| AT THE COMPANY: | AT FINANCIAL RELATIONS BOARD: |
| John K. Schmidt | Jeff Wilhoit | |
| Chief Operating Officer | General Inquiries | |
| Chief Financial Officer | (312) 640-6757 | |
| (563) 589-1994 | | |
| jschmidt@ dubuquebank.com | | |
FOR IMMEDIATE RELEASE
MONDAY, JULY 26, 2004
HEARTLAND FINANCIAL USA, INC. REPORTS SECOND QUARTER EARNINGS
Dubuque, Iowa, July 26, 2004—Heartland Financial USA, Inc. (Nasdaq NMS: HTLF) today reported results for the second quarter of 2004.
Second Quarter 2004 Highlights
Net income up by 9% over second-quarter 2003
Average earning assets increased 18% over second-quarter 2003
Net interest income increased 14% over second-quarter 2003
Acquisition of Rocky Mountain Bancorporation completed on June 1, 2004
Exclusive of the acquisition, loans up $99 million or 7% since year-end 2003
Second branch of Arizona Bank & Trust opens in Chandler, Arizona
| | | | Second Quarter | | | | First Six Months | |
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| | | | 2004 | | | | 2003 | | | | 2004 | | | | 2003 | |
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| Net income (in millions) | | $ | 4.6 | | | $ | 4.2 | | | $ | 9.6 | | | $ | 8.7 | |
| Diluted earnings per share | | | .29 | | | | .28 | | | | .62 | | | | .58 | |
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| Return on average assets | | | .84 | % | | | .92 | % | | | .92 | % | | | .98 | % |
| Return on average equity | | | 12.23 | | | | 13.15 | | | | 13.22 | | | | 13.84 | |
“Our solid growth in earning assets and deposits is clear indication that our customers continue to respond to our community bank focus while benefiting from the resources that our large and growing organization can provide. Early indications of favorable consumer response at Rocky Mountain Bank and our new Phoenix area locations are further validation of that strategy.”-- Lynn B. Fuller, chairman, president and chief executive officer, Heartland Financial USA |
Dubuque, Iowa, July 26, 2004—Heartland Financial USA, Inc. (Nasdaq NMS: HTLF) today reported net income of $4.6 million, or $0.29 per diluted share, for the second quarter ended June 30, 2004. This represents an increase of $368,000, or 9 percent, over net income of $4.2 million, or $0.28 per diluted share, during the second quarter of 2003. Return on average equity was 12.23 percent and return on average assets was 0.84 percent for the second quarter of 2004, compared to 13.15 percent and .92 percent, respectively, for the same quarter in 2003.
“In the second quarter, we were able to complete a number of our recent growth initiatives, including closing our Rocky Mountain Bank acquisition, bringing our second Arizona Bank & Trust location fully on line in Chandler, Arizona, and moving all of our operations resources into our new state-of-art operations center in Dubuque,” said Lynn B. Fuller, chairman, president and chief executive officer. “Our solid growth in earning assets and deposits is clear indication that our customers continue to respond to our community bank focus while benefiting from the resources that our large and growing organization can provide. Early indications of favorable consumer response at Rocky Mountain Bank and our new Phoenix area locations are further validation of that strategy.
“We continue to evaluate new opportunities to bring Heartland’s unique value proposition to new areas that we believe are underserved. The infrastructure we are putting in place, including the new operations center, will enable us to pursue these opportunities with more responsiveness, flexibility and confidence than ever before. The integration of Rocky Mountain Bank is well underway and our proposed acquisition of the Wealth Management Group of Colonial Trust Company is expected to close prior to the end of the third quarter.”
The acquisition of Rocky Mountain Bancorporation, the holding company for Rocky Mountain Bank, was completed effective June 1, 2004. The purchase price of $34.5 million consisted of $10.4 million in cash and the remainder in 1,387,227 shares of Heartland common stock. At May 31, 2004, Rocky Mountain Bank had total assets of $354.0 million, total loans of $278.1 million and total deposits of $285.7 million.
Net interest income totaled $17.9 million during the second quarter of 2004, an increase of $2.1 million or 14 percent from the $15.8 million recorded during the second quarter of 2003. Contributing to this increase was the 18 percent growth in average earning assets and a shift in balances invested in federal funds and other short-term investments to higher-yielding loans. Interest income in the second quarter of 2004 totaled $28.3 million compared to $25.4 million in the second quarter of 2003. Interest expense for the second quarter of 2004 was $10.4 million compared to $9.6 million in the second 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, and $25.0 million of variable-rate cumulative trust preferred securities on March 17, 2004. Net interest margin, expressed a s a percentage of average earning assets, was 3.70 percent during the second quarter of 2004 compared to 3.82 percent for the same period in 2003 and 3.93 percent for the first quarter of 2004. The reduction in this percentage in the second quarter of 2004 compared to the first quarter of 2004 resulted primarily from a decrease in the return on the mortgage-backed securities held in the securities portfolio.
Noninterest income totaled $9.6 million during the second quarter of 2004, an increase of 14 percent from the noninterest income of $8.4 million recorded during the second quarter of 2003. Service charges and fees, one of the three noninterest income categories that experienced a significant change during the quarter, increased $1.0 million or 70 percent, as Heartland’s mortgage loan servicing portfolio expanded from $464.0 million at June 30, 2003, to $554.0 million at June 30, 2004. The second category, valuation adjustment on mortgage servicing rights, experienced an $186,000 reversal of the valuation allowance during the second quarter of 2004 compared to a $694,000 increase in the valuation allowance during the same quarter of 2003. The growth in these two noninterest income categories was partially offset by an $844,000 reduction in gains on sales of loans, as refinancing activity on res idential mortgage loans was at historically high levels during 2003.
For the second quarter of 2004, noninterest expense increased 16 percent to $19.2 million, reflecting increased costs related to the August 2003 opening of Arizona Bank & Trust and its opening of a second branch in May 2004. Also contributing to the increased costs was the recently completed acquisition of Rocky Mountain Bank. Total full-time equivalent employees increased from 642 at quarter-end 2003 to 828 at quarter-end 2004. Of that increase, 130 are full-time equivalent employees at Rocky Mountain Bank.
For the first six months of 2004, Heartland’s effective tax rate was 30.46% compared to 32.81% during the first six months of 2003. The reduced effective rate is the result of historic rehabilitation tax credits of $400,000 available in 2004 and an increase in tax-exempt interest income.
Total assets exceeded $2.47 billion at June 30, 2004, up $458 million since year-end 2003. Total loans and leases were $1.73 billion at June 30, 2004, an increase of $383 million since year-end 2003. Exclusive of the Rocky Mountain Bank acquisition, Dubuque Bank and Trust Company, Wisconsin Community Bank and Arizona Bank & Trust were major contributors to the $99.2 million or 7 percent growth in loans, primarily in the commercial and commercial real estate category. Wisconsin Community Bank continues to record strong gains in structuring financing under the USDA and SBA loan guaranty programs. Total deposits at June 30, 2004, were $1.83 billion, an increase of $337 million since year-end 2003. Exclusive of the Rocky Mountain Bank acquisition, the $42.4 million or 3 percent growth in deposits came from Wisconsin Community Bank, Arizona Bank & Trust and Riverside Community Bank.
The allowance for loan and lease losses at June 30, 2004, was 1.38 percent of loans and 316 percent of nonperforming loans, compared to 1.37 percent of loans and 333 percent of nonperforming loans at December 31, 2003. Nonperforming loans increased to $7.6 million or 0.44 percent of total loans and leases compared to $5.6 million or 0.41 percent of total loans and leases at December 31, 2003. Exclusive of the $3.3 million in total nonperforming loans at Rocky Mountain Bank, total nonperforming loans decreased $1.3 million, due primarily to the charge off of one credit in the Albuquerque market during the first quarter of 2004. Charge-offs during the first half of 2004 totaled $1.7 million, of which $642,000 was related to the credit in the Albuquerque market.
“Each of our independently chartered banks possess particular strengths that contribute to the overall success of Heartland,” continued Fuller. “Our focus going forward is to continue identifying and investing in these market leaders in our ongoing quest to return maximum value to our shareholders.”
About Heartland Financial USA:
Heartland is a $2.5 billion financial services company with eight banks in Iowa, Illinois, Wisconsin, New Mexico, Arizona and Montana:
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 two offices in Mesa and Chandler, Arizona
Rocky Mountain Bank, with eight offices in Bigfork, Billings, Bozeman, Broadus, Plains, Plentywood, Stevensville and Whitehall, Montana
Other subsidiaries include:
ULTEA, Inc., a fleet management company with offices in Madison, Wisconsin and Chicago, Illinois
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.
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-
