from $11.22 billion, primarily due to an increase of $1.36 billion in wholesale deposits.
· The average interest rate paid on interest bearing deposits increased 236 basis points to 2.90% from 0.54%.
· Average borrowings decreased $30.8 million or 6% to $475.7 million from $506.5 million, and the average interest rate paid on borrowings was 5.78% compared to 3.74%.
Net interest income changes for the third quarter of 2023 compared to the third quarter of 2022 were:
· Net interest income totaled $145.8 million compared to $155.9 million, a decrease of $10.1 million or 6%.
· Net interest income on a tax-equivalent basis (non-GAAP) totaled $147.9 million compared to $158.0 million, a decrease of $10.1 million or 6%.
*Noninterest Income and Noninterest Expense *
Total noninterest income was $28.4 million during the third quarter of 2023 compared to $29.2 million during the third quarter of 2022, a decrease of $798,000 or 3%. Significant changes within the noninterest income category for the third quarter of 2023 compared to the third quarter of 2022 were:
· Service charges and fees increased $1.3 million or 7% to $18.6 million from $17.3 million.
· Trust fees decreased $638,000 or 12% to $4.7 million from $5.4 million, primarily attributable to reduced retirement plan services income following the sale of the recordkeeping and administrative functions of HTLF Retirement Plan Services.
· Net security losses totaled $114,000 compared to net losses of $1.1 million.
· Net gains on sales of loans held for sale decreased $927,000 or 51% to $905,000 from $1.8 million, primarily attributable to a decrease in residential mortgage loans sold to the secondary market.
· Other noninterest income decreased $1.4 million or 69% to $619,000 compared to $2.0 million. During the third quarter of 2022, HTLF received a $637,000 recovery on an acquired loan that had been charged off prior to acquisition.
Total noninterest expense was $111.1 million during the third quarter of 2023 compared to $108.9 million during the third quarter of 2022, which was an increase of $2.2 million or 2%. Significant changes within the noninterest expense category for the third quarter of 2023 compared to the third quarter of 2022 were:
· Salaries and employee benefits totaled $62.3 million compared to $62.7 million, a decrease of $399,000 or 1%. The decrease was attributable to a reduction of full-time equivalent employees and lower incentive compensation expense, mostly offset by higher salary expense. Full-time equivalent employees totaled 1,965 compared to 2,020, a decrease of 55 or 3%.
· FDIC insurance assessments totaled $3.3 million compared to $2.0 million, an increase of $1.3 million due to assessment rate changes that were effective with the first quarter 2023 assessment.
· Other noninterest expenses totaled $15.3 million compared to $13.6 million, an increase of $1.7 million or 12%. Credit card processing expenses increased $1.4 million or 49% to $4.3 million from $2.9 million.
The effective tax rate was 21.89% for the third quarter of 2023 compared to 19.97% for third quarter of 2022. The following items impacted the third quarter 2023 and 2022 tax calculations:
· Various tax credits of $1.6 million compared to $1.7 million.
· Tax expense of $1.6 million compared to $258,000 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 13.14% compared to 11.45%.
*Total Assets, Total Loans and Total Deposits*
Total assets were $20.13 billion at September 30, 2023, a decrease of $114.4 million or 1% from $20.24 billion at year-end 2022. Securities represented 32% and 35% of total assets at September 30, 2023, and December 31, 2022, respectively.
Total loans held to maturity were $11.87 billion at September 30, 2023, compared to $11.72 billion at June 30, 2023, and $11.43 billion at December 31, 2022, representing increases of $154.5 million or 1%, and $444.1 million or 4%, respectively.
Significant changes by loan category at September 30, 2023 compared to June 30, 2023 included:
· Commercial and business lending, which includes commercial and industrial, PPP and owner occupied commercial real estate loans, increased $31.7 million or 1% to $6.03 billion compared to $5.99 billion.
· Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $142.0 million or 4% to $3.69 billion compared to $3.54 billion.
· Residential mortgage loans decreased $14.6 million or 2% to $813.8 million from $828.4 million.
Significant changes by loan category at September 30, 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 $284.5 million or 5% to $6.03 billion compared to $5.74 billion.
· Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $278.9 million or 8% to $3.69 billion compared to $3.41 billion.
· Agricultural and agricultural real estate loans decreased $78.4 million or 9% to $842.1 million compared to $920.5 million.
· Residential mortgage loans decreased $39.6 million or 5% to $813.8 million compared to $853.4 million.
Total deposits were $17.10 billion as of September 30, 2023, compared to $17.66 billion at June 30, 2023, which was a decrease of $562.6 million or 3%. Total deposits were $17.10 billion as of September 30, 2023, compared to $17.51 billion at December 31, 2022, a decrease of $412.0 million or 2%.
Total customer deposits were $14.80 billion as of September 30, 2023 compared to $14.65 billion at June 30, 2023, which was an increase of $152.3 million or 1%. Significant customer deposit changes by category at September 30, 2023, compared to June 30, 2023, included:
· Customer demand deposits decreased $105.0 million or 2% to $4.79 billion compared to $4.90 billion.
· Customer savings deposits increased $40.8 million or 1% to $8.19 billion compared to $8.15 billion.
· Customer time deposits increased $216.5 million or 14% to $1.81 billion compared to $1.60 billion.
Total customer deposits were $14.80 billion at September 30, 2023 compared to $15.22 billion at December 31, 2022, which was a decrease of $426.2 million or 3%. Significant customer deposit changes by category at September 30, 2023 compared to December 31, 2022, included:
· Customer demand deposits decreased $908.5 million or 16% to $4.79 billion compared to $5.70 billion.
· Customer savings deposits decreased $480.5 million or 6% to $8.19 billion compared to $8.67 billion.
· Customer time deposits increased $962.8 million to $1.81 billion compared to $851.5 million.
Total wholesale and institutional deposits were $2.30 billion as of September 30, 2023, which was a decrease of $714.8 million or 24% from $3.02 billion at June 30, 2023. Significant wholesale and institutional deposit changes by category at September 30, 2023, compared to June 30, 2023, included:
· Wholesale and institutional savings deposits decreased $58.5 million or 9% to $564.5 million compared to $623.0 million.
· Wholesale time deposits decreased $656.3 million or 27% to $1.74 billion compared to $2.40 billion.
Total wholesale and institutional deposits were $2.30 billion as of September 30, 2023, which was an increase of $14.2 million or 1% from $2.29 billion at December 31, 2022. Significant wholesale and institutional deposit changes by category at September 30, 2023 compared to December 31, 2022 included:
· Wholesale and institutional savings deposits decreased $759.0 million or 57% to $564.5 million compared to $1.32 billion.
· Wholesale time deposits increased $773.2 million or 80% to $1.74 billion compared to $965.7 million.
*Provision and Allowance *
Provision and Allowance for Credit Losses for Loans
Provision for credit losses for loans for the third quarter of 2023 was $2.7 million, which was a decrease of $1.7 million from $4.4 million recorded in the third quarter of 2022.
The allowance for credit losses for loans totaled $110.2 million at September 30, 2023 and $109.5 million at December 31, 2022. The following items impacted the allowance for credit losses for loans at September 30, 2023:
· Provision expense for the nine months ended September 30, 2023, totaled $12.7 million.
· Net charge-offs of $12.0 million were recorded for the first nine months of 2023.
Provision and Allowance for Credit Losses for Unfunded Commitments
The allowance for unfunded commitments decreased $2.7 million or 13% to $17.5 million at September 30, 2023, from $20.2 million at December 31, 2022, primarily due to a reduction of $85.6 million in unfunded commitments for construction loans, which carry the highest loss rate. Total unfunded commitments increased $84.1 million or 2% to $4.81 billion at September 30, 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 $1.5 million for the third quarter of 2023 compared to $5.5 million for the third quarter of 2022. The total allowance for lending related credit losses was $127.7 million or 1.08% of total loans at September 30, 2023, compared to $129.7 million or 1.13% of total loans as of December 31, 2022.
*Nonperforming Assets *
Nonperforming assets decreased $753,000 or 1% to $66.2 million or 0.33% of total assets at September 30, 2023, compared to $66.9 million or 0.33% of total assets at December 31, 2022. Nonperforming loans were $51.8 million or 0.44% of total loans at September 30, 2023, compared to $58.5 million or 0.51% of total loans at December 31, 2022. At September 30, 2023, loans delinquent 30-89 days were 0.12% of total loans compared to 0.04% of total loans at December 31, 2022. Other real estate owned, net, increased $6.0 million or 71% to $14.4 million at September 30, 2023 from $8.4 million at December 31, 2022. HTLF added one property with a book value of $11.3 million to other real estate during the third quarter of 2023.
*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.
· Adjusted 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, and the fair value adjustment on securities and derivatives, net of deferred taxes. This measure is included as it is considered to be a critical metric to analyze and evaluate financial condition and capital strength, composition and trends on a comparable basis by excluding the variability of the fair value of securities and derivatives, net of deferred taxes.
· 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 October 29, 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 $20.13 billion as of September 30, 2023. HTLF's banks serve 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", "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 SEC.
*-FINANCIAL TABLES FOLLOW- *
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *For the Quarter Ended*
*September 30,* *For the Nine Months Ended*
*September 30,* *2023* *2022* *2023* *2022*
*Interest Income*
Interest and fees on loans $ 182,394 $ 122,913 $ 505,136 $ 334,000
Interest on securities:
Taxable 54,800 45,648 168,948 116,366
Nontaxable 6,584 6,164 18,990 17,874
Interest on federal funds sold 3 — 3 —
Interest on deposits with other banks and short-term investments 1,651 1,081 4,833 1,715
*Total Interest Income* *245,432* *175,806* *697,910* *469,955*
*Interest Expense*
Interest on deposits 92,744 15,158 231,617 24,665
Interest on short-term borrowings 1,167 360 4,437 494
Interest on other borrowings 5,765 4,412 16,756 11,780
*Total Interest Expense* *99,676* *19,930* *252,810* *36,939*
*Net Interest Income* *145,756* *155,876* *445,100* *433,016*
Provision for credit losses 1,516 5,492 9,969 11,983
*Net Interest Income After Provision for Credit Losses* *144,240* *150,384* *435,131* *421,033*
*Noninterest Income*
Service charges and fees 18,553 17,282 55,316 50,599
Loan servicing income 278 831 1,403 1,951
Trust fees 4,734 5,372 15,810 17,130
Brokerage and insurance commissions 692 649 2,065 2,357
Capital markets fees 1,845 1,809 8,331 9,719
Securities losses, net (114 ) (1,055 ) (1,532 ) (272 )
Unrealized gain/(loss) on equity securities, net 13 (211 ) 165 (615 )
Net gains on sale of loans held for sale 905 1,832 3,786 8,144
Valuation adjustment on servicing rights — — — 1,658
Income on bank owned life insurance 858 694 3,042 1,741
Other noninterest income 619 1,978 2,489 5,877
*Total Noninterest Income* *28,383* *29,181* *90,875* *98,289*
*Noninterest Expense*
Salaries and employee benefits 62,262 62,661 186,510 192,867
Occupancy 6,438 6,794 20,338 21,250
Furniture and equipment 2,720 2,928 8,698 9,480
Professional fees 13,616 14,289 41,607 42,286
FDIC insurance assessments 3,313 1,988 9,627 5,134
Advertising 1,633 1,554 6,670 4,392
Core deposit and customer relationship intangibles amortization 1,625 1,856 5,128 5,993
Other real estate and loan collection expenses, net 481 304 984 577
(Gain)/loss on sales/valuations of assets, net 108 (251 ) (2,149 ) (3,435 )
Acquisition, integration and restructuring costs 2,429 2,156 5,994 5,144
Partnership investment in tax credit projects 1,136 979 1,828 1,793
Other noninterest expenses 15,292 13,625 46,307 40,678
*Total Noninterest Expense* *111,053* *108,883* *331,542* *326,159*
*Income Before Income Taxes* *61,570* *70,682* *194,464* *193,163*
Income taxes 13,479 14,118 44,181 41,637
*Net Income* *48,091* *56,564* *150,283* *151,526*
Preferred dividends (2,013 ) (2,013 ) (6,038 ) (6,038 )
*Net Income Available to Common Stockholders* *$* *46,078* *$* *54,551* *$* *144,245* *$* *145,488*
*Earnings per common share-diluted* *$* *1.08* *$* *1.28* *$* *3.37* *$* *3.42*
*Weighted average shares outstanding-diluted* *42,812,563* *42,643,940* *42,769,872* *42,596,301*
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *For the Quarter Ended* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022* *9/30/2022*
*Interest Income*
Interest and fees on loans $ 182,394 $ 168,899 $ 153,843 $ 143,970 $ 122,913
Interest on securities:
Taxable 54,800 58,172 55,976 53,178 45,648
Nontaxable 6,584 6,378 6,028 6,132 6,164
Interest on federal funds sold 3 — — 11 —
Interest on deposits with other banks and short-term investments 1,651 2,051 1,131 1,410 1,081
*Total Interest Income* *245,432* *235,500* *216,978* *204,701* *175,806*
*Interest Expense*
Interest on deposits 92,744 81,975 56,898 32,215 15,158
Interest on short-term borrowings 1,167 848 2,422 2,223 360
Interest on other borrowings 5,765 5,545 5,446 5,043 4,412
*Total Interest Expense* *99,676* *88,368* *64,766* *39,481* *19,930*
*Net Interest Income* *145,756* *147,132* *152,212* *165,220* *155,876*
Provision for credit losses 1,516 5,379 3,074 3,387 5,492
*Net Interest Income After Provision for Credit Losses* *144,240* *141,753* *149,138* *161,833* *150,384*
*Noninterest Income*
Service charges and fees 18,553 19,627 17,136 17,432 17,282
Loan servicing income 278 411 714 790 831
Trust fees 4,734 5,419 5,657 5,440 5,372
Brokerage and insurance commissions 692 677 696 629 649
Capital markets fees 1,845 4,037 2,449 1,824 1,809
Securities losses, net (114 ) (314 ) (1,104 ) (153 ) (1,055 )
Unrealized gain/(loss) on equity securities, net 13 (41 ) 193 (7 ) (211 )
Net gains on sale of loans held for sale 905 1,050 1,831 888 1,832
Valuation adjustment on servicing rights — — — — —
Income on bank owned life insurance 858 1,220 964 600 694
Other noninterest income 619 407 1,463 2,532 1,978
*Total Noninterest Income* *28,383* *32,493* *29,999* *29,975* *29,181*
*Noninterest Expense*
Salaries and employee benefits 62,262 62,099 62,149 61,611 62,661
Occupancy 6,438 6,691 7,209 6,905 6,794
Furniture and equipment 2,720 3,063 2,915 3,019 2,928
Professional fees 13,616 15,194 12,797 16,320 14,289
FDIC insurance assessments 3,313 3,035 3,279 1,866 1,988
Advertising 1,633 3,052 1,985 1,829 1,554
Core deposit and customer relationship intangibles amortization 1,625 1,715 1,788 1,841 1,856
Other real estate and loan collection expenses, net 481 348 155 373 304
(Gain)/loss on sales/valuations of assets, net 108 (3,372 ) 1,115 2,388 (251 )
Acquisition, integration and restructuring costs 2,429 1,892 1,673 2,442 2,156
Partnership investment in tax credit projects 1,136 154 538 3,247 979
Other noninterest expenses 15,292 15,575 15,440 15,377 13,625
*Total Noninterest Expense* *111,053* *109,446* *111,043* *117,218* *108,883*
*Income Before Income Taxes* *61,570* *64,800* *68,094* *74,590* *70,682*
Income taxes 13,479 15,384 15,318 13,936 14,118
*Net Income* *48,091* *49,416* *52,776* *60,654* *56,564*
Preferred dividends (2,013 ) (2,012 ) (2,013 ) (2,012 ) (2,013 )
*Net Income Available to Common Stockholders* *$* *46,078* *$* *47,404* *$* *50,763* *$* *58,642* *$* *54,551*
*Earnings per common share-diluted* *$* *1.08* *$* *1.11* *$* *1.19* *$* *1.37* *$* *1.28*
*Weighted average shares outstanding-diluted* *42,812,563* *42,757,603* *42,742,878* *42,699,752* *42,643,940*
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *As of* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022* *9/30/2022*
*Assets*
Cash and due from banks $ 248,756 $ 317,303 $ 274,354 $ 309,045 $ 250,394
Interest bearing deposits with other banks and short-term investments 99,239 82,884 87,757 54,042 149,466
Cash and cash equivalents 347,995 400,187 362,111 363,087 399,860
Time deposits in other financial institutions 1,490 1,490 1,740 1,740 1,740
Securities:
Carried at fair value 5,482,687 5,798,041 6,096,657 6,147,144 6,060,331
Held to maturity, at cost, less allowance for credit losses 835,468 834,673 832,098 829,403 830,247
Other investments, at cost 90,001 72,291 72,364 74,567 80,286
Loans held for sale 6,262 14,353 10,425 5,277 9,570
Loans:
Held to maturity 11,872,436 11,717,974 11,495,353 11,428,352 10,923,532
Allowance for credit losses (110,208 ) (111,198 ) (112,707 ) (109,483 ) (105,715 )
Loans, net 11,762,228 11,606,776 11,382,646 11,318,869 10,817,817
Premises, furniture and equipment, net 187,436 190,420 191,267 197,330 203,585
Goodwill 576,005 576,005 576,005 576,005 576,005
Core deposit and customer relationship intangibles, net 20,026 21,651 23,366 25,154 26,995
Servicing rights, net — — — 7,840 8,379
Cash surrender value on life insurance 196,694 195,793 194,419 193,403 193,184
Other real estate, net 14,362 2,677 7,438 8,401 8,030
Other assets 609,139 510,359 432,008 496,008 466,921
*Total Assets* *$* *20,129,793* *$* *20,224,716* *$* *20,182,544* *$* *20,244,228* *$* *19,682,950*
*Liabilities and Equity*
*Liabilities*
Deposits:
Demand $ 4,792,813 $ 4,897,858 $ 5,119,554 $ 5,701,340 $ 6,083,563
Savings 8,754,911 8,772,596 9,256,609 9,994,391 10,060,523
Time 3,553,269 3,993,089 3,305,183 1,817,278 1,123,035
Total deposits 17,100,993 17,663,543 17,681,346 17,513,009 17,267,121
Short-term borrowings 392,634 44,364 92,337 376,117 147,000
Other borrowings 372,059 372,403 372,097 371,753 371,446
Accrued expenses and other liabilities 438,577 285,416 207,359 248,294 241,425
*Total Liabilities* *18,304,263* *18,365,726* *18,353,139* *18,509,173* *18,026,992*
*Stockholders' Equity*
Preferred equity 110,705 110,705 110,705 110,705 110,705
Common stock 42,656 42,645 42,559 42,467 42,444
Capital surplus 1,088,267 1,087,358 1,084,112 1,080,964 1,079,277
Retained earnings 1,226,740 1,193,522 1,158,948 1,120,925 1,074,168
Accumulated other comprehensive loss (642,838 ) (575,240 ) (566,919 ) (620,006 ) (650,636 )
*Total Equity* *1,825,530* *1,858,990* *1,829,405* *1,735,055* *1,655,958*
*Total Liabilities and Equity* *$* *20,129,793* *$* *20,224,716* *$* *20,182,544* *$* *20,244,228* *$* *19,682,950*
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND FULL TIME EQUIVALENT EMPLOYEE DATA* *For the Quarter Ended* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022* *9/30/2022*
*Average Balances*
Assets $ 20,207,920 $ 20,221,511 $ 20,118,005 $ 19,913,849 $ 19,775,341
Loans, net of unearned 11,800,064 11,625,442 11,378,078 11,117,513 10,783,135
Deposits 17,507,813 17,689,138 17,505,867 17,319,218 17,282,289
Earning assets 18,439,010 18,523,552 18,392,649 18,175,838 18,157,795
Interest bearing liabilities 13,158,631 13,209,794 12,582,234 11,980,032 11,723,026
Common equity 1,746,818 1,727,013 1,655,860 1,548,739 1,674,306
Total stockholders' equity 1,857,523 1,837,718 1,766,565 1,659,444 1,785,011
Tangible common equity (non-GAAP)^(1) 1,149,992 1,128,527 1,055,617 946,688 1,070,399
*Key Performance Ratios*
Annualized return on average assets 0.94 % 0.98 % 1.06 % 1.21 % 1.13 %
Annualized return on average common equity (GAAP) 10.47 11.01 12.43 15.02 12.93
Annualized return on average tangible common equity (non-GAAP)^(1) 16.34 17.33 20.05 25.19 20.76
Annualized ratio of net charge-offs/(recoveries) to average loans 0.12 0.32 (0.04 ) (0.06 ) 0.00
Annualized net interest margin (GAAP) 3.14 3.19 3.36 3.61 3.41
Annualized net interest margin, fully tax-equivalent (non-GAAP)^(1) 3.18 3.23 3.40 3.65 3.45
Efficiency ratio (GAAP) 63.77 60.93 60.94 60.05 58.84
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)^(1) 59.95 59.88 57.16 54.33 55.26
Annualized ratio of total noninterest expenses to average assets (GAAP) 2.18 2.17 2.24 2.34 2.18
Annualized ratio of core expenses to average assets (non-GAAP)^(1) 2.08 2.16 2.14 2.14 2.09
(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.
*For the Quarter Ended*
*September 30,* *For the Nine Months Ended*
*September 30,* *2023* *2022* *2023* *2022*
*Average Balances*
Assets $ 20,207,920 $ 19,775,341 $ 20,182,808 $ 19,523,433
Loans, net of unearned 11,800,064 10,783,135 11,602,741 10,437,409
Deposits 17,507,813 17,282,289 17,567,614 16,931,730
Earning assets 18,439,010 18,157,795 18,451,907 17,969,001
Interest bearing liabilities 13,158,631 11,723,026 12,985,665 11,255,232
Common equity 1,746,818 1,674,306 1,710,230 1,801,835
Total stockholders' equity 1,857,523 1,785,011 1,820,935 1,912,540
Tangible common stockholders' equity 1,149,992 1,070,399 1,111,724 1,195,952
*Key Performance Ratios*
Annualized return on average assets 0.94 % 1.13 % 1.00 % 1.04 %
Annualized return on average common equity (GAAP) 10.47 12.93 11.28 10.80
Annualized return on average tangible common equity (non-GAAP)^(1) 16.34 20.76 17.83 16.79
Annualized ratio of net charge-offs/(recoveries) to average loans 0.12 0.00 0.14 0.17
Annualized net interest margin (GAAP) 3.14 3.41 3.23 3.22
Annualized net interest margin, fully tax-equivalent (non-GAAP)^(1) 3.18 3.45 3.27 3.27
Efficiency ratio (GAAP) 63.77 58.84 61.86 61.39
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)^(1) 59.95 55.26 58.98 58.99
Total noninterest expenses to average assets (GAAP) 2.18 2.18 2.20 2.23
Core expenses to average assets (non-GAAP)^(1) 2.08 2.09 2.12 2.17
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND FULL TIME EQUIVALENT EMPLOYEE DATA* *As of and for the Quarter Ended* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022* *9/30/2022*
*Common Share Data*
Book value per common share $ 40.20 $ 41.00 $ 40.38 $ 38.25 $ 36.41
Tangible book value per common share (non-GAAP)^(1) 26.23 26.98 26.30 24.09 22.20
ASC 320 effect on book value per common share (16.27 ) (14.04 ) (13.35 ) (14.58 ) (15.31 )
Common shares outstanding, net of treasury stock 42,656,303 42,644,544 42,558,726 42,467,394 42,444,106
Tangible common equity ratio (non-GAAP)^(1) 5.73 % 5.86 % 5.72 % 5.21 % 4.94 %
Adjusted tangible common equity ratio (non-GAAP)^(1) 8.73 % 8.54 % 8.37 % 8.11 % 8.07 %
*Other Selected Trend Information *
Effective tax rate 21.89 % 23.74 % 22.50 % 18.68 % 19.97 %
Full time equivalent employees 1,965 1,966 1,991 2,002 2,020
*Loans Held to Maturity*
Commercial and industrial $ 3,591,809 $ 3,590,680 $ 3,498,345 $ 3,464,414 $ 3,278,703
Paycheck Protection Program ("PPP") 3,750 4,139 8,258 11,025 13,506
Owner occupied commercial real estate 2,429,659 2,398,698 2,312,538 2,265,307 2,285,973
Commercial and business lending 6,025,218 5,993,517 5,819,141 5,740,746 5,578,182
Non-owner occupied commercial real estate 2,656,358 2,530,736 2,421,341 2,330,940 2,219,542
Real estate construction 1,029,554 1,013,134 1,102,186 1,076,082 996,017
Commercial real estate lending 3,685,912 3,543,870 3,523,527 3,407,022 3,215,559
Total commercial lending 9,711,130 9,537,387 9,342,668 9,147,768 8,793,741
Agricultural and agricultural real estate 842,116 839,817 810,183 920,510 781,354
Residential mortgage 813,803 828,437 841,084 853,361 852,928
Consumer 505,387 512,333 501,418 506,713 495,509
*Total loans held to maturity* *$* *11,872,436* *$* *11,717,974* *$* *11,495,353* *$* *11,428,352* *$* *10,923,532*
Total unfunded loan commitments $ 4,813,798 $ 4,905,147 $ 4,867,925 $ 4,729,677 $ 4,664,379
*Deposits *
Demand-customer $ 4,792,813 $ 4,897,858 $ 5,119,554 $ 5,701,340 $ 6,083,563
Savings-customer 8,190,430 8,149,596 8,501,337 8,670,898 8,691,545
Savings-wholesale and institutional 564,481 623,000 755,272 1,323,493 1,368,978
Total savings 8,754,911 8,772,596 9,256,609 9,994,391 10,060,523
Time-customer 1,814,335 1,597,849 1,071,476 851,539 973,035
Time-wholesale 1,738,934 2,395,240 2,233,707 965,739 150,000
Total time 3,553,269 3,993,089 3,305,183 1,817,278 1,123,035
*Total deposits * *$* *17,100,993* *$* *17,663,543* *$* *17,681,346* *$* *17,513,009* *$* *17,267,121*
Total customer deposits $ 14,797,578 $ 14,645,303 $ 14,692,367 $ 15,223,777 $ 15,748,143
Total wholesale and institutional deposits 2,303,415 3,018,240 2,988,979 2,289,232 1,518,978
*Total deposits* *$* *17,100,993* *$* *17,663,543* *$* *17,681,346* *$* *17,513,009* *$* *17,267,121*
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *As of and for the Quarter Ended* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022* *9/30/2022*
*Allowance for Credit Losses-Loans*
Balance, beginning of period $ 111,198 $ 112,707 $ 109,483 $ 105,715 $ 101,353
Provision for credit losses 2,672 7,829 2,184 2,075 4,388
Charge-offs (3,964 ) (9,613 ) (2,151 ) (2,668 ) (938 )
Recoveries 302 275 3,191 4,361 912
*Balance, end of period* *$* *110,208* *$* *111,198* *$* *112,707* *$* *109,483* *$* *105,715*
*Allowance for Unfunded Commitments*
Balance, beginning of period $ 18,636 $ 21,086 $ 20,196 $ 18,884 $ 17,780
Provision for credit losses (1,156 ) (2,450 ) 890 1,312 1,104
*Balance, end of period* *$* *17,480* *$* *18,636* *$* *21,086* *$* *20,196* *$* *18,884*
*Allowance for lending related credit losses* *$* *127,688* *$* *129,834* *$* *133,793* *$* *129,679* *$* *124,599*
*Provision for Credit Losses*
Provision for credit losses-loans $ 2,672 $ 7,829 $ 2,184 $ 2,075 $ 4,388
Provision (benefit) for credit losses-unfunded commitments (1,156 ) (2,450 ) 890 1,312 1,104
*Total provision for credit losses* *$* *1,516* *$* *5,379* *$* *3,074* *$* *3,387* *$* *5,492*
*Asset Quality*
Nonaccrual loans $ 51,304 $ 61,956 $ 58,066 $ 58,231 $ 64,560
Loans past due ninety days or more 511 1,459 174 273 678
Other real estate owned 14,362 2,677 7,438 8,401 8,030
Other repossessed assets 1 5 24 26 —
*Total nonperforming assets* *$* *66,178* *$* *66,097* *$* *65,702* *$* *66,931* *$* *73,268*
*Nonperforming Assets Activity *
Balance, beginning of period $ 66,097 $ 65,702 $ 66,931 $ 73,268 $ 67,532
Net loan (charge-offs)/recoveries (3,662 ) (9,338 ) 1,040 1,693 (26 )
New nonperforming loans 19,295 19,805 4,626 1,439 8,388
Reduction of nonperforming loans^(1) (14,691 ) (5,253 ) (5,711 ) (8,875 ) (2,015 )
Net OREO/repossessed assets sales proceeds and losses (861 ) (4,819 ) (1,184 ) (594 ) (611 )
*Balance, end of period* *$* *66,178* *$* *66,097* *$* *65,702* *$* *66,931* *$* *73,268*
*Asset Quality Ratios*
Ratio of nonperforming loans to total loans 0.44 % 0.54 % 0.51 % 0.51 % 0.60 %
Ratio of nonperforming assets to total assets 0.33 0.33 0.33 0.33 0.37
Annualized ratio of net loan charge-offs/(recoveries) to average loans 0.12 0.32 (0.04 ) (0.06 ) 0.00
Allowance for loan credit losses as a percent of loans 0.93 0.95 0.98 0.96 0.97
Allowance for lending related credit losses as a percent of loans 1.08 1.11 1.16 1.13 1.14
Allowance for loan credit losses as a percent of nonperforming loans 212.70 175.35 193.52 187.14 162.05
Loans delinquent 30-89 days as a percent of total loans 0.12 0.12 0.10 0.04 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* *September 30, 2023* *June 30, 2023* *September 30, 2022* *Average*
*Balance* *Interest* *Rate* *Average*
*Balance* *Interest* *Rate* *Average*
*Balance* *Interest* *Rate*
*Earning Assets*
Securities:
Taxable $ 5,726,057 $ 54,800 3.80 % $ 5,962,207 $ 58,172 3.91 % $ 6,303,278 $ 45,648 2.87 %
Nontaxable^(1) 881,162 8,085 3.64 895,458 7,896 3.54 951,232 7,802 3.25
Total securities 6,607,219 62,885 3.78 6,857,665 66,068 3.86 7,254,510 53,450 2.92
Interest on deposits with other banks and short-term investments 142,301 1,651 4.60 153,622 2,051 5.36 222,170 1,081 1.93
Federal funds sold 152 3 7.83 — — — 11 — —
Loans:^(2)
Commercial and industrial^(1) 3,610,677 63,001 6.92 3,565,449 56,644 6.37 3,182,134 37,526 4.68
PPP loans 3,948 11 1.11 6,302 24 1.53 17,859 363 8.06
Owner occupied commercial real estate 2,412,501 30,127 4.95 2,366,107 28,031 4.75 2,272,666 23,601 4.12
Non-owner occupied commercial real estate 2,586,011 38,779 5.95 2,462,098 35,583 5.80 2,258,424 25,895 4.55
Real estate construction 1,027,544 19,448 7.51 1,028,109 18,528 7.23 914,520 12,382 5.37
Agricultural and agricultural real estate 822,957 12,582 6.07 848,554 12,256 5.79 799,823 8,966 4.45
Residential mortgage 827,402 9,482 4.55 840,741 9,383 4.48 858,119 8,665 4.01
Consumer 509,024 9,615 7.49 508,082 9,068 7.16 479,590 6,028 4.99
Less: allowance for credit losses-loans (110,726 ) — — (113,177 ) — — (102,031 ) — —
Net loans 11,689,338 183,045 6.21 11,512,265 169,517 5.91 10,681,104 123,426 4.58
*Total earning assets* *18,439,010* *247,584* *5.33* *%* *18,523,552* *237,636* *5.15* *%* *18,157,795* *177,957* *3.89* *%*
Nonearning Assets 1,768,910 1,697,959 1,617,546
*Total Assets* *$* *20,207,920* *$* *20,221,511* *$* *19,775,341*
*Interest Bearing Liabilities*
Savings $ 8,737,581 $ 49,195 2.23 % $ 8,935,775 $ 41,284 1.85 % $ 10,059,652 $ 12,907 0.51 %
Time deposits 3,945,371 43,549 4.38 3,812,330 40,691 4.28 1,156,908 2,251 0.77
Short-term borrowings 103,567 1,167 4.47 89,441 848 3.80 134,974 360 1.06
Other borrowings 372,112 5,765 6.15 372,248 5,545 5.97 371,492 4,412 4.71
*Total interest bearing liabilities* *13,158,631* *99,676* *3.01* *%* *13,209,794* *88,368* *2.68* *%* *11,723,026* *19,930* *0.67* *%*
*Noninterest Bearing Liabilities*
Noninterest bearing deposits 4,824,861 4,941,033 6,065,729
Accrued interest and other liabilities 366,905 232,966 201,575
*Total noninterest bearing liabilities* *5,191,766* *5,173,999* *6,267,304*
*Equity* *1,857,523* *1,837,718* *1,785,011*
*Total Liabilities and Equity* *$* *20,207,920* *$* *20,221,511* *$* *19,775,341*
*Net interest income, fully tax-equivalent (non-GAAP)*^*(1)(3)* *$* *147,908* *$* *149,268* *$* *158,027*
*Net interest spread*^*(1)* *2.32* *%* *2.47* *%* *3.22* *%*
*Net interest income, fully tax-equivalent (non-GAAP*^*)(1)(3)** to total earning assets* *3.18* *%* *3.23* *%* *3.45* *%*
Interest bearing liabilities to earning assets 71.36 % 71.31 % 64.56 %
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.
(2) Nonaccrual loans and loans held for sale are included in the average loans outstanding.
(3) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS* *For the Nine Months Ended* *September 30, 2023* *September 30, 2022* *Average*
*Balance* *Interest* *Rate* *Average*
*Balance* *Interest* *Rate*
*Earning Assets*
Securities:
Taxable $ 5,927,026 $ 168,948 3.81 % $ 6,407,459 $ 116,366 2.43 %
Nontaxable^(1) 899,613 23,611 3.51 990,784 22,625 3.05
Total securities 6,826,639 192,559 3.77 7,398,243 138,991 2.51 %
Interest bearing deposits with other banks and other short-term investments 133,910 4,833 4.83 238,819 1,715 0.96
Federal funds sold 51 3 7.86 7 — —
Loans:^(2)
Commercial and industrial^(1) 3,547,256 169,552 6.39 % 2,977,751 95,020 4.27
PPP loans 6,718 61 1.21 63,342 6,487 13.69
Owner occupied commercial real estate 2,355,545 84,927 4.82 2,270,486 67,742 3.99
Non-owner occupied commercial real estate 2,459,965 105,111 5.71 2,166,873 69,929 4.31
Real estate construction 1,051,298 56,107 7.14 880,354 31,673 4.81
Agricultural and agricultural real estate 835,673 36,191 5.79 776,127 23,905 4.12
Residential mortgage 840,143 28,138 4.48 850,444 25,108 3.95
Consumer 506,143 26,925 7.11 452,032 15,632 4.62
Less: allowance for credit losses-loans (111,434 ) — — (105,477 ) — —
Net loans 11,491,307 507,012 5.90 10,331,932 335,496 4.34
*Total earning assets* *18,451,907* *704,407* *5.10* *%* *17,969,001* *476,202* *3.54* *%*
Nonearning Assets 1,730,901 1,554,432
*Total Assets* *$* *20,182,808* *$* *19,523,433*
*Interest Bearing Liabilities*
Savings $ 9,130,980 $ 128,372 1.88 % $ 9,652,651 $ 20,673 0.29 %
Time deposits 3,344,434 103,245 4.13 1,106,095 3,992 0.48
Short-term borrowings 138,157 4,437 4.29 124,459 494 0.53
Other borrowings 372,094 16,756 6.02 372,027 11,78