Lynn B. Fuller - Chairman and CEO Bryan McKeag - CFO Kenneth J. Erickson - EVP, Chief Credit Officer.

Jeffrey Rulis - D.A. Davidson & Co. Damon DelMonte - Keefe Bruyette & Woods Inc. Jon Arfstrom - RBC Capital Markets.

Greetings, and welcome to the Heartland Financial USA Inc. Third Quarter 2015 Conference Call. This afternoon, Heartland distributed its third quarter press release and hopefully you 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 Web site 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 Web site or the SEC's Web site. At this time, all participants are in a listen-only mode. [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’ll 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. 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 stockholders 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.

So I’d like to point out that our stock is trading at just over 13x our trailing 12-month earnings of $2.81 per share and that 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 a 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, the 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’ve 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.

While 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’re seeing a favorable purchase to refi ratio approximating 70 to 30 towards the purchased business.

With regard to mortgage 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 valuation. 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 and efficiency projects and FTE reductions.

As a result, our efficiency ratio trend is showing improvement and remains below 70%. We continue to invest technology and talent building out scalable systems and processes preparing Heartland for 10 billion in asset size and beyond. In a moment, Bryan McKeag will address noninterest expenses in more detail.

Now, for an update on M&A activities and 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, N.A., 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 planned 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’re 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. So in concluding my comments today, I’m 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’ll 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 topics.

Bryan?.

Thanks, Lynn, and good afternoon. I’ll 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’ll 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 remains unchanged during the quarter. The investment portfolio ended at 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 four basis points this quarter to 4.01% as interest costs on deposits and borrowings declined three basis points and investment yields rose two basis points. These were partially offset by a six 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 reflect the return to more normal seasonal activity from the higher refi markets we’ve experienced the last couple of quarters. The service loan portfolio continued to grow adding $178 million this quarter, ending the quarter at 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 nonrecurring 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 of 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 saves from our acquisitions but also have the volatility that comes as we book the initial cost 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 have 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 is average 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 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 increase 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. 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 loan. Three of these loans totaling 5.3 million came with the acquisitions closed this quarter. 12.2 million or 36.63% of our nonperforming loan are in our bank’s 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 nonaccrual status.

This quarter, there were a total of 1.2 million that was passed 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 acquisitions. 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 purchased accounting adjustments for the acquisition of the Bank in Sheboygan and the closeout of the purchased accounting of the Freedom Bank and Morrill & Janes Bank acquisitions.

459.7 million of loans from our acquisitions still resides in a purchased 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 of 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 purchased accounting pools and have an allowance established on them.

The allowance for loan and lease losses as a percent of loans and leases decrease from 1.03% to 1.01% this quarter. Valuation reserves totaled 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 portfolio, 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 expansions.

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 rate. 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 lower 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 peer growth percentage. We will continue to acquire new loan customers through bank acquisitions while the market still supports these purchased activities.

All of our banks completed our annual examinations from the FDIC and/or their respected state examination team 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’ll now open the phone lines for your questions..

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Jeff Rulis from D.A. Davidson. Please proceed with your question..

Thanks. Good afternoon..

Hello..

I have a question, Bryan, on the expense guidance that you gave now.

The sequential flat guidance, again, that’s a core basis?.

Yes. I mean there are some moving parts from acquisitions that are kind of tough to go quarter-over-quarter and we do have tax credits that we purchase 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 convergence, 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 that we believe we can get..

The 25%, how about yet that number.

Do you have a figure for what the 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..

Sure.

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 upcoming quarters to bring over a balance?.

Yes, Premier will increase in the fourth quarter but our forecast as of now is we may increase in total by a couple of million depending on the results for the balance of this quarter. But again, it was anticipated.

The allowance that we allocated for these was taken into account in the acquisition price and now we’ll just have our special asset team work at those things and those credits to resolve both..

And any assumption on the CIC for NPAs?.

There will be some that we’ll 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 it’s fixed into the bank. But naturally every portfolio has some nonperformers in it..

Sure. Okay. And then maybe one last one just kind of a maintenance.

Just the SBLF, again if you could just update us on the intent with that payoff or not?.

Yes. That is planned to be paid off March of '16 and we have the cash available to do that. That was always the plan..

Great. I’ll step back. Thank you..

I’ve got for you the anticipated cost saves on CIC and again, we’re looking at 75% of the cost saves to occur in 2016 and that’s approximately $3 million. And then on into '17, 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 in '17..

We would expect to have all of our cost saves out by the end of '17..

Okay. Thank you..

Our next question comes from the line of Damon DelMonte from KBW. Please proceed with your question..

Hi, guys. Good afternoon.

How are you doing?.

Good.

How are you, Damon?.

Great. Just to quickly circle back on the expenses, so the core expenses this quarter I think Bryan you had said there were $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?.

Yes, I know 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 would be coming over, how does that impact, if at all, the provision expense going forward?.

Those would sit in the purchased accounting pool as they come forward. When a credit decision is made on those loans and as I said mentioned, they got about 500 million sitting in the purchased accounting pool over the next couple of years.

As those loans go through a credit decision, then they move from the purchased accounting pool into the regular loan pool and allowances is established as that point in time..

Okay, that’s helpful. Thanks. And just 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’re trying to sell the product or originate loans through branches.

Is that correct?.

Yes, 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 purchase versus refi business.

And we’d like to run between 70% and 80% purchased activity but in smaller markets you just don’t have enough population churn. Well, now with the banks that we’ve acquired in the last couple of years, we are in a sufficient number of metro areas with branches that we can bring the mortgage operation back into our bank branches.

The reason that’s 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, products or services per household – products that 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’re in our branches. So that’s why we moved back into our branch network and out of those loan production offices that are outside of our footprint..

Okay.

So you’ve closed all those, like nontraditional banking markets that you were doing IPOs in?.

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

Got you. Okay, I’ll hop out. Thank you..

Yup..

[Operator Instructions]..

Matt, are you still there?.

I’m sorry. The next question comes from the line of Jon Arfstrom from RBC Capital Markets. Please proceed with your question..

Thanks. Good afternoon, guys..

Hi, Jon..

A question for you, Lynn, just on the acquisition environment. Fresno and Denver are different probably than Sheboygan in terms of appeal to other buyers.

Just curious – and nothing again Sheboygan, but just curious to get your take in the competitive environment particularly in some of the newer markets you’re buying in?.

Well, Denver, obviously you’ve seen acquisitions out there that are pretty lofty as far as the multiples, but I think we’re able to get in that 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’s with conservative estimates for growth in NIM and cost takeouts 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 turned down a lot of them before we ever get through full modeling.

And in some cases, we get outbid and in other cases, we can’t hit our multiples for EPS growth and internal rates of return. So, like I tell our commercial bankers, I said having a deep pipeline is the best way to be really picky about the deals you’re going to do. 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 could make it on their own..

Okay, that’s helpful.

And then just time to digest the recent acquisitions, I mean you commented a little bit on them but do you feel like you’re ready to go again or do you need a quarter or two to potentially have some of these?.

Well, we’re pretty well lined up as 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 – when we do an in-market deal, it’s easier for us. Fresno will be more of a challenge.

Logistically getting to California and the fact that’s a separate charter, it’s more work. But we can fold them into our existing footprint, those are easier to do.

We’re lined up through second quarter of next year, so anything that we would be announcing between now and through the end of first quarter next year is going to have to go to the second half of the year..

Okay.

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 a quarter before last that I’d kind of pull 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 we’ll come closest to breakeven. The other sectors in beef production, hog production vary.

Prices are pretty good in those segments. I’ve 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 have the best yield by far that they’ve ever had.

So I would think that the prices that are out there for the [indiscernible] corn and soybeans should yield profitable years, but it will certainly not be robust years for them. As far as land prices, looking in a 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 portfolio.

Does that answer your question?.

It does. Thanks, guys. I appreciate it..

Yup.

[Operator Instructions]. Management, it appears there’s 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 intangible equity that were in line with where we’d like to be.

And we remain focused on a variety of initiatives that will drive efficiency throughout the company, revenue growth and continued earnings improvement. Finally, our pipeline of acquisition opportunities remains strong.

Through both organic and acquired growth, we’re 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’d 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. So 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..