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Heartland Financial USA Inc. (HTLF - Snapshot Report) has beaten the Zacks Consensus Estimate in the past two quarters, and is set to report its third-quarter results shortly. Earnings momentum for this Zacks #2 Rank (Buy) regional bank has been advancing since its robust second quarter results in July, which included a positive surprise of more than 67%. Moreover, the company has a P/B ratio of just 1.6, making it an attractive value pick.

Earnings Recap

Heartland Financial is expected to release its third quarter earnings on October 29. The Zacks Consensus Estimate is at 65 cents per share based on the revenue expectation of $63.0 million.

On July 30, Heartland Financial reported second quarter earnings of 77 cents per share, surpassing the Zacks Consensus Estimate by 67.4% and last year’s earnings by 42.6%. An improved top-line growth was partially offset by higher operating expenses.

Net interest income was $37.2 million, up 1.6% from the year-ago quarter on the back of lower total interest expense. Non-interest income surged 92.8% to $28.3 million. Yet, non-interest expense escalated 28.2% to $41.5 million as a result of rising salaries and employee benefits costs.

Asset quality continued to show an improvement at Heartland Financial during the second quarter. As of June 30, 2012, the ratio of nonperforming assets to total assets was 1.87%, down 80 basis point year over year. Furthermore, net charge-offs on loans was $923,000 compared with $6.5 million in the prior-year quarter.

Earnings Momentum Advances

Over the last 90 days, the Zacks Consensus Estimate for 2012 jumped 35.5% to $2.75 per share, implying year-over-year growth of 123.7%. For 2013, the Zacks Consensus Estimate surged 26.5% to $2.34 over the same time frame.

Reasonable Valuation

Along with a low P/B ratio, Heartland Financial has a forward P/E multiple as low as 10.1 (a P/E ratio under 15.0 and a P/B ratio below 3.0 generally indicate value). The company has a trailing 12-month ROE of 14.1%, compared with the peer group average of 8.7%.

Headquartered in Dubuque, Iowa, Heartland Financial provides various banking products and services. The company focuses primarily on clients in the Midwestern, Southwestern and Western United States, to whom it delivers high-quality financial products and services. The company was founded in 1981 and conducts business through 64 full-service banking locations. With a market capital of roughly $456.0 million, Heartland Financial competes with First State Bancorporation (FSNM) and Old Second Bancorp, Inc. (OSBC), among others.

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