HTLF - Earnings call transcript Q4 2017 | Heartland Financial USA, Inc.

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Operator

Greetings and welcome to the Heartland Financial USA, Inc Fourth Quarter 2017 Conference Call. This afternoon, Heartland distributed its fourth quarter press release and hopefully, you’ve had a chance to review the results. If there is anyone on this call who did not receive a copy, you may access it at Heartland’s website at www.htlf.com. With us today from management are Lynn Fuller, Chairman and Chief Executive Officer; Bruce Lee, President; Bryan McKeag, Executive Vice President and Chief Financial Officer; and Andrew Townsend, Executive Vice President and Chief Credit Officer. Management will provide a brief summary of the quarter and then we will open up the call to questions from analysts.

forward-looking presentation, the like providing Commission. information under guidelines the that remind today begin by the of defined some management of we I and to would everyone falls the Before Securities as Exchange statements will be

part and must out projected. predictions and future forward-looking statements guidelines, of that the Company’s actual I presentation statements differ those during the this concerning these materially results hopes, of any As point made beliefs, from could expectations are

time, these obtained Additional from Mr. As call on in Company’s mode. on this a Instructions] included I reminder, Lynn information [Operator factors filings, time-to-time At now or this in the is XX-Q time, a over and Heartland. which website turn are all sir. Fuller the the website. ahead, conference Company’s Please go is on at to this listen-only XX-K SEC’s may will being At participants recorded. be the

Lynn Fuller

Heartland’s and for the us Thank today performance discussed company’s you, year joining Kevin the earnings to as everyone afternoon and we welcome quarter call. fourth appreciate XXXX good ended. We just conference and quarter

for one of and and quarter Chief with being topics. quarter followed to adjustment, I’ll call our on time turn year For fourth Officer this provide color Then EVP strategies. the related to EVP and CFO for the our who our and quarter. Well, results full cover XXXX. Bruce new earnings President, on insights set touch tax will that the Andrew additional by our pleased credit excluding next fourth news call records year highlights the key operating Heartland's will Lee, very minutes, the I'll Townsend, Credit who Heartland's over will Heartland’s on offer I'm on then afternoon progress Bryan quarterly McKeag,

passage year we in to tax common asset income XXXX was Now and the diluted our for charge or to quarter to response common full onetime diluted Act deferred per deferred XX.X the share of In available shareholders million million a $X.XX to available after and tax reduction common asset $X.XX $X.XX net fourth share. XX.X was million per a in per net income shareholders the of XX.X or Jobs charge cut share. the non-cash resulting diluted income the value tax of recorded or

increase the Heartland's available to shareholders XX.X was Excluding to 'XX was earnings per fifth income million marking full-year common available X% shareholders income fourth $XX.X year the or charge XXXX deferred tax of straight and share, common net over quarter diluted for annual $X.XX net a million common increases.

Heartland from Now XX% this should more going in quarter. reduction a estimate from to than tax benefit will We rate charge the the forward XXXX XX%. realize corporate the tax taken benefit tax cover the

accretion will impact provide internal XXXX, they return favorable tax modeled rates minutes. cut earnings will per In color were Bryan addition, a the tax share closed since the effects of in for the and at as the of tax few on improve rate. XX% XX further all acquisitions

by billion goal XX will over these in to of first two completed successful top million Founder's year Bancshares When mid-XXXX. year XXX in excellent us half Inc. our in assets in Texas with assets. two a notably we merger announced and Heartland's off Banks Colorado in asset quarter an XXXX to million assets to Symmetry bank addition Citywide providing with Minneapolis Bancshares acquisitions, affinity acquisition exceed of XXX acquisitions earnings a Heartland's to bank Heartland start is Inc., closer the And in of delivering XXXX largest taking solid date. the Bancorp In are completed FirstBank for billion fourth for commercial this California and agreements Citywide in operating our XX and

recent the in plan balance assets in was to XXXX. through sheet XX below discussed quarterly billion manage we strategically to calls our remain our As

strategic In sides their through 'XX pleased will goal accomplished XXXX, shifts on that return and both short-term borrowings. QX We of QX have primarily both levels. the to to are some in balance investments sheet

we are equity first enviable tax most very was the growth our ratio in half moved loans quarter up For X% Organic this prior to in the above over X.X% at the of time. a current value loans quarter organic deferred QX of and slightly value X our purchase each interest for interest and increase in more our common was the to Heartland's acquired for XXXX positive occurring growth Book with ending organic went second year tangible of quarter year. discuss asset X.XX% the benefiting effect Bruce Lee quarters. at with deposits will from moving increased level. although deposits the net was of X% and Net four the equity and range pleased at year growth moment last share book XXXX. accounting. tangible the deposits of charge In midpoint $XX.XX the income contracted non-time in $XX.XX dollars QX margin continued the detail. in has the margin loan for to for and the to respectively. X.XX% billion Nevertheless Net target for of of common Heartland's for for

full with significant the ratio XX.X%. This year respect efficiency over a at year over the we've improvement and year represents quarter basis made fourth progress the past year XX to points. Heartland's at XX.XX% of with Now

realize see in we new going from ratio would savings As forward. acquisitions to improvement and in investments this cost technology we further expect

non-interest Bruce Ryan more detail. in address comments will expense Following Lee's

X.X Heartland's assets. total the Founders XX%, the increased represents on billion or result moving the acquisitions. XX% currently assets of during sheet, largely year balance of Citywide the portfolio by and bank to Now nearly security

metrics half now the Credit quarter four room was all with see to growth. loan X.XX%. four Citywide ratio of a years and Currently detail positive of In newest on expect for credit portfolio decline available efforts for Drew portfolio to our plenty superb minutes diligent addition portfolios. related for other and I improving. want praise will and these more we credit as additions, a yield topics. with related XX% Townsend credit congratulate sale provide have is We quality the also Founders for their this duration our teams the and towards for to at few our their

to X more in forward. where to or Now for price operates. assets committed opportunities franchise in experience, high moving going attractive in these remain we to on each Building banking accretive expansion several position state improves into The achieving is remains in and to increase other acquisitions evaluate great XXXX M&A to Heartland, Heartland's We of pursue our for mergers a M&A the share reach through continue ability priority opportunities. our acquisitions. and our Heartland additional a M&A our on goal billion Heartland looking

declared pleased per January our $X.XX And Board dividend to $X.XX Heartland the in the report increase at very in record December, boosts XXXX. month's financial on dividend Board approved the of per share Xnd, regular in $X.XX a per Now XXXX.This with $X.XX share. our in respect that to special common share regular performance March to to the a payable annual meeting dividend this I'm common quarterly recognition dividend of company's

XX of want company's call adequacy to as America. and add asset an of the call portion Based banks. ranked that banks XXX initiatives. list I'll on will metrics again capital number on my growth, recognition financial in from has Heartland Heartland's to Heartland Forbes' best received profitability, largest Bruce? now I strategic quality, overview the the Bruce today's to closing related XX provide in of Lee, on one the turn US Now Forbes who over President

Bruce Lee

Thank you, Good Lynn. afternoon.

Heartland's As Lynn in financial the performance quarter year strong and described was respects. all for the

million with where we comment detail. delivered organic I'm pleased across I'll Heartland. Now the in organic of growth fourth loan quarter loan begin quarter on growth. I'm another loans that to results pleased added to we In of more those report $XX

second organic over the the growth loan of category experienced half net During priority highest million organic in exceeded million. growth and $XXX $XX of lending, we our commercial year

tailwinds. to and expect carry We XXXX of cuts, tax this strength momentum strong the on economic into

and clients climate quite meet across country as our by current I bankers is their encouraged with As business the optimism our they the describe I'm positive.

that cut, positioned and and plans. are capitalize stronger The rates loan well looking banks to optimism, costs hearing translate for it fueling demand energy the deposit are low future interest Heartland tax this expansion we're on are into lower and growth. Specifically, to

asset I'll the can mark managed turn ensure billion deposit. and XXXX. until second crossing carefully Now In to half XXXX monitored to of our $XX strategically the delay portfolio we we deposit

increased quarter organic non-time XX.X%. non-time our was During deposits $X.X billion the deposit Year-over-year virtually flat. fourth or growth

a the of deposit non-time when mix also deposits a including highly online account. banking deposits momentum producing we're increase in its We efforts. stepping quarter new X% increase XX% total. Heartland digital improving for account successful acquired In up non-interest-bearing in To checking valued new with year-over-year our in results the representing fourth excellent and now marketing retail getting deposits channel maintain XX% we is the through were our delivered promotion

the online of XXXX. for in small opening add first business quarter will We account

fourth satisfied in consistently December the In charges Heartland's commercial estate increase as performance the delivering card to was increase of Turning of We to a Heartland's revenue fourth to from plans X% of quarter year-over-year an with non-interest mortgage and seasonally XXXX portfolio, servicing $X.X fees portfolio standout fees the regard far mortgage real results. and in XX% total our and quarter. unit was residential are the profitable remain XX% in increased on service XX% XXXX. with In income income-producing focus from that compared XXXX. year-over-year businesses. increase showed a implementing and of XX. Trust mortgage production billion a December slower our loan

million $XX a of million our value. more in competency In fair Heartland have again demonstrated books our million or acquisition value activity. have of XXXX $XX on approximately MSRs strong book which than $XX We

October. integration we assets billion Colorado we employees, completed core With recap carefully conversion on to by clients. balances bank in conversion nearly Founders February retained. those Also, California. XX% merging we all of announced extremely Valley in with Citywide the in process followed deposits So, Premier Bank Banks acquisition accounts base after to million systems February and deposit throughout focus Heartland the $X.XX retention joined pleased assets largest we acquisition are watched briefly of of $XXX flawless loan Indeed, in date in also intensely into in in serve a before approximately clients who in the with and deposit our all and acquisition retention July, and our Citywide's

an creating expand million of Our we of in Then respect two become charter. Signature Minnesota in track the Texas pending earlier record Bank $XXX in Trust, the location and we $XXX quarter To well assets. is matched seamless on significantly private financial the the we presence assets these with acquisition in for comments announced fourth really and needs in & and Lynn's its integrations. Minnetonka, active banks adding Bank XXth FirstBank announced and Minnesota our serving in one pending professionals December acquisition on merger in of appreciate entity approximately and business, in increase focus will potential clients. an community conversations strong We this shares continue Bancshares to million in which Heartland's Lubbock with over specialized bank into and

FirstBank brings mortgage with a and unit organizations. strong solid commercial Trust and balanced Company retail banking

over CFO, with our for the FirstBank acquisition In begin that heights We in close growth to state remarks, close that expect second shaping conversions pleased markets. be are will more Texas additional expect Lubbock year the transaction facilitating the Bryan experience to for and year of scheduled integrations performance. McKeag Trust concluding in considerable another active With attractive I'm their Company with already transaction strong new February an I lead our as in year the the the in banks and positioned to our call turn results. XXXX quarter. up reach in to exciting FirstBank we on expected is to take Bancshares to financial and and XXXX acquisitions Signature detail well and team we my to

Bryan McKeag

Bruce another and and eventful Thanks everyone. this quarter. Well afternoon Lynn Bruce described has was as good

X the sheet point Bruce deposits, point more add So, points, to and small common the $XX.X color in will already investments tax earnings. only value basis of and to a offset clarity have by commented market and reduce by mentioned will ratio assets equity XX-basis derivatives comment add X from down quarterly balance results. I increased our already a retained so of a and some other from items. with I deferred changes ratio X.XX%, the X write which quarterly Starting to which was million on on and basis try increase tangible basis our points few loans Lynn

a as retirement $XX other decreased million borrowings First, Heartland's of of result trust $XX repurchase for securities. statutory our and preferred of million

bank asset equipment that note reductions real-estate building, X.X items. we other line you'll to declined we another million to bank assets and the tax specifically reduction Second, deferred declined intend one large down sold property our largely due several million million X.X we non-earning OREO deal as also assets. XX.X were More had Other property. wrote sold in and premises sell down one and in large

yields higher on loan equivalent acquired is from to exempt basis up increase prior point cost driver accretion which net million to purchase was quarters. which discounts. points The X-basis income last quarter primarily of last on higher basis XX X and yields point creation compared million loans. margin XX-basis net related the interest slightly higher point Loan basis borrowings increase also statement The we accounting higher the yields improved interest increased XX.X in Moving the year. investment quarter. of increased the income quarter X of on And the was totaled primary X.X% to decline to million purchase the due a a interest in a from tax to the have yielding discounts securities. tax again increase this accounting lower of mix Offsetting a deposits during $X.X

Non-interest last also to quarter. XX.X charges This the declined was down interest the income XX purchase which Service down last from to basis on of million this gain quarter. and XXX,XXX XXX,XXX quarter. quarter margin points of accounting and XX loans totaled of slightly compared on discounts XXX,XXX When quarter down sale basis securities for from in the quarter last the includes gain quarter, prior sale XXX,XXX. fees was up the net compares points from accretion

which the up as I market million last XXX,XXX primarily the to XX.X includes related X.X up repurchase fees XXX,XXX gain of quarter, prior non-interest million from from increases of due Switching trust reflecting and inclusion to trust were securities by and the other quarter. mentioned. the conversion strong to However, XXX,XXX was $X expense, costs non-interest decreased system M&A was income this preferred this decrease expense value non-interest retirement from and quarter. previously million million of quarter total This a $X.X

lower quarter. fees fourth costs advertising as deposit associated this Citywide the and The and Bruce XXX,XXX is compared or and main million accrual expense largest decrease XXX,XXX with similar were the in cost to during Our the level which occurred conversion primarily as employee a time and equivalent quarter campaign salary Advertising mentioned surrounding last XXX,XXX M&A and quarter $X.X over this this last which by category, market category previously additional full that benefits Professional slightly conversion fourth was which decreased quarter. related drivers increased Denver due in quarter benefit of to last count, a cost were the XX were quarter. up quarter. the decreased incentive favorable adjustments

interest interest charge slightly lower decrease loan for expect expected Provision offset be an to we digits. pending and from purchase of annualized around expense our show tax into other for bond my January to as quarter I'll basis Xst in tax expect provisioning growth X be was year expected newer results the last for corporate The and was current related higher lastly, current markets card for And percentage on end -- Finally, and and is in for and offs a over mid-single tax the accounting for single quarter XXXX included deferred range basis costs as became tax net XX.X run we and higher The our quarter. Heartland's effective lower be XXXX to this the controlled the rate believe the XX.X% was as percent reported down a by patterns. to also, normal a be significantly the and list have growth X.XX% accounting million adjusting law seasonal provisions. new XXX,XXX as is the of to growth show for on -- net with from accretion. to production Chief growth should M&A purchase equivalent partially income turn over with of low credit two and for Mortgage to our to Executive loss reasonable with XX% full And the loan basis. going we last excluding We after follow credit strong effective however remain gain will deposit related expected XXXX acquisitions up rate starting forward. which XXXX customer call several rates. mortgage tax our of is a run on should improve the disappointing new margin XX from expected gains sell tax million. increases Credit the tax rate loan in will we rate Core acquired XX.X traction non-interest municipal Officer. normalized fee lessen law nearly President costs in X.XX income larger XX.X% nearing asset which digit advantage quarter to investments that is Vice is as security and tax core XX% well excluding expectations write with the rates as continue up Drew I'll Townsend expenses that new the newly tax comments exclude a core

Drew Townsend

Delinquency non-performing primarily loans the in to very non-pass favorably as total Trust to government equating assets percent as rated and mortgage non-performing of as fourth related relationships, reduced and have at past of three I'm Heartland. of quarter loans. million pleased I'll loans. key the This and quality residential levels loan fourth a at discussing and continue to assets. to of representing quarters Dubuque the to metrics Trust now reduction continued years; by is highlights these. charge-offs X.XX% I last respectively. billion in report growing attributable the previously over the total guaranteed The Bank primarily than my provide during XXXX a Thank last recent on credit while fourth non-pass total seven several over total total are Continuing to able years. broadly will years XX% loans in quarter total the X.X you, decrease low X% continued of represent agri to represent At Total compares non-performing Bryan. of charge-offs rated the reported to at each repurchased X.XX% These and two me the XXXX. of remarks only begin we levels and that which details charge-offs for lowest been More more concentrated improve and non-performing were loans allowance for were are reserved credit afternoon assets; delinquency in by the the quarter the are loan loans. our in loans net further X.X one, by business also total loan commercial demonstrated for portfolio and well Bank XX% level the to now loans. ratio levels three, in quality two, million relationships continued Mexico and Better discuss assets $X in loans less and non-performing credit lowest Allow of loss. total of the the totals X% also of three are XXXX for

the percent allowance relatively total remained X.XX%. a quarter the unchanged of as for Finally, at fourth loans loan for losses

covered and acquisitions of from mentioned previous million. As most valuation recent X.X billion loans quarters reserves, our PCI by in $XX.X totaling the are

future As expense these credit in allowance decisions be these made establish loans. on associated quarters the acquired are necessary will loans acquired provision to for

to loans XX. loans of from ratio X.XX% of loans as would December in result these allowance Excluding total

attributed favorable to with ended pleased to allowance that is that Summarizing I'm loans respect the to very position Lastly, individually impaired. X.X% with considered a of report XXXX total are quality. credit only we

on loan Lynn focus to will remarks optimize our and XXXX we That I are turn working with processes questions. call better closely member for the achieve back in to banks concludes and to our growth my addition remain In experience. our customer available credit a

Lynn Fuller

Thanks, Drew.

for Now will we from lines questions our the open phone analysts.

Operator

with with question. your [Operator Davidson. Jeff proceed with Our DA Rulis Instructions] is first question Please

Jeff Rulis

Bryan on work a up number have there. income of guidance at core maybe of at the the what could least a or you just non-core and follow fee Do one expense a we was two? that off

Bryan McKeag

my [I here, think fee XX.X million. reported here] So For -- we [ph] number check income

you would I had core [ph]. I think usually both out X.X the on of be probably get that from rest should gain trusts. for out security guys that so and million the -- back the back gains the The support we

Jeff Rulis

rate side, you are the then off annualized the run figure. on of And same? that expense just So, on -- talking the

Bryan McKeag

expense looked credits Yes, amount to kind going adjustments you the I tax of got fair out. accruals. When we side the then tends -- itself some a there on. M&A to of a you lot cost is had get but at net It it

think XX close the you everything is what in that out tick to when the really I it of core recorded there. So, was pretty

I which and is the if a low think ballpark. single that -- there so, think that from digits I would And you that grew took

Jeff Rulis

And then just margin another one itself. on the

XXX XXX to excluding the sort you of it's that are accretions. So --

Bryan McKeag

analyzed the rate. I so about the from you well, XX% Yes, for our tax a there the think going X XXX adjustment basis and is get you quarter with if start I points if equivalent to tax way XX% tax

to XXX and that basis normalize next that points right mid-point that accretion, this down and up had range, year. at gets that that we that kind purchase of at -- XX the if basis point in we running XXX to then XX quarter so would we of of XXX the XXX, puts have XX of you been XXX took to points the for this quarter, accounting lot moved back to basis So I had loans a we

Jeff Rulis

include on And deals I the so or accretion QX. in, later that guess guess QX to close, I does then any layering

Bryan McKeag

to just the that their may know interest the don’t that would plus. XX banks tell I Right, acquiring core you I number XXX slightly in are yet, we're two be that margins

So, margin, are big shouldn’t should about have a pulling on ballpark us, be think the in with impact the they right I them so in our same.

Operator

Andrew your proceed Our with question. Sandler with Liesch Please O’Neill. next with is question

Andrew Liesch

of Just last anything questions this the that’s higher a in are seeing here on any portfolio quarters, couple been you was charge-offs has running I in concern. the couple else the giving of expecting then you

Bruce Lee

so believe on we like had weren’t at point. surprises the well of don’t back Andrew, I these page, identified, pretty we turn clear honestly, we or and everything the we as corner kind turn identified they this feel what have

Andrew Liesch

to what growth Bruce your loan circling to that others. bank optimism and Okay, there than any even you your comments more have markets on giving bankers are been just earlier,

Bruce Lee

Bryan go they actually what's in fabulous markets it construction would backwards the very growth growth last and we during markets of feel have. markets there accretion good. most about did our to the did good and But loans of I talking as scheduled now feel in Actually, I Denver out feel they going feels momentum week of the about payoffs fourth was Citywide good. the California about have its while say western Andrew positive Arizona, several just there. pretty doesn’t right of one had really quarter, We and was our appear that attributed have large we was in seven we XX the

positive. it's really board, very very, So, I it the feels across would say

from boost with that think we that tax cut a at about end we I a optimism the got year here I ago. of where month the the think increased has and the were

Andrew Liesch

comfortable then pending, just from and one up two the would curious deals transaction? when you be these follow just Bruce, you, Okay announcing

Bruce Lee

we in would hopefully per really hope the announcement in 'XX, 'XX, have Well, the can se. be We still may a to sooner. of another deal had I we announce but by and end of end got the other give deals I you before can't date

Operator

question. is your Please question next Damon KBW. proceed with with with Our DelMonte

Damon DelMonte

range feel a per and million why you Bryan really frame meaningful you question I quarter mean range step wasn’t growth. that X for at driven. we first provision you comfortable there the credit that think full-year of or expect quarters least amount said just in that provision, kind or more could So, on couple of the growth, low-to-mid on we was a of would guess I quarterly with maybe Could a of higher a regarding based last loan a were for basis? in kind

Bryan McKeag

Yes, have I think I what a it's if XX.X X it average on going took had I and loan would depending a think growth X.X we in upon something you if X.X so X bumps lumpy you million on up be do there. the that's couple about quarters we any think think maybe in pops this be year could roughly was get but I quarter, somewhere of

Damon DelMonte

on behind basis that? an this the quarter were balances that period end what up average thought And then jumped on like it looks like maybe up the securities the was

Bryan McKeag

of slow quarter because year. where a end end some things go you'll quarters deposits things those we we one bumped kind over of that Well, one, ran have and taken of have we the I were got might in two so up of we we things down borrowings to the happen couple of some of the kind that other end the loved think year securities and we short-term at as off see our tend of the to

they come now as the our where supply see and more down So in were. next where come back quarter borrowings into you'll we've the as year will line back next gone

Bruce Lee

two 'XX. short-term I that return comments those to you securities my borrowings in in QX and Damon said will of items the saw levels that

Damon DelMonte

Trust in of the accurate. reported a you loss through looking and subsidiary -- banks looks then individual kind that like quarter? And this Bank Is it Arizona &

Bryan McKeag

little their think exact and them the Yes. we tax they I go asset when by I our size bank out it do the of ended caused they to did negative. bit one to deferred more, up a that know I was and adjustment to think got but to obviously relative spread don’t things had reason we

Damon DelMonte

sort, some is [Indiscernible] It wasn’t this part like material of there loss of the was

Bryan McKeag

the we if would banks the I DTA all been had have Yes, think write-off would have positive. not

Damon DelMonte

the guess to one question final And I on clarify is merger charges.

I quarter? think there was of X million merger expense said you about this

Bryan McKeag

Yes.

Damon DelMonte

was spread into… kind of that out And

Bryan McKeag

seven travel folks a mostly just three up about tad probably ended or professional is There the fees, for traveling. and expenses maybe our other up bit in more ended entertainment in

Damon DelMonte

And offsets there. in some was of then there kind

said one-time the offset of You that not million because to us questions asking merger one a something XX.X were had good folks probably which, charges but said you is -- sure had the else. rate by

Bryan McKeag

so had getting things kind we of you that here, back takes up my it -- million credits in of X the Well a notes you I we've few take the million but went adjustments out you million adjusted we backed and to and XX about XX almost there, XX get X true if out there. tax had so for to so gets million of when that salary put bonus a

Damon DelMonte

I missed the on comment adjustments. salary the

Bryan McKeag

a to categories. noisy tends Unfortunately, it little expense be in the

Operator

Our next with question question. with is your with please FRB, Steve proceed Moss

Steve Moss

on here, one follow asking thinking questions securities the afternoon. and it little portfolio of up Good answered my different investment Most of just been way it. have about

change any going change curve rate there in the real in the flatter forward? the Given and is investment strategy tax

Bryan McKeag

year been short. at value the now of lot And going on right year least spreads into have end Well this not I long say curve relatively would narrow. have early pretty of staying the so there's we're out muni at a the

stays I end of to flat stay narrow think we’ll do. be we front long operating anything in the curve the So and might closer as the as curve those

Bruce Lee

but throw backs And us deal flow SBA and up cash investment a given rate in of Steve munis -- taxable that flow so year some to appetite for had that top trading equivalents hikes an before mortgage opportunity shed lot the good some this anticipating have right inventory of have on floaters. less munis, lot in of we been treasury, year A of investments cash end. muni

Steve Moss

borrowings levels. or helpful -- down of here thinking run they that's current to Okay portfolio balances CDs just at would were if the going and forward or terms roughly kind just in be maintain it pay about of off

Bryan McKeag

end the saw go where of investments as of I a would in our probably the out have growth that year we think reduce that use we we as how go sheet to then of loan the whether balance the or and to we really Whether first it's matter short-term at deposits borrowings would you deposits. next. can of fund the some

Operator

is with proceed with Piper Race question. with question please your next Our Jaffray, Nathan

Nathan Race

was I Let's down just fundings to discussion the terms if the those back projects in in forth in that I'm the came any completed any XQ, required some credit well the the to and of just credit Colorado your I know the as guys construction kind and at know to string you in so there comments but Colorado growth guess have operations on go appreciate of here as of you have your curious quarter, that books as specifically you credits criteria. shrinkage. of some I of loan not for Was fit within of terms tended expectations these aspect all in may the historically some case XXXX. Colorado know

Bruce Lee

that Citywide changes portfolio with brought Centennial any of that well shrinkage happy the actions a and or of credit that. to none was prior to we're as we us very wanted, had portfolio the Nathan result

going pipeline there the what's meetings on we have all but out of half meetings potential 'XX. Colorado for portfolio their as we participating that and some days the pipeline the year range in mentioned very-very potentially was of like the a upper that for in mid-single couple in would of that for mix I positive of we in they and in and expect only of actually actually be they out to look and I XXXX, last now the to not have feel Colorado first loan that to as prospect right that a week we very growth So about I say and digit robust

Nathan Race

of Got to and its class just so your color charge-offs and great the back just for charge-off the I you that at precise through this items commentary I'm the expectations quarter your just looking levels looking going we charge-off and terms the trends it, XXXX? discussion, guess have the context appreciate as of five go quarter, during fourth curious in

Bruce Lee

classified and for point we any I would with not I on I frequently work optimism. because time the into their expect a ones of pretty levels cetera. sticky stable, limited is way, And portfolios really material somewhat are have the feel but portfolio larger guarantees I Yes, think that Ag -- banks the loss again some we we handful to only say loss I in The have meet seeing been I continuing downgrades. sector and again, first et good sure first out we wouldn’t any Ag don't of I the in very expect of government charge-offs relationships handful again to would and criticized respect got that with and a are insight have those

strategies We have in are some out. quarters multiple that place

I that are so, space see to And think going some we improvement. in

not now see me charge-offs know frankly, there's optimistic net right I like I would putting down to down come make in So, that will XXXX. charge-offs quite feel nothing

Nathan Race

XXXX, the about you online on proforma And Bryan ratio for from could got deals any efficiency two checkout of ratio coming so just thinking obviously XX to thoughts now? sizable the efficiency XX of where pretty here guys maybe months kind

Bryan McKeag

hard that’s say I did core this Yes, with year a year. We start did gauge least to -- I really but full let's the for -- so think would XX.X for core. the we at

we would really can it down think make XXs. ratio we tax taxable think under X% do tax we has have -- this If to almost ratio that another the old XX, for rate, rate. is it the adjustment been that push you under had XX income low the under added that to the I so get tax reported that I our under that XX% XX adjustment And which goal under in even under get

somewhere will get while a next XX entities benefit that think hit going a when to then you that between items bit onetime for That the XX into maybe to take and realize adding the and of little better the you have I year. will two saves. cost new So, are it than upfront us

it that’s push, saying bit. hurt could just little maybe I'm a it So, a

Bruce Lee

fully ratio expect out to to efficiency -- have our But after -- months out. we question to XX we be to would expect months and look would XX closer your much acquisitions Nathan it XX XX, if you absorbed will those reduce we those would

Nathan Race

look save around essential get to realized imply, that get so basis I once another Bruce. XX% commentary at just I we If XQ lower would appreciate adjusted from an on that cost just the XXX got I on full acquisitions bps

Operator

question your next with Our is proceed Daniel Cardenas question. with Please James. with Raymond

Daniel Cardenas

how out into we that the quarter, purchase the provision loans the accounting million was of the regular related pool portfolio. had For moment much that X.X of to the of this

Bryan McKeag

quarters loans the about trying think million the looked and change so I for we and quarter to this than in difference. the quarter I of over into quarter moving last quarter. a almost to provisions had a explain change more portfolio had We dollars

Daniel Cardenas

we as of of kind of look first the at half you then expecting accounting are movement same so, XXXX, portfolio. And types of out the the purchase

Bryan McKeag

what old numbers couple would calculations. to think be this our but think specific five would back quarter, we that probably last normalize [indiscernible] change that’s had have so where of underlying the may in I reserves aren’t and get I you can it that been quarter downgrades a just

four, that quarter, given growth, things growth, that’s So a probably range without in be loan a all bit I may equal. under their X.X loan range why organic some could growth, think be we're think tad with in round in that loan I being we

Bruce Lee

quarter. in we that to we the or of Citywide, payoffs at We expect reoccur same do in the the expect not downs had pay level first that don’t fourth quarter

Bryan McKeag

quarter that can see when again I think terms in, both to pick in you you signature FirstBank and go well. third as a number to margins come will levels provide the and and of probably up more having when little then back

Daniel Cardenas

in and on that what pay James quarter? of of downs impact this kind Marlon then terms just offs And did pay have

Bryan McKeag

I always look at in on an individual bank basis.

Daniel Cardenas

when down, to are XX quarter at looking it's million. mean roughly I you quarter problem, No

Lynn Fuller

I Give it I have think here. me one second,

Bryan McKeag

does portfolio their if a happen sometimes will Dan our help. within One of we to some move and a little out dropped that bank participations deposits bit, of thing kind

Lynn Fuller

about and that loan half, believe growth. have negative was I they That still did

Drew Townsend

a I this I of we And growth them. got move but don’t have numbers some loans pay out down.

Lynn Fuller

half done right, moved purpose was their of on reduction as participations. That’s we

Bryan McKeag

so you the deposits counts, come at their the been around for down some helping if have we our loans up. I they as banks other year back been You and can have see very to that look moving them as back by liquidity with half think

Daniel Cardenas

anything what that? increasing the like the good, given windfall of I then one-time Right reform, just tax wages thoughts or in looking are terms to work. minimum initial your or at you kind and putting mean Are contributions, HSAs

Bryan McKeag

going ads don’t support think, good number communities and but to employees. timer and community we're in largest different support bit as you've are from little the of a as banks our banks financial the that's we do employees a as offer benefits so in one and than a consortium feel organization, we really to very things not of of volunteering the do employees the to with that communicating very in past banks we're going communities benefits the per something through what country. charitable continue where doing really that for our Dan, are so and their that larger have continuing so some We of technology do we've proud time provide been we about see be to seen the packages been say both our as active and to on we well we talent, we the people's that our

Operator

no time. to seems be further this at There

So, to I the would back Mr. turn closing comments. for like over to floor Fuller

Lynn Fuller

the of and rate closed performance more and has Thank very for And for banks accretive at $X.XX by XXX% for everyone. were well were for sets hope ongoing for records in charge an in success by ratio new for heights net our assets excluding finally, with solid you, and even more improve Heartland's two XXXX quarter XXXX. our quarter conference efforts now our of XXXX. tax the reaching EPS tax a are growing XX XXXX earnings and and interest since Daven. our which as I'll our really to annual XXXX with the XXXX the to special acquisitions XXXX The level rate. and efficiency our with X.XX% XXth increased continues and a to quarter joining momentum share. common this evening joining quarterly an XX% approved And growing year reach XX% for acquisitions by positive margin XX%. XX% and with dividend an increasing Heartland's past and of regular which financial call in as on increase Heartland XX.XX% for the accretive excellent at years financial enviable a fourth we than the impact pleased more tax closing, set quarter In very just Directors income deferred a stage ahead today continued again Thank Board I'd the for dividend of you over like next schedule Heartland's doubled exceptional XXXX for further us net fourth our and X full-year quarterly the successful everyone a have is year reduction. our April based to cash us two to boosts for you to have new good and we poised for thank lot join early can recap dividend

Operator

concludes This today's conference.

may at You for time. this your participation. Thank your you lines disconnect

Heartland Financial USA (HTLF) 29 Jan 182017 Q4 Earnings call transcript