Blue Valley Ban Corp. Announces Fourth Quarter 2018 Operating Results

Blue Valley Ban Corp. (OTCQX: BVBC) (the "Company”) today reported consolidated earnings for the quarter ended December 31, 2018 of $277,000 compared to a net loss of $2,588,000 for the comparable period ended December 31, 2017. For the twelve months ended December 31, 2018, the Company earned $5,263,000 compared to $574,000 for the twelve months ended December 31, 2017. Earnings per common share for the quarter- and year-to-date periods ended December 31, 2018 were $0.05 and $0.95, respectively, compared to $(0.48) and $0.11, respectively, for the quarter- and year-to-date periods ended December 31, 2017.

On January 16, 2019, the Company entered into an Agreement and Plan of Merger pursuant to which the Company will be acquired by Heartland Financial USA, Inc. (the "Merger”). Earnings for the quarter- and year-to-date periods ended December 31, 2018, included expenses related to the Merger ("Transaction expenses”) of $2,260,000. Transaction expenses included legal, accounting and equity compensation expenses. Numerous key aspects of the operating results and financial condition for the Company reflected positive trends and results as of and during the periods ended December 31, 2018.

Robert D. Regnier, Chairman and CEO of Blue Valley Ban Corp., commented, "This past year’s performance was one of the best in the history of our Company. I am excited about our future as part of the Heartland organization, with the Merger providing us additional resources to continue to grow our business and better serve our customers.”

For the quarter ended December 31, 2018, net interest income increased by $702,000, or 11.9%, compared to the prior year period, primarily due to increased loan interest income. The Company’s non-interest income increased by $413,000, or 33.3%, compared to the prior year period, primarily due to a gain of $363,000 recognized on the sale of a bank branch building and additional rental income of $136,000 as a result of a fully leased property held for sale. For the quarter ended December 31, 2018, the Company’s non-interest expense increased by $2,153,000, or 36.3%, compared to the prior year period, primarily due to Transaction expenses of $2,260,000.

The Tax Cuts and Jobs Act ("Tax Reform”) enacted in December 2017 positively impacted consolidated earnings in 2018. The Tax Reform reduced the Company’s effective tax rate to 24.4% for the twelve month period ended December 31, 2018 compared to 36.7% for the prior year period. This comparison excludes the one-time, non-cash charge of $3,595,000 for the re-measurement of the Company’s deferred tax assets in December 2017. The lower effective tax rate in 2018 resulted in a tax savings of approximately $855,000 for the year ended December 31, 2018.

As a result of the volume and composition of loan growth and other factors used to determine the level of the allowance for loan losses, the Company did not record a provision for loan loss for the quarter ended December 31, 2018, compared to a negative provision of $400,000 recorded during the same period in the prior year. The Company’s ratio of total reserves to non-accrual loans was approximately 1,866% as of December 31, 2018, which exceeds the most recent Uniform Bank Performance Report (UBPR) peer group ratio of 505%. At December 31, 2018, the Company’s ratio of nonperforming loans to total loans was 0.06%, which compares favorably with the most recent UBPR peer group ratio of 0.62%.

About Blue Valley Ban Corp.

Blue Valley Ban Corp. is a bank holding company that, through its subsidiaries, provides banking services to closely-held businesses, their owners, professionals and individuals in Johnson County, Kansas.

This release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of those safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, can generally be identified by use of the words "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," or the negative of these terms or other comparable terminology. The Company is unable to predict the actual results of its future plans or strategies with certainty. Factors which could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, the ability to complete the Merger, the ability to successfully and timely combine the two organizations in the Merger; the ability to recognize the cost savings in the Merger; the ability to obtain the regulatory and shareholder approvals necessary to complete the Merger; fluctuations in market rates of interest and loan and deposit pricing; inability to maintain or increase deposit base and secure adequate funding; a continued deterioration of general economic conditions or the demand for housing in the Company's market areas; legislative or regulatory changes; regulatory action; continued adverse developments in the Company's loan or investment portfolio; any inability to obtain funding on favorable terms; the Company’s non-payment on Trust Preferred Securities or other debt; the loss of key personnel; significant increases in competition; potential unfavorable actions from rating agencies; potential unfavorable results of litigation to which the Company may become a party, and the possible dilutive effect of potential acquisitions or expansions. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time, and it is not possible for us to predict all risk factors. Nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All statements in this release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events, except as required by law.

Additional Information about the Merger and Where to Find It

Heartland intends to file with the SEC a registration statement on Form S-4 (the "Registration Statement”) to register the shares of Heartland common stock that will be issued to BVBC shareholders in the proposed Merger. The Registration Statement will include a proxy statement/prospectus that will be used to solicit proxies for a special meeting of the BVBC shareholders at which the Merger will be considered (the "Proxy Statement/Prospectus”). The Proxy Statement/Prospectus will contain important information about BVBC, Heartland and the Merger. All BVBC shareholders are urged to read the Proxy Statement/Prospectus carefully when it becomes available. Once filed, the Registration Statement, the Proxy Statement/Prospectus and related documentation will be available at no charge at the SEC’s website (www.sec.gov), BVBC’s website (www.bankbv.com) or by contacting Mark Fortino, Secretary and Chief Financial Officer of BVBC.

BVBC and certain of the directors and executive officers of BVBC may be deemed to be participants in the solicitation of proxies from the shareholders of BVBC in connection with the Merger. Information about the directors and executive officers of BVBC and their securities holdings will be included in the Proxy Statement/Prospectus, when it is filed as part of the Registration Statement. Information about the directors and executive officers of Heartland and their beneficial ownership of Heartland common stock is set forth in the proxy statement for Heartland’s 2018 Annual Meeting of Stockholders, as filed with the SEC on Schedule 14A on April 6, 2018. Information about the directors and executive officers of BVBC and their beneficial ownership of BVBC common stock is set forth in the proxy statement for BVBC’s 2018 Annual Meeting of Stockholders, as filed with the OTCQX on April 9, 2018. Additional information regarding the interests in the Merger of the BVBC directors and executive officers and other persons who may be deemed participants in the transactions contemplated by the Merger Agreement and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading the Proxy Statement/Prospectus and other relevant documents regarding the Merger to be filed with the SEC. Free copies of these documents may be obtained as described above.

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