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Heartland Financial USA, Inc.
April 6, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the annual stockholders'
meeting of Heartland Financial USA, Inc. to be held at the
corporate headquarters, located at 1398 Central Avenue, Dubuque,
Iowa, on Wednesday, May 20, 1998, at 2:30 p.m. The accompanying
Notice of Annual Meeting of Stockholders and Proxy Statement
discuss the business to be conducted at the meeting. A copy of
the Company's 1997 Annual Report to Stockholders is enclosed. At
the meeting we shall report on Company operations and the outlook
for the year ahead.
Your Board of Directors has nominated three persons to serve
as Class II directors, and proposes to amend Article IV of the
Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 7,000,000 to 12,000,000
shares. Additionally, the Company's management has selected and
recommends that you ratify the selection of KPMG Peat Marwick LLP
to continue as the Company's independent public accountants for
the year ending December 31, 1998. We recommend that you vote
your shares for each of the director nominees and in favor of the
proposals.
We encourage you to attend the meeting in person. Whether
or not you plan to attend, however, please complete, sign and
date the enclosed proxy and return it in the accompanying
postpaid return envelope as promptly as possible.
We look forward with pleasure to seeing and visiting with
you at the meeting.
With best personal wishes,
\s\ Lynn S. Fuller
---------------------------
Lynn S. Fuller
Chairman of the Board
1398 Central Avenue Dubuque, Iowa 52001 (319) 589-2000
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of HEARTLAND FINANCIAL
USA, INC. (the "Company") will be held at the corporate
headquarters, 1398 Central Avenue, Dubuque, Iowa, on Wednesday,
May 20, 1998, at 2:30 p.m., for the purpose of considering and
voting upon the following matters:
1.to elect three (3) Class II directors.
2.to amend Article IV of the Company's Certificate of
Incorporation to increase the number of authorized shares
of Common Stock, $1.00 par value per share, from
7,000,000 to 12,000,000 shares.
3.to approve the appointment of KPMG Peat Marwick LLP as
independent public accountants for the Company for the
fiscal year ending December 31, 1998.
4.to transact such other business as may properly be
brought before the meeting or any adjournments or
postponements thereof.
The Board of Directors is not aware of any other business to
come before the meeting. Stockholders of record at the close of
business on March 23, 1998, are the stockholders entitled to vote
at the meeting and any adjournments or postponements thereof.
By order of the Board of Directors
/s/ Lois K. Pearce
----------------------------------
Lois K. Pearce
Secretary
Dubuque, Iowa
April 6, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT
THE MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED
STATES.
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PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Heartland Financial
USA, Inc. (the "Company") of proxies to be voted at the Annual
Meeting of Stockholders to be held at the corporate headquarters
located at 1398 Central Avenue, Dubuque, Iowa, on Wednesday,
May 20, 1998, at 2:30 p.m. local time, or at any adjournments or
postponements thereof.
The Company, a Delaware corporation, is a multi-bank and
thrift holding company with 17 locations in Iowa, Illinois and
Wisconsin. The Company is the parent of Dubuque Bank and Trust
Company, Dubuque, Iowa ("DB&T"); Galena State Bank and Trust
Company, Galena, Illinois ("GSB"); First Community Bank, a
Federal Savings Bank, Keokuk, Iowa ("FCB"); Riverside Community
Bank, Rockford, Illinois ("RCB") and Wisconsin Community Bank,
Cottage Grove, Wisconsin ("WCB"). These banks are collectively
referred to as the "Banks". The Company also has non-banking
subsidiaries involved in providing insurance, consumer credit
loans, fleet vehicle leasing and related services and products.
The Banks and other subsidiaries of the Company are collectively
referred to as the "Subsidiaries".
The Proxy Statement and the accompanying Notice of Meeting
and proxy are first being mailed to holders of shares of common
stock, par value $1.00 per share, of the Company ("Common
Stock"), on or about April 6, 1998.
Voting Rights and Proxy Information
All shares of Common Stock represented at the annual meeting
by properly executed proxies received prior to or at the annual
meeting, and not revoked, will be voted at the annual meeting in
accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted for the
nominees and for adoption of the proposals set forth in this
Proxy Statement. A majority of the shares of the Common Stock
present in person or represented by proxy will constitute a
quorum for purposes of the meeting. Abstentions and broker non-
votes will be counted for purposes of determining a quorum.
Stockholders of record on the books of the Company at the
close of business on March 23, 1998, will be entitled to vote at
the meeting or any adjournments or postponements of the meeting.
On March 18, 1998, the Company had outstanding 4,728,107 shares
of Common Stock, with each share entitling its owner to one vote
on each matter submitted to a vote at the annual meeting.
Directors shall be elected by a plurality of the votes present in
person or represented by proxy at the meeting and entitled to
vote. In all other matters, the affirmative vote of the majority
of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be
required to constitute stockholder approval. Abstentions will be
treated as votes against any proposal and broker non-votes will
have no effect on the vote.
The Board of Directors would like to have all stockholders
represented at the annual meeting. Whether or not you plan to
attend, please complete, sign and date the enclosed proxy and
return it in the accompanying postpaid return envelope as
promptly as possible. A proxy given pursuant to this
solicitation may be revoked at any time before it is voted.
Proxies may be revoked by: (i) duly executing and delivering to
the Secretary of the Company a later dated proxy relating to the
same shares prior to the exercise of such proxy; (ii) filing with
the Secretary of the Company at or before the meeting a written
notice of revocation bearing a later date than the proxy; or
(iii) attending the meeting and voting in person (although
attendance at the meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy
should be delivered to Ms. Lois K. Pearce, Secretary, Heartland
Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001.
ELECTION OF DIRECTORS
At the annual meeting to be held on May 20, 1998, the
stockholders will be entitled to elect three Class II directors
for terms expiring in 2001. The directors of the Company are
divided into three classes having staggered terms of three years.
Each of the nominees for election as Class II directors are
incumbent directors. The Company has no knowledge that any of
the nominees will refuse or be unable to serve, but if any of the
nominees become unavailable for election, the holders of proxies
reserve the right to substitute another person of their choice as
a nominee when voting at the meeting.
Set forth below is information concerning the nominees for
election and for the other directors whose terms of office will
continue after the meeting, including the age, year first elected
a director and business experience of each during the previous
five years as of March 23, 1998. Unless otherwise indicated,
each person has held the positions indicated for at least five
years. The nominees, if elected at the annual meeting, will
serve as Class II directors for three year terms expiring in
2001. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR
SHARES FOR EACH OF THE NOMINEES FOR DIRECTOR.
NOMINEES
Position with the Company
Name Served as Company and the Subsidiaries and
(Age) Director Since and Principal Occupation
- ------------------- ------------------- -------------------------
CLASS II
(Term Expires 2001)
Mark C. Falb 1995 Director of DB&T;
(Age 50) President and Chief
Executive Officer (1983-
1992) and Chairman of the
Board (1992) of Wm. C.
Brown Companies; Westmark
Enterprises,
Inc.,President and CEO
(1992-1993), Chairman and
CEO (1993-present);
Kendall/Hunt Publishing
Co., Chairman and CEO
(1992-present).
James A. Schmid 1981 Vice Chairman of the
(Age 74) Board of the Company
(1991-present); Chairman
of the Board and Director
of DB&T; Director of DB&T
Insurance Inc., Citizens
Finance Co. and DB&T
Community Development
Corp. (1994-present);
Chairman of the Board
(1991-present), President
(1974-1992) and Chief
Executive Officer (1992-
present) of Crescent
Electric Supply Company.
Robert Woodward 1987 Director of DB&T, DB&T
(Age 61) Insurance Inc.,
Citizens Finance Co. and
DB&T Community
Development Corp.(1994-
present); Chairman of the
Board and Chief Executive
Officer of Woodward
Communications, Inc.
(1995-present).
CONTINUING DIRECTORS
Position with the Company
Name Served as Company and the Subsidiaries and
(Age) Director Since and Principal Occupation
- ------------------- ------------------- -------------------------
CLASS III
(Term Expires 1999)
Lynn S. Fuller 1981 Chairman of the Board and
(Age 73) Chief Executive
Officer of the Company;
Director and Vice
Chairman of the Board of
DB&T; Director of DB&T
Insurance Inc., Citizens
Finance Co. and DB&T
Community Development
Corp.(1994-present).
Evangeline K. 1981 Director of DB&T, DB&T
Jansen Insurance Inc., Citizens
(Age 81) Finance Co. and DB&T
Community Development
Corp. (1994-present).
Position with the Company
Name Served as Company and the Subsidiaries and
(Age) Director Since and Principal Occupation
- ------------------ ------------------- ---- --------------------
CLASS I
(Term Expires 2000)
Lynn B. Fuller 1987 President of the Company;
(Age 48) Director, President
and Chief Executive
Officer of DB&T; Director
of GSB; Director and
President of DB&T
Insurance Inc., Citizens
Finance Co. and DB&T
Community Development
Corp. (1994-present);
Director of Keokuk
Bancshares (1994-
present), FCB (1994-
present) and DBT
Investment (1994-
present); Director and
Chairman of RCB (1995-
present); Director and
Chairman of ULTEA, Inc.
(1996-present); Director,
WCB (1997-present).
Gregory R. Miller 1994 Executive Vice President
(Age 49) of the Company (1996-
present); Director (1991-
present) and Vice-
Chairman of the Board of
FCB (1998-present); Chief
Executive Officer and
President of FCB (1991-
1997); President of KFS
Services (1991-1997).
All of the Company's directors will hold office for the
terms indicated, or until their respective successors are duly
elected and qualified. There are no arrangements or
understandings between the Company and any other person pursuant
to which any of the Company's directors have been selected for
their respective positions. No member of the Board of Directors
is related to any other member of the Board of Directors, except
that Lynn S. Fuller is the father of Lynn B. Fuller.
Meetings of the Board of Directors and Committees
Regular meetings of the Board of Directors of the Company
are held quarterly. During 1997, the Board of Directors held six
regular meetings and two special meetings. All directors during
their terms of office in 1997 attended at least 75% of the total
number of meetings of the Board of Directors of the Company and
of meetings held by all committees of the Board on which any such
director served. The Company does not currently have a standing
nominating committee. Rather, the entire Board participates in
the process of selecting nominees to fill vacancies on the Board.
Pursuant to the Company's bylaws, the Board of Directors will
consider nominees recommended by stockholders provided any such
recommendation is made in writing and delivered to the Secretary
of the Company no later than 14 days prior to the date of the
annual meeting at which directors are to be elected and otherwise
complies with the Company's bylaws.
The Compensation Committee, consisting of directors Schmid
(Chairman), Falb, Jansen and Woodward, meets to review the
salary, other compensation and performance of the Chief Executive
Officer and each of the other executive officers named in the
Summary Compensation Table and recommends adjustments. During
1997, the Compensation Committee met five times.
The Audit Committee recommends independent auditors to the
Board, reviews the results of the auditors' services, reviews
with management and the internal auditor the systems of internal
control and internal audit reports and assures that the books and
records of the Company are kept in accordance with applicable
accounting principles and standards. The members of the Audit
Committee are directors Schmid (Chairman), Falb, Jansen and
Woodward. During 1997, the Audit Committee met two times.
Compensation of Directors
Each of the Company's directors is paid a fee of $415 for
each board meeting attended and $235 for each committee meeting
attended, except that Mr. Lynn B. Fuller receives no fees for his
services as director of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with
respect to the beneficial ownership of the Company's Common Stock
at March 23, 1998, by each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock,
by each director or nominee, by each executive officer named in
the Summary Compensation Table and by all directors and executive
officers of the Company as a group.
Amount and Nature
Name of Individual and of Beneficial Percent of
Number of Persons in Group Ownership (1) Class
- -------------------------- ------------------ ----------
5% Stockholders
Dubuque Bank and Trust Company
1398 Central Avenue
Dubuque, Iowa 52001 690,010 (2) 14.59%
Heartland Partnership, L.P.
1145 S. Grandview
Dubuque, Iowa 52003 278,000 (3) 5.88%
Directors
Mark C. Falb 89,536 (4) 1.89%
Lynn B. Fuller 103,711 (5) 2.19%
Lynn S. Fuller 475,661 (6) 10.06%
Evangeline K. Jansen 560,656 (7) 11.86%
Gregory R. Miller 106,582 (8) 2.25%
James A. Schmid 191,440 (9) 4.04%
Robert Woodward 215,710(10) 4.56%
Other Executive Officers
John K. Schmidt 14,343 .30% *
Kenneth J. Erickson 18,208 .39% *
Douglas J. Horstmann 17,715 .39% *
All directors and
executive officers
as a group (12 persons) 1,821,076 38.52%
* Less than one percent
(1) The information contained in this column is based upon
information furnished to the Company by the persons named above
and the members of the designated group. Amounts reported
include shares held directly as well as shares which are held in
retirement accounts and shares held by certain members of the
named individuals' families or held by trusts of which the named
individual is a trustee or substantial beneficiary, with respect
to which shares the respective director may be deemed to have
sole or shared voting and/or investment power. The nature of
beneficial ownership for shares shown in this column is sole
voting and investment power, except as set forth in the footnotes
below. Inclusion of shares shall not constitute an admission of
beneficial ownership or voting and investment power over included
shares.
(2) Includes 214,477 shares over which DB&T has sole voting
and investment power and 209,533 shares over which DB&T has
shared voting or investment power.
(3) Mr. Lynn S. Fuller, Chairman of the Board and Chief
Executive Officer of the Company, is the General Partner of
Heartland Partnership, L.P., and in such capacity exercises sole
voting and investment power over such shares.
(4) Includes 53,488 shares over which Mr. Falb has shared
voting and investment power and 22,352 shares held by Mr. Falb's
spouse, as trustee, over which Mr. Falb has no voting or
investment power.
(5) Includes an aggregate of 2,020 shares held by Mr.
Fuller's spouse and minor child, over which shares Mr. Fuller has
shared voting and investment power. Excludes 7,000 shares held
by the Heartland Partnership, L.P. over which Mr. Fuller has no
voting or investment power but in which Mr. Fuller does have a
beneficial interest.
(6) Includes shares held by the Heartland Partnership,
L.P., as well as 36,142 shares held by a trust for which Mr.
Fuller's spouse is a trustee and over which shares Mr. Fuller has
shared voting and investment power.
(7) Represents shares held in certain trusts for which Ms.
Jansen serves as trustee or co-trustee. Voting and investment
power is shared with respect to 144,256 of such shares.
(8) Includes an aggregate of 37,050 shares held by Mr.
Miller's spouse, over which shares Mr. Miller has shared voting
and investment power.
(9) Includes 5,392 shares held by Mr. Schmid's wife, over
which Mr. Schmid has shared voting and investment power, 73,336
shares held in trust over which Mr. Schmid has sole voting and
investment power, and 42,192 shares held by Crescent Realty
Corp., of which Mr. Schmid is a controlling person.
(10) Includes an aggregate of 130,600 shares held by various
trusts of which Mr. Woodward is a trustee and over which shares
Mr. Woodward has shared voting and investment power over 124,200
shares and sole voting and investment power over 6,400 shares.
(11) Includes 2,400 shares held by Mr. Erickson jointly with
his spouse, over which shares Mr. Erickson has shared voting and
investment power.
(12) Includes 9,000 shares held by Mr. Horstmann's spouse,
over which shares Mr. Horstmann has shared voting and investment
power.
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") requires that the Company's directors, executive
officers and 10% stockholders file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
Such persons are also required to furnish the Company with copies
of all Section 16(a) forms they file. Based solely upon the
Company's review of such forms, the Company is not aware that any
of its directors, executive officers or 10% stockholders failed
to comply with the filing requirements of Section 16(a) during
the period commencing January 1, 1997 through December 31, 1997.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation paid or granted to the Company's Chief Executive
Officer and to each of the other five most highly compensated
executive officers of the Company or the Subsidiaries for the
fiscal year ended December 31, 1997:
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
(a) (b) (c) (d)
Fiscal
Year
Ended
Name and Principal December Salary Bonus
Position 31st ($)(1) ($)(2)
- ------------------------- ---------- --------- --------
Lynn B. Fuller 1997 $165,000 $73,042
President of the Company 1996 157,000 72,523
1995 155,000 83,031
Lynn S. Fuller
Chairman and Chief 1997 $ 4,243 $ ---
Executive Officer 1996 105,000 ---
of the Company 1995 105,000 ---
Gregory R. Miller 1997 $103,591 $20,000
Executive Vice President 1996 103,591 14,304
of the Company 1995 99,607 14,304
John K. Schmidt
Executive Vice President 1997 $105,000 $29,182
and Chief Financial Officer 1996 99,000 26,257
of the Company 1995 95,000 25,575
Kenneth J. Erickson 1997 $100,000 $20,808
Senior Vice President 1996 96,000 22,946
of the Company 1995 90,000 15,940
Long-term
Compensation
---------------------
(a) (b) (f) (g) (h)
Fiscal
Year
Ended Restricted Underlying All Other
Name and Principal December Stock Options/ Compensa-
Position 31st Awards ($) SARs(#) tion($)(3)
- ------------------ ---------- ---------- ---------- ----------
Lynn B. Fuller 1997 $ --- $12,000 $47,179
President 1996 --- 12,000 28,168
of the Company 1995 --- 24,000 20,473
Lynn S. Fuller
Chairman and Chief 1997 --- --- 23,678
Executive Officer 1996 --- --- 25,036
of the Company 1995 --- --- 19,964
Gregory R. Miller 1997 $ --- 6,000 $29,307
Executive Vice 1996 --- 6,000 20,043
President 1995 --- 12,000 16,930
of the Company
John K. Schmidt 1997 $ --- 8,000 $30,071
Executive Vice 1996 --- 8,000 18,602
President and 1995 --- 16,000 15,650
Chief Financial
Officer of the Company
Kenneth J. Erickson 1997 $ --- 8,000 $31,382
Senior Vice President 1996 --- 8,000 19,117
of the Company 1995 --- 16,000 13,899
(1) Includes amounts deferred under the Company's
Retirement Plan.
(2) The amounts shown represent amounts received under the
Company's Management Incentive Compensation Plan.
(3) The amounts shown represent amounts contributed on behalf of
the respective officer to the Company's Retirement Plan and the
allocable portion of the premium paid for life insurance under
the Company's split-dollar life insurance plan for certain of the
named executive officers. For Messrs. Lynn B. Fuller and Lynn S.
Fuller, the amounts shown include an automobile allowance. For
1996 and 1997, such amounts also include the aggregate value of
the discount to market price of shares purchased under the
Company's Employee Stock Purchase Plan and/or the Company's
Executive Restricted Stock Purchase Plan. For 1996, the amount
contributed for each officer under the Retirement Plan, and the
aggregate below market discount realized by each named
individual, is as follows; $18,622 and $7,171 for Mr. Lynn B.
Fuller, $14,361 and $4,244 for Mr. Lynn S. Fuller, $15,117 and
$4,926 for Mr. Miller, $15,759 and $2,705 for Mr. Schmidt and
$14,349 and $4,587 for Mr. Erickson. For 1997, such amounts were
$19,632 and $25,023 for Mr. Lynn B. Fuller, $12,484 and $16,536
for Mr. Miller, $16,105 and $13,799 for Mr. Schmidt and $15,085
and $16,051 for Mr. Erickson.
Stock Option Information
The following table sets forth certain information
concerning the number and value of stock options granted in the
last fiscal year to the individuals named in the Summary
Compensation Table:
OPTIONS GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d)
% of Total
Option Granted
Options to Employees Exercise or
Granted in Fiscal Base Price
Name (#) (1) Year ($/Sh)
- ----------------------- ----------------------- -----------
Lynn B. Fuller 12,000 18% $24.00
Gregory R. Miller 6,000 9% 24.00
John K. Schmidt 8,000 12% 24.00
Kenneth J. Erickson 8,000 12% 24.00
(a) (e) (f)
Grant Date
Expiration Present Value
Name Date ($) (2)(3)
- ---------------------- ---------- -------------
Lynn B. Fuller 01/02/07 $102,360
Gregory R. Miller 01/02/07 51,180
John K. Schmidt 01/02/07 68,240
Kenneth J. Erickson 01/02/07 68,240
(1) Options become exercisable in three equal portions on the
day after the third, fourth and fifth anniversaries of the January 2,
1997 date of grant.
(2) The Black Scholes valuation model was used to determine the
grant date present values. Significant assumptions include: [risk-
free interest rate, 6.30%; expected option life, 10 years; expected
volatility, 24.27%; expected dividends, 2.17%.]
(3) The ultimate value of the options will depend on the future
market price of the Company's Common Stock, which cannot be forecast
with reasonable accuracy. The actual value, if any, an executive may
realize upon the exercise of an option will depend on the excess of
the market value of the Company's Common Stock, on the date the option
is exercised, over the exercise price of the option.
The following table sets forth certain information concerning the
number and value of stock options at December 31, 1997 held by the
named executive officers. No stock options were exercised during 1997
by such persons.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of Securities
Shares Underlying Unexercised
Acquired On Value Options/SARs at FY End
Name Exercise Realized (#) (d)
(a) (#) (b) ($) (c) Exercisable Unexercisable
- ------------------ --------- -------- ---------- -------------
Lynn B. Fuller --- --- --- 48,000
Gregory R. Miller --- --- --- 24,000
John K. Schmidt --- --- --- 32,000
Kenneth J. Erickson --- --- --- 32,000
Value of Unexercised
In-the-Money
Options/SARs at FY End
Name ($) (e)
(a) Exercisable Unexercisable
- -------------------- ----------- -------------
Lynn B. Fuller --- $537,000
Gregory R. Miller --- 268,500
John K. Schmidt --- 358,000
Kenneth J. Erickson --- 358,000
Compensation Committee Report On Executive Compensation
The Company's compensation program is administered by the
Compensation Committee (the "Committee"). The Chief Executive
Officer serves on this and all committees ex-officio but on none
as Chairman.
In determining appropriate levels of executive compensation,
the Committee has at its disposal independent reference
information regarding compensation ranges and levels for
executive positions in comparable companies. In determining
compensation to be paid to executive officers, primary
consideration is given to quality long-term earnings growth
accomplished by achieving both financial and non-financial goals
such as return on equity, earnings per share and asset and
deposit growth. The objectives of this philosophy are to: (i)
encourage a consistent and competitive return to stockholders;
(ii) reward bank and individual performances; (iii) provide
financial rewards for performance of those having a significant
impact on corporate profitability; and (iv) provide competitive
compensation in order to attract and retain key personnel.
There are three major components of Company's executive
officer compensation (i) base salary, (ii) annual incentive
awards and (iii) long-term incentive awards.
The process utilized by the Committee in determining
executive officer compensation levels for all of these components
is based upon the Committee's subjective judgment and takes into
account both qualitative and quantitative factors. No specific
weights are assigned to such factors with respect to any
compensation component. Among the factors considered by the
Committee are the recommendations of the chief executive officer
with respect to the compensation of the Company's other key
executive officers. However, the Committee makes the final
compensation decisions concerning such officers. The Company
also has adopted the Heartland Financial, USA, Inc. 1993 Stock
Option Plan ("Stock Option Plan"). The Stock Option Plan is
intended to promote equity ownership in the Company by directors
and selected officers and employees of the Company and the
Subsidiaries to increase their proprietary interest in the
success of the Company and to encourage them to remain in the
employ of the Company or the Subsidiaries. The Company has also
purchased a split-dollar life insurance policy on each of its
executive officers.
The Chief Executive Officer's salary for 1997 was based on a
variety of factors, the foremost of which was agreement that his
salary would remain at the current level until the transition of
the President to the Chief Executive Officer position occurs.
The Chief Executive Officer was not eligible for incentive based
compensation in 1997.
Respectfully,
James A. Schmid, Chairman
Mark C. Falb
Evangeline K. Jansen
Robert Woodward
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
During the last completed fiscal year, in addition to each
of the members of the Committee, John K. Schmidt also
participated in Committee deliberations concerning executive
compensation. No such person participated in any decisions
regarding their own compensation. Mr. Schmidt is not a director
of the Company or DB&T but is the Executive Vice President and
Chief Financial Officer of the Company and is Senior Vice
President and Chief Financial Officer of DB&T. All of the
directors of the Company also serve as a director of DB&T except
for Mr. Gregory R. Miller. Mr. Lynn S. Fuller serves as Vice
Chairman of the Board of Directors of DB&T and Chairman of the
Board and Chief Executive Officer of the Company. Mr. Lynn B.
Fuller serves as President and Chief Executive Officer of DB&T
and President of the Company.
The incorporation by reference of this Proxy Statement into
any document filed with the Securities and Exchange Commission by
the Company shall not be deemed to include the following
performance graph and related information unless such graph and
related information is specifically stated to be incorporated by
reference into such document.
Stockholder Return Performance Presentation
The following graph shows a five year comparison of
cumulative total returns for the Company, the Nasdaq Stock Market
(US Companies) and an index of Nasdaq Bank Stocks. The Company's
shares are traded in the over-the-counter market and are not
listed for trading on any exchange. Figures for the Company's
Common Stock represent interdealer quotations, without retail
markups, markdowns or commissions and do not necessarily
represent actual transactions. The graph was prepared at the
Company's request by SNL Securities L.C., Charlottesville,
Virginia.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ASSUMES $100 INVESTED ON DECEMBER 31, 1992
*Total return assumes reinvestment of dividends
Cumulative Total Return
1992 1993 1994 1995 1996 1997
Heartland Financial USA,Inc $100 $212 $301 $364 $520 $634
Nasdaq Stock Market - US $100 $115 $112 $159 $195 $240
Nasdaq Bank Stock Index $100 $114 $114 $169 $223 $377
TRANSACTIONS WITH MANAGEMENT
Directors and officers of the Company and the Subsidiaries,
and their associates, were customers of and had transactions with
the Company and one or more of the Subsidiaries during 1997.
Additional transactions may be expected to take place in the
future. All outstanding loans, commitments to loan, transactions
in repurchase agreements and certificates of deposit and
depository relationships, in the opinion of management, were made
in the ordinary course of business, on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons and did not involve more than the normal risk of
collectibility or present other unfavorable features.
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously
approved an amendment (the "Amendment") to Article IV of the
Company's Certificate of Incorporation ("Certificate") that would
increase the number of authorized shares of the Company's Common
Stock, $1.00 par value per share, from 7,000,000 shares to
12,000,000 shares. The Board of Directors has also approved a
resolution providing for a two-for-one stock split of the Common
Stock in the form of a stock dividend if the Amendment is
approved. No distribution date for any such stock split has yet
been determined. As of March 23, 1998, the Company had 4,728,107
shares of Common Stock issued and outstanding.
The Board of Directors has proposed adoption of the
Amendment for several reasons, including those set forth below.
First, the Amendment will provide for the additional shares of
Common Stock necessary to effectuate the proposed stock split.
As a result of the stock split, the number of shares of Common
Stock owned by each of the Company's stockholders as of the
record date for the stock split will double, and each such share
will have approximately half of the per share value of Common
Stock prior to the stock split. The decrease in the per share
value of Common Stock should also lead to a commensurate decrease
in the per share market price, thus making an investment in
Common Stock by existing or potential stockholders of the Company
more readily possible.
Second, the additional shares authorized by the Amendment
will provide management with enough shares of Common Stock to
enter into certain transactions involving the use of Common Stock
that may be advisable from time to time. Such transactions could
include, but are not limited to, the acquisition by the Company
of additional branch locations, subsidiaries or bank and thrift
holding companies. Although no such transactions are planned for
the immediate future, management and the Board of Directors
believe that it is in the Company's best interests to have
available a sufficient number of authorized shares of Common
Stock if such transactions become advisable.
Third, the additional shares of Common Stock authorized by
the Amendment could be used to raise additional working capital
for the Company or the Subsidiaries. The Board of Directors does
not currently have any plans to raise capital through the
issuance of additional shares or otherwise, but these shares
would be available for that purpose.
The increase in the number of shares of Common Stock
authorized by the Amendment will allow for the possibility of
substantial dilution of the voting power of current stockholders
of the Company, although no dilution will occur as a direct
result of the proposed stock split. The degree of any such
dilution which would occur following the issuance of any
additional shares of Common Stock, including any newly authorized
Common Stock, would depend upon the number of shares of Common
Stock that are actually issued in the future, which number cannot
be determined at this time. Issuance of a large number of such
shares could significantly dilute the voting power of existing
stockholders.
The existence of a substantial number of authorized and
unissued shares of Common Stock could also impede an attempt to
acquire control of the Company because the Company would have the
ability to issue additional shares of Common Stock in response to
any such attempt. The Company is not aware of any such attempt
to acquire control at this time, and no decision has been made as
to whether any or all newly authorized but unissued shares of
Common Stock would be issued in response to any such attempt.
To be approved by the Company's stockholders, the Amendment
must receive the affirmative vote of a majority of shares present
in person or represented by proxy and entitled to vote on the
Amendment at the annual meeting. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE YOUR SHARES FOR THE AMENDMENT.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG
Peat Marwick LLP, independent auditors, to be the Company's
auditors for the fiscal year ending December 31, 1998, and
recommends that the stockholders ratify the appointment. KPMG
Peat Marwick LLP has been the Company's auditors since June,
1994. A representative of KPMG Peat Marwick LLP is expected to
attend the meeting and will be available to respond to
appropriate questions and to make a statement if he or she so
desires. If the appointment of auditors is not ratified, the
matter of the appointment of auditors will be considered by the
Board of Directors. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THIS APPOINTMENT.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposals of stockholders intended to be presented at
the 1998 Annual Meeting of Stockholders must be received by the
Company on or before December 5, 1998, and must otherwise comply
with the Company's bylaws.
OTHER MATTERS
The Board of Directors is not aware of any business to come
before the meeting other than those matters described above in
this Proxy Statement. However, if any other matter should
properly come before the meeting, it is intended that holders of
the proxies will act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the
Company. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial
owners of Common Stock. In addition to solicitation by mail,
directors, officers and regular employees of the Company or the
Subsidiaries may solicit proxies personally or by telegraph or
telephone without additional compensation.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1)
and (2) on the proxy card, the shares of such stockholder shall
be voted FOR in each instance.
By order of the Board of Directors
\s\ Lynn B. Fuller
-----------------------------------
Lynn B. Fuller
President
Dubuque, Iowa
April 6, 1998
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
