HEARTLAND FINANCIAL USA INC - FORM 8-K - EX-99.1 - HTLF EARNINGS RELEASE Q1 2011

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8-K - HEARTLAND FINANCIAL USA INC	q120118kcoverpage1.htm



CONTACT:	FOR IMMEDIATE RELEASE
John K. Schmidt	April 25, 2011
Chief Operating Officer
Chief Financial Officer
(563) 589-1994
jschmidt@htlf.com

HEARTLAND FINANCIAL USA, INC. REPORTS FIRST QUARTER 2011 RESULTS

Quarterly Highlights


▪	Net income of $4.2 million


▪	Net interest margin of 4.19%


▪	Provision for loan and lease losses totaled $10.0 million


▪	Demand deposits increased $56.9 million or 39% annualized since year-end 2010


▪	Loans held to maturity increased $16.6 million or 3% annualized since year-end 2010



	Quarter Ended March 31,
	2011			2010
Net income (in millions)	$	4.2		$	5.3
Net income available to common stockholders (in millions)	2.9			4.0
Diluted earnings per common share	0.18			0.24

Return on average assets	0.29		%	0.41		%
Return on average common equity	4.67			6.83
Net interest margin	4.19			4.14



“With earnings of $4.2 million, we are pleased to report another profitable quarter. Overall, however, Heartland's earnings fell short of expectations as a result of $10.0 million in provision expense.” Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA, Inc.

Dubuque, Iowa, Monday, April 25, 2011-Heartland Financial USA, Inc. (NASDAQ: HTLF) today reported net income of $4.2 million for the quarter ended March 31, 2011, compared to $5.3 million for the first quarter of 2010. Net income available to common stockholders was $2.9 million, or $0.18 per diluted common share, for the quarter ended March 31, 2011, compared to $4.0 million, or $0.24 per diluted common share, for the first quarter of 2010. Return on average common equity was 4.67 percent and return on average assets was 0.29 percent for the first quarter of 2011, compared to 6.83 percent and 0.41 percent, respectively, for the same quarter in 2010.

Commenting on Heartland's first quarter results, Lynn B. Fuller, Heartland's chairman, president and chief executive officer, said, “With earnings of $4.2 million, we are pleased to report another profitable quarter. Overall, however, Heartland's earnings fell short of expectations as a result of $10.0 million in provision expense.”

The decrease in net income for the first quarter of 2011 compared to the first quarter of 2010 resulted primarily from an increased provision for loan and lease losses, combined with increases in salaries and employee benefits, professional fees and other noninterest expenses. Earnings during the first quarter of 2011 were positively affected by increases in net interest income, gains on sale of loans and securities gains, along with a reduction in losses on repossessed assets.

Net Interest Margin Remains Above 4.00 Percent; Net Interest Income Remains Flat

Net interest margin, expressed as a percentage of average earning assets, was 4.19 percent during the first quarter of 2011 compared to 4.14 percent for the first quarter of 2010. The continuation of a net interest margin above 4.00 percent has been a direct result of continued price discipline, the effect of which would have been more significant had it not been for the amount of foregone interest on Heartland's nonaccrual loans, which had balances of $92.5 million or 3.89 percent of total loans and leases at March 31, 2011, and $82.9 million or 3.46 percent of total loans and leases at March 31, 2010.

Fuller said, “As a result of further declines in interest rates and considerable growth in demand deposits, we continue to benefit from an exceptional net interest margin, which reached 4.19 percent for the quarter. That's up five basis points from one year ago and the best margin we've seen in well over a decade. We've now maintained margin above 4 percent for seven consecutive quarters.”

Net interest income on a tax-equivalent basis totaled $37.0 million during the first quarter of 2011, an increase of $1.2 million or 3 percent from the $35.8 million recorded during the first quarter of 2010. These increases reflect Heartland's success in optimizing the composition of its interest bearing liabilities by de-emphasizing higher cost time deposits, which decreased to 36 percent of total average interest bearing deposits during the first quarter of 2011 from 39 percent during the first quarter of 2010.

On a tax-equivalent basis, interest income in the first quarter of 2011 was $49.2 million compared to $50.8 million in the first quarter of 2010, a decrease of $1.5 million or 3 percent. The $73.9 million or 2 percent growth in average earning assets during the first quarter of 2011 was offset by the impact of a decrease in the average interest rate earned on these assets.

Interest expense for the first quarter of 2011 was $12.2 million, a decrease of $2.7 million or 18 percent from $14.9 million in the first quarter of 2010. Average interest bearing liabilities decreased $152.5 million or 5 percent for the quarter ended March 31, 2011, as compared to the same quarter in 2010, and the average interest rates paid on Heartland's deposits and borrowings declined 27 basis points to 1.65 percent in the first quarter of 2011 from 1.92 percent in 2010.

Noninterest Income Increases; Noninterest Expense Increases

Noninterest income was $12.6 million during the first quarter of 2011 compared to $10.6 million during the first quarter of 2010, an increase of $2.0 million or 19 percent. Contributing to this increase was growth of $298,000 or 14 percent in trust fees, $633,000 or 43 percent in securities gains and $604,000 or 76 percent in gains on sale of loans.

Loan servicing income increased $122,000 or 9 percent for the first quarter of 2011 as compared to the first quarter of 2010. Two components of loan servicing income, mortgage servicing rights and amortization of mortgage servicing rights, are dependent upon the level of loans Heartland originates and sells into the secondary market, which in turn is highly influenced by market interest rates for home mortgage loans. Mortgage servicing rights

income was $984,000 during the first quarter of 2011 compared to $694,000 during the first quarter of 2010 and amortization of mortgage servicing rights was $864,000 during the first quarter of 2011 compared to $603,000 during the first quarter of 2010. Also included in loan servicing income are the fees collected for the servicing of mortgage loans for others, which is dependent upon the aggregate outstanding balance of these loans, rather than quarterly production and sale of mortgage loans. Fees collected for the servicing of mortgage loans for others was $873,000 during the first quarter of 2011 compared to $722,000 during the first quarter of 2010. The portfolio of mortgage loans serviced for others by Heartland totaled $1.44 billion at March 31, 2011, compared to $1.18 billion at March 31, 2010.

“The integration of our new mortgage banking unit is progressing very well. We are fully operational in our Arizona, New Mexico, Colorado and Montana markets. New lending offices have also been staffed in the non-Heartland markets of Austin, Texas and Danville, California, operating under the name, National Residential Mortgage,” commented Fuller.

For the first quarter of 2011, noninterest expense totaled $32.9 million, an increase of $4.0 million or 14 percent from the same quarter of 2010. Contributing to this growth in noninterest expense was a $2.8 million or 18 percent increase in salaries and employee benefits, which was higher during the first quarter of 2011 as a result of the expansion of residential loan origination via the addition of National Residential Mortgage and increased staffing at Heartland, primarily in the special assets area. Also contributing to the increase in noninterest expense was an $808,000 or 37 percent increase in professional fees, primarily associated with the workout and disposition of nonperforming assets and the services provided to Heartland by third-party consultants, and a $837,000 or 27 percent increase in other noninterest expenses, half of which was associated with a writedown on land in Phoenix, Arizona, which had originally been purchased for branch expansion but has now been listed for sale.

Heartland's effective tax rate was 22.24 percent for the first quarter of 2011 compared to 28.77 percent for the first quarter of 2010. Federal low-income housing tax credits included in Heartland's effective tax rate totaled $138,000 during the first quarter of 2011 compared to $54,000 during the first quarter of 2010. Heartland's effective tax rate is also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 44.39 percent during the first quarter of 2011 compared to 28.37 percent during the first quarter of 2010. The tax-equivalent adjustment for this tax-exempt interest income was $1.3 million during the first quarter of 2011 compared to $1.1 million during the first quarter of 2010.

Loan Demand Remains Soft; Growth in Demand Deposits

At March 31, 2011, total assets were $4.00 billion, consistent with total assets at December 31, 2010. Securities represented 31 percent of total assets at March 31, 2011, compared to 32 percent of total assets at December 31, 2010.

Total loans and leases, exclusive of those covered by loss share agreements, were $2.36 billion at March 31, 2011, compared to $2.34 billion at year-end 2010, an increase of $16.6 million or 3 percent annualized. Commercial and commercial real estate loans, which totaled $1.73 billion at March 31, 2011, increased $8.5 million or 2 percent annualized since year-end 2010. This growth occurred at Dubuque Bank and Trust Company, Arizona Bank & Trust and Minnesota Bank & Trust. Residential mortgage loans, which totaled $169.5 million at March 31, 2011, increased $5.8 million or 14 percent annualized since year-end 2010. Agricultural and agricultural real estate loans, which totaled $253.2 million at March 31, 2011, increased $2.2 million or 4 percent annualized since year-end 2010.

Fuller stated, “Some of our markets are beginning to see new loan demand from local businesses. We view this as an encouraging sign of confidence in an improving economy.”

Total deposits were $3.08 billion at March 31, 2011, compared to $3.03 billion at year-end 2010, an increase of $48.3 million or 6 percent annualized. The composition of Heartland's deposits continued to shift from higher cost certificates of deposit to lower cost non-maturity deposits during the first quarter of 2011, as demand deposits increased $56.9 million or 39 percent annualized since year-end 2010 and savings deposits increased $11.0 million or 3 percent annualized since year-end 2010. Conversely, time deposits, exclusive of brokered deposits, experienced a decrease of $21.5 million or 10 percent annualized since year-end 2010. At March 31, 2011, brokered time deposits totaled $39.2 million or 1 percent of total deposits compared to $37.3 million or 1 percent of total deposits at December 31, 2010.

“Deposits increased by nearly $50 million from year-end, with demand deposits accounting for a majority of the

growth. Compared to one year ago, demand deposits are up 30 percent and time deposits are down nearly 11 percent,” Fuller added.

Allowance for Loan Losses Increases; Nonperforming Assets Increase

The allowance for loan and lease losses at March 31, 2011, was 1.83 percent of loans and leases and 47.55 percent of nonperforming loans compared to 1.82 percent of loans and leases and 47.12 percent of nonperforming loans at December 31, 2010, and 1.96 percent of loans and leases and 59.21 percent of nonperforming loans at March 31, 2010. The provision for loan losses was $10.0 million for the first quarter of 2011 compared to $8.9 million for the fourth quarter of 2010 and $8.9 million for the first quarter of 2010. Additions to the allowance for loan and lease losses continued during the first quarter of 2011 primarily as a result of the continuation of depressed economic conditions and the impact those conditions have on the appraised values of collateral. When updated appraisals have been obtained, many reflect a decline in property values due primarily to a lack of recent comparable sales and an extension of absorption periods.

Nonperforming loans, exclusive of those covered under the loss sharing agreements, were $91.0 million or 3.86 percent of total loans and leases at March 31, 2011, compared to $90.6 million or 3.87 percent of total loans and leases at December 31, 2010, and $78.3 million or 3.30 percent of total loans and leases at March 31, 2010. Included in the March 31, 2011, nonperforming loans was a $3.0 million loan past due ninety days or more that has since returned to performing status. Approximately 58 percent, or $53.0 million, of Heartland's nonperforming loans are to 25 borrowers, with $12.9 million originated by Rocky Mountain Bank, $9.1 million originated by New Mexico Bank & Trust, $8.2 million originated by Wisconsin Community Bank, $6.2 million originated by Summit Bank & Trust, $4.0 million originated by Arizona Bank & Trust, $4.0 million originated by Minnesota Bank & Trust, $3.1 million originated by Galena State Bank and Trust Co., $3.0 million originated by Dubuque Bank and Trust Company and $2.5 million originated by Riverside Community Bank. The portion of Heartland's nonperforming loans covered by government guarantees was $3.1 million at March 31, 2011. The industry breakdown for these nonperforming loans as identified using the North American Industry Classification System (NAICS) was $12.8 million to lessors of real estate, $8.2 million for lot and land development, $7.7 million for construction and development, $6.0 million for manufacturing and $4.1 million for other activities related to real estate. The remaining $14.2 million was distributed among eight other industries.

Delinquencies in each of the loan portfolios continue to be well-managed and no significant adverse trends have been identified. Loans delinquent 30 to 89 days as a percent of total loans were 0.61 percent at March 31, 2011, compared to 0.67 percent at December 31, 2010, 1.65 percent at September 30, 2010, 0.61 percent at June 30, 2010, and 1.22 percent at March 31, 2010.

Other real estate owned was $35.0 million at March 31, 2011, compared to $32.0 million at December 31, 2010, and $28.7 million at March 31, 2010. Liquidation strategies have been identified for all the assets held in other real estate owned. Management continues with its plans to market these properties through an orderly liquidation process instead of a quick liquidation process that would likely result in discounts greater than the projected carrying costs. During the first quarter of 2011, $5.3 million of other real estate owned was sold. As of this earnings release date, an additional $3.6 million of other real estate owned has been sold or is under agreement to sell prior to the end of the second quarter of 2011.

Net charge-offs on loans during the first quarter of 2011 were $9.4 million compared to $4.4 million during the first quarter of 2010. A large portion of the net charge-offs in both years was related to nonfarm nonresidential real estate and construction, land development and other land loans.

The schedule below summarizes the changes in Heartland's nonperforming assets, including those covered by loss share agreements, during the first quarter of 2011:



(Dollars in thousands)	Nonperforming Loans			Other Real Estate Owned			Other Repossessed Assets			Total Nonperforming Assets
December 31, 2010	$	95,498		$	32,002		$	302		$	127,802
Loan foreclosures	(8,973		)	8,937			36			—
Net loan charge offs	(9,431		)	—			—			(9,431		)
New nonperforming loans	26,259			—			—			26,259
Reduction of nonperforming loans⁽¹⁾	(7,781		)	—			—			(7,781		)
OREO/Repossessed sales proceeds	—			(4,822		)	(95		)	(4,917		)
OREO/Repossessed assets writedowns, net	—			(1,110		)	—			(1,110		)
Net activity at Citizens Finance Co.	—			—			(20		)	(20		)
March 31, 2011	$	95,572		$	35,007		$	223		$	130,802

(1) Includes principal reductions and transfers to performing status.

Fuller concluded, “This quarter's earnings were negatively impacted by $10.0 million of provision expense that resulted primarily from lower appraised values on a handful of impaired loans. We believe that our allowance for loan losses is properly reserved and that further funding of the allowance should begin to ease as the economy improves. The reduction and resolution of nonperforming assets remains our highest priority at both the corporate and subsidiary bank level.”

Conference Call Details

Heartland will host a conference call for investors at 5:00 p.m. ET today. To participate, dial 877-941-2332 at least five minutes before start time, or log onto www.htlf.com. If you are unable to participate on the call, a replay will be available until April 23, 2012, by logging onto www.htlf.com.

About Heartland Financial USA, Inc.

Heartland Financial USA, Inc. is a $4.0 billion diversified financial services company providing banking, mortgage, wealth management, investment, insurance and consumer finance services to individuals and businesses. Heartland currently has 61 banking locations in 42 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado and Minnesota. Additional information about Heartland Financial USA, Inc. is available at www.htlf.com.

Safe Harbor Statement

This release, and future oral and written statements of Heartland and its management, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Heartland's financial condition, results of operations, plans, objectives, future performance and business. Although these forward-looking statements are based upon the beliefs, expectations and assumptions of Heartland's management, there are a number of factors, many of which are beyond the ability of management to control or predict, that could cause actual results to differ materially from those in its forward-looking statements. These factors, which are detailed in the risk factors included in Heartland's Annual Report on Form 10-K filed with the Securities and Exchange Commission, include, among others: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war, (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of acquisitions; (x) unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices. All statements in this release, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.

-FINANCIAL TABLES FOLLOW-

###



HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended March 31,
	2011			2010
Interest Income
Interest and fees on loans and leases	$	36,966		$	37,328
Interest on securities and other:
Taxable	7,411			9,455
Nontaxable	3,564			2,849
Interest on federal funds sold	—			—
Interest on deposits in other financial institutions	1			5
Total Interest Income	47,942			49,637
Interest Expense
Interest on deposits	8,026			10,760
Interest on short-term borrowings	259			234
Interest on other borrowings	3,936			3,959
Total Interest Expense	12,221			14,953
Net Interest Income	35,721			34,684
Provision for loan and lease losses	10,009			8,894
Net Interest Income After Provision for Loan and Lease Losses	25,712			25,790
Noninterest Income
Service charges and fees	3,361			3,204
Loan servicing income	1,549			1,427
Trust fees	2,479			2,181
Brokerage and insurance commissions	848			712
Securities gains, net	2,089			1,456
Gain on trading account securities	216			48
Gains on sale of loans	1,402			798
Income on bank owned life insurance	403			314
Other noninterest income	261			453
Total Noninterest Income	12,608			10,593
Noninterest Expense
Salaries and employee benefits	18,186			15,423
Occupancy	2,386			2,294
Furniture and equipment	1,409			1,447
Professional fees	3,019			2,211
FDIC insurance assessments	1,345			1,420
Advertising	850			814
Intangible assets amortization	146			151
Net loss on repossessed assets	1,632			2,064
Other noninterest expenses	3,914			3,077
Total Noninterest Expense	32,887			28,901
Income Before Income Taxes	5,433			7,482
Income taxes	1,212			2,160
Net Income	4,221			5,322
Net income attributable to noncontrolling interest, net of tax	16			25
Net Income Attributable to Heartland	4,237			5,347
Preferred dividends and discount	(1,336		)	(1,336		)
Net Income Available to Common Stockholders	$	2,901		$	4,011
Earnings per common share-diluted	$	0.18		$	0.24
Weighted average shares outstanding-diluted	16,557,353			16,435,844



HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended
	3/31/2011			12/31/2010			9/30/2010			6/30/2010			3/31/2010
Interest Income
Interest and fees on loans and leases	$	36,966		$	37,440		$	38,756		$	38,270		$	37,328
Interest on securities and other:
Taxable	7,411			7,889			8,225			8,938			9,455
Nontaxable	3,564			3,438			3,282			3,047			2,849
Interest on federal funds sold	—			—			—			1			—
Interest on deposits in other financial institutions	1			1			1			7			5
Total Interest Income	47,942			48,768			50,264			50,263			49,637
Interest Expense
Interest on deposits	8,026			8,524			9,033			9,955			10,760
Interest on short-term borrowings	259			330			305			291			234
Interest on other borrowings	3,936			4,068			4,213			4,208			3,959
Total Interest Expense	12,221			12,922			13,551			14,454			14,953
Net Interest Income	35,721			35,846			36,713			35,809			34,684
Provision for loan and lease losses	10,009			8,860			4,799			9,955			8,894
Net Interest Income After Provision for Loan and Lease Losses	25,712			26,986			31,914			25,854			25,790
Noninterest Income
Service charges and fees	3,361			3,537			3,665			3,494			3,204
Loan servicing income	1,549			2,323			1,862			1,620			1,427
Trust fees	2,479			2,428			2,267			2,330			2,181
Brokerage and insurance commissions	848			948			739			785			712
Securities gains, net	2,089			2,170			2,158			1,050			1,456
Gain (loss) on trading account securities	216			107			18			(264		)	48
Gains on sale of loans	1,402			3,813			2,394			1,083			798
Valuation adjustment on mortgage servicing rights	—			1,239			(1,239		)	—			—
Income on bank owned life insurance	403			463			396			293			314
Other noninterest income	261			1,265			349			443			453
Total Noninterest Income	12,608			18,293			12,609			10,834			10,593
Noninterest Expense
Salaries and employee benefits	18,186			16,892			15,502			15,574			15,423
Occupancy	2,386			2,339			2,287			2,201			2,294
Furniture and equipment	1,409			1,543			1,515			1,599			1,447
Professional fees	3,019			3,065			2,621			2,549			2,211
FDIC insurance assessments	1,345			1,306			1,331			1,384			1,420
Advertising	850			1,058			906			1,052			814
Goodwill impairment charge	—			—			1,639			—			—
Intangible assets amortization	146			146			149			145			151
Net loss on repossessed assets	1,632			7,345			4,219			1,636			2,064
Other noninterest expenses	3,914			3,623			3,277			3,435			3,077
Total Noninterest Expense	32,887			37,317			33,446			29,575			28,901
Income Before Income Taxes	5,433			7,962			11,077			7,113			7,482
Income taxes	1,212			1,464			4,187			2,035			2,160
Net Income	4,221			6,498			6,890			5,078			5,322
Net income available to noncontrolling interest, net of tax	16			35			30			25			25
Net Income Attributable to Heartland	4,237			6,533			6,920			5,103			5,347
Preferred dividends and discount	(1,336		)	(1,336		)	(1,336		)	(1,336		)	(1,336		)
Net Income Available to Common Stockholders	$	2,901		$	5,197		$	5,584		$	3,767		$	4,011
Earnings per common share-diluted	$	0.18		$	0.31		$	0.34		$	0.23		$	0.24
Weighted average shares outstanding-diluted	16,557,353			16,515,657			16,465,650			16,459,978			16,435,844



HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As Of
	3/31/2011			12/31/2010			9/30/2010			6/30/2010			3/31/2010
Assets
Cash and cash equivalents	$	86,278		$	62,572		$	141,702		$	75,771		$	78,010
Securities	1,244,447			1,264,564			1,211,297			1,213,875			1,234,339
Loans held for sale	8,317			23,904			41,047			25,750			16,002
Loans and leases:
Held to maturity	2,360,604			2,343,987			2,361,567			2,385,772			2,369,233
Loans covered by loss share agreements	19,201			20,800			23,557			25,420			27,968
Allowance for loan and lease losses	(43,271		)	(42,693		)	(44,732		)	(48,314		)	(46,350		)
Loans and leases, net	2,336,534			2,322,094			2,340,392			2,362,878			2,350,851
Premises, furniture and equipment, net	119,954			121,012			121,940			122,066			121,033
Goodwill	25,909			25,909			25,909			27,548			27,548
Other intangible assets, net	13,440			13,466			11,510			12,426			12,320
Cash surrender value on life insurance	66,073			61,981			62,038			62,113			61,525
Other real estate, net	35,007			32,002			32,408			32,882			28,652
FDIC indemnification asset	1,396			2,294			1,939			1,952			2,357
Other assets	66,019			69,657			73,002			71,168			65,604
Total Assets	$	4,003,374		$	3,999,455		$	4,063,184		$	4,008,429		$	3,998,241
Liabilities and Equity
Liabilities
Deposits:
Demand	$	637,452		$	580,589		$	581,957		$	537,468		$	489,807
Savings	1,569,993			1,558,998			1,572,891			1,552,546			1,571,881
Brokered time deposits	39,225			37,285			37,285			37,285			37,285
Other time deposits	835,704			857,176			881,510			888,847			938,438
Total deposits	3,082,374			3,034,048			3,073,643			3,016,146			3,037,411
Short-term borrowings	194,934			235,864			196,533			200,515			190,732
Other borrowings	365,281			362,527			413,448			425,994			426,039
Accrued expenses and other liabilities	28,393			35,232			43,234			38,273			28,226
Total Liabilities	3,670,982			3,667,671			3,726,858			3,680,928			3,682,408
Equity
Preferred equity	78,798			78,483			78,168			77,853			77,539
Common equity	250,918			250,608			255,430			246,922			235,543
Total Heartland Stockholders' Equity	329,716			329,091			333,598			324,775			313,082
Noncontrolling interest	2,676			2,693			2,728			2,726			2,751
Total Equity	332,392			331,784			336,326			327,501			315,833
Total Liabilities and Equity	$	4,003,374		$	3,999,455		$	4,063,184		$	4,008,429		$	3,998,241
Common Share Data
Book value per common share	$	15.28		$	15.26		$	15.58		$	15.08		$	14.4
ASC 320 effect on book value per common share	$	0.49		$	0.60		$	1.25		$	0.93		$	0.28
Common shares outstanding, net of treasury stock	16,418,228			16,425,055			16,392,091			16,375,460			16,357,874
Tangible Capital Ratio ⁽¹⁾	5.61		%	5.60		%	5.63		%	5.45		%	5.17		%

(1) Total common stockholders' equity less goodwill and intangible assets (excluding mortgage servicing rights) divided by total assets less intangible assets (excluding mortgage servicing rights).



HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	For the Quarter Ended
	3/31/2011			12/31/2010			9/30/2010			6/30/2010			3/31/2010
Average Balances
Assets	$	4,009,863		$	4,091,276		$	4,012,107		$	4,033,350		$	3,984,794
Loans and leases, net of unearned	2,399,656			2,414,799			2,427,141			2,437,357			2,384,490
Deposits	3,068,753			3,075,193			3,018,928			3,040,763			3,024,827
Earning assets	3,583,883			3,637,735			3,602,953			3,632,056			3,510,015
Interest bearing liabilities	3,010,629			3,095,791			3,084,742			3,165,862			3,163,161
Common stockholders' equity	251,833			255,940			252,781			241,816			238,028
Total stockholders' equity	333,016			336,827			333,346			322,110			318,027
Tangible common stockholders' equity	223,736			227,696			222,771			211,640			207,695

Earnings Performance Ratios
Annualized return on average assets	0.29		%	0.50		%	0.55		%	0.37		%	0.41		%
Annualized return on average common equity	4.67		%	8.06		%	8.76		%	6.25		%	6.83		%
Annualized return on average common tangible equity	5.26		%	9.06		%	9.94		%	7.14		%	7.83		%
Annualized net interest margin ⁽¹⁾	4.19		%	4.05		%	4.18		%	4.09		%	4.14		%
Efficiency ratio ⁽²⁾	69.17		%	70.09		%	69.05		%	63.14		%	64.27		%

(1) Tax equivalent basis is calculated using an effective tax rate of 35%
(2) Noninterest expense divided by the sum of net interest income and noninterest income less net security gains



HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
	As of and for the Quarter Ended
	3/31/2011			12/31/2010			9/30/2010			6/30/2010			3/31/2010
Loan and Lease Data
Loans held to maturity:
Commercial and commercial real estate	$	1,727,530		$	1,718,993		$	1,714,592		$	1,740,856		$	1,710,669
Residential mortgage	169,513			163,726			170,543			169,105			175,065
Agricultural and agricultural real estate	253,189			250,943			260,393			255,576			258,239
Consumer	214,682			214,515			219,731			223,800			228,311
Direct financing leases, net	876			981			1,233			1,420			1,951
Unearned discount and deferred loan fees	(5,186		)	(5,171		)	(4,925		)	(4,985		)	(5,002		)
Total loans and leases held to maturity	$	2,360,604		$	2,343,987		$	2,361,567		$	2,385,772		$	2,369,233
Loans covered under loss share agreements:
Commercial and commercial real estate	$	9,368		$	10,056		$	11,703		$	12,266		$	13,241
Residential mortgage	5,291			5,792			6,545			7,148			8,064
Agricultural and agricultural real estate	2,628			2,723			2,807			3,346			2,806
Consumer	1,914			2,229			2,502			2,660			3,857
Total loans and leases covered under loss share agreements	$	19,201		$	20,800		$	23,557		$	25,420		$	27,968
Asset Quality
Not covered under loss share agreements:
Nonaccrual loans	$	87,970		$	90,512		$	85,190		$	84,925		$	78,239
Loans and leases past due ninety days or more as to interest or principal payments	3,038			85			—			—			47
Other real estate owned	34,532			31,731			32,129			32,554			28,290
Other repossessed assets	223			302			492			486			528
Total nonperforming assets not covered under loss share agreements	$	125,763		$	122,630		$	117,811		$	117,965		$	107,104
Covered under loss share agreements:
Nonaccrual loans	$	4,564		$	4,901		$	5,330		$	4,949		$	4,621
Loans and leases past due ninety days or more as to interest or principal payments	—			—			—			—			—
Other real estate owned	475			271			279			328			362
Other repossessed assets	—			—			—			—			—
Total nonperforming assets covered under loss share agreements	$	5,039		$	5,172		$	5,609		$	5,277		$	4,983
Allowance for Loan and Lease Losses
Balance, beginning of period	$	42,693		$	44,732		$	48,314		$	46,350		$	41,848
Provision for loan and lease losses	10,009			8,860			4,799			9,955			8,894
Charge-offs on loans not covered by loss share agreements	(9,785		)	(11,133		)	(8,735		)	(8,879		)	(4,505		)
Charge-offs on loans covered by loss share agreements	(238		)	(445		)	(43		)	(46		)	(264		)
Recoveries	592			679			397			934			377
Balance, end of period	$	43,271		$	42,693		$	44,732		$	48,314		$	46,350
Asset Quality Ratios Excluding Assets Covered Under Loss Share Agreements
Ratio of nonperforming loans and leases to total loans and leases	3.86		%	3.87		%	3.61		%	3.56		%	3.30		%
Ratio of nonperforming assets to total assets	3.14		%	3.07		%	2.90		%	2.94		%	2.68		%
Annualized ratio of net loan charge-offs to average loans and leases	1.59		%	1.79		%	1.37		%	1.32		%	0.74		%
Allowance for loan and lease losses as a percent of loans and leases	1.83		%	1.82		%	1.89		%	2.03		%	1.96		%
Allowance for loan and lease losses as a percent of nonperforming loans and leases	47.55		%	47.12		%	52.51		%	56.89		%	59.21		%



HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS
	For the Quarter Ended
	March 31, 2011							March 31, 2010
	Average							Average
	Balance			Interest		Rate		Balance			Interest		Rate
Earning Assets
Securities:
Taxable	$	923,713		$	7,411	3.25	%	$	926,161		$	9,455	4.14	%
Nontaxable⁽¹⁾	298,671			4,509		6.12		239,587			3,807		6.44
Total securities	1,222,384			11,920		3.95		1,165,748			13,262		4.61
Interest bearing deposits	4,381			1		0.09		2,848			5		0.71
Federal funds sold	332			—		—		617			—		—
Loans and leases:
Commercial and commercial real estate ⁽¹⁾	1,746,757			24,957		5.79		1,695,161			24,821		5.94
Residential mortgage	185,299			2,410		5.27		196,770			2,720		5.61
Agricultural and agricultural real estate ⁽¹⁾	252,999			3,840		6.16		258,770			3,984		6.24
Consumer	213,668			4,850		9.21		231,660			4,974		8.71
Direct financing leases, net	933			13		5.65		2,129			32		6.10
Fees on loans	—			1,254		—		—			986		—
Less: allowance for loan and lease losses	(42,870		)	—		—		(43,688		)	—		—
Net loans and leases	2,356,786			37,324		6.42		2,340,802			37,517		6.50
Total earning assets	3,583,883			49,245		5.57	%	3,510,015			50,784		5.87	%
Nonearning Assets	425,980							474,779
Total Assets	$	4,009,863		$	49,245			$	3,984,794		$	50,784
Interest Bearing Liabilities
Interest bearing deposits
Savings	$	1,553,295		$	2,547	0.67		$	1,549,140		$	4,136	1.08
Time, $100,000 and over	270,447			1,610		2.41		324,888			2,070		2.58
Other time deposits	613,682			3,869		2.56		683,859			4,554		2.70
Short-term borrowings	210,032			259		0.50		169,237			234		0.56
Other borrowings	363,173			3,936		4.40		436,037			3,959		3.68
Total interest bearing liabilities	3,010,629			12,221		1.65	%	3,163,161			14,953		1.92	%
Noninterest Bearing Liabilities
Noninterest bearing deposits	631,329							466,940
Accrued interest and other liabilities	34,889							36,666
Total noninterest bearing liabilities	666,218							503,606
Stockholders' Equity	333,016							318,027
Total Liabilities and Stockholders' Equity	$	4,009,863						$	3,984,794
Net interest income ⁽¹⁾				$	37,024						$	35,831
Net interest spread ⁽¹⁾						3.93	%						3.95	%
Net interest income to total earning assets ⁽¹⁾						4.19	%						4.14	%
Interest bearing liabilities to earning assets	84.00		%					90.12		%

(1) Tax equivalent basis is calculated using an effective tax rate of 35%



HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS
	As of and For the Quarter Ended
	3/31/2011			12/31/2010			9/30/2010			6/30/2010			3/31/2010
Total Assets
Dubuque Bank and Trust Company	$	1,152,387		$	1,131,622		$	1,201,966		$	1,128,580		$	1,160,474
New Mexico Bank & Trust	880,980			913,776			891,642			878,518			849,428
Wisconsin Community Bank	469,305			474,366			461,822			458,468			456,510
Rocky Mountain Bank	417,846			417,781			438,923			439,241			454,558
Riverside Community Bank	302,057			290,018			297,272			295,671			283,195
Galena State Bank & Trust Co.	275,807			278,353			289,558			283,038			287,495
Arizona Bank & Trust	231,020			223,574			251,245			267,959			267,453
First Community Bank	118,000			115,675			114,686			118,887			119,962
Summit Bank & Trust	93,600			95,414			100,843			97,332			95,442
Minnesota Bank & Trust	62,251			58,386			57,832			55,722			54,318
Total Deposits
Dubuque Bank and Trust Company	$	839,634		$	809,271		$	825,773		$	784,955		$	806,574
New Mexico Bank & Trust	659,373			646,302			655,724			624,454			608,030
Wisconsin Community Bank	374,758			392,432			363,868			358,034			355,880
Rocky Mountain Bank	348,723			347,924			349,853			350,636			363,842
Riverside Community Bank	245,639			241,184			242,717			242,964			233,440
Galena State Bank & Trust Co.	239,445			236,647			250,749			243,964			250,621
Arizona Bank & Trust	188,415			183,279			204,663			229,885			230,699
First Community Bank	95,790			93,578			92,802			97,057			98,691
Summit Bank & Trust	80,327			81,024			79,823			82,445			81,414
Minnesota Bank & Trust	46,205			44,278			41,316			41,234			39,912
Net Income (Loss)
Dubuque Bank and Trust Company	$	4,858		$	3,934		$	5,727		$	3,304		$	4,921
New Mexico Bank & Trust	958			3,098			2,972			1,828			2,341
Wisconsin Community Bank	1,466			1,581			2,157			2,271			1,367
Rocky Mountain Bank	(630		)	1,393			(695		)	1,204			(596		)
Riverside Community Bank	(212		)	190			(140		)	290			640
Galena State Bank & Trust Co.	579			1,000			877			967			1,046
Arizona Bank & Trust	(1,452		)	(231		)	42			(2,004		)	(2,900		)
First Community Bank	100			38			(374		)	19			399
Summit Bank & Trust	(604		)	(208		)	201			399			(118		)
Minnesota Bank & Trust	(81		)	(178		)	(147		)	(134		)	(123		)
Return on Average Assets
Dubuque Bank and Trust Company	1.72		%	1.29		%	1.99		%	1.13		%	1.66		%
New Mexico Bank & Trust	0.43			1.33			1.34			0.83			1.12
Wisconsin Community Bank	1.26			1.31			1.85			1.98			1.23
Rocky Mountain Bank	(0.61		)	1.27			(0.63		)	1.08			(0.53		)
Riverside Community Bank	(0.28		)	0.25			(0.19		)	0.40			0.93
Galena State Bank & Trust Co.	0.85			1.39			1.21			1.35			1.46
Arizona Bank & Trust	(2.58		)	(0.38		)	(0.06		)	(2.95		)	(4.62		)
First Community Bank	0.35			0.13			(1.26		)	0.06			1.35
Summit Bank & Trust	(2.59		)	(0.84		)	0.79			1.65			(0.50		)
Minnesota Bank & Trust	(0.53		)	(1.23		)	(1.00		)	(1.00		)	(0.95		)
Net Interest Margin as a Percentage of Average Earning Assets
Dubuque Bank and Trust Company	3.98		%	3.92		%	4.01		%	4.04		%	4.05		%
New Mexico Bank & Trust	4.34			4.00			4.35			3.94			4.18
Wisconsin Community Bank	4.57			4.26			4.60			4.35			3.80
Rocky Mountain Bank	3.91			3.76			3.81			3.79			3.90
Riverside Community Bank	4.01			4.38			4.30			3.84			3.95
Galena State Bank and Trust Co.	3.73			3.60			3.53			3.56			3.48
Arizona Bank & Trust	4.25			3.72			3.77			3.46			3.64
First Community Bank	2.80			3.02			3.40			3.58			3.79
Summit Bank & Trust	2.99			2.78			3.22			3.98			3.29
Minnesota Bank & Trust	4.75			4.07			3.14			3.24			3.24



HEARTLAND FINANCIAL USA, INC. SELECTED FINANCIAL DATA - SUBSIDIARY BANKS (Unaudited) DOLLARS IN THOUSANDS
	As of
	3/31/2011			12/31/2010			9/30/2010			6/30/2010			3/31/2010
Total Portfolio Loans and Leases
Dubuque Bank and Trust Company	$	689,178		$	673,399		$	672,401		$	698,562		$	681,668
New Mexico Bank & Trust	513,568			513,658			511,279			513,257			509,696
Wisconsin Community Bank	320,841			320,711			325,543			323,024			314,102
Rocky Mountain Bank	238,201			246,213			260,832			272,035			281,079
Riverside Community Bank	161,238			162,706			165,539			159,137			157,511
Galena State Bank and Trust Co.	136,210			137,153			131,955			133,666			131,539
Arizona Bank & Trust	134,254			124,388			129,871			129,445			131,115
First Community Bank	59,176			60,827			64,375			64,666			66,560
Summit Bank & Trust	47,024			48,020			52,396			53,543			58,272
Minnesota Bank & Trust	40,197			36,013			26,868			25,058			24,997
Allowance For Loan and Lease Losses
Dubuque Bank and Trust Company	$	10,412		$	10,803		$	9,874		$	12,343		$	10,395
New Mexico Bank & Trust	7,277			7,704			8,297			8,388			7,999
Wisconsin Community Bank	3,369			3,847			4,518			4,306			5,328
Rocky Mountain Bank	4,425			3,779			5,181			6,465			7,434
Riverside Community Bank	3,693			3,524			3,109			2,751			2,425
Galena State Bank & Trust Co.	2,278			1,811			1,743			1,543			1,466
Arizona Bank & Trust	6,018			5,407			5,915			7,912			7,056
First Community Bank	1,572			1,629			2,087			1,262			993
Summit Bank & Trust	1,103			1,271			1,312			913			994
Minnesota Bank & Trust	636			565			270			242			240
Nonperforming Loans and Leases
Dubuque Bank and Trust Company	$	9,741		$	5,094		$	4,880		$	5,754		$	6,408
New Mexico Bank & Trust	15,979			20,753			14,651			15,901			13,998
Wisconsin Community Bank	11,776			12,702			12,070			10,159			15,773
Rocky Mountain Bank	18,303			21,406			29,986			31,981			21,558
Riverside Community Bank	11,443			7,611			7,662			7,722			5,543
Galena State Bank & Trust Co.	6,259			5,308			2,976			2,605			1,372
Arizona Bank & Trust	6,959			8,797			5,758			5,165			4,922
First Community Bank	3,156			2,417			2,850			2,338			2,512
Summit Bank & Trust	4,527			5,965			3,694			2,691			5,513
Minnesota Bank & Trust	2,229			8			—			—			—
Allowance As a Percent of Total Loans and Leases
Dubuque Bank and Trust Company	1.51		%	1.60		%	1.47		%	1.77		%	1.52		%
New Mexico Bank & Trust	1.42			1.50			1.62			1.63			1.57
Wisconsin Community Bank	1.05			1.20			1.39			1.33			1.70
Rocky Mountain Bank	1.86			1.53			1.99			2.38			2.64
Riverside Community Bank	2.29			2.17			1.88			1.73			1.54
Galena State Bank & Trust Co.	1.67			1.32			1.32			1.15			1.11
Arizona Bank & Trust	4.48			4.35			4.55			6.11			5.38
First Community Bank	2.66			2.68			3.24			1.95			1.49
Summit Bank & Trust	2.35			2.65			2.50			1.71			1.71
Minnesota Bank & Trust	1.58			1.57			1.00			0.97			0.96

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HEARTLAND FINANCIAL USA INC Reports