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Heartland Financial USA declares special dividend

DUBUQUE, Iowa (AP) -- Heartland Financial USA Inc. said Wednesday that its board authorized a special cash dividend of 10 cents per share.

The bank cited strong financial performance for the payout, which is to be made on Dec. 28 ahead of a potential increase in tax rates on dividend income.

The special dividend is payable to shareholders of record as of Dec. 24, and is in addition to the total 40 cents per share that Heartland Financial has paid this year in quarterly cash dividends. The company, based in Dubuque, Iowa, has paid a dividend each quarter since its inception in 1981.

The special dividend is "in recognition of our company's exceptional financial performance in 2012," Lynn Fuller, Heartland's chairman, president and CEO.

Heartland Financial joins a growing number of companies issuing special end-of-year dividends or moving up regular payouts, moves that could protect investors from potentially higher dividend taxes starting in January. Since 2003 investors have paid a maximum 15 percent on dividend income. That historically low rate will expire in January unless Congress and President Barack Obama reach a compromise on taxes and government spending, and the rate could increase as part of any deal that's reached.

As it stands, dividends will be taxed as ordinary income in 2013, the same as wages, so rates will go up depending on which income bracket a taxpayer is in. For the highest earners, the dividend rate would jump to 43.4 percent.

Shares of Heartland Financial fell 24 cents to $25.62 in morning trading.