EX-99 3 x998k302pr.txt 1ST QUARTER 2002 EARNINGS PRESS RELEASE Exhibit 99 PRESS RELEASE April 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: First Quarter 2002 Earnings RELEASE: Immediate HEARTLAND FINANCIAL USA, INC. REPORTS A 55% INCREASE IN FIRST QUARTER EARNINGS (Dubuque, Iowa) Heartland Financial USA, Inc. (HTLF - OTC BB) today announced a $1.357 million or 55% increase in earnings for the first quarter of 2002. Net income totaled $3.813 million, or $.39 on a diluted earnings per common share basis, for the first quarter of 2002 compared to $2.456 million, or $.25 on a diluted earnings per common share basis, during the same quarter in 2001. Return on common equity was 14.19% and return on assets was .95% for the first quarter of 2002. For the same period in 2001, return on equity was 10.24% and return on assets was .67%. Contributing to the improved earnings during the first quarter of 2002 was the $2.309 million or 20% growth in net interest income due primarily to growth in earning assets. Average earning assets went from $1.321 billion during the first quarter of 2001 to $1.457 billion during the same quarter in 2002, a change of $136 million or 10%. Also contributing to the improved earnings was the $1.046 million or 14% increase in noninterest income while the increase in noninterest expense was held to $1.085 million or 8%. In addition to gains on sale of loans, the other noninterest income category to reflect significant improvement was service charges and fees. Exclusive of securities gains and losses, including trading account securities gains and losses, noninterest income experienced a $1.340 million or 19% increase. The Company's adoption of the provision 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 first quarter of 2001 on this goodwill was $134 thousand ($.01 on a diluted per common share basis). Chairman, President and Chief Executive Officer Lynn B. Fuller noted, "I am excited about the Company's earnings performance this quarter. Earnings for this year are off to a good start as first quarter net income exceeded our budgeted expectations. Our return on average equity in excess of 14% and return on average assets of nearly 1% provides excellent evidence of the benefits derived from the expansion and diversification efforts embarked upon in the late 1990's." Total assets remained stable at March 31, 2002, declining by less than 1% since year-end 2001. Loans and leases were $1.094 billion and deposits were $1.217 billion at the end of the first quarter, a decrease of 1% and an increase of 1%, respectively, since year- end 2001. Historically, the Company has not experienced significant growth in its core business during the first quarter of the year. 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 $21.606 million or 3% during the first quarter. Management feels that opportunities for growth within the commercial loan portfolio will continue to expand during remaining quarters of 2002. Net interest margin, expressed as a percentage of average earning assets, was 3.86% during the first quarter of 2002 compared to 3.54% for the same period in 2001 and 3.79% for the fourth quarter of 2001. During the first quarter of 2001, national prime decreased from 9.50% to 8.00%. During the first 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 8.60% during the first quarter of 2001 to 7.00% during the first quarter of 2002, a decline of 160 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 5.06% during the first quarter of 2001 to 3.14% for the same quarter in 2002, a decline of 192 basis points. The allowance for loan and lease losses at March 31, 2002, was 1.38% of loans and 177% of nonperforming loans, compared to 1.33% of loans and 180% of nonperforming loans, at year-end 2001. Nonperforming loans increased to .78% of total loans and leases at March 31, 2002, compared to .73% of total loans and leases at December 31, 2001. This increase was primarily the result of one agricultural credit at New Mexico Bank and Trust for which a workout plan is in process. The $985 thousand provision for loan losses made during the first quarter of 2002, an increase of $264 thousand or 37% when compared to the same period in 2001, resulted primarily from the increase in nonperforming loans and growth experienced in the commercial loan portfolio. 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 March 31, 2002 2001 ---------------------------- INCOME STATEMENT DATA Interest income (tax equivalent adjusted) $ 25,131 $ 28,022 Interest expense 11,278 16,478 ---------- ---------- Net interest income 13,853 11,544 Provision for loan and lease losses 985 721 Noninterest income 8,472 7,426 Noninterest expense 15,358 14,273 Income tax expense 1,885 1,238 Tax equivalent adjustment 284 282 ---------- ---------- Net income $ 3,813 $ 2,456 ========== ========== PER COMMON SHARE DATA Earnings per common share - basic $ 0.39 $ 0.26 Earnings per common share - diluted 0.39 0.25 Dividends declared per common share 0.10 0.09 Weighted average shares outstanding - basic 9,729,332 9,618,210 Weighted average shares outstanding - diluted 9,793,766 9,724,761 AVERAGE BALANCES Assets $1,630,312 $1,476,725 Loans and leases, net of unearned 1,087,221 1,046,744 Deposits 1,213,712 1,096,192 Earning assets 1,457,072 1,321,222 Stockholders' equity 108,965 97,243 EARNINGS PERFORMANCE RATIOS Return on average assets 0.95% 0.67% Return on average equity 14.19 10.24 Net interest margin 3.86 3.54 Net interest margin, excluding fleet leasing company debt 3.96 3.70 Efficiency ratio 69.04 77.58 Efficiency ratio, banks only 59.25 66.14 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 quarter year ended ended March 31 December 31 2002 2001 ---------------------------- BALANCE SHEET DATA Total Assets $1,631,437 $1,644,064 Securities 361,127 325,217 Total loans and leases 1,093,805 1,105,205 Allowance for loan & lease losses 15,075 14,660 Total deposits 1,217,199 1,205,159 Long-term debt 140,483 143,789 Total stockholders' equity 110,411 107,090 PER COMMON SHARE DATA Book value per common share $ 11.24 $ 11.06 FAS 115 effect on book value per common share 0.30 0.37 LOAN AND LEASE DATA Commercial and commercial real estate $ 673,085 $ 651,479 Residential mortgage 142,704 168,912 Agricultural and agricultural real estate 143,887 145,460 Consumer 124,045 127,874 Direct financing leases, net 13,793 15,570 Unearned discount and deferred loan fees (3,709) (4,090) ---------- ---------- Total Loans and Leases $1,093,805 $1,105,205 ========== ========== ASSET QUALITY Nonaccrual loans $ 7,425 $ 7,623 Restructured loans - - Loans past due ninety days or more as to interest or principal payments 1,069 500 Other real estate owned 245 130 Other repossessed assets 291 343 ---------- ---------- Total nonperforming assets $ 9,030 $ 8,596 ========== ========== ALLOWANCE FOR LOAN AND LEASE LOSSES Balance, beginning of period $ 14,660 $ 13,592 Provision charged to operating expense 985 4,283 Loans charged off (837) (3,757) Recoveries 267 542 Additions related to acquisitions - - ---------- ---------- Balance, end of period $ 15,075 $ 14,660 ========== ========== ASSET QUALITY RATIOS Ratio of nonperforming loans to total loans & leases 0.78% 0.73% Ratio of nonperforming assets to total assets 0.55 0.52 Ratio of net loan chargeoffs to average loans and leases 0.05 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 177.49 180.47 As of and As of and for the for the quarter year ended ended March 31 December 31 2001 2000 ---------------------------- BALANCE SHEET DATA Total Assets $1,512,050 $1,466,387 Securities 262,601 228,065 Total loans and leases 1,057,788 1,042,096 Allowance for loan & lease losses 14,100 13,592 Total deposits 1,105,103 1,101,313 Long-term debt 119,466 102,856 Total stockholders' equity 99,344 96,146 PER COMMON SHARE DATA Book value per common share $ 10.33 $ 10.00 FAS 115 effect on book value per common share 0.30 0.14 LOAN AND LEASE DATA Commercial and commercial real estate $ 578,633 $ 550,366 Residential mortgage 203,703 215,638 Agricultural and agricultural real estate 135,034 133,614 Consumer 127,109 128,685 Direct financing leases, net 17,249 17,590 Unearned discount and deferred loan fees (3,940) (3,797) ---------- ---------- Total Loans and Leases $1,057,788 $1,042,096 ========== ========== ASSET QUALITY Nonaccrual loans $ 4,887 $ 5,860 Restructured loans 354 357 Loans past due ninety days or more as to interest or principal payments 433 523 Other real estate owned 257 489 Other repossessed assets 260 219 ---------- ---------- Total nonperforming assets $ 6,191 $ 7,448 ========== ========== ALLOWANCE FOR LOAN AND LEASE LOSSES Balance, beginning of period $ 13,592 $ 10,844 Provision charged to operating expense 721 3,301 Loans charged off (298) (2,280) Recoveries 85 585 Additions related to acquisitions - 1,142 ---------- ---------- Balance, end of period $ 14,100 $ 13,592 ========== ========== ASSET QUALITY RATIOS Ratio of nonperforming loans to total loans & leases 0.54% 0.65% Ratio of nonperforming assets to total assets 0.41 0.51 Ratio of net loan chargeoffs to average loans and leases 0.02 0.17 Allowance for loan losses as a percent of loans 1.33 1.30 Allowance for loan losses as percent of nonperforming loans and leases 248.51 201.60 HEARTLAND FINANCIAL USA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA For the Quarter Ended March 31, 2002 2001 ------------------- NONINTEREST INCOME Service charges and fees $ 1,933 $ 1,461 Trust fees 832 766 Brokerage commissions 127 126 Insurance commissions 217 251 Securities gains, net 81 572 Loss on trading account securities (28) (225) Rental income on operating leases 3,856 3,854 Gain on sale of loans 1,007 393 Other noninterest income 447 228 -------- -------- Total noninterest income $ 8,472 $ 7,426 ======== ======== NONINTEREST EXPENSE Salaries and employee benefits $ 6,985 $ 6,210 Occupancy 777 825 Furniture and equipment 818 806 Depreciation on equipment under operating leases 3,030 2,918 Outside services 881 753 FDIC deposit insurance assessment 53 51 Advertising 452 379 Goodwill and core deposit intangibles amortization 254 418 Other noninterest expenses 2,108 1,913 -------- -------- Total noninterest expense $ 15,358 $ 14,273 ======== ========