Exhibit 99
[LOGO]
Heartland Financial USA, Inc.
PRESS RELEASE
October 17, 2002
FROM: Lynn B. Fuller - Chairman, President and CEO
(563) 589-2105
John K. Schmidt - Executive Vice President and CFO
(563) 589-1994
RE: Third Quarter 2002 Earnings
RELEASE: Immediate
HEARTLAND FINANCIAL USA, INC. REPORTS A 79% INCREASE IN THIRD
QUARTER EARNINGS
(Dubuque, Iowa) Heartland Financial USA, Inc. (HTLF - OTC BB)
today announced a $2.115 million or 79% increase in earnings for
the third quarter of 2002. Net income totaled $4.777 million, or
$.48 on a diluted earnings per common share basis, compared to
$2.662 million, or $.27 on a diluted earnings per common share
basis, during the same quarter in 2001. Return on common equity
was 16.20% and return on assets was 1.13% for the third quarter
of 2002. For the same period in 2001, return on equity was
10.38% and return on assets was .67%.
Chairman, President and Chief Executive Officer Lynn B. Fuller
noted, "Heartland's third quarter was an excellent quarter, as we
saw growth in margin, reduced provision expense and relatively
modest growth in noninterest expense. The resultant record third
quarter earnings and continued asset growth continues to
reinforce the value of Heartland's community banking model."
Contributing to the improved earnings during the third quarter of
2002 was the $2.542 million or 19% growth in net interest income
due primarily to growth in earning assets. Average earning
assets went from $1.420 billion during the third quarter of 2001
to $1.511 billion during the same quarter in 2002, a change of
$91 million or 6%. Also contributing to the increased earnings
during the third quarter was the $1.020 million or 85% decrease
in provision for loan and lease losses. Additionally, noninterest
income experienced a $760 thousand or 10% increase, exclusive of
securities gains and losses, including impairment losses on
equity securities and trading account securities gains and
losses, and a valuation adjustment on mortgage servicing rights.
Noninterest expense was held to an $874 thousand or 6% increase.
For the nine-month period ended on September 30, 2002, net income
increased $4.829 million or 61% when compared to the same period
in 2001. Net income totaled $12.761 million, or $1.30 on a
diluted per common share basis, compared to $7.932 million, or
$.82 on a diluted per common share basis, during the same period
in 2001. Return on common equity was 15.14% and return on assets
was 1.03% for the nine-month period in 2002 compared to 10.65%
and .69%, respectively, for the same period in 2001.
The largest contributor to the improved earnings during the first
nine months of 2002 was the $7.102 million or 19% growth in net
interest income. Average earning assets went from $1.375 billion
during the first nine months of 2001 to $1.477 billion during the
same period in 2002, a change of $101 million or 7%. The $1.263
million or 42% decrease in provision for loan and lease losses
also contributed to the improved earnings for the first nine
months of 2002. Additionally, noninterest income experienced a
$2.707 million or 13% increase, exclusive of securities gains and
losses, including impairment losses on equity securities and
trading account securities gains and losses, and valuation
adjustments on mortgage servicing rights. 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 $2.609 million or 6% 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
Company's adoption of the provisions of FAS No. 147, Acquisitions
of Certain Financial Institutions, on September 30, 2002,
discontinued the amortization of $6.543 million in unamortized
other intangibles retroactively to January 1, 2002. The amount of
amortization expense recorded during the third quarter of 2001 on
this goodwill and other intangibles was $264 thousand ($.03 on a
diluted per common share basis). For the nine-month period ended
on September 30, 2001, amortization expense on this goodwill and
other intangibles was $793 thousand ($.08 on a diluted per common
share basis).
A majority of the $76 million or 5% growth in total assets since
year-end 2001 occurred during the third quarter. Loans and leases
were $1.164 billion and deposits were $1.290 billion at the end
of the third quarter, an increase of 5% and 7%, respectively,
since year-end 2001. Commercial and agricultural loan growth was
$80 million or 12% and $12 million or 9%, respectively, during
the first nine months of 2002. A portion of this growth was
offset by the $25 million or 15% decrease in the mortgage loan
portfolio due to paydowns experienced 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.
Net interest margin, expressed as a percentage of average earning
assets, was 4.12% for the third quarter of 2002 compared to 4.02%
during the second quarter of 2002 and 3.67% for the third quarter
of 2001. 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 7.83% during the third quarter of 2001 to 6.95% during
the third quarter of 2002, a decline of 88 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. Interest
expense as a percentage of average earning assets went from 4.16%
during the third quarter of 2001 to 2.83% for the same quarter in
2002, a decline of 133 basis points.
The allowance for loan and lease losses at September 30, 2002,
was 1.34% of loans and 253% of nonperforming loans, compared to
1.33% of loans and 180% of nonperforming loans, at year-end 2001.
Nonperforming loans decreased to .53% of total loans and leases
at September 30, 2002, compared to .73% of total loans and leases
at December 31, 2001. The $1.778 million provision for loan
losses made during the first nine months of 2002, a decrease of
$1.263 million or 42% when compared to the same period in 2001,
resulted primarily from a large recovery on a prior-year charge-
off and the decrease in nonperforming loans.
Heartland also today announced the signing of an agreement to
sell its branch facility in Eau Claire, Wisconsin. The branch has
approximately $38 million in loans. The transaction is subject to
receipt of regulatory approval and is expected to close in the
fourth quarter of 2002.
Heartland is a $1.7 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
September 30,
2002 2001
----------------------------
INCOME STATEMENT DATA
Interest income (tax equivalent
adjusted) $ 26,464 $ 28,044
Interest expense 10,786 14,908
---------- ----------
Net interest income 15,678 13,136
Provision for loan and lease
losses 177 1,197
Noninterest income 7,514 7,167
Noninterest expense 15,626 14,752
Income tax expense 2,175 1,422
Tax equivalent adjustment 437 270
---------- ----------
Net income $ 4,777 $ 2,662
========== ==========
PER COMMON SHARE DATA
Earnings per common share
- basic $ 0.49 $ 0.28
Earnings per common share
- diluted 0.48 0.27
Adjusted earnings per common
share - basic (1) 0.49 0.30
Adjusted earnings per common
share - diluted (1) 0.48 0.30
Dividends declared per common
share 0.10 0.09
Weighted average shares
outstanding - basic 9,819,148 9,584,400
Weighted average shares
outstanding - diluted 9,894,883 9,692,878
AVERAGE BALANCES
Assets $1,681,632 $1,585,087
Loans and leases, net of
unearned 1,135,481 1,080,299
Deposits 1,265,459 1,179,506
Earning assets 1,510,709 1,420,128
Stockholders' equity 116,974 101,727
EARNINGS PERFORMANCE RATIOS
Return on average assets 1.13% 0.67%
Return on average equity 16.20 10.38
Net interest margin 4.12 3.67
Net interest margin, excluding
fleet leasing company debt 4.20 3.80
Efficiency ratio 69.08 74.69
Efficiency ratio, banks only 56.37 63.98
(1) Excludes goodwill amortization discontinued with the adoption
of FAS No. 142 on January 1, 2002, and the adoption of FAS
No. 147 on September 30, 2002.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Nine Months Ended
September 30,
2002 2001
----------------------------
INCOME STATEMENT DATA
Interest income (tax equivalent
adjusted) $ 77,076 $ 84,417
Interest expense 32,879 47,322
---------- ----------
Net interest income 44,197 37,095
Provision for loan and lease
losses 1,778 3,041
Noninterest income 23,292 22,155
Noninterest expense 46,147 43,538
Income tax expense 5,699 3,903
Tax equivalent adjustment 1,104 836
---------- ----------
Net income $ 12,761 $ 7,932
========== ==========
PER COMMON SHARE DATA
Earnings per common share
- basic $ 1.30 $ 0.83
Earnings per common share
- diluted 1.30 0.82
Adjusted earnings per common
share - basic (1) 1.30 0.91
Adjusted earnings per common
share - diluted (1) 1.30 0.90
Dividends declared per common
share 0.30 0.27
Weighted average shares
outstanding - basic 9,785,180 9,593,741
Weighted average shares
outstanding - diluted 9,849,890 9,696,340
AVERAGE BALANCES
Assets $1,648,550 $1,535,248
Loans and leases, net of
unearned 1,108,473 1,064,991
Deposits 1,232,423 1,135,700
Earning assets 1,476,602 1,375,343
Stockholders' equity 112,722 99,555
EARNINGS PERFORMANCE RATIOS
Return on average assets 1.03% 0.69%
Return on average equity 15.14 10.65
Net interest margin 4.00 3.61
Net interest margin, excluding
fleet leasing company debt 4.09 3.74
Efficiency ratio 69.12 75.36
Efficiency ratio, banks only 58.41 65.70
(1) Excludes goodwill amortization discontinued with the adoption
of FAS No. 142 on January 1, 2002, and the adoption of FAS
No. 147 on September 30, 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
Nine Months Year
Ended Ended
September 30, December 31,
2002 2001
----------------------------
BALANCE SHEET DATA
Total Assets $1,720,241 $1,644,064
Securities 380,211 325,217
Total loans and leases 1,164,386 1,105,205
Allowance for loan &
lease losses 15,565 14,660
Total deposits 1,290,373 1,205,159
Long-term debt 130,219 143,789
Total stockholders' equity 119,588 107,090
PER COMMON SHARE DATA
Book value per common share $ 12.19 $ 11.06
FAS 115 effect on book value
per common share 0.54 0.37
LOAN AND LEASE DATA
Commercial and commercial
real estate $ 731,294 $ 651,479
Residential mortgage 144,221 168,912
Agricultural and agricultural
real estate 157,830 145,460
Consumer 121,020 127,874
Direct financing leases, net 13,266 15,570
Unearned discount and deferred
loan fees (3,245) (4,090)
---------- ----------
Total Loans and Leases $1,164,386 $1,105,205
========== ==========
ASSET QUALITY
Nonaccrual loans $ 5,296 $ 7,623
Restructured loans - -
Loans past due ninety days or
more as to interest or
principal payments 861 500
Other real estate owned 322 130
Other repossessed assets 424 343
---------- ----------
Total nonperforming assets $ 6,903 $ 8,596
========== ==========
ALLOWANCE FOR LOAN AND
LEASE LOSSES
Balance, beginning of period $ 14,660 $ 13,592
Provision charged to operating
expense 1,778 4,283
Loans charged off (2,123) (3,757)
Recoveries 1,250 542
Additions related to
acquisitions - -
---------- ----------
Balance, end of period $ 15,565 $ 14,660
========== ==========
ASSET QUALITY RATIOS
Ratio of nonperforming loans
to total loans & leases 0.53% 0.73%
Ratio of nonperforming assets
to total assets 0.40 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 1.34 1.33
Allowance for loan losses as
a percent of nonperforming
loans and leases 252.80 180.47
As of and As of and
For the For the
Nine Months Year
Ended Ended
September 30, December 31,
2001 2000
----------------------------
BALANCE SHEET DATA
Total Assets $1,587,886 $1,466,387
Securities 336,322 228,065
Total loans and leases 1,082,697 1,042,096
Allowance for loan &
lease losses 15,244 13,592
Total deposits 1,186,669 1,101,313
Long-term debt 123,042 102,856
Total stockholders' equity 103,618 96,146
PER COMMON SHARE DATA
Book value per common share $ 10.82 $ 10.00
FAS 115 effect on book value
per common share 0.42 0.14
LOAN AND LEASE DATA
Commercial and commercial
real estate $ 616,004 $ 550,366
Residential mortgage 178,451 215,638
Agricultural and agricultural
real estate 145,692 133,614
Consumer 130,430 128,685
Direct financing leases, net 16,149 17,590
Unearned discount and deferred
loan fees (4,029) (3,797)
---------- ----------
Total Loans and Leases $1,082,697 $1,042,096
========== ==========
ASSET QUALITY
Nonaccrual loans $ 8,017 $ 5,860
Restructured loans - 357
Loans past due ninety days or
more as to interest or
principal payments 696 523
Other real estate owned 93 489
Other repossessed assets 488 219
---------- ----------
Total nonperforming assets $ 9,294 $ 7,448
========== ==========
ALLOWANCE FOR LOAN AND
LEASE LOSSES
Balance, beginning of period $ 13,592 $ 10,844
Provision charged to operating
expense 3,041 3,301
Loans charged off (1,737) (2,280)
Recoveries 348 585
Additions related to
acquisitions - 1,142
---------- ----------
Balance, end of period $ 15,244 $ 13,592
========== ==========
ASSET QUALITY RATIOS
Ratio of nonperforming loans
to total loans & leases 0.80% 0.65%
Ratio of nonperforming assets
to total assets 0.59 0.51
Ratio of net loan chargeoffs
to average loans and leases 0.13 0.17
Allowance for loan losses as
a percent of loans 1.41 1.30
Allowance for loan losses as
a percent of nonperforming
loans and leases 174.96 201.60
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the For the
Quarter Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------------ -------------------
NONINTEREST INCOME
Service charges and
fees $ 2,188 $ 1,702 $ 6,338 $ 4,717
Trust fees 871 767 2,607 2,311
Brokerage commissions 122 181 452 474
Insurance commissions 158 161 535 590
Securities gains, net 573 552 729 1,476
Gain (loss) on trading
account securities (450) (331) (692) (510)
Rental income on
operating leases 3,583 3,842 11,113 11,491
Gain on sale of loans 1,049 584 2,578 1,500
Valuation adjustment
on mortgage servicing
rights (503) - (829) -
Impairment loss on
equity securities (267) (455) (267) (455)
Other noninterest
income 190 164 728 561
-------- -------- -------- --------
Total noninterest
income $ 7,514 $ 7,167 $ 23,292 $ 22,155
======== ======== ======== ========
NONINTEREST EXPENSE
Salaries and employee
benefits $ 7,180 $ 6,381 $ 21,088 $ 18,919
Occupancy 799 758 2,353 2,365
Furniture and
equipment 792 765 2,441 2,349
Depreciation on
equipment under
operating leases 2,845 2,947 8,754 8,739
Outside services 1,054 901 3,051 2,525
FDIC deposit insurance
assessment 51 52 157 155
Advertising 406 394 1,245 1,180
Goodwill and core
deposit intangibles
amortization 124 418 371 1,254
Other noninterest
expenses 2,375 2,136 6,687 6,052
-------- -------- -------- --------
Total noninterest
expense $ 15,626 $ 14,752 $ 46,147 $ 43,538
======== ======== ======== ========