Exhibit 99
[LOGO]
Heartland Financial USA, Inc.
PRESS RELEASE
January 23, 2003
FROM: Lynn B. Fuller - Chairman, President and CEO
(563) 589-2105
John K. Schmidt - Executive Vice President and CFO
(563) 589-1994
RE: Fourth Quarter 2002 Earnings
RELEASE: Immediate
HEARTLAND FINANCIAL USA, INC. REPORTS A 22% INCREASE IN INCOME
FROM CONTINUING OPERATIONS DURING THE FOURTH QUARTER
(Dubuque, Iowa) Heartland Financial USA, Inc. (HTLF - OTC BB)
today announced income from continuing operations for the fourth
quarter of 2002 of $4.210 million, a $749 thousand or 22%
increase over the $3.461 million recorded during 2001. A major
contributor to the improved earnings was the $2.298 million or
17% growth in net interest income due primarily to growth in
earning assets. Average earning assets went from $1.455 billion
during the fourth quarter of 2001 to $1.563 billion during the
same quarter in 2002, a change of $108 million or 7%. Noninterest
income experienced a $1.397 million or 17% increase, primarily as
a result of the $840 thousand increase in gains on sale of loans
and the $360 thousand valuation adjustment on mortgage servicing
rights. Noninterest expense was held to a $1.881 million or 12%
increase.
The Eau Claire branch of Wisconsin Community Bank, a bank
subsidiary of Heartland, was sold effective December 15, 2002.
The effect of this discontinued operation on net income during
the fourth quarter of 2002 was a gain of $1.896 million, or $.19
on a diluted earnings per common share basis. Net income totaled
$6.106 million, or $.62 on a diluted earnings per common share
basis, compared to $3.482 million, or $.36 on a diluted earnings
per common share basis, during the same quarter in 2001. Return
on common equity was 20.06% and return on assets was 1.39% for
the fourth quarter of 2002. For the same period in 2001, return
on equity was 13.20% and return on assets was .85%.
Chairman, President and Chief Executive Officer Lynn B. Fuller
noted, "We are extremely pleased that Heartland was able to
record double-digit growth in earnings for the third consecutive
year. The results of management's efforts to improve net interest
margin were reflected in this year's earnings. Also significant
contributors to the improved earnings during 2002 were gains on
sale of loans and service charges and fees. The 2002 results
reinforce and encourage our community banking approach. Our
management team remains focused on expanding the customer base in
the markets we serve and looking for opportunities to enter new
markets. Representative of this was the entrance into a new
market at the beginning of 2003 by our bank subsidiary in New
Mexico with the opening of a branch in Santa Fe."
For the year ended on December 31, 2002, net income increased
$7.453 million or 65% when compared to the same period in 2001.
Exclusive of the Eau Claire branch sale, income from continuing
operations increased $5.461 million or 49%. Income from
continuing operations totaled $16.590 million, or $1.68 on a
diluted per common share basis, compared to $11.129 million, or
$1.15 on a diluted per common share basis, during 2001. Return on
common equity was 16.44% and return on assets was 1.13% for the
year 2002 compared to 11.32% and .73%, respectively, for the year
2001.
The largest contributor to the improved earnings during the year
2002 was the $9.173 million or 18% growth in net interest income.
Average earning assets went from $1.395 billion during 2001 to
$1.498 billion during 2002, a change of $103 million or 7%. The
$705 thousand or 17% decrease in provision for loan and lease
losses also contributed to the improved earnings for 2002.
Additionally, noninterest income experienced a $3.339 million or
11% 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 $4.438 million 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
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 fourth quarter of 2001
on this goodwill and other intangibles was $264 thousand ($.03 on
a diluted per common share basis). For the year 2001,
amortization expense on this goodwill and other intangibles was
$1.058 million ($.11 on a diluted per common share basis).
A majority of the $142 million or 9% growth in total assets since
year-end 2001 occurred during the last half of the year. Loans
and leases were $1.175 billion and deposits were $1.338 billion
at the end of 2002, an increase of 6% and 11%, respectively,
since year-end 2001. Commercial and agricultural loan growth was
$92 million or 14% and $10 million or 7%, respectively, during
2002. A portion of this growth was offset by the $23 million or
14% 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
Heartland usually sells into the secondary market.
Net interest margin, expressed as a percentage of average earning
assets, was 4.06% for the fourth quarter of 2002 compared to
4.12% during the third quarter of 2002 and 3.73% for the fourth
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 effect 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 7.15% during
the fourth quarter of 2001 to 6.62% during the fourth quarter of
2002, a decline of 53 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 3.42% during the fourth quarter
of 2001 to 2.56% for the same quarter in 2002, a decline of 86
basis points.
The allowance for loan and lease losses at December 31, 2002, was
1.37% of loans and 359% of nonperforming loans, compared to 1.33%
of loans and 180% of nonperforming loans, at year-end 2001.
Nonperforming loans decreased to .38% of total loans and leases
at December 31, 2002, compared to .73% of total loans and leases
at December 31, 2001. The $3.553 million provision for loan
losses made during 2002, a decrease of $705 thousand or 17% when
compared to 2001, resulted primarily from a large recovery on a
prior-year charge-off and the decrease in nonperforming loans.
Heartland is a $1.8 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 five offices in Cottage
Grove, Middleton, Sheboygan, Green Bay and Monroe, Wisconsin
New Mexico Bank and Trust, with nine offices in Albuquerque,
Clovis and Santa Fe, 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
December 31,
2002 2001
----------------------------
INCOME STATEMENT DATA
Interest income (tax equivalent
adjusted) $ 26,079 $ 26,213
Interest expense 10,093 12,525
---------- ----------
Net interest income 15,986 13,688
Provision for loan and lease
losses 1,775 1,196
Noninterest income 9,553 8,156
Noninterest expense 17,015 15,134
Income tax expense 2,070 1,798
Tax equivalent adjustment 469 255
---------- ----------
Income from continuing
operations 4,210 3,461
Discontinued operations
Gain from operations of
discontinued operations
(including gain on disposal
of $2,602) 4,147 34
Income tax expense 2,251 13
---------- ----------
Gain on discontinued operations 1,896 21
---------- ----------
Net income $ 6,106 $ 3,482
========== ==========
PER COMMON SHARE DATA
Earnings per common share
- basic $ 0.62 $ 0.36
Earnings per common share
- diluted 0.62 0.36
Earnings per common share
from continuing operations
- basic(1) 0.43 0.36
Earnings per common share
from continuing operations
- diluted(1) 0.43 0.36
Adjusted earnings per common
share - basic(2) 0.62 0.39
Adjusted earnings per common
share - diluted(2) 0.62 0.38
Adjusted earnings per common
share from continuing operations
- basic(3) 0.43 0.39
Adjusted earnings per common
share from continuing
operations - diluted(3) 0.43 0.38
Dividends declared per common
share 0.10 0.10
Weighted average shares
outstanding - basic 9,811,168 9,581,389
Weighted average shares
outstanding - diluted 9,890,267 9,685,376
(1) Excludes the discontinued operations for the sale of our
Eau Claire branch in the fourth quarter of 2002 and the
related gain on sale.
(2) 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.
(3) 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,and the discontinued operations
for the sale of our Eau Claire branch in the fourth quarter
of 2002 and the related gain on sale.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Year Ended
December 31,
2002 2001
----------------------------
INCOME STATEMENT DATA
Interest income (tax equivalent
adjusted) $ 101,585 $ 108,700
Interest expense 42,332 58,620
---------- ----------
Net interest income 59,253 50,080
Provision for loan and lease
losses 3,553 4,258
Noninterest income 32,757 30,261
Noninterest expense 62,771 58,333
Income tax expense 7,523 5,530
Tax equivalent adjustment 1,573 1,091
---------- ----------
Income from continuing
operations 16,590 11,129
Discontinued operations
Gain from operations of
discontinued operations
(including gain on disposal
of $2,602) 4,774 469
Income tax expense 2,497 184
---------- ----------
Gain on discontinued operations 2,277 285
---------- ----------
Net income $ 18,867 $ 11,414
========== ==========
PER COMMON SHARE DATA
Earnings per common share
- basic $ 1.93 $ 1.19
Earnings per common share
- diluted 1.91 1.18
Earnings per common share
from continuing operations
- basic(1) 1.69 1.16
Earnings per common share
from continuing operations
- diluted(1) 1.68 1.15
Adjusted earnings per common
share - basic(2) 1.93 1.27
Adjusted earnings per common
share - diluted(2) 1.91 1.26
Adjusted earnings per common
share from continuing operations
- basic(3) 1.69 1.27
Adjusted earnings per common
share from continuing
operations - diluted(3) 1.68 1.26
Dividends declared per common
share 0.40 0.37
Weighted average shares
outstanding - basic 9,791,549 9,602,520
Weighted average shares
outstanding - diluted 9,855,614 9,705,487
(1) Excludes the discontinued operations for the sale of our
Eau Claire branch in the fourth quarter of 2002 and the
related gain on sale.
(2) 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.
(3) 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, and the discontinued operations
for the sale of our Eau Claire branch in the fourth quarter of
2002 and the related gain on sale.
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Quarter Ended
December 31,
2002 2001
----------------------------
AVERAGE BALANCES
Assets $1,740,807 $1,627,582
Loans and leases, net of
unearned 1,170,711 1,081,313
Deposits 1,311,427 1,203,931
Earning assets 1,562,850 1,454,730
Stockholders' equity 120,792 104,679
EARNINGS PERFORMANCE RATIOS
Return on average assets 1.39% 0.85%
Return on average equity 20.06 13.20
Net interest margin 4.06 3.73
Net interest margin, excluding
fleet leasing company debt 4.13 3.84
Efficiency ratio 66.78 69.32
Efficiency ratio, banks only 55.80 60.29
NONINTEREST INCOME
Service charges and fees $ 1,839 $ 1,641
Trust fees 800 837
Brokerage commissions 206 141
Insurance commissions 230 217
Securities gains, net 61 13
Gain (loss) on trading account
securities 94 93
Rental income on operating leases 3,489
3,955
Gain on sale of loans 2,078 1,238
Valuation adjustment on
mortgage servicing rights 360 -
Impairment loss on equity
securities - (318)
Other noninterest income 396 339
---------- ----------
Total noninterest income $ 9,553 $ 8,156
NONINTEREST EXPENSE
Salaries and employee benefits $ 7,716 $ 6,448
Occupancy 867 697
Furniture and equipment 878 830
Depreciation on equipment
under operating leases 2,801 3,066
Outside services 1,300 937
FDIC deposit insurance
assessment 52 53
Advertising 678 413
Goodwill and core deposit
intangibles amortization 124 418
Other noninterest expenses 2,599 2,272
---------- ----------
Total noninterest expense $ 17,015 $ 15,134
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
For the Year Ended
December 31,
2002 2001
----------------------------
AVERAGE BALANCES
Assets $1,671,614 $1,558,332
Loans and leases, net of
unearned 1,124,032 1,069,072
Deposits 1,252,174 1,152,757
Earning assets 1,498,164 1,395,189
Stockholders' equity 114,740 100,836
EARNINGS PERFORMANCE RATIOS
Return on average assets 1.13% 0.73%
Return on average equity 16.44 11.32
Net interest margin 3.96 3.59
Net interest margin, excluding
fleet leasing company debt 4.04 3.72
Efficiency ratio 68.81 73.98
Efficiency ratio, banks only 57.68 64.21
NONINTEREST INCOME
Service charges and fees $ 8,089 $ 6,308
Trust fees 3,407 3,148
Brokerage commissions 658 615
Insurance commissions 765 807
Securities gains, net 790 1,489
Gain (loss) on trading account
securities (598) (417)
Rental income on operating leases 14,602 15,446
Gain on sale of loans 4,656 2,738
Valuation adjustment on
mortgage servicing rights (469) -
Impairment loss on equity
securities (267) (773)
Other noninterest income 1,124 900
---------- ----------
Total noninterest income $ 32,757 $ 30,261
NONINTEREST EXPENSE
Salaries and employee benefits $ 28,571 $ 25,182
Occupancy 3,178 3,014
Furniture and equipment 3,273 3,144
Depreciation on equipment
under operating leases 11,555 11,805
Outside services 4,318 3,433
FDIC deposit insurance
assessment 209 208
Advertising 1,917 1,588
Goodwill and core deposit
intangibles amortization 495 1,672
Other noninterest expenses 9,255 8,287
---------- ----------
Total noninterest expense $ 62,771 $ 58,333
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
As of As of
December 30, December 31,
2002 2001
----------------------------
BALANCE SHEET DATA
Total assets $1,785,979 $1,644,064
Securities 390,815 325,217
Total loans and leases 1,175,236 1,105,205
Allowance for loan &
lease losses 16,091 14,660
Total deposits 1,337,985 1,210,159
Long-term debt 161,379 143,789
Total stockholders' equity 124,041 107,090
PER COMMON SHARE DATA
Book value per common share $ 12.60 $ 11.06
FAS 115 effect on book value
per common share 0.43 0.37
LOAN AND LEASE DATA
Commercial and commercial
real estate $ 743,520 $ 651,479
Residential mortgage 145,931 168,912
Agricultural and agricultural
real estate 155,596 145,460
Consumer 120,853 127,874
Direct financing leases, net 12,308 15,570
Unearned discount and deferred
loan fees (2,972) (4,090)
---------- ----------
Total Loans and Leases $1,175,236 $1,105,205
========== ==========
ASSET QUALITY
Nonaccrual loans $ 3,944 $ 7,623
Restructured loans - -
Loans past due ninety days or
more as to interest or
principal payments 541 500
Other real estate owned 452 130
Other repossessed assets 279 343
---------- ----------
Total nonperforming assets $ 5,216 $ 8,596
========== ==========
ALLOWANCE FOR LOAN AND
LEASE LOSSES
Balance, beginning of period $ 14,660 $ 13,592
Provision for loan and lease
losses continuing operations 3,553 4,258
Provision for loan and lease
losses discontinued operations (329) 25
Loans charged off (3,203) (3,757)
Recoveries 1,410 542
Additions related to
acquisitions - -
---------- ----------
Balance, end of period $ 16,091 $ 14,660
========== ==========
ASSET QUALITY RATIOS
Ratio of nonperforming loans
to total loans & leases 0.38% 0.73%
Ratio of nonperforming assets
to total assets 0.29 0.52
Ratio of net loan chargeoffs
to average loans and leases 0.16 0.30
Allowance for loan losses as
a percent of loans 1.37 1.33
Allowance for loan and leases
to nonperforming loans and
leases 358.77 180.47