Exhibit 99
PRESS RELEASE
July 18, 2002
FROM: Heartland Financial USA, Inc.
Lynn B. Fuller - Chairman, President and CEO
(563) 589-2105
John K. Schmidt - Executive Vice President and CFO
(563) 589-1994
RE: Second Quarter 2002 Earnings
RELEASE: Immediate
HEARTLAND FINANCIAL USA, INC. REPORTS A 39% INCREASE IN SECOND
QUARTER EARNINGS
(Dubuque, Iowa) Heartland Financial USA, Inc. (HTLF - OTC BB)
today announced a $1.097 million or 39% increase in earnings for
the second quarter of 2002. Net income totaled $3.911 million,
or $.40 on a diluted earnings per common share basis, compared to
$2.814 million, or $.29 on a diluted earnings per common share
basis, during the same quarter in 2001. Return on common equity
was 13.98% and return on assets was .96% for the second quarter
of 2002. For the same period in 2001, return on equity was
11.32% and return on assets was .73%.
Contributing to the improved earnings during the second quarter
of 2002 was the $2.152 million or 18% growth in net interest
income due primarily to growth in earning assets. Average
earning assets went from $1.385 billion during the second quarter
of 2001 to $1.462 billion during the same quarter in 2002, a
change of $77 million or 6%. Exclusive of securities gains and
losses, including trading account securities gains and losses,
and a valuation adjustment on mortgage servicing rights,
noninterest income experienced a $607 thousand or 8% increase.
The Company's adoption of the provisions of Statement of
Financial Accounting Standards ("FAS") No. 142, Goodwill and
Other Intangible Assets, on January 1, 2002, discontinued the
amortization of $9.507 million in unamortized goodwill. The
amount of amortization expense recorded during the second quarter
of 2001 on this goodwill was $135 thousand ($.01 on a diluted per
common share basis). For the six-month period ended on June 30,
2001, amortization expense on this goodwill was $269 thousand
($.03 on a diluted per common share basis).
For the six-month period ended on June 30, 2002, net income
increased $2.454 million or 47% when compared to the same period
in 2001. Net income totaled $7.724 million, or $.79 on a diluted
per common share basis, compared to $5.270 million, or $.54 on a
diluted per common share basis, during the same period in 2001.
Return on common equity was 14.08% and return on assets was .95%
for the six-month period in 2002 compared to 10.79% and .70%,
respectively, for the same period in 2001.
The largest contributor to the improved earnings during the first
six months of 2002 was the $4.459 million or 19% growth in net
interest income. Average earning assets went from $1.353 billion
during the first six months of 2001 to $1.460 billion during the
same period in 2002, a change of $107 million or 8%. Exclusive of
securities gains and losses, including trading account securities
gains and losses, and a valuation adjustment on mortgage
servicing rights, noninterest income experienced a $1.947 million
or 14% increase. In addition to gains on sale of loans, the other
noninterest income category to reflect significant improvement
was service charges and fees. Noninterest expense was held to a
$1.995 million or 7% increase.
Chairman, President and Chief Executive Officer Lynn B. Fuller
noted, "I am very pleased with our second quarter operating
results. Once again, earnings experienced significant growth over
the prior year, despite a challenging economy. Improvement in our
net interest margin has been a key factor in our earnings growth
as management continued to focus efforts on enhancing our yield
on assets and reducing our costs of funding. Growth in
noninterest expense has also continued to taper off as we have
realized full utilization of the resources expended in previous
years for expansion and diversification efforts. For the first
six months of 2002, our return on average equity exceeded 14%
compared to the 10.79% recorded last year."
Total assets remained stable at June 30, 2002, increasing by less
than 1% since year-end 2001. Loans and leases were $1.100 billion
and deposits were $1.228 billion at the end of the second
quarter, an increase of 1% and 2%, respectively, since year-end
2001. Loan growth was slowed due to paydowns experienced in the
mortgage loan portfolio as customers continued to refinance their
mortgage loans into fifteen- and thirty-year fixed rate loans,
which the Company usually sells into the secondary market. Some
of this slowed growth was offset by an increase in the commercial
loan portfolio, which grew $41.612 million or 6% during the first
six months.
Net interest margin, expressed as a percentage of average earning
assets, was 4.02% during the second quarter of 2002 compared to
3.86% for the first quarter of 2002 and 3.60% for the second
quarter of 2001. During the second quarter of 2001, national
prime decreased from 8.00% to 6.75%. During the second quarter of
2002, national prime remained unchanged at 4.75%. The Company
manages its balance sheet to minimize the effect a change in
interest rates has on its net interest margin. The Company has
been successful in the utilization of floors on its commercial
loan portfolio to minimize the affect downward rates have on its
interest income. If rates begin to edge upward, the Company will
not see a corresponding increase in its interest income until
rates have moved above the floors in place on these loans.
Interest income as a percentage of average earning assets went
from 8.21% during the second quarter of 2001 to 6.99% during the
second quarter of 2002, a decline of 122 basis points.
Additionally, on the liability side of the balance sheet, the
Company has locked in some funding in the three- to five-year
maturities as rates were at historical low levels. During the
last half of 2001, the Company elected to obtain additional
Federal Home Loan Bank advances to lock in these low rates in
anticipation of fixed-rate commercial loan growth and the
replacement of maturing advances during the first half of 2002.
Interest expense as a percentage of average earning assets went
from 4.61% during the second quarter of 2001 to 2.97% for the
same quarter in 2002, a decline of 164 basis points.
The allowance for loan and lease losses at June 30, 2002, was
1.38% of loans and 201% of nonperforming loans, compared to 1.33%
of loans and 180% of nonperforming loans, at year-end 2001.
Nonperforming loans decreased to .69% of total loans and leases
at June 30, 2002, compared to .73% of total loans and leases at
December 31, 2001. The $1.601 million provision for loan losses
made during the first half of 2002, a decrease of $243 thousand
or 13% when compared to the same period in 2001, resulted
primarily from a decrease in nonperforming loans.
Heartland is a $1.6 billion financial services company with six
banks in Iowa, Illinois, Wisconsin and New Mexico:
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, FSB, with three offices in Keokuk, Iowa
and Carthage, Illinois
Riverside Community Bank, with three offices in Rockford,
Illinois
Wisconsin Community Bank, with six offices in Cottage Grove,
Middleton, Sheboygan, Green Bay, Monroe and Eau Claire,
Wisconsin
New Mexico Bank and Trust, with eight offices in Albuquerque
and Clovis, New Mexico
Other subsidiaries include:
ULTEA, Inc., a fleet leasing company with offices in Madison
and Milwaukee, Wisconsin
Citizens Finance Co., a consumer finance company with offices
in Madison and Appleton, Wisconsin; Dubuque, Iowa; and
Rockford, Illinois
Additional information about Heartland is available through our
website at www.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 information 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 September 11th, (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.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
June 30,
2002 2001
----------------------------
INCOME STATEMENT DATA
Interest income (tax equivalent
adjusted) $ 25,481 $ 28,351
Interest expense 10,815 15,936
---------- ----------
Net interest income 14,666 12,415
Provision for loan and lease
losses 616 1,123
Noninterest income 7,306 7,562
Noninterest expense 15,423 14,513
Income tax expense 1,639 1,243
Tax equivalent adjustment 383 284
---------- ----------
Net income $ 3,911 $ 2,814
========== ==========
PER COMMON SHARE DATA
Earnings per common share
- basic $ 0.40 $ 0.29
Earnings per common share
- diluted 0.40 0.29
Adjusted earnings per common
share - basic (1) 0.40 0.31
Adjusted earnings per common
share - diluted (1) 0.40 0.30
Dividends declared per common
share 0.10 0.09
Weighted average shares
outstanding - basic 9,808,922 9,600,801
Weighted average shares
outstanding - diluted 9,872,842 9,695,351
AVERAGE BALANCES
Assets $1,633,707 $1,543,933
Loans and leases, net of
unearned 1,102,715 1,067,931
Deposits 1,218,097 1,131,402
Earning assets 1,462,024 1,384,678
Stockholders' equity 112,228 99,694
EARNINGS PERFORMANCE RATIOS
Return on average assets 0.96% 0.73%
Return on average equity 13.98 11.32
Net interest margin 4.02 3.60
Net interest margin, excluding
fleet leasing company debt 4.11 3.72
Efficiency ratio 70.43 73.95
Efficiency ratio, banks only 59.78 66.63
(1) Excludes goodwill amortization discontinued with the adoption
of FAS No. 142 on January 1, 2002.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Six Months Ended
June 30,
2002 2001
----------------------------
INCOME STATEMENT DATA
Interest income (tax equivalent
adjusted) $ 50,612 $ 56,373
Interest expense 22,093 32,414
---------- ----------
Net interest income 28,519 23,959
Provision for loan and lease
losses 1,601 1,844
Noninterest income 15,778 14,988
Noninterest expense 30,781 28,786
Income tax expense 3,524 2,481
Tax equivalent adjustment 667 566
---------- ----------
Net income $ 7,724 $ 5,270
========== ==========
PER COMMON SHARE DATA
Earnings per common share
- basic $ 0.79 $ 0.55
Earnings per common share
- diluted 0.79 0.54
Adjusted earnings per common
share - basic (1) 0.79 0.58
Adjusted earnings per common
share - diluted (1) 0.79 0.57
Dividends declared per common
share 0.20 0.18
Weighted average shares
outstanding - basic 9,769,443 9,600,801
Weighted average shares
outstanding - diluted 9,831,652 9,699,990
AVERAGE BALANCES
Assets $1,632,010 $1,510,329
Loans and leases, net of
unearned 1,094,968 1,057,338
Deposits 1,215,904 1,113,797
Earning assets 1,459,548 1,352,950
Stockholders' equity 110,597 98,469
EARNINGS PERFORMANCE RATIOS
Return on average assets 0.95% 0.70%
Return on average equity 14.08 10.79
Net interest margin 3.94 3.57
Net interest margin, excluding
fleet leasing company debt 4.04 3.71
Efficiency ratio 69.73 75.71
Efficiency ratio, banks only 59.50 67.11
(1) Excludes goodwill amortization discontinued with the adoption
of FAS No. 142 on January 1, 2002.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
As of and As of and
for the for the
six months year
ended ended
June 30, December 31,
2002 2001
----------------------------
BALANCE SHEET DATA
Total Assets $1,652,238 $1,644,064
Securities 346,408 325,217
Total loans and leases 1,115,039 1,105,205
Allowance for loan &
lease losses 15,409 14,660
Total deposits 1,228,077 1,205,159
Long-term debt 136,321 143,789
Total stockholders' equity 114,724 107,090
PER COMMON SHARE DATA
Book value per common share $ 11.68 $ 11.06
FAS 115 effect on book value
per common share 0.44 0.37
LOAN AND LEASE DATA
Commercial and commercial
real estate $ 693,091 $ 651,479
Residential mortgage 138,198 168,912
Agricultural and agricultural
real estate 150,136 145,460
Consumer 123,098 127,874
Direct financing leases, net 13,958 15,570
Unearned discount and deferred
loan fees (3,442) (4,090)
---------- ----------
Total Loans and Leases $1,115,039 $1,105,205
========== ==========
ASSET QUALITY
Nonaccrual loans $ 6,918 $ 7,623
Restructured loans - -
Loans past due ninety days or
more as to interest or
principal payments 728 500
Other real estate owned 108 130
Other repossessed assets 241 343
---------- ----------
Total nonperforming assets $ 7,995 $ 8,596
========== ==========
ALLOWANCE FOR LOAN AND
LEASE LOSSES
Balance, beginning of period $ 14,660 $ 13,592
Provision charged to operating
expense 1,601 4,283
Loans charged off (1,267) (3,757)
Recoveries 415 542
Additions related to
acquisitions - -
---------- ----------
Balance, end of period $ 15,409 $ 14,660
========== ==========
ASSET QUALITY RATIOS
Ratio of nonperforming loans
to total loans & leases 0.69% 0.73%
Ratio of nonperforming assets
to total assets 0.48 0.52
Ratio of net loan chargeoffs
to average loans and leases 0.08 0.30
Allowance for loan losses as
a percent of loans 1.38 1.33
Allowance for loan losses as
percent of nonperforming
loans and leases 201.50 180.47
As of and As of and
for the for the
six months year
ended ended
June 30, December 31,
2001 2000
----------------------------
BALANCE SHEET DATA
Total Assets $1,570,663 $1,466,387
Securities 278,041 228,065
Total loans and leases 1,082,969 1,042,096
Allowance for loan &
lease losses 14,675 13,592
Total deposits 1,168,660 1,101,313
Long-term debt 119,358 102,856
Total stockholders' equity 101,302 96,146
PER COMMON SHARE DATA
Book value per common share $ 10.56 $ 10.00
FAS 115 effect on book value
per common share 0.34 0.14
LOAN AND LEASE DATA
Commercial and commercial
real estate $ 609,448 $ 550,366
Residential mortgage 190,591 215,638
Agricultural and agricultural
real estate 140,195 133,614
Consumer 129,993 128,685
Direct financing leases, net 16,719 17,590
Unearned discount and deferred
loan fees (3,977) (3,797)
---------- ----------
Total Loans and Leases $1,082,969 $1,042,096
========== ==========
ASSET QUALITY
Nonaccrual loans $ 7,602 $ 5,860
Restructured loans 354 357
Loans past due ninety days or
more as to interest or
principal payments 3,416 523
Other real estate owned 166 489
Other repossessed assets 331 219
---------- ----------
Total nonperforming assets $ 11,869 $ 7,448
========== ==========
ALLOWANCE FOR LOAN AND
LEASE LOSSES
Balance, beginning of period $ 13,592 $ 10,844
Provision charged to operating
expense 1,844 3,301
Loans charged off (962) (2,280)
Recoveries 201 585
Additions related to
acquisitions - 1,142
---------- ----------
Balance, end of period $ 14,675 $ 13,592
========== ==========
ASSET QUALITY RATIOS
Ratio of nonperforming loans
to total loans & leases 1.05% 0.65%
Ratio of nonperforming assets
to total assets 0.76 0.51
Ratio of net loan chargeoffs
to average loans and leases 0.07 0.17
Allowance for loan losses as
a percent of loans 1.36 1.30
Allowance for loan losses as
percent of nonperforming
loans and leases 129.05 201.60
For the For the
Quarter Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------------ -------------------
NONINTEREST INCOME
Service charges and
fees $ 2,217 $ 1,554 $ 4,150 $ 3,015
Trust fees 904 778 1,736 1,544
Brokerage commissions 203 167 330 293
Insurance commissions 160 178 377 429
Securities gains, net 75 352 156 924
Gain (loss) on trading
account securities (214) 46 (242) (179)
Rental income on
operating leases 3,674 3,795 7,530 7,649
Gains on sale of
loans 522 523 1,529 916
Valuation adjustment
on mortgage servicing
rights (326) - (326) -
Other noninterest
income 91 169 538 397
-------- -------- -------- --------
Total noninterest
income $ 7,306 $ 7,562 $ 15,778 $ 14,988
======== ======== ======== ========
NONINTEREST EXPENSE
Salaries and employee
benefits $ 6,923 $ 6,328 $ 13,908 $ 12,538
Occupancy 777 782 1,554 1,607
Furniture and
equipment 831 778 1,649 1,584
Depreciation on
equipment under
operating leases 2,879 2,874 5,909 5,792
Outside services 1,116 871 1,997 1,624
FDIC deposit insurance
assessment 53 52 106 103
Advertising 387 407 839 786
Goodwill and core
deposit intangibles
amortization 253 418 507 836
Other noninterest
expenses 2,204 2,003 4,312 3,916
-------- -------- -------- --------
Total noninterest
expense $ 15,423 $ 14,513 $ 30,781 $ 28,786
======== ======== ======== ========