HTLF - Earnings call transcript Q2 2018 | Heartland Financial USA, Inc.

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Operator

Greetings and welcome to the Heartland Financial USA, Inc Second Quarter 2018 Conference Call. This afternoon, Heartland distributed its second quarter press release and hopefully, you 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, Executive Operative Chairman; Bruce Lee, President and CEO; and Bryan McKeag, Executive Vice President and Chief Financial Officer. Management will provide a brief summary of the quarter and then we will open up the call to your questions.

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

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

Lynn Fuller

joining We heights Thank in quarter XXXX. you, new Devin, of discuss everyone the reach afternoon. and second appreciate performance us we to good as Heartland’s today

minutes, progress touch operating Then next and few will CFO to on Bryan quarterly Bruce our color President Heartland’s the will the call I'll then results. key the on over Heartland’s for the CEO, who EVP and Lee quarter. on For our I’ll cover highlights turn McKeag, strategies. provide additional

investor as of management our leadership that Executive role a mergers recall of Lee and at remain transition, ensure Stockholder in our CEO Analyst X, risk acquisitions, effective President overseeing Chairman, June an seamless audit. Meeting I XXXX succession To may and Heartland. You and May, Operating relations, became in announced active I Bruce

to experience worked the years, X Heartland him highlights second leading a and doubling and Heartland's in onto years. Heartland's uniquely on X financial the make I Bruce and side-by-side his assets qualify banks of long Well, Charters for Bank Group record the past year-to-date. has earnings Bruce lead success legacy of large both every now small to of Lee and Over and the and leading three carry quarter proven track Company. have

to a net income common share per and million XX.X with very and million. available for solid and report second earnings Diluted year-to-date year-to-date are XX.X of the a common We pleased $X.XX shareholders were $X.XX. quarter to quarter

be deposits, Assets for X.XX%, acquired net at X.XX%, and and this total on and quarter average respectively. respectively. X.XX% the year-to-date and equity year-to-date ended on next and the fully combination X.XX%, quarter common to of billion billion a return and year-to-date still non-time our at XX.XX%, and average excellent deposits common up Well, on by to X.X% both track the were Return with X.XX% interest at quarter average and at Return the XX% and for was on year, margin was XX both respectively. XX.X tangible thanks mix XX.XX% equity assets of was for and respectively. year-to-date deposit quarter tax-equivalent for time organic growth. was In our the quarter

the year quarter quarter same over book over year quarter value $XX.XX same the ended to ago a at ratio equity X.XX% ago slightly the a book common tangible tangible Our $XX.XX. only decreasing with and value to increased

And remain non-performing Directors increase to the XX, share record the dividend of cash prior stock stockholders now stock quarterly M&A. credit the close XXXX Well, on XX, XXXX. business $X.XX with As a at asset quarter. sound of regular to to August recent common and remained of payable the result today, assets consistent Company's our of on the issued on on per Board August with the our acquisitions ratios with quality in quality voted

a for quarter, Lubbock and Inc., mid-August. Bancshares closed system successfully second on-schedule the are FirstBank conversion we During in

Charter. our and Bank remains of to Texas, XXth CEO FirstBank as Heartland's We're Heartland's community billion of to Garland operations Chairman happy Orr, leads welcome and family President. than FirstBank FirstBank Texas assets. Greg banks Texas Barry is more in $X with

Charter actively our pipeline Xth surpass announcing pursuing, that Bank yet FirstBank with acquisitions, this additional hope is and and we're Well, milestone. mergers deep the one expansion to is Heartland's of year. extremely

pursuing and said, of provide those earnings expand operate. per our in often an call current assumptions to which we've assets that’s Lee, share, goal shareholders of As where years. Company’s are acquisitions we each are based me, accretive to within opportunities towards CEO, overview back our X We we a initiatives. footprint -- current excuse over as billion in a now produce minimum the on earn and work will and the the state continue Bruce I’ll only of Heartland’s to we're of favored to remain Bruce? internal four strategic return conservative who XX% maximum President of rate of turn

Bruce Lee

new Thank It of Chief Executive you, Officer today the an addressing USA. Heartland to Lynn. group is Financial, as the honor be

effective responsibilities I know, the role of Xst, As CEO. you and June assumed

great second to an Over the for are and for smooth delivering future XXXX. we worked All thank as we a for transition, as the I active in Lynn gratitude support our for new and very his remain Lynn friendship. quarter. have Chairman. pleased and in reach agreed future of Heartland, across Operating to past I hope and closely align a heights Company I ensure feeling Executive has the and to on results years, share the vision the that have personally promise he and I'm three to also together want

$XX leadership with significant Barry looking mid-XXXX. to to in in by over forward Heartland conversion a team billion assets assets of in assets Texas Company's $X During the are the the spending in put now and been and on assets focused mirror. we deep Texas has growing acquired second billion $XX rearview With FirstBank we current heart in the quarter, $XX.X successfully we are billion, we in and his team, August. Orr successful & of Trust billion The with time

fourth growth year-to-date; XXXX of annualized consecutive second million growth. $XX We quarter The about of organic loan in and loan delivered $XX growth. delivered have growth of this Heartland's quarter represents we million X% loan organic second the in quarter marks

growth is wins our I systems operations agricultural in Bank Brooks the merged the in of loan driven loan also strongly to Crystal's Trust team area delivered second also of team banks. and commercial am agricultural Minnesota April. that focused contributed & loan conversion growth that at the Our and by pleased his Signature strong in segments after Bank Curtis & with during Bank Ken the Minnesota commercial to commercial our Wisconsin quarter. late across share and completing growth primarily Trust

with the deposits business for who continually have fund focus Equally optimistic bankers lending our XXXX. customers and and on outlook quarters of are growth to loans. our our we We in quarter strong past met and dozens to I've positive the is fourth into third pipelines of expect growing deposits. continue growth Over reporting growth

focus during Our CDA in delivered million the $XXX quarter. second growth

Our interest now deposit almost deposits. demand Likewise, the constitute XX% our deposits non-time non mix. mix is enviable. deposits XX% of bearing of are

deposit team his on focus Bank results. growth and and Trust; excellent Premier Valley delivered quarter. Our exceptional at and and growth Bank Walter Charter deposit Frank & mix our during the team California in his yielded Greg Mexico New have Leyendecker

were overall and the service for higher Now service switching fees and fees, quarter charges charges million quarters. than $X to linked

again approximately in strong delivered Signature contributed our Our organization recent partner card acquisition $XXX,XXX commercial results. and FirstBank

continue quarter, transition early the be call our performance system our As to operation outsourced I The we retire processing the see restructuring mentioned earnings quarter. we business, in dual began to checking during previous our opening. in complete to nearly first the in to account consumer able mortgage and of strong an we model. is third In the expect retail

accounts XXXX. fourth introducing are account quarter up over now of XXXX, in nearly of the consumer XXX% opening Our first accounts net new half retail checking of opening XX% online are online. all Since the we

banking our capability. usage are online continuing business, our to retail In our adopt continues Our baking to retail customers online climb. new

fact, contribute third to three her that from we have continuing mobile in branches To In will this are we closings accessing branch and to online improved cost in network retail will end, banking quarter. are our announced reductions third devices. rationalize closing efficiency. banking be their online result the exclusively customers of The and

in rationalize Overall, quarter's continued our revenue we momentum customers' in to performance delivery. for invest the with have our feel and deliver to pleased positive will service enhancements are respond branch preferences network to We continuing significant to continually results. technology we

$XX I million or metrics basis at million we points will credit were key that XX or at banks. to points XX, to XX Next, credit highlight Heartland. at am compared report March XX. basis stable June I $XX at continue assets our Non-performing member see pleased quality to

X.X% levels since rated in end. $X -- last to years. acquired in ratio the XX FirstBank loans past compare over at basis of from non-performing second X.X% several decreased to ratio to million basis or the assets and delinquency $X million quarter assets the Non-pass was the XX favorably points quarter. X% continued Excluding quarter non-performing the decreased The delinquency points transaction,

offs like an Lastly, I'd to announcement. Switching for leadership share $X.X charge million basis the quarter points. gears or second XX net were exciting

welcome We to Heartland as Business Kevin Vice our of are President Private Services Ahern pleased to Unit. Executive Client

of Financial is Board effective has a Directors who You company Heartland the Kevin assumed as of was asset of Bank a at with Financial. in the Directors as experience and their XXXX. and acquired CIC and Founder, CIC in of former holding long-standing Chairman be by he will the organization. -- because subsidiary Board Centennial Bancshares relationship of Citywide Bancshares, Chairman to Kevin's and the Service that X, Board Banks February previously Kevin, may Chairman Client name member Heartland Chairman Marty the of a Kevin remain was is served Schmitz Private decades formed position bank has XXXX. June recognize a the of CEO its bank, will of XXXX. tremendous the Founder,

sharing have new Relations and Lastly, is htlf.com. a you mobile But call contemporary to financial the sites and more future. detail design friendly. address results. also that I'll to looking for visit and is in the functionality recently over I Bryan share the would to we The launched we now the to website. our encourage same With that, you site McKeag renovated bank like I forward quarterly on with Investor to are turn

Bryan McKeag

Thanks, afternoon. Bruce, and good

we this fronts and a Bruce on Lynn lot progress of described, made quarter. have As

some try I'll with So comments, to starting ratios. color several more to key add their

the the recoveries accounts of points basis Investment this and generating in Interest tax-equivalent the prior borrowings basis included four yields net accounting a deposit X and Heartland's purchase up includes points And to margin Loan discounts, XX%. loan of the costs margin compared basis to quarter. one by points under and interest points basis of quarter, points XX% million the just at interest investments in on quarter points accretion and of flow about of X.X%, with four increased very the XX to total, is for one last yields XX liquidity position or increased from First, than compared per large basis quarter. also assets, XX is interest ratio which from assets, shape. to basis our of increased cash basis X% increased good improvement. point. last quarter is XXX month. $XX net borrowings In during deposits basis million

basis efficiency XXX from over the XX.XX% was Next, quarter. ratio last for quarter, down the points

Excluding M&A basis been quarter would XXX the cost, or for ratio just lower around points efficiency the XX.X%. a have

year. down the as half to XXX last first the For of basis compared was ratio XXXX, points

restructuring and We and XXXX improvements saves see the last when expect additional to the we half the mortgage start ratio of of in our acquisitions. XXXX, impacts of benefits the scale cost to our show

points. points; offset value basis by a reduction already of deposits, common to our derivatives -- the ratio this ratio commented reduced also has couple and XX I tangible so sheet to but ratio of the acquisition market on retained comment quarter basis X.XX%. -- balance was basis reduced and XX the XX was only items. The Bruce or of increase by will investments earnings FirstBank the which in ratio, loans by points offset in on points and the other four Texas, than increased which basis Lastly, decreased more equity added which

increased than Texas, duration million about the X the is declined FirstBank X.XX%. while of quarter portfolio XX% equivalent to the to less maturity X.X portfolio the for acquisition at just investments on the sale investments held increased The the for slightly billion, X basis years. quarter ended available with total The for First, XXX Tax sale yield assets. million portfolio under investment point of quarter. four and of available representing during

Second, which a -- the the percentage loans of X basis to allowance X.XX%. loans has total for loan points declined losses, quarter for

are covered million X.X% loans of previous most for those $X.X recent frequent billion loans. As and valuation $XX.X we quarters, reserves by have just mentioned totaling from under of in about acquisitions our PCI

ratio would or result loans last ended lower these to point from losses XXXX, allowance June quarter. X to which loan than X.XX% loans total XX, basis loans in an is the Excluding of

net to million one Lubbock. addition which from last quarter, additional for Moving quarter, another which million prior signature The onto of X.X totaled million, X.X million the and driven approximately X.X by income income up income in sales for gain totaled quarter up quarter. was million X.X million quarter XX.X on was last $XXX.X interest from fourth the added quarter. up this FirstBank Mortgage primarily X.X When statement, million Minnesota. million of the increase compared Non-interest from in loans quarter PrimeWest million X.X day the was interest the increased income added while in by the Texas was X.X

to Texas quarter, million. securities were Service the at last reduction XXX,XXX relatively to over of FirstBank or and million of All of of were million quarter which to full totaled the the income quarter. gains quarter is compared compared increased last flat up a Credit an last card charges attributable XXX,XXX last $X.X quarter of also of addition the categories fees additional over For $X.X quarter. Minnesota to a XXX,XXX for $X signature. non-interest losses XXX,XXX

was to X.X quarter, million increase this expense last Moving of expense, over million total XX.X non-interest non-interest the quarter. an

restructuring and may million $X.X expenses. to costs quarter, million system compared mortgage M&A included last million quarter last related This conversion $X.X Also, were as of expenses quarter. you recall $X

excluding we write-downs, In write $X.X had losses. about in million asset down increase and conversion addition,

of loan in million, run another This Texas about for core increase most increase to down changes quarter, and XXX,XXX compared increases remaining XXX,XXX and core of XXX,XXX X.X from the FirstBank expenses core in million $X.X M&A accounted higher compared result for were significant related of to costs of to components Excluding $XX up of sale Cecil, increase this the in to million addition unchanged. were $X is remaining The related last costs signature. which Professional The X.X cost $X which million quarter is model validation origination quarter and increased of million. post items, full salary were and on the Texas attributed million related and which these up $XXX,XXX million while with signature rate an quarter the $XX work. FirstBank, primarily this attributable full XXX,XXX quarter benefits in was which projects higher $X.X of attributable last on FirstBank higher million readiness costs of a fees were $X.X cost, increase category million. Minnesota the to million conversion equipment to remaining Losses the write-offs. to Texas. the expense to was and of of accounted category By X.X or assets

to believe quarter of a tax awards. that We which loss remaining commercial is up The lots on rate to tax the on other finally divesting and quarter conversion tax is of for XXX,XXX Dubuque of restricted bulk being quarter, to go the XX% the related Signature. is and the In increase. branch is normalized $XXX,XXX effective full to XX% sales were expenses in And FirstBank, of the was XXX,XXX accounts addition XX.XX% reasonable forward of that for XXX,XXX to X.X benefit last to a stock million, a attributable XX.XX% on rate the loss costs, included reported the consolidated related compared Texas attributable basis. the is of

income integration a customer credit growth expected mid-single our net and fourth increases into expenses last for deposit the is current or Finally, expect and show FirstBank, the newly full Core card X planned to not run digits. saves expected decline an single is until mortgage range system Heartland mid that is will losses seasonal expected of the remaining in is of to on XXXX, get we Core normal quarter in the remaining acquired of we the starting Provision basis quarter. are for With million with quarter which pressure our loan growth, interest losses bases. annualized quarter FirstBank, are currently to we And of million of mortgage X.XX pricing. expected X to the X.XX% on range X.X continue tax a summarize Texas rates show continued corporate quarter, strong outlook the from basis X about to be million conversion quarter. third over security X of asset is for margin excluding The to current on and I’ll the X of With equivalent should the million restructuring. I’ll to sell the and half cost the Texas, as M&A realize some PrimeWest by FirstBank, have as for remain any X.X%, deposit my comments, complete in be we XXXX. expected quarter million is full call to the million high increase for improvement next loan Mortgage see million next as that, to the to lastly, we'll excluding annualized expected fourth production Lynn. gains to gains and quarter quarter. then per losses million per next to conversion remain quarter and offset costs fee Texas that X turn for digit to in and to benefits quickly

Lynn Fuller

did is Officer, the answer We’ll here lines your might credit. EVP position Drew Thank that He I and and Bryan. add he have in question speaking is open today, our also now to but any with for Credit questions not you, phone us. Chief Townsend,

Operator

session. a we’ll Our from DA proceed first Instructions] And Please be question-and-answer [Operator with the conducting Jeff you. now Rulis with question. line of your question comes Davidson. Thank

Jeff Rulis

that X.X safe four the guess million reserve and Xs a suggest rate established, can to sort through A you ag and Maybe then it of five sort reserve yet high quarter? say, two? specific credits his question loans talking talked and the about you're or those -- went us that C&I of that -- provision credits I so of Bryan per provision assumption. you million two established added, to about vet was on would an of a kind just were the the the Is two provision

Bryan McKeag

specifics million some let offs and and handle get little always tend two credits X there's then the quarter. moving one we The then to on the issue I'll bit charge accounting of Drew over have Yes, credits. loan purchase from the loans to get growth during the a pool. We X we've that Jeff, got or

the I what next towards couple about probably here same guiding I was to So -- think I'm was things what quarters. for that basically stay are going the

Jeff Rulis

okay. it, Got

Drew Townsend

And as that Bryan's effectively wouldn't Jeff what have identify again the this from is did we a moved we new to there had, comments collateral. identified Drew. shortfall a there understood quarter. ones much into to be where that larger of the inspection add to this We prior were I to process couple maybe

Jeff Rulis

systemic it those, what? Absent to doesn’t or appear be

Drew Townsend

not. No, I would say

in we to just and the one I we're are overall think loss issue close think respect there's a comment. continued But systemic I portfolio don't would ag I make paying that. so with exposure. specifically to Obviously, attention stress seeing

Jeff Rulis

within stress the particular portfolio, there like segment? ag Is which

Drew Townsend

now pressure encompassing. the as all well There's would it's stressed. dairy to are on kind commodity with say respect I prices right of prices grain,

have unfolds a what and beef national so that economic So, those have the in as situation may our see little ag particular how but we'll bit well on commodities. and impact two to pork,

Jeff Rulis

like one is from then including XXX other of strip from the that just flat were on If four we points and XXX guess out on is I to maybe guidance guess. and to apples-to-apples so on at accretion here up. to that? the basis recovery, margin I Is the Okay that the XXX kind

Lynn Fuller

so. I think Yes,

is for to give the but should think that in range. next -- in I there and but think pricing that wildcard update deposit able quarter, stay think we'll may next change, the it think in that quarter range. be wild biggest you we I how I and certainly And will card an I hang

Bruce Lee

this Jeff, is I Bruce. think

our up the the fortunate Bryan, those sure we attract he's attract anticipate to think moving deposit -- we've is, of bit moving a lagged not to we deposits. some engine us guiding been but I competition to to we have deposits. make loan reason do deposit continue we growth haven't we little pricing up and the going to very new pricings, continue organic that need flat that We've to basically been

Jeff Rulis

Thanks Bruce.

clarify it's So but drift? guess I Bryan, got accretion not drop over a to so you of guess be expected off that we're in then just at I looking assumption to some time short-term there. would accretion,

Bryan McKeag

I said a will, large because purchase like that one was the X% nearing it accounting of we think yes, acquisition its and end that's have before, I as that discount.

well. So going as little differentials that get rate weans get bit that lower ones, some off but bit little as and a at they're a in new of we you'll

So down, but I one will probably Lubbock, to only of we a bump of with quarter, think half get see down. little you it's a come up more bit going may it back then maybe wean quarter

Operator

line Please Our Piper comes the question. from with proceed with Race your Nathan next Jaffray. question of

Nathan Race

the core for rate flat back is on the margin hikes question guidance last of to this half back year, in additional accurate? margin, your Bryan excludes going that Just the any that

Bryan McKeag

Correct, correct, yes.

Nathan Race

or you to you half are in back deal this update activities, optimistic And and like opportunities the a curious sounds thoughts your acquisition then year. just hear get it Butch Bruce, the on that of amount

desk? Just could potential of and of speak you seeing just magnitude that to volume you’re opportunities this geography and across if transaction kind transaction wondering the overall the of the

Bruce Lee

got as ever Arizona. be at busy exception were We only pricing every highs. the as market we maybe historic seen that about have it, in in I've Nathan, the it's opportunities think I would

provision inverted XX well. curve the head out to this on, that’s months we set if especially and going to expense yield to a into it's if time So, as happens impact a we when the tax get’s for to be rate, the XX growth, cautious what assumptions recession federal

is mean, that cautious, that of So, I banks reason get recession done are pricing the before lot of to levels there a next for there's hit. lot but these something being awful and looking

So, a that were stay just we lot on per at bid financial true share. going our to deals lot, accretive have of a deals are to we current that have to shareholders and but to look metrics earnings

We’re very conservative our on modeling. our and assumptions

we of And so on takeouts, that, showing cost even might to if and at those we XX% rate competing just believable see we're that overly huge run to of on the we worry years. are aggressive but of not earn the assumptions have want least just back being at I go there. we four up a lot and deal return are some against banks some be going got the I within an look internal competing banks that that that

Nathan Race

Got sneak color that, one for if And Bruce. it that’s great on appreciate expense. one I Bryan can just last

that announced up, saves include cost get you'll $X quarter? the to $X the you that does Your step million the guidance that last restructuring million from for

Bruce Lee

Yes.

Operator

Our next question with comes with question. Please from proceed the line Terry your Inc. McEvoy Stephens of

Terry McEvoy

Is just the is merger $XX Bryan, any XX.X reported follow-up ex for on million, expense are Nate. the that million XQ? Or charges? of the a was of it’s that

Bryan McKeag

that -- or as the the of X.X merger million. and X ex any merger I see million I losses if charges out so backed there, what It's the charges, you did

rate. run I to you $XX think core that should million get close about

at X of so million then another items, so that plus and the up probably to we onetime the million or XX-ish million X total will there X minus. or have from put so And you

Terry McEvoy

a XQ? just saves conversion. when get the are the post through cost then And thoughts What follow-up on you your

Bryan McKeag

X then from get of bit up. X.X but you coming little we coming to have and in Texas I that's saves the cost million, We know, think still should a million

and non-interest a again, quarter Texas -- interest revenue So as remember, full both from expense and we'll on add. income the the well get of

Terry McEvoy

overall, your -- you like class? talk hearing on from commercial the asset about balance loan some talk you cautious seems estate, there then about banks other you markets And message growth. just where what down. an Could CRE, it And big the Was is real just we of organic as actually we're versus commercial had think are of more thoughts then consumer? it

Bruce Lee

This consumer growth is are is in then make so but side that Bruce. the some comments have commercial a a as core real but year commercial we growth add for run-off. been some loans, that estate not maybe we're Drew did seen lender residential not and growth we mean mortgage loans, balances really having it's few. The I few have a well consumer let seeing operating I'll real in of as over much, have estate aggressive those we and not an companies

As heard California. you in Colorado. off We on balances ran off that balances we also ran prior in some had some calls, had that

companies. operating core is focus our Drew? So

Drew Townsend

I Yes, have much that. to wouldn’t to add

occupied, and estate, that is might in it quarter, entire stated, really wasn’t it's we And largely one the most or of I things As mix had other geography. or across C&I. I as all if the saw concentrated look footprint at too. that the add It in real our markets nice some spend a is the have mix of where we we nice own new money had out go Bruce two

Bruce Lee

the value calls, you from quarter not and of on value our focus our And in, talked customer several adding And the to that to from to in us relationship last relationships, existing brought loans prospecting. over heard calling our new managers we the commercial customers, about our the strategic base. making new business adding XX% relationships, was

were reasons the and prospecting so months that about our pleased are type and trajectory the a how out day that of of we they're why optimistic an to. with growth couple last in calling the and the it's with one a in bankers quite time we're the awful lot new of of our of loan So, well type of customer it's talking loans. as as spent I've

Operator

you. Thank

O'Neill. from question Sandler Liesch next question. comes Andrew Please proceed with with your the Our of line

Andrew Liesch

want more on to talk pay for a Just loan on really more down growth just the bit side. and

versus mean didn't the what past, managed -- the -- did some and second you want in expected yes. maybe some what quarter I out relationships size, downs something right the see of on Or had what been in versus some second you outsized some deals layout you’ve bank you seeing what downs are there pay occurred you now? What on the with had But you’ve you’ve actually declines. pay quarter? like there've Given then schedule? that were

Bruce Lee

consistent we say where and our moved There large was the relationship second was of it. with knew we those happening the would but the situations and there of were both quarter relatively relationship really one was out Company very were. bank I anticipated another expectations sold that was what

So, at would say, there quarter. a was construction all. unexpected have I lot this nothing also didn't of downs pay we there

You talk especially were anything in this secondary out were taken to loans the in some construction out us of where that we market like quarter. That completed have Colorado or the wasn’t either didn’t and We sold. all citywide ordinary. heard the past, had that at at

Operator

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

Daniel Cardenas

you Maybe not the any if credit color give geographies quality bit to us on is or whether as that little concern you could give of there side? a

Bruce Lee

type. would portfolio stressed a you is let all I geography good. right standpoint, would as pretty The I product it Drew Drew, comment, now from a mentioned. but I'll standpoint or say say feels from ag

paying a way happening from all really geographies, pretty that to good might be one geography Illinois that we area feels every the standpoint, California. we’re of of attention, but a in so all And the growth one and have our it from lot

Drew Townsend

in and quarter we rated exact rated $XX to now about and a at would might be, million improvement ended that, in million $XX total same in this our substandard saw I watched quarter-over-quarter number it. sub to we legacy quarter. the has that that Lubbock sub about dollars, -- We add Daniel,

of saw nice XXX we sub is there another So, and quite XXX so rated. in -- million our significant growth amount improvement frankly

So real would hard And different into I right headwinds, values as portfolio relates get that FSA just Bruce's and the to comment, to or reaffirm thing has -- of lot gives a facing very which to again, right, reinforce, of pause conscious reason be ag that ag for only it’s guarantees. to a area, us again is now. it our estate and utilizing tried we’ve

may pretty road have a bump I good shape. in but we we’re and here So, think overall in the there,

Bruce Lee

in I might don’t we’ve if just see the I good There’s of in as in opportunities loan Dan, M&A lot the one some impact in would have I a hope this the deposit forward we’re the going much fair comments, the Bruce. on have mean that we’ll organic Twin of third, is Cities But and add M&A example. bought as but both the I my a growth of major of would markets is our still of opportunity and a that competitors side. give the that in quarters I disruption. we're with is think that amount fourth. that involved us for mentioned I lot a out the been know

were two in Denver sold. competitors Our major

a been think opportunity I disruption take great in we our major that's these by being us have So, of ahead really sold. of a to markets created advantage the number competitors of

Daniel Cardenas

and if the about number. give of you cost whether maybe as saves little to that in then of I can talking additional And could well Bryan be as missed there in color closures the us any branch bit XQ? a closures, were you And then maybe projected terms

Bryan McKeag

saves We've and of cost a think the referenced was million saw that's them. realized from I -- to about Yes, about a in million yet X.X to we Texas already FirstBank down that I some come.

down some at back the pieces But come of original there. XX% our cost with up went of saves, and looked happen you -- if some you of number. they've already bigger a some already So had

a The was it'll to. over be forward, We've not only going going time know number. cost -- So not We'll build that's what more saves massive one they'll we're branch Heartland you on the a have themselves. had I side, so but two. referring couple or to

Bruce Lee

ready that I we're but will you three maybe our prepared I to prior do branch yet. think intent to not we don't quite guidance forecast branches some save probably evaluating about end the now, think and there of some it I some to closures, mean of the there. the or either would sales provide are but talking be We're math. be year we're other can

Drew Townsend

the fair as competitive look and from I'll factors then look like maybe Okay, question in color did betas, like And to last fair on then enough. step deposit what what Deposit some quarter enough, they and the me side? back.

Lynn Fuller

continue be They we Yes, off I'll what to performing the under with start betas. way model.

compared the bit I of beta, on or raised last in maybe XXX. for XX cost basis back two we we've ticked quarter you our But think to only up prior up bought points a like us look three. they if XX if little about year, deposits is which really

to on non-deposit on time. XXs XX in the for XXs So, model non-time like and we and the more

about we're what third so a or betas be. our would of normal So, running

Bruce Lee

to pricing. to I the more really On we but and raising and going as have will we along market, to we're so it's are new our much aggressive market have, and we of intend with how earlier, to each have that some to one in their relationships we maintain boards by mentioned much pressure a our that And our as grow attracting we our we to what staff. pricing allowing marketing on pricing. market, and are It's if increase CEOs have that not to see then occur to really focus retail determine starting side be little

Operator

Our Instructions] KBW. [Operator Please Damon question with comes from with your line the question. proceed DelMonte next

Damon DelMonte

kind things just know And early that? wondering all So the but there tariffs? I questions portfolio. of this you're you that discussion how answered, the the been weighing much that's about ag have pretty weakness been imposed in with my is or for any seeing Has on was recently

Bruce Lee

We’ve we as the will bumper it well. at tell, as a look is crop of a mean probably is, season I other there it aspect coming now lot. right Time discussed Damon the

of fair demand going you change out on a amount global fields, the I tariffs in when there's then if that were a potential to balance top because be concern. scenario, the of mean, and think surplus coming the of So, of

So, soon happen. seems think to to a more I And quite like frankly basis don't probably know I what on it's come. will daily there too tell

it how see out. we'll all So plays

Bryan McKeag

that our kept of our on leverage prices are most the Midwest, our the think for We most the to debt an kept somewhere is I land in acre. ag X,XXX. to around at productive we our see level credit backdoor we XX,XXX selling where event, think I of credits XX,XXX operations down very where low,

that we've a cases risk. clients though low bit And the the So the a to kept are to not many struggle backdoor. maybe posting we earnings a so credit on their covers that get that of that, cash in guarantee get anytime XX% leverage of our a do and so even be we would flow wise, having FSA can on

Operator

time. further questions to Instructions] this seem [Operator There no at be

So closing call I for turn like back to to would over the Mr. remarks. Fuller

Lynn Fuller

Thanks, Kevin.

So prospects, is in close Heartland's year, assets pipeline company earnings time strong Texas and FirstBank with billion closing, of billion heading XX recent for growth. greater deep and acquisition a continued profitable very and this our XX next for than at well-positioned of

like quarterly So, I October everyone can and joining thank join have everyone today next hope you would Thanks our to for a us again XXXX. us evening. on call Bye. and XX, conference Monday, for great

Operator

This concludes today's teleconference.

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

Heartland Financial USA (HTLF) 23 Jul 182018 Q2 Earnings call transcript