Heartland Financial USA, Inc. (HTLF) Q4 2023 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Basic Financial Performance: 3. Positive loan growth but mixed deposit trends. Product Development: 3. HTLF 3.0 plan shows promise but lacks immediate impact. Market Strategy: 3. Strategic initiatives are in place but with long-term focus. Expenses: 3. Expected decrease in core expenses but slight increase in loan loss provisions. Shareholder Return Plan: 3. No significant updates. Q&A reveals stable NIM outlook and strategic focus, but uncertainty in HTLF 3.0 execution. Overall, the mixed short-term outlook and lack of immediate catalysts balance out to a neutral sentiment.
Key Financial Performance
Quarterly Cash Dividend $0.30 per share, reflecting strength and stability in strategies and performance.
Series E Preferred Stock Dividend $175, resulting in $0.4375 per depository share, payable on April 15, 2024.
Tangible Book Value per Common Share $28.77, a 19% increase from 2022.
Net Income Available to Common Stockholders (Q4 2023) -$72.4 million, compared to $71.9 million for the year, primarily due to a pre-tax loss of $140 million from the sale of investment securities.
Earnings Per Share (EPS) (Q4 2023) -$1.69, compared to $1.68 for the year.
Adjusted Earnings (Q4 2023) $45.6 million, or $1.06 EPS, excluding losses related to balance sheet repositioning.
Adjusted Earnings (2023) $193.9 million, or $4.53 EPS.
Net Interest Income (Q4 2023) $156 million, an increase of $10 million, or 7% from the linked quarter.
Net Interest Income (2023) $601 million, an increase of $3 million, or 1% from the previous year.
Net Interest Margin (Q4 2023) 3.52%, an increase of 34 basis points from the linked quarter.
Total Assets (Q4 2023) $19.4 billion, a decrease of $718 million, or 4% from the linked quarter.
Commercial and Ag Loans Growth (Q4 2023) $224 million, or 2% from the linked quarter.
Commercial and Ag Loans Growth (2023) $719 million, or 7%.
Consumer Loans (Q4 2023) Decreased $12 million, or 2% from the linked quarter.
Residential Mortgage Loans (Q4 2023) Decreased $16 million, or 2% from the linked quarter.
Wholesale Deposits (Q4 2023) Decreased $958 million from the linked quarter.
Customer Deposits (Q4 2023) Increased $59 million from the linked quarter.
Average Customer Deposits (Q4 2023) Increased $271 million, or 2% from the prior quarter.
Total Deposits (Q4 2023) $16.2 billion, largely due to the paydown of wholesale deposits.
Provision for Loan Losses (Q4 2023) $11.7 million, with an allowance for lending-related credit losses of 1.15% of total loans.
Net Loan Charge-Offs (Q4 2023) $392,000, or 1 basis point of total average loans.
Delinquency Ratio (Q4 2023) Decreased to 9 basis points of total loans.
CET1 Ratio (Q4 2023) 11%, even after the securities loss and restructuring expenses.
Tangible Common Equity Ratio (Q4 2023) Increased 80 basis points to 6.53%.
Operating Highlights
New Commercial Relationships: In the fourth quarter, HTLF added 234 new commercial relationships, representing $196 million in funded loans and $54 million of new deposits.
Expansion in Key Markets: HTLF is investing in growth by expanding middle market banking and adding talent in California's Central Valley, Denver, Kansas City, Milwaukee, Minneapolis, and Phoenix.
Treasury Management Products: HTLF is expanding treasury management products and capabilities.
Digital Platform Development: HTLF is creating a digital platform to serve consumers and small businesses.
Balance Sheet Repositioning: HTLF sold investment securities with proceeds totaling $865 million in a pre-tax loss of $140 million, which improved net interest margin and balance sheet efficiency.
Cost Reduction Initiatives: HTLF is reducing retail delivery costs by centralizing retail structure and decreasing the number of retail leaders.
Operational Efficiency: The adjusted efficiency ratio was 59% for both the quarter and full year.
HTLF 3.0 Initiatives: HTLF introduced HTLF 3.0, focusing on efficiency, EPS growth, and capital use.
Charter Consolidation: HTLF completed charter consolidation, positioning the company for future growth.
Risk or Challenges
Balance Sheet Repositioning Losses: HTLF incurred a pre-tax loss of $140 million from selling investment securities to improve liquidity and reduce high-cost wholesale deposits.
Regulatory Assessment: The company faced an FDIC insurance special assessment of $8.1 million, which is a common challenge for banks.
Credit Quality Risks: Nonperforming assets increased to 57 basis points, primarily due to a downgrade of a manufacturing customer facing cash flow challenges.
Market Conditions: Commercial real estate, particularly the office market, is under pressure, which could impact loan performance.
Operational Costs: Increased professional fees and restructuring expenses, totaling $4.4 million, may affect profitability.
Consumer Fee Income Changes: New fee policies led to a decrease in consumer NSF and overdraft fees, impacting future fee income.
Economic Environment: The company anticipates a modest increase in the provision for credit losses, indicating potential economic challenges ahead.
Guidance & Outlook
HTLF 3.0 Initiatives: HTLF 3.0 is a connected set of initiatives aimed at driving efficiency, enhancing EPS growth, delivering higher return on assets, and improving capital utilization.
Balance Sheet Repositioning: The company sold investment securities totaling $865 million to repay high-cost wholesale deposits, improving net interest margin and capital position.
Commercial Loan Growth: Commercial and ag loans grew $224 million, or 2% from the linked quarter, aligning with guidance.
Retail Structure Centralization: HTLF is centralizing its retail management to reduce delivery costs and improve operational efficiency.
Expansion Plans: Investments are being made in middle market banking and talent acquisition in key growth markets.
2024 Loan Growth: Expected loan growth of 6% to 8%, primarily in the commercial portfolio.
2024 Deposit Growth: Anticipated increase in deposits of 5% to 7% to support loan growth.
Net Interest Margin: Stable net interest margin expected around 3.5% assuming stable interest rates.
Core Noninterest Income: Expected to be flat, with growth in treasury management and card fees offset by lower consumer fees.
Core Expenses: Projected to decrease by around 2% due to lower occupancy and operational expenses.
CET1 Ratio: CET1 ratio expected to approach 11.5% to 12% by year-end 2024.
Shareholder Return Plan
Quarterly Cash Dividend: The HTLF Board of Directors has approved a quarterly cash dividend of $0.30 per share on the company's common stock, payable on February 27, 2024.
Preferred Stock Dividend: The Board also approved a dividend of $175 for Series E preferred stock, resulting in a dividend of $0.4375 per depository share payable on April 15, 2024.
Dividend History: For more than 40 years, HTLF has increased or maintained its common stock dividend every quarter.
Share Repurchase Program: None
Key Q&A
Earnings Word Cloud
HTLF Transcript
Basic Financial Performance: 3. Positive loan growth but mixed deposit trends. Product Development: 3. HTLF 3.0 plan shows promise but lacks immediate impact. Market Strategy: 3. Strategic initiatives are in place but with long-term focus. Expenses: 3. Expected decrease in core expenses but slight increase in loan loss provisions. Shareholder Return Plan: 3. No significant updates. Q&A reveals stable NIM outlook and strategic focus, but uncertainty in HTLF 3.0 execution. Overall, the mixed short-term outlook and lack of immediate catalysts balance out to a neutral sentiment.
HTLF Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
