Heartland Financial USA Inc (HTLF) 2015 Q3 法說會逐字稿

Greetings, and welcome to the Heartland Financial USA Incorporated third-quarter 2015 conference call.

This afternoon, Heartland distributed its third-quarter press release, and hopefully you've 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 www.htlf.com. With us today from management are Lynn Fuller, Chairman and Chief Executive Officer; Bryan McKeag, Chief Financial Officer; and Ken Erickson, Executive Vice President and Chief Credit Officer. Management will provide a brief summary of the quarter, and then we will open up the call to your questions.

Before we begin the presentation, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, I must point out that 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-K and 10-Q filings, which may be obtained on the Company's website or the SEC's website.

(Operator Instructions)

As a reminder, this conference is being recorded.

At this time, I would now like to turn the call over to Mr. Lynn Fuller at Heartland. Please go ahead, sir.

Thank you, Matt, and good afternoon, everyone. We sure appreciate everyone joining us today as we review Heartland's performance for the third quarter of 2015.

For the next few minutes, I will touch on the highlights for the quarter. And will then turn the call over to Bryan McKeag, our EVP and CFO, who will provide further detail on Heartland's quarterly financial results. And then Ken Erickson, our EVP and Chief Credit Officer, will offer insights on credit-related topics.

Well, I'm very pleased to begin this afternoon's call with news that Heartland reported another very solid quarter, with net income available to common shareholders of $14.4 million. That's a 22% increase over earnings of $11.8 million in the third quarter of 2014. On a per-share basis, Heartland earned $0.69 per diluted common share for the quarter, compared to $0.63 per diluted common share for the third quarter of last year.

Year to date, net income available to common shareholders of $44.8 million represents a 54% increase over earnings of $29 million for the first three quarters of 2014. And year-to-date earnings per share of $2.16 per diluted common share increased 39% over the $1.55 per common share earned in the first three quarters of 2014. I would like to point out that our stock is trading at just over 13 times our trailing 12-month earnings of $2.81 per share. And we view this as positive for Heartland shares, as it represents an excellent opportunity for buyers.

Moving on, book value and tangible book value per common share continued to increase, ending the quarter at $24.68 and $21.20, respectively. Our tangible capital ratio edged up to 6.5% for the quarter, at the midpoint of our target range of 6% to 7%. Heartland's annualized return on average common equity year to date was 12.38%, and return on average tangible common equity was 14.31%. While the highlight of Heartland's third-quarter results was net interest margin, which moved counter to the industry trend and increased to 4.01% for the quarter. Net interest income in dollars was also up, with a significant increase over last year's quarter and year-to-date periods.

Looking at the balance sheet, total assets increased during the quarter to $6.8 billion, largely attributable to two acquisitions closed during the quarter. For the quarter, organic loan growth slowed a bit to $39 million. For the year, organic loan growth of $217 million was very close to our 6% target at 5.6%. You may recall that quality loan growth has been our number one priority, and pipelines continue to look reasonably good. Credit quality remains very good, with nonperforming loans to total loans moving up only slightly to 73 basis points. We view this as the temporary effect of newly acquired nonperforming loans coming into our portfolio. In a few minutes, Ken Erickson will provide more detail on credit-related topics.

Our securities portfolio now represents 23% of total assets. Having nearly achieved our strategic goal of converting cash flow from our securities portfolio into quality loans, we've shifted our strategic priority to funding future loan growth. Our number one priority is now deposit growth, focused on non-maturity demand, savings, and money market deposits.

The tax equivalent yield on our securities portfolio increased two basis points to 2.73%, while our duration declined to 3.6 years. As it relates to deposits, we have experienced year-to-date organic growth of 2%. Accompanying this growth is a continued favorable shift in deposit mix, with noninterest demand deposits increasing to nearly 30%, savings and money market demand accounts at 53%, and time deposits moving down to only 17% of total deposits.

Heartland's residential real estate division experienced another good quarter, with originations of $371 million, bringing our annual volume to over $1.1 billion. We are seeing a favorable purchase-to-refi ratio, approximating 70% to 30% towards the purchased business. With regard to mortgaged business, we continue to refine our strategy, and have closed some out-of-bank footprint loan production offices to increase our focus on building out mortgage within our member banks' branches. Heartland's mortgage-servicing portfolio continues to grow, reaching nearly $4 billion at quarter end. We show $29.5 million of MSRs on our books, which is approximately $10.7 million less than our evaluation.

An area of significant focus for Heartland is noninterest expense, which decreased from the second quarter as we continued to implement a variety of process improvement initiatives, efficiency projects and FTE reductions. As a result, our efficiency ratio trend is showing improvement, and remains below 70%. We continue to invest in technology and talent, building out scalable systems and processes, preparing Heartland for $10 million in assets-size and beyond. In a moment, Bryan McKeag will address noninterest expenses in more detail.

Now for an update on M&A activities. In over the last three months, Heartland closed two of its previously announced acquisitions. The first, Community Bancorporation of New Mexico Inc, added assets of approximately $170 million to our New Mexico Bank & Trust subsidiary, bringing the bank to nearly $1.3 billion in assets and seventh-largest bank in the state for total deposits. The second was First Scottsdale Bank NA, which joined Arizona Bank & Trust, adding approximately $85 million in assets and bringing Arizona Bank & Trust to nearly $600 million in assets and 19th largest bank in the state for total deposits.

As you may recall, in May of this year, we announced the signing of a definitive merger agreement with Premier Valley Bank based in Fresno, California. With regulatory approvals now in place, and pending today's shareholder vote, we anticipate a November closing of this transaction. And last Friday, we reported the signing of a definitive agreement with CIC Bancshares Inc, parent company of Centennial Bank in Denver, Colorado. Subject to shareholder and regulatory approval, we anticipate closing this transaction in the first quarter of 2016, with a system integration plan for the second quarter.

Upon closing, Centennial Bank will be merged into our Summit Bank & Trust subsidiary, adding 14 banking centers to our footprint, bringing our assets in Colorado to $875 million, with 17 locations. The combined bank will operate under the Centennial Bank name.

Currently, three of our nine banks hold assets above our goal of $1 billion per charter. And with the completion of this proposed merger, an additional bank will be nearly that large. Centennial Bank brings a solid and experienced leadership team that will strengthen our position in Denver, the Front Range and mountain markets. Kevin Ahern and James Basey are both successful, well-connected, long-time bankers in the Colorado banking market. We are excited that both will be joining our Colorado bank and Heartland team. We continue to evaluate additional opportunities for expansion throughout the Heartland footprint. Our Company is in a great position to leverage new acquisitions and realize cost savings.

In concluding my comments today, I am pleased to report that at its October meeting, the Heartland Board of Directors elected to maintain our dividend at $0.10 per common share, payable on December 4, 2015.

I will now turn the call over to Bryan McKeag for more detail on our quarterly results. And Bryan will then introduce Ken Erickson, who will provide commentary on credit copies. Bryan?

Thanks, Lynn, and good afternoon.

I will take a few minutes to discuss the main performance drivers of our results, and provide updates on key operating metrics from another busy quarter. I will start with the loan portfolio. Loans held to maturity grew $193 million this quarter, ending the quarter at just over $4.6 billion. Excluding the $154 million in loans from our Community Bank Santa Fe and First Scottsdale acquisitions, loans increased $39 million. Our year-to-date organic loan growth now stands at $217 million or just under 6%, which is in line with our expectation of 2% average growth per quarter.

Moving to investments. Investments available for sale declined $54 million, and investments held to maturity remained unchanged during the quarter. The investment portfolio ended the quarter at just under $1.6 billion, representing 23% of assets, down from 28% at the end of last year. At quarter end, the duration of the entire investment portfolio was 3.6 years, and just 3.1 years for the available-for-sale portion.

On the liability side, deposits increased $190 million this quarter to $5.5 billion. The increase was largely due to the two acquisitions during the quarter. Demand deposits accounted for $96 million of this growth, of which $68 million was organic and $28 million was from acquisitions. All other interest-bearing deposit categories grew a total of $94 million, primarily from acquisitions.

Shifting to the income statement, net interest margin expanded 4 basis points this quarter to 4.01%, as interest costs on deposits and borrowings declined three basis points and investment yields rose 2 basis points. These were partially offset by a 6-basis point decrease in loan yields. More importantly, net interest income continued to grow, reaching a new high of $59.7 million for the quarter, up from $57.6 million in the prior quarter.

Noninterest income totaled $25 million for the quarter, which was down $5.6 million when compared to last quarter, as investment security gains declined $1.3 million and mortgage banking also declined. More specifically to mortgage banking, gain on sale of loans was $9.8 million, down $4.8 million or 33% from the prior quarter, primarily due to lower mortgage loan application activity, which was down 28% quarter over quarter. The decline in applications largely reflects a return to more normal seasonal activity from the higher refi markets we have experienced the last couple of quarters.

The service loan portfolio continued to grow, adding $178 million this quarter, ending the quarter just under $4 billion. That portfolio has grown $601 million or 18% over the last 12 months.

Switching to noninterest expense, total expenses were $62 million, a decrease of $1.5 million from the prior quarter. Expenses this quarter include $700,000 in nonrecurring costs related to our two closed acquisitions. Several expense categories of note include salary and benefit expense, which increased $200,000 over the prior quarter, primarily due to $200,000 of non-recurring acquisition costs this quarter.

Loss on sale or valuation of assets was down $800,000, as last quarter included $700,000 of write-offs related to the closure of five underperforming, out-of-footprint mortgage production offices. This quarter, we closed two additional out-of-footprint offices and recorded $100,000 in related asset write-offs.

Other noninterest expense was also down $1 million from last quarter, as this quarter included $800,000 of costs for historical tax credits compared with $2.2 million of similar costs last quarter. All other expense categories combined were flat quarter over quarter.

For the quarter, our efficiency ratio picked up a bit to 69.85%, primarily due to two items. First, we booked $700,000 in nonrecurring acquisition expenses during the quarter. And second, mortgage loan revenue declined. The good news is that core expenses remained flat to slightly down compared with the prior quarter.

Going forward, our efficiency ratio may be somewhat volatile from quarter to quarter, as we realize the benefits of scale and cost savings from our acquisitions, but also have the volatility that comes as we book the initial costs related to these acquisitions. We will also experience some seasonal volatility in this ratio from our mortgage business. Over the long haul however, we expect our efficiency ratio will trend downward.

The effective tax rate was just over 25% for the quarter, which included $1.1 million of historic tax credits. That's up from last quarter's 21% rate, which included a higher level of historic tax credits. Excluding the tax credit impact, the tax rate this quarter would've been in the 32% to 33% range.

To wrap up, I would add the following, relative to next quarter. Loan growth is expected to remain near current levels, which has averaged 1% to 2% per quarter. Net interest income should continue to increase as we continue to grow loans, with the net interest margin expected to be between 3.95% and 4%. Gain on sale of loans next quarter is expected to decline as mortgage activity should be seasonably lower than in Q3. Core expenses, excluding the cost of tax credits, should remain relatively flat next quarter. However, we expect some nonrecurring acquisition and integration costs will be expensed in the quarter.

Finally, the Premier Valley Bank acquisition is expected to close at the end of November. As a result, we should see loans increase by approximately $400 million next quarter, deposits increased approximately $600 million next quarter, and shares outstanding will increase, as we anticipate issuing between 1.7 million and 1.8 million shares in the transaction. But remember, for earnings per share purposes, these shares will only be outstanding for one-third of the quarter.

And with that, I'll turn the call over to Ken Erickson, Executive Vice President and Chief Credit Officer.

Thank you, Bryan, and good afternoon.

I will begin by discussing the change in nonperforming loans and other real estate owned. This quarter resulted in nonperforming loans increasing from 60 basis points to 73 basis points of total loans. There are only five nonperforming loans with individual loan balances exceeding $1 million. In aggregate, these five loans totaled $9.1 million or 27.1% of our total nonperforming loans. Three of these loans totaling $5.3 million came with the acquisitions closed this quarter. $12.2 million or 36.63% of our nonperforming loans are in our banks' retail portfolios of consumer and residential real estate loans. This is an increase of $1.9 million since June 30, and is tied to the increase in residential real estate loans held in portfolio.

30- to 89-day delinquencies increased to 0.4%. We normally do not allow any loans to exceed 90 days without placing the loan on a nonaccrual status. This quarter, there were a total of $1.2 million that was past 90 days and still accruing. The issues leading to these delinquencies have been resolved since the end of September. The increased trends of nonperforming loans and delinquencies are both the result of the three bank acquisitions closed earlier this year. Without these acquisitions, nonperforming loans decreased by $882,000 or 3.5% compared to December 31, 2014. The increases were anticipated in acquisition. Our special assets team has begun working with these borrowers to obtain an appropriate resolution.

Other real estate owned increased by $58,000 in the third quarter, remaining at $17 million. Nonperforming assets as a percent of total assets increased from 0.66% to 0.76%. Other real estate owned has also been impacted by acquisitions. Without the acquisitions, other real estate owned would have decreased by $4.3 million or 22.8% compared to December 31, 2014. Sale of other real estate owned were less than the prior quarter.

A couple of anticipated sales were delayed into the fourth quarter. As of today, we have under contract for sale 16 properties for a total of $2.9 million in the fourth quarter, and expect additional properties to go under contract for sale before the end of the year. Increased emphasis has been placed on liquidation of these nonperforming assets. Our existing portfolio of other real estate is made up of 15 residential properties aggregating $2.5 million, and 48 commercial properties that aggregate to $14.5 million.

Provision expense was $3.2 million in the third quarter, a $2.5 million reduction from the second quarter. Last quarter was impacted by the significant loan growth in the second quarter, as well as purchase accounting adjustments for the acquisition of the bank in Sheboygan, and the closeout of the purchase accounting of the Freedom Bank and Morrill & Janes Bank acquisitions. $469.7 million of loans from our acquisitions still reside in the purchase accounting pool and are covered by the valuation reserve. As credit decisions are made on these accounts in future quarters, a provision expense will be necessary to establish the associated allowance for those loans.

Net charge-offs were $1.7 million for the third quarter. $714,000 of this amount was taken by our consumer finance company, resulting in only $976,000 in net charge-offs for the bank portfolio. As shown in the earnings release, our coverage ratio of allowance for loan and lease losses as a percentage of nonperforming loans and leases was 139.54%, down from 170.78% at the end of June. This decrease is the result of the nonperforming loans added through acquisitions.

Excluding the effect of future acquisitions, the coverage ratio should continue to increase in future quarters as nonperforming loans are reduced and as loans currently covered by the valuation reserve migrate out of purchase accounting pool and have an allowance established on them. The allowance for loan and lease losses as a percent of loans and leases decreased from 1.03% to 1.01% this quarter. Valuation reserves total $18.9 million, are recorded for those loans obtained in acquisitions. Excluding those loans would result in a ratio of 1.13%, which would compare to 1.11% for June 30.

As mentioned by both Lynn and Bryan, our loan growth was less than last quarter. Within the commercial and agricultural portfolios, new loan production, excluding acquisitions, resulted in $11.7 million of increased outstanding. 54% of the new loan production in the third quarter was in C&I, and 20% was in commercial real estate, of which three-fourths of the CRE loans were owner-occupied.

While we have been successful in moving some business from our competitors, 75% of the new money disbursed in the third quarter was for new projects and expansion. All of our banks shared in this growth, with the largest growth coming from Arizona Bank & Trust, who had 31% of the total new production.

We have not seen a significant push towards fixed rates. Just over half of the new production was fixed-rate loan. These new loans were also relatively granular additions to our portfolio, with only seven exceeding $5 million, the largest being $10.3 million. Residential real estate and consumer loan originations resulted in growth in the third quarter of $16.9 million and $9.9 million, respectively. We attribute this slower organic growth to the sluggish economy.

We pride ourselves in being able to retain acquired loan customers and turn them into long-term relationships. Our organic growth should continue to exceed the pure growth percentage. We will continue to acquire new loan customers through bank acquisitions while the market still supports these purchase activities.

All of our banks completed their annual examinations from the FDIC and/or their respective state examination teams during the past quarter. These examinations went well, with no significant changes noted in classified credits, or other significant weaknesses or recommendations noted.

With that, I will turn the call back to you, Lynn, and remain available for questions.

Thanks, Ken. We will now open the phone lines for your questions.

(Operator Instructions)

Jeff Rulis from D.A. Davidson.

Thanks, good afternoon.

Hello.

I had a question, Bryan, on the expense guidance that you gave. Now the sequential flat guidance -- again, that is on a core basis?

Yes. There are some moving parts from acquisitions that are tough to go quarter over quarter, and we do have tax credits that we purchased throughout the year, and that can fluctuate. But I think the rest, with the two new acquisitions coming in, getting some cost saves as we do conversions, we do have Premier Valley coming in. So there's a lot of moving parts. I think at the end of the day, most of that is going to net itself down to pretty close to flat.

Okay. And then on the CIC deal, you mentioned 25% cost saves off of that noninterest expense base. What is that figure roughly?

I don't have the raw dollars in front of me, in terms of what their expense run rate is. But yes, that's what we model, and have looked in due diligence, and we believe we can get. So (multiple speakers).

The 25% -- how about just that number? Do have a figure for what that actual dollar amount is, the 25?

Again, I don't have all that information with me. I can get that for you afterwards. I just don't have it right here, sorry.

And maybe one for Ken, on seeing the increase in NPAs from the deals this quarter. Is that anticipated as well for Premier and CIC in the incoming quarters, to bring over a balance?

Premier will increase in the fourth quarter. What we've got forecasted out now is, we may increase in total by a couple of million, depending upon the results for the balance of this quarter. But again, it was anticipated; the allowance that we allocated for these, though, was taken into account in the acquisition price. And now we will just have our special assets team work with those banks and those credits to resolve those.

And any assumption on the CIC or NPAs?

There will be some that will pick up, that's still out several months. We may have some of those or they may have some of those resolved by the time they [can extend] to the bank. But naturally, every portfolio has nonperformers in it.

Sure. Okay, and then one last one, a maintenance. The ex-PLF -- again, if you could update us on the intent with that payoff or not? The PLF payoff [which] --

Yes, that is planned to be paid off March of 2016, And we have the cash available to do that. That was always the plan.

Great, I will step back. Thank you.

I've got for you the anticipated cost saves on CIC. And again, we are looking at 75% of the cost saves to occur in 2016, And that's approximately $3 million. And then on into 2017, the balance of it, which would be -- total cost saves on that transaction would be just short of $5.5 million. So another $2.5 million in 2017. We would expect to have all of our cost saves out by the end of 2017.

Okay, thank you.

Damon DelMonte from KBW.

Hey, guys, good afternoon, how you doing?

Good.

Great. Just to quickly circle back on the expenses. The core expenses this quarter, I think, Bryan, you had said there was $700,000 of nonrecurring expenses this quarter. Is that correct?

Correct.

Okay. And could you just quickly go over where those were spread out over the different categories?

I know it's about $200,000, I think, was sitting in salary and related. I think there was another about $200,000 or so that went through professional. And the rest would have gone through other expenses.

Okay, great. And then with these nonperforming loans that will be coming over, how does that impact, if at all, the provision expense going forward?

Those would sit it in the purchase accounting pools as they come forward, when a credit decision is made on those loans. And as I mentioned, we've got about $500 million sitting in the purchase accounting pool. Over the next couple of years, as those loans go through a credit decision, then they move from the purchase accounting pool into the regular loan pool, and an allowance is established at that point in time.

Okay, that is helpful, thanks. And then one final question here. Could you guys talk a little bit more about the mortgage strategy? I think you said you're closing down some loan production offices and you are trying to sell the product or initiate -- originated loans through branches. Is that correct?

Yes, we had -- when we started to ramp up mortgage a number of years ago, outside of our bank branch network, we had loan production offices in Seattle, Washington; Portland, Oregon; Las Vegas, Nevada and some of the larger metro areas that have enough population churn that we could generate our desired mix of purchased versus refi business. And we like to run between 70% and 80% purchase activity, but in smaller markets, you just don't have enough population churn. Now with the banks that we have acquired in the last couple of years, we are in sufficient number of metro areas with branches that we can bring the mortgage operation back into our bank branches.

The reason that is important to us is that we can make money in three ways out of doing mortgage origination in our bank branches. We can make money on the origination. We can make money on the servicing. And we can create a customer for life, if we can get five to six products per household into them -- or products or services per household. [Not] products -- it would be services per household. So it's really hard for us to do that when we're outside of our bank branch footprint. But the cross-sell is much easier when we are in our branches. So that's why we have moved back into our branch network and out of those loans production offices that are outside of our footprint.

Okay, so you have closed all of those nontraditional banking markets that you were doing the OPOs in.

Yes, there are just are just a few left still, but the majority of those have been closed. And that is why we had some of that one-time expense flowing through.

Got you. Okay, I will hop out, thank you.

Yes.

(Operator Instructions)

Jon Arfstrom from RBC Capital Markets.

Thanks, good afternoon, guys.

Hi, Jon.

A question for you, Lynn, just on the acquisition environment. Fresno and Denver are different probably then Sheboygan, in terms of appeal to other buyers. Just curious -- and nothing against Sheboygan -- but just curious to get your take on the competitive environment, particularly in some of the newer markets you are buying in?

Well, Denver -- obviously you have seen acquisitions out there that are pretty lofty, as far as the multiples. I think we were able to get in at a price we could make sense out of. It has to hit our criteria for financial metrics. One, it's got to be accretive to our current shareholders' earnings per share. And we like to have a minimum 15% internal rate of return on the transaction, and that is with conservative estimates for growth in NIM -- and cost take-outs, for that matter.

So I feel pretty good about what we've been able to do from a pricing standpoint. I mean, clearly we've got to be within a reasonable range for what the market says a multiple on earnings and a multiple on book would have to be. But we have an awful lot of opportunities, and I guarantee you, we turn down a lot of them before we ever get through full modeling. And in some cases we get outbid; in other cases, we can't hit our multiples for EPS growth and internal rates of return. So like I tell our commercial bakers, I said having a deep pipeline is the best way to be really picky about the deals you are going to do. So I feel pretty good about it. What I do find very typical is banks under $1 billion are the ones that are really questioning most whether they are survivors in this industry. You get above $1 billion, a lot of the banks I talk to in that $1 billion to $3 billion range, I think, they more often feel that they can make it on their own.

Okay, good, that is helpful. And then just time to digest the recent acquisitions. You commented a little bit on them, but do you feel like you are ready to go again, or do you need a quarter or two to digest some of these?

Well, we are pretty well lined up, as we talked about, for conversion of systems. And I think, depending on size, we've said in the past that we think we can do anywhere from two to three a year. The deals that are coming up -- well, when we can do an in-market deal, it is easier for us. Fresno will be more of a challenge just logistically, getting to California, and the fact that it is a separate charter.

It is more work. But where we can fold them into our existing footprint. Those are easier to do. But we are lined up pretty much. We are lined up through second quarter of next year. So anything that we would be announcing between now and the end of the first quarter of next year is going to have to go to the second half of the year.

Okay, good. And then Ken, maybe give us an update on the ag portfolio and maybe early returns, in terms of what you've seen from the harvest, and then what you're seeing from land prices, cash rents, things like that?

Yes, the comment I made, I think, the quarter before last that I said would poll all of our ag bankers, and they did not feel too bad about what the portfolio was going to be for this year. The cash grain is probably the one that will come the closest to breakeven. The other sectors in beef production, hog production, dairy, prices are pretty good in those segments. I have heard some early-yield information and this will be spotty across the Midwest, too, based upon rains and stuff. But the one farmer I have spoken to said that they had the best yields by far that they've ever had. So I would think that the prices that are out there for the commodities and corn soybeans should yield profitable years, but it will certainly not be robust years for them.

As far as land prices, you look in the crystal ball, I think that we will see land prices come down. That usually lags a couple of years from commodity prices that will start to pull down cash rent. And then that will bring down land values. We have never been a lender on ag real estate to loan against appraised values. We've got a formula we look at to see what the production value of that is, and then we typically loan roughly 60% or two-thirds of that. So I don't feel we are at risk with land values going down and putting any stress on our portfolios. Does that answer your question?

It does. Thanks, guys, appreciate it.

Yes.

(Operator Instructions)

It appears there are no further questions at this time. Would you like to make any closing remarks?

Sure, I can do that, Matt. In conclusion, we are very pleased with Heartland's excellent third-quarter performance. And just to recap a little bit, earnings are strong, with year-to-date earnings per share of $2.16, representing an increase of 39% over last year. With loan and deposit growth, we were able to hold our margin and actually increase it to 4.01%. We had double-digit return on average common and average common tangible equity that were in line with where we would like to be. And we remain focused on a variety of initiatives that will drive efficiencies throughout the Company, revenue growth and continued earnings improvement.

And finally, our pipeline of acquisition opportunities remains strong. Through both organic and acquired growth, we are moving closer to our goal of $1 billion of assets in each of the states where we operate. So in short, I feel very good about Heartland's performance, and continue to see excellent opportunities ahead for us. I would like to thank everyone for joining us today. And hope you can join us again for our next quarterly conference call, which will take place on Monday, January 25, 2016. Thanks again, and have a good evening, everyone.

This concludes today's teleconference. Thank you for your participation, and you may disconnect your lines at this time.