Heartland Financial profit rises in 4th quarter, year

Sustained low interest rate environment lowers net interest margin

George Ford
Published: January 29 2013 | 2:00 pm - Updated: 28 March 2014 | 10:41 am in
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Heartland Financial USA on Tuesday reported higher fourth-quarter and annual profits on continued expansion of mortgage operations, coupled with reduced provision for loan and lease losses and increased net interest income.

The Dubuque-based corporate parent of Dubuque Bank & Trust, posted net income of $8.9 million, or 50 cents per share, in the fourth quarter of 2012, up from $6.2 million, or 31 cents per share, in the final period of 2011.

For the year, Heartland Financial recorded a net profit of $49.3 million, or $2.73 per share, an improvement from $28 million, or $1.23 per share, in 2011.

Return on average common equity was 10.59 percent and return on average assets was 0.71 percent for the fourth quarter of 2012, compared with 7.77 percent and 0.49 percent, respectively, for the final quarter of 2011.

For the year, return on average common equity was 15.59 percent and return on average assets was 1.03 percent, compared with 7.77 percent and 0.50 percent, respectively, for 2011.

Net interest margin, expressed as a percentage of average earning assets, was 3.81 percent during the fourth quarter of 2012, compared with 4.08 percent for the fourth quarter of 2011. On an annual basis, net interest margin was 3.98 percent in 2012, down from 4.16 percent in 2011.

Lynn Fuller, Heartland Financial chairman, president and CEO, attributed the declines in net interest margin to the sustained low interest rate environment where yields on the securities and loan portfolios are declining at a greater pace than rates paid on deposits and loans.

"Going forward, we view margin as a key challenge in this low rate environment," Fuller said. "Deposit rates have little room for further reductions while competition for new loans and lower reinvestment rates on maturing securities continues to push asset yields lower."

Heartland Financial operates banks in 47 communities in Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado and Minnesota and loan production offices in California, Nevada, Wyoming, Idaho and North Dakota.

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