Heartland Financial USA, Inc. ("HTLF") Reports Annual Earnings and Fourth Quarter Results as of December 31, 2023
*Fourth Quarter Highlights*
· Net loss available to common stockholders of ($72.4) million or ($1.69) per diluted common share.
· Adjusted earnings available to common stockholders of $45.6 million, or $1.06 per diluted common share (non-GAAP), which excludes losses related to balance sheet repositioning, losses on sale or write-down of assets, FDIC special assessment expense, and restructuring costs.
· Loan growth of $196.2 million or 2%.
· Average customer deposits grew $270.7 million or 2%.
· Common equity ratio increased to 9.27%; Tangible common equity ratio (non-GAAP) improved 80 basis points to 6.53%.
· Net interest margin, fully tax-equivalent (non-GAAP) improved 34 basis points to 3.52%.
· Consolidated final charter, with an expense of $1.3 million in the quarter, and initiated HTLF 3.0, the Company's new strategic plan which includes:
· Investing in growth through banker expansion and talent acquisition in the Central Valley of California, Denver, Kansas City, Milwaukee, Minneapolis, and Phoenix.
· Expanding Treasury Management products and capabilities.
· Creation of consumer and small business digital platforms.
· Footprint and facilities optimization, with a focus on efficient return on capital.
· In the quarter we took the following actions as part of HTLF 3.0:
· An $865.4 million balance sheet repositioning resulting in a $140.0 million pre-tax loss.
· Centralized retail management span of control with restructuring costs of $944,000.
· Footprint consolidation resulting in $1.1 million in restructuring costs and $2.1 million in losses on sales/valuations of facilities. *Quarter Ended*
*December 31,* *Year Ended December 31,* *2023* *2022* *2023* *2022*
*Earnings Summary:*
Net income/(loss) available to common stockholders (in millions) $ (72.4 ) $ 58.6 $ 71.9 $ 204.1
Diluted earnings/(loss) per common share (1.69 ) 1.37 1.68 4.79
Return on average assets (1.42 )% 1.21 % 0.40 % 1.08 %
Return on average common equity (16.61 ) 15.02 4.19 11.74
Return on average tangible common equity (non-GAAP)^(1) (24.88 ) 25.19 6.91 18.56
Net interest margin 3.47 3.61 3.29 3.32
Net interest margin, fully tax-equivalent (non-GAAP)^(1) 3.52 3.65 3.33 3.37
Efficiency ratio 293.86 60.05 79.58 61.03
Adjusted efficiency ratio, fully-tax equivalent (non-GAAP)^(1) 59.31 54.33 59.06 57.74
*Adjusted Earnings Summary (1):*
Adjusted earnings available to common stockholders (in millions) $ 45.6 $ 62.5 $ 193.9 $ 209.5
Adjusted diluted earnings per common share 1.06 1.46 4.53 4.91
Adjusted annualized return on average assets 0.96 % 1.28 % 1.01 % 1.11 %
Adjusted annualized return on average common equity 10.46 16.00 11.31 12.06
Adjusted annualized return on average tangible common equity 16.38 26.77 17.82 19.03
(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.
“2023 was a year of significant progress and successful execution of HTLF’s strategic plans. With the completion of the charter consolidation initiative in the fourth quarter, we are now able to focus on HTLF 3.0, a set of initiatives that will drive improved efficiency, enhance EPS growth, deliver higher return on assets, and more efficient use of capital. The balance sheet repositioning, retail span of control and facilities optimization initiatives we executed during the quarter represent the beginning of HTLF 3.0.”
*Bruce K. Lee, president and chief executive officer, HTLF*
DENVER, Jan. 29, 2024 (GLOBE NEWSWIRE) -- *Heartland Financial USA, Inc. (NASDAQ: HTLF) *today reported the following results for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022:
· Net income/(loss) available to common stockholders of ($72.4) million compared to $58.6 million, a decrease of $131.0 million or 223%. Adjusted earnings available to common stockholders^(1) of $45.6 million compared to $62.5 million, a decrease of $16.9 million or 27%.
· Earnings/(loss) per diluted common share of ($1.69) compared to $1.37, a decrease of $3.06. Adjusted diluted earnings per common share^(1) of $1.06 compared to $1.46, a decrease of $0.40.
· Net interest income of $156.1 million compared to $165.2 million, a decrease of $9.1 million or 5%.
· Return on average assets of (1.42%) compared to 1.21%. Adjusted annualized return on average assets^(1) of 0.96% compared to 1.28%.
· Return on average common equity of (16.61%) compared to 15.02%. Adjusted annualized return on average common equity^(1) of 10.46% compared to 16.00%.
· Return on average tangible common equity^(1) of (24.88%) compared to 25.19%. Adjusted annualized return on average tangible common equity^(1) of 16.38% compared to 26.77%.
HTLF reported the following results for the year ended December 31, 2023 compared to the year ended December 31, 2022:
· Net income available to common stockholders of $71.9 million compared to $204.1 million, a decrease of $132.3 million or 65%. Adjusted earnings available to common stockholders^(1) of $193.9 million compared to $209.5 million, a decrease of $15.6 million or 7%.
· Earnings per diluted common share of $1.68 compared to $4.79, a decrease of $3.11. Adjusted diluted earnings per common share^(1) of $4.53 compared to $4.91, a decrease of $0.38 or 8%.
· Net interest income of $601.2 million compared to $598.2 million, an increase of $3.0 million or 1%.
· Return on average assets of 0.40% compared to 1.08%. Adjusted annualized return on average assets^(1) of 1.01% compared to 1.11%.
· Return on average common equity of 4.19% compared to 11.74%. Adjusted annualized return on average common equity^(1) of 11.31% compared to 12.06%.
· Return on average tangible common equity (non-GAAP) of 6.91% compared to 18.56%. Adjusted annualized return on average tangible common equity^(1) of 17.82% compared to 19.03%.
Commenting on HTLF's 2023 results, Bruce K. Lee, HTLF’s president and chief executive officer, said, “2023 was a year of significant progress and successful execution of HTLF’s strategic plans. With the completion of the charter consolidation initiative in the fourth quarter, we are now able to focus on HTLF 3.0, a set of initiatives that will drive improved efficiency, enhance EPS growth, deliver higher return on assets, and more efficient use of capital. The balance sheet repositioning, retail span of control and facilities optimization initiatives we executed during the quarter represent the beginning of HTLF 3.0.”
*Announced and Initiated HTLF 3.0*
HTLF’s new strategic plan, HTLF 3.0, was announced and initiated in the fourth quarter of 2023. HTLF 3.0's initiatives include:
· Investing in growth through banker expansion and talent acquisition in the Central Valley of California, Denver, Kansas City, Milwaukee, Minneapolis, and Phoenix.
· Expanding Treasury Management products and capabilities.
· Creation of consumer and small business digital platforms.
· Footprint and facilities optimization, with a focus on efficient return on capital.
In the quarter we took the following actions as part of HTLF 3.0:
· A $865.4 million balance sheet repositioning resulting in a $140.0 million pre-tax loss.
· Centralized retail management span of control with restructuring costs of $944,000.
· Footprint consolidation resulting in $1.1 million in restructuring costs and $2.1 million in losses on sales/valuations of facilities.*Charter Consolidation Update*
During the fourth quarter of 2023, Dubuque Bank and Trust Company was consolidated into HTLF Bank, which successfully completed the consolidation of all 11 charters. Total consolidation restructuring costs were $17 million, of which $1.3 million were incurred in the fourth quarter of 2023.
*Net Interest Income and Net Interest Margin *
Net interest margin was 3.47% (3.52% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2023, compared to 3.61% (3.65% on a fully tax-equivalent basis, non-GAAP) during the fourth quarter of 2022.
Total interest income and average earning asset changes for the fourth quarter of 2023 compared to the fourth quarter of 2022 were:
· Total interest income was $255.9 million compared to $204.7 million, an increase of $51.2 million or 25%, primarily attributable to higher yields and an increase in average loans.
· Total interest income on a tax-equivalent basis was $257.9 million, an increase of $51.1 million or 25%, from $206.9 million.
· Average earning assets decreased $321.9 million or 2% to $17.85 billion compared to $18.17 billion, which was primarily attributable to the balance sheet repositioning completed in the fourth quarter of 2023.
· The average rate on earning assets increased 121 basis points to 5.73% from 4.52%, primarily due to recent interest rate increases.
Total interest expense and average interest-bearing liability changes for the fourth quarter of 2023 compared to the fourth quarter of 2022 were:
· Total interest expense was $99.7 million, an increase of $60.3 million from $39.5 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 180 basis points to 3.11% from 1.31%.
· Average interest-bearing deposits increased $638.2 million or 6% to $11.95 billion from $11.31 billion, primarily due to growth in time deposits. Total average interest-bearing deposits were 72% of total average deposits compared to 65%.
· The average interest rate paid on HTLF's interest-bearing deposits increased 179 basis points to 2.92% from 1.13%.
· Average borrowings increased $103.4 million or 15% to $773.7 million from $670.2 million, and the average interest rate paid on borrowings was 5.99% compared to 4.30%.Net interest income changes for the fourth quarter of 2023 compared to the fourth quarter of 2022 were:
· Net interest income totaled $156.1 million compared to $165.2 million, a decrease of $9.1 million or 5%.
· Net interest income on a tax-equivalent basis (non-GAAP) totaled $158.2 million compared to $167.4 million, a decrease of $9.2 million or 5%.
*Noninterest Income and Noninterest Expense*
Total noninterest income was ($111.8) million during the fourth quarter of 2023 compared to $30.0 million during the fourth quarter of 2022, a decrease of $141.8 million. Significant changes by noninterest income category for the fourth quarter of 2023 compared to the fourth quarter of 2022 were:
· Service charges and fees increased $1.3 million or 7% to $18.7 million from $17.4 million, which was primarily attributable to an increase in debit interchange volume.
· Net securities losses totaled $140.0 million compared to net securities losses of $153,000, which was an increase of $139.9 million attributable to the balance sheet repositioning strategy executed in the quarter.
· Net gains of sales of loans held for sale decreased $794,000 to $94,000 compared to $888,000, primarily due to a decrease of loans sold to the secondary market as HTLF exits mortgage loan originations through PrimeWest.Total noninterest expense for the fourth quarter of 2023 was $130.3 million compared to $117.2 million for the same quarter of 2022, which was an increase of $13.1 million or 11%. Significant changes within the noninterest expense category for the fourth quarter of 2023 compared to the fourth quarter of 2022 were:
· Salaries and employee benefits totaled $64.8 million compared to $61.6 million, which was an increase of $3.2 million or 5%. The fourth quarter of 2023 included $813,000 higher severance related expenses and the fourth quarter of 2022 included a $1.5 million benefit associated with the employer tax credit. Increases in other components of salary expenses during the fourth quarter of 2023 were largely offset by lower incentive compensation expense.
· FDIC insurance assessment of $10.3 million, which included a one-time special assessment of $8.1 million in the fourth quarter of 2023 compared to $1.9 million in the fourth quarter of 2022, which was an increase of $8.4 million.
· Acquisition, integration and restructuring costs totaled $4.4 million compared to $2.4 million, an increase of $1.9 million or 79% due to the addition of HTLF 3.0 initiatives and the completion of the charter consolidation project.
· Partnership investment in tax credit projects increased $326,000 or 10% to $3.6 million compared to $3.2 million. The expense is dependent upon the number and timing of tax credit projects placed into service.
HTLF's effective tax rate was 27.97% for the fourth quarter of 2023 compared to 18.67% for the fourth quarter of 2022. The following items impacted HTLF's fourth quarter 2023 and 2022 tax calculations:
· Various tax credits of $3.8 million compared to $3.6 million.
· Tax expense of $1.3 million compared to $561,000 resulting from disallowed interest expense related to tax-exempt loans and securities, aligning with the increases in total interest expense.
· Tax-exempt interest income as a percentage of pre-tax income of (7.93%) compared to 10.85%.For the years ended December 31, 2023 and 2022, HTLF's effective tax rate was 17.42% and 20.76%, respectively.
*Total Assets, Total Loans and Total Deposits *
Total assets were $19.41 billion at December 31, 2023, a decrease of $832.5 million or 4% from $20.24 billion at year-end 2022. Securities represented 29% and 35% of total assets at December 31, 2023, and December 31, 2022, respectively, primarily due to the balance sheet repositioning.
Total loans held to maturity were $12.07 billion at December 31, 2023, compared to $11.87 billion at September 30, 2023 and $11.43 billion at December 31, 2022. Loans increased $196.2 million or 2% during the fourth quarter of 2023 and $640.3 million or 6% since year-end 2022.
Significant changes by loan category at December 31, 2023 compared to September 30, 2023 included:
· Commercial and business lending, which includes commercial and industrial, PPP, and owner occupied commercial real estate loans, increased $267.8 million or 4% to $6.29 billion at December 31, 2023, compared to $6.03 billion at September 30, 2023.
· Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, decreased $120.5 million or 3% to $3.57 billion from $3.69 billion.
· Agricultural and agricultural real estate loans totaled $919.2 million compared to $842.1 million, an increase of $77.1 million or 9%.
· Residential loans totaled $797.8 million compared to $813.8 million, a decrease of $16.0 million or 2%.
· Consumer loans decreased $12.2 million or 2% to $493.2 million from $505.4 million.Significant changes by loan category at December 31, 2023 compared to December 31, 2022 included:
· Commercial and business lending, which includes commercial and industrial, PPP, and owner occupied commercial real estate loans, increased $552.3 million or 10% to $6.29 billion at December 31, 2023, compared to $5.74 billion at December 31, 2022.
· Commercial real estate lending, which includes non-owner occupied commercial real estate and construction loans, increased $158.4 million or 5% to $3.57 billion from $3.41 billion.
· Agricultural and agricultural real estate loans totaled $919.2 million, a decrease of $1.3 million or less than 1% from $920.5 million.
· Residential loans totaled $797.8 million compared to $853.4 million, a decrease of $55.5 million or 7%.
· Consumer loans decreased $13.5 million or 3% to $493.2 million from $506.7 million.Total deposits were $16.20 billion as of December 31, 2023, compared to $17.10 billion at September 30, 2023, which was a decrease of $899.3 million or 5%. Total deposits were $16.2 billion as of December 31, 2023, compared to $17.51 billion at December 31, 2022, a decrease of $1.31 billion or 7%.
Total customer deposits were $14.86 billion as of December 31, 2023, compared to $14.80 billion at September 30, 2023, which was an increase of $58.8 million or less than 1%. Significant customer deposit changes by category at December 31, 2023, compared to September 30, 2023, included:
· Customer demand deposits decreased $292.5 million or 6% to $4.50 billion compared to $4.79 billion.
· Customer savings deposits increased $220.8 million or 3% to $8.41 billion compared to $8.19 billion.
· Customer time deposits increased $130.5 million or 7% to $1.94 billion compared to $1.81 billion.Total customer deposits were $14.86 billion at December 31, 2023 compared to $15.22 billion at December 31, 2022, which was a decrease of $367.3 million or 2%. Significant customer deposit changes by category at December 31, 2023 compared to December 31, 2022, included:
· Customer demand deposits decreased $1.20 billion or 21% to $4.50 billion compared to $5.70 billion.
· Customer savings deposits decreased $259.7 million or 3% to $8.41 billion compared to $8.67 billion.
· Customer time deposits increased $1.09 billion to $1.94 billion compared to $851.5 million.Total wholesale and institutional deposits were $1.35 billion as of December 31, 2023, which was a decrease of $958.1 million or 42% from $2.30 billion at September 30, 2023. Significant wholesale and institutional deposit changes by category at December 31, 2023, compared to September 30, 2023, included:
· Wholesale and institutional savings deposits decreased $170.1 million or 30% to $394.4 million compared to $564.5 million.
· Wholesale time deposits decreased $788.0 million or 45% to $950.9 million compared to $1.74 billion.
Total wholesale and institutional deposits were $1.35 billion as of December 31, 2023, which was a decrease of $943.9 million or 41% from $2.29 billion at December 31, 2022. Significant wholesale and institutional deposit changes by category at December 31, 2023 compared to December 31, 2022 included:
· Wholesale and institutional savings deposits decreased $929.1 million or 70% to $394.4 million compared to $1.32 billion.
· Wholesale time deposits decreased $14.8 million or 2% to $950.9 million compared to $965.7 million.
*Provision and Allowance*
Provision and Allowance for Credit Losses for Loans
Provision for credit losses for loans for the fourth quarter of 2023 was $12.8 million, which was an increase of $10.7 million from $2.1 million of provision benefit recorded in the fourth quarter of 2022. The provision expense for the fourth quarter of 2023 was primarily impacted by a customer that moved to non accrual due to its abrupt decision to discontinue business operations.
HTLF's allowance for credit losses for loans totaled $122.6 million at December 31, 2023, compared to $109.5 million at December 31, 2022, respectively. The following items impacted HTLF's allowance for credit losses for loans for the year ended December 31, 2023:
· Provision expense for the year ended December 31, 2023, totaled $25.4 million.
· Net charge-offs of $12.4 million were recorded for the year or 0.11% of average loans. Net charge-offs of $392,000 were recorded in the fourth quarter of 2022 or 0.01% of average loans.
Provision and Allowance for Credit Losses for Unfunded Commitments
HTLF's allowance for unfunded commitments totaled $16.5 million and $20.2 million at December 31, 2023 and December 31, 2022, respectively. The following impacted HTLF's allowance for credit losses for unfunded commitments during 2023:
· Provision benefit for the year ended December 31, 2023, totaled $3.7 million.
· Unfunded commitments decreased $103.9 million or 2% to $4.63 billion at December 31, 2023 compared to $4.73 billion at December 31, 2022.
Total Provision and Allowance for Lending Related Credit Losses
The total provision expense for lending related credit losses was $11.7 million for the fourth quarter of 2023 compared to $3.4 million for the fourth quarter of 2022. The total allowance for lending related credit losses was $139.0 million at December 31, 2023, which was 1.15% of total loans as of December 31, 2023, compared to $129.7 million or 1.13% of total loans as of December 31, 2022.
*Nonperforming Assets*
Nonperforming assets increased $43.6 million or 65% to $110.5 million, which was 0.57% of total assets at December 31, 2023, compared to $66.9 million or 0.33% of total assets at December 31, 2022. The increase was primarily driven by a well-collateralized long-term manufacturing customer who is experiencing cash flow challenges due to a recent acquisition. Nonperforming loans were $97.9 million or 0.81% of total loans at December 31, 2023, compared to $58.5 million or 0.51% of total loans at December 31, 2022. At December 31, 2023, loans delinquent 30-89 days were 0.09% of total loans compared to 0.04% of total loans at December 31, 2022.
*Non-GAAP Financial Measures*
This earnings release contains references to financial measures which are not defined by generally accepted accounting principles ("GAAP"). Management believes the non-GAAP measures are helpful for investors to analyze and evaluate the company's financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Additionally, 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:
· Adjusted earnings available to common stockholders, adjusts net income for the loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability net income available to common stockholders as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
· Adjusted annualized return on average assets, adjusts net income for the loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability of annualized return on average assets as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
· 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. Net interest margin, fully tax equivalent, is net interest income adjusted for the tax-favored status of certain loans and securities divided by average earning assets.
· 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 annualized return on average common equity, adjusts net income for the loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability of annualized return on average assets as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
· 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.
· Adjusted annualized return on average tangible common equity, adjusts net income available to common stockholders for the loss from sale of securities, and other non-operating expenses as well as the tax effect of those transactions. Management believes this measure enhances the comparability of annualized return on average assets as it reflects adjustments commonly made by management, investors and analysts to evaluate the ongoing operations and enhance comparability with the results of prior periods.
· 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 January 28, 2025, by logging on to www.htlf.com.
*About HTLF*
Heartland Financial USA, Inc., operating under the brand name HTLF, is a bank holding company with assets of $19.41 billion. HTLF has banks serving 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 the company 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 the company'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 the company's operations or performance. These forward-looking statements are generally identified by the use of the words such as "believe", "expect", "intent", "anticipate", "plan", "intend", "estimate", "project", "may", "will", "would", "could", "should", "may", "view", "opportunity", "potential", or similar or negative expressions of these words or phrases that are used in this release, and future oral and written statements of the company and its management. Although the company may make these statements based on management’s experience, beliefs, expectations, assumptions and best estimate of future events, the ability of the company 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 the company 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 the company’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 and governmental measures addressing them, climate change and climate-related regulations, persistent inflation, higher interest rates, 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 due to 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 or correct or update 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-**CONTACT:*
Kevin L. Thompson
Executive Vice President
Chief Financial Officer
(563) 589-1994
kthompson@htlf.com
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *For the Quarter Ended*
*December 31,* *For the Year Ended*
*December 31,* *2023* *2022* *2023* *2022*
*Interest Income*
Interest and fees on loans $ 192,861 $ 143,970 $ 697,997 $ 477,970
Interest on securities:
Taxable 54,573 53,178 223,521 169,544
Nontaxable 6,278 6,132 25,268 24,006
Interest on federal funds sold — 11 3 11
Interest on deposits with other banks and short-term investments 2,174 1,410 7,007 3,125
*Total Interest Income* *255,886* *204,701* *953,796* *674,656*
*Interest Expense*
Interest on deposits 88,071 32,215 319,688 56,880
Interest on borrowings 5,874 2,223 10,311 2,717
Interest on term debt 5,804 5,043 22,560 16,823
*Total Interest Expense* *99,749* *39,481* *352,559* *76,420*
*Net Interest Income* *156,137* *165,220* *601,237* *598,236*
Provision for credit losses 11,738 3,387 21,707 15,370
*Net Interest Income After Provision for Credit Losses* *144,399* *161,833* *579,530* *582,866*
*Noninterest Income*
Service charges and fees 18,708 17,432 74,024 68,031
Loan servicing income 158 790 1,561 2,741
Trust fees 4,905 5,440 20,715 22,570
Brokerage and insurance commissions 729 629 2,794 2,986
Capital market fees 1,676 1,824 10,007 11,543
Securities gains (losses), net (140,007 ) (153 ) (141,539 ) (425 )
Unrealized gain (loss) on equity securities, net 75 (7 ) 240 (622 )
Net gains on sale of loans held for sale 94 888 3,880 9,032
Valuation adjustment on servicing rights — — — 1,658
Income on bank owned life insurance 729 600 3,771 2,341
Other noninterest income 1,132 2,532 3,621 8,409
*Total Noninterest Income* *(111,801* *)* *29,975* *(20,926* *)* *128,264*
*Noninterest Expense*
Salaries and employee benefits 64,766 61,611 251,276 254,478
Occupancy 6,509 6,905 26,847 28,155
Furniture and equipment 2,901 3,019 11,599 12,499
Professional fees 17,060 16,320 58,667 58,606
FDIC insurance assessments 10,313 1,866 19,940 7,000
Advertising 1,677 1,829 8,347 6,221
Core deposit and customer relationship intangibles amortization 1,611 1,841 6,739 7,834
Other real estate and loan collection expenses, net 505 373 1,489 950
(Gain) loss on sales/valuations of assets, net 2,072 2,388 (77 ) (1,047 )
Acquisition, integration and restructuring costs 4,365 2,442 10,359 7,586
Partnership investment in tax credit projects 3,573 3,247 5,401 5,040
Other noninterest expenses 14,933 15,377 61,240 56,055
*Total Noninterest Expense* *130,285* *117,218* *461,827* *443,377*
*Income Before Income Taxes* *(97,687* *)* *74,590* *96,777* *267,753*
Income taxes (27,324 ) 13,936 16,857 55,573
*Net Income/(Loss)* *(70,363* *)* *60,654* *79,920* *212,180*
Preferred dividends (2,012 ) (2,012 ) (8,050 ) (8,050 )
*Net Income/(Loss) Available to Common Stockholders* *$* *(72,375* *)* *$* *58,642* *$* *71,870* *$* *204,130*
*Earnings/(loss) per common share-diluted* *$* *(1.69* *)* *$* *1.37* *$* *1.68* *$* *4.79*
*Weighted average shares outstanding-diluted* *42,838,405* *42,699,752* *42,791,795* *42,630,703*
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *For the Quarter Ended* *12/31/2023* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022*
*Interest Income*
Interest and fees on loans $ 192,861 $ 182,394 $ 168,899 $ 153,843 $ 143,970
Interest on securities:
Taxable 54,573 54,800 58,172 55,976 53,178
Nontaxable 6,278 6,584 6,378 6,028 6,132
Interest on federal funds sold — 3 — — 11
Interest on deposits with other banks and short-term investments 2,174 1,651 2,051 1,131 1,410
*Total Interest Income* *255,886* *245,432* *235,500* *216,978* *204,701*
*Interest Expense*
Interest on deposits 88,071 92,744 81,975 56,898 32,215
Interest on borrowings 5,874 1,167 848 2,422 2,223
Interest on term debt 5,804 5,765 5,545 5,446 5,043
*Total Interest Expense* *99,749* *99,676* *88,368* *64,766* *39,481*
*Net Interest Income* *156,137* *145,756* *147,132* *152,212* *165,220*
Provision for credit losses 11,738 1,516 5,379 3,074 3,387
*Net Interest Income After Provision for Credit Losses* *144,399* *144,240* *141,753* *149,138* *161,833*
*Noninterest Income*
Service charges and fees 18,708 18,553 19,627 17,136 17,432
Loan servicing income 158 278 411 714 790
Trust fees 4,905 4,734 5,419 5,657 5,440
Brokerage and insurance commissions 729 692 677 696 629
Capital markets fees 1,676 1,845 4,037 2,449 1,824
Securities gains (losses), net (140,007 ) (114 ) (314 ) (1,104 ) (153 )
Unrealized gain (loss) on equity securities, net 75 13 (41 ) 193 (7 )
Net gains on sale of loans held for sale 94 905 1,050 1,831 888
Valuation adjustment on servicing rights — — — — —
Income on bank owned life insurance 729 858 1,220 964 600
Other noninterest income 1,132 619 407 1,463 2,532
*Total Noninterest Income* *(111,801* *)* *28,383* *32,493* *29,999* *29,975*
*Noninterest Expense*
Salaries and employee benefits 64,766 62,262 62,099 62,149 61,611
Occupancy 6,509 6,438 6,691 7,209 6,905
Furniture and equipment 2,901 2,720 3,063 2,915 3,019
Professional fees 17,060 13,616 15,194 12,797 16,320
FDIC insurance assessments 10,313 3,313 3,035 3,279 1,866
Advertising 1,677 1,633 3,052 1,985 1,829
Core deposit and customer relationship intangibles amortization 1,611 1,625 1,715 1,788 1,841
Other real estate and loan collection expenses, net 505 481 348 155 373
(Gain) loss on sales/valuations of assets, net 2,072 108 (3,372 ) 1,115 2,388
Acquisition, integration and restructuring costs 4,365 2,429 1,892 1,673 2,442
Partnership investment in tax credit projects 3,573 1,136 154 538 3,247
Other noninterest expenses 14,933 15,292 15,575 15,440 15,377
*Total Noninterest Expense* *130,285* *111,053* *109,446* *111,043* *117,218*
*Income Before Income Taxes* *(97,687* *)* *61,570* *64,800* *68,094* *74,590*
Income taxes (27,324 ) 13,479 15,384 15,318 13,936
*Net Income/(Loss)* *(70,363* *)* *48,091* *49,416* *52,776* *60,654*
Preferred dividends (2,012 ) (2,013 ) (2,012 ) (2,013 ) (2,012 )
*Net Income/(Loss) Available to Common Stockholders* *$* *(72,375* *)* *$* *46,078* *$* *47,404* *$* *50,763* *$* *58,642*
*Earnings/(loss) per common share-diluted* *$* *(1.69* *)* *$* *1.08* *$* *1.11* *$* *1.19* *$* *1.37*
*Weighted average shares outstanding-diluted* *42,838,405* *42,812,563* *42,757,603* *42,742,878* *42,699,752*
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *As of* *12/31/2023* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022*
*Assets*
Cash and due from banks $ 275,554 $ 248,756 $ 317,303 $ 274,354 $ 309,045
Interest-bearing deposits with other banks and other short-term investments 47,459 99,239 82,884 87,757 54,042
Cash and cash equivalents 323,013 347,995 400,187 362,111 363,087
Time deposits in other financial institutions 1,240 1,490 1,490 1,740 1,740
Securities:
Carried at fair value 4,646,891 5,482,687 5,798,041 6,096,657 6,147,144
Held to maturity, at cost 838,241 835,468 834,673 832,098 829,403
Other investments, at cost 91,277 90,001 72,291 72,364 74,567
Loans held for sale 5,071 6,262 14,353 10,425 5,277
Loans:
Held to maturity 12,068,645 11,872,436 11,717,974 11,495,353 11,428,352
Allowance for credit losses (122,566 ) (110,208 ) (111,198 ) (112,707 ) (109,483 )
Loans, net 11,946,079 11,762,228 11,606,776 11,382,646 11,318,869
Premises, furniture and equipment, net 181,070 187,436 190,420 191,267 197,330
Goodwill 576,005 576,005 576,005 576,005 576,005
Core deposit and customer relationship intangibles, net 18,415 20,026 21,651 23,366 25,154
Servicing rights, net — — — — 7,840
Cash surrender value on life insurance 197,085 196,694 195,793 194,419 193,403
Other real estate, net 12,548 14,362 2,677 7,438 8,401
Other assets 574,772 609,139 510,359 432,008 496,008
*Total Assets* *$* *19,411,707* *$* *20,129,793* *$* *20,224,716* *$* *20,182,544* *$* *20,244,228*
*Liabilities and Equity*
*Liabilities*
Deposits:
Demand $ 4,500,304 $ 4,792,813 $ 4,897,858 $ 5,119,554 $ 5,701,340
Savings 8,805,597 8,754,911 8,772,596 9,256,609 9,994,391
Time 2,895,813 3,553,269 3,993,089 3,305,183 1,817,278
Total deposits 16,201,714 17,100,993 17,663,543 17,681,346 17,513,009
Borrowings 622,255 392,634 44,364 92,337 376,117
Term debt 372,396 372,059 372,403 372,097 371,753
Accrued expenses and other liabilities 282,225 438,577 285,416 207,359 248,294
*Total Liabilities* *17,478,590* *18,304,263* *18,365,726* *18,353,139* *18,509,173*
*Stockholders' Equity*
Preferred equity 110,705 110,705 110,705 110,705 110,705
Common stock 42,688 42,656 42,645 42,559 42,467
Capital surplus 1,090,740 1,088,267 1,087,358 1,084,112 1,080,964
Retained earnings 1,141,501 1,226,740 1,193,522 1,158,948 1,120,925
Accumulated other comprehensive income/(loss) (452,517 ) (642,838 ) (575,240 ) (566,919 ) (620,006 )
*Total Equity* *1,933,117* *1,825,530* *1,858,990* *1,829,405* *1,735,055*
*Total Liabilities and Equity* *$* *19,411,707* *$* *20,129,793* *$* *20,224,716* *$* *20,182,544* *$* *20,244,228*
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *For the Quarter Ended* *12/31/2023* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022*
*Average Balances*
Assets $ 19,667,825 $ 20,207,920 $ 20,221,511 $ 20,118,005 $ 19,913,849
Loans, net of unearned 11,938,272 11,800,064 11,625,442 11,378,078 11,117,513
Total deposits 16,709,394 17,507,813 17,689,138 17,505,867 17,319,218
Customer deposits 14,969,948 14,699,235 14,655,535 15,123,181 15,739,698
Earning assets 17,853,957 18,439,010 18,523,552 18,392,649 18,175,838
Interest-bearing liabilities 12,721,680 13,158,631 13,209,794 12,582,234 11,980,032
Common equity 1,729,086 1,746,818 1,727,013 1,655,860 1,548,739
Total stockholders' equity 1,839,791 1,857,523 1,837,718 1,766,565 1,659,444
Tangible common equity (non-GAAP)^(1) 1,133,888 1,149,992 1,128,527 1,055,617 946,688
*Key Performance Ratios*
Annualized return on average assets (1.42 )% 0.94 % 0.98 % 1.06 % 1.21 %
Adjusted annualized return on average assets (non-GAAP)^(1) 0.96 0.98 0.96 1.12 1.28
Annualized return on average common equity (GAAP) (16.61 ) 10.47 11.01 12.43 15.02
Adjusted annualized return on average common equity (non-GAAP)^(1) 10.46 10.92 10.80 13.16 16.00
Annualized return on average tangible common equity (non-GAAP)^(1) (24.89 ) 16.32 17.31 20.03 25.17
Adjusted annualized return on average tangible common equity (non-GAAP)^(1) 16.38 17.02 17.00 21.17 26.77
Annualized ratio of net charge-offs (recoveries) to average loans 0.01 0.12 0.32 (0.04 ) (0.06 )
Annualized net interest margin (GAAP) 3.47 3.14 3.19 3.36 3.61
Annualized net interest margin, fully tax-equivalent (non-GAAP)^(1) 3.52 3.18 3.23 3.40 3.65
Efficiency ratio (GAAP) 293.86 63.77 60.93 60.94 60.05
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)^(1) 59.31 59.95 59.88 57.16 54.33
Annualized ratio of total noninterest expenses to average assets (GAAP) 2.63 2.18 2.17 2.24 2.34
Annualized ratio of core expenses to average assets (non-GAAP)^(1) 2.23 2.08 2.16 2.14 2.14
(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*
*December 31,* *For the Year Ended*
*December 31,* *2023* *2022* *2023* *2022*
*Average Balances*
Assets $ 19,667,825 $ 19,913,849 $ 20,053,004 $ 19,621,839
Loans, net of unearned 11,938,272 11,117,513 11,687,313 10,608,831
Deposits 16,709,394 17,319,218 17,351,294 17,029,398
Earning assets 17,853,957 18,175,838 18,301,190 18,021,134
Interest-bearing liabilities 12,721,680 11,980,032 12,919,125 11,437,921
Common equity 1,729,086 1,548,739 1,714,983 1,738,041
Total stockholders' equity 1,839,791 1,659,444 1,825,688 1,848,746
Tangible common equity (non-GAAP)^(1) 1,133,888 946,688 1,117,311 1,133,124
*Key Performance Ratios*
Annualized return on average assets (1.42 )% 1.21 % 0.40 % 1.08 %
Adjusted annualized return on average assets (non-GAAP)^(1) 0.96 1.28 1.01 1.11
Annualized return on average common equity (GAAP) (16.61 ) 15.02 4.19 11.74
Adjusted annualized return on average common equity (non-GAAP)^(1) 10.46 16.00 11.31 12.06
Annualized return on average tangible common equity (non-GAAP)^(1) (24.89 ) 25.17 6.89 18.55
Adjusted annualized return on average tangible common equity (non-GAAP)^(1) 16.38 26.77 17.82 19.03
Annualized ratio of net charge-offs (recoveries) to average loans 0.01 (0.06 ) 0.11 0.11
Annualized net interest margin (GAAP) 3.47 3.61 3.29 3.32
Annualized net interest margin, fully tax-equivalent (non-GAAP)^(1) 3.52 3.65 3.33 3.37
Efficiency ratio (GAAP) 293.86 60.05 79.58 61.03
Adjusted efficiency ratio, fully tax-equivalent (non-GAAP)^(1) 59.31 54.33 59.06 57.74
Annualized ratio of total noninterest expenses to average assets (GAAP) 2.63 2.34 2.30 2.26
Annualized ratio of core expenses to average assets (non-GAAP)^(1) 2.23 2.14 2.15 2.16
(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* *12/31/2023* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022*
*Common Share Data*
Book value per common share $ 42.69 $ 40.20 $ 41.00 $ 40.38 $ 38.25
Tangible book value per common share (non-GAAP)^(1) 28.77 26.23 26.98 26.30 24.09
ASC 320 effect on book value per common share (11.00 ) (16.27 ) (14.04 ) (13.35 ) (14.58 )
Common shares outstanding, net of treasury stock 42,688,008 42,656,303 42,644,544 42,558,726 42,467,394
*Capital Ratios*
Common equity ratio 9.27 % 8.49 % 8.65 % 8.54 % 8.16 %
Tangible common equity ratio (non-GAAP)^(1) 6.53 5.73 5.86 5.72 5.21
Tier 1 leverage ratio 9.44 9.59 9.40 9.25 9.13
Common equity tier 1 ratio^(2) 10.97 11.37 11.33 11.28 11.07
Total risk based capital ratio^(2) 14.53 14.90 14.93 14.98 14.76
*Other Selected Trend Information*
Effective tax rate 27.97 % 21.89 % 23.74 % 22.50 % 18.68 %
Full time equivalent employees 1,970 1,965 1,966 1,991 2,002
*Loans Held to Maturity*
Commercial and industrial $ 3,652,047 $ 3,591,809 $ 3,590,680 $ 3,498,345 $ 3,464,414
Paycheck Protection Program ("PPP") 2,777 3,750 4,139 8,258 11,025
Owner occupied commercial real estate 2,638,175 2,429,659 2,398,698 2,312,538 2,265,307
Commercial and business lending 6,292,999 6,025,218 5,993,517 5,819,141 5,740,746
Non-owner occupied commercial real estate 2,553,711 2,656,358 2,530,736 2,421,341 2,330,940
Real estate construction 1,011,716 1,029,554 1,013,134 1,102,186 1,076,082
Commercial real estate lending 3,565,427 3,685,912 3,543,870 3,523,527 3,407,022
Total commercial lending 9,858,426 9,711,130 9,537,387 9,342,668 9,147,768
Agricultural and agricultural real estate 919,184 842,116 839,817 810,183 920,510
Residential mortgage 797,829 813,803 828,437 841,084 853,361
Consumer 493,206 505,387 512,333 501,418 506,713
*Total loans held to maturity* *$* *12,068,645* *$* *11,872,436* *$* *11,717,974* *$* *11,495,353* *$* *11,428,352*
*Total unfunded loan commitments* $ 4,625,768 $ 4,813,798 $ 4,905,147 $ 4,867,925 $ 4,729,677
*Deposits*
Demand-customer $ 4,500,304 $ 4,792,813 $ 4,897,858 $ 5,119,554 $ 5,701,340
Savings-customer 8,411,240 8,190,430 8,149,596 8,501,337 8,670,898
Savings-wholesale and institutional 394,357 564,481 623,000 755,272 1,323,493
Total savings 8,805,597 8,754,911 8,772,596 9,256,609 9,994,391
Time-customer 1,944,884 1,814,335 1,597,849 1,071,476 851,539
Time-wholesale 950,929 1,738,934 2,395,240 2,233,707 965,739
Total time 2,895,813 3,553,269 3,993,089 3,305,183 1,817,278
*Total deposits* *$* *16,201,714* *$* *17,100,993* *$* *17,663,543* *$* *17,681,346* *$* *17,513,009*
Total customer deposits $ 14,856,428 $ 14,797,578 $ 14,645,303 $ 14,692,367 $ 15,223,777
Total wholesale and institutional deposits 1,345,286 2,303,415 3,018,240 2,988,979 2,289,232
*Total deposits* *$* *16,201,714* *$* *17,100,993* *$* *17,663,543* *$* *17,681,346* *$* *17,513,009*
(1) Refer to "Non-GAAP Measures" in this earnings release for additional information on the usage and presentation of these non-GAAP measures, and refer to these financial tables for the reconciliations to the most directly comparable GAAP measures.
(2) December 31, 2023 calculation is preliminary.
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA* *As of and for the Quarter Ended* *12/31/2023* *9/30/2023* *6/30/2023* *3/31/2023* *12/31/2022*
*Allowance for Credit Losses-Loans*
Balance, beginning of period $ 110,208 $ 111,198 $ 112,707 $ 109,483 $ 105,715
Provision (benefit) for credit losses 12,750 2,672 7,829 2,184 2,075
Charge-offs (3,886 ) (3,964 ) (9,613 ) (2,151 ) (2,668 )
Recoveries 3,494 302 275 3,191 4,361
*Balance, end of period* *$* *122,566* *$* *110,208* *$* *111,198* *$* *112,707* *$* *109,483*
*Allowance for Unfunded Commitments*
Balance, beginning of period $ 17,480 $ 18,636 $ 21,086 $ 20,196 $ 18,884
Provision for credit losses (1,012 ) (1,156 ) (2,450 ) 890 1,312
*Balance, end of period* *$* *16,468* *$* *17,480* *$* *18,636* *$* *21,086* *$* *20,196*
*Allowance for lending related credit losses* *$* *139,034* *$* *127,688* *$* *129,834* *$* *133,793* *$* *129,679*
*Provision for Credit Losses*
Provision (benefit) for credit losses-loans $ 12,750 $ 2,672 $ 7,829 $ 2,184 $ 2,075
Provision for credit losses-unfunded commitments (1,012 ) (1,156 ) (2,450 ) 890 1,312
*Total provision (benefit) for credit losses* *$* *11,738* *$* *1,516* *$* *5,379* *$* *3,074* *$* *3,387*
*Asset Quality*
Nonaccrual loans $ 95,426 $ 51,304 $ 61,956 $ 58,066 $ 58,231
Loans past due ninety days or more 2,507 511 1,459 174 273
Other real estate owned 12,548 14,362 2,677 7,438 8,401
Other repossessed assets — 1 5 24 26
*Total nonperforming assets* *$* *110,481* *$* *66,178* *$* *66,097* *$* *65,702* *$* *66,931*
*Nonperforming Assets Activity*
Balance, beginning of period $ 66,178 $ 66,097 $ 65,702 $ 66,931 $ 73,268
Net loan (charge offs) recoveries (392 ) (3,662 ) (9,338 ) 1,040 1,693
New nonperforming loans 61,193 19,295 19,805 4,626 1,439
Reduction of nonperforming loans^(1) (14,278 ) (14,691 ) (5,253 ) (5,711 ) (8,875 )
OREO/Repossessed assets sales proceeds (2,220 ) (861 ) (4,819 ) (1,184 ) (594 )
*Balance, end of period* *$* *110,481* *$* *66,178* *$* *66,097* *$* *65,702* *$* *66,931*
*Asset Quality Ratios*
Ratio of nonperforming loans to total loans 0.81 % 0.44 % 0.54 % 0.51 % 0.51 %
Ratio of nonperforming assets to total assets 0.57 0.33 0.33 0.33 0.33
Annualized ratio of net loan charge-offs (recoveries) to average loans 0.01 0.12 0.32 (0.04 ) (0.06 )
Allowance for loan credit losses as a percent of loans 1.02 0.93 0.95 0.98 0.96
Allowance for lending related credit losses as a percent of loans 1.15 1.08 1.11 1.16 1.13
Allowance for loan credit losses as a percent of nonperforming loans 125.15 212.70 175.35 193.52 187.14
Loans delinquent 30-89 days as a percent of total loans 0.09 0.12 0.12 0.10 0.04
(1) Includes principal reductions, transfers to performing status and transfers to OREO.
*HEARTLAND FINANCIAL USA, INC.*
*CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)*
*DOLLARS IN THOUSANDS* *For the Quarter Ended* *December 31, 2023* *September 30, 2023* *December 31, 2022* *Average*
*Balance* *Interest* *Rate* *Average*
*Balance* *Interest* *Rate* *Average*
*Balance* *Interest* *Rate*
*Earning Assets*
Securities:
Taxable $ 5,119,970 $ 54,573 4.23 % $ 5,726,057 $ 54,800 3.80 % $ 6,122,313 $ 53,178 3.45 %
Nontaxable^(1) 759,464 7,681 4.01 881,162 8,085 3.64 890,368 7,762 3.46
Total securities 5,879,434 62,254 4.20 6,607,219 62,885 3.78 �