Amended Form 10-K FYE 12-31-2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
                                                          
 
FORM 10-K/A
(Amendment No. 1)
 
                                                          
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
 SECURITIES EXCHANGE ACT OF 1984

For the fiscal year ended December 31, 2003

Commission File Number: 0-24724

HEARTLAND FINANCIAL USA, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)

42-1405748
(I.R.S. Employer identification number)
 
1398 Central Avenue, Dubuque, Iowa 52001
(Address of principal executive offices) (Zip Code)

(563) 589-2100
(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:


Trust Preferred Securities
(issued by Heartland Financial Capital Trust I)
(Title of Exchange Class)


American Stock Exchange
(Name of Each Exchange on which Registered)


Securities registered pursuant to Section 12(g) of the Act:

Common Stock $1.00 par value
Preferred Share Purchase Rights
(Title of Class)
 
     
 
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
The index to exhibits follows the signature page.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x  No o

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the last sales price quoted on the over-the-counter market bulletin board on June 30, 2003, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $255,261,888.* Such figures include 2,298,708 shares of the Registrant's Common Stock (restated to reflect the three-for-two stock split effected in the form of a dividend on December 29, 2003) held in a fiduciary capacity by the Trust Department of the Dubuque Bank and Trust Company, a wholly-owned subsidiary of the Registrant.

*      Based on the last sales price of the Registrant's common stock on June 30, 2003, and reports of beneficial ownership filed by directors and executive officers of Registrant and by beneficial owners of more than 5% of the outstanding shares of common stock of Registrant; however, such determination of shares owned by affiliates does not constitute an admission of affiliate status or beneficial interest in shares of Registrant's common stock.
 
As of March 9, 2004, the Registrant had issued and outstanding 15,171,786 shares of common stock, $1.00 par value per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2004 Annual Meeting of Stockholders are incorporated by reference into Part III.
 
 
EXPLANATORY NOTE
 
This Amendment No. 1 to Heartland Financial USA, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2003, is being filed to add the Independent Auditors' Report to Item 8 of Part II. This Independent Auditors' Report was inadvertently omitted from the original Annuarl Report on Form 10-K filed on March 15, 2004. In accordance with Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, the Registrant has included in this Amendment No. 1 only Item 8. of Part II. The remainder of the information contained in the original filing is not amended hereby.
 
 
 
ITEM 8.

HEARTLAND FINANCIAL USA, INC.
 
 
 
 
CONSOLIDATED BALANCE SHEETS
 
 
 
 
(Dollars in thousands, except per share data)
 
 
 
 
 
  
Notes
December 31,
 2003
December 31,
2002
     
 
 
ASSETS
 
 
    
 
    
 
    
 
  
Cash and due from banks
   
4
 
$
68,424
 
$
61,106
 
Federal funds sold and other short-term investments
   
 
    
3,445
   
39,886
 
         
 
 
Cash and cash equivalents
   
 
    
71,869
   
100,992
 
Time deposits in other financial institutions
   
 
    
1,132
   
1,677
 
Securities:
   
5
   
 
    
 
  
Trading, at fair value
   
 
    
1,073
   
915
 
 
    
 
    
 
    
 
  
Available for sale-at fair value (cost of $441,606 for 2003 and $381,398 for 2002)
   
 
    
450,680
   
389,900
 
Loans and leases:
   
6
   
 
    
 
  
Held for sale
   
 
    
25,678
   
23,167
 
Held to maturity
   
 
    
1,322,549
   
1,152,069
 
Allowance for loan and lease losses
   
7
   
(18,490
)
 
(16,091
)
         
 
 
Loans and leases, net
   
 
    
1,329,737
   
1,159,145
 
Assets under operating lease
   
 
    
31,636
   
30,367
 
Premises, furniture and equipment, net
   
8
   
49,842
   
35,591
 
Other real estate, net
   
 
    
599
   
452
 
Goodwill, net
   
 
    
20,167
   
16,050
 
Core deposit premium and mortgage servicing rights
   
9
   
5,069
   
4,879
 
Other assets
   
 
    
56,562
   
46,011
 
         
 
 
TOTAL ASSETS
   
 
  
$
2,018,366
 
$
1,785,979
 
     
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
   
 
    
 
    
 
  
                     
LIABILITIES:
   
 
    
 
    
 
  
Deposits:
   
10
   
 
    
 
  
Demand
   
 
  
$
246,282
 
$
197,516
 
Savings
   
 
    
569,286
   
511,979
 
Time
   
 
    
676,920
   
628,490
 
         
 
 
Total deposits
   
 
    
1,492,488
   
1,337,985
 
Short-term borrowings
   
11
   
176,835
   
161,379
 
Other borrowings
   
12
   
173,958
   
126,299
 
Accrued expenses and other liabilities
   
 
    
34,162
   
36,275
 
         
 
 
TOTAL LIABILITIES
   
 
    
1,877,443
   
1,661,938
 
 
    
 
    
 
    
 
  
STOCKHOLDERS' EQUITY:
   
16,17,18,19
   
 
    
 
  
Preferred stock (par value $1 per share; authorized, 184,000 shares, none issued or outstanding)
   
 
    
-
   
-
 
   
 
    
 
    
 
  
Series A Junior Participating preferred stock (par value $1 per share; authorized,
    
 
    
-
    
-
  
        16,000 shares, none issued or outstanding)    
 
    
 
    
 
  
Common stock (par value $1 per share; authorized, 16,000,000 shares at
    
 
    
 
    
 
  
December 31, 2003 and December 31, 2002; issued 15,261,714 and 9,905,783 shares at December 31, 2003 and December 31, 2002, respectively)
   
 
    
15,262
   
9,906
 
Capital surplus
   
 
    
20,065
   
16,725
 
Retained earnings
   
 
    
102,584
   
94,048
 
Accumulated other comprehensive income
   
 
    
4,794
   
4,230
 
Treasury stock at cost (98,211 shares at December 31, 2003 and 59,369 shares at
    
 
    
 
    
 
  
December 31, 2002, respectively)
   
 
    
(1,782
)
 
(868
)
         
 
 
TOTAL STOCKHOLDERS' EQUITY
   
 
    
140,923
   
124,041
 
         
 
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   
 
  
$
2,018,366
 
$
1,785,979
 
     
 
 
See accompanying Notes to Consolidated Financial Statements.
   
 
    
 
    
 
  
 

HEARTLAND FINANCIAL USA, INC.  
 
CONSOLIDATED STATEMENTS OF INCOME  
 
(Dollars in thousands, except per share data)  
 
 
 
For the Years Ended December 31,
 
  
Notes
     2003
     2002
     2001
     
 
 
 
INTEREST INCOME:
   
 
    
 
    
 
    
 
  
Interest and fees on loans and leases
   
6
 
$
85,936
 
$
83,553
 
$
89,452
 
Interest on securities:
   
 
    
 
    
 
    
 
  
Taxable
   
 
    
9,100
   
13,132
   
14,143
 
Nontaxable
   
 
    
3,952
   
2,757
   
1,790
 
Interest on federal funds sold
   
 
    
355
   
322
   
1,981
 
Interest on interest bearing deposits in other financial institutions
   
 
    
174
   
248
   
243
 
         
 
 
 
TOTAL INTEREST INCOME
   
 
    
99,517
   
100,012
   
107,609
 
         
 
 
 
INTEREST EXPENSE:
   
 
    
 
    
 
    
 
  
Interest on deposits
   
10 
    
27,763
   
31,395
   
45,783
 
Interest on short-term borrowings
   
 
    
2,350
   
2,643
   
4,515
 
Interest on other borrowings
   
 
    
8,214
   
8,294
   
8,322
 
         
 
 
 
TOTAL INTEREST EXPENSE
   
 
    
38,327
   
42,332
   
58,620
 
         
 
 
 
NET INTEREST INCOME
   
 
    
61,190
   
57,680
   
48,989
 
Provision for loan and lease losses
   
7
   
4,183
   
3,553
   
4,258
 
         
 
 
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE
    LOSSES
    
 
    
57,007
    
54,127
    
44,731
  
         
 
 
 
NONINTEREST INCOME:
   
 
    
 
    
 
    
 
  
Service charges and fees
   
 
    
6,207
   
5,977
   
4,667
 
Trust fees
   
 
    
3,814
   
3,407
   
3,148
 
Brokerage commissions
   
 
    
863
   
658
   
615
 
Insurance commissions
   
 
    
703
   
765
   
807
 
Securities gains, net
   
 
    
1,823
   
790
   
1,489
 
Gain (loss) on trading account securities
   
 
    
453
   
(598
)
 
(417
)
Impairment loss on equity securities
   
 
    
(317
)
 
(267
)
 
(773
)
Rental income on operating leases
   
 
    
13,807
   
14,602
   
15,446
 
Gains on sale of loans
   
 
    
6,339
   
4,656
   
2,738
 
Valuation adjustment on mortgage servicing rights
   
 
    
338
   
(469
)
 
-
 
Other noninterest income
   
 
    
2,511
   
1,124
   
900
 
         
 
 
 
TOTAL NONINTEREST INCOME
   
 
    
36,541
   
30,645
   
28,620
 
         
 
 
 
NONINTEREST EXPENSES:
   
 
    
 
    
 
    
 
  
Salaries and employee benefits
   
15
   
33,113
   
28,571
   
25,182
 
Occupancy
   
16
   
3,880
   
3,178
   
3,014
 
Furniture and equipment
   
 
    
4,115
   
3,273
   
3,144
 
Depreciation on equipment under operating leases
   
 
    
11,353
   
11,555
   
11,805
 
Outside services
   
 
    
4,695
   
4,318
   
3,433
 
FDIC deposit insurance assessment
   
 
    
218
   
209
   
208
 
Advertising
   
 
    
2,354
   
1,917
   
1,588
 
Goodwill amortization
   
 
    
-
   
-
   
1,057
 
Core deposit premium amortization
   
 
    
404
   
495
   
615
 
Other noninterest expenses
   
 
    
7,560
   
7,143
   
6,646
 
         
 
 
 
TOTAL NONINTEREST EXPENSES
   
 
    
67,692
   
60,659
   
56,692
 
         
 
 
 
INCOME BEFORE INCOME TAXES
   
 
    
25,856
   
24,113
   
16,659
 
Income taxes
   
14
   
8,137
   
7,523
   
5,530
 
         
 
 
 
INCOME FROM CONTINUING OPERATIONS   
 
    
17,719
   
16,590
   
11,129
 
Discontinued operations
   
 
    
 
    
 
    
 
  
Income from operation of discontinued branch (including gain on sale of $2,602)
   
 
    
-
   
3,751
   
469
 
Income taxes
   
 
    
-
   
1,474
   
184
 
         
 
 
 
Income on discontinued operation
   
 
    
-
   
2,277
   
285
 
         
 
 
 
NET INCOME
   
 
  
$
17,719
 
$
18,867
 
$
11,414
 
     
 
 
 
EARNINGS PER COMMON SHARE -  BASIC         $   1.18   $   1.28   $   0.79  
     
 
 
 
EARNINGS PER COMMON SHARE - DILUTED
         $   1.16   $  1.28   $  0.79  
     
 
 
 
CASH DIVIDENDS DECLARED PER COMMON SHARE
         $  0.27   $   0.27   $  0.27  
     
 
 
 
 
    
 
    
 
    
 
    
 
  
See accompanying Notes to Consolidated Financial Statements.          

HEARTLAND FINANCIAL USA, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the years ended December 31, 2003, 2002 and 2001
 
(Dollars in thousands)
 
 
 
 
 
  
      2003
      2002
      2001
   
 
 
 
Cash Flows From Operating Activities:
   
 
    
 
    
 
  
Net income
 
$
17,719
 
$
18,867
 
$
11,414
 
Adjustments to reconcile net income to net cash provided by operating activities:
   
 
    
 
    
 
  
Depreciation and amortization
   
15,543
   
15,203
   
16,616
 
Provision for loan and lease losses
   
4,183
   
3,553
   
4,283
 
Provision for income taxes less than (in excess of) payments
   
716
   
1,996
   
(635
)
Net amortization of premium on securities
   
7,580 
    
4,420
   
1,285
 
Securities gains, net
   
(1,823
)
 
(790
)
 
(1,489
)
(Increase) decrease in trading account securities
   
(158
)
 
613
   
(1,528
)
Loss on impairment of equity securities
   
317
   
267
   
773
 
Loans originated for sale
   
(434,851
)
 
(278,650
)
 
(207,332
)
Proceeds on sales of loans
   
438,679
   
287,106
   
201,565
 
Net gain on sales of loans
   
(6,339
)
 
(4,656
)
 
(2,738
)
Increase (decrease) in accrued interest receivable
   
(104
)
 
235
   
1,603
 
Increase (decrease) in accrued interest payable
   
468
   
491
   
(1,597
)
Other, net
   
(1,805
) 
  
199
   
(4,923
)
   
 
 
 
Net cash provided by operating activities
   
40,125
   
48,854
   
17,297
 
 
    
 
    
 
    
 
  
Cash Flows From Investing Activities:
   
 
    
 
    
 
  
Purchase of time deposits
   
(95
)
 
(1,068
)
 
-
 
Proceeds on maturities of time deposits
   
700
   
3
   
959
 
Proceeds from the sale of securities available for sale
   
81,545
   
47,086
   
65,010
 
Proceeds from the maturity of and principal paydowns on securities available for sale
   
188,529
   
151,099
   
109,436
 
Purchase of securities available for sale
   
(334,944
)
 
(263,566
)
 
(267,354
)
Net increase in loans and leases
   
(171,795
)
 
(109,282
)
 
(55,118
)
Purchase of bank-owned life insurance policies
   
(10,000
)
 
-
   
(8,568
)
Increase in assets under operating leases
   
(12,622
)
 
(6,495
)
 
(11,663
)
Capital expenditures
   
(18,677
)
 
(7,398
)
 
(4,602
)
Cash and cash equivalents received for sale of operation
   
-
    
30,469
   
-
  
Proceeds on sale of OREO and other repossessed assets
   
1,249
   
1,192
   
790
 
   
 
 
 
Net cash used by investing activities
   
(276,110
)
 
(157,960
)
 
(171,110
)
 
    
 
    
 
    
 
  
Cash Flows from Financing Activities:
   
 
    
 
    
 
  
Net increase in demand deposits and and savings accounts
   
106,073
   
58,758
   
111,338
 
Net increase (decrease) in time deposit accounts
   
48,430
   
77,802
   
(7,492
)
Net increase in short-term borrowings
   
15,456
   
676
   
20,794
 
Proceeds from other borrowings
   
52,750
   
7,840
   
69,381
 
Repayments of other borrowings
   
(5,091
)
 
(25,330
)
 
(28,448
)
Purchase of treasury stock
   
(7,999
)
 
(1,348
)
 
(1,026
)
Proceeds from sale of common stock
   
1,339
   
2,076
   
1,689
 
Dividends
   
(4,096
)
 
(3,926
)
 
(3,560
)
   
 
 
 
Net cash provided by financing activities
   
206,862
   
116,548
   
162,676
 
   
 
 
 
Net increase (decrease) in cash and cash equivalents
   
(29,123
)
 
7,442
   
8,863
 
Cash and cash equivalents at beginning of year
   
100,992
   
93,550
   
84,687
 
   
 
 
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
71,869
 
$
100,992
 
$
93,550
 
   
 
 
 
Supplemental disclosures:
   
 
    
 
    
 
  
Cash paid for income/franchise taxes
 
$
7,795
 
$
6,648
 
$
6,365
 
Cash paid for interest
 
$
38,694
 
$
41,841
 
$
61,790
 
Securities held to maturity transferred to securities available for sale
 
$
-
 
$
-
 
$
2,154
 
 
    
 
    
 
    
 
  
See accompanying Notes to Consolidated Financial Statements.        
 

HEARTLAND FINANCIAL USA, INC.
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
 
For the years ended December 31, 2003, 2002 and 2001 (Dollars in thousands, except per share data)
 
               
 
  
 
 
Common Stock
 
 
Capital Surplus
 
 
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
 
 
Treasury Stock
 
 
 
Total
 
Balance at January 1, 2001
 
$
9,906
 
$
18,812
 
$
71,253
 
$
1,301
 
$
(5,126
)
$
96,146
 
Net Income-2001
   
 
    
 
    
11,414
   
 
    
 
    
11,414
 
Unrealized gain on securities available for sale
   
 
    
 
    
 
    
3,796
   
 
    
3,796
 
Unrealized gain (loss) on derivatives arising during the period net of reclassification of $46
   
 
    
 
    
 
    
350
   
 
    
350
 
Reclassification adjustment for net security gains realized in net income
   
 
    
 
    
 
    
(716
)
 
 
    
(716
)
Income taxes
   
 
    
 
    
 
    
(1,166
)
 
 
    
(1,166
)
   
 
 
 
 
 
 
Comprehensive income
   
 
    
 
    
 
    
 
    
 
    
13,678
 
Cash dividends declared:
   
 
    
 
    
 
    
 
    
 
    
 
  
Common, $.25 per share
   
 
    
 
    
(3,560
)
 
 
    
 
    
(3,560
)
Purchase of 118,884 shares of common stock
   
 
    
 
    
 
    
 
    
(1,026
)
 
(1,026
)
Sale of 211,197 shares of common stock
   
 
    
(696
)
 
 
    
 
    
2,548
   
1,852
 
   
 
 
 
 
 
 
Balance at December 31, 2001
 
$
9,906
 
$
18,116
 
$
79,107
 
$
3,565
 
$
(3,604
)
$
107,090
 
Net Income-2002
   
 
    
 
    
18,867
   
 
    
 
    
18,867
 
Unrealized gain on securities available for sale
   
 
    
 
    
 
    
3,630
   
 
    
3,630
 
Unrealized gain (loss) on derivatives arising during the period, net of reclassification of $667
   
 
    
 
    
 
    
(2,100
)
 
 
    
(2,100
)
Reclassification adjustment for net security gains realized in net income
   
 
    
 
    
 
    
(523
)
 
 
    
(523
)
Income taxes
   
 
    
 
    
 
    
(342
)
 
 
    
(342
)
   
 
 
 
 
 
 
Comprehensive income
   
 
    
 
    
 
    
 
    
 
    
19,532
 
Cash dividends declared:
   
 
    
 
    
 
    
 
    
 
    
 
  
Common, $.27 per share
   
 
    
 
    
(3,926
)
 
 
    
 
    
(3,926
)
Purchase of 143,314 shares of common stock
   
 
    
 
    
 
    
 
    
(1,348
)
 
(1,348
)
Sale of 393,307 shares of common stock
   
 
    
(1,391
)
 
 
    
 
    
4,084
   
2,693
 
   
 
 
 
 
 
 
Balance at December 31, 2002
 
$
9,906 
  
$
16,725 
 
$
94,048 
  
$
4,230 
  
$
(868 
 ) 
$
124,041
 
Net Income-2003
   
 
    
 
    
17,719
   
 
    
 
    
17,719
 
Unrealized gain on securities available for sale
   
 
    
 
    
 
    
2,153
   
 
    
2,153
 
Unrealized gain (loss) on derivatives arising during the period, net of reclassification of $123
   
 
    
 
    
 
    
208
   
 
    
208
 
Reclassification adjustment for net security gains realized in net income
   
 
    
 
    
 
    
(1,506
)
 
 
    
(1,506
)
Income taxes
   
 
    
 
    
 
    
(291
)
 
 
    
(291
)
   
 
 
 
 
 
 
Comprehensive income
   
 
    
 
    
 
    
 
    
 
    
18,283
 
Cash dividends declared:
   
 
    
 
    
 
    
 
    
 
    
 
  
Common, $.27 per share
   
 
    
 
    
(4,096
)
 
 
    
 
    
(4,096
)
Three-for-two stock split
   
5,087
   
 
    
(5,087
)
 
 
    
 
    
 
  
Purchase of 427,344 shares of common stock
   
 
    
 
    
 
    
 
    
(7,999
)
 
(7,999
)
Issuance of 821,226 shares of common stock
   
269
   
3,340
   
 
    
 
    
7,085
   
10,694
 
   
 
 
 
 
 
 
Balance at December 31, 2003
 
$
15,262 
  
$
20,065 
  
$
102,584 
  
$
4,794 
  
$
(1,782
)
$
140,923
 
   
 
 
 
 
 
 
See accompanying Notes to Consolidated Financial Statements.


INDEPENDENT AUDITORS’ REPORT

 
The Board of Directors
Heartland Financial USA, Inc.:

We have audited the accompanying consolidated balance sheets of Heartland Financial USA, Inc. and subsidiaries (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heartland Financial USA, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
 
As discussed in note 1 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002.

KPMG LLP

Des Moines, Iowa
January 21, 2004  
 
 
     
 
SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 17, 2004.
     
  HEARTLAND FINANCIAL USA, INC.
 
 		  
 		  
 
Date:  March 17, 2004 By:   /s/ Lynn B. Fuller
 
  Principal Executive Officer 

     
 
 		  
 		  
 
Date:  March 17, 2004 By:   /s/ John K. Schmidt
 
 
Executive Vice President and Principal Financial and
Accounting Officer

 3.    INDEX OF EXHIBITS
 
31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).