Heartland Financial USA, Inc. (NASDAQ:HTLF) reported solid Q3 financial results in its recent earnings call, with net income available to common shareholders at $46.1 million and earnings per share of $1.08. The company showcased robust loan and deposit growth, improved credit quality, and significant paydown of wholesale deposits and borrowings. HTLF also announced the completion of its charter consolidation and the appointment of a Chief Strategy Officer and Chief Innovation and Digital Officer to its executive team.
Key takeaways from the call include:
- HTLF reported a strong liquidity profile with $1.2 billion in principal cash flow expected from its securities portfolio over the next 12 months.
- The loan-to-deposit ratio stood at 69%, with loan growth of $150 million to $200 million expected in the next quarter.
- The company's net interest margin on a tax equivalent basis is projected to stabilize at around 3.20%.
- Non-interest expenses totaled $111 million, with recurring operating expenses decreasing to $107.4 million.
- The company's credit performance is expected to remain stable, with provision for credit losses in the range of $3 million to $5 million.
- HTLF has announced its next phase, HTLF 3.0, focusing on reducing expenses, increasing EPS, and growing TCE.
- The company plans to reduce service charges by around $600,000 in Q4 and expects improvement in the capital markets line due to new opportunities in the pipeline.
During the call, the company also highlighted a reduction in core operating expenses to assets from 2.22% in 2021 to 2.08% in the current quarter, resulting in a $28 million reduction in expenses. HTLF executives discussed plans for further expense reductions and the upcoming HTLF 3.0 initiative, which will involve reinvesting in areas such as branch footprint and management layers in 2024.
The company is closely monitoring the economy and weak spots while focusing on efficiency, EPS, expense control, and TCE in decision-making regarding geographies, branch network, and management layers. More guidance is expected in the fourth quarter, with the next earnings call slated for late January.
HTLF executives also addressed a temporary movement of an $11 million item from performing loans to non-performing loans, clarifying its impact on the net ins and outs of non-performing loans. They are currently evaluating their branch network and geography for potential expansion or contraction, with a key focus on expense control, EPS, and TCE.
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