Wednesday, 10 December, 2008
Holding company will use funds for lending, possible acquisitions
Heartland Financial USA, Inc. (HTLF: 21.11, -0.03, -0.1%) announced that it has been selected to participate in the U.S. Treasury Department's Capital Purchase Program. The program is a voluntary initiative designed for publicly-held U.S. financial institutions to build capital and increase the flow of credit to support the economy. The approval is preliminary and subject to certain conditions and the execution of definitive agreements.
Heartland, a $3.4 billion multi-bank holding company based in Dubuque, Iowa has 61 locations and serves 42 communities in eight states.
The holding company plans to use the money to "do our part to help move the economy forward and create jobs through our commercial lending services," stated Lynn B. Fuller, Chairman, President and CEO of Heartland. "We intend to continue to offer commercial and personal loans that stimulate the local economies, and potentially, acquire banks in our existing markets. We are pleased to take this leadership role."
Under the program, Heartland will issue senior preferred shares in an amount equal to 3 percent of its risk weighted assets, or approximately $81.7 million. The preferred shares are subject to a 5 percent annual dividend for each of the first five years of the investment, increasing to 9 percent thereafter, unless Heartland redeems the shares. In conjunction with participation in the program, Heartland will also issue to the Treasury 10-year warrants to purchase common stock with an aggregate market value of 15 percent of the senior preferred stock investment.
The Capital Purchase Program was authorized by the government's Troubled Asset Relief Program (TARP) under the Emergency Economic Stabilization Act of 2008. The TARP is designed to infuse capital into the nation's healthiest banks to increase the flow of financing to American consumers and businesses.
"Even before receiving preliminary TARP approval, Heartland and its subsidiary banks were well-capitalized and exceeded all regulatory capital requirements. The additional capital accessed through this program will further strengthen Heartland's capital ratios. Both the federal government and bank regulators encourage participation to help stimulate the economy in local communities. That will be our primary goal. Beyond that, there may be opportunities to acquire other banks, including those that have been weakened by the current crisis. Our regulators have made it clear that TARP funds may also be used for this purpose," Fuller concluded.
Source: http://www.marketwatch.com/
