| FOR FURTHER INFORMATION: | RE: Heartland Financial USA, Inc. |
| | |
| AT THE COMPANY: | AT FINANCIAL RELATIONS BOARD: |
| John K. Schmidt | Jeff Wilhoit | Rose Tucker |
| Chief Financial Officer | General Inquiries | Analysts/Investors |
| (563) 589-1994 | (312) 640-6757 | (310) 407-6522 |
| jschmidt@ dubuquebank.com | jwilhoit@ financialrelationsboard.com | rtucker@ financialrelationsboard.com |
FOR IMMEDIATE RELEASE
MONDAY, APRIL 26, 2004
HEARTLAND FINANCIAL USA, INC. REPORTS FIRST QUARTER EARNINGS
Dubuque, Iowa, April 26, 2004—Heartland Financial USA, Inc. (Nasdaq NMS: HTLF) today reported results for the first quarter of 2004.
First Quarter 2004 Highlights
Net income up by 12% over first-quarter 2003
Average earning assets increased 12% over first-quarter 2003
Loans up $37 million or 3% since year-end 2003
Net interest income increased 7% over first-quarter 2003
Agreement to acquire Rocky Mountain Bancorporation signed
Agreement to acquire personal trust division of Colonial Trust Company signed
Second Arizona Bank & Trust location in Chandler, Arizona neared completion
| | | First Quarter |
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| | | 2004 | | 2003 | |
| | |
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| Net income (in millions) | | $ | 5.1 | | $ | 4.5 | |
| Diluted earnings per share | | | .33 | | | .30 | |
| | | | | | |
| Return on average assets | | | 1.02 | % | | 1.04 | % |
| Return on average equity | | | 14.26 | | | 14.56 | |
| Net interest margin | | | 3.93 | | | 4.16 | |
“All of our first quarter activities underscore our dedication to pursuing compelling growth opportunities wherever they may be, while remaining true to our core community banking focus and dedication to customer service.”-- Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA |
Dubuque, Iowa, April 26, 2004—Heartland Financial USA, Inc. (Nasdaq NMS: HTLF) today reported net income of $5.1 million, or $0.33 per diluted share, for the first quarter ended March 31, 2004. This is an increase of $542 thousand or 12 percent over the net income of $4.5 million, or $0.30 per diluted share, recorded during the first quarter of 2003. Return on average equity was 14.26 percent and return on average assets was 1.02 percent for the first quarter of 2004 compared to 14.56 percent and 1.04 percent, respectively, for the same quarter in 2003.
“During the first quarter, we invested in new market areas and strengthened our presence in existing market areas through acquisitions and de novo openings,” said Lynn B. Fuller, chairman, president and chief executive officer. “Arizona Bank & Trust, our second entry into the fast-growing Southwest, neared completion on its second location in the Phoenix area. Taken together with our proposed acquisition of the Wealth Management Group of Colonial Trust Company, we have taken significant steps to achieve critical mass in an important new market.
“We took a similarly decisive step in entering the Rocky Mountain region through our proposed acquisition of Rocky Mountain Bancorporation headquartered in Billings, Montana. As that transaction nears approval, we are even more excited by the opportunities to build a strong presence in a stable and demographically emerging market. All of our first quarter activities underscore our dedication to pursuing compelling growth opportunities wherever they may be, while remaining true to our core community banking focus and dedication to customer service.”
Fuller also noted the Company’s progress on other operational initiatives, including the fourth quarter completion oftechnology upgrades designed to maximize information flow and reduce processing costs. Fuller also expects to begin staffing its nearly completed operations center in the middle of the second quarter. That facility will further centralize and streamline key back office functions, resulting in additional cost savings and efficiencies.
“Given the type of growth profile we are pursuing, these operational improvements are important in building a solid platform,” continued Fuller. “Our investments also extend to attracting and investing in the right human assets as well, including Ron Larson’s first quarter appointment to Heartland’s board, as well as John Schmidt’s early second quarter appointment to chief operating officer of the Company in addition to his role as CFO. Ron’s experience and knowledge of the Southwestern market has already proven invaluable, and John will become an even greater asset to Heartland in his new role.”
Net interest income totaled $17.4 million during the first quarter of 2004, an increase of $1.1 million or 7 percent from the $16.3 million recorded during the first quarter of 2003. Contributing to this increase was the 12 percent growth in average earning assets and a reduction in the balances retained in federal funds and other short-term investments. Interest income in the first quarter of 2004 totaled $27.0 million compared to $25.8 million in the first quarter of 2003. Interest expense for the first quarter of 2004 was $9.6 million compared to $9.5 million in the first quarter of 2003. A large portion of the growth in interest expense is a result of the issuance of $20.0 million of 8.25% cumulative trust preferred securities on October 20, 2003. Net interest margin, expressed as a percentage of average earning assets, was 3.93 percent during the first quarter of 2004 compared to 4.16 percent for the same period in 2003 and 3.60 percent for the fourth quarter of 2003.
Noninterest income totaled $9.7 million during the first quarter of 2004, an increase of 15 percent from the noninterest income of $8.5 million recorded during the first quarter of 2003. This increase was primarily a result of additional securities gains of $860 thousand and growth in service charges and fees of $820 thousand. Securities gains of $542 thousand resulted from partial liquidation of the equity securities portfolio. Heartland’s mortgage loan servicing portfolio grew from $428.1 million at March 31, 2003, to $540.2 million at March 31, 2004. The significant growth in these two noninterest income categories was partially offset by a $1.0 million reduction in gains on sales of loans, as refinancing activity on residential mortgage loans slowed during the first quarter of 2004.
For the first quarter of 2004, noninterest expense increased 12 percent to $18.0 million, reflecting increased costs related to the opening of Heartland’s newest bank, Arizona Bank & Trust, in Mesa, Arizona. Also contributing to this increase was Wisconsin Community Bank’s opening of an additional branch in Madison, Wisconsin and the formation of HTLF Capital Corp., the Company’s investment banking subsidiary, during the summer of 2003. Total full-time equivalent employees increased from 626 at quarter-end 2003 to 676 at quarter-end 2004.
For the first quarter of 2004, Heartland’s effective tax rate was 29.56% compared to 34.18% during the first quarter of 2003. During the 2004, Dubuque Bank and Trust, Heartland’s flagship bank, acquired a 99.9% ownership in a limited liability company that owns a certified historic structure for which historic rehabilitation tax credits apply to the 2004 tax year. Also affecting the tax effective rate was an increase in the amount of tax-exempt interest income recorded during the first quarter of 2004.
Total assets exceeded $2.05 billion at March 31, 2004, up $35 million since year-end 2003. Total loans and leases were $1.39 billion at March 31, 2004, an increase of $37 million since year-end 2003. A majority of this growth occurred at Wisconsin Community Bank, primarily as a result of their participation in both the USDA and SBA loan guaranty programs. Management is optimistic that loan demand will continue throughout the remaining quarters of 2004. Total deposits at March 31, 2004, were $1.47 billion, a decrease of $19 million since year-end 2003. A decline in demand deposit balances was, in large part, due to normal seasonal fluctuations that many banks experience during the first quarter of the year.
The allowance for loan and lease losses at March 31, 2004, was 1.38 percent of loans and 356 percent of nonperforming loans, compared to 1.37 percent of loans and 333 percent of nonperforming loans at December 31, 2003. Nonperforming loans declined to $5.4 million or .39 percent of total loans and leases compared to $5.6 million or .41 percent of total loans and leases at December 31, 2003. Total charge-offs during the first quarter of 2004 totaled $1.1 million, of which $642 thousand was related to one credit in the Albuquerque market. The provision for loan losses during the first quarter of 2004 was $1.4 million compared to $1.3 million in the same period one year ago, an increase that resulted primarily from the loan growth experienced.
Looking ahead, Fuller is optimistic. “Our focus for the balance of 2004 is to continue unlocking the value of our new and existing assets as we seek to extend our community focused banking mandate. We have proven to be adept operators in this niche, and that knowledge affords us a level of confidence as we seek out new pockets of growth, both on a geographical and core business competency basis.”
About Heartland Financial USA:
Heartland is a $2.0 billion financial services company with seven banks in Iowa, Illinois, Wisconsin, New Mexico and Arizona:
Dubuque Bank and Trust Company, with eight offices in Dubuque, Epworth, Farley and Holy Cross, Iowa
Galena State Bank and Trust Company, with three offices in Galena and Stockton, Illinois
First Community Bank, with three offices in Keokuk, Iowa and Carthage, Illinois
Riverside Community Bank, with three offices in Rockford, Illinois
Wisconsin Community Bank, with seven offices in Cottage Grove, Fitchburg, Green Bay, Middleton, Monroe and Sheboygan, Wisconsin and Minneapolis, Minnesota
New Mexico Bank & Trust, with twelve offices in Albuquerque, Clovis, Melrose, Portales and Santa Fe, New Mexico
Arizona Bank & Trust, with one office in Mesa, Arizona and a second office scheduled to open in May 2004 in Chandler, Arizona
Other subsidiaries include:
ULTEA, Inc., a fleet management company with offices in Madison and Milwaukee, Wisconsin; Chicago, Illinois and Minnetonka, Minnesota
Citizens Finance Co., a consumer finance company with offices in Madison and Appleton, Wisconsin; Dubuque, Iowa; and Rockford, Illinois
HTLF Capital Corp., an investment banking firm with offices in Denver, Colorado and Blue Springs, Missouri
Heartland’s shares are traded on The Nasdaq Stock Market under the symbol HTLF.
Additional information about Heartland is available through our website atwww.htlf.com.
The Company has filed with the Securities and Exchange Commission a registration statement on Form S-4 and other relevant documents concerning the proposed merger with Rocky Mountain Bancorporation, Inc.THE COMPANY URGES ROCKY MOUNTAIN BANCORPORATION SHAREHOLDERS TO READ THESE MATERIALS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION. These documents are available free of charge at the SEC’s website,www.sec.gov and from the Company at its website or by requesting copies from the Corporate Secretary at 1398 Central Avenue, Dubuque, Iowa 52004-0778, telephone 563-589-2108.ROCKY MOUNTAIN BANCORPORATION SHAREHOLDERS SHOULD READ THAT INFORMATION CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER.
This release may contain, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as believe, expect, anticipate, plan, intend, estimate, may, will, would, could, should or similar expressions. Additionally, all statements in this release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new inf ormation or future events.
A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (i) the strength of the local and national economy; (ii) the economic impact of past and any future terrorist threats and attacks and any acts of war or threats thereof, (iii) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business; (iv) changes in interest rates and prepayment rates of the Company’s assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of acquisitions; (x) unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.
-FINANCIAL TABLES FOLLOW-
| HEARTLAND FINANCIAL USA, INC. |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
| | | As of and For the |
| | | Quarter Ended |
| | | March 31, |
| | | 2004 | 2003 |
|
Income Statement Data | | | | | | | |
Interest income (tax equivalent adjusted)(1) | | $ | 27,025 | | $ | 25,805 | |
| Interest expense | | | 9,600 | | | 9,532 | |
| | |
| |
| |
| Net interest income | | | 17,425 | | | 16,273 | |
| Provision for loan & lease losses | | | 1,356 | | | 1,304 | |
| Noninterest income | | | 9,721 | | | 8,475 | |
| Noninterest expense | | | 18,016 | | | 16,057 | |
| Income tax expense | | | 2,126 | | | 2,349 | |
Tax equivalent adjustment(1) | | | 582 | | | 514 | |
| | |
| |
| |
Net income | | $ | 5,066 | | $ | 4,524 | |
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Per Common Share Data | | | | | | | |
| Earnings per common share-basic | | $ | 0.33 | | $ | 0.30 | |
| Earnings per common share-diluted | | | 0.33 | | | 0.30 | |
| Weighted average shares outstanding-basic | | | 15,167,212 | | | 14,836,913 | |
| Weighted average shares outstanding-diluted | | | 15,425,803 | | | 15,011,370 | |
| Common shares outstanding, net of treasury | | | 15,157,266 | | | 14,891,632 | |
| | | | | | | | |
| (1) Tax equivalent basis is calculated using an effective tax rate of 34%. | |
| HEARTLAND FINANCIAL USA, INC. | | | |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) |
| DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA |
|
| | | For the Quarter |
| | | Ended |
| | | March 31, |
| | | 2004 | 2003 |
|
Average Balances | | | | | | | |
| Assets | | $ | 2,004,416 | | $ | 1,767,997 | |
| Loans and leases, net of unearned | | | 1,354,497 | | | 1,197,387 | |
| Deposits | | | 1,474,477 | | | 1,326,625 | |
| Interest bearing liabilities | | | 1,600,973 | | | 1,424,544 | |
| Earning assets | | | 1,782,054 | | | 1,585,117 | |
| Stockholders' equity | | | 142,897 | | | 126,041 | |
| | | | | | | | |
Earnings Performance Ratios | | | | | | | |
| Return on average assets | | | 1.02 | % | | 1.04 | % |
| Return on average equity | | | 14.26 | | | 14.56 | |
| Net interest margin | | | 3.93 | | | 4.16 | |
Net interest margin, excluding fleet leasing company debt | | | 3.99 | | | 4.23 | |
Efficiency ratio(1) | | | 70.36 | | | 66.72 | |
Efficiency ratio, banks only(1) | | | 61.93 | | | 56.63 | |
| | | | | | | | |
Noninterest Income | | | | | | | |
| Service charges and fees | | $ | 2,127 | | $ | 1,307 | |
| Trust fees | | | 1,020 | | | 952 | |
| Brokerage commissions | | | 278 | | | 147 | |
| Insurance commissions | | | 224 | | | 250 | |
| Securities gains, net | | | 1,540 | | | 680 | |
| Gain (loss) on trading account securities | | | 85 | | | (28 | ) |
| Rental income on operating leases | | | 3,462 | | | 3,418 | |
| Gain on sale of loans | | | 527 | | | 1,532 | |
| Valuation adjustment on mortgage servicingrights | | | (73 | ) | | (298 | ) |
| Impairment loss on equity securities | | | - | | | (148 | ) |
| Other noninterest income | | | 531 | | | 663 | |
| | |
| |
| |
Total noninterest income | | $ | 9,721 | | $ | 8,475 | |
| | |
| |
| |
Noninterest Expense | | | | | | | |
| Salaries and employee benefits | | $ | 8,821 | | $ | 7,760 | |
| Occupancy | | | 1,063 | | | 917 | |
| Furniture and equipment | | | 1,127 | | | 875 | |
| Depreciation on equipment under operating leases | | | 2,861 | | | 2,787 | |
| Outside services | | | 1,501 | | | 1,110 | |
| FDIC deposit insurance assessment | | | 51 | | | 53 | |
| Advertising | | | 539 | | | 473 | |
| Core deposit intangibles amortization | | | 88 | | | 101 | |
| Other noninterest expenses | | | 1,965 | | | 1,981 | |
| | |
| |
| |
Total noninterest expense | | $ | 18,016 | | $ | 16,057 | |
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(1) Noninterest expense divided by the sum of net interest income and noninterest income less security gains.
