Heartland Financial USA (HTLF) 8-K Other Events

 

Volume 12, Issue 4 Fourth Quarter 2004 INVESTMENT PROFILE is published quarterly to keep current and potentialHeartland stockholders informed of company activities and to provide an overview of the Company’s current financial performance.   Community Banking   Dubuque Bank & Trust Galena State Bank First Community Bank Riverside Community Bank Wisconsin Community Bank New Mexico Bank & Trust Arizona Bank & Trust Rocky Mountain Bank   Consumer Finance   Citizens Finance   Investment Banking   HTLF Capital Corp.   Vehicle Leasing and Fleet Management   ULTEA   Contact   John K. Schmidt (563) 589-1994 jschmidt@htlf.com Highlights ■Net income improved by 77% over fourth quarter2003.Diluted earnings per share was $.40 for fourth-quarter 2004 compared to $.24 a year earlier. ■ Net interest income increased 46% over fourth quarter 2003, primarily as a result of the 32% growth in average earning assets. Additionally, the early redemption of all $25.0 million of our 9.60% trust-preferred securities on September 30, 2004, contributed to this improvement. ■ Net interest margin as a percentage of average earning assets improved by 38 basis points over fourth-quarter 2003 and 18 basis points over third-quarter 2004. ■ Noninterest income increased 17% during the quarter as service charges and fees, trust fees and gains on sale of loans experienced improvement. ■ Rocky Mountain Bank was a major contributor to the 31% increase in service charges on deposit accounts. ■ The 55% improvement in trust fees resulted primarily from the additional fees generated by the accounts acquired from the Wealth Management Group of Colonial Trust Company in August. ■ Gains on sale of loans increased 82%, in large part due to the sale of guaranteed portions of a few loans structured under the USDA loan program by Heartland Business Bank. ■ Noninterest expense increased 25%, reflecting the inclusion of operating costs at the recently completed acquisitions of Rocky Mountain Bank and the Wealth Management Group of Colonial Trust Company. Additionally, Arizona Bank & Trust opened a second branch in May 2004. ■ Heartland’s effective tax rate was 26.11% during fourth-quarter 2004 compared to 28.48% during fourth-quarter 2003.The reduced effective ratewas primarily the result of federal historic rehabilitation tax credits of $675,000 and state historic rehabilitation tax credits of $843,000. ■ Citizens Finance moved forward with its expansion strategy in December with the opening of a new branch in Crystal Lake, Illinois.   Investor Information Heartland’s common stock is traded on the NASDAQ National Market System under the symbol “HTLF.” Heartland is its own stock transfer agent. Any correspondence may be directed to Lois K. Pearce, Corporate Secretary. Primary market makers are: ■ Howe Barnes Investments, Inc., 135 S. LaSalle Street, Chicago, IL 60603-4398, Phone 800-800-4693 ■ FTN Financial Securities Corporation, 350 Madison Avenue, 19th Floor, New York, NY 10017, Phone 866-268-6529   Additional information about Heartland is available through our website atwww.htlf.com.   Stock Value Per Share   PE Ratio - Diluted (12/31/04): 15.960 52-Week Price Range (12/31/04):$16.75-$22.07 Closing Price (12/31/04): $20.11 Book Value(12/31/04): $10.69 Price/Book Value (12/31/04): 188.12% Current Dividend: $0.32 Yield: 1.59% Shares outstanding (12/31/04): 16,441,058   This newsletter may contain forward-looking statements. Actual events and results may differ significantly from those described in such forward-looking statements, due to changes in the economy, interest rates or other factors. For additional information about these factors, please review our filings with the Securities and Exchange Commission. Heartland undertakes no obligation to update any statement in this newsletter in light
of new information or future events.

Financial Highlights(Dollars in thousands, except per share data)

	For the Qtrs Ended December 31,				For the Years Ended December 31,
		2004		2003		2004		2003		2002
Income Statement Data
Net Interest income	$	22,533	$	15,415	$	77,130	$	61,190	$	57,680
Provision for loan losses		1,446		1,007		4,846		4,183		3,553
Noninterest income		9,851		8,453		37,841		36,541		30,645
Noninterest expense		22,015		17,654		81,936		67,692		60,659
Income tax expense		2,330		1,483		7,937		8,137		7,523
Income from continuing operations		6,593		3,724		20,252		17,719		16,590
Income (loss on discontinued operations		-		-		-		-		2,277
Net income		6,593		3,724		20,252		17,719		18,867

Ratios
Return on average equity		15.18	%	10.74	%		12.82	%	13.46	%	16.44	%
Return on average assets		1.00		0.74			0.87		0.95		1.13
Net interest margin (tax equivalent)(1)		3.99		3.61			3.87		3.80		4.04
Allowance as a percent of total loans		1.41		1.40			1.41		1.40		1.40
Earnings per share - diluted(2)	$	0.40	$	0.24		$	1.26	$	1.16	$	1.28
Earnings per share from continuing  operations-diluted(2)(3)		0.40		0.24			1.26		1.16		1.12
Dividends per share		0.08		0.08			0.32		0.27		0.27
Book value per share		10.69		9.29			10.69		9.29		8.40

Balance Sheet Data
Total assets	$	2,630,590	$	2,018,366	$	2,630,590	$	2,018,366	$	1,785,979
Total loans and leases, net of unearned		1,772,954		1,322,549		1,772,954		1,322,549		1,152,069
Total deposits		1,983,846		1,492,488		1,983,846		1,492,488		1,337,985
Stockholders' equity		175,782		140,923		175,782		140,923		124,041

⁽¹⁾Tax-equivalent basis is calculated using an effective tax rate of 35%. /⁽²⁾Restated to reflect three-for-two stock split effected in the form of a dividend on December 29, 2003. /⁽³⁾Excludes discontinuedoperations of our Eau Claire branch.

Total Assets (In thousands)  Total Loans (In thousands)  Total Deposits (In thousands)

[GRAPHS DEPICTING VALUES IN THE TABLE ABOVE]

Earnings Per Share from Continuing Operations - Diluted   Net Interest Margin (Tax equivalent)Allowance as Percent of Total Loans

[GRAPHS DEPICTING VALUES IN THE TABLE ABOVE]