SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HEARTLAND FINANCIAL USA, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO]
Heartland Financial USA, Inc.
April 10, 2002
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 22, 2002, at 1:30 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
our 2001 Annual Report to Stockholders is enclosed. At the
meeting we shall report on operations and the outlook for the
year ahead.
Your board of directors has nominated two persons to serve
as Class III directors. Additionally, our management has selected
and recommends that you ratify the selection of KPMG LLP to
continue as our independent public accountants for the year
ending December 31, 2002.
We recommend that you vote your shares for each of the
director nominees and in favor of the proposal.
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. This will
ensure that your shares are represented at the meeting.
We look forward with pleasure to seeing you and visiting
with you at the meeting.
With best personal wishes,
/s/ Lynn B. Fuller
-----------------------------
Lynn B. Fuller
Chairman of the Board
1398 Central Avenue - Dubuque, Iowa 52001 - (563) 589-2100
[LOGO]
Heartland Financial USA, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2002
TO THE STOCKHOLDERS:
The annual meeting of stockholders of HEARTLAND FINANCIAL
USA, INC. will be held at our corporate headquarters, 1398
Central Avenue, Dubuque, Iowa, on Wednesday, May 22, 2002, at
1:30 p.m., for the purpose of considering and voting upon the
following matters:
1. to elect two Class III directors.
2. to approve the appointment of KPMG LLP as independent
public accountants for the fiscal year ending December
31, 2002.
3. to transact such other business as may properly be
brought before the meeting or any adjournments or
postponements of the meeting.
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 25, 2002, are the stockholders entitled to vote
at the meeting and any adjournments or postponements of the
meeting. In the event there are not sufficient votes for a
quorum or to approve or ratify any of the foregoing proposals at
the time of the annual meeting, the meeting may be adjourned or
postponed in order to permit further solicitation of proxies.
By order of the Board of Directors
/s/ Lois K. Pearce
----------------------------------
Lois K. Pearce
Secretary
Dubuque, Iowa
April 10, 2002
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE US 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.
[LOGO]
Heartland Financial USA, Inc.
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation by the board of directors of Heartland Financial
USA, Inc. of proxies to be voted at the annual meeting of
stockholders to be held at our headquarters located at 1398
Central Avenue, Dubuque, Iowa, on Wednesday, May 22, 2002, at
1:30 p.m. local time, or at any adjournments or postponements of
the meeting. We mailed this proxy statement on or about April 10,
2002.
Heartland Financial USA, Inc., a Delaware corporation, is a
diversified financial services holding company headquartered in
Dubuque, Iowa. We offer full-service community banking through
six banking subsidiaries with a total of 32 banking locations in
Iowa, Illinois, Wisconsin and New Mexico. In addition, we have
separate subsidiaries in the consumer finance, vehicle
leasing/fleet management, insurance agency and investment
management businesses. Our primary strategy is to balance our
focus on increasing profitability with asset growth and
diversification through acquisitions, de novo bank formations,
branch openings and expansion into non-bank subsidiary
activities.
The following information regarding the meeting and the
voting process is presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us
because on March 25, 2002, you owned shares of our common stock.
This proxy statement describes the matters that will be presented
for consideration by the stockholders at the annual meeting. It
also gives you information concerning the matters to be voted
upon to assist you in making an informed decision.
When you sign the enclosed proxy card, you appoint the proxy
holder as your representative at the meeting. The proxy holder
will vote your shares as you have instructed in the proxy card,
thereby ensuring that your shares will be voted whether or not
you attend the meeting. Even if you plan to attend the meeting,
you should complete, sign and return your proxy card in advance
of the meeting just in case your plans change.
If you have signed and returned the proxy card and an issue
comes up for a vote at the meeting that is not identified on the
form, the proxy holder will vote your shares, pursuant to your
proxy, in accordance with his or her judgment.
What matters will be voted on at the meeting?
You are being asked to vote on the election of two Class III
directors of Heartland Financial for a term expiring in 2005 as
well as the ratification of KPMG LLP as our independent auditors
for the 2002 fiscal year. These matters are more fully described
in this proxy statement.
How do I vote?
You may vote either by mail or in person at the meeting. To
vote by mail, complete and sign the enclosed proxy card and mail
it in the enclosed pre-addressed envelope. No postage is required
if mailed in the United States. If you mark your proxy card to
indicate how you want your shares voted, your shares will be
voted as you instruct.
If you sign and return your proxy card but do not mark the
form to provide voting instructions, the shares represented by
your proxy card will be voted "for" both nominees named in this
proxy statement and "for" the ratification of our auditors.
If you want to vote in person, please come to the meeting. We
will distribute written ballots to anyone who wants to vote at
the meeting. Please note, however, that if your shares are held
in the name of your broker (or in what is usually referred to as
"street name"), you will need to arrange to obtain a proxy from
your broker in order to vote in person at the meeting.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our
stock transfer records and/or in accounts with stockbrokers.
Please sign and return ALL proxy cards to ensure that all your
shares are voted.
If I hold shares in the name of a broker, who votes my shares?
If you received this proxy statement from your broker, your
broker should have given you instructions for directing how your
broker should vote your shares. It will then be your broker's
responsibility to vote your shares for you in the manner you
direct.
What if I change my mind after I return my proxy?
If you hold your shares in your own name, you may revoke your
proxy and change your vote at any time before the polls close at
the meeting. You may do this by:
- signing another proxy with a later date and returning
that proxy to Ms. Lois K. Pearce, Secretary, Heartland
Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa
52001;
- sending notice to us that you are revoking your proxy;
or
- voting in person at the meeting.
If you hold your shares in the name of your broker and desire
to revoke your proxy, you will need to contact your broker to
revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to
vote as of the record date must be present in person or by proxy
at the meeting in order to hold the meeting and conduct business.
Shares are counted as present at the meeting if the
stockholder either:
- is present and votes in person at the meeting; or
- has properly submitted a signed proxy card or other
proxy.
On March 25, 2002, the record date, there were 9,828,333
shares of common stock issued and outstanding. Therefore, at
least 4,914,168 shares need to be present at the annual meeting
in order to hold the meeting and conduct business.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of
directors or designate a substitute nominee. In the latter case,
shares represented by proxies may be voted for a substitute
nominee. You cannot vote for more than two nominees. The board
has no reason to believe any nominee will be unable to stand for
re-election.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each
nominee for director. You may vote "for," "against" or "abstain"
on any other proposal that may properly be brought before the
meeting. Abstentions and broker non-votes will be considered in
determining the presence of a quorum but will not affect the vote
required for the ratification of our auditors or election of
directors.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share
of stock you owned on the record date.
How many votes are needed for each proposal?
The two individuals receiving the highest number of votes
cast "for" their election will be elected as directors of
Heartland Financial. The ratification of our auditors and all
other matters must receive the affirmative vote of a majority of
the shares present in person or by proxy at the meeting and
entitled to vote.
Where do I find the voting results of the meeting?
We will announce voting results at the meeting. The voting
results will also be disclosed in our Form 10-Q for the quarter
ended June 30, 2002.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to
solicitations by mail, officers, directors and employees of
Heartland Financial or its subsidiaries may solicit proxies in
person or by telephone. These persons will not receive any
special or additional compensation for soliciting proxies. We may
reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for
forwarding proxy and solicitation materials to stockholders.
ELECTION OF DIRECTORS
At the annual meeting to be held on May 22, 2002, you will be
entitled to elect two Class III directors for terms expiring in
2005. The directors are divided into three classes having
staggered terms of three years. Evangeline K. Jansen, a director
since 1981, passed away in June of 2001. In January of 2002, the
board appointed Thomas L. Flynn, a director of Dubuque Bank and
Trust, to fill the vacancy created by Ms. Jansen's death. Also in
January of 2002, Gregory R. Miller resigned as a director. The
board has not yet filled the vacancy created by Mr. Miller's
resignation as a Class I director. Each of the nominees for
election as a Class III director is an incumbent director. We
have 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 25, 2002. Unless otherwise indicated, each
person has held the positions indicated for at least five years.
The nominees for Class III directors, if elected at the annual
meeting, will serve for a three-year term expiring in 2005. The
board of directors recommends that you vote your shares FOR each
of the nominees for director.
NOMINEES
Served as
Heartland
Financial Position with Heartland
USA, Inc. Financial USA, Inc. and
Name Director its Subsidiaries and
(Age) Since Principal Occupation
------------------ --------- ------------------------
CLASS III
(Term Expires 2005)
James F. Conlan 2000 Director of Dubuque Bank and
(Age 38) Trust (1999-present); Attorney
at Law, Partner of Sidley &
Austin
Thomas L. Flynn (1) 2002 Director of Dubuque Bank and
(Age 46) Trust (2000-present); Iowa
State Senator; President of
Flynn Ready-Mix Concrete
(1) Mr. Flynn was appointed to the board in January of 2002 to
fill the vacancy created by the death of Evangeline K. Jansen, a
director of Heartland Financial since its formation in 1981.
CONTINUING DIRECTORS
Served as
Heartland
Financial Position with Heartland
USA, Inc. Financial USA, Inc. and
Name Director its Subsidiaries and
(Age) Since Principal Occupation
------------------ --------- ------------------------
CLASS I
(Term Expires 2003)
Lynn B. Fuller 1987 Chairman of the Board (2000-
(Age 52) present), President (1990-
present) and Chief Executive
Officer (1999-present) of
Heartland Financial; Director,
Vice Chairman of the Board
(2000-present), President
(1987-1999) and Chief
Executive Officer (1986-1999)
of Dubuque Bank and Trust;
Director of Wisconsin
Community Bank (1997-present),
New Mexico Bank & Trust (1998-
present), Galena State Bank,
First Community Bank,
Riverside Community Bank and
Keokuk Bancshares, Inc.;
Director and President of
Citizens Finance; Director and
Chairman of ULTEA
CLASS II
(Term Expires 2004)
Mark C. Falb 1995 Vice Chairman of the Board
(Age 54) (2001-present); Chairman
(2001-present) and Director
(1984-present) of Dubuque Bank
and Trust; Director of
Citizens Finance (1997-
present); Chairman of the
Board and Chief Executive
Officer of Westmark
Enterprises, Inc. and
Kendall/Hunt Publishing
Company
John K. Schmidt 2001 Executive Vice President and
(Age 42) Chief Financial Officer of
Heartland Financial; President
and Chief Executive Officer
(2000-present) and Senior Vice
President and Chief Financial
Officer (1992-2000) of Dubuque
Bank and Trust; Director of
Keokuk Bancshares, Inc. (1997-
present); Vice President of
ULTEA and Treasurer of
Citizens Finance
Robert Woodward 1987 Director of Dubuque Bank and
(Age 65) Trust and Citizens Finance;
Chairman of the Board and
Chief Executive Officer of
Woodward Communications, Inc.
All of our 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 Heartland Financial and any other person pursuant to
which any of our directors have been selected for their
respective positions. With the exception of Mr. Conlan, who is
the brother-in-law of Mr. Fuller, no member of the board of
directors is related to any other member of the board of
directors.
Meetings of the Board of Directors and Committees
Regular meetings of the board of directors are held
quarterly. During 2001, the board of directors held four regular
meetings and three special meetings. All directors during their
terms of office in 2001 attended at least 75% of the total number
of meetings of the board and of meetings held by all committees
of the board on which any such director served. We do not
currently have a standing nominating committee. Rather, the
entire board participates in the process of selecting nominees to
fill vacancies on the board. The board of directors will consider
nominees recommended by stockholders provided any such
recommendation is made in writing and delivered to the corporate
secretary as further provided in our bylaws.
The compensation committee, currently consisting of directors
Falb, Conlan, Woodward and Flynn, 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. James A. Schmid
had served as chairman of the compensation committee until his
death in February 2001. Mr. Falb was elected to serve as chairman
of the compensation committee in April 2001. Ms. Jansen served on
the compensation committee until her death and Mr. Miller until
his resignation. During 2001, the compensation committee met four
times.
The audit committee recommends independent auditors to the
board, reviews with the independent auditors the plan, scope and
results of the auditors' services and reviews with management and
the internal auditors the systems of internal control and the
plan, scope and results of internal audits performed. The audit
committee charter is attached as Exhibit A. Currently, the
members of the audit committee are directors Falb, Conlan,
Woodward and Flynn. James A. Schmid had served as chairman of the
audit committee until his death in February 2001. Mr. Falb was
elected to serve as chairman of the audit committee in May 2001.
Ms. Jansen served on the audit committee until her death and Mr.
Miller until his resignation. During 2001, the audit committee
met three times.
Compensation of Directors
Each of our directors is paid a fee of $450 for each board
meeting attended and $300 for each committee meeting attended,
except for Messrs. Fuller and Schmidt who, as executive officers,
do not receive any fees for their services as director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with
respect to the beneficial ownership of our common stock at March
25, 2002, by each person known by us 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
Heartland Financial as a group. Unless otherwise noted, the
address of each 5% stockholder is 1398 Central Avenue, Dubuque,
Iowa 52001.
Amount and Nature
Name of Individual and of Beneficial Percent of
Number of Persons in Group Ownership (1) Class
-------------------------- ------------------ ----------
5% Stockholders and Directors
Dubuque Bank and Trust Company 1,871,358 (2) 19.0%
Lynn S. Fuller 892,820 (3) 9.1%
Heartland Partnership, L.P. 556,000 (4) 5.7%
James F. Conlan 45,899 (5) *
Mark C. Falb 108,842 (6) 1.1%
Thomas L. Flynn 9,800 (7) *
Lynn B. Fuller 392,138 (8) 4.0%
John K. Schmidt 109,724 (9) 1.1%
Robert Woodward 420,807 (10) 4.3%
Other Executive Officers
Kenneth J. Erickson 120,900 (11) 1.2%
Douglas J. Horstmann 112,898 (12) 1.1%
Paul J. Peckosh 91,220 (13) *
All directors and
executive officers
as a group (10 persons) 1,508,943 15.4%
* Less than one percent
(1) The information contained in this column is based upon
information furnished to Heartland Financial 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 - 48,000 shares; Mr.
Schmidt - 59,000 shares; Mr. Erickson - 62,667 shares; Mr.
Horstmann - 65,999 shares; Mr. Peckosh - 34,000 shares and all
directors and executive officers as a group - 348,333 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 676,223 shares over which Dubuque Bank and
Trust, Heartland Financial's lead bank subsidiary, has sole
voting and investment power and 109,784 shares over which Dubuque
Bank and Trust has shared voting or investment power.
(3) Includes shares held by the Heartland Partnership,
L.P., over which Mr. Fuller has sole voting and investment power,
as well as 38,034 shares held by a trust for which Mr. Fuller's
spouse is a trustee and 77,848 shares held in a trust for which
Mr. Fuller serves as co-trustee, over which Mr. Fuller has shared
voting and investment power.
(4) Mr. Lynn S. Fuller, a former director of Heartland
Financial and a stockholder of more than 5% of the outstanding
shares, is the general partner of Heartland Partnership, L.P.,
and in such capacity exercises sole voting and investment power
over such shares.
(5) Includes 19,000 shares held by Mr. Conlan's spouse,
over which Mr. Conlan has shared voting and investment power, and
14,000 shares held by the Heartland Partnership, L.P., over which
Mr. Conlan has no voting or investment power but in which Mr.
Conlan's spouse does have a beneficial interest.
(6) Includes 45,904 shares held by Mr. Falb's spouse, as
trustee, over which Mr. Falb has no voting or investment power.
(7) Includes 1,500 shares held by Mr. Flynn's spouse in an
Individual Retirement Account, over which Mr. Flynn has no voting
or investment power.
(8) Includes an aggregate of 5,095 shares held by Mr.
Fuller's spouse and minor children and 77,848 shares held in a
trust for which Mr. Fuller serves as co-trustee, over which Mr.
Fuller has shared voting and investment power. Includes 14,000
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.
(9) Includes an aggregate of 14,800 shares held by Mr.
Schmidt's spouse and minor children and 488 shares held by Mr.
Schmidt jointly with his spouse, over which Mr. Schmidt has
shared voting and investment power.
(10) Includes an aggregate of 235,600 shares held by various
trusts of which Mr. Woodward is a trustee and over which Mr.
Woodward has shared voting and investment power. Mr. Woodward has
full power of attorney for 5,712 shares held by his mother. Also,
Mr. Woodward has shared voting and investment power over 120,200
shares held by Woodward Communications, Inc., of which Mr.
Woodward is a director on its board.
(11) Includes 6,333 shares held by Mr. Erickson jointly with
his spouse, over which Mr. Erickson has shared voting and
investment power.
(12) Includes 18,000 shares held by Mr. Horstmann's spouse,
over which Mr. Horstmann has shared voting and investment power.
(13) Includes 3,063 shares held by Mr. Peckosh jointly with
his spouse, over which Mr. Peckosh has shared voting and
investment power, and 1,600 shares held by Mr. Peckosh's spouse,
over which Mr. Peckosh has no voting and investment power.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
that our 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 us with copies of all Section 16(a) forms they file.
Based solely upon our review of such forms, we are not aware that
any of our directors, executive officers or 10% stockholders
failed to comply with the filing requirements of Section 16(a)
during 2001, except Mr. Woodward failed to file one report
required by Section 16(a) of the Exchange Act for the disposition
of shares resulting from the division of a trust of which he was
a trustee. Mr. Woodward is not a trustee for the new trust.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation paid or granted to our chief executive officer and
to each of the other four most highly compensated executive
officers of Heartland Financial or our subsidiaries for the
fiscal year ended December 31, 2001:
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
(a) (b) (c) (d)
Fiscal
Year
Ended
Name and Principal December Salary Bonus
Position 31 ($)(1) ($)(2)
------------------------- ---------- --------- --------
Lynn B. Fuller 2001 $215,000 $116,581
President and Chief 2000 200,000 103,231
Executive Officer of 1999 180,000 81,707
Heartland Financial
John K. Schmidt 2001 $150,000 $ 65,843
Executive Vice President 2000 135,000 64,143
and Chief Financial Officer of 1999 118,000 32,931
Heartland Financial
Kenneth J. Erickson 2001 $130,000 $ 41,987
Executive Vice President of 2000 118,000 33,304
Heartland Financial 1999 109,000 36,040
Douglas J. Horstmann 2001 $116,000 $ 30,445
Senior Vice President of 2000 108,000 26,072
Heartland Financial 1999 105,000 28,234
Paul J. Peckosh 2001 $102,000 $ 30,354
Senior Vice President of 2000 98,000 29,443
Heartland Financial 1999 94,250 25,828
Long-term
Compensation
Awards
---------------------
(a) (b) (f) (g) (h)
Fiscal
Year Securities
Ended Restricted Underlying All Other
Name and Principal December Stock Options/ Compensa-
Position 31 Awards ($) SARs(#) tion($)(3)
------------------ ---------- ---------- ---------- ----------
Lynn B. Fuller 2001 $ --- 10,000 $23,236
President and Chief 2000 --- 9,000 22,671
Executive Officer of 1999 --- 24,000 21,974
Heartland Financial
John K. Schmidt 2001 $ --- 6,000 $23,974
Executive Vice 2000 --- 6,000 20,719
President and 1999 --- 16,000 19,497
Chief Financial
Officer of Heartland
Financial
Kenneth J. Erickson 2001 $ --- 2,000 $20,696
Executive Vice 2000 --- 3,000 19,290
President of Heartland 1999 --- 12,000 16,015
Financial
Douglas J. Horstmann 2001 $ --- 2,000 $18,014
Senior Vice President 2000 --- 2,000 17,054
of Heartland Financial 1999 --- 6,000 15,443
Paul J. Peckosh 2001 $ --- 500 $16,712
Senior Vice President 2000 --- 1,500 15,622
of Heartland Financial 1999 --- 6,000 15,191
(1) Includes amounts deferred under our retirement plan.
(2) The amounts shown represent amounts received under our
management incentive compensation plan.
(3) The amounts shown represent amounts contributed on
behalf of the respective officer to our retirement plan, the
aggregate value of the discount to market price of shares
purchased under our employee stock purchase plan and/or our
executive restricted stock purchase plan, and the allocable
portion of the premium paid for life insurance under our
executive death benefit program. For Mr. Fuller, the amounts
shown include an automobile allowance of $1,493 for 2001, $1,611
for 2000 and $1,463 for 1999. For Mr. Schmidt, the amounts shown
include an automobile allowance of $2,573 for 2001, $2,280 for
2000 and $1,082 for 1999. For 2001, 2000 and 1999, the amount
contributed for each officer under our retirement plan was
$21,284, $20,500 and $19,988 for Mr. Fuller, $21,284, $20,581 and
$18,283 for Mr. Schmidt, $20,508, $19,068 and $15,808 for Mr.
Erickson, $17,849, $16,864 and $15,266 for Mr. Horstmann and
$16,456, $15,328 and $14,909 for Mr. Peckosh. There was no
discount realized on shares purchased under our stock plans
during 2001, 2000 and 1999.
Stock Option Information
The following table sets forth certain information concerning
the number and value of stock options granted in the last fiscal
year to the individuals named in the summary compensation table:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d)
% of Total
Options Granted
Options to Employees Exercise or
Granted in Fiscal Base Price
Name (#) (1) Year ($/Share)
----------------------- ------------ ----------- -----------
Lynn B. Fuller 10,000 22.35% $13.00
John K. Schmidt 6,000 13.41% 13.00
Kenneth J. Erickson 2,000 4.47% 13.00
Douglas J. Horstmann 2,000 4.47% 13.00
Paul J. Peckosh 500 1.12% 13.00
(a) (e) (f)
Grant Date
Expiration Present Value
Name Date ($) (2)(3)
---------------------- ---------- -------------
Lynn B. Fuller 06/01/11 $ 30,000
John K. Schmidt 06/01/11 18,000
Kenneth J. Erickson 06/01/11 6,000
Douglas J. Horstmann 06/01/11 6,000
Paul J. Peckosh 06/01/11 1,500
(1) Options become exercisable in three equal portions on
the day after the third, fourth and fifth anniversaries of the
June 1, 2001, 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, 5.22%; expected option life, 10 years;
expected volatility, 16.03%; expected dividends, 2.77%.
(3) The ultimate value of the options will depend on the
future market price of our 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 our common stock, on the date the
option is exercised, over the exercise price of the option.
The following table sets forth information concerning the
stock options at December 31, 2001, held by the named executive
officers. No stock options were exercised during 2001 by any of
the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
(a) (b) (c) (d)
Number of Securities
Shares Underlying Unexercised
Acquired On Value Options/SARs at FY-End
Exercise Realized (#)
Name (#)(1) ($) Exercisable Unexercisable
------------------ --------- -------- ----------- -------------
Lynn B. Fuller --- $--- 96,000 67,000
John K. Schmidt --- --- 64,000 44,000
Kenneth J. Erickson --- --- 64,000 33,000
Douglas J. Horstmann --- --- 64,000 26,000
Paul J. Peckosh --- --- 48,000 20,000
(a) (e)
Value of Unexercised
In-the-Money
Options/SARs at FY-End
($)
Name Exercisable Unexercisable
-------------------- ----------- -------------
Lynn B. Fuller $343,520 $ 6,400
John K. Schmidt 229,014 4,266
Kenneth J. Erickson 229,014 4,266
Douglas J. Horstmann 229,014 4,266
Paul J. Peckosh 171,760 3,200
(1) On February 28, 2002, the listed executives acquired a
portion of the shares underlying exercisable options. Mr. Fuller
acquired 72,000 shares, Mr. Schmidt acquired 21,000 shares, Mr.
Erickson acquired 16,000 shares, Mr. Horstmann acquired 10,668
shares and Mr. Peckosh acquired 24,000 shares.
Change of Control Agreements
We have entered into a separate change of control agreement
with each of the named executive officers and certain other of
our officers. These agreements provide that if employment is
terminated six months prior to a change in control of Heartland
Financial (as defined in the agreements) or within one year
thereafter, the terminated officer is to be paid severance
compensation equal to a multiple of such officer's total
compensation (as defined in the agreements) at the time of
termination. The multiple varies for each officer, up to a
maximum of four times total compensation. Additionally, the
agreements provide for the continuation of medical and dental
benefits for up to two years after such termination and the
payment of expenses for out-placement counseling for a period of
one year, up to a maximum amount equal to twenty-five percent of
total compensation. Messrs. Fuller, Schmidt and Erickson are
prohibited by their respective agreements from competing with us
or our subsidiaries within a designated geographic area for a
period of two years following the termination of employment.
Compensation Committee Report on Executive Compensation
The incorporation by reference of this proxy statement into
any document filed with the Securities and Exchange Commission by
Heartland Financial shall not be deemed to include the following
report unless such report is specifically stated to be
incorporated by reference into such document.
The compensation committee administers our compensation
program. 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 primary objectives of this philosophy are to:
- encourage a consistent and competitive return to
stockholders;
- reward bank and individual performances;
- provide financial rewards for performance of those
having a significant impact on corporate profitability;
and
- provide competitive compensation in order to attract and
retain key personnel.
There are three major components of our executive officer
compensation: base salary, annual incentive awards and 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 our other key
executive officers. However, the committee makes the final
compensation decisions concerning such officers.
We have adopted the Heartland Financial USA, Inc. 1993 Stock
Option Plan. The stock option plan is intended to promote equity
ownership in Heartland Financial by our directors and selected
officers and employees to increase their proprietary interest in
the success of Heartland Financial and to encourage them to
remain in the employ of Heartland Financial or our subsidiaries.
We have also purchased split-dollar life insurance policies on
each of our executive officers.
The compensation of Mr. Fuller, the chief executive officer,
during 2001 was based upon a number of factors, including:
- our compensation program;
- the individual's performance, substantial experience,
expertise and length of service with our organization;
- progress toward our performance objectives; and
- compensation of officers with similar duties and
responsibilities at comparable organizations.
Respectfully,
Mark C. Falb, James F. Conlan, Thomas L. Flynn, 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. Fuller and Schmidt also
participated in committee deliberations concerning executive
compensation. However, neither participated in any decisions
regarding their own compensation. Mr. Fuller serves as chairman
of the board, president and chief executive officer of Heartland
Financial. Mr. Schmidt is the executive vice president and chief
financial officer of Heartland Financial and president and chief
executive officer of Dubuque Bank and Trust. All of the regular
members of the committee also serve as directors of Dubuque Bank
and Trust.
Stockholder Return Performance Presentation
The incorporation by reference of this proxy statement into
any document filed with the Securities and Exchange Commission by
Heartland Financial 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.
The following graph shows a five-year comparison of
cumulative total returns for Heartland Financial USA, Inc., the
Nasdaq Stock Market (U.S.) and an index of Nasdaq Bank Stocks.
Our shares are traded in the over-the-counter market under the
symbol "HTLF" and are eligible for quotation on the OTC Bulletin
Board. Figures for our common stock represent inter-dealer
quotations, without retail markups, markdowns or commissions and
do not necessarily represent actual transactions. The graph was
prepared at our request by Research Data Group, Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ASSUMES $100 INVESTED ON DECEMBER 31, 1996
[GRAPH DEPICTING VALUES ON THE FOLLOWING TABLE]
*Total return assumes reinvestment of dividends
Cumulative Total Return Performance
December 31,
----------------------------------
1996 1997 1998 1999 2000 2001
Heartland Financial USA, Inc. 100 116 169 166 131 132
Nasdaq Stock Market (U.S.) 100 122 173 321 193 153
Nasdaq Bank 100 167 166 160 182 197
TRANSACTIONS WITH MANAGEMENT
Directors and officers of Heartland Financial and our
subsidiaries, and their associates, were customers of and had
transactions with us and one or more of our subsidiaries during
2001. 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.
In February 2002, Heartland Financial purchased loans made
by our lead bank subsidiary, Dubuque Bank and Trust, to several
directors and executive officers of Heartland Financial and our
subsidiaries in order to facilitate their exercise of options to
purchase Heartland Financial common stock. The current rate of
interest on the loans is 5.60% and each loan expires on December
31, 2002, with the ability to automatically renew for four
successive one-year terms. The terms and conditions of the loans
are such that Heartland Financial will not incur a loss or charge
to income as a result of making these loans. Following is a list
of those directors and executive officers of Heartland Financial
who, as of the date of this proxy statement, have loans
outstanding and the amount of the indebtedness: Lynn B. Fuller -
$791,372; John K. Schmidt - $190,917; $; Kenneth J. Erickson -
$147,000; Douglas J. Horstmann - $104,000 and Paul J. Peckosh -
$236,048.
AUDIT COMMITTEE REPORT
The incorporation by reference of this proxy statement into
any document filed with the Securities and Exchange Commission by
Heartland Financial shall not be deemed to include the following
report unless such report is specifically stated to be
incorporated by reference into such document.
The audit committee assists the board in carrying out its
oversight responsibilities for our financial reporting process,
audit process and internal controls. The audit committee also
reviews the audited financial statements and recommends to the
board that they be included in our annual report on Form 10-K.
The committee is comprised solely of independent directors.
The audit committee has reviewed and discussed our audited
financial statements for the fiscal year ended December 31, 2001,
with our management and KPMG LLP, our independent auditors. The
committee has also discussed with KPMG LLP the matters required
to be discussed by SAS 61 (Codification for Statements on
Auditing Standards) as well as having received and discussed the
written disclosures and the letter from KPMG LLP required by
Independence Standards Board Statement No. 1 (Independence
Discussions with Audit Committees). Based on the review and
discussions with management and KPMG LLP, the committee has
recommended to the board that the audited financial statements be
included in our annual report on Form 10-K for the fiscal year
ended December 31, 2001, for filing with the Securities and
Exchange Commission.
Respectfully,
Mark C. Falb, James F. Conlan, Thomas L. Flynn, Robert Woodward
RELATIONSHIP WITH INDEPENDENT AUDITORS
Our board of directors has appointed KPMG LLP to be the
independent auditors for the fiscal year ending December 31,
2002, and recommends that the stockholders ratify the
appointment. KPMG LLP has been our auditor since June 1994. A
representative of KPMG 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
independent auditors is not ratified, the matter of the
appointment will be considered by the board of directors. The
board of directors recommends that you vote your shares FOR
ratification of this appointment.
Audit Fees
Our independent auditor during 2001 was KPMG LLP. The
aggregate fees and expenses billed by KPMG LLP in connection with
the audit of our annual financial statements as of and for the
year ended December 31, 2001, and for the required review of our
financial information included in our Form 10-Q filings for the
year 2001 was $95,000.
Financial Information Systems Design and Implementation Fees
KPMG LLP did not perform nor bill us for these services
during 2001.
All Other Fees
The aggregate fees and expenses billed by KPMG LLP for all
other services rendered to us for 2001 was $76,450.
The audit committee, after consideration of the matter, does
not believe the rendering of these services by KPMG LLP is
incompatible with maintaining its independence as our principal
auditor.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Any proposals of stockholders intended for presentation at
the 2003 annual meeting of stockholders must be received by us on
or before December 11, 2002, and must otherwise comply with our
bylaws.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1)
or (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
Chairman of the Board
Dubuque, Iowa
April 10, 2002
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
EXHIBIT A
HEARTLAND FINANCIAL USA, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to
assist the Board in fulfilling its oversight responsibilities.
The Audit Committee's primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, and legal compliance;
- Monitor the independence and performance of the Company's
independent auditors and internal auditing department;
- Provide an avenue of communication among the independent
auditors, management, the internal audit function, and the
Board of Directors;
- Encourage adherence to, and continuous improvement of, the
Company's policies, procedures, and practices at all levels;
- Review areas of potential significant financial risk to the
Company; and
- Monitor compliance with legal and regulatory requirements.
The Audit Committee has the authority to conduct any
investigation appropriate to fulfilling its responsibilities, and
it has direct access to the independent auditors and the internal
audit function, as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it
deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
The Audit Committee shall be comprised of three or more directors
as determined by the Board, each of whom shall be independent non-
executive directors, free from any relationship that would
interfere with the exercise of his or her independent judgment.
All members of the Committee shall have a basic understanding of
finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the
Committee shall have accounting or related financial management
expertise.
Audit Committee members shall be appointed by the Board on
recommendation of the Nominating Committee. If an Audit Committee
Chair is not designated or present, the members of the Committee
may designate a Chair by majority vote of the Committee
membership.
The Committee shall meet at least three times annually, or more
frequently as circumstances dictate, and make regular reports to
the Board.
III. Audit Committee Responsibilities and Duties
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter at least
annually, and recommend any proposed changes to the Board
for approval.
2. Review the Company's annual audited financial statements
prior to filing or distribution. Discuss with management and
independent auditors significant issues regarding accounting
principles, practices and judgments.
3. Review with management and the independent auditors the
Company's quarterly financial results or other items
required to be communicated by the independent auditors
under SAS No. 61 or SAS No. 90 either prior to the release
of earnings or before filing as considered appropriate by
notification by KPMG. Include a discussion of any
significant changes to the Company's accounting. The Chair
of the Audit Committee may represent the entire Audit
Committee for purposes of this review.
4. In consultation with management, the independent auditors
and the internal audit function, consider the integrity of
the Company's financial reporting processes and controls.
Participate in regularly scheduled meetings with management,
the internal audit function and the independent auditors to
discuss any significant risk exposures and the steps
management has taken to monitor, control and report such
exposures. Review significant findings reported by the
independent auditors and the internal audit function,
together with management responses.
5. The independent auditors are ultimately accountable to the
Audit Committee and the Board of Directors. The Audit
Committee shall review the independence and performance of
the auditors and annually recommend to the Board of
Directors the appointment of the independent auditors or
approve any discharge of auditors when circumstances
warrant.
6. Receive and review the annual engagement letter, and approve
the fees and other compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should receive from the
independent auditors the letter required by Independence
Standards Board Statement No. 1 (and any related
amendments), and discuss with the independent auditors all
significant relationships they have with the Company that
could impair the auditors' independence.
8. Review the independent auditors' audit plan - discuss scope,
staffing, locations, reliance upon management, and internal
audit function and general audit approach, prior to the
audit.
9. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61 and
90 relating to the conduct of the audit. Such review should
also include:
(a) Any problems or difficulties encountered in the
course of the audit work, including any restrictions
on the scope of activities or access to required
information;
(b) Any management letter provided by the auditor and
the Company's response to that letter;
(c) Any changes required in the planned scope of the
internal audit;
(d) The internal audit vendor responsibilities;
(e) Selection of new or changes to accounting policies
or a change in the application of existing
accounting policies;
(f) Significant estimates, judgments and uncertainties
in management's preparation of financial statements;
and
(g) Unusual transactions.
10. Consider the independent auditor's judgment about the
quality and appropriateness of the Company's accounting
principles as applied in its financial reporting.
11. Review the Annual Internal Audit Plan of the internal audit
function, and its performance under said plan, including the
fees to be paid. The internal audit function shall be
responsible to senior management, but have a direct
reporting responsibility to the Board of Directors through
the Committee. Changes in the internal audit function shall
be subject to Committee approval.
12. Review the appointment, performance and replacement of the
internal audit function (firm). Discuss with the internal
audit function all significant relationships they have with
the Company that would impair their objectivity in
accordance with Statement on Auditing Standards No. 60.
Recommend to the Board retention or replacement of the
function.
13. Review significant reports prepared by the internal audit
function together with management's response and follow-up
to these reports.
14. On at least an annual basis obtain from the external
auditors all copies of attorney letters discussing any legal
matters that could have a significant impact on the
Company's financial statements, the Company's compliance
with applicable laws and regulations and inquiries received
from regulators or governmental agencies. Review all reports
concerning any significant fraud or regulatory noncompliance
that occurs at the Company. This review should include
consideration of the internal controls that should be
strengthened to reduce the risk of a similar event in the
future.
15. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be
included in the Company's annual proxy statement.
16. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Conduct as
reported to committee by regulatory agencies, external and
internal auditors and legal counsel.
17. Meet as needed with the chief financial officer, the
internal audit function and the independent auditor in
executive sessions.
18. Perform any other activities consistent with this Charter,
the Company's by-laws, and governing law, as the Committee
or the Board deems necessary or appropriate.
19. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing
activities.
While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee
to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is
the responsibility of management. Nor is it the duty of the Audit
Committee to conduct investigations, to resolve disagreements, if
any, between management and the independent auditor or to assure
compliance with laws and regulations and the Company's Code of
Conduct. This is the responsibility of the full Board.
[LOGO]
Heartland Financial USA, Inc.
Proxy Card
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
HEARTLAND FINANCIAL USA, INC. TO BE HELD ON MAY 22, 2002
The undersigned hereby appoints Lynn B. Fuller and John K.
Schmidt, or either one of them acting in the absence of the
other, with power of substitution, attorneys and proxies, for and
in the name and place of the undersigned, to vote the number of
common shares that the undersigned would be entitled to vote if
then personally present at the annual meeting of stockholders of
Heartland Financial USA, Inc., to be held at the corporate
headquarters located at 1398 Central Avenue, Dubuque, Iowa, on
the 22nd day of May, 2002, at 1:30 p.m., local time, or any
adjournments or postponements thereof, upon the matters set forth
in the Notice of Annual Meeting and Proxy Statement, receipt of
which is hereby acknowledged, as follows:
1. ELECTION OF DIRECTORS:
[ ] FOR all [ ] WITHHOLD AUTHORITY
nominees listed to vote for all nominees
below (except as listed below
marked to the
contrary below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Class III (Term Expires 2005): James F. Conlan and Thomas L.
Flynn
2. APPROVE THE APPOINTMENT OF KPMG LLP as Heartland Financial
USA, Inc.'s independent public accountants for the year
ending December 31, 2002:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In accordance with their discretion, upon all other matters
that may properly come before said meeting and any
adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED UNDER
PROPOSAL 1 AND FOR PROPOSAL 2.
Dated: , 2002
------------------
Signature(s)
------------------
------------------------------
NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES
APPEAR ABOVE. ALL JOINT OWNERS OF SHARES SHOULD SIGN. STATE
FULL TITLE WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC. PLEASE RETURN SIGNED PROXY IN THE ENCLOSED
ENVELOPE.