Heartland Financial strikes deals to unload Montana branches

Gary Hider/Gary L Hider - stock.adobe.com

Heartland Financial USA in Denver, which does business as HTLF, says it will sell its nine branches in Montana as part of a plan to exit the state and focus more on other markets and digital banking.

Glacier Bancorp in Kalispell, Montana, and Stockman Bank of Montana in Miles City have agreed to buy the branches, the $19.4 billion-asset banking Heartland said in a press release late Tuesday.

HTLF said six branches — two in Billings and one each in Bozeman, Plentywood, Stevensville and Whitehall — would be sold to Glacier. Three more — one each in Bigfork, Kalispell and Plains — would be purchased by Stockman.

The transactions, expected to close late in the third quarter or early in the fourth, include about $594 million of deposits and $363 million of loans. Financial terms were not disclosed in the release.

The deals are part of a previously announced effort to "improve capital and increase the efficiency of HTLF's footprint" as well as "better serve customers and drive efficiency, enhance revenue growth, deliver higher return on assets and more efficient use of capital," the release said.

The company "intends to strategically reinvest sales proceeds in talent, technology and other existing markets where it has the greatest growth potential," the release said.

An HTLF executive was not immediately available for an interview on Wednesday.

HTLF still would operate in 11 states in the Midwest and Southwest after the sales. But the company would exit the Mountain West region, according to Stephens Inc. analyst Terry McEvoy.

He called the deals "unsurprising" given HTLF's efficiency plan and the fact that Montana stood apart from the rest of the bank's footprint. It is not "connected to a state with another HTLF bank. And it's relatively small (4% of HTLF's deposits), providing less scale," McEvoy said in a report.

HTLF, which faced pressure from an investor group led by its former CEO to sell in 2022, instead consolidated multiple bank charters into a single entity, HTLF Bank, over the course of the past two years. The bank said it would follow that with more moves to lower costs.

In the fourth quarter, the company swung to a loss of $72.4 million, or $1.69 per share, from year-earlier net income of $58.6 million, or $1.37.

The loss, reported last month, "was expected" because of costs tied to the company's restructuring, D.A. Davidson analyst Jeff Rulis said. However, HTLF also reported a jump in nonperforming assets. NPAs as percentage of overall assets rose 24 basis points in the fourth quarter to 0.57%.

"A large, Midwest manufacturing credit exhibiting cash flow challenges was the main driver," Rulis said.