Lynn Fuller — who is expected to serve another two months as executive chairman of Heartland Financial USA in Dubuque, Iowa — has launched an activist campaign urging the bank's board to consider finding a buyer.
Fuller disclosed Tuesday that he is leading a shareholder group that controls 6.1% of the bank. In a filing with the Securities and Exchange Commission, the group chided Heartland management for abandoning “the culture that made for a successful community bank for its customers and employees, and the acquirer of choice for its future partners.”
Fuller, 72, has worked at the $19.3 billion-asset bank almost continuously since 1971 and was CEO from 1999 to June 2018.
Now he is at the head of a shareholder group pushing for a possible sale “to another banking organization whose leadership would be better suited to serve the needs of Heartland employees, customers, and communities while maximizing the value of the Heartland franchise for its shareholders," according to the filing.
Fuller had not returned a reporter’s call by deadline.
Thomas Flynn, Heartland’s vice chairman and lead independent director, said the board would “carefully review and consider” the shareholder group’s March 8 letter.
“Our board and management team are committed to creating value for all shareholders, and we will continue to take actions that will enable us to achieve this objective,” Flynn said Wednesday in a press release.
Central to the dispute is Heartland’s plan to
In February, when Heartland announced the restructuring plan, Chief Financial Officer Brian McKeag said it would result in $20 million of annual savings when complete.
Heartland announced the consolidation plan Feb. 3. Fuller submitted his letter of resignation 12 days later — with a parting shot at the company’s new direction. The resignation is set to take effect at Heartland’s annual meeting, scheduled for May 18.
“Management, with the apparent support of some directors, seems focused excessively on administrative initiatives such as collapsing the charters of our subsidiary banks, rather than on profitably expanding our loan portfolio and growing through acquisitions,” Fuller wrote. “Of course, the Board is free to pursue these administrative measures, but I cannot in good conscience lead an exercise whose success is unlikely to yield the results our stockholders rightly expect.”
Fuller included his resignation letter in Tuesday’s SEC filing.
Flynn said Heartland intends to leave the local brands and decision-making untouched, and that consolidation would provide the company “with the agility, efficiencies and scalability to support growth.”
The number of multicharter banking organizations has been in decline since the 2008 financial crisis, as prominent multicharter companies including Fulton Financial in Lancaster, Pennsylvania, Simmons First National Corp. in Pine Bluffs, Arkansas, and Synovus Financial in Columbus, Georgia, moved to a unified model.
Heartland’s predicament is a battle over strategic direction, according to Paul Davis, director of market intelligence for Strategic Resource Management in Memphis, Tennessee.
“On one side, it’s the established way of doing things," Davis said. "And on the other it’s a matter of trusting that management will generate higher returns once changes have been made.”
Heartland reported earnings of $211.9 million in 2021, up 40% year over year and good for a 1.19% return on assets.
Lynn Fuller’s father, who was also named Lynn, joined Heartland when it was Dubuque Bank and Trust in 1964. He was the company’s chairman from 1988 until his retirement in 2000.
