HTLF - Earnings call transcript Q3 2020 | Heartland Financial USA, Inc.

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Operator

Greetings, and welcome to the Heartland Financial USA, Inc.

Third Quarter 2020 Conference Call. This afternoon, Heartland distributed its third quarter press release and hopefully, you have 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 htlf.com. With us today from management are Lynn Fuller, Executive Operating Chairman; Bruce Lee, President and CEO; and Bryan McKeag, Executive Vice President and Chief Financial Officer. brief the the call a we and provide open will to will summary quarter of then Management your questions.

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

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

would factors ahead. included the turn and or obtained to over these go on information Fuller the Company’s may the the on time-to-time SEC’s XX-K Web Additionally, Heartland. call filings, be now which Sir, Lynn is please I Mr. from site. website in at At company’s XX-Q time, this

Lynn Fuller

good Towanda performance XXXX. XXXX We conference call. Wanda you, third we Heartland’s the Thank joining as quarter and quarter Welcome of earnings the today third discuss everyone afternoon. appreciate to us for Company’s

the touch highlights I provide who will and additional quarter. cover Lee, the the CEO, Heartland’s and on then performance will COVID-XX response. and results. Bryan few our then, McKeag, next business our turn President for over will minutes, call will the Bruce And CFO, to For Heartland’s I EVP color around

questions credit. Jones, Chief Officer, Credit regarding be Nathan to and today EVP also is answer us Now joining who will available

customers, and shareholders, our communities. times, ongoing and challenging very been our safety our these has our the During the of support of priority employees our

provide care employees, to Lee that and our and liquidity, support, the many doing Bruce things financial customers, communities. metrics. differentiate protect more to through on ourselves credit continue capital, and our and detail We Bryan shareholders for McKeag will we're performance strong

for had quarter that highlights quarter. third So XXXX. excellent pleased very report an financial the of we to I'm to third the now on

for of net share preferred Series the common income linked In QX Net $X.XX, which was common was $XX in from our on to X,XXX,XXX only $XX.X average for the linked our from Dubuque EPS, was million with Bank and for exceeded of XXXX on equity totaling second portfolio history, our Earnings million. Annualized $X.XX gains sales. at quarter the after-tax several which million the quarter, our shareholders compared mortgage quarters. to at XX best available second gain to quarter. $X.XX was included E sale $XX.X Trust of fact, it & dividend four million was to quarter. best XX.XX%, before This the branch servicing nearly diluted income common per a compared prior return income record

all $XX.XX, and at to we the across net return for at categories quarter strong were assets new at basis X% last XXXX tax at on respectively, also margin X.XX% over four X.XX% on an respectively. balance tangible prior $XX.XX a value year-to-date. the increase $XX.X Book fully of surpassed sheet, reached record and QX achieved interest substantial with quarters. Additionally, value respect and average and of high and four assets quarters. But was the annualized X.XX% equivalent billion, The the XX%, growth book a quarter this over

billion. equity our focus, Investments were was is $X.X up which amazing And Net an were $X.X And Assets billion. million. up up loans billion. deposits, $XXX $X $X.X up nonmaturity up were billion.

remain sheet, all growth very capital our remain substantial our capital liquid and of balance ratios including still strong. our in we all of our With ratios, the in

to improved quarter ratio equity end, last X.XX% up common X.XX% tangible at quarter. M&A. On from Our to

contributing substantially $X December Texas Trust Texas-based approximately West will with in the XXXX. set over close with They & in bank Lubbock, be in & into in will net Texas will early last $X.X on discussed are third we share largest AimBank billion AimBank and Heartland's will in with merged Trust, assets. for quarter, Heartland's be to we and in XXXX. As and the conversion to market the assets target transaction subsidiary, largest FirstBank headquartered largest mid-February for billion West bank acquisition, bank deposit income this become Lubbock. With contribute the fifth FirstBank

While will to $XXX will million also a nearly assumption Bank conversion, complete our transaction nicely in $XXX early XXXX. Bank in & million income will be Trust branches. four Arizona Arizona billion. adding purchase Bank approximately Arizona, assets $X.X and simultaneous Johnson Trust and & Phoenix, its Phoenix net and to contribute in and the This deposits loans This December, take will for in Bank close of

more and As billion And past, past our in expand $X to work state in toward assets I'm of to where our operate. priority the XX I've banks footprint current quarter. goal our in this billion been report we $X in or our said that goal reached assets each of of has our XX pleased have

to more share consolidate market continues and position industry the more become market important. While and

shareholders We XX share top dividend record Heartland's deposit COVID-XX XX XX payable November approved week, turn shareholders of approved Directors common Board deposit share the record now of XX MSAs $X.XX XX, I'll on company's preferred on an President XX market five November the closing, January over XX, performance, operating dividend Bruce our payable also of and who per and $XXX Board Bruce? credit. in last CEO, a are in XXXX. XXXX, top The our XX, provide of share and XXXX. Heartland's market overview Lee, will XXXX, XX, December of response MSAs. call to on to In a of to

Bruce Lee

revenue pre-provision per $XX.X from increase $X.XX year third linked our start ago expense linked net Net an Lynn. low XX% operating and of a environment. increase Thank continued a of our member and to by income resiliency XX% year the teams common highlight the $X.XX our while admiration we we everyone. Heartland on or to customers, record common communities. each creativity the and XX% business expressing earnings available humbled in caused demonstrated challenges increase focus customers quarter. compared $XX.X flat by and Heartland's to our of quarter, an a most COVID-XX an diluted a quarter. Earnings a the commitment Good of interest as my for share quarter across in XX%. the by year rate uncertainty their They and dedication, I'm I want ever, core ago gratitude ago, shareholders banks. have afternoon, pandemic. to from you, In million, company, delivered from third that's $X.XX and increase from of uncommon the a million, the of our and discipline,

Our basis points efficiency lowest XXX linked for ever lower year XX.X%. a efficiency was our and how our XXX last during the I'm XX.XX% a Year-to-date, basis year, we're quarter. efficiency ratio the quarter is year-to-date than proud operating ago points than of XX.X%. ratio ratio third of quarter, After lower pandemic.

customers top We're level safety for to Employee banks service delivering Heartland open priority. our high the and expect, are invest continues remains Our business. customer of our for growth. and

customers our We our pandemic and home plan, so. work from while protecting who management can running continue operate our Employees to effectively do under business. employees

of exposure. bank lobby or footprint into limit as flexibility come a has XX of continue during We're those XXX Consumer are Heartland's the to centers open are to transactions confident the in diverse be as demonstrated banking with to adapt We've and rotating pandemic. A ability XX% restricted we as While Three communities. our Only fully to are customers both serving Digital continues and drive-thru quarter year-to-date. and lobbies, our operating lobby strength foreseeable have and operate banking in locations in as the decreased on well quarters to to geographic closed environment operate reopening normal. result and digitally. as We'll closing of our and are local comfortable conditions centers changed bank this in increase appropriate. drive-thrus for access. our currently continue teams two approximately branch who only future. a are behavior transactions offices or pandemic. operating and

continue branches our under consumer footprint. rationalize and to digital, approved XX% consolidation this In are branch branch the shift Given six an additional quarter, third of ongoing we we review. to

ended deposit $XX.X a during growth, deposits the increasing delivered increase. and deposits Trust non-time increase quarter. another billion non-time Dubuque X% or XX Bank of X% of a with Rocky Seven deposit deposits. million led quarter X% & We billion, $XXX Total Bank and to delivered at Turning strong $XX.X banks Mountain totaled growth. by the our with

basis year. XX account noninterest-bearing quarter, and from strategy basis accounts Our enviable non-time in last in diligent down third We've reduced of the XX% quarter deposit to second with points for XX XX pricing executing deposit basis also in costs the balances. total points deposit our and been quarter XX% and have mix the from in remains points

Turning to loans.

the our date, PPP less decreased have million released portfolio portfolio, are $XX,XXX. are our under agriculture our loan by PPP commercial in Our SBA decreased representing client process residential borrowers Many additional lending portfolio began applications, million borrowers of XX% application. Earlier forgiveness mortgage the in than total of quarter. of tax from forgiveness Approximately with X% of PPP balances a and quarter, million. $XX to XX% our of $XX month, application On the loans In waiting million, X% SBA process implications. slightly October and remaining or linked Xth, million the begin rule $XX to representing the loans commercial $X.X for $XXX this $XX submitted clarification borrowers loans. PPP billion still from decreased of decreased linked our forgiveness PPP simplified To forgiveness anticipation changes eligible.

Turning metrics. to key credit

points decreased XX quarter. nonperforming of the of representing total of end points Our end third second at the the loans the loans from basis basis quarter, XX

also non-pass pandemic, $X.X As in the of from from loans a decreasing points shift to a downward XX ratio This points period. The prior at Due of XX basis continues a loans quarter. total period. at Other end Non-pass the started third over rating. to X.X% low XX% basis to but XX not basis XX points the from from in XX the loans rated compared quarter relatively remained total nonperforming The the the basis assets, X.X% of quarter expected. real Substandard XX% previous the to million points end over of the delinquency risk decreased points to to to improve, second the has quarter. at level. in basis third assets estate $X.X to ratio second anticipated percentage quarter. the comprised same extent the in million we declined

were Lastly, was by driven for at two in net million to the XX basis the basis third $X.X This credits. XX points commercial million $XX.X loan increase compared points reported or quarter quarter. charge-offs or second

an in First, that's million on do industry operates charge-off pandemic. $XX.X fracking a previously industry. additional the the of impacted company identified and have sand We sand reserved not exposure for been negatively to a fracking that by

The charge-off in California. industry in second wine loan was the a $X.X large identified newly wholesale million

borrowers, the Excluding pandemic. charge-offs overall to last we charge-offs large quarter. have these metrics improvement would credit in during remained from flat are our two from commercial encouraged the with And close

believe The or the As payments status, $XXX these of XX $XXX primarily deferments and loan modified Heartland's by received ultimate total X million million about interest-only the and we will news activity severity business September heavily on have the programs financial The or of days. to second on Page pandemic of days. and have the are XX government X.X% table Heartland's terms for are More exposure XXth, impact on alleviate modification. and the COVID-XX of relief duration COVID is remainder principal on million pandemic, to in modifications original COVID-XX programs stress. deferral release. and second more under performance billion restrictions payment to of customer remain $XXX segments available of consumer additional related interest availability of the approximately and $X.X XX% only our loans for are economic information impacted of of depend original loans returned their in

investments. to Turning strategic

efficiency more through installing than and ratio. for significantly We network, ATMs new XXX to Compass, more experience upgrade protection. Operation completed across are customer ATMs investing the our the all-time initiative, and our The offer ATM achieving Customer low while of an new growth our are convenience fraud footprint. all state-of-the-art company-wide enrich We and

This at allowing previous deposits without as the third We're make seeing video banker digital banking will authentication already business to increased accounts our allows innovative measures we customers for a New upgrade. via XX% quarter. video. & deposits center. video customers, fraud. consumer our visiting features, of small and this just to In with across offering loans benefit our benefits to at a We've such the apply image bulk Bank channels deposits a last implemented banking began live customers XX/X Trust. business, ATMs banking Wisconsin the quarter, enhanced week, In from protect open also our them from transact platform

X% improved time banking to payables, giving internal transition enhancing more best-in-class serve payment customer this products, easier solution loan nCino onto loan supporting security efforts. greater our our environment. goal improved expanding clients their in commercial the bank and software solution all reached applications will experience, delivering funding. We've final innovation-oriented across banking and compatibility commercial program electronic while We a development began our by accounts our solutions each quarter, of significant modify tools suite, footprint out deposits, to September the integrated our capture from banks in and e-deposit efficiency, any evaluate manages feedback preferring business make a with single business virtually customers almost we're We the our accessible based the another on and experience, the to speed We to the rolling needs and committed achieving operations that of device. and CRM in taking teams payable These clients are origination giving launched clients third Salesforce We external for a types. at approach. platform. transforming meet better remotely know we as from to an enable acceptance. pilot milestone current they introduced evidenced the product commercial the of design clients customer and for decrease customer-first more and our and We're In

to or automate box securely payments collecting We are of medical advancing clients, process error the fraud. check company, for our lock capability decreasing help the business while including potential

our billion. combined in $X is to billion the FirstBank in expected the scheduled is December Trust, more integration to donation we're conversion than Johnson over and in I in for performance make & Bryan? record simultaneous challenges safe February complete scheduled assets. with to market. to & create difference high-need call third by enrich community. to we Bank's our over I'm responding need This AimBank's April on December, bank schools, complete system assets created teachers raise the October On we a our McKeag, Arizona the announced lives to $X.X the in communities Bryan its in meaningful provide close expectations. support is donation in performance to M&A addition Part financials. AimBank, detail volunteer the Bank $XXX,XXX Heartland's COVID-XX. be largest this of students Financial to schools. Trust donations Xth, will banking hours Heartland acquisition in Trust with in Arizona grateful and AimBank will help These contributed to our money is purchase where live The healthy environment. front, they was of our of $X.X work. organization a within Bank mission Officer, centers supplies and to close On to more quarter to nonprofit Chief now million and that employees' XXXX. with and Heartland's learn In Phoenix turn we four to will and the providing and & Heartland's materials

Bryan McKeag

million. release, press earnings includes which losses This share $X.X for afternoon. credit and good costs and referencing $X.XX for million per this of quarter. of integration I'll shows and begin by $X.X acquisition the Bruce, -- today Thanks, reported of provisions

site acquisition our presentation, third pre-provision in this our in per and Excluding and quarter, investor quarter you also aspects. results was solid site. which positive were earnings earnings financial updated point share core is on these items, would Web with Again, the also after-tax to almost integration and I IR costs Heartland's metrics $X.XX. trends all

economic off and total the quarter $XX this on million commitments. million improvement. mentioned, was new million, showed $XXX by sub-rated credit that forecast balances in problem I full updated unfunded As offset These was and $X.X by identified largely decline $XX driven million credit million and charged loan decline losses quarter were in in The for provision provision the consensus increase an a during loans. $X.X

lending-related components the allowance economic $XX.X with in provision losses total allowances of basis the the in significant commitments $X.X allowance $X.X reserved loan. XX the economic million Heartland's was loans loans. of million credit million In $XX.X And lending-related uncertainty or the decrease quarter, However, on million the total lending-related of and the points total Together, of loans resulted credit then charge-off net changed million in the credit of for end to in losses loans. the loans. of reflecting for for we $XX.X $XX.X not that XX losses X.XX% unfunded fully charge-offs losses million. in second Net and million mentioned excluded, the two on XXXX total level of X.XX% assessment of factors a outlook loans. a quarter allowance X.XX% for to credit of totaled points were the $XX.X develop At or increased quarterly new allowance PPP that losses less million are previously loans $XXX.X for was of $XXX.X the these this When total total, charge-offs basis credit used attributed to remains. been had total allowance allowance quarter or million resulted

grew of a of common increased of X.XX% risk to XX total XX.XX% quarter ratio assets at increases portfolio just ratio balance remained common Tier in with million, as comprise were approximately ratios bond our the million commitment XXth, XX% assets. last $XX rest partially loan also six the ratio X due $XXX the years unused equity points $XXX At just grew at totaled Total network of million some at excess basis regulatory a quarter cash monthly from with the of on $XXX we $XXX fair now earnings this and the of of to sheet. of capacity. banking $XX.X ratio assets invested Investments the equity PPP generate over on retained the Borrowings Investments based Moving some deposit million from the had $XXX tax duration on under from flow September offset of capital of X.XX% impact and increase at to quarter increased million of billion cash pre-investment $X.X XX.XX%. expected with yield X.XX%, the liquidity a quarter and as pre-invested Heartland's a strong equivalent and approximately to borrowing million and strategy X.X% billion ending basis. marks our Tangible the or end. value by XX%. assets flow forgiveness.

Heartland's to with reserves, sheet healthy base, ample continues very solid So be balance low strong and capital leverage. loss liquidity

this on quarter, was than than or Net quarter last deposits in this was declines and income Moving yields and statement. the the offset slightly and of XX points in basis a totaled million income drop interest compared to The basis XX investment That XX basis to points prior million net points lower interest margin quarter. cost quarter or $X.X respectively. on last reflecting $XXX.X borrowings quarter. interest basis point loan by on X basis lower X.XX% tax-equivalent

quarter totaled higher in total quarter, included for points the $X sales compared $X.X activity, accretion income as gain net Noninterest while loans on the purchase to gains was quarter. XX million up quarter. last This last basis compared $XXX,XXX basis $XX.X million on from interest points security the to the quarter, decreased of mortgage XX million up margin prior accounting

fees quarter. fees charges, loan this higher and all In addition, trust service servicing were

quarters. Core exclude also million Moving or this noninterest rate costs to compared quarter. million equipment costs expenses totaled level benefits combined and last losses, thirds $X.X or integration occupancy, costs of slightly were million, million for this for tax $XX.X expense. costs furniture and and $XX.X quarter to past well-managed costs, XX account quarter. These at run credit specifically, salary approximately two More which remained excludes the last asset acquisition, and restructuring Noninterest decreased down compared and flat $XX quarter. our million $X.X core $XX.X at up and slightly to million categories gains totaling benefits

over peak this XXX XX In FTEs addition, quarter X,XXX and quarters, a in XX% quarter from also last of X,XXX of relatively remained has or flat the FTEs X declined by our XXXX.

have billion our leverage increased the implement we other ongoing we same XX%. and have is customer years, on part of increased many the company's productivity quarter company, continuing over results item demonstrate branch that totaled and this or work the two included branches as $X.X During to while trim $X.X million I assets we've program. time productivity which period, and would identified achieved restructure compass past the million network and One mention half expense the improvements $X.X losses These and growth. the all write-downs significant on as of a optimization branch assets, Heartland's write-down

program As next to to progress, two quarters. continues this the we or branch expect occur write-downs additional one over

or interest into new over forgiven margin PPP forward, with modest going excluding have next So moving excluding pressure. the of muted net remains quarters, more two The but is to than slower expect we XXXX. trends uncertain we forgiveness under growth. deposit PPP to one been and estimating growth, following be timing remain acquisitions, likely loan the would the including continue

billion in upcoming $X.X deposits million stable to be should $XX will to decline declines higher in be a $X will prior mortgage billion are third $X.X the goodwill M&A and approximately in both will at level high scheduled than on on and $XX has regard the much period. the to million $X.X less quarter. and Core loans $XX saw to transactions expenses However, that close basis, billion been And activity $XX billion should seasonally a range. combined and than add it December, during additional cost X.X lift and With million remain these adding million for should an next transactions. million you and million M&A my lastly, call next And after the EPS and and after are turn in would the intangibles, deposit from XX% with core of shares $X saves additional transaction. to XX% million quarter I'll comments conversion And costs approximate details million I almost back to in our $X.X related the provide over with AIM realized to questions. in interest to should of the of two $X.X XXXX. to remaining years QX two we for also to early transactions last that, quarter in these direct in In quarters same the but in our closing for Butch of on come time,

Lynn Fuller

very good. for Thank lines Very open up you your much. phone We'll questions. the now

Operator

Thank you [Operator Instructions].

with Our of Davidson. comes first from question Rulis Jeff D.A.

Jeff Rulis

that A though more net COVID any on million. balances? call it smaller $XX.X the detail on remaining question risk detailed as the was even in remaining, it, those categories loans maybe charge-offs peg or you'd two that at $X -- the you Were in million that. detail any just the bucket on also Just

Lynn Fuller

balances say there's any remaining This I charge-offs would our I'll But comments those in chime there? Nathan in and guess, it’s that large you normal Nathan, size. get nothing also I the direction, portfolio any other just us is in. let of for sort after two activity would, lead Butch, past

Nathan Jones

Butch, And it the across mostly said It's usual No. well. you suspects.

credits, numerous ag, across diverts everything it from to see to development You'd others.

Jeff Rulis

quarters. fracking absent that two, have to would about the commentary the remain of mentioned the wholesale I you wine elevated. expected think the credits, kind prior it’s And had Butch, similar charge-offs and to you've

and heading elevated somewhere Just elevated, or in basis here? that? we it maybe we what that to comment. into I the of north gauge are is to as points trying XX to guess sort just are that driving modifications roll-off XX of Is gauge trying Just --

Lynn Fuller

earnings you that and But jump uncertainty I it going can there's Nathan, the you're And that up wood picking comment here. just from think our on I think I'll add. Knocking reflects fact then in release. forward.

the we I through be we fast. that there take really million coming change quick had down things but with. ones this knew was and quarter, don’t think showed the we point, pipe, any charges and As $X.X that the did we that we I at big this really that to mean, of saw quarter there up charge took dealt went

could think get in always I we're think in we we're good environment, So this -- pretty surprise. concerned could I shape. But that a

Nathan Jones

I seeing make numbers, remaining the non-pass with credits. with metrics, think There's comment about delinquency in I half of some the pleased are we in. the states that we deferral, other is we're portfolio than NPA our X% very spikes sort credit less around while the might lot There's uncertainty of our both numbers of COVID. happening of are a increases elevated in the that operate loan

there's sort from amount tremendous around program. So of a And a government reopenings. bit there's little recent of uncertainty the pullback been a stimulus of

So I with showing think statement to we're just trying numbers. specific that's more anything that than our be cautious in up

Jeff Rulis

Got it.

addressed Okay, that well. pretty last one one. that Maybe

loans what may of headwind. the to we comments and get hesitation greater, combination. sense in tightening is up? demand quarter just absolute it's trying your runoff is a to muted is continue the loan -- of got terms in the for But and/or be -- demand credit guess, I'm a a or is new -- drying on on Bryan, and appetite? force, got Just sort that your and on Is for I'm which going exceptions to your maybe But that that lower runoff loan what growth.

Bryan McKeag

So a it's of couple things.

Let's first a itself being the refi-ed in Those out mortgage Texas, residential have deposit maintain loans us. the to other but be continued That generally as is from are to rates are able take increasing. being refinanced business. and low. the relationship really mortgage very, values We you the know, residential portfolio loans home as exited did away steady We pretty with much portfolio is, remaining we very consumer. than have or

is book story have are if Most to way. into consumer loans values consumer which this fixed a rate, continue they're in longer-term and The refi-ing people those home low of there. rate same the bit equity low our that's rate environment, So little XX-year loans, home balances interest appreciate, the mortgages.

is book companies. So pay fairly actually rates and the our some secondary our construction that out, our for reasons $X A in to estate taking we think into we'd in is but booking for of portfolios. with of funded on we've would a expect be we more commercial smaller community construction those the renewed had to mid-Xs we Many books keep see continue market. off. focus million, reasons, good those feeling million $X off and phase there confident just going investment seeing as is loans seeing low, the them lot long activity We're for necessarily of are real real the deals, runoff to are not Where new refinanced C&I we're are And those as being pricing like banks, that's during credit on there reasons. decrease those as million, $X portfolio we the banks, that trade anticipated. community the a investment some estate operating the don't in

that some is there so And of happening. away refinancing from us

Operator

you. Thank

line from question Liesch comes next Our Andrew of Piper with the Sandler.

line Your is open.

Andrew Liesch

margin, of do quarters? you I you just appreciate pre-funding curious PPP. the think payoffs kind how comments remains out Bryan, do the securities the much coming with on Where but in what the some sort taking and your kind flattens margin of think on of strategy of pressure expected

Bryan McKeag

because with I lot Obviously, got a ifs Yes. couch to of [Multiple this Speakers].

another basis X of we maybe it have points I to dropping. points basis XX probably think

change that mix percentage, the quarter. the with given there higher being Just whole seen investments that we've for a wasn't

would timing great. That again shows loans even how a could will I cash PPP quarter then liquidity would loan there's a the much deposits investments excess with flow the change the little in of probably We help the that. this what that. how switch up in see portfolio that lot. Certainly, bit we'll can forgiveness, to But little mean and get is a loan So be out from grow. of much growth bit. the just

and the I in, So AIM think before would get size XX got probably I say if and is Johnson come everything. you maybe things of balance lot the bigger. liquidity sheet a But X, of

this interest go is say, relatively margin say So down, to I it you income even going was I flat would might net Andrew, our though where remain quarter. to think

line think hold I So we can a there.

is fact of news AIM -- that's portfolio been AIM's liquidity. X in and having Johnson excess north net margin is good interest X.X. both going almost have and has to Now come in they've The a

help we'll excess equity. the though comes So when that when some that in will margin get

looks obviously there's could cloud lot what we how those fourth bring quarter that parts. of [Multiple a the So like. Speakers] And also really fees, moving in

Andrew Liesch

the What's And struggling is after that still of out then eventually, need of that I then there more time gotten deferral payment And borrowers? at deferral, tone commonality they're what's the of still those relationships the some deferrals have any these them? ending? on if resolving of second a sort loans they the And mean process of if I that. among guess

Nathan Jones

really as additional The experienced portfolio, additional the probably being well lodging in the as support of it’s other overwhelming most is located within deferrals. the majority industry seeing by most there is needing really banks the and stress

movement in We raises, are some seeing positive where us in customers. put being giving pretty some as as capital measures we're significant place, well seeing austerity those confidence

much give so with it's of at add going move today. you'd do as to to like But where have we to point we to that? We determination But address customers good them itself. resolve about forward. feel continue where and to kind Butch, those at it's they're still anything of of this unknown a hard as really to will

Lynn Fuller

I weeds support maybe, going want continue if some think getting to But little to in. have think ongoing we see us -- this a and is thing those only in I turn to the loans TDRs. of jump you're Bryan, and provide then the into to

Bryan McKeag

couple had quarter. a of this we In fact,

at our of front top tables had press I the table of of me. in right in that we my I'm the back head, million. I it off don't have If look doing release, $X you the think

of up couple there TDRs. I based frowned believe not And million up credit I'm we lodging think second additional TDR. the if that did on for were you those And in their and that $X two of renewal. were the I credits come end

do could in second, come know if there be some So through additional continues and that XXX, that their the you we that next deferral yet have to period TDRs.

Lynn Fuller

all other that Andrew, banks, when started, like payment might The almost is that in we providing liberal I were fairly the comment first modification. make, pandemic

The reunderwriting process. second goes and our it go-round, complete it's a complete

there's be eyes probably it the So moved beyond go-around. had second that, workout will if a And it anything room. of our lot on at even into we've

Bryan McKeag

we [Multiple up Speakers]… Which beefed

Operator

Instructions]. [Operator you Thank

from comes the question line next with McEvoy Our Terry of Stephens.

Your line is open.

Terry McEvoy

what thoughts kind Maybe the tech that I out I cost share you like those will of the of not your six the be said, some review consolidated? of them the reinvested side. you on the understand guess the will do how you and first are that. XX%, into branches the on other branch of XX% But on branches, and much under savings question think maybe and optimization, upgrade meaning will be ATM of you of And investments of said fair a kind Butch, then, pass review. have are

Lynn Fuller

the that Bryan take question can about first, and saves. Let then me Terry, cost talk

right on definitely those half that doing will we're those of or probably there's we now sell XX%, what consolidate. think either I

do couple in I want haven't just, market, our been a years, think might we to grow those they the of them. bank the to because long how growth remaining but we be last give [Technical into Difficulty] over able

that they're market. in for us it's that make want them sell haven't to. really close way one. the we able for doesn't -- not a so we or to branch make another have sense reason, grow So good don't whatever been we it And But

Bryan McKeag

they in to think And you markets some I so question continue will need those as the this grow? grow environment to well? is Do that in going digital, of

Lynn Fuller

three to decision commercially pandemic work. really and our really businesses strategy, -- branches we're know, or little we historically, to based this you more behavior how changes. time more want during months four than oriented to just see of a We upon small business-oriented. it close as that made And small whether And want give part

Bryan McKeag

question, of of six and an cost Terry, people close million, And other $X.X basis branches base premises, your had estate annual a to kind part on the the costs. real

figured yet be out a sure. this that's in probably estimate Difficulty] as XX% bit branch to I to of that because presumably that going of more of I between so cost would have probably go in little somewhere so have away. digital see the to But see that think for we'll conservatively to to keep right lot consolidate and the how ballpark We'll we environment. activity, get happens or we'll [Technical people some that XX% XX%

Lynn Fuller

over Terry, our as those prune we right pretty good you have consolidate XX% And system when as able historical on deposits. been around than to over know, much a but consolidate of We lower year started numbers maintaining and we've to that little some a modeled branches. ago, we XX%. maintain we branch We've been

Terry McEvoy

rate question. a of X.X% X.X%. that look from the you you. portfolio. like follow-up what a providing if have are Speakers] the How as in for I'm portfolio sensitive just curious in, of went I of Thanks know just then retail the [Multiple properties, kind non-pass-rated that to non-pass higher COVID And that much of don't front portfolios But for now loans those average? those you've out or than couple some lodging say specific the does quarters? details called

Nathan Jones

industries lodging for don't most that I they the specific of as all. driving have percentages. one far a while are as perspective more being far the ones of credit where from And each impacted ones their Again, non-pass of decreases larger, percentages as largest are the the with individually are as one the

or you continue struggling as noted, and struggle we experiencing industry well one an monitor. something as from to the Specifically,

all management, non-pass that? we to and add really they're Butch, going doing into just the we that we're size, we're just measures through go to make million both and credits, movement, individual can. things them the both taking you'd at as really to individual is as all we and over sure post, X with look monthly and really RMs necessary over anything One the we're where sure proactively at we're anything meetings going well of having depth, like three to understand that understanding the make senior where any in to actually of

Lynn Fuller

think it did you [Multiple page? was I Bryan, point the into Speakers] fine. No,

Bryan McKeag

Well, outsized and you to sub-rated. an sit size, of I loans its that as say, recall, going Terry, portfolio we've to had on was relative kind in always just component ag

one So continued that bit. trends I that's drives be to think of that a little the

Operator

you. Thank

comes the DelMonte Damon KBW. Our next question with line from

Your line is open.

Damon DelMonte

little circle question, first the reserve? of on of you just the balances million that But to outlook bit and of explain the released quarter. $X.X that had you some because unfunded just that Is kind down of there. to provision a lower for why reserve this So was wanted back commitments just you the before that, could kind

Bryan McKeag

the commitments. things. loans down, on The effect coming Yeah, it's obviously, two some that had

have moved permanent that into have a tend We to Butch mentioned, those little reserve. their And bit quite Once move, construction lower a up or also, CRE bit low. few that had a as owner-occupied or they loans little they moved out category.

higher rate a reserve We construction our have loans. on

that combination down. mixed so And that to and lower caused the go

Damon DelMonte

you the uncertainties. probably we given we we're the back about as we forward, to provision try going going go kind to this of to then the coming ongoing as of potential just quarters first And and charge-offs for low half kind do about it's somewhere not the fair assume closer to economic kind quarter, but provision the of year? saw of what elevated a think in see commentary I as think mean, net in

Bryan McKeag

as the it's first think half. high don't as I

step or million, less I million get books. on the $X you point’s million had the my between for close $X somewhere the on the to or right. regular the, just would assume or don't $XX that so back loans and $XX and investment on If unfunded, we if decimal we the there suspect million provision

for in not Somewhere And really get million times probably quality. $X changes get just lot $XX at you growth between a of and t quarters. couple normal then more or that credit what next we're million and that loan past it's hopefully then of changes and charge-offs once we is looking the do

Damon DelMonte

I said or the like X.XX quarter. you say, should think loans I was And ex PPP the ACL, reserve this

virus? just So and the level you're the comfortable some with, the spike of that's the the footprint weaknesses of across kind of just given rising

Bryan McKeag

you like right mean, We a that of One was it the the back, of now. what And that great I year of the we're we had at I right? spot a Well, look recession. never never loans things I know, had is worst for X.X% bad year more than as charge-offs. during doesn't did feel

going this $XX just somewhere of pull lead we where was get didn't we do shape. of of good things pretty there and change. that probably, continue taken didn't the just a on we looking happen, if those answer. really and the take uncertainties. We done we're in side that back worse some in charge-offs have think to unless high factors things kind us really that which range. more should sure we in to if next room the bit Damon, or think didn't And I if they false forecast if positive think $X that maybe I prudent trudge be So we part were that along that could see. do, million businesses two, get obviously, and then a can't additional this, and I just quarter could something was better to I instead and get think But we’d But on here why it's in, coming the have That's provision. just We does going -- smaller make stimulus to don't given long-winded enough were, last what out to We all to probably with little reason quarter, keep don't CECL the of changes, million wanted was better. the a gives -- more math

Damon DelMonte

added just And have point Were of may can missed decline? I Was then said drag I there liquidity. walk a But the know on the other factors that in entirely any quarter-over-quarter me PPP? you you XX you kind But this. margin, there? was basis liquidity? there from down

Bryan McKeag

Yes.

for did, had I -- of thing think a just paper. looking I another sheet both I'm little we that

loans last was about points It X -- XX XX quarter. was basis So loans was basis points. PPP basis PPP accounting points. Again, purchase

X yield So interest it is our does net XX, it so down But was about that pull the same. margin.

and you with but up volume have You volume the accounting. in up. purchase were volume then have ex ex PPP rates left Investments, down down. there's loans, And liabilities both rates rates and some from loans and down

being asset fact So investments of we liquidity a from and that lower towards say us. a mostly have would it's shift I assets had that earning combination lot the in of the things. a

Operator

turn comments. Thank would now you. Fuller I'm to showing no for further closing questions at I time. to the over Mr. like this

Lynn Fuller

In were our very we the closing, financial for of number Thank third we with a new Towanda. records. set and quarter, you, performance pleased again,

and history. the foremost, shareholders diluted quarter $X.XX available second share. best $XX.X common of for First million was our Earnings our of quarter to in net income was best common per per share earnings

the for year-to-date in ratio Our the lowest record at quarter and was efficiency history. XX.XX% XX.XX% our

assets four $X quarters. in billion of $XX.X Our over growth last with the record reached a new billion high

late us achieved hope Our in balance of AimBank next our sheet for partners, of issues today XX West benign. everyone the XXXX. credit relatively thank call join this evening, remains our remain conference excited January everyone. XX Texas our We'd and can goal four extremely for quarter. last in a more merger Bank to welcome joining And Phoenix, liquid, all us assets Have quarterly last, charters and like of capital you Arizona. ratios to good strong Johnson $X and remain billion or our new branches in we're again

Operator

gentlemen, you and participation. this conference Thank your concludes Ladies today's for call.

disconnect. now may You

Heartland Financial USA (HTLF) 26 Oct 202020 Q3 Earnings call transcript