[LOGO]
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) 589-2100
<PAGE>
[LOGO]
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.
<PAGE>
[LOGO]
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 23, 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 a Class II director is an
incumbent director. 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
Name Served as Position with the Company and
(Age) Company the Subsidiaries and
Director Since Principal Occupation
CLASS II
(Term Expires
2001)
Mark C. Falb 1995 Director of DB&T; Chairman of
(Age 50) the Board and Chief Executive
Officer of Westmark
Enterprises, Inc. and
Kendall/Hunt Publishing
Company.
James A. Schmid 1981 Vice Chairman of the Board of
(Age 74) the Company; 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 and Chief Executive
Officer of Crescent Electric
Supply Company.
Robert Woodward 1987 Director of DB&T; Director of
(Age 61) DB&T Insurance Inc., Citizens
Finance Co. and DB&T
Community Development Corp.
(1994-present); Chairman of
the Board and Chief Executive
Officer (1995-present) and
Executive Vice President
(1983-1994) of Woodward
Communications, Inc.
CONTINUING DIRECTORS
Name Served as Position with the Company and
(Age) Company the Subsidiaries and
Director Since 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; Director of
Jansen DB&T Insurance Inc., Citizens
(Age 81) Finance Co. and DB&T
Community Development Corp.
(1994-present).
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 Inc., FCB and DBT
Investment Corporation (1994-
present); Director and
Chairman of RCB (1995-
present); Director and
Chairman of ULTEA, Inc. (1996-
present); Director of WCB
(1997-present).
Gregory R. 1994 Executive Vice President of
Miller the Company (1996-present);
(Age 49) Director (1987-present), Vice
Chairman (1998-present),
President and Chief Executive
Officer (1988-1997) of FCB;
President and Chief Executive
Officer of Keokuk Bancshares,
Inc. (1990-1997); Senior Vice
President and Portfolio
Manager of Chicago Capital
Fund Management (1998-
present).
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 of
Name of Individual and Beneficial Percent
Number of Persons in Group Ownership(1) of Class
5% STOCKHOLDERS
Dubuque Bank and Trust Company
1398 Central Avenue
Dubuque, Iowa 52001 424,010(2) 9.0%
Heartland Partnership, L.P.
1145 S. Grandview
Dubuque, Iowa 52003 278,000(3) 5.9%
DIRECTORS
Mark C. Falb 89,536(4) 1.9%
Lynn B. Fuller 111,711(5) 2.4%
Lynn S. Fuller 475,661(6) 10.1%
Evangeline K. Jansen 560,656(7) 11.9%
Gregory R. Miller 110,582(8) 2.3%
James A. Schmid 191,440(9) 4.0%
Robert Woodward 215,710(10) 4.6%
OTHER EXECUTIVE OFFICERS
John K. Schmidt 19,676 *
Kenneth J. Erickson 23,541(11) *
Douglas J. Horstmann 23,048(12) *
All directors and executive
officers as a group 1,858,408 39.3%
(12 persons)
* 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. Also included are
shares obtainable through the exercise of options within 60 days
of the date of the information presented in this table in the
following amounts: Mr. Lynn B. Fuller - 8,000 shares; Mr. Miller
- - 4,000 shares; Messrs. Schmidt, Erickson and Horstmann - 5,333
shares and all directors and executive officers as a group -
37,332 shares. 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 and 37,573 shares held in a trust
for which Mr. Fuller serves as co-trustee, over which 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., over which Mr. Fuller has sole voting and investment power,
as well as 36,142 shares held by a trust for which Mr. Fuller's
spouse is a trustee and 37,573 shares held in a trust for which
Mr. Fuller serves as co-trustee, over which 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 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 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 Mr. Erickson has shared voting and
investment power.
(12) Includes 9,000 shares held by Mr. Horstmann's spouse,
over which 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 President and to
each of the other four 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
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
Gregory R. Miller 1997 $103,591 $20,000
Executive Vice President 1996 103,591 14,304
of the Company 1995 99,607 14,304
Kenneth J. Erickson 1997 $100,000 $20,808
Senior Vice President 1996 96,000 22,946
of the Company 1995 90,000 15,940
Douglas J. Horstmann 1997 $ 99,000 $20,601
Senior Vice President of DB&T 1996 $ 96,000 $17,946
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
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
Gregory R. Miller 1997 $ --- 6,000 $29,307
Executive Vice 1996 --- 6,000 20,043
President 1995 --- 12,000 16,930
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
Douglas J. Horstmann 1997 $ --- 8,000 $28,818
Senior Vice President 1996 $ --- 8,000 18,358
of DB&T 1995 $ --- 6,000 13,898
(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 Mr. Fuller, the amounts
shown include an automobile allowance of $1,901 for 1997, $1,901
for 1996 and $1,577 for 1995. For 1997 and 1996, 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 1997, such amounts were $19,632 and $25,023 for Mr.
Fuller, $16,105 and $13,799 for Mr. Schmidt, $12,484 and $16,536
for Mr. Miller, $15,085 and $16,051 for Mr. Erickson and $14,349
and $14,252 for Mr. Horstmann. 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. Fuller, $15,759 and $2,705
for Mr. Schmidt, $15,117 and $4,926 for Mr. Miller, $14,349 and
$4,587 for Mr. Erickson and $14,349 and $3,858 for Mr. Horstmann.
Stock Option Information
The following table sets forth certain information
concerning the number and value of stock options granted in the
last fiscal year to the individuals named in the Summary
Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d)
% of Total
Options Granted
Options to Employees Exercise or
Granted in Fiscal Base Price
Name (#) (1) Year ($/Share)
- ----------------------- ----------------------- -----------
Lynn B. Fuller 12,000 18.5% $24.00
John K. Schmidt 8,000 12.3% $24.00
Gregory R. Miller 6,000 9.2% $24.00
Kenneth J. Erickson 8,000 12.3% $24.00
Douglas J. Horstmann 8,000 12.3% $24.00
(a) (e) (f)
Grant Date
Expiration Present Value
Name Date ($) (2)(3)
- ---------------------- ---------- -------------
Lynn B. Fuller 01/02/07 $102,360
John K. Schmidt 01/02/07 $ 68,240
Gregory R. Miller 01/02/07 $ 51,180
Kenneth J. Erickson 01/02/07 $ 68,240
Douglas J. Horstmann 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 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
John K. Schmidt --- $--- --- 32,000
Gregory R. Miller --- $--- --- 24,000
Kenneth J. Erickson --- $--- --- 32,000
Douglas J. Horstmann --- $--- --- 32,000
Value of Unexercised
In-the-Money
Options/SARs at FY-End
Name ($) (e)
(a) Exercisable Unexercisable
- -------------------- ----------- -------------
Lynn B. Fuller $--- $537,000
John K. Schmidt $--- $358,000
Gregory R. Miller $--- $268,500
Kenneth J. Erickson $--- $358,000
Douglas J. Horstmann $--- $358,000
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 report
unless such report is specifically stated to be incorporated by
reference into such document.
Compensation Committee Report On Executive Compensation
The Company's compensation program is administered by the
Compensation Committee (the "Committee"). 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 president 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 with the exception of the Chief Executive
Officer.
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, Messrs. Lynn S. Fuller, Lynn B.
Fuller and John K. Schmidt also participated in Committee
deliberations concerning executive compensation. No such person
participated in any decisions regarding their own compensation.
Mr. Lynn S. Fuller serves as Chairman of the Board and Chief
Executive Officer of the Company and Vice Chairman of the Board
of DB&T. Mr. Lynn B. Fuller serves as President of the Company
and President and Chief Executive Officer of DB&T. 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 Senior
Vice President and Chief Financial Officer of DB&T. All of the
members of the Committee also serve as directors of DB&T.
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
[GRAPH DEPICTING VALUES ON THE FOLLOWING TABLE]
Cumulative Total Return
1992 1993 1994 1995 1996 1997
Heartland Financial USA, Inc 100 212 301 364 520 634
NASDAQ-Total US 100 115 112 159 195 240
NASDAQ Bank 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 1999 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
