Heartland Financial USA Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 30, 2023

There are 7 speakers on the call.

Operator

Greetings, and welcome to HTLS 2023 Third Quarter 2023 Third Quarter Conference Call. This afternoon, HCLF announced its 3rd quarter financial results and hopefully you've had a chance to review the earnings release that is available on HTLF's website at htlf.com. With us today from management are Bruce Lee, President and CEO Brian McKeag, Chief Financial Officer and Nathan Jones, Chief Credit Officer. Management will provide a summary of the quarter and then we will open the call to your questions. Before we begin the presentation, I would like to remind everyone that some of the information provided today falls under the guidelines of forward looking statements as defined by the Securities and Exchange Commission.

Operator

As part of these guidelines, any statements made During this presentation concerning the company's hopes, beliefs, expectations and predictions of the future are forward looking statements and actual results could differ materially from those projected. Additional information on these factors is included from time to time in the company's 10 ks and 10 Q filings, which may be obtained on the company's or the SEC's websites. I would now like to turn the call over to Mr. Bruce Lee, HTLF's President and CEO. Please go ahead, Mr.

Operator

Lee.

Speaker 1

Thank you, Latif. Good afternoon, everyone. This is Bruce Lee, President and CEO. Welcome to HTLF's 2023 Third Quarter Earnings Conference Call. I appreciate you joining us today as we discuss our ongoing solid performance.

Speaker 1

For the next few minutes, I'll discuss HTLF's highlights for the quarter, then turn the call over to Brian McKeag, Chief Financial Officer, for more details on our performance and financials. Also joining us today is Nathan Jones, Chief Credit Officer, who can answer questions regarding the stable credit quality across our portfolios. The HTLF Board of Directors approved a quarterly cash dividend of $0.30 per share on the company's common stock payable on November 29, 2023. The Board also approved a dividend of $175 for Series E preferred stock, which results in a dividend of $0.4375 per depository share payable on January 16, 2024. For more than 40 years, HTLF has increased or maintained our common stock dividend each quarter.

Speaker 1

This is a direct result of the strength, insight and growth we consistently provide to our customers and shareholders. In the 3rd quarter, HTOF delivered solid loan and deposit growth. Our credit quality remained stable. And in October, we successfully completed the final conversion of charter consolidation. For the quarter, net income available to common stockholders was $46,100,000 and earnings per share of $1.08 Charter consolidation expenses reduced EPS by 0 point 0 $4 We delivered on our balance sheet guidance from last quarter's earnings call and are pleased with the results.

Speaker 1

At the end of last quarter, we said we were going to grow loans, grow customer deposits and pay down wholesale funding. We accomplished all three of those things. From the linked quarter, consumer deposit growth was $152,000,000 or 1%. Total loan growth was $154,000,000 or 1% and was almost fully funded by our customer deposit growth. And we paid down wholesale deposits and borrowings by $367,000,000 While we did that, we also lowered expenses with core expenses decreasing $3,300,000 or 3% from the linked quarter.

Speaker 1

Let's start with deposits. Our deposit base is diverse and granular. Customer deposits are diversified by both geography and industry, with no industry concentration higher than 10% across our portfolios. In the 3rd quarter, Customer deposits increased $152,000,000 90% of the growth came from commercial and small business and 10% from consumer. While we maintain a favorable deposit mix, customer demand accounts increased slight decreased slightly to 33% of customer balances, which reflects the ongoing but slowing transition to interest bearing accounts.

Speaker 1

Wholesale deposits and borrowings were reduced by $367,000,000 from the linked quarter, which was made up of a $715,000,000 decrease in wholesale deposits and a $348,000,000 increase in borrowings. Overall, total deposits for the quarter decreased to $17,100,000,000 64% of total balances are insured or collateralized. Turning to loans. In the Q3, we saw continued strength across our commercial loan portfolios with increases in each. From the linked quarter, non owner occupied real estate increased $126,000,000 or 5%.

Speaker 1

Construction increased $16,000,000 or 2%. Commercial and industrial increased slightly, while owner occupied real estate increased $31,000,000 or 1%. And our Ag portfolio also increased slightly. In total, commercial and ag loans grew $176,000,000 or 2% from the linked quarter in line with our guidance. In the Q3, we added 269 new commercial relationships representing $253,000,000 in funded loans $95,000,000 of new deposits.

Speaker 1

81% of new commercial loan originations have variable rate structures, flat from the linked quarter and a 12% increase from the prior year. Yield on these new originations increased 27 basis points from the Q2. Our commercial pipeline remains strong at over $1,000,000,000 It's distributed across our regions with strength in the Mountain West and Southwest. While we added more than 2,800 consumer relationships in the quarter, our consumer loan portfolio decreased $7,000,000 or 1% from the linked quarter, while residential mortgage decreased $15,000,000 or 2%. We expect total loan growth of 150 to $200,000,000 of core loan growth in the 4th quarter, which we again expect to substantially fund through customer deposit growth.

Speaker 1

In addition, we expect seasonal ag line utilization of $100,000,000 that would be paid down in the first half of twenty twenty four. Turning to key credit metrics, our disciplined credit approach is delivering stable credit quality across our portfolios. Delinquency ratio remained low at 12 basis points. Non performing loans declined $11,600,000 to 44 basis points of total loans, non performing assets as a percentage of total assets remained flat at 33 basis points. Non pass rated loans decreased $32,600,000 and net charge offs declined to 3,700,000 some of which had previously been reserved in prior quarters.

Speaker 1

This included 1,300,000 from the sale of our $10,000,000 consumer credit card portfolio. Market conditions have been applying additional pressure on the commercial real estate office market across the country. We feel good that our office exposure is low at 3.6% of our total loan portfolio. We continue to place emphasis on targeted reviews of our portfolios and recently conducted an in-depth review of each office credit over $1,000,000 We believe our portfolio is well constructed, granular and generally situated outside of central business We continue to enhance our ongoing portfolio management, surveillance and refine how we screen new opportunities for underwriting. For more on our CRE office exposure, please see Page 16 in the investor deck.

Speaker 1

As I mentioned at the top, earlier this month, we completed the final conversion of Charter Consolidation. All our local bank brands are now divisions of HTLF Bank, and we're now able to serve all our customers anywhere in our footprint. The nearly 2 year project was completed on schedule and on budget, driving greater internal efficiency, while we continue to deliver external growth. We are now strategically and structurally positioned

Speaker 2

for

Speaker 1

our next phase, HTLM 3.0, to execute on new initiatives that leverage our brand, products, technologies and capabilities. While we remain focused on continuing to achieve organic growth, we are also focused on reducing expenses, increasing EPS and growing TCE over the next few quarters. We continue to evaluate our balance sheet and capital structure to maximize efficiency and flexibility. And we're analyzing our expense structure including geographies, branch footprint, management layers and span of control. We expect some one time expenses associated with these initiatives And Brian will have more details in his comments.

Speaker 1

We will provide more on HTLF 3.0 during our Q4 earnings call in January. We're investing further in our strategy and innovation and have added to our executive leadership team. Robert Kahn is our new Chief Strategy Officer and Zach Hamilton, our new Chief Innovation and Digital Officer. Both Robert and Zach will help drive HTLF's continued growth and evolution and help us further differentiate ourselves and the products and services we bring to our customers. HCLF is delivering and executing on our strategies: customer deposit growth, quality loan growth, stable credit quality and we're driving long term efficiency.

Speaker 1

This is all made possible by the hard work and dedication of HTLF's employees, we're committed to delivering strength, insight and growth to our customers, communities, shareholders and each other. Together, we are HTLF. I'll now turn the call over to Brian for more details on our performance and financials.

Speaker 2

Thanks, Bruce, and good afternoon. As Bruce just described, HTLF performed well in a challenging environment this quarter, reporting earnings per share of $1.08 with loan growth of $154,000,000 which was fully funded by the increase $152,000,000 in customer deposits. Reported quarterly results included charter consolidation restructuring costs of $2,400,000 which reduced EPS by $0.04 In addition, net gains and losses on investments and other asset sales and write downs were low at a net loss of just over $200,000 Before I go into more detail, I want to remind everyone that our 3rd quarter earnings release and investor presentation are both available in the Investor Relations section of HTLF's website. So I'll start my comments with the provision for credit losses, which was 1,500,000 The provision reflects our stable credit quality, including a reduction of nearly $12,000,000 in non performing loans, lower charge offs at 12 basis points of total loans and a continued low delinquency rate of 12 basis points of total loans. At quarter end, the total allowance for lending related credit losses, which includes both the allowance on loans and unfunded commitments, decreased $2,100,000 to $127,700,000 or 1.08 percent of total loans.

Speaker 2

Moving to the rest of the balance sheet. Bruce has already covered loans and deposits, so I'll start with investments. Investments declined almost $300,000,000 during the quarter to $6,400,000,000 representing 32% of assets with a tax equivalent yield of 3.79 percent. Due to the increase in mid to long term interest rates near quarter end, The unrealized loss on our available for sale portfolio increased $129,000,000 to 747,000,000 The relatively small held to maturity portfolio of $835,000,000 or 13% of investments has an unrecorded negative fair value mark of $77,000,000 The available for sale portfolio has a modified duration of just under 5.4 years. However, the hedges we have placed on $840,000,000 of our longer dated municipals and agency backed secured mortgage backed securities reduces the effective duration to just over 4.6 years.

Speaker 2

Moving to liquidity. HTLF's liquidity profile at quarter end is strong and stable with $1,200,000,000 of principal cash flow coming off our securities portfolio over the next 12 months with $240,000,000 expected next quarter. 2nd, a low level of outstanding borrowings and $3,100,000,000 of available capacity with the Fed and FHLB. 3rd, we have several Fed fund borrowing lines and broker deposit sources that remain open and available. 4th, our customer deposit base is granular and well diversified with over 64% of total deposits either insured or collateralized.

Speaker 2

5th, Our loan to deposit ratio is 69% and when removing all wholesale deposits, it remains low 80%. Cash and unpledged available for sale securities totals $3,900,000,000 And lastly, the holding company cash position stands at over $300,000,000 which is over 3.5 times our current annualized interest and dividend payments. In addition, our dividend payout is relatively low at 28% of current EPS. With regards to capital, regulatory capital ratios remain strong with Common Equity Tier 1 at just over 11.4% and total risk based capital ratio of nearly 15%. Adjusted for unrealized losses on our investments, These ratios remain well above capitalized levels at approximately 7.25% and 10.75% respectively.

Speaker 2

The tangible common equity ratio decreased 13 basis points to 5.73% atquarterend. The decline in market value of investments was partially offset by an increase in fair value of swaps this quarter, resulting in a net decrease of 35 basis points that is attributable to the accumulated other comprehensive income or ALCI. Moving to the income statement, starting with revenue. Net interest income totaled $145,800,000 this quarter, which is $1,400,000 lower than the prior quarter. The net interest margin on a tax equivalent basis held up well, falling 5 basis points this quarter to 3.18 percent, which was close to our expected range of NIM in the low to mid-320s.

Speaker 2

The decrease this quarter included a 2 basis point decline in purchase accounting accretion. Non interest income of $28,400,000 this quarter was down $4,100,000 from the prior quarter. Excluding security losses, Core non interest income was down $4,400,000 to $28,500,000 falling short of our expectation of $30,000,000 to $31,000,000 The primary driver of the miss was capital markets fees, which were $2,200,000 lower than last quarter. Shifting to expenses, non interest expenses totaled $111,000,000 this quarter. That's up $1,600,000 from last quarter.

Speaker 2

However, excluding restructuring, tax credit costs and asset gains and losses, the run rate of recurring operating expenses decreased $3,400,000 to $107,400,000 coming in better than our forecast of $109,000,000 to $110,000,000 The decrease was driven by $1,400,000 lower advertising costs and $1,600,000 decrease in professional fees. As we close out 2023 next quarter, HTLF expects loan growth of $150,000,000 to $200,000,000 to be primarily funded by customer deposit growth of $125,000,000 to $175,000,000 In addition, we expect an additional $100,000,000 of seasonal draws on ag lines of credit that we anticipate will be repaid in the Q1 2024. Achieving these loan and deposit growth expectations enables the bulk of investment cash flows to be utilized to decrease wholesale deposits and short term borrowings. Net interest margin on a tax equivalent basis is expected to stabilize in the 3.20 percent range, excluding Fed any Fed moves prior to year end. Provision for credit losses is projected to remain in the $3,000,000 to $5,000,000 range.

Speaker 2

This assumes relatively stable credit performance and a manageable level economic contraction over the next 12 months. Core non interest income, excluding investment gains or losses, is expected to be flat at $28,000,000 to $29,000,000 We expect a reduction in consumer NSF and OD fees as we institute new policies across our now single charter customer base and we see a continued decline in mortgage related revenue. Both of these will be offset by higher capital markets fees. Recurring operating expenses are expected to to $109,000,000 to $110,000,000 This excludes any new FDIC assessments that may be levied next quarter. Charter consolidation restructuring costs are forecast to be $2,000,000 to $3,000,000 next quarter, which includes both the final consolidation implementation expenses as well as expenses to complete several span of control improvements next quarter as we achieve the remaining benefits of the Charter consolidation project.

Speaker 2

We also expect to have some additional restructuring costs and Real Estate write downs that will be booked over the next couple of quarters as we begin to execute the next phase of facilities optimization and other HTLF 3.0 initiatives. We will have more details to share next quarter regarding our views of the 2024 performance, including the impact of these new HCLF 3.0 initiatives. And finally, we believe a tax rate of 23% excluding tax credits is a reasonable run rate. And with that, I'll turn the call back over to Bruce for questions.

Speaker 1

Thanks, Brian. Latif, we can open up the line

Operator

Our first question comes from the line of Andrew Liesch of Piper Sandler. Hey, guys. Thanks for taking the questions. Good afternoon. Just on So the margin guide of around 320, so does it just pull a bit up from 318?

Operator

So do you think it could even rise beyond that about what the Fed does?

Speaker 2

I'm always cautious to go too far On the margin, but the reason we think it's going to go up from where we were is last quarter, right at the end is we saw the pay down of the wholesale borrowings and funding and deposits. So that should carry over and come down a little bit this quarter as we Hopefully get the deposit growth that we're looking for. And we also saw a slowing in the mix shift that was going from non interest bearing to interest bearing accounts. So as those two things waned at the end of the Q3 and go into the Q4, we think we can see the margin go up a tick or 2. Beyond that, there's so many variables in there.

Speaker 2

Andrew, I hate to go too far and get ahead of ourselves.

Operator

Got it. So I mean, at this point, do you think another 25 basis points would matter that much?

Speaker 2

Not at the current betas that are out there on the deposit side. If we got back to normal betas, which for us are about a 30 beta, this quarter, for example, our betas were over 100% Because of the catch up and everything. So if we get back to normal betas, there would be a little bit from a Fed move, but not a lot at this point. We're kind of topping out on the benefit.

Operator

Got it. And then just on your commentary on the tax rate like 23% this quarter closer to 22%. So was 1% benefited the tax rate from that tax credit amortization that you mentioned earlier and operating expenses?

Speaker 2

Yes, for this quarter, yes, for this last past quarter, yes, it's about a little Got you. Okay.

Operator

A little

Speaker 2

bit more

Speaker 3

to me.

Operator

Got you. I will factor that into my modeling. All right. Thanks for taking the questions here. I will step back.

Operator

Thank you. Our next question comes from the line of Damon D'Amanti of KBW.

Speaker 4

Hey, good evening guys. Hope everybody is doing well today. Just wanted to ask a little bit on the credit front. Nice to see NPLs not really move at all sorry, NPA is not really move at all. It looks like within there you had NPLs coming down and a little bit of a tick up here in OREO.

Speaker 4

Is that just A loan that moved into OREO status or were there some other moving parts there?

Speaker 5

Correct, Damon. This is Nathan Jones. That's a credit that we had in our non pass. It's a multifamily credit. We felt that for looking at it, there was some disagreement between sponsors.

Speaker 5

Was the best move quickly on this one and just drive a fast conclusion for the best overall resolution. That's what we did, but we don't think it's systemic or any other issues that go with that.

Speaker 4

Got it. Okay. That's good. And then with regards to the outlook for loan growth, you guys seem to be continuing to fire on all cylinders here. What areas of your footprint are you seeing like the best opportunities?

Speaker 4

Has that changed at all in the last couple of quarters? Or is it still kind of the western side of the footprint?

Speaker 1

Damon, this is Bruce. It's still really The Mountain West, the West, the Southwest, it's a little lighter in the Midwest right now, but I would call it steady. It's all of the calling efforts that we've been putting in actually for probably the last 24 months are really starting to pay dividends. And because we are open for business, we've been recruiting, we've been calling on new customers and that's really helped When some of the banks in some of the markets that we operate in, they've been sputtering a little bit trying to decide whether they're going to be in business or not.

Speaker 4

Got it. Okay. That's all that I had for now. I'll step back. Thank you.

Speaker 1

Thanks, Damon.

Operator

Thank you. Our next question comes from the line of Terry McEvoy of Stephens Inc.

Speaker 6

Hi, good afternoon everybody.

Speaker 5

Hi.

Speaker 6

Hi. So with the Charter consolidation complete, can you just remind me of the $20,000,000 of savings? How much of that you think falls to the bottom line, let's say in 2024 versus how much of that is will be reinvested into growth? And Really, how could that or how does that play into the HTLF 3.0 in terms of accelerating organic growth across the bank?

Speaker 2

I think we'll double team this one. I'll take the first part. In terms of what Has fallen to the bottom line. There's a we have a slide in our deck. I think it's let me just find out real quick.

Speaker 2

I think it's Slide 10, where we show what our core operating expenses to assets has done over time. So we started this back in 2021. We were running at about 2.22% of cost to assets. We're now down this quarter down to 2.08%. If you do the math on about 20 we've been about $20,000,000,000 that whole time give or take.

Speaker 2

That's about $28,000,000 of run rate reduction in our expenses. So the $20,000,000 is in there. We do have a little bit. So it's more than that. There's some other things in there, but I think we've gotten a $20,000,000 plus I think we'll get just a little bit more here as we do the Span of control changes here in the Q4.

Speaker 2

So that's what we've got steaming into next year. However, I'll let Bruce talk about what we're planning to reinvest and

Operator

a little bit more about

Speaker 1

3.0? Yes. So Terry, you'll hear us talk at the end of the year and the next quarter Kind of more about HCLF 3.0, but I guess the way I think about it, we're everything that Brian just described is really going to follow the bottom line. We're going to be reinvesting the span of control as well as looking at management layers, looking at our branch footprint, Looking at the size of our branch locations, that's where we're really going to get the investment dollars for next year in 2024.

Speaker 6

Understood. And Brian, appreciate all the forward looking commentary for the Q4. Specifically, the service charges, which were $18,600,000 in the Q3. How much of a decline do you expect because of the new policies that you mentioned? And I guess what gives you confidence that the capital markets line will return?

Speaker 2

Yes, a couple of things. So I think it's around $600,000 We'll be implementing this in December.

Speaker 5

Okay.

Speaker 2

So the NSF reduction for Q4 is about $600,000 And then as I said, mortgage banking for us has been coming down. I think it's going to continue to Kind of fall off, just not seeing a lot of good activity there. The capital markets piece, I think Q3 was just soft for us. I think there's some things that we now see coming into the 4th quarter. And I think Bruce may have a couple of comments here, but I feel pretty confident we can make that up there.

Speaker 1

Yes. So Terry, one of the things on the capital markets front, We've taken a really hard look at our pipeline and we've really spent the last probably 2 weeks, maybe even 3 weeks out there Talking to a

Speaker 5

lot of our customers who

Speaker 1

currently have floating rate debt, sort of adding value, showing them The inverted yield curve and looking at a 3 year or 4 out, they can actually reduce By doing a swap, they can reduce their interest costs. So we've seen our pipelines really begin to grow as we've been out there talking to customers and helping them look at how to create some fixed rate debt from floating on their own balance sheets, which help them manage their own interest rate risk.

Speaker 4

Thank

Operator

you. We have a follow-up question from the line of Andrew Liesch, Piper Sandler. Hi, thank you guys. Do you have handy the balance of Shared National Credits that you have on balance sheet?

Speaker 5

Yes. First of all, Shared National Credits for us is not really a focus. Our strategy is really The kind of when we reach out and do participations, we repurchase them. It's really gaining that exposure with some of the companies in the markets we really want kind of a deeper relationship with an exposure in those markets. But overall, if you take all participations that we have and repurchase them, we're not the lead bank.

Speaker 5

It's actually it's only about 9% of our book. It's mostly C and I. And really, we've maintained the discipline. We maintained the rest of our portfolio there, very disciplined, Both geographic diversification as well as industry diversification. I think our largest concentration that would be in manufacturing.

Speaker 5

So we feel good about that book and where we're at. Bruce, anything you like to add?

Speaker 2

Yes.

Speaker 1

Andrew, we've really viewed this as Not an asset play here, but it's a relationship play. In all of our Transactions, whether we're a buyer or a seller, we have a non credit relationships. And I think and Correct me if I'm wrong, Nathan. But I think that we have purchased about 9%, but we've also sold About 4.5% or 5%. It's about 5%.

Speaker 1

Yes. So it's about a net of the total book is a net of about 4% or 5% Of our total portfolio.

Operator

Got it. Very helpful. Thank you so much. Thank you. Our next question comes from the line of Jeff Rulis of D.

Operator

A. Davidson.

Speaker 3

Thanks. Good afternoon. Just a question on the as you wind down the Charter Consolidation, more specific to the maybe the folks that were sort of really assigned to that process. Just wanted to see if there's a rotation or there's a reassignment of those and maybe that comes as part of 3.0 or just want to get the sense for If there was a headcount that was sort of assigned to oversee that and do they pivot and are there any expected positive impact as they kind of relook at other projects?

Speaker 2

Yes. So If you think about I guess I'll answer it this way. We had very few 100% dedicated folks to the project that were on our payroll. And so within those restructuring charges were very little salaries for folks. So our internal people will get reassigned to the projects and other things that we're looking at for 3.0.

Speaker 2

And again, they were doing their day job as well as Doing the consolidation. We thought we might have to do more, but the consolidations quite frankly went very smooth and congratulations to all the folks at HTLF because I think They did a great job of getting the projects done and doing their day jobs and all the other things that we needed to do. So it was very good. Most of that cost that we use people for was external consultants that came in and helped us.

Speaker 3

Okay, that's helpful. Thanks. And Just to circle back maybe for Nathan on the non performing loans, some reductions there, but it looked like there was even a balance that kind of came in that's new On net down, but just in general credit comments, it doesn't sound like you're too concerned about systemic changes, but maybe if you could touch on what was added and areas that kind of you're looking at that are softening at all?

Speaker 5

Yes. Non performing was down about $11,600,000 but there was a slight increase. That's really an ag credit and The majority of that is actually USDA guaranteed. So we don't have large concerns there about the increase. We continue to monitor it.

Speaker 5

We're watching the economy as well. We follow-up with different economists across trying to understand and talk to my peers, we're seeing weak spots. We just don't anything at this point that's systemic to be concerned about, but we continue to monitor it very diligently though.

Speaker 2

And I think Jeff, if you're referring to the Table that we have in the back where we show the ins and outs of non performers. The $11,000,000 item that ended up in OREO that went through. So it grossed up the in and the out of non performers. It was in performing loans at the end of last quarter, became a problem, we jumped on it right away. So in our tables, we kind of flow that as a plus and a minus Through NPLs to get to OREO.

Speaker 3

Okay. So in the new maybe it kind of shows new non performers, but it was like a temporary new because it came in and then went out. Got it. Okay.

Speaker 4

If you

Speaker 2

took the new and the reduction both down by 11,000,000 Then I think you'd see what really was the net other ins and outs of the non performance. Appreciate it.

Speaker 3

We're not performing. Yes. Okay. Thanks. And Bruce, it sounds like we'll kind of Give you some time on the 3.0, but you did touch on geographies and kind of taking a look at what would be the metrics or the demographics and not to oversimplify it, but where do you I mean, I think the answer is efficiency, but anything that you lead us into before we get that reveal of kind of geographies that makes sense, some that don't in that discussion?

Speaker 1

Yes. So we'll get in a lot more detail the next time we all talk. Look, when you look at our footprint, it's clear that we don't have scale in a fair amount of our markets. And our long term goal is both efficiency and growth potential for us. And so we are looking very heavily not only at the branch network, but the actual geography to make decisions on whether we should Expand or we should contract those geographies.

Speaker 3

Okay. We'll look forward to the updates. Thank you.

Speaker 1

I would say the keys for us, it's all about EPS, it's all about expense control and what does it do to our TCE. Those are sort of the three things that are always in the forefront of our minds as we're making decisions about geographies, The branch play that we've been talking about, as well as span of control and layers of management. Now that we have the Charter consolidation done, we can actually execute some of these things. But we had to get the consolidations done so that we could then move to the next phase.

Operator

Thank you. As there are no further questions at this time, I would like to turn the call back over to Mr. Lee for closing comments.

Speaker 1

Thank you, Latif. In closing, HTLF had a solid 3rd quarter. We continue to add relationships, grow customer deposits, grow quality loans, maintain stable credit quality and drive efficiency. While we remain focused on continuing to achieve organic growth, We're also focused on reducing expenses, increasing EPS and growing TCE over the next few quarters. We continue to evaluate our balance sheet and capital structure to maximize efficiency and flexibility.

Speaker 1

And we're analyzing our expense structure including geographies, branch footprint, management layers and span of control. We'll provide more guidance in the 4th quarter. Thank you for joining us tonight. Our next quarterly earnings call will be in late January. Have a good evening everyone.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Heartland Financial USA Q3 2023
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