Executive Summary

Q2 2024 delivered solid core results with adjusted diluted EPS of $1.15 and adjusted revenue of $188.9M; net interest margin (FTE) expanded 16 bps q/q to 3.73% as loan yields rose and deposit costs fell .
On consensus, HTLF modestly beat adjusted EPS by $0.01 ($1.15 vs $1.14) and exceeded revenue ($188.9M vs $183.2M); S&P Global consensus was unavailable via the tool, so third-party benchmarks are shown for context .
Management executed portfolio and funding actions: sold $108.4M securities at a $10.6M pre-tax loss to improve risk/liquidity, reduced wholesale deposits 20% q/q, and closed the sale of nine Rocky Mountain Bank branches in July with an expected ~$30M gain in Q3 2024 .
Credit costs rose (loan provision $9.7M) amid specific nonperforming additions (notably a $33.2M food manufacturing customer), tempering GAAP EPS ($0.88) and efficiency ratio, but capital strengthened (TCE up 40 bps q/q to 7.28%) .
Strategic catalyst: UMB merger integration planning underway; management continues to target a Q1 2025 close, cited as a path to higher ROA and more efficient capital use .

What Went Well and What Went Wrong

What Went Well

Margin and core profitability improved: net interest margin (FTE) rose to 3.73% vs 3.57% in Q1; adjusted efficiency ratio improved to 57.73% vs 58.77% .
Funding progress: annualized cost of deposits fell to 2.08% (from 2.11%), wholesale/institutional deposits down 20% q/q to $822.9M; management emphasized paying down high-cost wholesale funding .
Strategic actions and narrative: “HTLF delivered a solid second quarter… margin expanded through increased loan yields and decreased deposit costs… sale of Rocky Mountain Bank… expected Q1 2025 transaction close” — Bruce K. Lee, President & CEO .

What Went Wrong

Credit and noninterest headwinds: loan provision rose to $9.7M; noninterest income fell 44% YoY to $18.2M, with $10.1M securities losses and lower fees (NSF/overdraft policy changes, capital markets) .
GAAP operating efficiency deteriorated: GAAP efficiency ratio increased to 65.70% (from 62.46% in Q1) due to higher noninterest expense, including $6.0M acquisition/integration costs .
Asset quality mixed: nonperforming assets ticked up to 0.59% of assets (from 0.51%); specific additions included a $33.2M food manufacturing loan; 30–89 day delinquencies rose (one $9.2M construction loan later cured) .

Financial Results

Core P&L, EPS, Margins (Quarterly; oldest → newest)

Metric	Q4 2023	Q1 2024	Q2 2024
Net Interest Income ($USD Millions)	$156.1	$154.2	$158.7
Noninterest Income ($USD Millions)	$(111.8)	$27.7	$18.2
Adjusted Revenue (non-GAAP, $USD Millions)	$186.3	$183.7	$188.9
Diluted EPS (GAAP, $USD)	$(1.69)	$1.16	$0.88
Adjusted Diluted EPS (non-GAAP, $USD)	$1.06	$1.22	$1.15
Net Interest Margin (FTE, %)	3.52%	3.57%	3.73%
Adjusted Efficiency Ratio (FTE, %)	59.31%	58.77%	57.73%
ROA (GAAP, %)	(1.42%)	1.08%	0.84%
Cost of Deposits (Annualized, %)	2.09%	2.11%	2.08%

Note: “Adjusted revenue” is company’s non-GAAP measure; MarketBeat “revenue” aligns with this series .

Q2 2024 vs Street Estimates

Metric	Consensus	Actual	Surprise
Adjusted EPS ($USD)	$1.14	$1.15	+$0.01 (beat)
Revenue (Adjusted, $USD Millions)	$183.19	$188.92	+$5.73 (beat)

S&P Global consensus was unavailable via the tool; third-party sources are provided for context.

Balance Sheet and Credit KPIs

Metric	Q4 2023	Q1 2024	Q2 2024
Total Assets ($USD Billions)	$19.41	$19.13	$18.81
Total Loans HTM ($USD Billions)	$12.07	$11.64	$11.61
Total Deposits ($USD Billions)	$16.20	$15.30	$14.96
TCE Ratio (%)	6.53%	6.88%	7.28%
NPLs / Total Loans (%)	0.81%	0.82%	0.89%
NPAs / Total Assets (%)	0.57%	0.51%	0.59%
Allowance for Lending Related Credit Losses / Loans (%)	1.15%	1.18%	1.21%
Provision for Credit Losses – Loans ($USD Millions)	$12.75	$3.67	$9.74

Loan and Deposit Mix (Balances at period-end)

Category ($USD Millions)	Q1 2024	Q2 2024
Commercial & Industrial	$3,545.1	$3,541.2
Owner-Occupied CRE	$2,545.0	$2,556.0
Non-Owner-Occupied CRE	$2,495.1	$2,434.3
Construction	$1,041.6	$1,082.7
Agriculture	$809.9	$803.0
Residential Mortgage	$756.0	$733.4
Consumer	$449.8	$455.9
Total Loans HTM	$11,644.6	$11,608.3
Customer Demand Deposits	$4,264.4	$4,244.2
Customer Savings Deposits	$8,269.9	$8,151.8
Customer Time Deposits	$1,735.0	$1,737.7
Wholesale & Institutional Deposits	$1,032.8	$822.9

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Expected gain on Rocky Mountain Bank branch sale (pre-tax)	Q3 2024	n/a	~$30M expected, realized in Q3; may offset future securities/real estate disposition losses	New
Merger close timing (UMB)	Q1 2025	n/a	“Expected Q1 2025 transaction close date”	New
Formal financial guidance (revenue, margins, opex, tax)	2024	none	None provided; effective tax rate Q2 actual 23.12% (not guidance)	Maintained absence

Earnings Call Themes & Trends

Transcript not available for Q2 (Q1 call was cancelled due to the UMB merger announcement). Themes below reflect press releases and filings.

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
Margin/Deposits	Q4: NIM (FTE) 3.52% vs heavy securities losses; Q1: NIM (FTE) 3.57%; cost of deposits 2.11%; reduced wholesale deposits $312M	NIM (FTE) 3.73%; cost of deposits 2.08%; wholesale deposits down 20% q/q	Improving margin, funding mix
Strategic portfolio actions	Q4: $140.0M securities loss; FDIC special assessment $8.1M ; Q1: announced Rocky Mountain sale, $30–$35M estimated premium	Sold $108.4M CRE-exposed securities at $10.6M loss; Rocky Mountain sale closed mid-July; ~$30M gain expected Q3	Active repositioning
Credit quality	Q4: NPAs 0.57% of assets; Q1: NPAs down to 0.51%; allowance rising modestly	NPAs 0.59%; specific additions (food manufacturing $33.2M); provision $9.7M	Mixed; specific-driven
HTLF 3.0 / technology	Q1: invest in talent; expand treasury; digital platforms; footprint optimization	Continued efficiency focus; portfolio/funding optimization	Ongoing execution
M&A (UMB)	Q1: merger announced; Q1 call cancelled	Integration planning; expected close Q1 2025	Advancing toward close

Management Commentary

“HTLF delivered a solid second quarter… margin expanded through increased loan yields and decreased deposit costs as we continue to pay down high cost wholesale deposits… sale of Rocky Mountain Bank in Montana… expected Q1 2025 transaction close date.” — Bruce K. Lee, President & CEO .
Q1 strategic lens: “We grew customer deposits while continuing to pay down high cost wholesale deposits… sale of Rocky Mountain Bank… HTLF 3.0… reinvest in talent, technology and markets with greatest growth potential.” — Bruce K. Lee .

Q&A Highlights

No Q2 2024 earnings call transcript was available; Q1’s call was cancelled due to the UMB merger announcement .
Management clarifications via press release: expected ~$30M Q3 gain from Rocky Mountain sale; intent to potentially use gains to offset losses from securities/real estate dispositions; continued margin expansion through higher loan yields and lower deposit costs .

Estimates Context

S&P Global consensus was unavailable through the tool for HTLF; for context, third-party sources indicate adjusted EPS of $1.15 vs consensus $1.14 and adjusted revenue of $188.9M vs $183.2M (modest beats). GAAP EPS ($0.88) is not directly comparable to adjusted consensus .
Some outlets framed EPS as a slight miss based on differing methodologies; company’s adjusted EPS aligns with the modest beat on most trackers .

Key Takeaways for Investors

Margin momentum is intact; loan yields rising and deposit costs falling should sustain NIM tailwinds near-term if rate stability persists .
Funding mix is improving with sharp reductions in wholesale/institutional deposits; this supports lower cost of funds and better spread dynamics .
Credit normalization bears watching: specific problem loans drove higher provision and NPA uptick; allowance coverage rose to 1.21% of loans, providing buffer .
Portfolio repositioning (securities sales) and the Rocky Mountain branch divestiture create earnings optionality; the ~$30M Q3 gain can offset future disposition losses, reducing P&L volatility risk in capital optimization .
Capital ratios strengthened (TCE 7.28%); combined with margin improvements, this enhances resilience into the UMB merger close .
Near-term trading: expect the Q3 one-time gain to be a catalyst; watch for updates on integration progress and any additional portfolio/funding actions that could influence earnings quality and multiples .
Medium-term thesis: post-merger scale and efficiencies (HTLF 3.0 plus UMB integration) should lift ROA/ROE and reduce cost-to-serve, supporting re-rating if credit costs remain contained .

HEARTLAND FINANCIAL USA INC (HTLF)·Q2 2024 Earnings Summary