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HF

HEARTLAND FINANCIAL USA INC (HTLF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.32 on net income to common of $14.0M as NIM fell 27 bps QoQ to 3.46% after early-October termination of fair value hedge swaps and credit costs spiked on targeted charge-offs ahead of the UMB merger .
  • Customer deposits rose to $14.55B (+$201.7M QoQ; +6% annualized) while cost of deposits improved 5 bps QoQ to 2.13%, and CET1 increased 50 bps QoQ to 13.16% .
  • Asset quality tightened: nonperforming loans rose to 1.04% of loans and net charge-offs annualized increased to 1.68%, with $43.1M of Q4 charge-offs tied to five non‑owner‑occupied CRE properties (part of $48.9M Q4 charge-offs) .
  • Management characterized Q4 as “solid” and emphasized balance-sheet strength and merger readiness; the merger with UMB is anticipated to close January 31, 2025—key near-term stock catalyst alongside any post-close integration updates .

What Went Well and What Went Wrong

What Went Well

  • CET1 and capital: CET1 rose 50 bps QoQ to 13.16%, reflecting balance-sheet strengthening ahead of the merger .
  • Deposits and funding cost: Customer deposits increased to $14.55B with deposit costs down 5 bps QoQ to 2.13%, improving funding mix and cost trend .
  • Management execution on strategic cleanup: “In preparation for the merger we took strategic action to charge off lower performing loans and to divest of certain investment securities,” positioning the balance sheet for the UMB combination .

What Went Wrong

  • Net interest margin compression: NIM fell to 3.46% from 3.73% QoQ, primarily due to termination of fair value hedge swaps in early October, removing a tailwind present in Q3 .
  • Elevated credit costs and asset quality: Provision rose to $37.2M (vs. $6.3M in Q3), nonperforming loans increased to 1.04% of loans, and net charge-offs annualized spiked to 1.68% (including $43.1M charge-offs across five non‑owner‑occupied CRE properties) .
  • Efficiency deterioration: Efficiency ratio worsened to 68.64% from 48.58% QoQ as NII declined and expense normalization followed Q3’s one-time gain on asset sales .

Financial Results

Sequential performance (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Net Interest Income ($USD Millions)$158.7 $157.9 $142.4
Noninterest Income ($USD Millions)$18.2 $19.0 $28.1
Total Revenue (NII + Noninterest) ($USD Millions)$176.9 (calc. from )$176.9 (calc. from )$170.4 (calc. from )
Provision for Credit Losses ($USD Millions)$9.0 $6.3 $37.2
Net Income to Common ($USD Millions)$37.7 $62.1 $14.0
Diluted EPS ($)$0.88 $1.44 $0.32
Net Interest Margin (%)3.68% 3.73% 3.46%
Efficiency Ratio (%)65.70% 48.58% 68.64%
Cost of Deposits (%)2.08% 2.18% 2.13%

Notes: “Total Revenue” shown as NII + Noninterest Income calculated from cited lines.

YoY performance

MetricQ4 2023Q4 2024
Net Income to Common ($USD Millions)$(72.4) $14.0
Diluted EPS ($)$(1.69) $0.32
Net Interest Margin (%)3.47% 3.46%
Efficiency Ratio (%)293.86% 68.64%

KPIs and Balance Sheet (oldest → newest)

KPIQ2 2024Q3 2024Q4 2024
Customer Deposits ($USD Billions)$14.13 $14.35 $14.55
Wholesale & Institutional Deposits ($USD Millions)$822.9 $601.9 $83.6
CET1 Ratio (%)11.68% 12.66% 13.16%
Nonperforming Loans / Total Loans (%)0.89% 0.61% 1.04%
Net Charge-offs (annualized) / Avg Loans (%)0.23% 0.99% 1.68%
Allowance for Loan Credit Losses / Loans (%)1.09% 0.93% 0.87%

Loan mix (balances, period-end)

Category ($USD Millions)Q2 2024Q3 2024Q4 2024
Commercial & Industrial$3,541.2 $3,503.1 $3,452.0
Owner-Occupied CRE$2,556.0 $2,489.7 $2,392.1
Non-Owner-Occupied CRE$2,434.3 $2,455.4 $2,303.5
Construction$1,082.7 $1,119.9 $1,084.7
Agricultural & Ag RE$803.0 $701.2 $766.2
Residential Mortgage$733.4 $708.0 $684.5
Consumer$455.9 $462.0 $471.7
Total Loans (HTM)$11,608.3 $11,440.9 $11,155.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
UMB merger closing timelineQ1 2025“Expected in Q1 2025” (Oct 29) “Anticipate closing on January 31, 2025” Narrowed to specific date
Financial/operating guidanceN/ANot providedNot provided in Q4 materialsMaintained “no guidance” posture

No explicit revenue, margin, expense, tax rate, or segment guidance was provided in the Q4 8‑K materials -.

Earnings Call Themes & Trends

No Q4 2024 earnings call transcript was available in the document set; themes below draw from company releases.

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Net Interest Margin and HedgesNIM expanded to 3.73% in Q2 and 3.73% in Q3; Q3 included $10.3M hedge-related interest income; hedges terminated in early Oct (post-Q3) .NIM contracted to 3.46% primarily due to hedge termination .Down near term post-hedge termination
Deposit Mix & CostsPaying down high-cost wholesale deposits; cost of deposits 2.08% in Q2, 2.18% in Q3 .Wholesale deposits fell sharply to $83.6M; cost of deposits improved to 2.13% .Mix and cost improving
Credit Quality/CREQ2/Q3 saw elevated provisioning tied to specific credits (food manufacturing syndication) and delinquency uptick -.Charge-offs $48.9M (incl. $43.1M from 5 NOO CRE), NPL/loans up to 1.04% .Near-term pressure; proactive cleanup
CapitalCET1 11.68% (Q2) to 12.66% (Q3) .CET1 rose to 13.16% (+50 bps QoQ) .Strengthening
Portfolio RepositioningSold securities with CRE exposure; Rocky Mountain Bank sale closed in July; Q3 gain realized -.Further divestment of certain investment securities for merger readiness .Ongoing optimization
Merger with UMBExpected Q1 2025 close; integration planning underway .Anticipate Jan 31, 2025 close; balance sheet readied .On track; timeline clarified

Management Commentary

  • “HTLF delivered a solid fourth quarter. Our common equity tier 1 ratio improved to 13.16%. Customer deposits grew at a 6% annual pace… We are delivering a strong balance sheet as we anticipate closing our merger with UMB Bank on January 31, 2025.” — Bruce K. Lee, President & CEO .
  • “In preparation for the merger we took strategic action to charge off lower performing loans and to divest of certain investment securities.” — Bruce K. Lee .

Q&A Highlights

  • No Q4 2024 earnings call transcript was available in the document set, so Q&A themes and clarifications were not accessible in our sources [ListDocuments showed none].

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) Wall Street consensus for Q4 2024 EPS and revenue, but the data was unavailable due to a missing mapping for HTLF in the SPGI feed (tool error returned). As a result, we cannot formally assess beat/miss against S&P Global consensus at this time.
  • Values retrieved from S&P Global would be cited here if available.

Key Takeaways for Investors

  • Post-hedge NIM reset is the principal earnings headwind into the UMB close; absent the fair value hedge benefit, core spread dynamics and deposit cost management will dominate near-term EPS trajectory .
  • Proactive credit cleanup (notably in NOO CRE) front-loads charge-offs and should reduce tail risk heading into the merger; watch for stabilization in NPLs, allowance coverage, and NCO cadence in early 2025 .
  • Funding positive: consumer/customer deposit growth, sharply lower wholesale/institutional balances, and 5 bps lower deposit costs support margin defense even as asset yields normalize .
  • Capital is a bright spot (CET1 13.16%); this provides flexibility for integration and potential balance-sheet optimization post-close .
  • Efficiency volatility should normalize post one-time items; focus on expense trajectory and realized cost/integration synergies post-merger versus the Q3 gain noise and Q4 credit cleanup .
  • Near-term trading catalysts: merger close and any pro forma updates from UMB on combined NIM/credit outlook; medium-term, credit normalization and deposit-cost trajectory are key to valuation re‑rating .

Supporting detail and sources:

  • Q4 2024 8‑K earnings press release and financial tables (Jan 28, 2025) -.
  • Q3 2024 8‑K release and tables (Oct 29, 2024) - -.
  • Q2 2024 8‑K release and tables (Jul 30, 2024) - -.